Did Obama's America Invents Act Solve the Patent Troll Problem?

This month, the Patent Trial and Appeal Board (PTAB) celebrated its second birthday. While two years may seem young, the PTAB has accomplished quite a bit in that time. After a slow six month ramp-up, the number of petitions challenging patents under the new system has grown significantly, reaching nearly 200 new filings a month. It takes 18 months for a patent challenge to make its way through the PTAB, and we are now finally seeing the effects of the influx. Now, with 75% of all trials resulting in every challenged patent claim being invalidated, it’s clear that the PTAB will have a very broad reach in patent litigation.

A Brief History of the PTAB

The PTAB was created under Obama’s Leahy-Smith America Invents Act and opened its doors in September of 2012, providing litigants with a brand new forum to challenge patent validity. There are several avenues available to a party looking to challenge the validity of a patent: Inter Partes Review (IPR), Covered Business Method Review (CBM), Derivation Proceedings (DER), and Post-Grant Review (PGR).

The type of procedure available to a party depends what type of patent they are challenging and what arguments they want to make. The majority of petitions are filed for Inter Partes Review, which is available to challengers of any type of patent. Trailing IPR proceedings in popularity are Covered Business Method proceedings, which are specifically focused on controversial business method patents. A small number of Derivation Proceedings and Post-Grant Review proceedings have been filed as well.

From beginning to end, the process from filing the initial petition challenging a patent to receiving a final decision from the PTAB takes about 18 months. Thus, at the two-year mark, we are only now seeing the effects of the first six months of filings, and we can expect to see a multitude of decisions being issued in the near future.

Stalled Legislation

A bill to protect companies from patent trolls was shelved by the Senate Judiciary Committee earlier this year. The legislation’s unraveling was due in large part to hard lobbying of universities and medical companies with extensive patent holdings. On the other side of the coin, the bill’s failure to gain momentum was a blow to patent troll targets, software companies and retailers, who called the decision to drop the legislation “a victory for the trolls.”

But Has the PTAB Made a Legislative Solution Unnecessary?

Despite the legislative breakdown, the U.S. may have inadvertently solved its troll problem through the creation of the PTAB. By design, the PTAB is structured to render speedy, less expensive resolutions to quickly invalidate bad patents, potentially making long, multi-million dollar trials over low-quality patents held by trolls a thing of the past.

Many of the petitions for IPR and CBM are being filed against some of the most notorious patent trolls, including giants like Intellectual Ventures, VirnetX, and Acacia. To date, nearly 70 petitions for IPR have been filed against the various arms of Intellectual Ventures, and nearly 40 petitions for IPR against VirnetX. With about 80% of IPR petitions resulting in a trial, and 75% of the instituted trials ending in invalidating every challenged claim, the odds don’t look good for patent owners who find themselves involved a post-grant proceeding. This is in large part thanks to the meticulous fact-finding of the PTAB’s technically savvy judges. IPR and CBM filings against patent trolls have been picking up steam in the past several months, so we can expect to start seeing the PTAB’s effect on these companies in late 2015 or early 2016.

Another potential residual effect from the creation of the PTAB is the encouragement of quick settlement in many patent troll cases. For example, in a IPR proceeding involving Acacia and Volkswagen, a settlement was reached less than a year after Volkswagen had filed its petition. 

Rather than waiting for legislation that might never come, the U.S. could already have in the PTAB the solution it needs to solve the patent troll problem.

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