Sunday, July 17, 2022

PTAB IPR abuse is a reality: patent holders should draw Director Vidal's attention to 'ransom' and 'racketeering' business models involving attacks on patents

On July 7, United States Patent & Trademark Office Director Kathi Vidal encouraged stakeholders to submit amicus briefs with a view to the Director review of the PTAB decisions in two cases involving challenges to patents asserted by VLSI Technology against Intel. The deadline is August 4.

This is really important stuff. Now, I don't want to take a position on the specific cases other than saying that the parties are entitled to a correct adjudication of their dispute (where the Federal Circuit plays a key role), and VLSI is additionally entitled to protection from abuse by third parties driven by questionable motives.

The Under Secretary of Commerce for Intellectual Property--that's her long-form title--raised transcendental questions involving

  • abuse of process or

  • conduct that otherwise thwarts, as opposed to advances, the goals of the [USPTO] and/or the America Invents Act (AIA).

That's a big topic, and I just want to bring up a couple of issues here, which I would encourage stakeholders to raise in their replies. This blog has repeatedly been referenced in court filings, even in an Acer v. Volkswagen patent infringement complaint in the Eastern District of Virginia. Of course, it would be even better if others could raise these points in a more elaborate form themselves.

While I've been a big believer in balanced patent enforcement rules and patent quality assurance for a long time, I disagree with those who essentially suggest that the end of invalidating patents justifies any means. Whether or not one believes that former Director Andrei Iancu (now, again, a top-notch patent litigator) went too far with the Fintiv rule, there is indeed rampant abuse, and I fear that various abusers of the system could be emboldened as they see the pendulum swinging back.

Not only can patent holders employ trollish litigation tactics in their assertion campaigns but it is equally possible to troll patent holders, for financial gain, through PTAB IPR petitions.

I don't even want to talk about the problem of short-selling stocks around attacks on business-critical patents (mostly in the pharmaceutical sector), but focus on Unified Patents.

Unified Patents is one of the most active filers of PTAB petitions. Its business model is that of a "club": companies who frequently defend against patent infringement assertions pay their fees and then Unified will keep them happy by attacking certain patents, but the members of the club don't formally make the decision. In its most recent petition, like in numerous others before that one, "Unified Patents, LLC [...] certifies that Unified is the real party-in-interest and further certifies that no other party exercised control or could exercise control over Unified's participation in this proceeding, the filing of this Petition, or the conduct of any ensuing trial."

I have a simple policy question here: is Unified really necessary?

The companies paying Unified are the likes of Adobe, Cisco, Daimler, Dell, Salesforce, Spotify, Tesla, and Uber. There's no doubt that those organizations would be well-equipped to bring their PTAB petitions themselves. That would be more transparent.

Unified always makes a lot of noise when it achieves a partial or complete invalidation of a patent, and there's deafening silence when it loses--which ends up hardening certain patents with a view to litigation. That's as counterproductive as it gets.

It's another question whether some of the companies who support Unified primarily just want to avoid that their own patents get challenged. Without access to the terms of the relevant agreements, I can't form an opinion on that one.

Even if one did not take issue with Unified's primary business model, Unified's latest strategy for leveraging its PTAB IPR machinery deserves a closer--and rather skeptical--look:

In at least one case (Alium), Unified has co-founded a patent pool that vows to challenge patents outside the pool. The euphemism here is "patent quality." But were this about quality, wouldn't it then make sense to start with the patents that are actually in that pool? No, the idea is for Unified to use some of the pool's licensing income to go out and attack patents in the same field of technology that belong to companies who may have perfectly valid reasons for declining to put their own IP in that pool.

Unified's partner, MPEG LA, is a very well-respected patent pool administrator. I have no idea why they partnered with Unified in the first place--it's certainly not because Unified knows more about the pool business than MPEG LA. But if even MPEG LA teamed up with Unified, who will be next? Is this going to become a scalable business model?

It raises serious policy issues when a patent pool puts pressure on patent holders to join. "Join us or we'll challenge your patents" should not be a message with which a patent pool tries to "convince" patent holders to join: patent pools should be all about finding a workable compromise between licensors and licensees (and that's what MPEG LA--when not working with Unified--is all about) and about maximizing transactional efficiencies.

The USPTO should deny any PTAB IPR petitions that might be part of a scheme to bully patentees into joining a pool. At least there should be a strong presumption against such petitions serving to advance the AIA's goals.

I agree with MPEG LA's amicus brief (PDF) in Continental v. Avanci et al. that antitrust law must not be used against patent pools to the extent that they "become inefficient and unreliable, licensors will cease to participate in them, the interoperability of the standards they enable will be lost, and the competitive market benefits including convenience for licensees and savings to consumers that they provide will disappear. As MPEG LA also notes, "[i]ndividual licensees should not be permitted to interfere with [...] competitive market forces and a business’ freedom to make [...] decisions."

But patent pools don't enjoy antitrust immunity either. And it's not just about potential implementer concerns such as whether a pool has the right to grant licenses at a certain level of a supply chain, or whether the terms (including duplicative-royalty policies) are fair to implementers. It can also be a serious problem if a pool is designed to contribute to the devaluation of patents.

That's why I applaud the European Commission's Directorate-General for Competition (DG COMP) for investigating on a preliminary basis (which will hopefully lead to full-blown investigations) concerns over the Alliance for Open Media (AOM) abusing the market power of its members like Google to force patent holders to give up their rights.

The USPTO, too, should be concerned about whether patent pools, or companies that co-found or otherwise profit from them, bring IPR petitions for reasons that run counter to the spirit of the AIA.