September 22, 2021 at 5:00 am ET
This month marks the 10th anniversary of the America Invents Act, and a substantial rise in the number of patent lawsuits against American manufacturers suggests that it may be time to renew its vows.
Sponsored and expertly led by Sen. Patrick Leahy (D-Vt.) and then-Rep. Lamar Smith (R-Texas), the AIA was passed by Congress and signed into law by then-President Barack Obama in 2011. It was the most significant reform of the U.S. patent system in over 50 years, moving from a “first-to-invent” to a “first inventor-to-file” approach. And, in a critical move for productivity, the legislation provided protections for American companies to fight back against bad patents, which today are being used as weapons for extortion.
Today, Leahy and Smith join the US Manufacturers Association for Development and Enterprise (US*MADE) for an event to celebrate this milestone and review the decade of changes in patent quality and litigation trends since 2011.
The patent system plays a critical role in promoting innovation in the United States, but bad actors continue to exploit its few weak spots. U.S. manufacturers, who generate about 11 percent of U.S. gross domestic product and employ tens of millions of Americans, are hit especially hard as frequent targets of abusive patent litigation.
The first quarter of 2021 saw a 43.3 percent increase in patent litigation compared to the same period last year. What’s more, patent litigation by nonpracticing entities, often referred to as “patent trolls,” was up 7 percent in the first half of 2021. More than half of defendants were added to patent litigation campaigns by patent trolls, who — unlike U.S. manufacturers — have no intention of adding value to the American economy by developing a product or service or creating any jobs whatsoever.
Opportunistic hedge funds finance the purchase of vague, overly broad patents, then pass them on to these patent trolls, who often sue hundreds, or even thousands, of companies all at once, alleging patent infringement where no such infringement exists. The goal? To get American manufacturers to pay settlements to avoid even more costly and time-consuming litigation. Patent trolls and their financial cohorts hit payday after payday at the expense of U.S. economic growth.
One of the most important protections for American companies ushered in by the AIA was the ability to challenge the validity of patents after they’ve already been granted.
The Leahy-Smith America Invents Act “allows a person who is not the patent owner to request to cancel as unpatentable one or more claims of patent by filing a petition with the U.S. Patent and Trademark Office (USPTO) to institute: (1) post-grant review on any ground that could be raised under specified provisions relating to invalidity of the patent or any claim.”
This procedure for challenging those few rare-but-very-harmful bad patents issued by the patent office, called “inter partes review,” can save hundreds of hours and millions of dollars in legal fees that kill progress. Wouldn’t we rather have Tesla focused on producing its home battery pack Powerwall, for which demand is through the roof, than wasting millions on the empty legal claims of patent trolls?
The inter partes review process takes 12 to 18 months and typically costs less than $1 million, compared to the average patent lawsuit, which can drag out over five years and gobble up $5 million or more in litigation fees. For the defendant, that can mean the difference between staying in business or going out of it.
Unfortunately, the U.S. Patent and Trademark Office drifted away from the safeguards put in place by the America Invents Act over the last several years. Today, the USPTO appears to be arbitrarily denying access to the IPR process, and patent trolls have taken notice and ramped up their attacks on American companies.
The U.S. patent system exists to protect inventors with bright ideas, but abuse of the system is on the rise. We should always be looking to improve patent quality at the USPTO through investment in more examiners and better training, as well as requirements that language throughout a patent application is specific and consistent before the patent will be issued. The inter partes review must also be accessible, as Congress clearly intended, for the invalidation of the most egregiously bad patents or claims.
American manufacturers are every day designing, developing and building everything from advancements in automobiles to health care devices and more. Improving the quality and integrity of our patent system will ensure the United States remains a leader in the global economy and good American jobs are preserved.
This 10th anniversary should be a wake-up call: America’s innovators need us to restore the promise of the America Invents Act.
Beau Phillips is executive director of US*MADE, a coalition of U.S. manufacturing companies and trade associations who produce their products in America working to curtail abusive patent litigation.
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