Injunctive Relief. In 2006, the Supreme Court in eBay vs. MercExchange (eBay) created a four-factor test for issuing injunctions. This was contrary nearly 200 years of settled law that granted injunctions as a default remedy upon a finding of infringement of a valid patent. eBay’s test effectively means that the patent holder must have the patented product on the market and the capability to distribute that product.
When a large corporation steals a patented invention and uses its deep pockets, existing market access, manufacturing, and supply chain capabilities to saturate the market with infringing products, the startup is left with no market to sell its product and usually goes out of business. With no product on the market, it is impossible for the startup or its investors to overcome eBay’s test.
Infringers have little incentive to negotiate fair licensing deals before infringing because they do not need to. If they steal it, they keep it and the market it created. They prefer to steal it and bet the inventor would never sue. Due to a combination of other judge-made law, making it virtually impossible to obtain lost profits and punitive damages, even if the patent holder sues and wins, the infringer will only pay what they would have paid had they licensed it in the outset. eBay opened the floodgates to predatory infringement (sometimes called efficient infringement).
Patent Eligibility. In a series of decisions culminating in its 2014 decision in Alice vs CLS Bank (Alice), the Supreme Court determined that the word ‘any’ in Section 101 has an additional judicial exception beyond ‘law of nature’ called an ‘abstract idea’. However, it did not define what an abstract idea is, thus making entire swaths of innovation patent-ineligible.
Alice renders inventions ineligible for patent protection in critical fields like artificial intelligence, 5G/6G, cybersecurity, enterprise systems, block chain, fintech, and much more. These are the very same technologies that foster new economic growth in America, technologies that China is attempting to lead in their 2025 initiative, and those that compete with or disrupt large entrenched market incumbents.
While no court has offered a coherent definition of the term abstract idea, the USPTO does not issue patents for inventions that they decide are directed to abstract ideas, and the courts invalidate patents issued by the USPTO for inventions that the courts decide are directed to abstract ideas. Today, nobody can say what will pass muster. One can only know when the Supreme Court says it is or isn’t an abstract idea.
Judge Michell, a former Chief Judge of the CAFC, and David Kappos, a former USPTO Director, and others wrote several authoritative articles showing how destructive the Alice decision is. (here, here, here and here)
PTAB AIA Proceedings. Other major harm inflicted on inventors and startups was in the inaptly named America Invents Act of 2011 (AIA) and its creation of the Patent Trial and Appeal Board (PTAB), an administrative tribunal within the USPTO with the mission of invalidating the same patents that the USPTO just issued. The PTAB invalidates a staggering 84% of the patents it fully adjudicates. Nearly all PTAB invalidation procedures are at the request of Big Tech, foreign, and Chinese Communist Party (CCP)- controlled multinational corporations. It is a political tribunal that does the bidding of domestic monopolies and large multinational market incumbents.
The PTAB’s devastating invalidation rate means that a patent can no longer be presumed valid and can only be valued after it survives PTAB challenges. This means that patents cannot be meaningfully valued for early-stage investment in a startup. Thus, startups cannot get funded, especially if their patented invention is likely to create a large market thereby becoming attractive to infringers who will petition the PTAB to invalidate the patents.