Here’s a quick rundown:
1. The Loss of Injunctive Relief: eBay vs. MercExchange, 2006
Injunctive Relief stops the infringer from making, selling, or using your patented invention.
In 2006, The Supreme Court in eBay vs. MercExchange held a decision that created a ‘public interest test’ that inventors must first pass before receiving injunctive relief. eBay’s ‘public interest’ test transformed what once was a personal property right, to a public franchise. To pass the ‘public interest’ test, the patent holder must show that they have a product on the market capable of replacing the infringer’s product. In theory, it makes sense, but when a large corporation steals the patent and saturates the market with the product, the startup is left with no market to sell their product and goes out of business. The startup cannot overcome the ‘public interest’ test, and infringer keeps the product, regardless of the infringement case outcome.
Not only does the eBay vs MercExchange case mean that if a big corporation steals it, they keep it, but it also stopped investments. For investments, a patent is valued at a fraction of the projected total value of the market that the invention will create. The foundation of any market is a willing buyer and seller who freely negotiate price, but since eBay, there will be no injunction to create a willing buyer and a willing seller. This leaves investors and startups with no way of valuing a patent, and therefore no way to valuate the startup for funding. Most inventions that would compete with Big Tech for their core technologies require huge upfront investment, but since eBay makes it impossible to value patents, these startups cannot attract enough funding, and they die before they begin.
- Infringer keep the stolen patent.
- Startups cannot attract funding.
- Corporations maintain the market without competition.
2. High Invalidation Rates; The Patent Trial and Appeal Board (PTAB) (2011)
The America Invents Act of 2011 (AIA) created the Patent Trial and Appeal Board (PTAB). The PTAB is a nonjudicial administrative tribunal within the USPTO, tasked with invalidating the same patents the USPTO previously granted. This created a dictatorial power for the USPTO Director over America’s most important private property right- the power to both grant and destroy (revoke) patents.
In most cases the petitioner is a large corporation—a big tech multinational or a Chinese corporation− that is infringing the patent that they are challenging for review. PTAB Tribunals are stacked with government lawyers, called ‘judges’ (Administrative Patent Judges; APJs). They receive an incentive (large bonus) to revoke the patents that were just granted by the USPTO. There is no jury and little due process of law. Since inception 84% of the patents that go through a PTAB process get fully or partially invalidated (partially usually means the parts of the patent that matter).
And the cost to the patent holder? They are burdened with half-a-million dollars in costs defending against a single PTAB proceeding, but multiple PTAB proceedings can be launched for the same patent, thus equaling an unlimited amount of petitions, and a never-ending financial burden for the patent holder. In addition, a single PTAB proceeding can burn three years of a patent’s enforceable life. This time is not returned. It is a guaranteed loss for the patent holder with only a small chance of retaining the patent. The PTAB’s high risk of invalidation makes patents uninvestible assets— Who’s going to invest when there’s an 84% likelihood the patent will be invalidated if it ends up in the PTAB?
When you attempt to stop a large corporation from infringing your patent, they will try to use the PTAB to invalidate your patent. If you win one PTAB attack, you can still be pulled into additional ones by the same or other infringers.
According to the AIPLA (American Institute of Patent Law Association), a reasonable PTAB defense costs $400,000 to $800,000. Historically, a typical inventor would hire an attorney on a contingency basis to fight an infringer (where the inventor doesn’t pay much up front and the attorney gets a percentage of the verdict award or settlement amount). Today, it is extremely rare for an attorney to take any PTAB case on contingency.
3. The Abstract Idea: Alice vs. CLS Bank (2014):
35 USC 101 defines what is eligible to be patented, provided that the invention passes statutory constructs of patentability – novelty, obviousness, and enablement. Section 101 says that any product, process, machine, or composition of matter is patent eligible. But U.S. Supreme Court’s decision in Alice vs CLS Bank 35 USC 101 determined that the word ‘any’ has an exception called an ‘abstract idea’. They did not define what an ‘abstract idea’ is, thus putting software, medical, high-tech inventions at risk since few understand the components that make-up these inventions. Without a definition to this exception, the USPTO has refused to issue a significant number of patents for legitimate, key future inventions, and the courts have invalidated numerous issued patents because of this exception. While technologies like artificial intelligence, blockchain, quantum computing, enterprise security, middleware, and much more, are considered ‘unpatentable’ in the U.S., other countries like China, are patenting them and advancing technology exponentially faster than the U.S.
Because of this decision, the United States falls behind as the leader in innovation; China takes the lead; Patents become uninvestible; Leading Future Technologies have a higher risk of not becoming an issued patent, and/or being invalidated.
A U.S. Patent is supposed to provide the inventor with the exclusive right to his or her invention (U.S. Constitution Article I, § 8, Clause 8). You should be able to legally stop any infringer, no matter how powerful. You should be able to create a disruptive startup or license your invention at a market rate. This is what created the incentive to invent that enabled America to lead the world in innovation for over 200 years and has been a major part of the American Dream.
The Summary eBay vs MercExchange, The Patent Trial and Appeal Board, The Abstract Idea:
eBay allows the infringer to keep what they stole, litigate the patent holder into oblivion, and makes it impossible to valuate a startup for funding. The PTAB and the abstract idea radically increase the invalidation rates of issued patents and the cost of defending them. This trifecta has gutted the patent system delivering the great American innovation engine to China on a silver platter. America is losing its leadership in innovation.
This U.S. what US Inventor is fighting to restore.
Help this vital effort by signing our Inventor Rights Resolution and getting U.S. Representatives and Senators behind this effort.