Patent Law Ain’t Broke, So Don’t Fix It

“If it ain’t broke, don’t fix it” applies to patent law as much as anything else. Our patent system is working, yet some want to change it in a way that will weaken the system of making sure all patents are valid.

With the prospect of faulty foreign drugs and tests being marketed to Americans for the coronavirus, now is a good time to protect against attempts to hurt American companies actually producing real products to test and fight COVID-19.

Techdirt reported on March 16, 2020, one such U.S. company was sued by Labrador Diagnostics “which does not seem to exist other than to file this lawsuit, and which claims to hold the rights to two patents (U.S. Patents 8,283,155 and 10,533,994) which, you'll note, were originally granted to Elizabeth Holmes and Theranos -- the firm that shut down in scandal over medical testing equipment that appears to have been oversold and never actually worked.” According to the report, Theranos sold patents to Fortress Investment, and Fortress “then set up this shell company, ‘Labrador Diagnostics,’ which decided in the midst of the Covid-19 pandemic it was going to sue one of the companies making COVID-19 tests, saying their test violates those Theranos patents, and literally demanding that the court bar the firm from making those Covid-19 tests.” 

Thankfully, instead of needing to spend millions of dollars and years in federal court, especially if there are appeals by one side or the other, Congress created a process to streamline such disputes in rare, but important cases. 

The U.S. Patent and Trademark Office (USPTO) has a proceeding called the Inter Partes Review (IPR) that was created in 2011 as part of the America Invents Act.  That proceeding allows patents to be reviewed to see if they should not have ever been granted. A patent might not have been eligible to have been granted in the first place if so-called “prior art” existed to show the item or process the patent covers already exists or is already patented.  Duplicate patents are sometimes missed by overworked patent examiners during the review process.  Also, there are situations where the patented item is not “new, novel or non-obvious,” which is the required standard for a patent. The IPR is a proceeding that reviews whether the patent should have ever been granted and is conducted by an administrative body of expert patent examiners called the Patent Trial and Appeal Board (PTAB).

Some in Congress are seeking to change the IPR system in a way that will empower trial lawyers and return to a time when shell companies like Labrador, which produce no goods or services, sued thousands of productive, job creating American business every year. Sen. Chris Coons (D-Del.) has legislation to weaken the patent system misnamed the “STRONGER Patents Act” that would eliminate the strongest tool American employers have to strike down the type of bad patents used in these sort of frivolous lawsuits. The Coons bill exhibits a misunderstanding of the purpose of patent law.  If enacted it would allow bogus patents to empower shell companies from all over the world created solely for patent litigation to file endless lawsuits for the purposes of extorting large amounts of money from U.S. companies large and small.

A number of the most respected economics, business and legal scholars who make it their business to study intellectual property law have come to the conclusion in a letter to Congress that the Inter Partes Review is a critical cog in patent law and that the Coons’ bill is the wrong approach.  The experts argue, “for years, the Patent Office has operated under tremendous workload pressure. In 2018, the Patent Office received over 640,000 patent applications and allowed over 360,000 patents. Patent examiners on average have only nineteen hours to examine patent applications.”  Mistakes happen and some invalid patents are issued. The IPR is a backstop for overworked patent examiners.

Without IPR, many U.S. businesses would be forced to pay off these shell companies even if they knew the case against them was bogus. The experts made the case that “even for the lowest-stakes category of patent lawsuits (in which less than $1 million is at risk), median litigation costs are $500,000. And for the highest-stakes lawsuits (in which more than $25 million is at risk), median litigation costs rise to over $3 million.” Frequently, the targets of NPEs make a business decision and settle (pay) rather than litigate, because the “cost of winning” still leads to less resources for things like more staff, research and development and other forms of business growth. Because the IPR is faster and less expensive than a trial in federal court, it gives these businesses a way to fight back without breaking the bank.

The IPR has removed hundreds of invalidly issued patents and changing existing law would harm patent quality, hurt American employers, and slow our post-COVID recovery. It is ironic that the “STRONGER Patents Act” pushed by Sen. Coons would weaken the whole process and empower NPEs to expand their efforts to target U.S. companies. 

It is especially unnerving that unethical NPEs would engage in litigation that might slow help in fighting the coronavirus.

Steve Sherman is an author, popular radio commentator, and former Iowa House candidate. His articles have appeared nationally in both print and online for Townhall, Human Events, Clash Daily, Washington Times, Washington Examiner, and Forbes.

“If it ain’t broke, don’t fix it” applies to patent law as much as anything else. Our patent system is working, yet some want to change it in a way that will weaken the system of making sure all patents are valid.

With the prospect of faulty foreign drugs and tests being marketed to Americans for the coronavirus, now is a good time to protect against attempts to hurt American companies actually producing real products to test and fight COVID-19.

Techdirt reported on March 16, 2020, one such U.S. company was sued by Labrador Diagnostics “which does not seem to exist other than to file this lawsuit, and which claims to hold the rights to two patents (U.S. Patents 8,283,155 and 10,533,994) which, you'll note, were originally granted to Elizabeth Holmes and Theranos -- the firm that shut down in scandal over medical testing equipment that appears to have been oversold and never actually worked.” According to the report, Theranos sold patents to Fortress Investment, and Fortress “then set up this shell company, ‘Labrador Diagnostics,’ which decided in the midst of the Covid-19 pandemic it was going to sue one of the companies making COVID-19 tests, saying their test violates those Theranos patents, and literally demanding that the court bar the firm from making those Covid-19 tests.” 

Thankfully, instead of needing to spend millions of dollars and years in federal court, especially if there are appeals by one side or the other, Congress created a process to streamline such disputes in rare, but important cases. 

The U.S. Patent and Trademark Office (USPTO) has a proceeding called the Inter Partes Review (IPR) that was created in 2011 as part of the America Invents Act.  That proceeding allows patents to be reviewed to see if they should not have ever been granted. A patent might not have been eligible to have been granted in the first place if so-called “prior art” existed to show the item or process the patent covers already exists or is already patented.  Duplicate patents are sometimes missed by overworked patent examiners during the review process.  Also, there are situations where the patented item is not “new, novel or non-obvious,” which is the required standard for a patent. The IPR is a proceeding that reviews whether the patent should have ever been granted and is conducted by an administrative body of expert patent examiners called the Patent Trial and Appeal Board (PTAB).

Some in Congress are seeking to change the IPR system in a way that will empower trial lawyers and return to a time when shell companies like Labrador, which produce no goods or services, sued thousands of productive, job creating American business every year. Sen. Chris Coons (D-Del.) has legislation to weaken the patent system misnamed the “STRONGER Patents Act” that would eliminate the strongest tool American employers have to strike down the type of bad patents used in these sort of frivolous lawsuits. The Coons bill exhibits a misunderstanding of the purpose of patent law.  If enacted it would allow bogus patents to empower shell companies from all over the world created solely for patent litigation to file endless lawsuits for the purposes of extorting large amounts of money from U.S. companies large and small.

A number of the most respected economics, business and legal scholars who make it their business to study intellectual property law have come to the conclusion in a letter to Congress that the Inter Partes Review is a critical cog in patent law and that the Coons’ bill is the wrong approach.  The experts argue, “for years, the Patent Office has operated under tremendous workload pressure. In 2018, the Patent Office received over 640,000 patent applications and allowed over 360,000 patents. Patent examiners on average have only nineteen hours to examine patent applications.”  Mistakes happen and some invalid patents are issued. The IPR is a backstop for overworked patent examiners.

Without IPR, many U.S. businesses would be forced to pay off these shell companies even if they knew the case against them was bogus. The experts made the case that “even for the lowest-stakes category of patent lawsuits (in which less than $1 million is at risk), median litigation costs are $500,000. And for the highest-stakes lawsuits (in which more than $25 million is at risk), median litigation costs rise to over $3 million.” Frequently, the targets of NPEs make a business decision and settle (pay) rather than litigate, because the “cost of winning” still leads to less resources for things like more staff, research and development and other forms of business growth. Because the IPR is faster and less expensive than a trial in federal court, it gives these businesses a way to fight back without breaking the bank.

The IPR has removed hundreds of invalidly issued patents and changing existing law would harm patent quality, hurt American employers, and slow our post-COVID recovery. It is ironic that the “STRONGER Patents Act” pushed by Sen. Coons would weaken the whole process and empower NPEs to expand their efforts to target U.S. companies. 

It is especially unnerving that unethical NPEs would engage in litigation that might slow help in fighting the coronavirus.

Steve Sherman is an author, popular radio commentator, and former Iowa House candidate. His articles have appeared nationally in both print and online for Townhall, Human Events, Clash Daily, Washington Times, Washington Examiner, and Forbes.