Whither goest the patent troll?

A decade ago, patent trolls were all the rage in the patent world. Whether in speeches, conferences, or articles, no subject engendered more IP conversation. If there was a rock-star matter in the patent world, it was the debate over trolls. Since those heady days, this Kat has sensed a notable decline in the public decibel level. It got this Kat to wonder: has patent trolling become such an ""oh so yesterday" subject?

Against this background, this Kat came across a piece, "The Growing Problem Of U.S. Patent Trolls, שnd What Should Happen Next", by Stefan Lederer, which was published in connection with Forbes magazine and the Forbes Business Council on July 22, 2021. In it, Lederer makes a spirited argument in favor of the position that patent trolling, with all its (according to the author) deleterious features, is still very much with us. So, let us consider Lederer's arguments. Patent trolling 2021—yes, no, or maybe?

First, for the sake of good order, Lederer means by the term patent trolls an abuse of the patent system, in which—

low-quality patents that are asserted against innovative companies by entities that often don’t even make any products. The worst of these patent trolls pick up low-quality patents and take advantage of asymmetries in the economics of litigation to make quick cash.

The root source of this situation, according to Lederer, is the patent prosecution process. Start with the sheer volume of patent applications. Focusing on the U.S., he states that over 600,000 applications are filed each year, meaning an examiner only has approximately 19 hours for examination.

In such a situation,

… bad patents are basically inevitable. If a patent isn't granted after the first application, inventors can just keep filing continuations and motions for reconsideration.

Following from this, he points to studies suggesting that an estimated 30% to 40% of issued patents are invalid or low quality.

For Lederer, alleged costs are a key metric associated with patent trolling. They amount to $29 billion dollars yearly in direct litigation expenditures (though the hyperlink reference is to a 2014 article), together with foregone expenditures in R&D (for which no monetary amount is provided).

That said, the author acknowledges that these costs declined from 2013-2017, only to once again rise. What accounts for this? This is where the article gets interesting. The key variable, he claims, were changes in post-grant review procedures, first facilitating those seeking to reduce patent trolling, but thereafter leading to increased patent trolling activity.

More specifically, in the words of the author,

The decline in the 2013 to 2017 period is largely attributable to post-patent grant review mechanisms. For example, the 2011 America Invents Act created faster, cheaper ways to show that a low-quality patent was invalid and empowered the PTO to implement new safeguards to improve patent quality. The Act specifically created Inter Partes Reviews at the PTO’s Patent Trial and Appeal Board.

Based on a 2019 report, utilization of an Inter Partes Review costs approximately only 10 percent of the cost of a similar action maintained in a civil court litigation ($500,000 versus $4 million or more). Such review is also quicker (usually taking no more than 18 months). Added to this was the aftermath from the Supreme Court's decision in Alice Corp v. CLS Bank, which, in the author's words, "affords much-needed relief by allowing defendants to challenge the overbroad, abstract patents, and have suits dismissed early."

So, for the early years of the previous decade, thanks to Congressional wisdom, patent trolls were seemingly on the run. Not gone, but certainly in retreat. In the period since 2017, however, these trends have reversed themselves. As the author laments, "[j]ust as declining litigation rates and costs were the upshot of a better post-grant review, the current increase in abusive litigation comes as those review mechanisms are under threat".

Who is the culprit? Lederer argues that the PTAB is exercising its discretion in such a way as to be less inclined to consider "meritorious" Inter Parties Reviews. In particular, the Federal Circuit is paying less deference, if at all, to the USPTO's 2019 "Revised Patent Subject Matter Eligibility Guidance" regarding patentable subject matter under § 101. Add to this the alleged potential for "abuse" of discretion by the PTO director by virtue of the Supreme Court decision in the case of United States v. Arthrex, Inc., which ruled that the PTO director may review and overrule the decisions of the patent judges of the PTAB.

In the face of these headwinds, Lederer suggests three prophylactic measures. Two of them flow from the discussion above—restoring the robustness of Inter Partes Reviews, and "getting right" the substance and authority of the PTO guidance on patentability.

The third suggestion comes from an unexpected source—file wrappers. He argues--

If that wrapper is filled with the examiner's repeated rejections to certain claims and the inventor repeatedly appeals those rejections, it suggests low quality. A defendant should be allowed to point to such a wrapper early in the case to rebut the patent’s inherent presumption of validity. Better yet, such a wrapper could trigger the withdrawal of the presumption of validity, which the plaintiff would then have to affirmatively plead.

It is unclear how suggestions (1) and (2) are meant to be implemented, and whether suggestion (3) can attract support within the patent bar. The upshot: the suggestions are more of a wish list than a call to action.

Interestingly, although the "patent trolls" themselves have been often vilified for gaming the system by taking advantage of the "asymmetries in the economics of litigation", they do not form any direct part of Lederer's presentation (although his suggestion regarding file wrappers is presumably intended to reduce the degree of alleged litigation asymmetries). This suggests a softening of anti-trolling discourse, away from the troll towards the conditions that make trolling possible.

But there is a rhetorical cost in doing so. James Bond, the spy, excites; organizational problems within the CIA, less so. In the same way, if the issue is less about swashbuckling, and more about administrative and legislative fixes—"yawn".

Which leads to the question: does this mean that patent trolling has moved to an inside page of the newspaper [Merpel reminds Kat readers under thirty years of age that there were once newspapers, regarding which one could speak about the front page and all the rest]. No issue can remain on the front page forever. But is the move to page 2 due to a maturity in the way that patent trolling is addressed, or a decline in the public saliency of the issue?

Patent trolling 2021—yes, no, maybe?

Picture on the lower left is by Bijay Chaurasia and is licensed under the Attribution-ShareAlike 4.0 International license.