30 Nov
2018

After years of setting the patent agenda Silicon Valley is now playing defence

The USPTO director’s explicit rejection of the ‘troll’ narrative and the departure of key Congressional backers mean that big technology companies find themselves in the unusual position of not being in control of the US IP policy-making narrative

The jury may still be out on whether there has been any significant pendulum swing-back in the US patent market, but one area where there has been a clear shift over the last 12 months is in policy making and the narrative that surrounds it. After many years in which all doors were open to them – in the White House, the USPTO and Congress – the Big Tech-backed reform lobby is now finding it a whole lot tougher to set the terms of the debate.

At the American Intellectual Property Law Association annual meeting in Washington DC in October, USPTO Director Andrei Iancu received a standing ovation from parts of his audience after delivering a speech in which he talked of “a new day at the PTAB”. Iancu announced further changes to the way that the agency operates and pushed back against criticisms of the decision to move from broadest reasonable interpretation to the Phillips construction at the PTAB. “There is no reason for the USPTO to be using a claim construction standard in IPR [inter partes reviews] that eliminates patents that would otherwise survive challenge in district courts,” he said. “Doing so is an example of what I have referred to as an over-correction that risks throwing out the baby with the bathwater.”

“Orwellian doublespeak”

This followed on from a speech Iancu had given the previous week in Texas that took direct aim at those whom he accused of “repeatedly telling ‘patent troll’ stories”. That narrative must end, he stated: “And, at least as far as the USPTO is concerned, it has now changed.”

Iancu continued: “Remarkably, in what I believe amounts to Orwellian ‘doublespeak’, those who’ve been advancing the patent troll narrative argue that they do so because they are actually pro-innovation. That by their highlighting, relentlessly, the dangers in the patent system, they actually encourage innovation. Right!”

No names were mentioned, but it did not take a huge leap of imagination to work out who the director was talking about. The High Tech Inventors Alliance – whose membership comprises Adobe, Amazon, Cisco, Dell, Google, Intel, Oracle and Salesforce – certainly got the message, putting out a press release repudiating Iancu’s words within days of them being delivered.

“NPE suits account for 90% of patent litigation involving high-tech products and services. But the IPR process along with the Supreme Court’s Alice decision have gone a long way to help level the playing field. The result is that since 2012, US companies have increased their investment in research and development by almost $200 billion per year and venture capital funding has increased dramatically from 2012 to 2017. Improving patent quality actually works and we hope that addressing this problem will be a top priority of Director Iancu and the Patent and Trademark Office,” the alliance’s general counsel John Thorne stated.

After a relatively cautious start in charge of the USPTO, during which he kept his cards close to his chest, the last few months have seen Iancu begin to nail his colours very firmly to the mast. He has made clear that he believes that the anti-patent rhetoric of recent years in the United States has been overblown and that decisions taken on the back of it have been damaging. What is more, Iancu is making plain he will do what he can to rebalance a system that he thinks has veered too far away from protecting the interests of patent owners.

Tech hits back

Thorne is not the only member of the high-tech community who has noticed Iancu’s changing rhetoric. The Electronic Frontier Foundation’s Daniel Nazer took to Twitter after the director’s Texas speech to claim that there is research showing the negative impacts of patent assertion and the “positive impacts of legal changes like eBay and Alice”.

For his part, Josh Landau, the Computer & Communications Industry Association’s (CCIA) patent counsel, wrote in an email to IAM that he didn’t know why Iancu chose the language he did. “I can only say that it’s disheartening to hear the PTO’s head describe evidence-based analysis of potential patent system improvements as ‘Orwellian doublespeak’, ‘fairy tales’, and ‘scary monster stories’,” he stated.

Landau continued: “Setting aside his rhetoric, while I share Director Iancu’s belief in the value of technological innovation, I find it unfortunate that he thinks that, in order to encourage inventors, we have to ignore the flaws in the patent system. These are not mutually exclusive goals and the director characterising them as such should be deeply concerning to people who want to see the patent system thrive.”

Any changes to PTAB procedure are always going to be met with some scepticism from Big Tech given that it is the likes of Apple, Google and Samsung that have become the most frequent users and staunchest defenders of inter partes reviews. But in his choice of words, Iancu has arguably abandoned what has to this point been one of his biggest strengths.

With his background as a patent litigator, he has been viewed as relatively neutral in the ongoing debate around patent rights in the United States, unaffiliated to a specific industry group. That cast him in a different light to former Johnson & Johnson executive Phil Johnson – another leading contender for the top job – who was always going to be hard for tech to swallow as a pharma veteran and an outspoken critic of the PTAB. It also placed Iancu in a different position to his predecessor Michelle Lee who, as a former senior figure at Google, was criticised by some as being too close to the Valley.

Many in the licensing community have privately viewed Iancu as “one of them” or at least far enough removed from the interests of the tech community to represent a far more balanced outlook on the US patent system. Now they know they are right.

By turning up the dial now, Iancu has left no doubt as to where he stands. He could easily have focused his Texas comments on the need for a more balanced system and simply called for an end to the patent troll narrative in far more sober terms but he chose to go much further. For companies used to having the claims they make repeated by those in positions of power and influence inside the Beltway, that must be hard to take.

Changes on Capitol Hill

However, Iancu is not the only member of the Trump administration changing the established narrative: Makan Delrahim, the head of the Department of Justice’s antitrust division, has also been making forceful points for close to a year now on the importance of balancing the interests of originators and implementers when it comes to the licensing of SEPs – and arguing that the use of antitrust laws is not appropriate when seeking to police SEP owners’ behaviour.

All this is in marked contrast to the mood music, language and decision making prevalent during the final years of the Obama administration, when Lee was in charge of the USPTO and the White House was publishing highly partial reports on patent assertion entities (PAEs) that repeated claims and data that many in the US patent community knew to be decidedly unreliable, to put it mildly.

And it is not just in the executive where change is in the air. The recent mid-term elections in the United States heralded the departures from the national legislative scene of two of Congress’s most influential and important backers of patent reform.

As chairman of the House Judiciary Committee, Virginia’s Bob Goodlatte was a driving force for change who bought totally into the patent troll narrative and framed reform as a means to curb abuses that harmed innovators and rewarded speculators. In doing this, he had the full and vocal backing of Darryl Issa from California, chairman of the Subcommittee on Courts, IP and the Internet. Neither stood for re-election in November. This means that come January 2019, two of Big Tech’s major patent go-to guys in the legislature will no longer be there.

Instead, when the new Congress convenes, the smart money is on the Judiciary Committee’s current ranking Democrat, Jerry Nadler, succeeding Goodlatte; while the ranking member of the IP subcommittee, Hank Johnson, could well take over from Issa. In contrast to the Republicans they are set to succeed, neither Democrat has given much indication of having a strong relationship with any particular part of the patent lobby.

Lone inventors loom up

Meanwhile, there is a sharp slow-down in the amount of patent litigation taking place in the United States. This comes at a time when data has emerged which indicates that a number of suits previously pinned on PAEs may actually have been filed by lone inventors.

In October, Unified Patents published figures which showed that lawsuits brought by individual NPEs – described as entities “owned or controlled by an individual inventor who is primarily focused on monetising inventions patented by the individual inventor” – had so far accounted for a little under 600 new suits during 2018, which was slightly more than half the number filed by PAEs.

Although the figures indicate that filings from individuals increased significantly between 2016 and 2017, the jump can largely be explained by Unified digging a bit more deeply to look at whether an NPE is essentially an individual plaintiff. This resulted in the firm attributing a number of suits to individuals for the first time last year when in previous years they may have been attributed to PAEs and other larger entities.

What this suggests is that throughout the last few years patent lawsuits initiated by that great American icon – the lone inventor – could well have been a lot more frequent than was previously thought.

That matters politically: it is one thing to approve laws that have been framed as a way to prevent the system being gamed, it is quite another to wave through legislation that has the potential to harm the United States’ latest generation of the kind of people Iancu name-checked in his Texas speech: “Edison, Bell, and the Wright Brothers; Boyer and Cohen and Caruthers; Ted Hoff and Frances Arnold.”

US patent filing statistics by year and by plaintiff type

 NPE (patent assertion entity)NPE (small company)NPE (individual)UniversityOperating company
2014

2,562

216

305

241,858
2015

3,580

132

197

101,919
2016

2,200

173

257

281,724
2017

1,384

133

582

201,538
2018*

1,112

99

592

91,568

*2018 numbers are for Q1-Q3

Source: Unified Patents

A challenge for the Valley

For those in Silicon Valley who are used to controlling the patent narrative and receiving an uncritical hearing in Washington DC, all this poses a major challenge: not just the need to keep further change on the agenda, but also to protect what has been secured up to now.

Already, Iancu is seeking to rebalance the pendulum at the PTAB; given that he also has the power to rework examination guidelines, more could be on the way. It is possible, too, that this may percolate down to the court level, so that judges become less willing to throw cases out on 101 grounds and the Federal Circuit becomes more inclined to uphold first-instance decisions. Who knows, a Supreme Court with more patent expertise available to it – thanks to Justice Gorsuch’s decision to appoint two IP specialists to clerk for him – might even start to roll-back on some of those rulings that have caused so much harm to patent owners over the last 10 to 15 years.

Right now, there is little indication of that happening but these are fluid, unpredictable times. Often in the recent past it has seemed that judicial opinions have reflected the way in which patents are perceived out in the wider world. Judges and their clerks cannot help but notice when the White House and Congress rail against abuses of the system and speculation at the expense of innovators. But if the executive and legislature no longer buy into an argument that the patent system is not fit for purpose, maybe the judiciary will be less inclined to believe it, too.

The trend is your friend, so the saying goes. Right now in the United States, Big Tech seems to have lost the Big Mo.