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A Big Tech Legislative Putsch Against Innovators

Lawmakers are billing bipartisan legislation recently introduced on Capitol Hill as a peace agreement in the ongoing policy war between startup innovators and Big Tech behemoths. In truth, however, the Patent Trial and Appeal Board Reform Act would lock in a massive victory for Big Tech.

Over the past several decades, Big Tech firms have increasingly tried to poach smaller rivals’ technologies rather than licensing those ideas and paying royalties. Small inventors have fought back by suing in federal court for patent infringement. Many times, they’ve been completely vindicated and won big judgments.

Just look at some recent examples. Last year, a federal jury ordered Apple to pay $300 million in damages for infringing on Optis Wireless Technology’s intellectual property. More recently, in January, a different court found that Google had stolen smart speaker technology from Sonos, a much smaller firm.

Big Tech executives obviously don’t enjoy paying out huge judgments, but neither are they willing to pay licensing fees if they can get away with helping themselves to the inventions of others. So about a decade ago, they lobbied their allies in Congress to create a quasi-judicial body within the U.S. Patent and Trademark Office with authority to review and invalidate patents.

Essentially, Big Tech firms figured they couldn’t get sued for patent infringement if there was no valid patent to infringe upon.

Their strategy worked, at least at first.

Lawmakers designed the Patent Trial and Appeal Board (PTAB), the body in question, to operate in a way that favors Big Tech and other companies challenging the validity of existing patents on technicalities. The PTAB has at least partially invalidated 84% of patents in the cases it has reviewed and ruled on.

In theory, the PTAB is supposed to create a quicker avenue for challenges to patents that are so vague they should never have been granted in the first place.

But in practice, the one-sided results have two possible explanations. The first is that USPTO does a routinely lousy job examining and issuing patents in the first place, which is not true. The second, which is on the mark, is that Big Tech firms have weaponized the PTAB, filing repeated challenges in a desperate race to strike down their smaller rivals’ patents — before those patent holders can win their infringement lawsuits in court.

To rein in this abuse, the USPTO put new safeguards in place in 2018-2020. Most notably, the so-called Fintiv principles give the agency the flexibility not to initiate a PTAB review in certain circumstances, such as when the patent in question is already subject to ongoing litigation in federal courts.

This makes sense. Letting PTAB hear such challenges while companies are already duking it out in court would force inventors to defend against Big Tech’s massively bankrolled assaults in two separate theaters. It’s akin to double jeopardy.

Big Tech executives and their lobbyists have complained bitterly over the Fintiv principles, claiming it limits their ability to challenge “low-quality” patents.

Baloney. There’s scant evidence to support Big Tech’s claims that the United States faces a growing epidemic of faulty patents. The rate of patent challenges has remained steady for a century: just 0.2% of patents approved by the USPTO are ultimately disputed.

If the U.S. Patent and Trademark Office were routinely doling out overly vague patents, that figure would be orders of magnitude larger.

Properly viewed, USPTO’s adoption of the Fintiv principles provided the reform PTAB urgently needed. So now Big Tech is looking to its friends in Congress to reverse Fintiv legislatively with the ironically named PTAB Reform Act. Doing so would reopen the floodgates to new patent-invalidation attempts before PTAB, including when federal court proceedings have already commenced.

The “reform” legislation throws a few bones to the small inventors hauled before PTAB, calling for USPTO to pay for their legal representation before the board, at least in some cases. But its real purpose is to wedge the door open permanently for multiple duplicative patent challenges.

That’s just what Big Tech wants. Lawmakers should reject this bogus compromise and let the Fintiv principles stand.

Andrew Langer is chairman of the Institute for Regulatory Analysis and Engagement, a non-partisan, academic public policy organization dedicated to assessing the impacts of proposed rules and other regulatory proceedings on individual economic sectors and the U.S. economy as a whole.

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