- - Monday, June 25, 2018

ANALYSIS/OPINION:

On Wednesday, the U.S. Patent and Trademark Office (USPTO) marked the granting of the nation’s 10 millionth patent. Patent filings and issuances are at historically high levels, with more than 2.8 million active patents in the United States, which is both good and troubling news.

This plethora of patenting is the scorecard of a championship American season of innovation. But it has also given rise to challenges that could cut that season short. With the USPTO receiving more than 650K patent applications a year and issuing more than 350,000 patents a year based on an average examination time of 19 hours per patent, many invalid patents have been mixed in with the valid and valuable ones in recent years.

The most innovative tech products — smart phones, for example — can be covered by tens or hundreds of thousands of patents. It is almost a certainty that many of those patents are invalid, leading to a contamination of the innovation ecosystem. The danger underscores the value of recent reforms that are helping to clear the system of the USPTO’s mistakes.

Coinciding with the recent record highs in U.S. patents being issued has been the passage and implementation of the America Invents Act, which created the inter-partes review (IPR) process. The IPR process has been a necessary advancement for improving patent quality and creating stability to innovators threatened by invalid patents.

With the increasing complexity and volume of new technology, patents that should not be granted — either because someone else already owned the technology or the public did — can slip by overworked USPTO examiners. Especially before the U.S. Supreme Court helped clarify patent subject matter eligibility in cases such as Alice vs. CLS Bank in 2014, there had been a deluge of low-quality patents feeding exploitative litigation, which threaten to freeze up confidence in the patent system and stall innovation.

But IPR has allowed the patent office to course correct mistakes it has made, rather than dragging each case of a challenged patent through the court system, which could take months if not years. It replaced the risks and costs of frivolous patents with the predictability and stability that entrepreneurs, patent holders, capital providers and corporations needed to go forward with investments.

The process is fair. It gives challengers and defenders a chance to be heard before an independent panel within the Patent Office, the Patent Trial and Appeal Board, which uses the same standards as patent examiners. Dissatisfied parties may appeal to federal court.

The process is selective. Over 99.8 percent of all active patents and 83 percent of litigated patents never face an IPR. Of the more than 8,000 petitions filed, only 16 percent have resulted in a loss for the patentee by a written decision invalidating all claims.

The board is careful in its reviews. Of the 3,120 petitions instituted and resolved, some or all patent claims survive in the majority (1,816 or 58 percent) of petitions. In fact, patentees win before the Patent Trial and Appeal Board on validity issues more often than in federal court.

Moreover, the process works, reducing by half the litigation that peaked in 2011.

The result? Over the past five years, since the adoption of the act and the launch of the IPR process, the 300 U.S. companies with the highest R&D spends collectively increased that spending by 44 percent. During that time, the Kauffman Index of Startup Activity shows a 194 percent increase in overall startup activity. Venture capital funding nearly doubled, and the United States climbing from 10th to 4th in the rankings of the Global Innovation Index.

The awarding of the 10 millionth patent is a good reminder that one reason the U.S. has achieved this level of success is the America Invents Act, and the IPR process it spawned. To protect America’s patent quality, this process needs to be preserved, protected and strengthened.

• John Thorne is a partner at Kellogg Hansen and general counsel of the High Tech Inventors Alliance, an association of Adobe, Amazon, Cisco, Dell, Google, Intel, Oracle and Salesforce.

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