Supreme Court Affirms Bad Patents Exist, Saves Review Process

By Beau Phillips

This article originally appeared in Bloomberg Law

The U.S. Supreme Court recently reaffirmed the process that the Patent and Trademark Office uses to take another look and eliminate bad patents. Beau Phillips, executive director of US*Made, says Justice Ruth Bader Ginsburg’s decision delivered an important message during a time when some on Capitol Hill deny there are bad patents and want to reform the review system.

In April, the U.S. Supreme Court made a strong statement against “bad patents” (patents granted despite failing the tests of patentability) and in support of the integrity of America’s patent system. 

In a 7-2 ruling little noted outside the rarified world of intellectual property law, the justices reaffirmed the process that the Patent and Trademark Office (PTO) uses to take another look and eliminate bad patents. Meanwhile, some in Congress want to weaken this critical safeguard.

The legal issue in Thryv Inc. v. Click-to-Call Technologies was simple: Could a court overturn the PTO’s determination that a deadline had not passed for challenging a bad patent?

The inter partes review (IPR) established under the 2011 America Invents Act, created a new process for challenging the validity of bad patent claims before the PTO. If the PTO finds the petition has merit and certain additional criteria are met (for example, as was at issue in Thryv, the petition must be filed before a non-appealable deadline), an IPR proceeding begins before the PTO’s Patent Trial and Appeal Board (PTAB). With the petitioner and patentholder’s participation, the PTAB holds a hearing to determine if the challenged patent claims are valid. 

The Supreme Court decided that overturning the ruling on deadlines “would unwind agency proceedings determining patentability and leave bad patents enforceable.”

An Important Message From Ginsburg

Justice Ruth Bader Ginsburg’s decision delivered an important message. At a time when some on Capitol Hill deny that there are “bad patents” and want to “reform” IPR to the point of making it useless, a Supreme Court decision that spans ideological differences among the court’s members affirms that there are bad patents and IPR is needed to fix them. 

Bad patents are often used to threaten or file dubious litigation. Such predatory patent litigation hurts no part of our economy more than small American manufacturers, who are often thinly capitalized. When launching new products, they face start-up costs (including for R&D, building or expanding a fabrication facility, hiring additional workers and creating distribution systems) that stretch their limited resources.

So, just as they are about to make their greatest contribution to the future of our country, they become uniquely vulnerable to these rent-seeking patent plaintiffs. A firm is faced with a choice of paying up in a quick settlement in a case that relies on an invalid patent or diverting time and attention to an expensive and prolonged legal battle. 

If it chooses the former, bad patents remain in the system to threaten other firms for a quick payday. If it chooses the latter, the typical patent suit takes five years and over $3 million to litigate. Meanwhile, the firm suffers and the resulting costs and delays could put it out of business.

U.S. manufacturing has been in an economic slump. Over the last 15 years, the U.S. percentage of GDP from manufacturing has shrunk from 13% to 11%. The current coronavirus crisis is laying bare this reality and everyone is realizing the importance of U.S. manufacturing—to critical infrastructure, public safety and even national strategic power. 

IPR is needed now more than ever to unleash the innovative potential of U.S manufacturing. It is not the time to backslide and return to the time where a predatory patent litigant can use bad patents to give U.S. manufacturers a highwayman’s choice—their money or their business.

As the nation starts to emerge from its shutdown economy, Congress should listen to Justice Ginsburg. As she wrote in her decision, “[b]y providing inter partes review, Congress, concerned about overpatenting and its diminishment of competition, sought to weed out bad patent claims efficiently.”

America should be guided by this wisdom and preserve IPR. Bad patents hurt everyone.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Beau Phillips is executive director of US*MADE, a coalition of manufacturers working to protect U.S. employers from abusive patent litigation.