The U.S. patent system is being used to hinder innovation. It needs reform and there is a critical fix that can be made today to ensure the system works for all types of entrepreneurs.
The Senate Judiciary Committee held a confirmation hearing for the Biden administration's nominee to lead the U.S. Patent and Trademark Office. The NHK-Fintiv rule was imposed by the previous director of the USPTO in contradiction to legislation passed by Congress. NHK-Fintiv restricts access to transparent expert review at the USPTO, instead forcing innovators to enter into expensive litigation or settlements.
The issue is important to the U.S. innovation economy at large and this is reflected in the prominence of this questioning during a short hearing. The next director will have to deal with aspects of NHK-Fintiv once confirmed. The USPTO can act now to protect American inventors.
The inter partes review process was created by the America Invents Act. Businesses can spend less time and money on frivolous litigation and more time on transparent, expert judges if they choose to use the Intellectual Property Rights. This review is important because not everyone is in good faith with their patent claims. In the last few years, more than half of all patent litigation has involved groups known as non-practicing entities.
Patent troll companies are shell companies that buy unused, broad patents and then use them to attack legitimate American inventors. Patent troll never intend to use the patents they purchase to produce anything of value. They only exist to extort judgments and settlements from companies that do.
We face a lot of patent troll at Intel. This is a bigger problem for smaller manufacturers. Thousands of identical demand letters have been sent to small businesses over the course of a single day. Many businesses pay a settlement or licensing fee rather than engage in extremely costly litigation, and they hope to hit the occasional jackpot with a non-expert jury ruling in their favor.
Patent troll litigation has consequences for American business. The average settlement is over $6.5 million and companies are forced to pay $29 billion in direct out-of-pocket costs every year. Not all businesses can afford to go through a lengthy trial and this money could be better spent on growing a business, hiring new workers or engaging in R&D. This type of predatory behavior was protected by the IPR process.
The NHK-Fintiv rule tilted the playing field back in favor of those who abuse the patent system when it was imposed by the previous director of the USPTO. If there is pending litigation, NHK-Fintiv can deny the patent if there is a valid claim. This flies in the face of the America Invents Act, which was supposed to make it easier to file expensive litigation when a patent is found invalid. Recent analysis has shown that the trial dates that the USPTO relies on for issuing these "discretionary denials" are inaccurate over 90 percent of the time.
Congress intended for NHK-Fintiv to be repealed in order to restore the IPR process. The Department of Commerce and the United States Patent and Trademark Office have the authority to protect American innovators now as the confirmation process moves forward.
They must act now. American inventors should not have the upper hand over patent troll for a day.
