November 2023
Randy Landreneau (president, US Inventor; president, Complete Product Development) and Dirk Tomsin (director of projects, US Inventor; co-owner, CrossFit Untapped) gave us reason to think that our patent system is too unstable for individual inventors.
Inventing and marketing a product take effort, insight, money, and time. Innovators want to be reimbursed or rewarded for their investment in helping others. Our government knows that a thriving economy depends on inventions. So to keep inventions coming, it rewards inventors with patents—legal protection from market competition for a limited time in exchange for sharing the invention with the public. This protection consists of courts and a legal structure that are meant to help inventors repel competitors. Innovators need this protection to be stable so they can estimate the costs, benefits, and risks of starting a new business. Unfortunately patents are too often unstable.
Molly Metz
Consider Molly Metz. She and Paul Borth invented a jump rope and spent $30,000 to patent it ('809 in 2010 and '208 in 2012). Metz sold that jump rope through her company JumpNrope and opened a gym dedicated in large part to jumping rope. Companies in India and China immediately began making, and American companies immediately began importing and selling, her jump rope without her permission. So Metz enforced her patents.
By 2018 she had stopped all U.S. companies, except Rogue Fitness, from selling her jump rope without her permission. In 2018 in a U.S. District Court, Metz sued to stop Rogue Fitness from infringing her patents. Before the case was decided, Rogue Fitness challenged the USPTO (‘586 and ‘587), claiming that the USPTO had invalidly issued Metz’s patents. Challenged, not in a court (part of our government’s judicial branch), but in the USPTO’s administrative tribunal, the Patent Trial and Appeal Board (PTAB; part of our government’s executive branch). PTAB invalidated both patents, so Metz appealed to the Court of Appeals for the Federal Circuit. As is typical with tribunal cases, the court deferred to the tribunal (PTAB) and upheld its decision. Metz appealed to the Supreme Court, which declined to hear the case.
This put Metz far behind square one. Not only did she lose her patents, she lost her trust in our patent system and lost the time, effort, and several hundred thousand dollars she invested in getting and defending her patents. As salt on her wound, the public is now free to make, sell, and use her jump rope. Metz is not the only inventor to suffer this misfortune.
The government is achieving its immediate objective of stimulating the economy. But by killing the goose that laid the golden egg, it is failing to develop a thriving economy.
Patent Office Error
The patent office gave and the patent office took away. This federal agency disagreed with itself as to the patentability of Metz’s inventions before and after granting her patents. The simplest explanation for this is that the USPTO failed at quality control. Another explanation preferred by some is that PTAB is unfair; that it favors big over small businesses, that it practices crony capitalism. Either way, an error made by the USPTO hurt Metz. Shouldn’t the USPTO be accountable to her? Couldn’t Congress pass a law that limits patent invalidation to, say, one year from issue? Or pass a law that gives an inventor clear title to a patent when it is issued? A thriving economy requires a stable legal environment.
Administrative Government
In our legal system an administrative tribunal (such as PTAB) usually decides disputes between citizens and federal agencies (such as the USPTO). Courts have the final say, but usually defer to tribunal decisions. Whether tribunals (or administrative government in general) are constitutional is uncertain. Regardless, examples of tribunal practices that are widely seen as questionable, irregular, or abusive abound. PTAB is no exception.
PTAB or Court?
Patent challengers often prefer to start their legal actions in PTAB instead of in a district court because:
Their burden of proof is lighter in PTAB (preponderance of the evidence) than in court (clear and convincing evidence);
PTAB reviews inter partes cases (such as Metz’s) only if the USPTO director thinks the challenger is likely to win invalidation of at least one patent claim (the success rate of challengers is 84%); courts hear almost all challenges;
PTAB judges are more comfortable than is a court jury with invalidating a patent;
PTAB rarely allows live testimony, so testimony from an affable charismatic witness for a patent owner is almost always reduced to a submitted document; courts routinely allow live testimony;
PTAB is usually concerned only with technical merit while courts may also be concerned with social issues (eg, an heroic lone inventor fighting a corporation); and
PTAB (several hundred thousand dollars) is much less expensive than a court (several million dollars).
Permanent Injunctions
If Metz’s patents had been found valid, would the patent system have stopped the infringers? Maybe not. Before 2006, the Court of Appeals for the Federal Circuit would almost always grant a permanent injunction to stop infringement. The Supreme Court ended that in eBay v. MercExchange. To get a permanent injunction, Metz would have had to show that:
(1) She suffered an irreparable injury;
(2) Available legal remedies were inadequate to compensate for that injury;
(3) Considering the balance of hardships between Metz and the defendant, a remedy in equity was warranted; and
(4) The public interest would not have been disserved by a permanent injunction.
This decision disconnects a patent owner’s right to exclude from how to exclude. For example, a patent owner might be compensated with monetary damages (which are typically a small fraction of the infringer’s profits), but not with a permanent injunction, for infringement. Different rules now apply to patents and to property, so it may be no longer useful to think of patents as property.
Patent law favors corporations over individuals. Before the Court’s decision, the uncertainty and high cost of patent litigation and the ability to have a patent re-examined encouraged corporations to infringe patents held by individuals. The Court’s decision encouraged corporations even more by making permanent injunctions against infringement less available. In particular, it will be difficult for a patent owner to show irreparable injury if he licenses, but does not make, use, or sell, embodiments of the invention.
Individual Inventors
Patents held by individuals are still valuable. Inventions that are not too profitable are unlikely to attract the attention of corporations. The patent system worked for Metz until she had to contend with Rogue Fitness.
Folks at U.S. Inventor are working hard to make patents more useful to the individual inventor. For more information, to get involved, or to support them, take a look at their web site.
Thank you, Mr. Landreneau and Mr. Tomsin, for helping us understand the state of American innovation.