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Patents Have Entered the Upside Down

In a landscape of amorphous patent rights, shifting legal precedence, toothless expert opinions, fluctuating patent values, and deafeningly silent Supreme Court justices, the U.S. patent system has been a display of the absurd.

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Ask 10 professionals for their attitude on the current state of patents, and you’ll receive ten distinctly different opinions ranging anywhere from the incredibly negative patents-are-dying attitude to the overly optimistic everything-is-fine-here outlook. The consternation of it all is that each of those 10 professionals would be absolutely right in their estimations, and entirely wrong as well. And that’s the patent world in which we’ve found ourselves during the entirety of 2019 and into 2020—everyone is wrong, and everyone is right, because no one actually knows which way is up anymore. We have officially entered the upside down.

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Two Steps Forward, Two Steps Back

For every positive indication of an improving U.S. patent system, there has been an equally negative counter-signal from the market, along with multiple nonsensical signs. For every $200M patent infringement verdict, there’s an about-face of a $500M verdict in a decade-long disagreement. While the USPTO director Andrei Iancu releases official guidelines for patent subject matter eligibility—presumably in an effort to reestablish certainty within the U.S. patent system—the courts simultaneously undermine any rational person’s ability to place their feet on firm patent ground. (Should you need examples of the legal quick sand I speak of, see some of this year’s hit opinions invalidating a garage door opener, an electric vehicle charger, check processing, or medical diagnostic methods.)

While it seems clear to many that there is not only rampant patent confusion, but a more fundamental problem at hand, it has taken intellectual property investment and innovation travelling outside of the U.S. before any kind of majority began to take notice. In an effort to re-strengthen patent rights for America’s innovators, a U.S. Senate subcommittee has been formed. In recent hearings, Senators Coons (D-Del.) and Tillis (R- N.C.) provided testimony along with 43 other experts to the subcommittee on Intellectual Property, the majority of which advocated for stronger patent rights. The senators’ stance is clear, as is that of the majority of those who provided testimony—the patent system has been hijacked by large tech companies and needs repair. As the senators wrote, “[the patent system] is now at risk, because our patent laws have become overly complicated, riddled by uncertainty, and, frankly, hostile to innovation.”

Despite concern about how we got to this point over the last half-decade, the mere existence of the subcommittee seems to be a positive indication that change is on the horizon. The reconstitution of a robust U.S. patent system providing clarity for everyone in the market is ostensibly nearly within our grasp. Yet here we stand, seemingly on the exact same marshy patent ground we were sinking in at the beginning of the year. The Federal Circuit tries to convince us all that they’re legally impotent because of the Supreme Court, who continues to remain conspicuously silent. All the while, many of us pretend to know exactly which way is up.

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Portrait of a Perplexing Patent System

For those that still don’t understand the confusion of it all, let me illuminate you with an anecdote. An inventor of mobile phone related technology had tried to sell his patent a few years ago. After years toiling over his invention, multiple false starts trying to solve how to develop a company around his innovation, and tens of thousands of dollars of personal investment, he finally decided it was time to let go and sell his patent. He was willing to sell his valuable patented innovation for as low as 5-figures, but he was given the cold shoulder from every tech company from California to Massachusetts, from the UK to Japan. No one would consider his patent seriously. The inventor grew depressed. A passion in which he had invested for many years was vanishing right in front of him. Amidst dark days for him personally, he let his patent expire. Like countless inventors in the same situation right now, he had given up hope in the patent system. 

But this is where the story turns on its head. This is where the current system doesn’t make sense. Early in 2019, the inventor was approached by a group that felt he was handed a raw deal. This group saw value in his patent, even as an expired asset. They agreed to help the inventor salvage whatever they could of his decades of effort. Filing a few lawsuits for past infringement to defend his rights in the U.S., the inventor soon found that a large multinational phone and electronics company wanted to sit down with him. They were offering to take a non-exclusive license to his patent, mind you, after being specifically approached to consider purchasing the patents very recently. The company offered to take a license on the patent for mid-6-figure value and the inventor accepted. 

To recap, rather than purchasing and owning the patent outright, this company elected to take a non-exclusive license to the patent for 10x the price. Ethical discussions aside, are we sure the economics of efficient infringement are sound?

This inventor’s story is one of far too many like it, and it is only one small corner of what has become of the patent landscape. There has been a growing frustration from America’s innovators and inventors that appears to be finally bubbling over. How can you blame them? How can you watch inventor Paula Murgia’s emotionally heart-wrenching description of having her patents invalidated by the PTAB after years of money, emotion, and time were invested under the presumption of validity she was offered by the USPTO?

But again, it’s not all gloom-and-doom. The inventor of the mobile phone related technology described above did find a positive outcome to his circuitous journey. Or take another example of a recent client. After over twenty years of successful operation, they became involved in a data breach that threatened their existence. Fighting a PR nightmare, they watched as enterprise customers began to pull their business one by one. They endured multiple rounds of painful layoffs leaving only management personnel remaining, until finally the bank called in their loan. They were sunk.

They were sunk, that is, until a buyer emerged for their patent portfolio. Decades of R&D and patent innovation investment provided them with a valuable intellectual property portfolio. The sale of their patent portfolio, in turn, provided enough cash to pay back their loan and weather the PR storm until customers began to return. Their revival story is still evolving, but they appear to have beaten all odds to arise like a phoenix from the ashes. And that’s the value that the patent system should afford, isn’t it? Through years of research and investment, they created valuable technology. They should be rewarded for that, and we should all be in favor of a patent system that provides that kind of certainty and value. This client was lucky that the patent system got it right in this instance, but there are countless other companies that haven’t been so lucky.

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Get Cozy

So, while all is not lost, all is also not right. Every week we see new indications of the patent market improving and decaying. Inventors are disillusioned. Startups aren’t sure if they should be investing in patents or if they should be ignoring them completely. Patent attorneys are confused, as are the courts, who are doing very little by way of extricating us all from this inanity, particularly the Federal Circuit. Large tech companies are equally perplexed, some no longer sure of the significance of their patent investment over the years, while others are entirely dismissive of patents altogether. Everyone is wrong. Everyone is right. And no one knows which is which. 

Welcome to the upside down, my friends. Get cozy, because who knows when we’ll have the clarity this system needs.

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This article, written by Vitek IP, originally was published on IPwatchdog.

Need assistance with your patent portfolio? Looking for patent analysis support? Wanting to sell your patents and maximize the value? Contact Vitek today.

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Vitek IP’s blog provides active thoughts on the state of the patent market. The words written here are not intended to be legal or investment advice, nor should they be taken that way. We know you are an intelligent, rational human being and you are not considering an opinion blog to be anything more than that–an opinion. Glad we all agree.