EFF recently won our challenge to invalidate claims of the “podcasting patent” using a procedure at the Patent Office called inter partes review. This procedure allowed us to challenge a patent that was being used to demand licenses from individual podcasters, even though EFF itself had never been threatened by the patent owner. EFF’s ability to file this petition was important because many of those targeted by the patent owner—small podcasters—would be unable to afford the $22,000 filing fees to challenge the patent, let alone the attorneys’ fees that would come along with it. Also, if an individual podcaster had filed an inter partes review it would have faced a risk of retaliation in the form of a district court lawsuit from Personal Audio. Instead, EFF was able to defend the public interest on behalf of the community as a whole.
But if Sen. Chris Coons has his way, EFF would not be able to file such challenges anymore. Specifically, Sen. Coons wants to amend the Patent Act to require that anyone who wants to challenge a patent using inter partes review would have had to have been accused of infringement by the patent owner.
This is a step backward. As we previously explained, the changes Sen. Coons proposes would gut the ability of non-profit organizations like EFF to protect the community when the community is unable to protect itself. Patents that have been wrongly granted hurt the public, and the public should have a right to challenge them.
Sen. Coons justifies this proposed change in the law because of perceived “abuse” of the system. Specifically, a few people have publicly challenged some important patents with the intent of making a quick buck by shorting the patent owner’s stock.
There are better solutions to the perceived problem. (We say “perceived” because, if a patent is bad, should it really matter who is challenging it? If it gets invalidated, the public gets the benefit of one fewer bad patent out there being used to give a company an undeserved monopoly). First, it’s not even clear (login req.) this is a problem. A recent challenge to a patent caused barely a blip in stock price—indeed, some stocks have gone down, but some have gone up after a challenge. Second, if this is a problem, this is not a patent problem. This sort of behavior is better regulated by securities law. The SEC should be who we turn to if we think this type of behavior is bad, not the USPTO. Finally, there are better ways to address the issue of stock price manipulation than banning public interest groups from challenging patents. One possible easy fix is to require the parties to disclose any financial interests they may have in the patent. The market could then take that into consideration.
There are problems with the patent system, but Sen. Coons’ bill is not the way to fix them. The Innovation Act deals with the problem of abusive litigation by patent trolls. Tell your lawmaker: Let's stop patent trolls. Pass the Innovation Act!