Unicorns fall short on fighting patent trolls

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GUEST:

When it comes to dealing with patent trolls, we’re seeing a big difference between how the tech giants (Apple, Google, etc.) handle the problem and how unicorns do. And it’s the unicorns that are playing a worse hand.

Although about a third of unicorns have been sued for patent infringement, only a couple of them have used a new United States Patent and Trademark Office (USPTO) process called Inter Partes Review (IPR) to deal with patent assertion entities (PAEs), or patent trolls. The technology giants, on the other hand, file hundreds of IPRs a year, most of them against patent trolls. Given that IPRs are often an order of magnitude less expensive than litigation and have a pretty good chance of halting a patent infringement suit in its track, according to the 2015 Patent Disputes report from UnifiedPatents, the fact that unicorns and other private companies have yet to catch on is a little bit surprising.

IPRs have become a go-to weapon against patent trolls, and the unique circumstances that unicorns and other private companies face arguably make IPRs even more attractive. Imagine a unicorn or other private company trying to fight a time-consuming, resource-draining patent infringement lawsuit against a patent troll while also preparing for an IPO!

The new IPR process was created in 2013 so that accused infringers could efficiently challenge the validity of a patent asserted in a lawsuit. An IPR petitioner (e.g., the accused infringer) can ask the court to stay the lawsuit pending the outcome of the IPR, which can pause litigation costs. The new IPR process has seen record growth since its institution, from 514 petitions filed in 2013 to over 1,700 in 2015, according to the UnifiedPatents report.

petitions by year

The report shows that in 2015, nearly 25 percent of all patent cases filed were IPRs. And about 40 percent of the IPRs filed in 2015 were directed at patent trolls. IPRs have quickly become a favored strategy among technology giants like Apple, Google, Samsung, Microsoft, Intel, and IBM because IPRs are often cheaper, faster, and more effective than litigation, according to the AIPLA 2015 Report of the Economic Survey.

Apple, for example, has filed 184 IPRs. The IPR process can be much less expensive (e.g., $ 300,000 v. $ 3 million) and at least twice as fast (an average duration of about 17 months from filing to final decision v. 2.5 to 5 years in court) as litigation, per the AIPLA report. In addition, for IPR petitions that are granted, the win rate is above 80 percent. Based on the above results, the Patent Trial and Appeal Board (PTAB) of the USPTO has become the second busiest patent docket in the country.

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However, unexpectedly, unicorns appear slow to adopt IPRs as part of their patent defense strategy. To date, only two out of 24 unicorns sued by patent trolls have responded by filing an IPR. Those two unicorns have filed four IPRs against patent trolls out of 72 actions, for a ratio of one IPR for every 18 patent troll lawsuits (1:18), while the overall ratio is about 1:5 as of January 2016, according to USPTO Patent Trial and Appeal Board data.

Some possible reasons for unicorns’ slow adoption of IPRs are their technical nature, the complexity of the process, and unfamiliarity. IPRs differ considerably from litigation; the rules and procedures are more like other USPTO proceedings and often focus on specific technology details.

[Editor’s note: A version of this story originally appeared on Law360.]

Jeff Toler is the founder of Toler Law Group, PC and a registered patent attorney with over 20 years of experience in complex intellectual property matters. You can reach him at [email protected].

Robert Paladino is an attorney at Toler Law Group, PC.

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