Patent trolls are a big, pricey problem — and small businesses can’t afford it | Opinion

The right to self-defense is ingrained in the American tradition. At its core is the understanding that liberty is tied to the ability to defend yourself.

New rules proposed by the U.S. Patent and Trademark Office, however, run afoul of this tradition. For over a decade, the USPTO has been home to a review process that allows all businesses to defend themselves against baseless, draining patent infringement lawsuits. Now, under its new proposals, the agency would restrict access to and undermine its own patent quality review procedures by picking and choosing who gets the full protection of the law and who is left to fend for themselves.

Patents are supposed to be tools to defend intellectual property with, not something to defend yourself from. But entities called patent trolls have turned the system on its head. Patent trolls do not create or sell products. Instead, they obtain overly broad patents, often purchased from the original patent-holder, and weaponize them by filing meritless lawsuits and intimidating businesses into settling.

For example: A Michigan-based spice company was sued in 2016 by a troll that claimed it had patented emailed shipping notifications. A small salt producer in Seattle was sued by a North Carolina company that said it had obtained a patent for crucial components of e-commerce technology used by many small businesses. In both cases, the patent trolls demanded tens of thousands of dollars. For many small businesses, it costs less to simply pay.

If all patents issued were high-quality – novel, useful, and nonobvious – trolling would be less concerning. But patent examiners at the USPTO are overwhelmed with applications, and only have 19 hours, on average, to consider all relevant information and make a decision. As a result, many broad, duplicative patents go into circulation, ready for trolls to purchase and use in lawsuits.

The outcome is thousands of U.S. businesses being sued for having customer login pages and shopping carts on their websites, for emailing tracking numbers to customers after they make a purchase, and for a range of other standard operating practices.

Patent trolls are litigious and prolific

Troublingly, patent trolls are responsible for more than half of all U.S. patent litigation. They are the “ambulance chasers” of the intellectual property world, only with patent trolls there is never any accident — i.e. infringement — in the first place. It is simply legal extortion that many businesses can’t afford.

Congress already addressed patent trolling once — in 2011 — when it passed the America Invents Act (AIA), bipartisan legislation that created a process at the USPTO called "inter partes review," or IPR. The concept was simple. Congress acknowledged that, due to time and resource limitations, not every patent the USPTO grants is high-quality, and that poor-quality patents were being leveraged by patent trolls in wasteful lawsuits. Through IPR, the public could petition patent office experts to review patents, and invalidate the ones that shouldn’t have been originally issued. It gave businesses a new tool to use in self-defense, and got them out of a no-win situation – paying a settlement, or paying to defend themselves in court.

IPR didn’t eliminate patent trolling, but it did help businesses defend themselves from egregious patent troll abuses, and in doing so strengthened America’s position against global competitors.

Now, the USPTO has proposed undercutting this defense by limiting what it calls “serial petitions” or “multiple challenges.”

In layman’s terms? Unilateral disarmament for those victimized by patent trolls.

Advocates for the USPTO’s proposed policy changes argue that IPRs should be one-and-done. In other words, if a business files for patent review and the patent isn’t invalidated, then that should prevent other businesses from asking the USPTO to review the same patent in the future.

The new proposals consider, absent exceptional circumstances, allowing just one petition for review to be filed per patent claim. Even if a patent isn't reviewed, a previous request for review precludes future petitions.

In addition to the rules drastically exceeding agency authority, there is a serious flaw with this logic: Patent trolls’ lawsuits aren’t one-and-done. In fact, trolls use the same patent in lawsuits over a span of years, targeting dozens or even hundreds of different businesses.

One-and-done patent review would unfairly punish businesses targeted by patent trolls later — taking away their legal right to petition for review — because of a previous challenge they had nothing to do with.

This would be especially damaging for Michigan’s auto manufacturers, retailers and restaurants, among others — putting a bullseye on their backs as patent trolls declare open season on businesses that are creating jobs, growing our economy, and serving our communities.

Is China getting in on the action?

Patents are designed to protect the intellectual property of America’s creative, inventor class. During my time as Chairman of the House Intelligence Committee, the committee was consistently briefed on attacks targeting American innovation. Foreign adversaries, especially the Chinese Communist Party, were attempting to steal evolving capabilities from our research universities and our businesses. These tactics still threaten America’s economic future, which has always been solidly founded on innovation and risk taking.

There is evidence emerging that our adversaries in China and beyond see patent trolling as an opportunity and are investing in lawsuits to stymie productive American industries. This August, in Delaware, a plaintiff was forced to disclose that their lawsuit was funded by PurpleVine IP, a Chinese limited liability company. In this case, the troll is going after a Connecticut-based audio electronics producer. It is just one example of a larger vulnerability in our legal system.

This rule change can't happen

When Congress drafted the AIA, it anticipated the serial petition concern and balanced it with making patent review accessible. Under current law, restrictions on the same petitioner's ability to challenge the same patent multiple times already safeguard against reviews being used to harassment of legitimate patent owners.

All targets of abusive litigation should have an equal opportunity to defend themselves — especially now that we know these threats are often coming from overseas. Business owners should be given peace of mind in knowing they won’t have legal protections taken away because of a previous review that they had no knowledge of, or because a previous petitioner submitted a sub-par challenge.

One-and-done style patent review would create a harmful imbalance in which patent trolls would be able to file serial lawsuits, but their targets would only get one chance to defend themselves through patent office review.

So long as patent trolls are still turning low-quality patents into legal weapons, businesses must have all options to defend themselves left on the table. It is absolutely essential that patent law allows Americans to defend ourselves and our inherent strength of creativity and innovation in a global environment that has lots of bad actors.

Peter Hoekstra is a Distinguished Senior Fellow at Gatestone Institute. He was U.S. Ambassador to the Netherlands from 2018-2021. He also served 18 years in the U.S. House of Representatives representing the Second District of Michigan, including as Chairman and Ranking Member of the House Intelligence Committee. Submit a letter to the editor at freep.com/letters.

This article originally appeared on Detroit Free Press: Proposed patent rules could help China stymie American industries