Senators Tillis And Leahy Raise The Alarm About Judge Albright's Patent Forum Selling In Waco

from the good-for-them dept

At times I've been at odds with Senators Pat Leahy and Thom Tillis regarding their view on intellectual property (though Leahy has a good history on patent law -- Tillis... not so much). However, kudos to both of them for recognizing a very, very real problem in the way in which Judge Alan Albright has been engaged in what's been called jurisdiction selling.

If you don't recall, Judge Albright, who was a patent litigator before being appointed to the bench in Waco, Texas, went on tour advertising that patent plaintiffs should file in his district court (where he is the only judge). And, this resulted in a ton of cases all being filed there. And despite Supreme Court precedent that says judges need to be willing to transfer patent cases to proper venues, Albright has been thumbing his nose at higher courts and seeming to do everything he can to keep cases in his court.

And now, both Tillis and Leahy are ringing appropriate alarm bells over Albright's activities. Leahy and Tillis together have sent a letter to Supreme Court Chief Justice John Roberts to call out Judge Albright's behavior. It is not often that you see two Senators (who lead the IP subcommittee, no less) sending a letter to the Chief Justice to accuse a district court judge of being up to no good. It's quite a letter.

We write you to express our concern about problems with forum shopping in patent litigation. Our understanding is that in some judicial districts, plaintiffs are allowed to request their case be heard within a particular division. When the requested division has only one judge, this allows plaintiffs to effectively select the judge who will hear their case. We believe this creates an appearance of impropriety which damages the federal judiciary's reputation for the fair and equal administration of the law. Worse still, such behavior by plaintiffs can lead individual judges to engage in inappropriate conduct intended to attract and retain certain types of cases and litigants.

We are particularly concerned with this problem in the context of patent litigation. In the last two years our nation has seen a consolidation of a large portion of patent litigation before a single district court judge in Texas. In 2016 and 2017, this single district court heard only, on average, one patent case per year. Last year, however, nearly 800 patent cases were assigned to one judge in this district. This year, this district appears to be on track to have more than 900 cases. This means that roughly 25% of all the patent litigation in the entire United States is pending before just one of the nation’s more than 600 district court judges.

The concentration of patent litigation is no accident. We understand that a single judge in this district has openly solicited cases at lawyers’ meetings and other venues and urged patent plaintiffs to file their infringement actions in his court. Our understanding is that this single judge has also repeatedly ignored binding case law and abused his discretion in denying transfer motions. This has resulted in a flood of mandamus petitions being fled at the Federal Circuit. The Federal Circuit has been compelled to correct his clear and egregious abuses of discretion by granting mandamus relief and ordering the transfer of cases no fewer than 15 times in just the past two years.

The extreme concentration of patent litigation in one district and the unseemly and inappropriate conduct that has accompanied this phenomenon are, in our view, the result of an absence of adequate rules regulating judicial assignment and venue for patent cases within a district. While we do not know of similar problems occurring in other single-judge districts, it is not hard to imagine similar scenarios arising under a set of rules that allows a plaintiff to effectively choose a particular judge to hear their case. In order to correct these issues, we request that you direct the Judicial Conference to conduct a study of actual and potential abuses that the present situation has enabled. Additionally, we ask that such a study consider and implement appropriate reforms that you can take to address this issue. Finally, we ask that such a report provide legislative recommendations to ensure this problem does not arise in the future.

While simply asking for a study and exploring reforms may not seem like a big deal, it does seem like a warning shot. If something isn't done to fix this by the Judicial Conference, then Congress may need to step in.

Meanwhile, on the same day Tillis sent another letter (without Leahy) to the current commissioner for patents at the USPTO calling out a separate issue involving Judge Albright. This gets a bit deep into the weeds, but, as we've covered, there have been ongoing fights over the whole inter partes review process. This is where certain patents can be challenged before a special patent review board -- the Patent Trial & Appeal Board (PTAB) -- which is charged with determining whether or not the original patent was granted in error. Patent holders hate hate hate hate the PTAB/IPR process and have been looking to kill it for some time. A key part of their argument is often that it involves two different processes -- sometimes in parallel for killing a patent. The patent can be challenged both in court during a case, and before the PTAB via IPR. Last year, in the Apple v. Fintiv case, a rule was put forth that the PTAB would deny the IPR process to cases that were far enough along, to prevent two parallel challenges to the patent (with possibly opposing outcomes) happening at the same time.

This new letter from Tillis highlights how Albright appears to be using this ruling to block PTAB IPR challenges by scheduling unrealistic trial dates, which are then used to block the PTAB from going forward with an IPR.

As you know, Fintiv instructs the PTAB not to institute an Inter Partes Review (“IPR”) procedure to challenge a patents validity if the panel deems it to be more efficient to allow parallel district court litigation to proceed based on a balancing test comprising six non-dispositive factors. Again, while I strongly support the policies underlying Fintiv, my concern relates to the PTAB’s application of the second of these factors: the proximity of the court's trial date to the PTAB’s projected statutory deadline for a final written decision. Specifically. I am concerned that the PTAB’s historical practice of crediting unrealistic trial schedules. This has not only produced outcomes that are untethered from the policy underpinnings of the Fintiv rule, but it has also created harmful incentives for forum shopping and inappropriate judicial behavior.

The negative consequences are most pronounced in the Waco Division of the U.S. District Court for the Western District of Texas. The sole judge in that division schedules very early trial dates for all patent cases assigned to him. Often, these dates prove to be not just unrealistic, but they [sic] impossible to fulfill as multiple conflicting trials are frequently scheduled to occur on the same date before the same judge in the same courtroom. However, because PTAB panels interpret Fintiv to require scheduled trial dates to be taken at face value, panels have regularly exercised discretion to deny institution of IPRs in deference to litigation pending before that district.

Tillis doesn't hold back that this is mostly because of Judge Albright:

To be clear, Ibelieve judicial conduct is partly to blame for this situation. Once a case has been filed in the Waco Division, many defendants have found it all but impossible to persuade the division's sole judge to transfer the case to a more appropriate venue. In denying such transfers, the court has repeatedly ignored binding case law and abused his discretion. This misconduct has resulted in a flood of mandamus petitions being filed at the Federal Circuit, The Federal Circuit has been compelled to correct his clear and egregious abuses of discretion by granting mandamus relief and ordering the transfer of cases no fewer than 15 times in just the past two years.

Notably, in granting these petitions, the Federal Circuit has cast grave doubt on the reliability of the Waco Division's trial schedules and claims regarding efficiency of adjudication. The appellate court has strongly criticized the division's improper reliance on purportedly greater “congestion” in transferee courts in attempting to justify inappropriate denials of transfers under 28 U.S.C. § 1404(a). More specifically, the Federal Circuit has refused to credit the division's overly optimistic assumptions regarding the time-to-trial in cases, admonishing the division's judge that a “proper analysis” considers “the actual average time to trial rather than aggressively scheduled trial dates." Moreover, the circuit court has also implicitly questioned whether even amore accurate “proper analysis” based on precise caseload counts and the accurate time-to-trial statistics produces a reliable assessment of relative court congestion, characterizing this analysis as mere “speculation.”

Tillis concludes by basically saying that the PTAB should ignore trial dates set by Albright in doing a Fintiv analysis:

Based on the facts currently available to me, it is difficult to imagine any plausible justification for the continued reliance on the demonstrably inaccurate trial dates set by the Waco Division. I therefore ask that you undertake a study and review of this matter and consider whether Fintiv should be modified to account for unrealistic trial scheduling. I ask that you complete this review and implement appropriate reforms based on your findings by no later than December 31, 2021.

It's pretty incredible for a single judge to get this much attention, let alone two separate letters calling out his behavior. Of course, seeing as he's done little to change his behavior despite the Federal Circuit continuing to push back on his activities, it's unclear if any of this will change how Judge Albright acts.

Filed Under: alan albright, forum selling, forum shopping, inter partes review, ipr, john roberts, pat leahy, patents, ptab, thom tillis, uspto

Supreme Court Says Patent Review Judges Are Unconstitutional, But It Can Be Fixed If USPTO Director Can Overrule Their Decisions

from the well-that-creates-some-other-problems dept

As you may recall, a few weeks ago I wrote about how Congress was asking the GAO to investigate whether the director of the US Patent & Trademark Office had been interfering in determinations made by the Patent Trial and Appeal Board (PTAB). I'm not going to go into all of the background again (please read the original for that), but under the America Invents Act, a process for reviewing patents after they were granted was set up, known as the Inter Partes Review (IPR) process. This was important, because the granting of patents is a non-adversarial process, where patent examiners are not given very much time to actually review everything. So the IPR process allowed those (especially those with prior art) to kick off a process by which the PTAB would recheck to see if the original examiner made a mistake in granting a 20 year monopoly to someone.

Unfortunately, because the members of the PTAB are designated as Administrative Patent Judges (APJs), there was the question of whether or not they needed to be appointed by the President with Senate confirmation to abide by the Appointments Clause of the Constitution. That question has been hanging out in the Supreme Court for many months -- with the decision finally coming down this week. In arguing against this notion, the USPTO itself had claimed that the APJs were "interior officers" that don't need Senate confirmation, and part of their "proof" was that the Director of the PTO could review their decisions. This raised some alarms in Congress, because it certainly wasn't their intention (from everything stated so far) to allow the Director of the PTO to put their finger on the scale of what is and what is not patentable.

The full opinion from the Supreme Court is a bit of a mess -- with different Justices signing onto different parts. But the key bits to pull out of this are that the Supreme Court found that the APJs are (or have been) "Principal Officers" meaning they should have been appointed by the President and confirmed by the Senate.

History reinforces the conclusion that the unreviewable executive power exercised by APJs is incompatible with their status as inferior officers. Since the founding, principal officers have directed the decisions of inferior officers on matters of law as well as policy. Hamilton articulated the principle of constitutional accountability underlying such supervision in a 1792 Treasury circular. Writing as Secretary of the Treasury to the customs officials under his charge, he warned that any deviations from his instructions “would be subversive of uniformity in the execution of the laws.” 3 Works of Alexander Hamilton 557 (J. Hamilton ed. 1850). “The power to superintend,” he explained, “must imply a right to judge and direct,” thereby ensuring that “the responsibility for a wrong construction rests with the head of the department, when it proceeds from him.”

However, in then immediately inserts its own remedy, saying that everything is fixable if the Patent Office Director actually can review the IPR decisions.

In sum, we hold that 35 U. S. C. §6(c) is unenforceable as applied to the Director insofar as it prevents the Director from reviewing the decisions of the PTAB on his own. The Director may engage in such review and reach his own decision. When reviewing such a decision by the Director, a court must decide the case “conformably to the constitution, disregarding the law” placing restrictions on his review authority in violation of Article II

So, the good news here is that the important PTAB/IPR process remains alive. But it does seem quite worrisome that the end result is that any Director of the Patent Office can now step in and overrule the PTAB. One would hope that the political ramifications of doing so would prevent it, but it does seem that it's now possible that a Director who just doesn't like the whole IPR/PTAB process (and there are many patent system fans who hate it) could just automatically deny every single IPR.

And that seems very worrisome. Of course, all of this could be solved by making the APJs Senate confirmable, but apparently no one wants to bother with doing that. Alternatively, we could rethink the entire patent approval process altogether, so that it doesn't need to go back and realize it granted 20 year monopolies for no good reasons... but, you know, that would take actual effort.

Filed Under: appointments clause, oversight, patent appeals board, patent review, patentability, patents, ptab, supreme court, uspto

Congressional Committee Calls On GAO To Investigate Whether Patent Office Director Is Putting Thumb On The Scale Of Patent Reviews

from the very,-very-interesting dept

The chair and ranking member of the House IP subcommittee that covers intellectual property is now asking the Government Accountability Office (GAO) to investigate whether or not the Director of the Patent Office is pressuring the important Patent Trial and Appeal Board (PTAB) to make certain decisions on the validity of patents. There's a lot of important background here, but it's all kind of fascinating how two big legal issues are coalescing in this result, in which the USPTO's own legal arguments may reveal how the Director has been unfairly influencing decisions. The two key points to understand are (1) the Inter Partes Review (IPR) process, and (2) questions about the constitutionality of certain appointments -- both of which are issues that we've covered for years, that seem deep in the weeds, but turn out to be quite important.

First, we've got the IPR process. This was an effort that was put in place with the America Invents Act (AIA) back in 2012. It was a recognition (FINALLY) that the Patent Office was approving way too many bad and overly broad patents, that were then being abused to shake down companies. The fact that the USPTO was approving so many awful patents was a built in bug (or feature?) of the way the patent system works.

The process for getting a patent is not truly adversarial. You have the party seeking the patent, and the examiner. Yet examiners were often judged on how many applications they dealt with, rather than the quality of the patents they approved. So there's no party arguing for why something does not deserve a patent. In theory, the examiner might do that, but the incentive structure there is broken as well. There is something called a "final" rejection from a patent examiner, but it's not actually final, since the party seeking the patent can continue to file renewed requests/appeals forever. And with the Patent Office getting heat for having too long a backlog, sooner or later, there are strong incentives for the examiner to just approve a patent to get it off his or her docket.

Rather than fix the many inherent problems in this setup, the AIA introduced a compromise that was better than nothing. It would create this special PTAB, which anyone could use to challenge a previously granted patent. At that point (usually once someone started threatening or suing over a patent) then finally, there would be a more careful review, with an adversarial process, to examine whether or not the patent should have been granted in the first place. Patent trolls and their friends have hated the whole IPR process since it began and have tried a variety of ways to challenge it. In 2018, the biggest legal challenge to the whole IPR process was rejected by the Supreme Court, who said that of course the PTO can invalidate the patents it never should have granted.

But that hasn't stopped the efforts by trolls and friends to invalidate the IPR process. The latest attempt is in the US v. Arthrex case, in which it is argued that the "judges" on the PTAB are unconstitutional for violating the Constitution's appointments clause. That case was heard by the Supreme Court a few months ago and a ruling should be coming soon.

And that takes us to the other deep in the weeds issue we've talked about for over a decade: whether or not appointments to various quasi-legal tribunals within the executive branch violate the Constitution's appointments clause. The Appointments Clause says certain "principle officers" of the government, including judges, need to be nominated by the President and approved by the Senate. There have been questions for years about whether or not certain roles that were appointed by various department heads violated this clause. Back in 2012, for example, a court said that the Copyright Royalty Board nominations were unconstitutional (though the court then immediately worked around that issue with a sort of wink and a nudge).

So, now the question at the heart of Arthrex is whether or not the PTAB judges are constitutionally appointed, since they're appointed not by the President with the consent of the Senate, but directly by the director of the Patent Office. And, in that case, the US government (defending the constitutionality of the PTAB judges) claimed that they were not principal judges, but rather "inferior officers" who could be appointed by the PTO director. That's all very interesting, but a key argument made by the government in defending that was that the PTO Director controls the PTAB judges, including how they decide cases.

And while that may be necessary to prove that their appointments were constitutional under the Appointments clause, it rang some alarm bells because it sure as hell suggested that the PTAB might be deciding whether or not patents are valid not based on the evidence before it but based on what the PTO director wanted. And that would be a big problem.

And, so that finally gets us to the latest bit of news, in which Reps. Hank Johnson and Darrell Issa, a bipartisan sort of odd-couple who head up the IP subcommittee are asking the GAO to look into whether or not the USPTO director is actually pressuring the PTAB judges into deciding the validity of patents one way or the other:

Recently, the Supreme Court granted certiorari in United States v. Arthrex, Inc., an appeal from a Federal Circuit decision that determined that APJs were “primary officers of the United States” and, thus, unconstitutionally appointed without Senate confirmation. In that appeal, the government’s position is that APJs are instead “inferior officers” who do not require Senate confirmation because they are subject to significant oversight and control by the Director of the USPTO, who is a Senate-confirmed political appointee. The government argues that this control includes, for example, the ability of the Director to dictate the outcome of PTAB cases by controlling which APJs decide which cases (i.e., APJs who will decide each case as the Director wishes) and by providing policy directives that APJs are obligated to follow.

If the government’s arguments are accurate, PTAB cases may have been decided based on factors outside of the evidentiary record and public legal authority (e.g., statutes, regulations, court precedents) available to the parties. This possibility raises potential due process concerns and would be inconsistent with the intent of Congress in enacting the AIA.

There is then a long list of fairly specific requests for the GAO to investigate that could raise some eyebrows. Here are just a few:

The policies, written or unwritten, that exist at the USPTO to effectuate each of the above mechanisms, as well as the statutory or other legal authority that forms the basis for each of the above mechanisms.

How APJs understand the role of the Director in the decisions they reach in AIA cases, including APJs’ awareness of the above mechanisms and associated policies and the number of APJs who have been subject to one or more of them. Also, the impact that the exercise of these mechanisms and policies have had on the decision-making of APJs in AIA cases.

Whether any APJs have objected or dissented, or attempted to object or dissent, to the above mechanisms and policies, or the exercise of those mechanisms and policies in specific AIA cases. If so, the results of those objections and the processes that were made available to APJs to object or dissent. Also, how APJs understand the extent to which they may object or dissent.

How often the Director, or a designate thereof, has directly influenced or changed a decision in a specific AIA case (i.e., inter partes review, post-grant review, or covered business method review). Also, the way those decisions were influenced or changed by the Director, and the mechanisms that were used to influence or change those decisions.

Whether specific notice was provided to the parties in those cases indicating that the Director, or designate thereof, was influencing or changing a decision in the case, and the information included in any such notice. Also, whether the decisions themselves document that influence or change, and explain the reasoning or justification for it.

In other words... either the Patent Office director is unfairly controlling or strongly influencing PTAB IPR decisions or the Patent Office lied to the Supreme Court. The most charitable explanation, of course, is that the PTO director could step in and order certain decisions, but has chosen not to. But even that would be worrisome and problematic. None of this looks particularly good for the PTO.

Filed Under: appointments, darrell issa, gao, hank johnson, inter partes review, ipr, patents, ptab, uspto

Appeals Court Rejects Sketchy Plan To Pretend To Sell Patents To Native American Nation To Avoid Scrutiny

from the sovereign-assholery dept

Some ethically sketchy patent lawyers thought they had come up with a brilliant scam to avoid having awful patents scrutinized by the special review board created by Congress within the Patent Office -- a process known as "inter partes review" or IPR. This Patent and Trademark Appeals Board (PTAB) has been a useful tool in going back and reversing the mistakes made by patent examiners in letting through bad patents. However, back in September, we wrote about a fairly devious plan by the lawyers from the law firm of Shore Chan DePumpo to help their clients avoid a PTAB review. The situation began with a PTAB ruling back in early 2017 in a review of a patent held by the University of Florida. The University claimed sovereign immunity exempted it from the whole PTAB process under the 11th Amendment (universities claiming sovereign immunity in patent cases goes way back) and the PTAB agreed it had no jurisdiction.

Sensing an opportunity, the lawyers at Shore Chan DePumpo worked out a neat little scheme in which a pharmaceutical company would "sell" its patents to a Native American nation (in this case, the St. Regis Mohawk Tribe). The "sale" was in name only. The pharmaceutical companies retained not just an exclusive license to the patents, but basically all other rights as well. The only thing St. Regis got was a nice little income stream in exchange for having its sovereign status used to shield the pharma companies' patents from scrutiny before the PTAB.

I'm sure it seemed like a good idea to someone at the time, but it has been an utter failure. In October, the district court made it clear that this was a scam it didn't intend to allow to go forward. Then, in February, the PTAB itself denied the tribe's motion, pointing out that the PTAB wasn't stupid and totally understood the scam being played:

Upon consideration of the record, and for the reasons discussed below, we determine the Tribe has not established that the doctrine of tribal sovereign immunity should be applied to these proceedings. Furthermore, we determine that these proceedings can continue even without the Tribe's participation in view of Allergan's retained ownership interests in the challenged patents. The Tribe's Motion is therefore denied.

And now, just to add one more nail to the coffin of this terrible idea, the Federal Circuit, which traditionally is happy to rubber stamp any scam to keep patent owners happy, has rejected this plan as well. The CAFC ruling doesn't call out this procedure as a scam, but rather focuses in on the procedural questions of whether or not the IPR process is akin to an agency enforcement action (which would not be blocked by sovereign immunity) v. a civil lawsuit (which would be). It goes through a number of factors and decides that it's more of an agency action, and thus the tribe (acting as a front for the pharma companies) can't claim sovereign immunity and avoid having the Patent Office review its patents.

I guess the lawyers at Shore Chan DePumpo will just have to go back to sending frivolous takedown notices to bloggers who criticize the firm...

Filed Under: cafc, federal circuit, inter partes review, ipr, mohawk nation, patents, ptab, sham transactions, sovereign immunity, st. regis mohawk tribe, uspto
Companies: allergan, mylan

Food Fight Over: New Jersey Turnpike Authority Gets Told To Pound Sand By PTAB Over Florida Pizza Company's Logo

from the happy-endings dept

You may recall that way back in early 2015, we discussed the absurd story of the New Jersey Turnpike Authority suing Jersey Boardwalk Pizza for trademark infringement. At issue was that the pizza joint's owners, both from New Jersey, had crafted a clever logo that mimicked the logo for the Garden State Parkway, except it altered all the words to be the parlor's name and the food it served. It was a clear homage. Nobody denied it. That didn't change the fact, however, that the NJ Turnpike Authority is both not in the business of selling pizza, nor is it in the business of being in Florida. As such, there was zero potential for customer confusion, and the court dismissed the case.

You would have thought that would be the end of this story. But, no, the NJTPA decided to go the trademark office and try to have the pizza parlor's trademark invalidated. Why in the hell it bothered doing so is anyone's guess. Regardless, it didn't work out well for the Garden State.

Three administrative judges with the United States Patent and Trademark Office ruled Monday that Jersey Boardwalk Pizza can continue to use its logo, which the New Jersey Turnpike Authority argued was confusingly similar to the Parkway logo.

In dismissing the authority's claims, the patent office's governing board noted the similarities, but the restaurant's business is unrelated to the roadway. The case was heard in February and took three months to decide.

All sorts of questions leap to mind. What exactly did the folks at the NJTPA think was going to happen at the PTAB after a U.S. District Court refused to entertain this bullshit? Who exactly makes up the legal staff for the NJTPA and are they, or are they not, fully functioning human beings? Is there some kind of gas leak we should be aware of, or perhaps some sort of underground radiation resting just under this legal team's offices?

The most important question, however, is this: how much taxpayer money was flushed down the litigious toilet, all because a couple of New Jersey transplants wanted a callback to their home state for a Florida pizza business? If the answer to that question is greater than zero, it sure feels like there should be exit interviews going on post-haste.

Filed Under: new jersey, new jersey turnpike authority, pizza, ptab, trademark
Companies: jersey boardwalk pizza

It's Over: The Podcast Patent Troll's Patent is Officially And Completely Dead

from the podcast-away,-folks dept

Going back many years now we've written about the company Personal Audio, which built itself up as a patent troll for digital audio. Back in 2011, it won a patent lawsuit against Apple over patents on playlists. In 2013, as podcasting was starting to take off, Personal Audio decided that one of its other patents actually covered podcasting as well and sued some top podcasters while threatening many others. EFF stepped in to use the valuable inter partes review process to seek to invalidate the patent, which worked. Though, in the process the company sought to intimidate EFF donors.

While all of this was happening, the company also realized that podcasters don't make any money, and figured out how to dump its lawsuits against individual podcasters... while still going after large companies like CBS.

After the Patent Office's appeals board (PTAB) invalidated the patent, Personal Audio went to court to overturn the ruling. Last year, an appeals court rejected that attempt, noting that the PTAB was correct in invalidating the patent. Personal Audio still kept fighting, and asked the Supreme Court to hear it's appeal.

Thankfully, on Monday, the Supreme Court denied that request, meaning that Personal Audio's podcasting patent is finally, truly and completely, dead.

Still, the fact that this process took about five years and a ton of time in court should demonstrate just what a drag bogus patents can be on the economy and innovation. It also shows just how valuable a bogus patent can be for the trolls that hold them. Even after Personal Audio realized that all the podcasters it was trying to shakedown had little money to hand out, it still fought to the bitter end in trying to keep the patent alive, knowing that it could successfully get larger media companies to pay up. So this is a victory, but also a demonstration of just how broken the patent system is. Personal Audio did nothing to help podcasts become a thing. It did nothing to help podcasts move forward or become popular. Its only contribution to the podcast world was to wreak havoc on a bunch of podcasters, scaring many of them and costing them a ton of money in legal fees. That's all a dead weight loss to the economy, that could have gone into making more and better content.

Filed Under: inter partes review, ipr, patents, podcasting, ptab, scotus, supreme court
Companies: eff, personal audio

Lawyer Behind Failing Sham To Protect Sketchy Patents Sends Bogus Copyright Cease & Desist To Blogger

from the a-bit-sensitive,-michael? dept

You may recall a story we had last fall on a really, really obnoxious and cynical scam to protect sketchy patents by "selling" the patents to Native American tribes. The details here are complex, and that original article has a longer explanation, but the very short version is that in 2010, Congress created a special appeals board to review patents to see whether they never should have been granted. This Patent and Trademark Appeals Board (PTAB) has actually been quite useful in getting rid of sketchy patents, which is why people with sketchy patents hate it, and are trying to get it declared unconstitutional by the Supreme Court.

But, while everyone waits on that some lawyers came up with a fairly devious plan to avoid PTAB review. It started when the PTAB agreed to dismiss some reviews of patents held by the University of Florida, after the University claimed that it had sovereign immunity as a state organization. The lawyers for the University of Florida, from the law firm of Shore Chan DePumpo based in Dallas, apparently sensed an opportunity. Realizing that a state-controlled organization could apparently avoid the entire PTAB process by claiming sovereign immunity, it realized that companies facing challenging PTAB reviews could potentially avoid doing so entirely by "selling" the patents to a "sovereign" organization, which would then license the exclusive rights back to the original patent holder. Effectively, the patent holder would pay a bit of money to some sort of sovereign operation, but would retain all of the rights as before, just structured as an exclusive license.

The big example of this from last fall was the pharmaceutical company Allergan, which seemed likely to lose some of its patents for the drug Restasis under PTAB review. So right before the PTAB was going to rule, the same lawyers engineered a "sale" of the patents to the St. Regis Mohawk Tribe. Allergan would pay the tribe $13.75 million basically for one purpose only: to magically exempt it from the PTAB process. As we noted at the time, this really does appear to be a sham sale for no other purpose than to avoid the PTAB.

The sham not only didn't work, it has backfired spectacularly. In February, the PTAB denied the tribe's motion, clearly recognizing what was going on:

Upon consideration of the record, and for the reasons discussed below, we determine the Tribe has not established that the doctrine of tribal sovereign immunity should be applied to these proceedings. Furthermore, we determine that these proceedings can continue even without the Tribe's participation in view of Allergan's retained ownership interests in the challenged patents. The Tribe's Motion is therefore denied.

Not only that, but the publicity of all of this woke up Congress, which introduced the PACED Act, which is directly designed to stop this kind of activity:

Senator Tom Cotton (R-Arkansas) and Senator Claire McCaskill (D-Missouri) along with Senators Pat Toomey (R-Pennsylvania), Joni Ernst (R-Iowa), David Perdue (R-Georgia) today introduced the Preserving Access to Cost Effective Drugs (PACED) Act, which restores the power of the Patent and Trade Office and federal courts, and the International Trade Commission to review patents regardless of sovereign immunity claims made as part of sham transactions.

In short, this scam hasn't worked out all that well. And it appears that the lead partner at Shore Chan DePumpo, Michael Shore, is a wee bit sensitive about all of this. Roy Schestowitz of the site Techrights.org has been writing about all of the PTAB shenanigans in numerous posts on his site. For example, here's a post he wrote on March 18th, about the anti-PTAB movement. That post, along with earlier posts about the PACED Act included a headshot of Michael Shore, the lawyer mentioned above.

Last week, another lawyer from Shore Chan DePumpo, Shukri Abdi, sent Schestowitz a laughably ridiculous cease and desist letter, claiming that Schestowitz was infringing on Shore's copyright in using a thumbnail of his headshot in those stories.

It has come to our attention that you are responsible for unlawfully publishing Michael Shore's photograph on the website www.techrights.org, as the named registrant and creator of the website, in violation of the United States Copyright Act. 17 U.S.C. § 101 et seq. We demand that you immediately cease such infringing activity, desist from such infringing activity in the future, and comply with the requirements set forth in this letter.

As you are no doubt aware, Mr. Shore has exclusive rights in his photographs, which you have widely reproduced, published, and/or distributed without permission. Your unauthorized reproduction, distribution, publication, and/or transmission of Mr. Shore's photograph on www.techrights.org, including the following webpages, constitutes copyright infringement.

The letter goes on to demand Schestowitz cease and desist from doing anything with the photograph and gives him until the end of this week to respond. In an abundance of caution, Schestowitz has done so. But he shouldn't need to. Abdi, a recent law school grad, specializes in patent and trademark issues, but considering she worked at the Intellectual Property Law Clinic in law school, one would hope that at some point someone taught her about Section 107 of copyright law, regarding exceptions to copyright law, including fair use. That starts out by noting that using works "for purposes such as criticism, comment, [and] news reporting" can be considered fair use, and thus non-infringing.

Indeed, there is a case that is directly on point on this issue, Dhillon v. Does, in which a lawyer named Harmeet Dhillon was upset about a website, called MungerGames, that published an article critical of her that included one of her own headshots that she had posted on the web. In other words, an identical situation to the one here. The court there found it to easily be fair use. And, of course, we won't even get that deeply into the open questions of whether or not Shore actually holds the copyright in this image. Abdi's letter states that Shore "has exclusive rights in his photographs" which is not entirely accurate. It's unclear who took this photo, but it clearly was not Shore. It is possible that there was an assignment of the copyright in the photo to Shore or that it was done under some sort of explicit work-made-for-hire agreement, but nowhere does the letter state that. Indeed, it seems to imply (incorrectly under the law) that Shore has exclusive rights in photos taken of him rather than by him. Notably, nowhere in the letter does Abdi suggest that Shore registered the copyright in the photo, which would be a necessary prerequisite to suing for statutory damages (there simply are no actual damages here anyway).

Of course, it's possible that Abdi knows all this and was just doing what the partners at her firm asked her to do, which was to send a purely bumptious, censorial threat to a blogger for daring to call out the sketchy legal practices of the law firm Shore Chan DePumpo in trying to craft sham patent sales for the sake of avoiding questionable patents getting invalidated by the PTAB. Of course, sending such a threat might just backfire, in the same way that Shore's plan to "sell" (wink, wink) patents to Native American tribes has backfired. Indeed, it might call attention to just how thin-skinned Michael Shore is, and how he's willing to have associates at his firm send out completely ridiculous, legally nonsensical threats in a weak attempt to try to scare off someone who was criticizing him.

And because this very story is about the headshot, and because using headshots is fair use, and because we're discussing it clearly, here is the headshot of Michael Shore:

Filed Under: bullying, cease and desist, censorship, copyright, fair use, michael shore, patents, ptab, roy schestowitz, shukri abdi, slapp, sovereign immunity
Companies: shore chan depumpo

Court Not Impressed With Sneaky Plan To Sell Patents To Native Americans To Avoid Review... But New Lawsuits Filed

from the and-on-and-on-and-on dept

A few weeks ago, we wrote about a hellishly sketchy plan by a drug company, Allergan, to avoid the process as known as "Inter Partes Review" of its weak patents. In the weeks since that post a bunch has happened, but before we catch you up, a refresher is important. One of the biggest problems of the patent system for years has been the US Patent Office's willingness to grant terrible patents. This is only partially the Patent Office's own fault -- as some of it is just the nature of how our patent system is designed. As it is, patent examiners have limited time to review patents, and all of the incentives are to approve them, rather than reject them (a rejection can be endlessly appealed, granting gets it off the examiner's plate and improves the "productivity" of the office). On top of that, there's no adversarial process -- an examiner only gets info on why the patent should be granted, and not reasons it shouldn't. In an age where unscrupulous patent attorneys push to patent absolutely everything and many view patents as a lottery ticket, you have a situation where an overwhelmed Patent Office is approving a ton of bad patents, and letting the courts deal with it down the road.

That, of course, has been a disaster for actual innovators who don't have time and money to waste in court fighting bogus patent lawsuits. In the last round of patent reform, the America Invents Act, in 2010, a small, but smart, change was added to the system: the IPR setup. The idea was that it was a way to get a tribunal at the patent office to take another look -- by creating the adversarial process that is lacking from the original patent review process. This enables third parties to raise issues about the patent to the tribunal -- called the Patent Trial and Appeal Board (PTAB) -- and lets the PTAB review whether the patent should have been granted in the first place. Many patent system supporters hate the whole IPR thing, because they don't like the fact that their bad patents can be more easily invalidated. It certainly cuts off one part of the patent troll shakedown game. The Supreme Court is currently considering a case right now to throw out the PTAB as unconstitutional, while Congress has been kicking around ideas to kill it as well.

In the meantime, though, some lawyers have come up with a truly sneaky, and truly awful "work around" that they've basically now productized. After a decision by the PTAB earlier this year to refuse to even hear an IPR request involving a patent held by the University of Florida after the University (a part of the state of Florida) argued "sovereign immunity", lawyers realized that anyone could get out of the IPR process if they just "sold" their patent to a government entity who could claim sovereign immunity. From there is was only a few logical leaps to realize that Native American nations could claim such sovereign immunity. Hence, the deal to "sell" Allergan's patents to the St. Regis Mohawk Tribe.

Basically everyone recognizes this is a sham sale. The St. Regis Mohawk Tribe has no interest in this patent. Or the other patents its now "buying." It just gets some cash, which the original patent holder finds worth paying because it helps them avoid the IPR process. Everything gets "licensed" back to the original patent holder anyway, so the actual transaction is quite clear: patent holders paying Native American tribes solely to avoid a review by the patent office of their sketchy patents.

When the Allergan deal became public, lots of people grew concerned. It seemed like such a naked attempt to game the system. The House Oversight Committee began investigating the issue, noting its serious concerns with what was happening.

On top of that, the issue flowed into the case involving the patents in question. Remember: the IPR process is handled at a special tribunal at the patent office. But there can still be lawsuits going on in parallel, and that's what was happening with Allergan in its patent fight against Teva Phramaceuticals (who is challenging the validity of Allergan's patents). The case still goes on no matter what happens with the IPR process, but Teva raised the issue of whether or not the Mohawk tribe now needed to become a plaintiff in the case too. After a pretty quick back and forth of papers flying in the court, the judge has, in fact, added the tribe as a plaintiff to the case, while issuing an order that raises serious concerns about this practice of laundering the patents through a Native American tribe to avoid IPR. While the court doesn't directly claim that the transfer is invalid, it certainly suggests the court does not look kindly on the practice:

The Court has serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed. The essence of the matter is this: Allergan purports to have sold the patents to the Tribe, but in reality it has paid the Tribe to allow Allergan to purchase—or perhaps more precisely, to rent—the Tribe’s sovereign immunity in order to defeat the pending IPR proceedings in the PTO. This is not a situation in which the patentee was entitled to sovereign immunity in the first instance. Rather, Allergan, which does not enjoy sovereign immunity, has invoked the benefits of the patent system and has obtained valuable patent protection for its product, Restasis. But when faced with the possibility that the PTO would determine that those patents should not have been issued, Allergan has sought to prevent the PTO from reconsidering its original issuance decision. What Allergan seeks is the right to continue to enjoy the considerable benefits of the U.S. patent system without accepting the limits that Congress has placed on those benefits through the administrative mechanism for canceling invalid patents.

If that ploy succeeds, any patentee facing IPR proceedings would presumably be able to defeat those proceedings by employing the same artifice. In short, Allergan’s tactic, if successful, could spell the end of the PTO’s IPR program, which was a central component of the America Invents Act of 2011. In its brief, Allergan is conspicuously silent about the broader consequences of the course it has chosen, but it does not suggest that there is anything unusual about its situation that would make Allergan’s tactic “a restricted railroad ticket, good for this day and train only.”...

Although sovereign immunity has been tempered over the years by statute and court decisions, it survives because there are sound reasons that sovereigns should be protected from at least some kinds of lawsuits. But sovereign immunity should not be treated as a monetizable commodity that can be purchased by private entities as part of a scheme to evade their legal responsibilities. It is not an inexhaustible asset that can be sold to any party that might find it convenient to purchase immunity from suit. Because that is in essence is what the agreement between Allergan and the Tribe does, the Court has serious reservations about whether the contract between Allergan and the Tribe should be recognized as valid, rather than being held void as being contrary to public policy.

The court doesn't go quite that far, noting that it doesn't need to determine this issue at this time, and the issue maybe better suited for the PTAB rather than federal court, but it certainly is noteworthy to see such strong language condemning the plan. Of course, that ruling was probably the least of Allergan's worries, as at the same time, the judge also invalidated the patents in question for obviousness. This post is about a different aspect of Allergan's sketchy plans, so we won't even bother digging into the 100+ pages in the judge's decision on this, other than to note that it appears to include even more sketchy behavior on the part of Allergan.

Of course, this is not stopping others from following in Allergan's footsteps. Just days after that court ruling, the very same "Mohawk Tribe" had magically teamed up with a company called SRC Labs, and filed a patent infringement case against Amazon and Microsoft. SRC Labs, if you're wondering, appears to be the estate of Seymour Cray, the founder of Cray Inc. (who was just involved in another important case unrelated to all of this). And, this is not the only such case.

It's hard to see this loophole lasting very long. Hopefully the IPR process survives the various challenges its facing, but on top of that, hopefully the PTAB and/or the courts, shut down this obvious gamesmanship for patent holders to avoid accountability.

Filed Under: inter partes review, ipr, patents, ptab, sovereign immunity, us pto
Companies: allergan, st. regis mohawk tribe

The Latest Scam To Protect Sketchy Patents From Patent Office Review: Sell To Native Americans

from the the-patent-system-is-so-damn-broken dept

We've written a bunch over the past few years about the so-called Inter Partes Review (IPR) process at the US Patent Office. In short, this is a process that was implemented in the patent reform bill back in 2010 allowing people and companies to ask a special "review board" -- the Patent Trial and Appeal Board (PTAB) -- at the Patent Office to review a patent to determine if it was valid. This was necessary because so many absolutely terrible patents were being granted, and then being used to shake down tons of companies and hold entire industries hostage. So, rather than fix the patent review process, Congress created an interesting work-around: at least make it easier for the Patent Office to go back and check to see if it got it right the first time.

Last year, part of this process was challenged at the Supreme Court and upheld as valid. However, the whole IPR is still very much under attack. There's another big Supreme Court case on the docket right now which argues that IPR is unconstitutional (the short argument is that you can already challenge patents in court, and by taking them to an administrative board, it creates an unconstitutional taking of property without a jury). There are also some attempts at killing the IPR in Congress.

While those play out, however, never underestimate the ability of sketchy lawyers to find loopholes and dive through them in ways that are clearly sticking a giant middle finger up at the law. Such is the case with the pharmaceutical company Allergan, who just "sold" some of its patents for the dry-eye drug Restasis to the St. Regis Mohawk Tribe based in upstate New York. There are currently challenges against the Restasis patents both in court and via the IPR at the PTAB -- and the PTAB has indicated that Allergan is likely to lose its patents. But Allergan has basically short circuited the process just days before the PTAB was set to hear arguments over the patent, and will now tell the PTAB it can't review these patents because of (no joke) the sovereign immunity of the Mohawk tribe.

The reasoning goes back, first, to a ruling at the beginning of this year where the PTAB dismissed some reviews of patents held by the University of Florida after the University -- a part of the state of Florida -- made a claim of sovereign immunity, saying it's exempted under the 11th Amendment of the Constitution. While there are some arguments against this, the PTAB agreed. The lawyers representing the University of Florida in this case apparently saw this as an opportunity. They're the same lawyers representing Allergan in this "sale."

Of course, it's a sale in name only. The only reason for the sale is to be able to avoid the IPR process. In all other ways, Allergan appears to retain control. From the NY Times article on the deal:

Under the deal, which involves the dry-eye drug Restasis, Allergan will pay the tribe $13.75 million. In exchange, the tribe will claim sovereign immunity as grounds to dismiss a patent challenge through a unit of the United States Patent and Trademark Office. The tribe will lease the patents back to Allergan, and will receive $15 million in annual royalties as long as the patents remain valid.

So, yeah. This is an insanely blatant attempt at avoiding a process put in place under the law, and where this pharmaceutical company is basically paying off a Native American tribe for the right to avoid a process that might invalidate some patents. As a side note, the tribe's quote on this to the NY Times is pretty ridiculous:

“The tribe has many unmet needs,” Dale White, the tribe’s general counsel, said in an interview. “We want to be self-reliant.”

Being "self-reliant" means doing something of actual value yourself. It doesn't mean abusing an already questionable loophole in patent law to help giant pharma companies keep their dubious patents and limit the ability of more affordable medicine to get on the market. And, of course, lots of people are predicting that there will be more deals like this in the near future.

Either way this is a big deal. Law professor Rachel Sachs has already pointed out that this could go way beyond just the IPR process and could impact claims in federal court as well. And you can be sure that if that's true it will be exploited. There is no "legitimate" reason for this patent sale and license-back other than to avoid having the patent reviewed. It's a sickeningly blatant attempt to avoid the law and to keep a patent from possible invalidation. Even those who support the patent system should be concerned when obvious games like this are played to abuse the system. It doesn't make the system look any stronger. It just shows how desperate some companies are to avoid having their patents looked at closely.

Of course, there is some more history on this issue going back quite a while. Almost exactly 10 years ago, we wrote about the ridiculousness of letting state universities claim sovereign immunity to avoid being sued for patent infringement (even while asserting patents against other entities). And, back in 2011, we saw a similar issue pop up with a Native American nation (in that case, the Quapaw Tribe in Oklahoma) able to have a patent infringement case dropped entirely by using sovereign immunity. At the time, we wondered if this might enable a creation of patent-free autonomous zones -- but that didn't really happen. Instead, we get something much, much worse: patent holding giants totally abusing the system to make sure that bad patents can be used to inflate prices and limit competition, even in the field of important life-saving drugs.

Filed Under: ipr, mohawk nation, patents, post grant review, ptab, restasis, sovereign immunity, us pto
Companies: allergan

Supreme Court Says, Yes, The Patent Office Can Review Crappy Patents Using Broad Standards

from the good-news dept

Last week, the Supreme Court made life a little easier for patent trolls, and this week it made life a little harder. At issue was just how the Patent Office could review patents after they were granted. The last round of patent reform, the America Invents Act in 2010, included something called Inter Partes Review (IPR) that allows anyone to basically challenge a bad patent, presenting specific evidence that it shouldn't have been granted due to prior art. A special board at the Patent Office, the Patent Trial and Appeal Board (PTAB), can then decide to review the patent if it decides that there's a "reasonable likelihood" that it will invalidate some of the patent claims due to the submitted evidence.

In the case that went to the Supreme Court, Cuozzo Speed Technologies was upset that the PTAB knocked out some patent claims on a patent it held after Garmin filed an IPR effort with the Patent Office, claiming that one of the claims in a Cuozzo patent was invalid thanks to prior art. The PTAB knocked out three claims from the patent, saying that two other claims were equally impacted from the prior art. Cuozzo appealed to the Federal Circuit (CAFC) on two points: first it was upset that the PTAB reviewed three claims when Garmin really focused on just one. And, second, it was upset that the PTAB used "the broadest reasonable construction" of the claims rather than the "ordinary meaning as understood by a person of skill in the art." CAFC sided with the PTAB, saying that the law says that you can't appeal what PTAB chooses to review, and that the standard it used was perfectly reasonable.

In a rare instance of the Supreme Court not slapping down the CAFC's ruling, it agreed with the appeals court.

Like the Court of Appeals, we believe that Cuozzo’s contention that the Patent Office unlawfully initiated its agency review is not appealable. For one thing, that is what §314(d) says. It states that the “determination by the [Patent Office] whether to institute an inter partes review under this section shall be final and nonappealable.” (Emphasis added.)

For another, the legal dispute at issue is an ordinary dispute about the application of certain relevant patent statutes concerning the Patent Office’s decision to institute inter partes review. Cuozzo points to a related statutory section, §312, which says that petitions must be pleaded “with particularity.” Those words, in its view, mean that the petition should have specifically said that claims 10 and 14 are also obvious in light of this same prior art. Garmin’s petition, the Government replies, need not have mentioned claims 10 and 14 separately, for claims 10, 14, and 17 are all logically linked; the claims “rise and fall together,” and a petition need not simply repeat the same argument expressly when it is so obviously implied.... In our view, the “No Appeal” provision’s language must, at the least, forbid an appeal that attacks a “determination . . . whether to institute” review by raising this kind of legal question and little more.

On the question of what standard to use in reviewing the claims, again the Supreme Court sides with CAFC and the Patent Office and against Cuozzo -- once again pointing to the plain language of the law:

The statute, however, contains a provision that grants the Patent Office authority to issue “regulations . . . establishing and governing inter partes review under this chapter.”... The Court of Appeals held that this statute gives the Patent Office the legal authority to issue its broadest reasonable construction regulation. We agree.

The court notes that the "ordinary meaning" to those "skilled in the art" standard is what's used in court, but this is about the Patent Office re-examining the patent itself, at which point it gets to set the rules for what is patent eligible. And, further, it finds that the standard the PTAB uses is perfectly reasonable under its authority -- in part because of the public's "paramount interest in seeing that patent monopolies are kept within their legitimate scope." That's quoting a 1945 case, but it's always nice to see the Supreme Court properly noting that a patent is a form of a monopoly.

To some extent, this ruling doesn't change anything, as it is just accepting the standard that the Patent Office has been using for a few years now. So whatever whining and complaints you'll see from patent trolls and their supporters is overblown. But this is a good ruling just in creating more certainty and clarity in the fact that the Patent Office can and should continue to use this process as it has been to reject overly broad patents.

Filed Under: cafc, inter partes review, ipr, patent office, patents, ptab, supreme court, uspto
Companies: cuozzo speed technologies, garmin