`
`Nos. 19-1434, 19-1452, 19-1458
`
`================================================================================================================
`
`In The
`Supreme Court of the United States
`--------------------------------- ♦ ---------------------------------
`
`UNITED STATES OF AMERICA,
`
`Petitioner,
`
`v.
`
`ARTHREX, INC., ET AL.,
`
`Respondents.
`
`--------------------------------- ♦ ---------------------------------
`On Writs Of Certiorari To The
`United States Court Of Appeals
`For The Federal Circuit
`--------------------------------- ♦ ---------------------------------
`BRIEF FOR AMICUS CURIAE NISKANEN CENTER
`IN SUPPORT OF PETITIONER
`--------------------------------- ♦ ---------------------------------
`
`DAVID BOOKBINDER
`NISKANEN CENTER
`820 First Street, NE
`Suite 675
`Washington, DC 20002
`301-751-0611
`dbookbinder@niskanencenter.org
`Counsel for Amicus Curiae
` Niskanen Center
`
`December 2, 2020
`
`================================================================================================================
`COCKLE LEGAL BRIEFS (800) 225-6964
`WWW.COCKLELEGALBRIEFS.COM
`
`
`
`
`
`i
`
`TABLE OF CONTENTS
`
`Page
`INTEREST OF AMICUS CURIAE ......................
`1
`SUMMARY OF ARGUMENT ..............................
`4
`ARGUMENT ........................................................
`7
`I. A PATENT IS A PUBLIC RIGHT, NOT
`
`PRIVATE PROPERTY ...............................
` II. THE PTAB IS AN ESSENTIAL PART OF
`THE U.S. PATENT SYSTEM ..................... 11
`A. Patent Examiners Make Mistakes ...... 12
`B. The PTAB is an Economically Efficient
`Means of Eliminating Bad Patents ....... 14
`1. The PTAB Saves Millions of Dollars
`in Litigation Costs .......................... 14
`2. The PTAB is a Useful Tool Against
`Anticompetitive Patent Trolling ..... 17
`CONCLUSION ..................................................... 19
`
`7
`
`
`
`ii
`
`TABLE OF AUTHORITIES
`
`Page
`
`CASES
`Brown v. Duchense, 60 U.S. 183 (1856) ...................... 10
`Ebay Inc. et al. v. Mercexchange, L.L.C., 547 U.S.
`388 (2006) ................................................................ 18
`Gayler v. Wilder, 51 U.S. 477 (1850) ........................... 10
`Oil States Energy Services, LLC v. Greene’s En-
`ergy Group, LLC, 138 S. Ct. 1365 (2018) ........ 2, 3, 10
`Overstock.Com, Inc. v. Furnace Brook, LLC, 420
`F.Supp.2d 1217 (D. Ut. 2005) .................................... 6
`SAS Institute v. Iancu, 138 S. Ct. 1348 (2020) ....... 5, 12
`Thompson v. Haight, 23 F. Cas. 1040 (Cir. Ct.
`SDNY, 1826) ............................................................ 12
`Thryv, Inc. v. Click-to-Call Technologies, 140
`S. Ct. 1367 (2020) .......................................... 4, 12, 19
`United States v. Bell Telephone, 128 U.S. 315
`(1888) ......................................................................... 9
`
`
`CONSTITUTIONAL PROVISIONS
`U.S. Const., Art. I, § 8 ................................................... 7
`
`STATUTES AND RULES
`35 U.S.C. 261 ............................................................. 3, 7
`35 U.S.C. 311(b) ........................................................... 11
`35 U.S.C. 316(a)(11) .................................................... 15
`
`
`
`
`iii
`
`TABLE OF AUTHORITIES—Continued
`
`Page
`Sup. Ct. R. 37.2(a) ......................................................... 1
`Sup. Ct. R. 37.6 ............................................................. 1
`
`OTHER AUTHORITIES
`Anne S. Layne-Farrar, “The Cost of Doubling
`Up: An Economic Assessment of Duplication
`in PTAB Proceedings and Patent Infringe-
`ment Litigation”, Landslide, Vol. 10, No. 5, p.
`1 (2018) .............................................................. 14, 15
`Caleb Nelson, “Adjudication in the Political
`Branches,” 107 Columbia Law Review, p. 559
`(2007) ......................................................................... 8
`Daniel Takash & Brink Lindsey, “Why Intellec-
`tual Property is a Misnomer”, Niskanen Cen-
`ter, September 2019 .................................................. 5
`Executive Office of the President, “Patent Asser-
`tion and U.S. Innovation,” June 2013 ..................... 18
`Federal Trade Commission, “Patent Assertion
`Entity Activity,” October 2016 ................................ 18
`Harold Demsetz, “Toward a Theory of Property
`Rights,” The American Economic Review, Vol.
`57, No. 2, p. 359 (1967) .............................................. 8
`James Bessen and Michael J. Meurer, “The Di-
`rect Costs From NPE Disputes,” Cornell Law
`Review, Vol. 99, p. 387 (2014) .................................. 17
`James Madison, “Detached Memoranda,” c.a. 31
`January 1820, National Archives ............................. 8
`
`
`
`iv
`
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`Josh Landau, “Inter Partes Review: Five Years,
`Over $2 Billion Saved,” Patent Progress, Sep-
`tember 14, 2017 ....................................................... 15
`Mark A. Lemley and A. Douglas Melamed,
`“Missing the Forest for the Trolls,” 113 Colum-
`bia Law Review, p. 2117 (2013) ........................ 17, 18
`Matthew G. Sipe, “Experts, Generalists, Laypeo-
`ple—and The Federal Circuit”, Harvard Jour-
`nal of Law & Technology, Vol. 32, No. 2, p. 575
`(2019) ................................................................. 16, 17
`Michael D. Frakes & Melissa F. Wasserman, “Ir-
`rational Ignorance at the Patent Office”, Van-
`derbilt Law Rev., Vol. 72, No. 3, p. 1002 (2019) ....... 13
`Michael D. Frakes and Melissa F. Wasserman,
`“Is the Time Allocated to Review Patent Ap-
`plications Inducing Examiners to Grant Inva-
`lid Patents? Evidence
`from Micro-Level
`Application Data,” NBER Working Paper
`20337, July 2014 ..................................................... 13
`Paul Clement, “Patent Rights v. Property” (2019) ........ 9
`Thomas Jefferson to Isaac McPherson, August
`13, 1813 ............................................................... 8, 11
`World
`Intellectual Property Organization,
`“World
`Intellectual Property
`Indicators
`2019—Patents” ........................................................ 12
`United States Patent and Trademark Office,
`“Fiscal Year
`2019 Performance
`and
`Accountability Report” ............................................ 12
`
`
`
`v
`
`TABLE OF AUTHORITIES—Continued
`
`United States Patent and Trademark Office,
`“U.S. Patent Statistics Chart Calendar Years
`1963-2019” ............................................................... 12
`
`Page
`
`
`
`1
`
`INTEREST OF AMICUS CURIAE
`
`The Niskanen Center is a nonprofit, nonpartisan
`
`501(c)(3) public policy think tank working to protect
`private property rights, economic liberty, well-func-
`tioning markets, and to roll back regressive regula-
`tions which restrict freedom of exchange and increase
`inequality. Niskanen’s longstanding interest in pa-
`tents as a form of quasi-property has led it to support
`the Patent Trial and Appeal Board (PTAB) as a valua-
`ble mechanism in preserving private property rights.1
`
`Immersed as we are every day in a sea of patented
`
`items, it is easy to forget that each one of those items
`represents a denial of the most fundamental of all
`property rights: to do whatever we want with the
`things we own. If Smith invents a widget and sells it
`to Jones, it now belongs to Jones and, like anything
`else she owns, she has the right to do whatever she
`wishes with it, including making and selling as many
`identical widgets as she wants. But if Smith patents
`that widget, then Jones may not also make or sell those
`widgets. Thus, by definition, patents eliminate peoples’
`fundamental right to do whatever they want with their
`own property.
`
`
`1 Under this Court’s Rule 37.2(a), all parties have consented
`
`to submission of this brief. Pursuant to Rule 37.6, Niskanen af-
`firms that no counsel for any party authored this brief in whole or
`in part, and no counsel or party made a monetary contribution to
`fund the preparation or submission of this brief. No person other
`than Niskanen, or its counsel, made a monetary contribution to
`its preparation or submission.
`
`
`
`2
`
`The Framers did not lightly infringe on property
`
`rights; indeed, the Constitution shows the utmost re-
`spect for them. The Constitution allows patents to do
`this solely as part of a legitimate public policy tradeoff:
`depriving people of their property rights is warranted
`because patents provide the financial incentives for in-
`ventors to develop and commercialize new technologies
`that inure to everyone’s benefit.
`
`But when the U.S. Patent and Trademark Office
`
`(USPTO) improperly grants Smith a patent for his
`widget, it eliminates Jones’ inherent right to do what
`she wants with that widget, but without the corre-
`sponding public policy benefit. By eliminating “bad pa-
`tents” that do not fulfill their Constitutional purpose,
`the PTAB is restoring the public’s fundamental right
`to do as they please with their own property.
`
`For years, the PTAB’s opponents have spun a le-
`
`gally untenable narrative based on the false premise
`that patents are deserving of the same protections as
`private property rights, and that PTAB’s authority in-
`fringes on those rights. For example, an amicus brief
`filed by thirty-nine patent-owning inventors in Oil
`States Energy Services, LLC v. Greene’s Energy Group,
`LLC, 138 S. Ct. 1365 (2018) argued that finding that
`patent rights are public rights would be a “dramatic
`transformation of the nature of the patent right, never
`contemplated nor debated in any legislative act. This
`statement signifies that hard-won and costly-to-obtain
`
`
`
`3
`
`private property remains in force only at the pleasure,
`whim, and discretion of governmental civil servants.”2
`
`This is simply wrong. Patents are not “property”;
`
`they are a “public franchise”, a monopoly right created
`by law. As Congress emphasized in the Patent Act, pa-
`tents merely have “attributes of personal property” (35
`U.S.C. 261; emphasis added), and all such attributes
`are “subject to the provisions of this title.” Id. “This pro-
`vision qualifies any property rights that a patent
`owner has in an issued patent, subjecting them to the
`express provisions of the Patent Act.” Oil States Energy
`Services, LLC v. Greene’s Energy Group, LLC, 138 S. Ct.
`1365, 1375 (2018). In short, patents are not private
`property in the sense of being an inalienable right, and
`instead carry with them only whatever rights Con-
`gress grants and subject to whatever conditions Con-
`gress imposes, one of which is review by the PTAB.3
`
`There are millions of such patents; last year alone,
`
`the USPTO added almost 400,000 to their number.4
`
`
`2 https://www.scotusblog.com/wp-content/uploads/2017/09/
`
`16-712-tsac-Affected-Patent-Owners.pdf.
`3 Respondent Arthrex has claimed that the Federal Circuit’s
`
`remedy of removing employment protections from PTAB judges
`violates “bedrock due process principles” which require, inter alia,
`“neutral decisionmakers”, and that tenure protections for admin-
`istrative judges are necessary “to ensure that impartiality.” Ar-
`threx Petition for Certiorari, pp. 14-15. Niskanen agrees that
`patent rights are entitled to some due process protections, but Ar-
`threx cited no case supporting the idea that tenure protection is
`a necessary element of an impartial administrative adjudicatory
`process, and Niskanen is unaware of any.
`4 https://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm.
`
`
`
`
`4
`
`Congress expressly designed the PTAB to eliminate
`mistakes in the patent process, and Niskanen submits
`this brief to explain how the PTAB fulfills this purpose
`by supplementing the efforts of patent examiners, en-
`hancing adjudication of patent disputes, and reducing
`abuse of the patent system. As this Court noted re-
`cently, in creating the PTAB’s inter partes review (IPR)
`process, Congress “sought to weed out bad patent
`claims efficiently.” Thryv, Inc. v. Click-to-Call Technolo-
`gies, 140 S. Ct. 1367, 1374 (2020).
`
`Since its inception, the PTAB has been just such
`
`an efficient mechanism, benefitting the economy by re-
`moving unnecessary hindrances and saving billions of
`dollars in litigation costs. It is a well-designed safe-
`guard preventing bad patents from interfering with all
`Americans’ economic liberty and property rights.
`--------------------------------- ♦ ---------------------------------
`
`SUMMARY OF ARGUMENT
`
`The Constitution grants Congress the authority to
`
`issue “exclusive Right[s]” (i.e., patents) to inventors,
`and patents serve a legitimate purpose by providing
`incentives to develop and commercialize new technolo-
`gies. This legal grant of exclusivity with “attributes of
`personal property” prevents free-riding in the form of
`imitation which could reduce the returns necessary to
`bring a given innovation into creation. Patents are the
`primary form of public subsidy used to overcome this
`market failure (although not all inventions require pa-
`tent exclusivity to be brought into production).
`
`
`
`5
`
`But a patent is not “property” in the conventional
`
`sense of being an inalienable right; no one would claim
`that there is such a right to a patent. Rather it is a
`federal grant of temporary monopoly power.5 That mo-
`nopoly power means that every patent the USPTO
`grants comes at the expense of everyone else’s eco-
`nomic liberty and property rights. And it would be na-
`ive to assume patent examiners get it right every time;
`as with all systems, patent examiners make mistakes
`and “[s]ometimes . . . bad patents slip through.” SAS
`Institute v. Iancu, 138 S. Ct. 1348, 1353 (2020).
`
`Such “bad patents” thus necessarily infringe on
`
`Americans’ property rights for no valid purpose, and
`great vigilance should be exercised to ensure that this
`happens as infrequently as possible. Given the stakes,
`it is common sense to have an institution like the
`PTAB to double-check the work of patent examiners
`and reevaluate whether the USPTO has properly
`granted a public franchise. Put another way, the PTAB
`is a safeguard against erroneous administrative ac-
`tions that infringe on economic liberty and property
`rights.
`
`The PTAB’s approximately 260 administrative pa-
`
`tent judges supplement the work of the USPTO’s 9,600
`patent examiners. Those patent examiners are given,
`on average, just 19 hours to examine a patent. Re-
`search suggests that increasing the time allocated to
`
`5 Daniel Takash & Brink Lindsey, “Why Intellectual Prop-
`
`erty is a Misnomer”, Niskanen Center, September 2019. Available
`at https://www.niskanencenter.org/wp-content/uploads/2019/09/
`LT_IPMisnomer-2-1.pdf.
`
`
`
`6
`
`patent examiners would yield significant welfare
`gains, but absent such a policy change, the PTAB’s ex
`post review helps ensure the integrity of the patent
`system. Since its creation in 2012, the PTAB has insti-
`tuted over 6,000 proceedings, of which approximately
`2,863 were settled and 3,414 were completed. Of the
`completed reviews, 2,114 invalidated all claims, 627
`had mixed outcomes, and 673 found all claims to be
`valid.6
`
`the
`reduces
`This highly efficient process
`
`deadweight costs of those “bad patents” in three ways.
`It benefits the economy (and individual liberty) as a
`whole by eliminating baseless restraints on private en-
`terprise. It has saved billions of dollars in litigation
`costs; litigating patent claims in federal courts costs
`millions of dollars; in contrast, the median cost of an
`IPR proceeding is estimated at $275,000, with the cost
`rising to about $350,000 if the IPR decision is ap-
`pealed. And the IPR process is especially valuable as a
`means of checking the abusive antics of “patent trolls”,
`i.e., “ ‘somebody who tries to make a lot of money off a
`patent that they are not practicing and have no inten-
`tion of practicing and . . . [have] never practiced.’ ”
`Overstock.Com, Inc. v. Furnace Brook, LLC, 420
`F.Supp.2d 1217, 1218 (D. Ut. 2005) (internal quota-
`tions omitted).
`
`
`6 https://www.uspto.gov/sites/default/files/documents/trial_
`
`statistics_20200930.pdf.
`
`
`
`7
`
`In short, the PTAB is a better, faster, cheaper sys-
`
`tem of correcting inevitable mistakes made in the pa-
`tent application process.
`--------------------------------- ♦ ---------------------------------
`
`ARGUMENT
`I. A PATENT IS A PUBLIC RIGHT, NOT PRI-
`VATE PROPERTY
`
`The Constitution grants “Congress [the] power . . .
`
`To promote the Progress of Science and useful Arts, by
`securing for limited Times to Authors and Inventors
`the exclusive Right to their respective Writings and
`Discoveries.” U.S. Const., Art. I, § 8. It is thus Con-
`gress’s prerogative to make laws governing what qual-
`ifies for a patent monopoly, and procedures for making
`this determination. But even if “patents . . . have the
`attributes of personal property” (35 U.S.C. 261) this
`does not change the fact that they, like other public
`rights and franchises, are “subject to the provisions”
`(id.) of the laws which create them and these “attrib-
`utes” of personal property are distinctly inferior to
`property rights which are not the gift of the federal
`government.
`
`The patent system’s grant of exclusivity benefits
`
`the U.S. economy by providing incentives for inventors
`to develop and commercialize new technologies. “If a
`new idea is freely appropriable by all, if there exist
`communal rights to new ideas, incentives for develop-
`ing such ideas will be lacking. The benefits derivable
`from these ideas will not be concentrated on their
`
`
`
`8
`
`originators. If we extend some degree of private rights
`to the originators, these ideas will come forth at a more
`rapid pace.” Harold Demsetz, “Toward a Theory of
`Property Rights,” The American Economic Review, Vol.
`57, No. 2, p. 359 (1967).7
`
`Historically, public rights or public franchises
`
`were “but means to carry out public ends; they origi-
`nated with the state rather than the individual, and
`even in private hands they amounted to mere trusts of
`civil power to be exercised for the public benefit.” Caleb
`Nelson, “Adjudication in the Political Branches,” 107
`Columbia Law Review, p. 559, 567-68 (2007). From the
`earliest days of the Republic, patents were understood
`to be a government grant designed to achieve a specific
`policy outcome, and not property themselves. In the
`words of James Madison, “Monopolies tho’ in certain
`cases useful, ought to be granted with caution, and
`guarded with strictness agst. abuse . . . [patents and
`copyrights] are considered as a compensation for a ben-
`efit actually gained to the community, as a purchase of
`property which the owner might otherwise withold
`from public use.”8 Thomas Jefferson put it even more
`succinctly: “[I]nventions . . . cannot in nature be a sub-
`ject of property.”9
`
`
`7 Available at https://econ.ucsb.edu/~tedb/Courses/Ec100C/
`
`Readings/Demsetz_Property_Rights.pdf.
`8 James Madison, “Detached Memoranda,” c.a. 31 January
`
`1820, National Archives (emphasis in original). Available at
`https://founders.archives.gov/documents/Madison/04-01-02-0549.
`9 Thomas Jefferson to Isaac McPherson, August 13, 1813.
`
`
`
`
`
`9
`
`In granting a patent to achieve this policy goal,
`
`however, the government necessarily restricts every-
`one else’s economic liberty, because Smith’s patent
`eliminates Jones’ right to replicate Smith’s widget de-
`sign:
`
`[A] patent is a form of government regulation
`that restrains members of the public in the ex-
`ercise of natural rights to liberty and prop-
`erty—rights that do come from nature and are
`protected by the common law. To grant a pa-
`tent is thus to take rights of immense value
`from the public and transfer them to the pa-
`tentee . . . a grave act, to be done, if at all, only
`after serious deliberation and only for the util-
`itarian purpose of increasing the common
`stock of knowledge and the advantages of
`technology.
`
`Paul Clement, “Patent Rights v. Property” (2019), p. 1
`(emphasis in original).10
`
`This Court has always recognized that a patent
`
`benefits the patentee at the expense of the general
`public: “[I]ssuing . . . patents . . . take[s] from the pub-
`lic rights of immense value, and bestow[s] them upon
`[a] patentee. [This] take[s] from the people this valua-
`ble privilege, and confer[s] it as an exclusive right upon
`the patentee.” United States v. Bell Telephone, 128 U.S.
`315, 370 (1888). And for more than 150 years, this
`
`
`Available at https://founders.archives.gov/documents/Jefferson/
`03-06-02-0322.
`10 Available at https://static.wixstatic.com/ugd/a0a494_
`
`53e5dd5e9ccd42899ffe45ec608f6b80.pdf.
`
`
`
`10
`
`Court has acknowledged that the exclusive right to an
`invention is solely the creation of the patent, and does
`not arise from the invention itself: “The inventor of a
`new and useful improvement certainly has no exclusive
`right to it, until he obtains a patent. This right is cre-
`ated by the patent.” Gayler v. Wilder, 51 U.S. 477, 493
`(1850) (emphasis added).
`
`[T]he right of property which a patentee has
`in his invention, and his right to its exclusive
`use, is derived altogether from these statutory
`provisions; and this court have always held
`that an inventor has no right of property in
`his invention, upon which he can maintain a
`suit, unless he obtains a patent for it, accord-
`ing to the acts of Congress; and that his rights
`are to be regulated and measured by these
`laws, and cannot go beyond them.
`
`Brown v. Duchense, 60 U.S. 183, 195 (1856).
`
` Most recently, this Court reiterated this principle
`and confirmed the PTAB’s role in implementing it: “the
`decision to grant a patent is a matter involving public
`rights—specifically, the grant of a public franchise. In-
`ter partes review is simply a reconsideration of that
`grant, and Congress has permissibly reserved the
`PTO’s authority to conduct that reconsideration.” Oil
`States Energy Services, LLC v. Greene’s Energy Group,
`LLC, 138 S. Ct. 1365, 1373 (2018).
`
`
`
`
`
`
`
`
`11
`
`II. THE PTAB IS AN ESSENTIAL PART OF THE
`U.S. PATENT SYSTEM
`
`Any well-functioning patent system must evalu-
`
`ate the quality of a given patent to ensure that this
`process does not turn into a free-for-all, giving away
`public franchises that do not promote the progress of
`science and the useful arts while limiting the rights of
`individuals, firms, or other inventors. Thomas Jeffer-
`son expressed this sentiment in his criticism of other
`patent systems:
`
`[G]enerally speaking, other nations have
`thought that these [patent] monopolies pro-
`duce more embarrasment than advantage to
`society . . . Considering the exclusive right to
`invention as given not of natural right, but for
`the benefit of society, I know well the difficulty
`of drawing a line between the things which are
`worth to the public the embarrasment of an ex-
`clusive patent, and those which are not.”11
`
`As Jefferson well understood, it can be difficult to de-
`termine whether a given patent will be “for the benefit
`of society.” Patent examiners are on the front lines of
`such decisions, but they are not infallible, and the IPR
`allows a petitioner to request cancellation of one or
`more claims in a patent (on limited grounds). 35 U.S.C.
`311(b).
`
`
`
`
`11 Thomas Jefferson to Isaac McPherson, August 13, 1813
`
`(emphasis added); available at https://founders.archives.gov/
`documents/Jefferson/03-06-02-0322.
`
`
`
`12
`
`A. Patent Examiners Make Mistakes
`
`Bad patents (those which contain one or more in-
`
`valid claims) are nothing new: “Implements and uten-
`sils, as old as the civilization of man, are daily, by
`means of some ingenious artifice, converted into sub-
`jects for patents . . . Impositions of this sort, are of com-
`mon occurrence, and will continue to multiply while
`the door to imposture is left open and unguarded.”
`Thompson v. Haight, 23 F. Cas. 1040, 1041 (Cir. Ct.
`SDNY, 1826).
`
`Recognizing that, as with any system, the USPTO
`
`and its staff are not perfect, Congress designed the
`PTAB as a quality control tool because it was “con-
`cerned about overpatenting and the diminishment of
`competition.” Thryv, Inc. v. Click-to-Call Technologies,
`140 S. Ct. 1367, 1374 (2020). And the unfortunate real-
`ity is that despite the USPTO’s best efforts, “some-
`times . . . bad patents slip through.” SAS Institute v.
`Iancu, 138 S. Ct. 1348, 1353 (2020).
`
`The sheer size of the U.S. patent system boggles
`
`the mind; as of 2018, there were more than three mil-
`lion patents in effect. World Intellectual Property Or-
`ganization, “World Intellectual Property Indicators
`2019—Patents,” p. 20.12 In 2019, the PTOs 9,600 exam-
`iners granted over 391,000 patents. United States Pa-
`tent and Trademark Office, “Fiscal Year 2019
`Performance and Accountability Report,” and “U.S.
`
`
`12 https://www.wipo.int/edocs/pubdocs/en/wipo_pub_941_2019-
`
`chapter1.pdf.
`
`
`
`13
`
`Patent Statistics Chart Calendar Years 1963-2019.”13
`While USPTO’s expansion and increased patenting
`more broadly are signs that the USPTO is a trusted
`institution, this does not mean that the current system
`is perfect. It is inevitable that mistakes will be made,
`and unfortunately current USPTO policies make it
`more likely that patents will be granted in error de-
`spite its best efforts.
`
`The average patent examiner is granted 19 hours
`
`to examine a patent, with the average time granted de-
`creasing for more skilled examiners. Michael D. Frakes
`and Melissa F. Wasserman, “Is the Time Allocated to
`Review Patent Applications Inducing Examiners to
`Grant Invalid Patents? Evidence from Micro-Level Ap-
`plication Data,” NBER Working Paper 20337, July
`2014.14 While there is no “magic number” to determine
`the right amount of time to properly examine a patent,
`it is clear that were examiners to be given more time
`for their herculean task the patent system would be
`more efficient. Research has found that simply dou-
`bling the amount of time given to patent examiners
`would produce a savings in litigation expenses of $527
`million. Michael D. Frakes & Melissa F. Wasserman,
`“Irrational Ignorance at the Patent Office”, Vanderbilt
`Law Rev., Vol. 72, No. 3, p. 1002 (2019).
`
`
`13 https://www.uspto.gov/sites/default/files/documents/USPTOFY
`
`19PAR.pdf and https://www.uspto.gov/web/offices/ac/ido/oeip/taf/
`us_stat.htm.
`14 https://www.nber.org/system/files/working_papers/w20337/
`
`w20337.pdf#page=9.
`
`
`
`14
`
`Given the constraints patent examiners face and
`
`the high volume of patent applications and issuances
`every year, mistakes will be made. Congress created
`the PTAB to help correct this, and it is impossible to
`ignore the shortcomings in the patent process when
`considering PTAB’s role.
`
`
`
`B. The PTAB is an Economically Efficient
`Means of Eliminating Bad Patents
`1. The PTAB Saves Millions of Dollars
`in Litigation Costs
`Litigation is expensive, and patent litigation is no
`
`exception. A 2015 survey found that in patent litiga-
`tion where between $1 and $10 million was at stake,
`the costs of litigation were about $1 million through
`discovery and $2 million through the final disposition.
`These respective costs increase to $2 and $3 million
`when $10-$25 million is at risk. Above this, over $5
`million can be spent by the time a final disposition is
`reached. Anne S. Layne-Farrar, “The Cost of Doubling
`Up: An Economic Assessment of Duplication in PTAB
`Proceedings and Patent Infringement Litigation”,
`Landslide, Vol. 10, No. 5, p. 1 (2018).15
`
`By comparison, the limited scope of the IPR pro-
`
`cess and the efficient nature of the proceedings means
`litigation costs are significantly lower. The same 2015
`survey estimated that the median cost of an IPR
`
`15 https://www.crai.com/sites/default/files/publications/The_
`
`Cost_of_Doubling_Up_An_Economic_Assessement_of_Duplication_
`in_PTAB_proceedings_Landslide_May_2018_Layne_Farrar.pdf.
`
`
`
`15
`
`proceeding was around $275,000. Even with the costs
`of appeal, the median cost was around $350,000. Id. at
`1. One estimate determined that from 2012 to 2017,
`the IPR process saved an estimated $2.3 billion in costs
`associated with more traditional forms of patent litiga-
`tion. Josh Landau, “Inter Partes Review: Five Years,
`Over $2 Billion Saved,” Patent Progress, September 14,
`2017.16
`
`IPR is fast in addition to being cheap. By law, a
`
`“final determination [must] be issued not later than 1
`year after the date on which the Director notices the
`institution of a review,” with an extension of not more
`than six months (although the Director can “adjust”
`these dates if other parties are joined to the proceed-
`ing). 35 U.S.C. 316(a)(11). By comparison, a patent trial
`can take two years to begin after the filing of an initial
`complaint, and a Markman ruling (where a district
`court determines the meaning of disputed words in a
`patent claim), can take between 13 and 20 months.
`Layne-Farrar, “The Cost of Doubling Up: An Economic
`Assessment of Duplication in PTAB Proceedings and
`Patent Infringement Litigation”, Landslide, Vol. 10,
`No. 5, p. 2.
`
`Some people, including notable figures like Ran-
`
`dall Rader, former Chief Judge of the Federal Circuit,
`have described the PTAB as a “Patent Death Squad.”17
`
`16 https://www.patentprogress.org/2017/09/14/inter-partes-
`
`review-saves-over-2-billion/.
`17 https://www.law360.com/articles/567550/ptab-s-death-squad-
`
`label-not-totally-off-base-chief-says.
`
`
`
`
`
`16
`
`This rhetoric, deployed by the PTAB’s critics (some of
`whom have a vested interest in preserving their ability
`to leverage patents of suspect quality) is hyperbole at
`best. To begin, as important as the PTAB is, it is rarely
`employed relative to the scale of the U.S. Patent Sys-
`tem. According to the USPTO, from September 16,
`2012 to September 30, 2020, 12,147 total petitions
`were filed, including 11,299 petitions for IPR. Of these,
`6,228 reviews were instituted. Approximately 2,863 of
`these proceedings were concluded via settlement. Of
`the reviews that proceeded to a final written decision,
`2,114 petitions invalidated all claims, 627 had mixed
`outcomes, and 673 found all claims to be valid.18 Con-
`sidering the hundreds of thousands of patents granted
`every year, having the PTAB subsequently invalidate
`one is an extraordinarily rare outcome.
`
` When comparing the success of PTAB rulings com-
`pared to those of district courts, research has found
`that “[t]he PTAB’s [APJ judge’s] expertise . . . is cau-
`tiously rewarded by a high affirmance rate advantage
`on fact-specific issues.” Matthew G. Sipe, “Experts,
`Generalists, Laypeople—and The Federal Circuit”,
`Harvard Journal of Law & Technology, Vol. 32, No. 2,
`p. 575 (2019). A study of Federal Circuit patent appeals
`from October 1, 2014 to September 30, 2016 found that
`of 703 PTAB appeals on validity findings, 91.2% (641)
`of decisions were affirmed. Id. at 610. By comparison,
`of 264 patent appeals from district courts, 84.9% (224)
`were affirmed. Id. at 610. The PTAB’s decisions thus
`
`18 https://www.uspto.gov/sites/default/files/documents/trial_
`
`statistics_20200930.pdf.
`
`
`
`17
`
`fare well in the Federal Circuit, validating the success
`of the IPR process with respect to evaluating patent
`quality. Indeed, the “data suggest[ ] that the Federal
`Circuit affirms findings made by the PTAB reliably
`more often than findings made by district court
`judges.” Id. at 578.
`
`
`
`2. The PTAB is a Useful Tool Against
`Anticompetitive Patent Trolling
`
`If the PTAB’s benefits were limited to providing a
`
`speedy and cheap resolution to issues which would
`otherwise be litigated in district court, it would still be
`a worthwhile institution. However, the PTAB’s benefits
`extend to the economy at large, because the patent’s
`public franchise necessarily limits everyone else’s
`property rights.
`
`Patent assertion by non-practicing entities (NPEs)
`
`can only be described as shakedown. NPE’s with port-
`folios of dubious quality patents assert their patents
`against defendants of all shapes and sizes, and NPEs
`imposed costs totaling around $29 billion in 2011
`alone. James Bessen and Michael J. Meurer, “The Di-
`rect Costs From NPE Disputes,” Cornell Law Review,
`Vol. 99, p. 387 (2014). While “trolling” most commonly
`refers to behavior by NPEs, they are not alone in as-
`serting patents of dubious quality for anticompetitive
`purposes.19 Such entities are also referred to as Patent
`
`
`19 For a discussion of the complicated dynamics of “patent
`
`trolling” and other bad actors abusing the patent system, see
`Mark A. Lemley and A. Douglas Melamed, “Missing the Forest
`
`
`
`
`18
`
`Assertion Entities (PAEs), which the Federal Trade
`Commission described as “businesses that acquire pa-
`tents from third parties and seek to generate revenue
`by asserti
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