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WHAT IS A BAD PATENT?
Patrick A Doody
Presented at the
Southern California Law Associations
Intellectual Property Spring Seminar,
June 8–10, 2007, Laguna Niguel, CA
©2007. Goodwin Procter LLP
Why Define a “Bad Patent?”
• Critics argue that the Patent System is
Broken
Too Easy to Obtain a Patent
Too Hard to Invalidate a Patent
Result – Too many “Bad Patents” that harm
Innovation
Is the Patent System Broken?
• No – “The Patent System is Not Broken,”
Intellectual Property & Technology Law
Journal, Vol. 18, No. 12, pp 10-24 (Dec. 2006).
• Not Harming the Economy
• Not Harming Innovation
Every economic indicator of innovation continues to rise
US still the most innovative country by far – due to a
functioning patent system
• Not Easier to Obtain a Patent
Patent System Not Harming
Innovation
• Most governments measure innovation by
examining: (1) the number of high-tech or
“knowledge-based” jobs as a percentage of all
jobs; (2) the number of patent applications
filed or patents granted; (3) the amount of
money industry invests in research and
development (R&D), the amount of R&D
expenditures compared to gross domestic
product (GDP) or net income; and (4) the
number of scientific and technical publications
each year
• Every one of these indicators continues to rise.
Percentage of Tech Jobs
Increases
Number of Patent Applications
Filed
Applications Filed and DJIA Closing per Year
12,000
400,000
300,000
DIJA
8,000
250,000
6,000
200,000
150,000
4,000
100,000
2,000
# of Patent Applications
350,000
10,000
50,000
0
0
1970
1975
1980
1985
1990
Year
1995
2000
DOW
2005
# Patent applications
Amount Invested in R&D
Science and Engineering
Publications
Innovation is Not Being
Harmed
• All indicators of innovation trend
upwards
• Business Week article – 8 out of top 10
most innovative companies are in the
US
Managers asked about enemies of innovation –
the patent system was not listed
So Why Define a “Bad Patent?”
• Congress and the Supreme Court appear to
believe the critics
• The Patent Reform initiatives seem to focus on
reducing the number of “bad patents.”
• How do we know whether a patent is or is not
a “bad” patent?
• If we can’t define a “bad patent,” how can we
solve the problems these patents allegedly
cause?
Are Silly Patents Bad Patents?
• Many Critics focus on Silly Patents as
Examples of Bad Patents
Silly patents are those that many believe have
little or no commercial viability
Examples: Swinging on a swing; teddy bear with
a watch; training a cat with a laser pointer
Silly Patents Have Existed For
Years
Silly Patents Are Not Bad
Patents
• Rarely asserted
Only one asserted – Crustless peanut butter and jelly patent
by Smuckers – Reexamined, court case stayed, and PTO
Board recently rejected the claims
• No evidence there are more silly patents today
than 100 years ago
• Present no threat to innovation – may even
promote innovation
Are Invalid Patents Bad
Patents?
• FTC report defines a poor quality patent
as one that is likely invalid or contains
claims that are overly broad
• Invalid or overly broad to whom?
• Validity is a matter of legal opinion
Subject to variability in claim interpretation
Subject to variability in interpreting scope and
content of prior art
“Invalid” Patents are Not Bad
Patents
• Federal Circuit struggles with claim
interpretation
CVI/Beta Ventures – 2 different panels interpreted
same claim term differently
• Patents found invalid in court
Not Bad Patents – Validity usually is a very close
call
So What is the Problem?
• Bad patents
not silly patents
not invalid patents
not capable of definition
• The Problem may not be with the Patent
May be the patent owner
May be overzealous enforcement
The Patent Owner
• The “T” word
This term itself is not capable of definition
• Non-Practicing Entity
RIM and eBay cases frequently cited by critics as
evidence the patent system is broken
Would critics have been as enraged if different
patentees brought those suits (AT&T or
Amazon)?
No – So the problem clearly is not with the patent
Overzealous Enforcement
• Widespread enforcement of a patent, coupled
with an offer to license at a nominal expense
• Justice Kennedy’s oft-cited concurrence in
eBay:
“[I]n cases now arising . . . the nature of the patent
being enforced and the economic function of the
patent holder present considerations quite unlike
earlier cases. An industry has developed in which
firms use patents not as a basis for producing and
selling goods but, instead, primarily for obtaining
licensing fees.”
Overzealous Enforcement
• Enforcement by non-practicing entity
No ability to cross-license
Only recourse is to pay license fee or risk being sued and
then pay litigation costs
• This is the Real Problem
Patent Reform – Coalition for Patent Fairness
“The strategy is to go after the small guys first. They just
ask a small enough sum that it doesn’t pay to fight. Not
that it’s always nickel and dime. Some of our clients
have paid six-figure settlements. But it still beats
litigating.”
Overzealous Enforcement –
The Real Problem
Testimony before Congress
Chuck Fish – VP and Chief patent counsel for
Time Warner noted that the focus should not be
on the underlying patents, but “rather we
believe that a focus on behaviors and the
consequences of those behaviors is essential.”
NAS report – noted that the continuing high rates
of innovation suggest that the patent system is
working well, but urged reform because patents
were being more actively acquired and
vigorously enforced.
What to Do about Overzealous
Enforcement?
• Solution should be judicial, not legislative or
administrative
• Judicial Remedies
Rule 11 Violations
Eon-Net, L.P. v. Flagstar Bancorp – W.D. Wash – court
found Rule 11 violations and sanctioned Eon-Net by
awarding attorney’s fees. Eon-Net would file complaint
and then send settlement letter (50-75K offer of
settlement). They used the same Complaint and letter in
about 32 suits, and the court found that the attorney did
not conduct an adequate pre-suit investigation.
What to Do about Overzealous
Enforcement?
• Other Judicial Remedies
RICO claim – Google filed a suit against an individual in Illinois
who claimed to have trademarked “Google.” The individual
sent Google a letter threatening its total destruction and warned
them that “beginning a legal proceeding on the issue would cost
Google at least $150,000 and that [the individual] would drop
the claim if paid at least $100,000.
Blackmail
Antitrust – Walker Process
Motion to Dismiss
Summary Judgment
Patent Reforms Will Not Solve
the Problem with Bad Patents
• Recent Legislative Reform and PTO
proposed rule changes affect all patent
holders
Do not address the real problem
Will not solve the real problem
Only serve to weaken patent rights – will harm
innovation and the economy
• One possible exception – Post Grant
Opposition
THANK YOU