A New Weapon in Corporate Patent Wars

It's about time there is somewhere where companies can take on the patent trolls. Aivars Lode avantce

A New Weapon in Corporate Patent Wars

Patent Trial and Appeal Board Can Upend PTO Decisions, but Some Say It Goes Too Far

By Ashby Jones March 10, 2014 7:25 p.m. ET

Companies have found a controversial new weapon in their battle against intellectual property lawsuits.

Liberty Mutual recently turned to the Patent Trial and Appeal Board to invalidate patents held by Progressive Casualty, some of which Progressive says relate to the idea behind its Snapshot product. Progressive

The Patent Trial and Appeal Board is a little known but powerful authority that often allows a company embroiled in a lawsuit to skip the question of whether it infringed a patent—and challenge whether the patent should have been issued in the first place.

The board was launched in September 2012 as part of the massive patent overhaul passed by Congress the previous year and is currently staffed by 181 judges, many of whom have deep experience in intellectual property or technical fields like chemical and electrical engineering. Through last Thursday it had received 1,056 requests to challenge patents, far more than were received by any federal court over the same time period.

The board is part of the Patent and Trademark Office. But so far, it hasn't shied away from upending the office's decisions to issue certain patents. As of last week, the board had issued 25 written decisions concerning patent challenges, and upheld parts of challenged patents in only a few of them.

"It's fast and has a whole fleet of expert judges that understand the science and know the technology," said Andrew Etkind, the general counsel of Garmin Ltd., a maker of GPS devices. Units of the company won a ruling from the board last year invalidating key parts of a patent held by an inventor who had sued Garmin in a New Jersey federal court.

Congress created the board in 2011 after hearing concerns from corporations, especially in the technology sector, that they were getting besieged with infringement lawsuits filed by patent-holding firms, ventures that profit from innovations they themselves had no hand in creating.

Companies complained that the patents at the heart of the lawsuits too often described innovations that were vague or obvious or flawed for some other reason, and should never have been issued. Lawsuits based on these patents, they alleged, were little more than attempts by patent-holding firms to extract quick settlements from corporate pockets.

The 2011 law allows the Patent Trial and Appeal Board to hear challenges to certain types of patents. Most typically, the challenges are requested by defendants fighting infringement claims in federal court.

Liberty Mutual Insurance Co. recently turned to the board to invalidate patents held by Progressive Casualty Insurance Co. Progressive argues its Snapshot product, which plugs into a car's dashboard and tracks driving behavior for use in calculating auto insurance premiums, is covered by the patent applications.

James Myers, a patent lawyer at Ropes & Gray LLP in Washington and counsel for Liberty Mutual, said that appearing before the board's judges was like "getting CAT-scanned, MRI-ed, and X-rayed, all within a three-hour period."

A spokesman for Progressive said the company was disappointed by the rulings, but said they weren't entirely unexpected given the board's track record.

Patent holders are concerned the board is eviscerating their rights. Many claim the movement to clean up the patent system has swung too far. Peter McAndrews, a lawyer in Chicago who represents patent holders, said the process is "one slanted toward destroying patents" already issued by the Patent and Trademark Office.

Mr. McAndrews said that for many of his clients, especially his smaller inventors, the board is making it too expensive to hang on to patents that they struggled to afford to get approved in the first place.

For patent-holders, help could be on the horizon. A provision in the current bill moving through Congress would change the way the board reviews each patent, potentially making challenges harder to win. Patent holders can also appeal the board's decisions to the U.S. Court of Appeals for the Federal Circuit, a specialized court that handles most of the nation's appeals in patent cases.

In recent months, Randall Rader, the chief judge of the Federal Circuit, has been one of the board's most outspoken critics. At a conference of intellectual-property lawyers last fall, the judge called the board's panels "death squads…killing property rights."

In an interview with The Wall Street Journal, Mr. Rader said the board is too quick to toss out patents that demonstrate only modest innovation. "The board needs to incentivize human progress—and understand that it often happens one small step at a time," he said.

But many company lawyers think the board is doing exactly as it should—taking a skeptical look at patents that have added little to the world. Many also feel that while the board is helping curtail unnecessary patent lawsuits, Congress still needs to do more.

Garmin's Mr. Etkind, for example, referred specifically to a provision that would make the loser of an infringement case pay the other side's fees in some instances. "But for now, the PTAB is a great move in the right direction," he said.