Businesses in the San Fernando Valley and throughout California have displayed enormous resilience over the last few years. From a global pandemic to supply chain disruptions and rising inflation rates, our state’s economy has overcome obstacle after obstacle. Main Street businesses have kept good-paying jobs in our communities and have been an economic bright spot in our state. Unfortunately, those gains are being put at risk by a reemerging threat: frivolous lawsuits from non-practicing entities, also known as NPEs or “patent trolls.”
NPEs are corporations that buy old and vague patents from the internet’s earliest days and use them to go after small businesses for alleged “patent infringement.” These infringement claims are frequently absurd, with companies threatened with lawsuits for simply using a scanner or having a shopping cart icon on their website. But lawsuits are expensive, and many small businesses are forced to settle out of court and, in the worst-case scenarios, shutter their business if they can’t afford a settlement.
The threat of patent trolls is nothing new. Congress is well aware of these baseless lawsuits’ impact on small businesses and has taken action to fight back. In 2011, Congress passed the Leahy-Smith America Invents Act. Among other things, the legislation established the process allowing the public to ask the United States Patent and Trademark Office to reevaluate questionable patents in a faster and cheaper procedure than litigation. This process, known as Inter Partes Review, has been an effective tool that allows the targets of baseless litigation to fight back.
Because Inter Partes Review discourages the proliferation of patent trolls, 99.8% of patents never face a review, so there is little chance the process will be abused. A study by IP Watchdog found that litigation fell from an all-time high in 2011 to its lowest level in decades in 2018, thanks to Inter Partes Reviews protecting businesses from threats and litigation.
Unfortunately, in the intervening years, the patent office has taken steps to weaken the Inter Partes Review process, and we already see the consequences. While lawsuits from patent trolls fell in the years after the America Invents Act’s passage, there’s been a 40% increase in NPE cases over the last five years. Instead of correcting to protect small businesses and strengthen the Inter Partes Review process, the patent office is doubling down. This April, they announced numerous changes that would codify and expand their efforts to undermine Inter Partes
Review, including changes that conflict with federal legislation. And in doing so, they encourage patent trolls and put American businesses at risk.
The changes the patent office is proposing include creating a much shorter deadline for filing an Inter Partes Review than was laid out in the America Invents Act, changing the standard for instituting a review from “reasonable likelihood” to “compelling merits,” and rewriting Congress’ rules on who can even file an Inter Partes Review. In issuing this proposed rule, the patent office has usurped Congressional authority.
Patent trolls are a drain on businesses across the state, the country, and our region. As I work with businesses still trying to recover from the pandemic, the last thing they need is a frivolous lawsuit that takes their time, money, and focus away from their operations. Business organizations like the Greater San Fernando Valley Chamber of Commerce aren’t the only ones who think so – Congress agrees and took action to protect our economy by passing the America Invents Act. The patent office’s recent proposals threaten to put that good work at risk. It’s time for the patent office to return to the drawing board and develop real guidance to protect American businesses everywhere.
Nancy Hoffman Vanyek is president and chief executive of the Greater San Fernando Valley Chamber of Commerce.