After nearly three years of patent reform discussions, there appears to be some light at the end of the tunnel. On Thursday, the Senate Judiciary Committee plans to mark up their Protecting American Talent and Entrepreneurship Act (PATENT) Act, which at present is a package of patent litigation reform measures aimed at making the business of frivolous litigation less attractive to those who like to game the system for financial gain. The bill, as initially presented, garnered a good deal of support from traditional reform supporters, including small businesses, hotels, banks, retailers and the tech industry. Even universities, who dislike the House's Innovation Act, have expressed tepid support for the PATENT Act.
Last-minute negotiations have unlocked a Pandora's box of possible amendments or revisions to the bill, nearly all of which could diminish (or even extinguish) the enthusiasm of current supporters and endanger the bill's chances to move forward. And almost all of them are focused on changing procedures established just a few years ago in the last round of patent reform.
The America Invents Act (AIA) was signed into law in September 2011. Included in the AIA was a section that created three new ways to challenge issued patents before the U.S. Patent and Trademark Office's (USPTO) Patent Trial and Appeal Board (PTAB), known as post-grant review (PGR), inter-partes review (IPR) and the transitional covered business method review (CBM).
Those tiny acronyms and how they function are hugely important to patent-holders, and to those wishing to challenge patents and the future of our patent system. The CBM program was created specifically to help financial services companies challenge a wave of low-quality patents (known as business method patents) issued prior to a Supreme Court decision that essentially ended the ability to get those patents. That's why CBM was "transitional" or temporary. It was meant to address only a finite number of particularly problematic patents, with challengers continuing to have the nondiscriminatory and permanent IPR and PGR programs available afterwards. The scope of the program was intentionally limited to financial services, as they were the primary target of abusive patent litigation practices, with business method patents at the core of the infringement claims.
CBM began in September 2012, and is not set to sunset until 2020. The USPTO report required in the AIA to evaluate its effectiveness is not even in a draft format. There's no comprehensive research on the impact of CBM on those financial services-related business method patents.
In the two-and-a-half year history of the CBM program, the PTAB has dramatically increased the scope of what is considered "financial services." In April 2014, the PTAB made this expansion of scope crystal clear in their Google v. Unwired Planet opinion, stating that CBM reviews are "not limited to products or services of the financial services industry." In addition, the PTAB has gone well beyond "business method patents" to allow challenges to software patents — a technology area never intended to be part of the program.
The increasingly broad interpretation of this once-narrow program has caused CBM filings to balloon — and raised concerns from a large swath of stakeholders from a variety of industries. Already, small inventors have been targeted with CBM petitions by large companies. These legitimate innovators are simply trying to protect their ideas from being copied on the cheap by larger competitors. An expansion/extension would further disadvantage these garage inventors, who are already concerned about other provisions in the bill tipping the scales in favor of large companies.
In addition to harming American innovators directly, there is the indirect impact to consider. The bottom line is that the program treats one type of patents differently than others, which both undermines legitimate property rights and signals to other countries that it's okay to discriminate against particular classes of patents. Already, we know that other countries are considering these options, and that these policies would take a toll on American innovators and our economy.
It would be baffling for the Senate to consider extending this program given the well-documented opposition to it and its potential to splinter the broad cross-industry support for the bill as is. And it would be even more bewildering if an effort to extend a nascent and unproven program that is five years from being retired were allowed to jeopardize the three years of work invested to reach consensus and compromise.
It is not too late to get out of the speeding train's way. I urge the Senate to reject calls to extend the CBM program.
Stoll is a partner and co-chair of the intellectual property group at Drinker Biddle & Reath and a former commissioner for patents at the United States Patent and Trademark Office.