For years, major US tech companies have complained about the threat of intellectual property theft. The US government has predicted that Chinese companies that flout intellectual property protections will cost the US economy as much as $600 billion each year. But this problem of companies ignoring patents and other intellectual property protections isn’t just a cross-border problem — there’s a similar problem right here in the United States. If big tech companies seem less concerned about intellectual property violations closer to home, it may be because in these cases they are often the perpetrators, not the victims.
For example, in January, the United States International Trade Commission, a quasi-judicial body that oversees trade enforcement matters, found that Google had infringed on several patents held by speaker maker Sonos. The commission gave Google 60 days to implement software updates to remove stolen technology or face an import ban on a range of its products – including its Google Home smart speakers and Pixel phone – and sell them here in America. Google has complied with this, price removing features and reducing the functionality of the products.
It was just one of many similar legal defeats that Google has suffered. In February, a jury in Texas ruled that Google’s Nest thermostat infringed a patent held by EcoFactor and ordered Google to pay $20 million. In a $26 million Verdict from November 2021, a federal jury found that Google’s YouTube platform violated a patent held by VideoShare LLC.
Google is not alone, however. Other big tech companies have infringed on the technologies of smaller competitors in recent years and have also faced reprimands and heavy financial penalties from the courts and the International Trade Commission. In August 2021, a jury ordered Apple to pay $300 million in damages to Optis Wireless Technology for infringing that company’s patents. Apple also owes VirnetX, an internet security software company, more than $570 million for breaches. And Cisco and Centripetal Networks, a start-up in Herndon, Va., will return to district court to determine whether Cisco infringed on Centripetal’s cybersecurity patents. Cisco previously owed Centripetal almost $2 billion for infringement, only to have that decision thrown out due to a minor dispute from a judge.
These judgments have shown Big Tech that the breach is not without legal consequences – but this solution may not have teeth for much longer. Instead of simply ending their infringements and fairly licensing their rivals’ technologies, big tech companies — including Apple and Google — are now looking for a legal workaround. They are trying to facilitate the invalidation of their rivals’ patents by pushing for legislation that would weaken intellectual property protections. After all, if there are no patents, there can be no infringement.
As per usual
For years, executives at big tech companies have viewed these legal judgments as just a cost of doing business. Damages for lost cases, even when they run into the hundreds of millions, are a drop in the bucket for companies like Apple, which reported revenue of $365.8 billion in 2021. Patent theft, unfortunately, is a rational strategy for corporate giants looking to consolidate their own dominance and neutralize a threat from an emerging startup. After all, stealing is cheaper than licensing small business technology.
Just over a decade ago, this strategy became even more viable. In 2011 — partly at the insistence of tech lobbyists — Congress created a tribunal within the United States Patent and Trademark Office (USPTO) called the Patent Trial and Appeal Board (PTAB), which was apparently created to provide a faster and cheaper way to settle patent disputes out of court. Instead, it opened a new path for Big Tech’s game of the patent system. Now, deep-pocketed tech companies could simultaneously challenge the patents of smaller competitors in two areas — in court and at the PTAB, where, in addition, they could file multiple, serial challenges against the same patent.
This has given big tech companies a major advantage. In many cases, after being sued by smaller rivals, big tech companies have asked the PTAB to overturn patents the courts could potentially uphold and find the tech giants guilty of infringement. Often, the PTAB would do just that: it at least partially invalidated 84% of the patents it judged in a final written decision. There are three main reasons for this: 1) the Commission’s standard of proof is lower than that of the courts, 2) repeated challenges are permitted – by the defendant, of course, but also by anyone who wants to challenge the validity of the patent for whatever reason – and 3) patent holders are burdened with around $500,000 per challenge, which big tech companies can afford. but startups often cannot.
In recent years, efforts have been made to correct this problem. Between 2018 and 2020, the USPTO instituted reforms aimed at preventing this type of abuse. Among other things, they clarified that the PTAB may decline to consider patent challenges under certain circumstances, such as when patents are already being challenged in court on the same grounds and a court decision is imminent. (Despite this, Google, Apple, Samsung, Cisco and six other top mega-companies accounted for more than 80% of PTAB petitions in 2021.) There is good logic in these reforms. After all, why should the PTAB, an administrative body, tackle the same issues that an independent tribunal has already tackled and resolved?
Apple, Cisco, Intel and Google recently sued the USPTO in an attempt to reverse these reforms, but their challenge was unsuccessful.
A new attack on patents
Now, however, Congress is advancing a bill that would effectively nullify the USPTO’s efforts to balance the patent system. Introduced by Senators Patrick Leahy (D-VT), John Cornyn (R-TX), and Thom Tillis (R-NC), it is called the “Patent Trial and Appeal Board Reform Act.” “. But far from improving the legal landscape for small inventors, it will render patent holders powerless to fend off redundant petitions at the hands of Big Tech.
The bill’s sponsors claim it will end Big Tech’s weaponization of the PTAB, but that couldn’t be a more inaccurate portrayal. Instead, if passed as currently written, it would remove the very protections that were put in place to level the playing field for small inventors, such as the PTAB’s ability to refuse legal challenges. when a patent is already challenged in court on the same grounds, or when the courts have already confirmed the validity of the patent. The bill also does not limit the number of motions the defendant can file as long as they are all filed on the same day.
If they succeed in weakening the American intellectual property system, it could be devastating for thousands of small, innovative startups – with disastrous consequences for the economy as a whole.
It would be a mistake for lawmakers to encourage Big Tech’s efforts to weaken America’s intellectual property protection system. It would make our economy less dynamic and less competitive. Instead, lawmakers should reject the PTAB Reform Act and revise it to block multiple and serial challenges, block challenges when the courts have already upheld the patent, and upgrade the PTAB’s evidentiary standard to the more rigorous standard of proof of the courts “clear and convincing”.
Widespread intellectual property infringement poses a major threat, not just to small startups, but to the U.S. economy as a whole. The very purpose of the US patent system is to induce companies, entrepreneurs, inventors and their investors to take risks on untested ideas. Unsurprisingly, venture capital investments in early-stage startups fell sharply in 2021-22.
Without confidence in the enforceability of patents, there would be very little reason to take these risks. And the result would be a much less dynamic, innovative and prosperous economy.