The ITC is tightening the scope of its jurisdiction
On the panel on ITC litigation and strategies at the US Patent Forum in Silicon Valley this week, speakers agreed that the International Trade Commission is changing the scope of how much domestic industry is required, especially when it comes to licensing.
“There is a recent trend of a tightening of jurisdiction,” said Richard Sterba, principal at Fish & Richardson. “It is the ITC’s response to the threat from Capitol Hill that, ‘If you can’t fix the perceived patent troll problem, we will fix it for you.’ It is increasing the requirements of economic domestic industry.”
Panellists also noted the difficulties posed by the internet for the ITC. For example, a decision last year in In the Matter of Certain Digital Models found infringement based not on tangible products, but on computer dental files.
The question was raised of how customs can stop a transmission over the internet. “I don’t think the ITC is going to find it has seizure authority over domains,” said Andrew Kopsidas, also a principal at Fish & Richardson.
IP can be like Monty Python sometimes
Another issue identified by Sterba at Fish & Richardson was that losers at the ITC will often continue to pursue district court litigation.
“One trend I see at the ITC lately is [companies] lose at the ITC and then go back to the district court and have another bite of the apple,” he said. “Nothing frustrates a client more than decisively winning an ITC investigation only to find themselves dragged back into district court by a plaintiff that like the black knight in Monty Python refuses to die.” (He is referencing this – warning: comedy violence.)
He added: “A lot of people don’t realise that the ITC statute does not really allow them to adjudicate to conclusion a patent claim. So when there is an invalidity finding at the ITC, that doesn’t mean anything to the Article III court. They can come back with their own finding and find the patents completely valid.”
Other panellists noted that in practical experience, however, they have seen very few district court judges who don’t give deference to at least the factual claims.
Bas de Blank, partner at Orrick, noted that some of the most enthusiastic users of the ITC are those that have had painful experiences there.
“In my experience people who have been respondents in an ITC investigation – and hated it, thought it was totally unfair that they had this happen to them and that it was a miserable experience – now they want to do it to their competitors. Some of the most enthusiastic clients for the ITC are those that have recently been through it. Which I think speaks to the real power of the ITC.”
Why shouldn’t hedge funds file IPRs?
The filing of inter partes review petitions by hedge funds has received a lot of attention recently. Two IPR petitions were filed by hedge fund manager Kyle Bass’s Coalition for Affordable Drugs challenging Acorda patents in February. This month Ferrum Ferro Capital filed a petition challenging an Allergan patent.
Many believe these petitions are an attempt to drive down stock prices to benefit from short selling. BIO reacted to Bass’s first petition by stating he had “opened a new door to abuse of the patent system”.
However, at the forum Kevin Jakel, CEO of Unified Patents, pointed out that everyone has the right to file a petition.
“It’s one of those things I think creates a very visceral reaction,” he said, quickly adding that Unified – which protects its members against non-practicing entities, including by filing IPR petitions – is not engaged in that activity. He said this dynamic is playing out in legislative reforms with the recently-introduced STRONG Act including a raft of PTAB reforms.
“We should come back to the fact that if a patent is invalid it is invalid,” said Jakel. “Does it really matter who it is that is filing to try to invalidate that patent? Should they be able to use prior art that has already been used in district court litigation? Maybe, maybe not. But the standing to bring challenges before the PTAB is broad, everyone has the opportunity to do that so the question should be should we limit that?
“Personally I think it makes for a thriving, strong patent system that we’ve got the ability to challenge patents that we believe are invalid. I don’t think that there is that much harassment going on. It’s being used creatively, but I think that’s the system we have and if we want to fix some of those things there are probably solutions to do that.”
Forget everything you know about Europe
"Anyone here been involved in patent litigation in Europe?” Wragge's David Barron began his presentation by asking. “You can forget everything you know."
Barron and his colleague Michael Schneider then gave an overview of the confusing variables at play in the move towards the Unitary Patent Court.
The most recent news on this is two proposals floated by the EPO earlier this month on fees and costs. The Office suggested renewal fees for the Unitary Patent could be based on the price of validating existing patents in the four most popular countries or on the price in the top five countries but with a 25% reduction for SMEs, natural persons, non-profit organisations, universities and public research organizations in years 2 to 10.
In practice the first option would lead to a total cost of €38,000 over the 20-year term and the second option would be €43,500. In many industries, only three countries are essential and some applicants have indicated they would go down the national route if the fees are higher than the cost of validating in three countries. Barron said that the cost for validating a patent now in the UK, France and Germany was about €25,000.