Cisco General Counsel Calls for IPR Improvements to Protect Patentholders

Innovation is the life blood of our company. We invest more than $6 billion annually in research and development, and have over 14,000 issued US patents, reflecting the strength of that investment. A strong, balanced US patent system is important to us to ensure that others don’t profit without our consent on the basis of our innovation. Seven years ago, we pushed for the improvements and rebalancing of the patent system that were achieved when the America Invents Act became the law of the land with strong bipartisan majorities in both houses of Congress, and supported by a range of industries including both pharma and our own IT industry.

We supported the AIA to end a wave of patent litigation brought by shell companies based on weak, poor quality patents. By 2011, patent litigation brought by patent assertion entities that didn’t make or sell any products, spurred by court decisions that made it hard to defend against unmeritorious suits, had quintupled in only six years. The AIA gave us a new system called “inter partes review” or “IPR” which made it much easier to challenge bad patents. The inter partes system allows the experts in the US Patent and Trademark Office (USPTO) to review their earlier work if a petition raises good reason to believe that an error had been made in granting the patent. This was far more effective than litigating validity, as courts, in deference to Patent Office expertise, offer a presumption of validity and impose an extremely high burden of proof to undo a Patent Office error. Last week, the Supreme Court in deciding the Oil States case confirmed that the inter partes review system is constitutional because patents are public rights that can be both given and taken away in an administrative procedure.

This new IPR system has been a great success. Compared to litigation in court, the process is relatively fast and inexpensive. The USPTO’s decisions – whether to invalidate a patent or allow it to remain in force – have been fully upheld on appeal more than 75% of the time. And the process is targeted on the weakest patents: Of 2.8 million patents in force, only about 4,400 have been challenged in the IPR process, the patent office deemed 3100 worthy of review, and at least one claim has been invalidated in only 1800 of those.

The need to change and improve never ends though. Indeed, the very success of the IPR procedure points to the necessity of further improvement for the patent system. The new tool has been a boon for the victims of shake down tactics to extract value from weak patents. But far too many weak patents have been issued and continue to be in force. Neither patent owners, who often make investments on the basis of patent protection, nor the public, which often pays more to products because of the exclusive rights conferred by patents, can rely on the validity of issued US patents when the screening is ineffective. On the other hand, although relatively few patents on drugs have been successfully challenged, the possibility of losing billions of dollars in investment on a blockbuster drug has caused the pharmaceutical industry to turn against the IPR process after supporting it at the time of the AIA. In particular, patent owners have raised concerns with the composition of Patent Office panels which do the review, the filing of repetitive challenges to the same patent, how the scope of a challenged patent is interpreted in comparing it to prior art, and the complexities faced by patent holders who wish to amend their patents to maintain validity. It never feels fair to have something so valuable as a patent right taken away when the patent holder believed the Patent Office had correctly granted the patent. Some of these issues can be fixed but care is required to make sure the IPR process remains effective. We support changes that will make the process more broadly accepted while continuing to assure patent quality. For example, the Patent Office should end the practice of adding judges to panels at a late date and instead find alternative ways to assure consistency of decision making. To allow petitioners a ready alternative to cumbersome amendment procedures, the PTO should ease access to accelerated reissue and reexamination procedures that provide full vetting of new claims. We stand ready to work with new PTO Director Andrei Iancu to improve the IPR process

Director Iancu has a firm understanding of the complexity of fixing the system. He has rightly focused first and foremost on the reliability and certainty of patent rights. We particularly like his emphasis on getting the initial examination right and making sure that examiners have tools they need to do their jobs. He’s right that better quality examination requires more resources so that examiners have the time and the tools to their jobs. We support the Big Data and IP Act recently introduced by Senators Hatch and Coons to extend the USPTO’s autonomy in setting fees for another 10 years and encourage the USPTO to use the latest search technologies. Director Iancu should use this autonomy to collect the fees necessary to achieve his goals of reliable and certain patents. In the long run the best way to address the concerns with inter partes review is making sure invalid patents don’t issue in the first place. That is the only way to gain the public’s confidence in the patent system.

Industry also has a part to play. To improve patent quality in the technical areas where we innovate, we have created a searchable archive of our own publications and web sites and made those accessible using the same search syntax that examiners already use. We are working with the MIT Media Lab to build a common platform for other companies to do the same, making it far easier for examiners to search and make sure that patents are not granted on old inventions. Developments in artificial intelligence and machine learning promise to make searching for prior art more efficient and effective and industry has a key role to play in giving the USPTO access to the latest advances.

Patent litigation certainly hasn’t gone away for us. We’ve been sued six times by non-practicing entities since the beginning of this year alone. But the number of patent lawsuits brought in the US by patent assertion entities has been almost cut in half since 2012. Buying bad patents and using them to sue doesn’t bring the easy money that it used to. We’re excited about the next steps for our patent system. The opportunity is here for industry and government to work together toward a patent system that we can all rely on.