The Facts

• Bad patents harm innovation and small businesses. Toggle Content

  20% decline in R&D spending

  Companies who lose patent infringement lawsuits brought by non-practicing entities (“NPE”) experience a 20% decline in R&D spending.

  [Source: Cohen et al., Patent Trolls: Evidence from Targeted Firms, Harvard Business School Finance Working Paper No. 15-002, p.38.]

  90% of companies

  targeted by NPEs are small to medium-sized businesses.

  [Source:  Bessen and Meurer, The Direct Costs From NPE Disputes, 99 Cornell L. Rev. 387 (2014)]

  $29 Billion

  is spent annually in direct costs by companies defending against NPE lawsuits, where the majority of the companies are small to medium-sized businesses.

  [Source: Bessen and Meurer, The Direct Costs from NPE Disputes, 99 Cornell L. Rev. 387 (2014), p.4]

  $5 Million

  The median cost to defend a patent case is between $600,000 and $5 million.

  [Source:  AIPLA Report of the Economic Survey (2015), p.37.]

• The Patent Office has limited resources to evaluate patent applications—some lemons get through. Toggle Content

  643,349

  patent applications were filed in 2018 alone, with 338,072  being granted and there are only 8,185 patent examiners at the Patent Office to review them all.

  [Source: U.S. Patent and Trademark Office, Performance and Accountability Report for Fiscal Year 2018]

  5.2 hours

  is the average time an examiner spends searching for prior art in complex fields of biotechnology and organic chemistry.

  [Source: http://www.generalpatent.com/node/2433]

  In comparison, litigation defendants may spend hundreds of hours looking for prior art!

  19 hours

  is the average time a patent examiner spends to review a patent application from start to finish, which includes:

  • reading the application;
  • searching for and reading the prior art;
  • comparing the prior art with the application;
  • drafting correspondence with the applicant; and
  • responding to the applicant’s arguments,

  all the while being responsible for hundreds of other pending applications in various stages of examination.

  [Source: Frakes and Wasserman, The Review of Economics and Statistics 2017 99:3, 550-563]

• Bad patents are used to threaten hard-working (often smaller) businesses with lengthy and costly litigation. Toggle Content

  “It’s really disheartening. How can any company innovate in this atmosphere?” —Ditto CEO Kate Endress

  California-based eyewear startup Ditto had its valuation reduced by $3-4 million and was forced to lay off four of its 15 employees to pay legal expenses in a patent lawsuit that was ultimately dismissed.

  [Sources: https://www.eff.org/deeplinks/2013/04/1-800-contacts-buys-patent-squelch-competition; July 13, 2017 Testimony of Julie P. Samuels before the Committee on the Judiciary Subcommittee on Courts, Intellectual Property, and the Internet]

  40% report “significant operational impact”

  40% of surveyed startups reported “significant operational impact” on their operations after receiving patent infringement demand letters, ranging from delayed hiring, change in business strategy, to complete shutdown of their businesses.

  [Source: Chien, Startups and Patent Trolls, 17 Stan. Tech. L. Rev. 461 (2014)]

• Congress recently gave the Patent Office an efficient and effective way to correct their mistakes and remove bad patents. Toggle Content

  In 2004, the Executive Director of the American Intellectual Property Law Association (AIPLA) testified that “[p]atents…of questionable validity undermine the confidence of businesses and consumers…[T]he time is now for an effective post-grant opposition system.”

  —Testimony of Michael K. Kirk, Executive Director AIPLA, House Hearing, 108th Congress (2004).

  In 2011, Congress enacted a law providing post-grant procedures called Inter Partes Review (IPR) and Covered Business Method (CBM) Review to fix bad patents.  As explained by Senator Sessions, these procedures “allow invalid patents that were mistakenly issued by the PTO to be fixed early in their life, before they disrupt an entire industry or result in expensive litigation.”

  —157 Cong. Rec. S1326 (daily ed. Mar. 7, 2011) (statement of Sen. Sessions)

• IPRs are faster and less expensive than district court litigation. Toggle Content

  Inter Partes Review

  1 year

  Congress mandates that the review be completed within one year.

  $80,000 – $350,000

  is the median cost of an IPR depending on whether the IPR is resolved early at the petition stage, or all the way through appeal.

  [Source: AIPLA Report of the Economic Survey, (2015)]

  District Court

  2+ years

  There is no time limit for district court litigation.  The median time just to reach trial is 2.24 years, and in some cases, up to 5 years. 

  [Source: www.lexmachina.com (data as of Jan. 2018)]

  $600,000 – $5,000,000

  is the median cost of district court litigation depending on the amount in controversy.

  [Source: AIPLA Report of the Economic Survey, 2015)]

• IPRs are focusing on bad patents. Toggle Content

  < 0.2% of patents

  As of February 15, 2019, only 5,954 patents of an estimated 3 million patents in force had been challenged at the PTAB — less than 0.2%.

  [Source: Data from Lex Machina – This includes all PTAB proceedings, not just IPRs, though IPRs are the vast majority]

  < 0.04% of patents

  Even fewer patents have been invalidated by the PTAB.  As of Dec. 31, 2018, only 1303 patents—or about 0.04%—of active patents have been invalidated in a PTAB trial.

  [Source: Data from Lex Machina]

   32% of IPR petitions that went to trial over the last six years resulted in all claims being found unpatentable (as of December 2018). That is less than the 45% rate of district court cases finding invalidity (where validity was at issue).

  [Sources: USPTO Trial Statistics IPR, CBM Dec 2018, Lex Machina – 765 District Court cases in the same time period resulted in the finding of invalidity out of 1,696 where validity was decided; (from 9/16/2012 to 12/31/2018)]

• IPR’s lead to economic expansion by improving patent quality and fostering innovation. Toggle Content

  Venture Capital investments increased by 175%, since AIA.

  [Source: PwC/CBInsights MoneyTree™ data explorer]

  Start-up activity accelerated by 194% from 2013-2016. 

  [Source: The Kauffman Index of Startup Activity: National Trends (last updated May 2017)]

  R&D spending has increased 48% for the top R&D spenders.

  [Source: PwC 2018 Global Innovation 1000 Study]

  Since AIA, U.S. GDP has increased by 16%.

  [Source: BEA Data]

• IPRs help reduce the skyrocketing cost of drugs. Toggle Content

  Drug companies maintain their monopolies on hundreds of the most urgently-needed medicines by applying for dozens, or even hundreds, of patents specifically to keep generic drugs out of the market. Generic market entry creates competition and would lower drug prices by up to 80%.

  Learn More: https://www.patientsforaffordabledrugs.org

  Most of the patents granted by the government to big drug companies are for tiny, non-innovative “inventions” on old, existing drugs. Yet these patents are used to keep drug prices high. IPR is the best tool generic drug companies have to invalidate these non-innovative patents – which should have never been granted.

  Learn More: https://www.capanow.org

  Humira is the world’s best-selling prescription drug in the world, with over $16 billion in U.S. sales per year. Humira’s patents ended in 2016. That’s when generic drug entry should have come, lowering the price. But just before 2016 arrived, the company that sells Humira, AbbVie, applied for and obtained over 75 patents to extend its monopoly to 2034. A generic drug company used the IPR process to have one of those patents invalidated. AbbVie’s patented “invention” had already been well known and published in a medical journal prior to AbbVie’s patent application.

  Learn More: https://www.stoprxpatentabuse.com