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In an article written by a prominent patent attorney and broker, he stated: “...recent studies show that more than half of the patents in circulation will end up being invalidated if challenged.”

How much truth in this? Or does it apply mainly to patents prosecuted before some of the still-fairly-recent Supreme Court cases such as Alice and Bilski ?

UPDATE – source of quote: http://www.iam-media.com/Intelligence/IAM-Yearbook/2015/Monetisation-and-strategy/How-to-work-with-patent-brokers-and-buyers

  • Could you please add a link to the article you quote from? – Eric Shain Mar 19 '18 at 13:33
  • See quote source just added. Attorney Louis Carbonneau has made similar statements in other articles and documents, more recently saying the percentage is "3 out of 4." – Charles Mar 20 '18 at 1:53
  • This might be better asked on Skeptics SE site. – Eric Shain Mar 20 '18 at 2:48
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The term "in circulation" is a little confusing. Does he mean "patents that are being circulated among potential buyers"? If so, that may well be the case.

Prior to Alice and the America Invents Act, issued patents were normally on pretty solid ground. As a result, patent lawyers typically sought claims as broad as possible. In order to infringe a patent, you must infringe every element of a claim. Similarly, in order to invalidate a patent, there cannot be a patentable limitation/element. So if the patent is "a device with A, B and C" and A, B and the combination of A and B is obvious, but adding in C is not obvious, it is patentable (assuming the subject matter is eligible).

The impact of this is that post-Alice and the AIA, good patent lawyers make sure that the claims are not overly broad. So there is something to the idea that patents filed for post-Alice are sometimes stronger in terms of validity (but weaker in terms of coverage).

I think what the attorney was thinking about was an "Inter Partes Review", or "IPR", a creation of the America Invents Act. The AIA actually created Post-Grant Review, Covered Business Method Review, and Inter Partes Review. Each of these happens before an administrative law panel (so a so-called "Article 1 Court"). The Supreme Court is currently considering whether those panels are constitutional (in a pending case known as Oil States). These panels have a track record of basically killing the vast majority of patent claims that they look at (see http://www.ipwatchdog.com/2017/06/14/90-percent-patents-challenged-ptab-defective/id=84343/). Of interest is that it is not uncommon for a federal district court (or courts) to have determined the patent to be valid, only to have the Article 1 court invalidate the patent later. This may be a bias against patents on the part of the USPTO panels (my guess), but also stems in part from the different standard of review. Proper Article 3 Courts give deference to the termination of the patent examiner, while Article 1 Courts do not.

So I'd say that the more than half statistic is valid if applied to patents reviewed via the post-grant procedures created by the AIA. This is particularly so if we're considered only patents that are being shopped around for sale, as that would eliminate patents being held by operating entities that are typically more limited in scope, covering the actual thing the company does.

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    Without a link to the article in question, it is hard to know upon what its conclusions are based. Since I'm guessing only a minority of patents are challenged, it is probably wrong to extrapolate from those to the broader population of granted patents. One would suppose that challenged patents are much more likely to be invalid in some way. – Eric Shain Mar 19 '18 at 13:36
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In that quote, there is a kernel of truth, with a candy-coating of editorializing.

The facts

If you look at the February 2018 USPTO statistics for the PTAB as an example, the final page shows some stats.

Final written decisions: Instituted claims unpatentable No claims: 389 (19%) Some claims: 323 (16%) All claims: 1304 (65%)

So one way to view it is 81% of patents do not hold up when challenged (in that at least one claim is found unpatentable). I think 81% would be regarded as a significant percentage.

Of course, we don't know if the quotee meant PTAB, or court, or what. But this at least indicates that the underlying statistics referred to by the quote, on their face, are plausible.

The opinion

The quote itself is very misleading, since it implies that this can be extrapolated across all patents ("in circulation", whatever that means). While this sounds good, it is almost certainly not the case.

First, there is no way to know what would happen to all cases generally, and anyone professing to know is only speculating.

A patent will generally only be challenged if the challenger has a reasonable expectation of winning. Why throw money away otherwise? So immediately you will see that only weak patents will be in a position to have a decision issued. The non-challenged cases are inherently not analogous.

In fact, it could well be that 99% of issued patents would pass through the IPR process unscathed (if this ever occurred), and all the current invalidations relate only to the other 1%. This would be consistent with the statistics too. But you can't get attention by saying "most patents are pretty good, no cause for alarm".

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    This answer echo's my thoughts. Since we know how many patents are issued and should be able to figure out how many have claims found to be unpatentable we should be able to calculate the actual percentage of invalid patents. The original argument is akin to suggesting if 80% of arrested people are found guilty then 80% of all people are guilty. – Eric Shain Mar 20 '18 at 22:38
  • @EricShain That's a perfect analogy. – Maca Mar 20 '18 at 22:39
  • Glad to see this has generated some interesting discussion. I think the motivation for the author of that quote (in multiple articles as I noted above) is simply to promote the "Patentability Analysis" service of his firm, Tangible IP. Nothing really wrong with that, in context of the big game. Kind of like an insurance salesman reminding you of all the bad things that could, and actually do happen, but trying to make a strong impression with it so you'll take action and hire him. – Charles Mar 20 '18 at 23:53
  • @Charles The Skeptics SE site is really good for this sort of question. I highly recommend you check it out. Extremely impressive answers there. – Eric Shain Mar 21 '18 at 23:15
  • Thanks, that is interesting and I will spend some time with it. But it states it's about "scientific skepticism." My post here was very clearly about patents and the strength of them, so I believe it belongs here. – Charles Mar 22 '18 at 2:45

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