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June 13, 2024 11:07 am

Local News

Opinion | Patent Law Abuse Threatening Small Businesses

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By Marc Feldman, small business owner

Three years ago, the future of my business felt precarious. The entertainment landscape in Las Vegas had taken a huge hit due to the pandemic and many venues were closed for nearly a year. As the city began to reopen, myself, along with so many other small business owners, had no idea what the future held. Now, three years later, business is thriving. Our city saw record business from the tourism industry in 2022, and entertainment in Las Vegas is back at pre-pandemic levels. Unfortunately, these precious gains are being put at risk by recent rules from the United States Patent and Trademark Office (PTO) that could hurt Main Street businesses around the country.

Patent law isn’t typically something most entertainment booking company owners have to think a lot about, but the rise of non-practicing entities (also called “patent trolls”) has changed that. These NPE’s are companies that buy up old, unused patents from decades ago, and use them to threaten small businesses like mine. They’ll claim to own the idea of something basic, like using a scanner or having a shopping cart logo on your website, and tell you you’re infringing on their patent just by running your business. The claims are ludicrous, and typically would fall apart in court. But court cases are expensive. For a business like mine, it’s often less expensive to settle with these trolls out of court than it would be to win a protracted legal battle. 

Congress knows patent trolls are a problem, and in 2011 Majority Leader Harry Reid helped shepherd landmark legislation through the legislative process to help businesses like mine. The America Invents Act created the Inter Partes Review (IPR) process at the PTO. Under the law, anyone can challenge a patent and have it reviewed by the Patent Trial and Appeal Board (PTAB) to make sure it’s valid. 

IPR has been a game changer for small businesses like mine. To start, instituting an IPR is a lot faster and less expensive than going to trial. When a company like mine gets a letter from a patent troll alleging infringement on a patent that never should have been issued in the first place, we now have the option of going to the PTAB to have that underlying patent invalidated. Invalidating the patent helps the business under attack, and prevents that same old patent from being used to target other small businesses in the future. Moreover, the America Invents Act allows anyone to file an IPR, meaning bigger companies or associations can file IPRs that stand to benefit their clients or members. 

Now, those improvements are being put at risk. Over the last few years, the PTO has weakened the IPR process, and we’ve already started to see the impact. While lawsuits from patent trolls fell after the 2011 legislation, there’s been a 40 percent jump in NPE cases in the last five years since the PTO started weakening IPR. Unfortunately, instead of course correcting to protect small businesses and the IPR process, the PTO appears prepared to double down. This April, the PTO announced a number of changes that would codify and expand their efforts to undermine IPR, including in ways that directly contradict the legislation passed by Congress. If the PTO moves forward with the proposed rules as written, they risk emboldening patent trolls and putting businesses like mine at risk. 

The changes the PTO is proposing include creating a much shorter deadline for filing an IPR than was laid out in the AIA, changing the standard for instituting a review from “reasonable likelihood” to “compelling merits,” and rewriting Congress’s rules on who can even file an IPR. In issuing this proposed rule, the PTO has significantly overstepped its bounds and usurped Congressional authority. 

With the worst of the pandemic behind us, many of us in the entertainment industry are excited for the future. We rely on the government to pass sensible rules that help promote growth and protect small businesses. The recently announced PTO Advanced Notice of Proposed Rulemaking on the PTAB does neither, and opens Main Street businesses up to threats from patent trolls. I hope the PTO will reconsider its proposed rules, and go back to the drawing board when it comes to passing new rules that have the power to impact businesses like mine.