Major American tech firms have lamented the problem of intellectual property theft for years. The American economy might lose up to $600 billion annually as a result of Chinese corporations disobeying IP restrictions, according to estimates made by the U.S. government. However, this issue of businesses disregarding patents and other IP restrictions isn't only a global concern; it also exists here in the United States.
Major IT corporations are frequently the perpetrators, not the victims, of IP violations in these situations, which may explain why they appear less bothered about them locally.
For instance, the US International Trade Commission, a quasi-judicial entity that reviews trade enforcement issues, determined in January that Google violated a number of patents owned by speaker manufacturer Sonos.
The commission granted Google 60 days to implement software updates to eliminate the stolen technology; failing to do so will result in a ban on the importation and sale of a number of Google goods in the United States, including the Pixel phone and Google Home smart speakers. Google cooperated, albeit at the expense of deleting features and decreasing the products' functioning.
This was one of many similar legal setbacks that Google has had. In February, a Texas jury found that Google's Nest Thermostat violated a patent owned by EcoFactor and imposed a $20 million fine on the company. A federal jury ruled Google's YouTube network infringed on VideoShare LLC's patent in a $26 million decision dated November 2021.
But Google isn't the only company. Other Big Tech companies have recently infringed on the intellectual property of smaller competitors, and as a result, they have received criticism and heavy fines from courts and the International Trade Commission.
A jury awarded Optis Wireless Technology $300 million in damages from Apple in August 2021 for violating the company's patents. VirnetX, a provider of internet security software, is also owed nearly $570 million by Apple for infringement.
Additionally, a Herndon, Virginia-based firm called Centripetal Networks and Cisco will go back to the district court to argue whether Cisco violated Centripetal's cybersecurity patents. Prior to the verdict being overturned by a judge's slight conflict, Cisco was previously found to be liable to Centripetal for infringement and owing them close to $2 billion.
Big Tech has learned from these rulings that intellectual property theft has legal repercussions, but this remedy may no longer be effective in the near future. Major tech companies, such as Apple and Google, are currently exploring a legal workaround rather than simply ceasing their infringement and fairly licencing rivals' technologies. By advocating for laws that would reduce IP protections, they are attempting to make it simpler to invalidate the patents of competitors. After all, there cannot be patent infringement if there are no patents.
Executives at significant tech companies have accepted these court decisions as a necessary evil for many years. Even when they reach the hundreds of millions of dollars, damages for lost cases are insignificant for businesses like Apple, which earned $365.8 billion in revenue in 2021.
Unfortunately, patent theft is a logical tactic used by corporate oligarchies to maintain their control and eliminate a danger from a rising upstart. After all, stealing is less expensive than licencing the innovations of smaller companies.
This tactic got much more effective a little over ten years ago.
Congress established the Patent Trial and Appeal Board (PTAB) within the U.S. Patent and Trademark Office (USPTO) in 2011, in part at the urging of tech lobbyists. The PTAB was ostensibly established to offer a quicker, less expensive means of resolving patent disputes outside of the courts. Instead, it gave Big Tech another way to manipulate the patent system. Now, wealthy tech companies could attack the patents of smaller competitors in two settings at once: in court and at the PTAB, where they could also submit multiple and serial challenges against the same patent.
Major IT corporations benefited greatly from this. Large tech corporations frequently asked the PTAB to invalidate patents that courts would uphold and find the tech behemoths guilty of violating after being sued by smaller competitors. In 84 percent of the patents it has decided upon in a final written ruling, the PTAB has at least partially invalidated the patent.
This is due to three key factors:
1) The evidence standard at the Board is lower than it is in court.
2) Repeated challenges are permitted, both by the defendant and anybody else who want to dispute the patent's validity.
3) The cost of each challenge to a patent owner is approximately $500,000. Big Tech companies can afford this cost, but startups frequently cannot.
There have been some attempts to solve this issue in recent years. To stop this kind of abuse, the USPTO implemented measures between 2018 and 2020. They noted, among other things, that under certain conditions, such as when the patents are already being challenged in court on the same grounds and the court's decision is approaching, the PTAB may decline to hear patent challenges. (Even still, more than 80% of PTAB applications in 2021 were from Google, Apple, Samsung, Cisco, and six other well-known mega-companies.) These reforms are logically sound. After all, there is no need for the PTAB, an administrative body, to take up matters that a separate court has already taken up and resolved.
Recently, the USPTO was sued by Apple, Cisco, Intel, and Google in an effort to undo those improvements, but their lawsuit was unsuccessful.
However, the USPTO's efforts to balance the patent system are now being effectively overturned by a bill that Congress is advancing.
The "Patent Trial and Appeal Board Reform Act" was introduced by Senators John Cornyn (R-TX), Thom Tillis (R-NC), and Patrick Leahy (D-VT).
But rather than enhancing the legal environment for small inventors, it will leave patent owners helpless to resist repeated applications from Big Tech.
The bill's supporters assert that it will prevent Big Tech from using the PTAB as a weapon, but this couldn't be further from the truth. Instead, if it were to become law as it is now written, it would eliminate the very safeguards that were put in place to level the playing field for small inventors, such as the PTAB's power to reject legal challenges when a patent is already being contested in court on the same grounds or the courts have already upheld the patent's validity.
Additionally, the measure does not place a cap on the number of petitions a defendant may submit, provided that they are all submitted on the same day.
It may be devastating for thousands of tiny, creative firms and have disastrous effects on the economy as a whole if they are successful in eroding the American IP system.
Legislators should not support Big Tech's efforts to undermine the nation's intellectual property rights. Our economy would become less dynamic and aggressive as a result. The PTAB Reform Act should be rejected by lawmakers, who should then rewrite it to bar repeated and serial challenges, block challenges after the courts have upheld the patent, and raise the PTAB's evidentiary standard to the stricter "Clear and Convincing" level used by the courts.
The U.S. economy as a whole, not just small companies, are seriously threatened by widespread IP infringement. America's patent system is designed specifically to encourage businesses, entrepreneurs, inventors, and their investors to take chances on unproven ideas. Naturally, VC funding for early-stage firms decreased significantly in 2021–2022.
There would be little incentive to take these chances if there was no faith in the enforceability of patents. A less dynamic, creative, and successful economy would be the end outcome.