A tactic sometimes used by a well-established competitor against a startup is to accuse the startup of patent infringement. Unless the startup has deep pockets, it cannot really afford to defend a patent lawsuit – an expense that often runs into the millions of dollars if the case goes to trial. The startup is fragile at this juncture, can be terrified about the prospect of a patent suit, and sometimes negotiates a settlement where the competitor receives rights to use the startup’s technology at less than fair value.
A defense for the startup is to strike back and attack the validity of the patent. The America Invents Act, signed into law in 2011, gave accused infringers (and others) a new weapon referred to as an “IPR.” This stands for “inter partes review.” It’s a trial conducted at the Patent and Trademark Office (PTO) in front of three (or more) administrative patent judges who will decide whether the patent claims are valid over prior art patents and printed publications. Two related proceedings are called a “post-grant review” and a “covered business method review.”
These proceedings are far less costly than defending a patent infringement suit, and in these proceedings you cannot be charged with infringement because the PTO lacks jurisdiction to hear infringement claims. If the patent owner wants to pursue infringement, it will have to go to court or the U.S. International Trade Commission.
To start one of these PTO trials, you need evidence showing why the patent is invalid. You can have a technical expert give a declaration about the prior art and about invalidity. A law firm or search company (or the expert) can look for evidence of invalidity.
Moreover, PTO trials offer some procedural advantages that a patent challenger does not have in a U.S. district court. These include interpreting the patent claims according to a “broadest reasonable interpretation” instead of how a district court interprets them, applying an easier burden of proof, and not applying the presumption that the claims are valid. Another advantage for the challenger is that PTO patent judges are vastly more technically competent than most U.S. District Court judges. Once initiated, PTO patent trials proceed very quickly – much faster than district court litigation. Given that speed together with the technical (and patent law) proficiency of the PTO judges, if the patent owner sues you for infringement in the District Court, you can ask to “stay” the district court case while the PTO determines whether the patent is valid. If the PTO starts the patent trial, most district courts stop the infringement proceedings until the PTO rules.
When faced with a timely, competently-prepared petition to start an IPR or other PTO trial, patent owners can become more reasonable. After all, their patent is now at stake, and if the PTO accepts the proposed trial, the patent challenger usually wins something. PTO trials can be settled and terminated if the parties reach a settlement early in the proceedings.
The bottom line – IPRs give you leverage against a patent holder without the expense of defending a full-blown patent infringement suit.