IP Trends to Keep an Eye On in 2021
By Sandy Chan | December 21, 2020
Like companies around the world, IP Counsel Cafe has had to adapt to meet the needs of the moment. Whether I’m speaking with IP Counsel from companies in India, Japan, Europe or the U.S., we are facing the same Covid-19 pandemic and have rapidly found new ways to get our jobs done. What has struck me is how Covid-19 has amplified the importance of innovation. In January, newspapers began reporting on a mysterious coronavirus in Wuhan, China, over 7,000 miles away. Reading the tea leaves, I pictured this coronavirus spreading invisibly around the globe as international commuters unwittingly went about their lives. I immediately canceled my own international flights, bought surgical masks and waited. IP Counsel Cafe’s Annual Meeting was scheduled to take place in Palo Alto in late April. By early March, IP Counsel Cafe was one of the first organizations to postpone its Annual Meeting, as global companies in the Bay Area swiftly perceived the approaching public health crisis, ordered shelter in place, and mandated work from home (WFH).
After the initial chaos of company-wide transitions to WFH, we faced a great deal of uncertainty. Trial dates had been postponed, filing deadlines were extended, everything was in limbo as different states and countries announced their own rules. However, one thing was clear: we needed a path forward. This meant we had to innovate.
IP Counsel Cafe got to work. We quickly researched and figured out how we could best help the community during these unprecedented times. We rolled out a new podcast to keep IP Counsel connected during these isolating times. We created a membership program that offers new ways for IP Counsel to connect. And after some trial and error, we successfully delivered what IP Counsel have come to expect from us over the past 12 years: we held the IP Counsel Cafe Annual Meeting virtually in September, bringing together IP law thought leaders from across the globe. Because the meeting was held virtually, we had more registrants than ever before, one of the upsides to holding virtual meetings. Several IP Counsel said they had long wanted to attend the Palo Alto meeting, but travel constraints had previously prevented them from doing so. Now, they were able to attend by simply logging on from home.
Despite global lockdowns, the IP world was certainly not at a standstill! From the impacts of Covid-19 on innovation, to the ever-changing state of patent protection in the U.S., we had plenty to talk about.
What impact has Covid-19 had on innovation and IP strategy? When the first wave of Covid-19 cases hit the U.S. in March, many companies shut their offices and mandated WFH. However, if their innovators needed to be in the work place to get their jobs done, companies made that a priority. Certainly not all innovators need to be in the work place to do their jobs. Software engineers, for example, have long been able to work remotely and they have been able to maintain, if not increase, their productivity during Covid-19. However, if the innovators needed the tactile lab environment, companies went to great lengths to secure personal protective equipment and keep other employees at home so that their innovators could continue working safely on-site. The goal was to minimize any disruption to innovation, the company’s lifeblood. Some companies are continuing to innovate as they did pre-Covid-19, but there is concern that the innovation pipeline flow may dry up if remote work drags on. Initially, companies did their best to function with their offices temporarily closed and teams fragmented. There were enough previously shelved projects that they finally had time to revisit. I heard anecdotally that patent filings were strong in the early months of the pandemic. Stuck at home, teams now had more time to go back and finish writing invention disclosures.
But are new innovations coming into the pipeline as we socially distance and work remotely? The pandemic has cut off the natural flow of in-person water cooler talk and sharing of information that occurs effortlessly when teams are physically together. These informal conversations and exchanges of ideas are hard to mimic in the electronic world.
Furthermore, Covid-19 has triggered an economic downturn and companies may choose to reduce or delay cost, including budgets for R&D and expensive patent applications. Together, these factors may lead to a decline in patent filings, a proxy for innovation.
On the other hand, some industries have ramped up their innovation in response to Covid-19 to create a boom particularly in the life sciences and technology fields. In the life sciences, some projects that had already been in the pipeline have been diverted to address Covid-19 testing, treatments and drug discovery. Artificial intelligence (AI) is also being used to quickly identify target molecules, reducing the amount of time needed for drug discovery.
Software companies have rapidly introduced products to facilitate remote work. There are new platforms to facilitate digital workflows. Some products also introduced virtual rooms in an attempt to recreate the effortless flow of information that occurs when teams are in the same physical space. Electronic signatures have also been widely adopted and video calls have become standard.
The real question is: what longer-term impact will Covid-19 have on innovation and intellectual property strategy? What will happen to patent filings in 2021 and beyond?
Regardless of its impact on innovation, some believe the pandemic has only accelerated business and IP filing trends that predate the pandemic. In 2018, the U.S. saw its first decline in patent applications in nine years while there was rapid growth in low- and middle-income countries such as Pakistan, Philippines, Uzbekistan, Morocco and Vietnam (Source: WIPO (2019) World Intellectual Property Indicators 2019. Geneva: World Intellectual Property Organization.) Many companies planning for the long term have recognized a change in their end consumer markets. Emerging markets in Asia, Southeast Asia, Latin America and Africa are growing very quickly. Some countries are also rapidly introducing legal reforms and developing better infrastructure to support manufacturing so it can be closer to the end consumers. Supply chains are shifting to match that, which is reflected in pre-Covid-19 filing trends. Covid-19 has only accelerated the trend toward more diverse patent filings outside the U.S.
On the litigation front, companies are once again talking about non-practicing entities (NPEs). In fact, IP Counsel Cafe was founded in 2008 to address the growing NPE or “troll” problem. After the America Invents Act (AIA) was passed in 2011, the NPE problem settled down. In 2012, a procedure known as Inter Partes Review (IPR) was introduced, as part of the AIA, to challenge patent validity. Defendants accused of patent infringement incorporated IPRs into their defense strategies, leading to the invalidation of over 1,900 patents. (Source: USPTO PTAB Trial Statistics Report March 2020.) Case law such as the U.S. Supreme Court’s 2014 Alice decision also made it harder for software patents to survive challenge. These factors dissuaded NPEs from asserting patents of questionable quality. But over the past year, NPE litigation has rebounded. Many people say patent litigation moves inversely to the economy, but this trend began before the Covid-19 triggered economic downturn.
Companies attribute this new wave of NPE activity to a couple of factors. Litigation funding has provided new ammunition to NPEs, providing them the ability to absorb uncertainty at the outset. The reason patent litigation has become an attractive asset class is that increasingly patent-friendly policies have increase the likelihood of the plaintiff’s success. For example, IPRs have become increasingly difficult to institute. When first introduced, IPRs were viewed very attractively by defendants because they were fairly easy to institute. When an NPE filed a patent infringement suit, the defendant filed an IPR, leading to the invalidation of many patents. Over time, however, the landscape has changed and the IPR institution rate has declined. IPRs are conducted by the Patent Trial and Appeal Board (PTAB), an adjudicative body within the The United States Patent and Trademark Office (USPTO). The IPR institution rate stabilized around 2015 to 2016, but began to decline in 2017. The institution rate took an especially precipitous drop in 2020. (Source: USPTO PTAB Trial Statistics Report March 2020.)
A significant contributor to the PTAB’s denial rate this year has been an increase in discretionary denials, a much discussed issue at this year’s Annual Meeting. A discretionary denial is a refusal to institute an IPR for reasons other than the merits of the IPR petition. In the NHK Spring case, the defendant was accused of patent infringement in district court. They then filed an IPR to challenge the validity of the patent. The PTAB denied review because there was a parallel district court proceeding. The USPTO went further in its Apple Inc. v. Fintiv order by establishing a 6-factor test for weighing efficiencies when determining whether to institute an IPR if there is a parallel district court proceeding. Since the district court could potentially review the same issues and reach trial before the PTAB has completed the IPR proceeding, it may be inefficient for the PTAB to institute an IPR. For this reason, under Fintiv, the PTAB may deny institution. This is particularly disadvantageous to a defendant in districts that set early trial dates. This circumstance has exacerbated the problem of NPEs filing patent litigation over poor quality patents by increasing forum shopping and judge shopping.
Just days before our Annual Meeting in September, Apple, Cisco, Google and Intel filed an Administration Procedure Act challenge in district court, and Cisco filed a petition at the federal circuit, challenging the PTAB’s NHK/Fintiv test. Our meeting speaking faculty included IP Counsel at Apple, Cisco, Google and Intel. Unfortunately the pending litigation did have a chilling effect, as several members of the USPTO were no longer able to participate in our event and speak about the PTAB. However, the USPTO announced in October that it was “considering the codification of its current policies and practices, or the modification thereof, through rulemaking and wishes to gather public comments on the Office’s current approach and on various other approaches suggested to the Office by stakeholders.” The comments were due November 19, 2020 so we anticipate new developments in the next few months.
The topics mentioned above were the most talked-about issues at the virtual meeting in September. As we make our way out of the pandemic next year, there will be much more to discuss. Litigation delays caused by Covid-19 will finally move forward. Many business changes precipitated by the pandemic may become permanent. It’s incredibly important for the IP legal community to have candid discussions at this time when so much is evolving.
This year, we were able to include more IP Counsel, and also more IP Counsel from different industries. In the past, most of our attendees were IP Counsel in the high-tech industry, but this year, we saw an increase in attendance by IP Counsel in the life sciences. I believe this reflects the increasing convergence of high-tech and the life sciences. For example, drug development is increasingly using AI and other technologies to facilitate innovation. As a result, patent portfolios in the life sciences are evolving and looking more like portfolios in the high-tech industry. This means there is a great deal the life sciences can learn from high-tech with regard to IP portfolio building and management. We are also seeing more IP Counsel in the high-tech industry move to jobs with life sciences companies.
IP Counsel Café is intent on facilitating continued discussion with IP stakeholders. During Covid-19 as we socially distance, it is more important than ever to network and maintain relationships with others. Without those relationships, it’s impossible to get things done. I look forward to a few more months of virtual networking, as it’s been a good time to reflect on what IP Counsel Cafe can do to best serve the community. We are expecting to be able to resume in-person meetings in the second half of 2021. In the meantime, we look forward to welcoming everyone to IP Counsel Café’s virtual spring meeting in April 2021, and we will see everyone at the annual Palo Alto meeting, hopefully in person, in October 2021.
Sandy Chan is executive director and general counsel of IP Counsel Café, a 3,000+ member organization that empowers the IP counsel community by creating a safe place for knowledge and information sharing. The IP Counsel Café spring meeting will be held virtually on April 19-23, 2021, and the annual meeting will be held on Oct. 4-8, 2021, hopefully in-person in Palo Alto. For more information, visit http://www.ipcounselcafe.com.
Reprinted with permission from the December 21, 2020 edition of Corporate Counsel © 2020 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.