The Revolving Door Project, a Prospect partner, scrutinizes the executive branch and presidential power. Follow them at therevolvingdoorproject.org.
The U.S. Patent and Trademark Office (USPTO) might be the most powerful government agency the majority of Americans have never heard of, much less think about on a daily basis. The USPTO is housed within the Department of Commerce, and it is charged with registering trademarks and granting patents. Its funding comes entirely from application fees, and its task as outlined in the Constitution is to promote the progress and dissemination of new technology. Its decisions therefore enhance or impede people’s access to medical care, agricultural inputs, automobile components, and thousands of other things.
Alas, the Patent Office has often neglected to serve the public’s interest—and seldom has it performed worse than under Donald Trump’s choice of director, the corporate lawyer Andrei Iancu.
With Iancu at the helm, USPTO prioritized the interests of fee-paying companies—or “customers,” as it called them—weakening enforcement of patent laws, and shrouding the USPTO’s operations in secrecy that precludes public accountability. It’s part of the reason why we have seen drug prices continue to soar, small farmers get crowded out of agriculture markets, and cars become more expensive and inaccessible.
In one Supreme Court case, United States v. Arthrex, the USPTO argued in a brief filed on November 25, 2020, that then-Director Iancu had “broad control” over the Patent Trial and Appeal Board (PTAB). The PTAB consists of administrative patent judges (APJs), who decide important issues, including whether to grant petitions challenging the validity of granted patents, and if so, whether those patents are invalid. Concerned about the USPTO’s arguments, congressional representatives from both parties asked the Government Accountability Office (GAO) to investigate its oversight of the PTAB. The GAO recently released preliminary results from its investigation. Those results reveal extensive damage done to the transparency, accountability, and integrity of the USPTO during Iancu’s reign.
According to the GAO report, the overwhelming majority (75 percent) of APJs felt pressured to change their decisions in particular cases to satisfy the preferences of the USPTO’s former director and management rather than the law’s requirements. Judges who refused to do so were removed and replaced with those who would. When that happened, the USPTO not only withheld, but actively misrepresented, the facts, telling the parties the judge was removed because of their unavailability rather than their insistence on independence.
These breaches of the public’s trust are dangerous. Take, for example, the PTAB’s refusal to review a petition challenging the validity of a patent on schizophrenia medication. This conveniently allowed the patent owner to continue litigating against a (different) generic manufacturer in district court. At the time, that decision made no sense: Congress authorized the public to file petitions like this in order to weed out invalid patents before the litigants and the public waste money on expensive district court trials. Now, in light of the GAO’s report, it’s logical to conclude that pressure from USPTO leadership influenced the PTAB’s decision to defy the will of Congress.
In another decision, the PTAB refused to grant two petitions so that patent infringement trials against Intel could proceed in Texas. That decision was not based on the petition’s merits; the PTAB refused to say what it thought of the petition because the district court proceeding was under way. As a result, the patent owner, VLSI Technology LLC, won a damages award of over $2 billion.
However, under current director Kathi Vidal, the PTAB has granted practically identical petitions against the same patents. This time, the PTAB considered the evidence and decided to grant review because VLSI’s patents are likely invalid, because their claims are preposterous. The patents broadly claim methods of sending information from one part of a computing device to another that were well known decades before the patent applications were filed in 2005 and 2006. If they were valid, any device with a processor chip would infringe them. (While VLSI owns the patents, it played no role in their filing; VLSI was created in 2016 by the Softbank Group–owned Fortress Investment Group.)
Why did the PTAB’s decision change? The patents and invalidity evidence were the same; what changed was the PTO’s leadership. That change—former Director Iancu’s departure and loss of power over the PTAB—most likely explains the difference in its decisions.
Lo and behold, there is a gigantic conflict of interest here. VLSI is a client of Irell & Manella, the law firm where Iancu was a partner before working at USPTO and to which he returned after leaving government. That means he is entitled to Irell’s share of the billions it won for VLSI—a victory that depended on the PTAB’s decision to deny review under his leadership. VLSI is not some genius inventor either; it is a shell company whose majority owner, an entity called FCO IV, is owned by six investment funds, all managed by the Fortress Investment Group, and whose owners include sovereign wealth funds.
The GAO report reveals the extent of Iancu’s subtle control over the PTAB, particularly the type of denial decision that concretely benefited Iancu’s former and current business interests. At the very least, the fact that the former director secretly controlled decisions that materially benefited his law firm creates an appearance of impropriety that is corrosive of public trust in the USPTO.
While Director Vidal has taken some commendable steps toward restoring the public’s confidence in the USPTO, including denying VLSI’s requests to overturn PTAB decisions granting petitions for review of its patents, the public’s trust in the USPTO is too important to depend on who the director happens to be. The public needs safeguards to protect its trust and the USPTO’s integrity whoever the future director is. The fact that a leader of the agency could engage in what is practically the dictionary definition of corruption is unacceptable.
There are numerous ways for the Biden administration to implement these safeguards. One option would be to issue a broad executive order that sets a path to restore public trust in the Patent Office. This order would require that the USPTO create a publicly available record of intervention in appeal proceedings by staff other than APJs, and outline new ethics practices that would ensure key USPTO staff recuse themselves from matters involving prior clients or former employers, and refrain from representing clients or working for companies whose cases they decide for at least three years. The order would also direct the patent office to allow the public ample time and opportunity to comment before PTAB designates decisions as precedent and binding legal authorities, while also removing precedential designations unilaterally determined by Iancu.
In addition to an executive order, the Biden administration must quickly engage congressional allies to direct the GAO to conduct a further investigation into the outcomes of discretionary denials of petitions such as in the VLSI case. Such an investigation would shed light on the level of influence Iancu exerted on the discretionary denial process and potentially highlight cases that warrant reconsideration.
These two steps will help reorient the Patent Office away from the hands of special interests. To ensure the public’s interest remains at the forefront of this change, the administration should also create an ombudsman for the public’s interest in science and technology within the White House Office of Science and Technology Policy. The holder of this position would be responsible for receiving and responding to complaints and petitions from members of the public who do not own patents but are concretely and negatively affected by the USPTO’s decisions.
Taken together, these safeguards will restore the public’s trust as well as the USPTO’s ability to promote innovation, competition, and economic prosperity for the public’s benefit. Without them, the patent system will remain vulnerable to the improper influence of special interests, putting the lives and livelihoods of countless Americans at risk.
Malfeasance seems to be a common theme embraced by members of the Trump administration, with Iancu’s crooked behavior resembling that of Scott Pruitt, Ryan Zinke, or indeed Trump himself. Like the others, Iancu’s chiseling evidently impeded the proper functioning of the USPTO, resulting in negative outcomes for millions of Americans. President Biden must move to correct this and restore the public trust in this little-known agency.