$17 million: The real and staggering cost to patent in the US in the PTAB age

At least $17 million. That is what my Bunch O Balloons patent has cost so far. It could grow to $50 million. Yes, we are talking about water balloons, not smartphones.

How can this be? Because the patent grant issued by the U.S. Patent and Trademark Office means nothing to infringers like Telebrands and Walmart. They simply ignore the patent and rush to take over the market with their knock-offs (Balloon Bonanza in 2015, Battle Balloons in 2016, and Easy Einstein Balloons in 2017). Then they use those revenues to hire attorneys and experts to say the patent is invalid. If the patent owner lacks deep pockets or good lawyers, his patent will not survive. If he does have access to infinite funds, he has about a 5 percent chance of survival thanks to the America Invents Act (AIA) and the USPTO’s implementation of the Patent Trial and Appeal Board (PTAB).

Fortunately, sales of the original Bunch O Balloons have been sufficient to maintain the legal fight. Zuru, the exclusive licensee of my patents, has done an outstanding job producing, marketing and distributing the original Bunch O Balloons. They have cooperated in defending the challenges to the patents brought by the infringers. We have mountains of objective indicia of non-obviousness, including recognition as best selling toy and an admission of copying by the infringer: “[t]his is only the first proto so assume this will have 37 filler rods and balloons…exactly like the original ‘Bunch of Balloons.’” Every fact is in our favor. It is the most cut and dry patent infringement case imaginable. But the outcome is uncertain due to the deteriorated condition of our patent system.

While the District Court for the Eastern District of Texas (my home district) has provided some relief in the form of preliminary injunctions against the infringing products, it is expensive and untimely. For example, one of the preliminary injunctions cost $1 million in legal fees, $4 million for bond, and took 9 months to obtain. Each year, Telebrands reboots with a minor change to the design – rinse and repeat. We won our third preliminary injunction back in May of 2017, but today Walmart is still selling pallet loads of the Easy Einstein knock-offs.

The $17 million investment would have secured my patents by now, except for the PTAB. The PTAB division of the USPTO hears inter partes review (IPR) and post grant review (PGR) challenges to issued patents. These procedures were created under the 2011 America Invents Act, ostensibly to efficiently remove defective patents that were mistakenly issued.

Instead, the PTAB simply encourages infringers like Telebrands to double down on the expense of litigation, rather than acquiescing to the adjudication by the District Court. Here, there is no service to the public by reviewing and expunging defective patents. It is nothing more than a cheap “get out of jail free” card for the infringer, a big second bite at the apple.

Read more of this IPWatchdog op-ed by Josh Malone by clicking here.

Photo: IPWatchdog