September marks the five-year anniversary of inter partes review (IPR), and Patent Progress is highlighting how successful the system has been at achieving its stated goals of increasing patent quality by providing a second look at invalid patents and decreasing costs by providing an efficient alternative to litigation.  Last week, I showed that, in those 5 years, IPR has saved at least $2 billion in attorneys’ fees and other deadweight losses alone.

One of the most famous IPR successes is EFF’s IPR filed against Personal Audio’s “podcast patent.”  Patent Progress has written about that case before, from early on when Personal Audio first asserted their patent to my post on how the STRONGER Patents Act would have prevented EFF from filing their IPR, as well as making it less likely to succeed, through to my story on the recent decision on appeal affirming its invalidity.

But that’s far from the only case where inter partes review has been used by non-profits, cities, small companies, and the U.S. government to defend themselves from patent trolls.  In fact, there’s quite a few.  

Patent Trolls And Highway Tolls?

Today, let’s look at the LA County Metropolitan Transport Association (which is a mouthful, so we’ll call it “LA Metro.”)

Los Angeles is infamous for being car-centric and even car-obsessed.  We even got a fun set of movies out of it.  There’s an extensive highway network, and in order to mitigate congestion, LA Metro set up high occupancy toll lanes using toll transponders.  The East Coast has EZPass; LA Metro uses something similar, called FasTrak.  LA also offers a version called FasTrak Flex, which lets the county change the toll charge based on the number of people riding in a car.

And, even if you’re a transportation authority, when you add new features, you risk patent trolls coming around to try and extract money from you.  And, like clockwork, LA Metro was sued for patent infringement.  By a troll called “Transport Technologies, LLC.”

What does they claim they own?  Well.

6. A method of receiving claimed vehicle occupancy data about a vehicle by a registrant, and also identifying the registrant as the vehicle traverses a designated section of highway, said method comprising the steps of:

transmitting the number of occupants in a vehicle claimed by a registrant;

transmitting a signal from the vehicle that identifies the registrant;

and then receiving the claim by a registrant as to number of occupants in a vehicle and reading the signal from the vehicle that identifies the registrant as the vehicle transits the designated section of highway.

Basically, they claim they own the idea of an EZPass that transmits¹ the number of occupants in the car as well as the pass’s identifier.

Defensive Driving

After LA Metro was sued, they went to mediation with Transport Technologies, the non-practicing entity that had sued them.  You don’t go to mediation because you think the other side’s patent is valid or because you think you infringe; you go because, in an ideal situation, mediation winds up being cheaper than litigation or an IPR.

But mediation failed here.  So LA Metro moved on to step 2; they defended themselves.  This took two main forms.

First, they filed a motion claiming that Transport Technologies patent was invalid under 35 U.S.C. § 101 as an abstract idea.  While the judge agreed that it was directed to an abstract idea, he chose to defer ruling on whether it was invalid until after he had construed the claims.  Alice motions often help defendants, but as this case shows, sometimes they aren’t enough.

That’s why LA Metro also filed a petition for inter partes review.  

Highway To Invalidity

In their petition, LA Metro identified a pair of patents from an electronic tolling company.  Those patents describe a toll pass that the driver can enter the number of passengers into, and a roadside reader that receives the number of passengers, the VIN of the car, and a date/time signal, among other information.  

So we’ve got the number of passengers—that’s the number of occupants in the vehicle.  We’ve got a signal that contains the VIN, and a car’s VIN identifies a vehicle registrant.  And we read that signal containing the number of passengers and the VIN as the car goes down the road.

It’s no wonder the PTAB decided that LA Metro had shown it was reasonably likely that the challenged claims of the patent were invalid.

After filing their petition, LA Metro requested the lawsuit be stayed while the IPR was conducted.  The judge, noting the benefits in efficiency that would be achieved by doing so, ordered a stay of litigation.  While no hearing transcript is available from the PTAB yet, an oral hearing was scheduled to occur in June 2017, with a final written decision expected by November 2017.

Given the strong evidence presented LA Metro, that final decision should eliminate any need for further litigation by invalidating the Transport Tech patent.

Why Was An IPR Beneficial Here?

There’s a couple of reasons that an IPR was beneficial here.  First and foremost is the fact that, while the patent appears to be invalid.  While there are good arguments that LA Metro doesn’t infringe (see the footnote), these arguments aren’t the type that judges will typically resolve on summary judgment.  Absent IPR, LA Metro would have had to go to trial to make those arguments.

LA Metro likely spent somewhere between $200,000 and $300,000 for the entire IPR.  Compare that to the cost of litigating a case through trial, which would have run into seven digits, and the financial impact alone makes it worthwhile.

The second reason is a well-documented fact: juries don’t like to invalidate patents.  Juries are significantly more likely to find infringement and validity than judges are, and jurors have been known to express sentiments like “if the Patent Office gave it to them, then it’s there … you can’t challenge what the Patent Office does.”  Jurors don’t tend to think that their judgement should be more important than the Patent Office’s.  Sometimes they don’t even think they have the power to overturn what the Patent Office did.

All that combines to make invalidity a hard case to try in front of a jury.

Instead of conducting a trial, inter partes review gave LA Metro a much less expensive avenue to pursue an invalidity case, and one which allowed them to present their arguments to an expert audience that understands both patent law and the relevant technology.  LA Metro saved money that can be spent on roads and railways, and they will get a result that is more likely to be the right result.  

IPR worked.