Section 18 of the America Invents Act

Yesterday we hosted a conversation between David Kappos, the Director of the US Patent and Trademark Office, and a bunch of founders/CEOs of our portfolio companies. It was a far reaching conversation that gave me optimism that our government does realize the issues with our patent system, particularly as it relates to software and business method patents.

There was one thing that we discussed that is very important and needs to be publicized broadly.

Section 18 of last year's America Invents Act provides for a "post-grant review proceeding for review of the validity of covered business method patents." Here's the provision. The USPTO has interpreted that provision and it is now fully implemented.

Here's what this means. If you are sued or threatened with a suit over a business method patent, you can submit the business method patent to the USPTO for a "post grant review." If the USPTO determines that patent is overly broad or should not have been issued, it will be thrown out in its entirety.

You can do this as part of your defense strategy and it will cost a fraction of a litigation defense. And the USPTO is required to complete the post grant review within one year of submittal, well ahead of any trial schedule.

So if you have been sued or if you are sued in the future over a business method patent, you should avail yourself of this post-grant review. It is faster, less expensive, and may well result in the elimination of bogus business method patents. And that's a good thing for everyone other than the troll who is suing you.

#VC & Technology

Comments (Archived):

  1. jason wright

    Can the USPTO be sued?

    1. Kasi Viswanathan Agilandam

      I am reminded of a Hindu mythology story … where God gives power to a guy who can burn anything by touching it … finally he comes to touch the God.

      1. Luke Chamberlin

        …and then? I’m on the edge of my seat!

        1. Kasi Viswanathan Agilandam

          ha…ha…Then God goes and begs Goddess for help … she provokes the guy to have a dance competition with her … where the guy was supposed to dance exactly like how the Goddess does … after 1-hour of dancing she makes a move where she touches her own head …and … finally.The guy touches his own head and gets burnt.Now you should finish your homework and go to sleep. If you behave like what i told you …I will tell you the next story of the Dutch boy saving the village from dyke tom’row :-).

          1. Luke Chamberlin

            Great story!! I see the origins of Bollywood dance numbers!

    2. Aaron Klein

      Heavens no. Government always exempts itself from the rules that apply to the rest of us. 😉

  2. kidmercury


    1. jason wright

      …among equals.

    2. Matt A. Myers

      This is the high-quality content we look forward from you kid. 😉

      1. kidmercury

        fred posted twice today thus diminishing the value of my first. i feel cheated.

        1. Elia Freedman

          The advantage you east coasters have… Or really early west coast risers, I guess. 🙂

        2. Matt A. Myers

          Fred’s a sneaky one sometimes

  3. Kasi Viswanathan Agilandam

    I am reminded of the story of the Dutch boy and the dyke. Only difference here is the boy himself is the architect of the dam :-).

  4. Bo Sartain

    The award of a patent can be a mixed blessing, because then you have to defend it. I know a founder whose company was sued within a week of the company’s patent being issued. It cost the company $1MM in legal expenses to prevail and fight off the lawsuit. Anything to get the legal expenses under control is a great thing.

    1. Pravin J


    2. Richard

      I dont follow: Standing to file an invalidity suit has been historically  . limited to the infringement defendant. Was the founder the plaintiff?

      1. Jon

        Rich: It was a first to invent suit. The plaintiff claimed he actually invented in first when he was in high school. We needed to pay him $500,000 and 50% of the company or go to court. When the well-known law firm determined the first plaintiff had credibility problems, they found another plaintiff to take their place.

        1. Richard

          How did the plaintiff get standing in this case? Can you forward the case citation?

        2. Elia Freedman

          I thought the first to invent stuff got thrown out a couple of years ago with the patent law revisions? I thought it was now the first to file a patent? Is that not the case?

  5. Pravin J

    Interesting. Wondering if there is any limit to the number of times a business method patent can be submitted for a post grant review?If any particular patent is receiving multiple requests for reviews in given time fram, maybe its time for USPTO to throw it out on priority; or its an acknowledgement that the method is a commodity now and the patent is no more justified.PS: Some issue with Disqus today? Last comment vanished

    1. Vitomir Jevremovic

      It looks like mine vanished too.. I’ll wait for couple of minutes, it maybe reappears lol. Anyone knows whats going on?

      1. fredwilson

        i see your comments

      2. William Mougayar

        It went into spam by mistake. I saw that 2 mins later & approved it.

        1. Vitomir Jevremovic

          Thanks.but how does a comment end up in a spam? does it affect some inner disqus rating on a profile,, should I worry? 🙂

          1. takingpitches

            I had the same experience a few weeks ago with Disqus on AVC. Had an unsatisfying back and forth with Disqus customer service, Never exactly understood why the comments were marked as spam originally, and why subsequent comments were not, but, fwiw, things seem fine now.

    2. Vitomir Jevremovic

      now it gave me an abuse response to a normal comment. I have no idea what is going on. Fred? Anyone?

      1. William Mougayar

        All good now, right? Just checking…Your new comments aren’t affected.

        1. Vitomir Jevremovic

          Yup. Thanks. but I do not dare posting in the main thread yet 🙂 ..though I will, when I have something important to say

  6. William Mougayar

    I’m curious to know what % of granted patents are business method patents? It must be a small number as I’ve been told they hard to defend and to get granted. Why not abolish them completely unless they are intricately tied to a patented technology?  

    1. Jorge M. Torres

      There’s actually a cloud of uncertainty hanging over business method patents due to a US Supreme Court case called In re Bilski, which the Patent Office has interpreted as raising the bar for patent eligibility. Not an outright ban, but consensus among practitioners is that it’s definitely become harder to get business method claims issued.

  7. Jorge M. Torres

    You may be wondering what happens to the litigation while the proceedings challenging the validity of the business method patent winds its way through the Patent Office. The drafters of Section 18 planned for this. The accused infringer can request a stay of litigation, and the judge must consider the request for a stay under a legal framework prescribed by statute.Before the new law, the judge could choose from among a number of standards, and he/she didn’t have to even entertain the request for a stay. Section 18 changed that.If the judge stays your case, then all litigation stops. This is a big deal, because in my experience the “run rate” for a patent infringement case that is in full-blown discovery can range from $20k all the way up to 100k per month depending on the circumstances.If your case is not stayed, then you’re effectively fighting on two fronts – federal court and the Patent Office. In that instance, your legal bills might actually go up in the short term while the Patent Office does its work.Aside from cash considerations, there are a whole host of strategic considerations around filing a challenge under Section 18. Founders and companies should think through the decision carefully and choose the option best aligned with their business objectives.

    1. fredwilson

      do you think this is a step in the right direction Jorge?

      1. Jorge M. Torres

        Not really, though I’m open to seeing how the post-grant review procedure works in practice. If we start seeing fewer patents end up in litigation, because trolls don’t want their patents reviewed or because judges are routinely staying business patent method cases, then I’ll be a bigger fan of this effort. I’m doubtful we’ll see that.Patent reform can do more harm than good. When it comes to fixing what’s broken with the patent system, the right direction isn’t getting Congress to pass new legislation. It’s entrepreneurship.We need hackers to build technologies that remove friction from the patent system. We need innovative business models that keep patents out of litigation. We need a system for transferring patent risk that works faster and more efficiently than the court system does. All of these things won’t come from Congress. But they have come, and they will continue to come, from the minds of entrepreneurs.That’s why I support the burgeoning legal hacking movement, which is tackling this issue head-on. It’s early, and there are more questions than answers. (There isn’t even an accepted definition of what legal hacking means.) But I’m certain that if we put at least as much energy into hacking the patent system as we do into lobbying Congress and bemoaning the state of the system that things will change for the better.

        1. andyidsinga

          hi Jorge – do you think open source (hw and sw) and blogging tech concepts will help prevent future patents by virtue of being more searchable etc? (would that be a legal hack?)

          1. Jorge M. Torres

            Yes, and that process has been happening for some time now. Long before web 2.0 tools were around, the Internet was shaping the way patent examiners searched for prior art. For example, my friends who are current and former examiners say Wikipedia has been a go-to source for for relevant prior art for several years. I think open source efforts around hardware and software add to this process.

        2. kidmercury

          +1…..thanks a lot for taking the time to share your insight.

        3. ShanaC

          what counts as legal hacking?

          1. Jorge M. Torres

            That’s an open question, but I’ll give it a shot. When I use the term legal hacking I have in mind two broad categories of activity – business hacks and policy hacks. Business hacks equip lawyers and their clients with new tools for interacting with the legal system and/or for minimizing legal risk. They can include new technologies (what most people have in mind when they use the term ‘hacks’) or business model innovation of some sort. A good example of a legal hack is Docracy, which open sources contracts and other agreements startups routinely use.Policy hacks are changes to statutes and regulations governing the administration of the law by courts and agencies. They can be as broad-based as a proposal banning all software patents or as targeted as the post-grant review process for business method patents that we’ve been discussing today.A good resource for all of this is Richard Susskind’s work (, esp. his book “The End of Lawyers.”Ultimately, I think the community will define what counts as legal hacking. That definitional process is evolving as is my own thinking around this. Hope this clarifies things.

          2. ShanaC

            Actually, this is great. I was watching the livestream of Doacracy at the NYTM – thought it was a great idea, and yes, it will cause the collapse of a lot of standard lawyering.I had never heard the term before – thought it might be a good idea to ask.

      2. Alex Murphy

        I think that the fact that they tried to “improve” the rules is a sign of optimization of the law / rules. That is very much a step in the right direction.

        1. Jorge M. Torres

          I don’t question the PTO’s intent. It’s clearly in the right place. They’re just trying to make the best of what they got from the AIA. (Congress’ intent is another story, esp. given that the banking industry was the genesis of this new post-grant review process). But don’t confuse intent with whether or not the law is now optimized. It’s too early to tell, and there are good reasons to believe that Section 18 will lead to more litigation, and, therefore, more cash spent litigating patent cases. That would not be good.

  8. steveplace

    What are your thoughts on

      1. steveplace

        huge brain fart. completely forgot that i first heard about it from your post a few days ago.

        1. fredwilson

          no worries. not everyone reads every post. i fact, very few do.

  9. nilb

    Can one request to deny patent, even when there was no suing involve ?

    1. Jorge M. Torres

      Nope, not under the law that Fred blogged about this morning.

  10. Vitomir Jevremovic

    Disqus is broken. This is a fine community, so won’t swear, but I have more then few things to say right now

    1. Vitomir Jevremovic

      Ok, here is a comment that by some unknown reason and black magic would not appear in the main thread:———————————Patents and IPs are an important subject, but I haven’t found posts here that cover that topic. Especially Patents and IPs in US vs. international (new and attractive) markets. It would be great if MBA Mondays could cover this subject and broader the discussion on the topic?

    2. fredwilson

      what’s wrong? i will get on it.

      1. Vitomir Jevremovic

        Let me try to describe the path:1. Posted comment#1. On refresh did not appear – vanished2. Refreshed after couple of minutes, nothing3. Wrote a new comment#2.0 similar to first. Posted. (copy to clipboard this time). Refreshed, nothing. Opened FireFox just in case. Nothing4. Wrote “Disqus is broken..” in FireFox. Posted. It did appear.5. Wrote in FireFox new comment#2.1 (from clipboard this time). Posted. Nothing after refresh6. Wrote it as a comment#2.2 to “Disqus is broken..”. It appeared7. After refresh, it marked the comment as “abusive”8. Comment#2.2 to comment (6.) disappeared. First comment#2.0 appears in the main thread.Hope this helps

        1. William Mougayar

          Thanks. I’m not sure why, but your comment and another one from Pravin J went automatically into spam this morning. These ‘false positives” happen very rarely, because the Disqus spam filters are pretty good in the vast majority of the time. Sorry about that.

        2. kidmercury

          did you include links in your comment?

          1. William Mougayar

            Having links doesn’t automatically place it in spam. In this case, he didn’t.

      2. ShanaC

        These problems have been happening sporadically to people over the past week-ish

    3. Aaron Klein

      Once again, I was logged out when I visited in mobile Chrome this morning. It’s really getting annoying how bad the mobile experience is. (Good news for Disqus…nobody else is better, but we just expect more from one of our favorite companies.)

  11. Vitomir Jevremovic

    Patents and IPs are an important subject, but I haven’t seen posts here that cover that topic. Especially Patents and IPs in US vs. international (new and attractive) markets. It would be great if MBA Mondays could cover this subject and broader the discussion on the topic?

    1. fredwilson

      there are a ton of them here at AVC…

      1. Vitomir Jevremovic

        my bad. I was searching “USPTO” as a key word. I thought if I searched for “patent” it would give me hundreds of posts 🙂 I didn’t. stupid. will study them, thanks

  12. Luke Chamberlin

    What’s the deal with East Texas?

    1. fredwilson

      we will be seeing a lot less suits in east texas as a result of some other changes that they USPTO has made

    2. Jorge M. Torres

      East Texas is a favorite forum for patent owners because the federal juries there have historically tended to find patents infringed and not invalid. That’s been the conventional wisdom, at least. Judicial turnover and new law handed down by the Congress and the courts has made it more difficult for a patent owner to maintain a patent lawsuit in East Texas against an out-of-state defendant, and practitioners expect to see a drop in the number of cases filed there when all the numbers are in.

      1. fredwilson

        exactly. Jorge – you are so knowledgeable in this area!

        1. Jorge M. Torres

          Thanks, Fred. The community at AVC is asking excellent questions, which make the action in the comments a lot of fun.

  13. Ranting Kumquat

    Does this connect to your post last Friday about In other words, does this mean stupid patents can be submitted for review and then can demonstrate why they are stupid?

    1. fredwilson

      they are not directly related but its all part of a big reform effort underway at the USPTO

  14. JimHirshfield

    This is great news. Who should we thank for it?

    1. fredwilson

      Chuck Schumer. i am serious. but the USPTO also had a strong hand in making this happen.

      1. JimHirshfield

        Cool. Thanks Chuck!

      2. markslater

        really? that guy?

      3. kidmercury

        lol….good thing you added “i am serious” otherwise everyone would’ve thought you were being sarcastic

      4. ShanaC

        I like chuck…

  15. Jon Cameron

    Itis important to understand what the USPTO means by less expensive. Thecosts is anticipated to be about $200,000 for each side. It is treated asan “inter partes” examination so each side needs counsel. However, the downside here is significant.The risks for the petitioner are significant. First, if the petitioner loses, the procedure will strengthen the patent which means the petitioner might have just fast-tracked their path to licensing.Especially for earlyfilers, there is no history so the outcome is a coin toss. If thepetitioner loses their appeal, they are barred from raising thesame issues in district court. Historically, the courts and USPTO havehad entirely different approaches to determining validity. Under the new law, we might see more consistency by having the same house rule on validity. Or we may see them consistently make the same mistake. I will let other parties play the guineapig until we understand the strategic consequences.

    1. markslater

      thanks for the insight.

  16. William Mougayar

    I just noticed the new format for Related articles with the images. That’s nice. Is it a Zemanta enhancement? 

    1. fredwilson


      1. SF

        Wonderful. I about to ask the same question.

  17. davidblerner

    Fred, I realize this was a private meeting but were you able to talk about some of the other major issues such as trolling and the inanity of most software patents?

    1. fredwilson

      there’s the Shield bill which will introduce “loser pays” into the patent litigation business. this is a huge deal and we should all get behind it. it will strike a dagger in the back of the trolls’ business model.

      1. davidblerner

        I’ll talk to my colleagues on nytm bod about the Shield Bill, thanks.

  18. Aaron Klein

    I will stay all positive on this topic and just say that once in a while, even government can get it right. I knew Chuck Schumer could get something constructive done in my lifetime. 😉

  19. LE

    If you are sued or threatened with a suit over a business method patent, you can submit the business method patent to the USPTO for a “post grant review.” If the USPTO determines that patent is overly broad or should not have been issued, it will be thrown out in its entirety.I’m wondering what the time period is to get the review. From what I can tell (so far quickly searching) there doesn’t appear to be any time limit to file for the review? (Thoughts anyone?) So it could be 1 month later or 10 years later (if that is when you are sued?)The other side of this (as another commenter has pointed out) is that there may be sacrificial lamb lawsuits in order to strengthen the patent. In other words the patent is granted and the owner quickly throws someone, anyone, under the bus so that the patent is then sent for review. If the patent stands it’s strengthened. And the process just becomes another cost of doing business and part of the process.- Patent granted- Quickly sue someone- Get reviewed- Know where you stand.

    1. ShanaC

      either way, lawyers make out

    2. fredwilson

      one year

      1. LE

        Posted this question on as the reference to “1 year” which I saw in the bitlaw link as well was confusing to me. Curious to dig deeper into this.http://patents.stackexchang

      2. LE Pretty f-ing cool!The question I asked was answered quickly by a law professor who writes patent law blog:”The post grant business method review is not the panacea that you were hoping for. While there is no “time limit” on filing these post grant reviews, the statute very narrowly defines business method patents to only include non-technological financial services patents.”(my emphasis)http://patents.stackexchang…And further:”A second problem with the post grant business method review is that the fee for filing such a review is – at minimum – $35,800. “

        1. fredwilson

          an expert community of lawyers and geeks should be able to peer produce a lot of good stuff

          1. LE

            Side note – I couldn’t “vote up” his response. It says “vote up requires 15 reputation”. (attached).Perhaps @disqus could work with @stackexchange so that anyone with a certain disqus rep could automatically vote up.#notchoppedliver

          2. fredwilson

            joel and daniel were in the same place all day yesterdaythat was a missed opportunity

  20. LE

    Two recent patents for obvious things in the domain business:Godaddy:…Today the United States Patent and Trademark office granted the domain name registrar a patent for “announcing a domain name registration on a social website”.Amazon:…More specifically, a lessor may use a domain name service to allow a third party (i.e., a “lessee”) to lease a domain name for use or to purchase the domain name outright. More specifically, the lessor may lease a domain name to a lessee so that any user who accesses the leased domain name is directed to a network resource identified by the lessee.”

    1. fredwilson

      please put those up on ask patents!

  21. Will Luttrell

    Twitter’s No-Lawsuit Pledge is simply awesome. Broad adoption of such measures is a pipe dream, but I find their work highly commendable.