There is a new leader of the patent office. On January 20th 2025, Coke Morgan Stewart was sworn in as the interim Undersecretary of Commerce for intellectual property and the acting director of the United States Patent and Trademark Office (or the USPTO).
Past Challenges for US Patent Holders
To understand why the appointment of Undersecretary Stewart is important, it’s first important to look at the challenges that patent holders and early stage entrepreneurs have faced in association with the patent system over about the last 10 years.
Just over 10 years ago, the America Invents Act (or AIA) introduced a new entity called the Patent Trial and Appeals Board (or the PTAB). This board, the PTAB, has been a source of concern for patent owners for many years. And this is because, since its inception, the PTAB has invalidated a staggering percentage of patent claims or patent rights assigned to patent holders.
In fact, data shows that up to 80% of patents that have been challenged before the PTAB have been then found to be invalid. Essentially the PTAB has taken the rights away of up to 80% of the patents that they’ve considered in challenges before the PTAB.
So, this has led to a perception especially among people like me – venture capitalists, early stage entrepreneurs, and inventors – that the PTAB operates as a patent death squad. The high invalidation rate of patents that are challenged before the PTAB have caused fear that innovation is being stifled and that investment in new innovative technologies in the United States is being suppressed because of the risk that patents can be held to be invalid before the PTAB.
Many people argue that this PTAB system disproportionately favors larger entities that can afford to challenge patents leaving smaller inventors, including those at startups and early stage companies, at a disadvantage. So this is an important issue pertaining to America’s overall economy because startups and small entities overwhelmingly are the engine that drive economic growth of the country as a whole.
How does USPTO leadership influence patent outcomes?
The leadership of the United States Patent and Trademark Office, the USPTO, significantly influences patent outcomes. For example, under former USPTO director Iancu, who served as a director from 2018 to 2021, the patent invalidation rate at the PTAB was notably lower due to his pro-inventor and pro-patent policies.
Director Iancu supported the Fintiv rule, which allowed the PTAB and the patent office discretion to deny petitions at the PTAB based on things like ongoing district court litigation. So in other words, if the district court was considering a patent matter, the PTAB would give more deference to the district court and not subject the patent at issue to two different simultaneous challenges. So as a result of Director Iancu’s policies, especially his support of the Fintiv rule, the total claims invalidation rate at the PTAB was significantly lower than under other leadership at around 60%. And 60% is actually pretty high for an invalidation rate anyway, but at least it was significantly lower under Director Iancu’s policies.
In contrast, under Director Kathi Vidal, who took over the USPTO in 2022 – and who prior to that had senior roles at Intel, which is of course a larger entity that probably has less incentive to protect the rights of patent holders because they just don’t want to deal with patent infringement lawsuits brought by startups, for example – the invalidation rate was much higher. It surged to 71% from 60% in the first half of 2024.
The significant increase in invalidation rates at the PTAB under Director Vidal’s leadership can be attributed to her policies that reduce the application of this Fintiv rule, which created additional layers of review for PTAB decisions. As a result under Director Vidal’s leadership many patents faced additional burdensome challenges that led to their invalidation, contributing to a perception of an increasingly hostile environment for patent holders and especially for smaller entities like startups and companies that are actively raising venture funding.
What The New Appointment Means for Inventors and Entrepreneurs
Now, let’s talk about newly appointed Undersecretary Stewart. Stewart has extensive experience at the USPTO and she’s held various senior roles so she brings a wealth of knowledge to this position. She’s been recognized for her experience in patent law and she’s defended USPTO decisions in United States Federal Court.
So why is Director Stewart’s appointment potentially good news for patent holders? Well, first and foremost, her extensive background in patent law suggests that she understands the intricacies of patent law and the importance of protecting intellectual property rights for all inventors. But more specifically, I think we could see a renewed emphasis on protecting patents for patent holders and on encouraging innovation. This will thereby benefit startups and early stage companies that are actively raising venture funding and will, for the American economy as a whole, be crucial for benefiting economic growth.
And also importantly, Director Stewart is known for her pro-patent stance and commitment to supporting innovators. She’s expected to advance policies that favor small businesses and entrepreneurs, ensuring that they have fair access to the patent system and to patent protections. For example, Director Stewart might be more inclined to support initiatives that make it much harder for larger entities to use the PTAB to challenge patents held by smaller entities like startups and early stage companies that are raising capital if they’re making less than $25 million a year. Given her history at the USPTO and her deep understanding of the current challenges with the PTAB she could be more inclined to push for reforms that could reduce the oppressively high patent invalidation rate that patent holders currently face when their patents are challenged at the PTAB.
Patent lawyers and venture capitalists are hopeful that we’ll see more initiatives aimed at advancing innovation rather than hindering it. They expect that the appointment of Director Stewart will create a more balanced playing field for all inventors, especially inventors tied to startups and early stage companies that are raising money which are responsible for a massive proportion of America’s economic growth.
And Undersecretary Stewart’s appointment as the acting director of the USPTO comes at a crucial time for patent holders. With increasing competitive pressure from foreign companies – especially companies from China – supporting American innovation has to be a top priority. We desperately need to reduce the trend of declining venture investments in American companies. We can do this by strengthening the American patent system for startups and innovative early stage companies.
Undersecretary Stewart’s experience and pro-patent philosophy could signal a shift toward more favorable conditions for patent holders. This is especially true for startups and individual inventors who rely on strong intellectual property protections.
If you have more questions about patents or raising money for innovative companies feel free to reach out. If you’re looking to patent your invention, book a free consultation today.
