by Josh Malone
Inventor of “Bunch O Balloons”
& Inventor Advocate
I quit my corporate job in 2006 to take my shot at the Inventor’s Dream. Eight years later, our savings depleted and my kids’ college unfunded, I took one last swing before trudging back to the corporate world.
I aimed at solving the water balloon problem. My kids and I have always enjoyed playing with water balloons. We would spend hours filling up thousands of balloons and I kept thinking that there had to be a better way to do this. After years of intermittent experiments, I put a straw in a balloon and sealed the balloon with a small rubber band. It worked! I decided to call it Bunch O Balloons and I filed for a patent. I brought it to a toy fair but didn’t get an offer, so I put it up on Kickstarter, a crowdfunding website. It went viral. After a few days, we raised over $900,000. A few weeks later I went on the Today Show and threw water balloons at Carson Daily.
Soon after we started production, a friend called and told us that they saw Bunch O Balloons on a commercial but it was called “Balloon Bonanza”. By then my patent had been issued, so I sent a cease and desist letter to Telebrands, the company violating my patent. They ignored it so I filed a lawsuit along with Zuru, the company Bunch O Balloons was licensed to.
Nine months later we got a preliminary injunction. It wasn’t over but they had to stop copying my inventions. But the next year they came out with another copy called “Battle Balloons”. We filed another lawsuit and got another preliminary injunction, but the next year they came out with another copy, “Easy Einsteins”.
We got another injunction but meanwhile, they went back to the patent office and asked the Patent Trial and Appeal Board to take my patents back, and they did. Without due process, the patent office overturned the federal court decisions and took away my property.
I headed straight to the patent office and led the first-ever protest there in which seven inventors and myself burned our patents on the sidewalk. After that, things started to turn around. We won our first lawsuit and the PTAB changed their mind and gave me my patents back. Telebrands eventually offered a settlement and we took it. Sadly, my success is an outlier. Most inventors don’t have the funds to fight for as long as I did which is why I have moved to Alexandria with my family to lobby for inventors’ rights.
STORIES in the MEDIA
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.
The USPTO has issued six patents for my invention. The primary examiner considered over 150 references of prior art, over 100 which he found with his own search. Multiple officials took part in the examination including two different primary examiners, three different supervisor examiners, one or more training quality assurance specialists, and a Technology Center Director. The patents were entirely prosecuted under the AIA and in light of the Enhanced Quality Initiatives of former USPTO Director Michelle Lee. The USPTO was aware of, and considered the validity challenges of, the earlier patents that were ongoing during examination of the later patents. Bottom line, these patents were rigorously and thoroughly examined by competent officials of the USPTO – they were not mistakenly issued!
But that does not matter to the administrative patent judges (APJs) of the PTAB. They determined that all claims of my first patent were “unpatentable.” Contrary to the applicant, examiners, the district court, the Court of Appeals for the Federal Circuit, and every child in America, the PTAB held that one of ordinary skill could not understand the phrase “substantially filled with water.” In the PTAB, it matters not whether the actual infringer understood the term or whether they copied the original invention without any regard for the patent. As a result of this aberrant ruling by the PTAB, the first trial against Telebrands and their Balloon Bonanza copycat has been postponed indefinitely. If the PTAB is upheld on appeal, the infringers will avoid liability for all their 2015 sales – tens of millions of dollars worth.
Recently the PTAB declared the claims of the second and third patents to be more likely than not obvious in light of a combination of Saggio and Donaldson. These are two of the references the examiner considered, as well as the District Court. The PTAB denied my motion to reconsider institution which, in part, asked if it is obvious, then why has nobody done it before? Why were water balloons filled one at time and tied with a knot for 63 years prior to my patent? Since the panel refused my rehearing request, I have to come up with another half-million dollars to re-prove that my invention warrants a patent. I have to endlessly prove over and over again that that I have an invention – there is no end in sight.
I am very thankful that my invention has been such a success. I am thankful for our historic patent system that gave me confidence to try. I am thankful that I am still in the fight, and even have hope to one day actually secure a patent that effectively protects my invention. But the risk is too great. I would not do it again, and would not recommend it to other inventors. What can I tell someone who has an invention and is preparing to scrape together $5,000 to $10,000 to file a patent application? Or quit his day job to launch a business around an innovative product? We can deal with the design risks, the marketing risks, the financial risks, and all the other challenges that set inventors apart – but that sealed and signed patent cannot be another gamble. We are crazy, but we are not stupid. If a patent’s costs are in excess of $17 million, and it still is not secure, how can we innovate?
Story published July 16, 2017 and featured on IP Watchdog
Historic Underpinnings of the Inventor Rights Act of 2019
I received some questions regarding my statement that the provisions of the Inventor Rights Act of 2019 “have historic roots.” This post addresses those in more detail.
Profit Disgorgement – Reset to 1946: I will start with the profit disgorgement provision – which is a major change away from the current compensatory scheme in U.S. Utility Patent Law. That said, disgorgement remains available for design patent infringement as well as other IP regimes such as copyright, trademark, and trade secret misappropriation. The basic approach to disgorgement is to calculate the infringer’s profits associated with the infringement and then hand those profits over to the rights holder. As Supreme Court explained in Tilghman v. Proctor, 125 U.S. 136 (1888), this approach is designed to avoid unjust enrichment by the infringer — what patent owners term “efficient infringement.”
The reasons that have led to the adoption of this [profit disgorgement] rule are that it comes nearer than any other to doing complete justice between the parties, that in equity the profits made by the infringer of a patent belong to the patentee and not to the infringer, and that it is inconsistent with the ordinary principles and practice of courts of chancery either on the one hand to permit the wrongdoer to profit by his own wrong
Tilghman v. Proctor, 125 U.S. 136 (1888). Profit disgorgement was eliminated from the text of the Patent Act in 1946 and Courts have held that it is no longer an available remedy. See Aro Manufacturing Co. v. Convertible Top Replacement Co., 365 U.S. 336 (1961) (“The purpose of the change was precisely to eliminate the recovery of profits as such, and allow recovery of damages only.”); Caprice L. Roberts, The Case for Restitution and Unjust Enrichment Remedies in Patent Law, 14 Lewis & Clark L. Rev. 653 (2010).
The provision found in the Inventor Rights Act of 2019 would effectively reinstate the disgorgement option close to what it was back in the 1870s when disgorgement became available for cases at law in addition to those in equity where it was already available.
Venue – Reset to 2017: Under TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017), federal patent infringement lawsuits can only be filed in states where the defendant either (1) is incorporated or (2) “committed acts of infringement and has a regular and established place of business.” Quoting 28 U.S.C. § 1400(b). Prior to TC Heartland, venue was much broader and was proper so long as the court had personal jurisdiction over the defendant (i.e., minimum contacts). The proposal in the Inventor Rights Act of 2019 would not fully restore the broad venue, but would allow an inventor to sue in states where the inventor conducted research or has a regular and established physical facility.
Injunctions – Reset to 2006: For many years courts issued injunctions as a matter of course against adjudged infringers. That changed following eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). In eBay, the Supreme Court ruled, inter alia, that no injunction should issue absent proof of irreparable harm caused by the infringement as well as inadequate remedy at law.
The proposal in the Inventor Rights Act of 2019 would would restore the pre-eBay law and thus allow for injunctive relief.
Post-Issuance Review – Reset to 1980: The Bayh-Dole Act (1980) authorized involuntary ex parte reexaminations. Since then, the scope of involuntary post issuance challenges have grown — most significantly with Trials under the 2011 America Invents Act (AIA).
The proposal in the Inventor Rights Act of 2019 would would restore the pre-1980 setup – barring any involuntary post-issuance review by the USPTO:
The United States Patent and Trademark Office shall not undertake a proceeding to reexamine, review, or otherwise make a determination about the validity of an inventor-owned patent without the consent of the patentee
IRA 2019.
Of course, a key principle of the proposal here is that it applies only to a subset of patents — those owned by their inventors.
(k) The term ‘inventor-owned patent’ means a patent with respect to which the inventor of the invention claimed by the patent or an entity controlled by that inventor—(1) is the patentee; and (2) holds all substantial rights.’
Id.
This article can be viewed in full on the IP WatchDog website
Restoring Injunctive Relief and Immunizing Inventors Against the PTAB
“We think that there are members who are open-minded to this, although there’s probably a lot of work left to be done before it’s going to become law… It seems clear that there’s an impetus to do something about these issues and we’ll be looking at how to shape the bill to give it the very best chance at passing into law.” – Spokesperson for Congressman Davis
Congressman Danny Davis (center) with inventors Randy Landreneau (left) and Josh Malone (right) and family members at the introduction of the Inventor Rights Act.
In mid-December 2019, Congressmen Danny Davis (D-IL) and Paul Gosar (R-AZ) introduced the Inventor Rights Act of 2019 into the House of Representatives. If passed, the bill would do much to reestablish strong patent protection rights for inventors who own their own patents, giving them an opportunity to opt out of validity trials at the Patent Trial and Appeal Board (PTAB) while also undoing many of the harmful effects of U.S. Supreme Court decisions such as TC Heartland and eBay.
A Potential Win for Individual Inventors
While the Inventor Rights Act is directed at a subset of patent owners feeling the brunt of changes to the patent system wrought by Congress and the federal judiciary over more than a decade, the bill does go a long way in correcting the situation for those individual inventors who are likely to have the fewest resources to enforce their patent rights. Anyone who has despaired at the response of D.C. lawmakers to the decline of the U.S. patent system will likely be encouraged by the bill’s acknowledgment that the promises of the Constitution’s Intellectual Property Clause are “no longer attainable” for inventors. After years of patent troll rhetoric wrecking the U.S. patent system, it’s refreshing to see a piece of legislation reference both the legal struggles of legitimate inventors as well as the “efficient infringement” business model “whereby large corporations infringe patent rights held by inventors without concern for any legal consequences.”
The bill begins amending the Patent Act by including a definition for “inventor-owned patent” into Section 100. An “inventor-owned patent” would encompass any patent which either the inventor or an entity created by the inventor is the patentee and holds all substantial rights to the patent.
Any inventor-owned patents would become subject to inventor protections that would be outlined by new Section 330, which the bill would add to the Patent Act. The first part of this new section would insulate inventor-owned patents from some of the more deleterious effects of the America Invents Act of 2011 by preventing the U.S. Patent and Trademark Office to hold validity trials on such patents, including reexaminations, without the consent of the patentee to engage in such trials.
Undoing the Harmful Effects of TC Heartland and eBay
The bill would also directly address issues that individual inventors and small entities have faced in enforcing their patents in district court which stem from the Supreme Court’s TC Heartland LLC v. Kraft Foods Group Brands LLC decision in 2017. New Section 330 would also include a choice of venue clause that allows infringement and declaratory actions involving inventor-owned patents to be brought in a judicial district in accordance with 28 U.S.C. § 1400(b), where the defendant has consented to be sued, where the inventor conducted research and development on the patent, or in accordance with 28 U.S.C. § 1391(c)(3) in the case of a foreign defendant that doesn’t meet the requirements of Section 1400(b). The choice of venue clause also gives the inventor the ability to bring a suit in a district where a party has both operated a regular and established physical facility for purposes other than creating venue and one of the following: engaged in R&D prior to the patent’s effective filing date; manufactured a tangible good that embodies an invention; or implemented a manufacturing process that embodies an invention.
Another clause in the Inventor Rights Act seeks to restore the presumption in favor of awarding injunctive relief to inventors proving infringement, a remedy that was in large part eradicated by the Supreme Court’s 2006 decision in eBay v. MercExchange, L.L.C. This section of new Section 330 would order a court, upon a finding that an inventor-owned patent is infringed and neither invalid or unenforceable, to presume that further infringement would cause irreparable injury and that available remedies at law would be inadequate to remedy that injury. The bill allows an infringing party to overcome this presumption if that party shows clear and convincing evidence that further infringement wouldn’t irreparably harm the patentee. Such evidence could include unreasonable delay in bringing an infringement suit after the patentee discovered or reasonably could have known about the infringement.
Finally, the Inventor Rights Act also includes strong provisions on damages recovery for inventors proving infringement of their patents, including a fee-shifting provision that seems designed to encourage individual inventors to seek the vindication of their patent rights in court despite lacking financial resources for obtaining legal representation. If a court finds that an inventor-owned patent has been infringed under various subsections of 35 U.S.C. § 271, including direct, induced, contributory or overseas infringement, the court shall award to the inventor both the infringer’s revenues from the infringement, minus any costs or deductions proven by the infringer, as well as costs under 28 U.S.C. § 1920. Upon a finding of willful infringement, the court may also award damages up to three times the amount of the profits award. If the inventor’s attorneys fees exceed 10 percent of the profits and damages award entered by the court, then the court shall award attorneys fees to the inventor so that those fees won’t exceed 10 percent of the damages award.
Support from Inventor Groups and Feedback From Capitol Hill
Understandably, this bill has been receiving support from those who understand the challenges faced by individual inventors in the current incarnation of the U.S. patent system. Randy Landreneau, President of US Inventor, offered the following comments on the Inventor Rights Act:
Recent legislation and court decisions have rendered American inventors defenseless against corporations intent on taking patented inventions. This has destroyed the incentive to invent that made America the world leader in innovation for 200 years. The future of American innovation depends on the restoration of inventors’ rights as granted in the U.S. Constitution, and that is the purpose of The Inventor Rights Act, H.R. 5478. Our effort now is to get enough support in the House to cause the Committee to take it up. Readers who want this bill to succeed should ask their U.S. Representatives to become co-sponsors.
IPWatchdog also received comments from a spokesperson in the office of Congressman Davis who informed us that the Inventor Rights Act has been accepted by the House Intellectual Property Subcommittee. It’s not likely that the bill will move towards a vote this year due to the election cycle, but Congressman Davis is very likely to reintroduce the bill next year. While changes in the reintroduced bill may well result from suggestions and comments coming from a variety of sources, the spokesperson indicated that there has been positive feedback on the bill, including from an unidentified member of the House of Representatives who indicated an interest in co-sponsoring the bill at a town hall event. “We think that there are members who are open-minded to this, although there’s probably a lot of work left to be done before it’s going to become law,” the spokesperson said. Although Congressman Davis’ office has an idea about which provisions of the bill will be most controversial, it’s currently too early to determine how to resolve those issues.
“We want to see where the inventor community and members of Congress come down on this bill,” the spokesperson said. “It seems clear that there’s an impetus to do something about these issues and we’ll be looking at how to shape the bill to give it the very best chance at passing into law.”
The Author
Steve Brachmann is a freelance journalist located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He writes about technology and innovation. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients and is available for research projects and freelance work.