Opinions and Editorials

Dec. 20, 2018

Politico: An Overreaching Patent Office Appeal Board Threatens Innovation and Inventors by James Daly

Presented by TiVo

Can a bunch of water balloons be worth $20 million?

To Josh Malone, and many inventors like him, they can be worth that and a lot more.

Malone, a father of eight and survivor of many spirited water balloon fights, used his experience as a mechanical engineer to dream up and develop Bunch O Balloons, which enabled more than 100 balloons per minute to be quickly filled with water and tied.

He launched a Kickstarter campaign for seed money, which brought in over $900,000 from more than 21,000 backers. Bunch O Balloons got press in Sports Illustrated and Time, and Malone even appeared on “Good Morning America” and “Today.” He paired up with Chinese toy giant Zuru for manufacturing and distribution and applied for a patent for Bunch O Balloons in February 2014 (it was issued 14 months later).

Soon, however, Malone’s balloon dream sprung a leak.

By the end of 2014, Bunch O Balloons had inspired a series of copycat products from TeleBrands, creator of the famous “As Seen on TV” logo. When confronted about these patent violations, TeleBrands claimed Malone’s patent wasn’t valid and in the summer of 2015 brought their case to the U.S. Patent Trial and Appeal Board (PTAB).

Created by Congress within the U.S. Patent and Trademark Office (USPTO) in 2011 as part of the America Invents Act, PTAB was designed to provide a quick and inexpensive administrative process for eliminating low-quality patents, or what some derisively call “bad patents” as an alternative to costly and time-consuming patent litigation.

Since its launch, however, PTAB has become something much different. In just a few years, the administrative tribunal’s rulings have given it a reputation as a place where good patents go to die. More than 82 percent of patents reviewed by PTAB are found to be defective, according to IP Watchdog.

For inventors like Malone, this has been devastating. “One of the bargains with the patent process is that you tell the world your secret, but in return you get legal protection for your idea,” said Malone, who is based in Plano, TX. “But now that simply isn’t the case.”

Which is what happened with Bunch O Balloons. In late 2015, in response to the TeleBrands legal challenge, PTAB declared Malone’s patents to be invalid. In November 2017, however, in a parallel federal court proceeding, a jury in the Eastern District of Texas found TeleBrands had willfully infringed on the patents, ruled Malone’s original patents to be valid, and awarded $12.25 million in lost profits and reasonable royalty damages to Zuru and Tinnus Enterprises, Malone’s company. Malone said they haven’t received any of that money from TeleBrands “and probably never will see it.”

Malone estimates that the many lengthy legal actions have cost him and Zuru at least $20 million in legal expenses. “and that doesn’t consider lost sales from their copy.” For smaller inventors and firms, the cost of defending their patents can be ruinous.