The vast number of America’s companies that need patents to prosper and grow should fear the post-grant provisions for challenging patents in H.R. 1249, the patent reform bill passed last month by the House of Representatives. In a system already plagued by delays in granting patents, they threaten to delay courts from enforcing patents once finally granted. This threat has received little attention, perhaps because advocates of the bill promise promptness that they cannot deliver.
Advocates’ promise of completion in one year rings hollow for several reasons. First, the one-year deadline does not count the year, on average, that the inevitable appeal will take. Second, the deadline is extendable to 18 months and, in any event, not enforceable. Third, the one year does not count the petition stage before the proceeding begins. That adds at least another 5 months—two months for the patent owner’s response plus three months, again unenforceable, for the patent office to decide whether the challenger’s petition warrants initiating such a proceeding. So, total elapsed time usually will be not one, but almost three years.
Moreover, three different and potentially serial challenge proceedings are possible: Ex Parte Reexamination as under current law, an entirely new Post-Grant Review (PGR), and Inter Partes Review (IPR). The latter, however, cannot begin until Post Grant Review concludes. If a patent is challenged as soon as it issues or at least within one year, and the first review (PGR) takes about three years, then a patent will still be under a cloud for three to four years after issuance.
When more than one alleged infringer is sued or threatened, the first potentially can bring a PGR and the second may later be able to instigate an IPR on a different ground of alleged invalidity. You see, while the first challenger is statutorily blocked from bringing a subsequent proceeding on any ground he could have raised in the first proceeding, others are not.
So, back-to-back challenges lasting five years or more are likely. How can such uncertainty over validity not defer investment decisions or discourage them altogether? What venture capital investors will risk their money before all such challenges are concluded? And without repeated investments most start-up companies will stall, or even die. Given that such firms are responsible for almost all new job creation and economic growth, this could have severe negative effects upon the whole society.
What would happen if your ownership of your house could be revoked six years after your purchase? And, under such a threat, who would give you a mortgage?
Supporters say frivolous challenges will be prevented by the threshold requirement to start a review. But the review threshold of a “likelihood a claim of the patent is invalid” may not work in practice to allow prompt court enforcement of plainly valid patent claims. Many patents have numerous claims that are plainly valid, but a very broad claim that may be of questionable invalidity. Thus, initiating these two reviews will often be easy. Patents often contain dozens of claims. Finding one that is likely invalid will not be difficult. And the review ties up all the other claims as well.
On top of that, ex parte reexamination remains available. Getting one started requires only “a substantial new question of patentability”. From experience, we know that low threshold is met over 90% of the time. We also know ex parte re exams are commonly started soon after an infringement suit is filed, or even anticipated.
In 2010, 780 were filed, two thirds with parallel infringement proceedings pending in district court or the International Trade Commission. In addition, they are far less expensive than inter partes proceedings and, unlike Post Grant Reviews, can be filed anytime during the 20 year life of a patent, and even filed anonymously. I expect in many infringement cases all three types of post-grant challenges will be employed, one after another.
The capacity of the patent office to adjudicate both types of post-grant reviews within the promised one-year deadline is highly questionable. The Board has less than 100 Administrative Patent Judges (APJs) and is swamped with an inventory of 24,000 appeals, six times the number of just a few years ago. Like appeals, post-grant reviews must be conducted by 3 judge panels, so the Board has less than 33 decision units.
The experience and competence of the APJs to try validity challenges as would a district judge is also suspect. In PGR, all grounds of invalidity may be tried, often presenting conflicting testimony and requiring credibility determinations with which APJs have little experience. They will also have to administer discovery and impose sanctions for abuse, tasks for which they have no prior experience whatsoever.
Of course, none of these post-grant review proceedings necessarily delays a co-pending infringement case. But from my service on the Judicial Conference of the United States and its Executive Committee from 2005-2010, I know just how overburdened our 600 district judges are. They will, I expect, grant stays routinely, freezing progress in the lawsuit. The effect will be that an issued patent cannot be enforced for many years after suit is commenced. If post-grant proceedings take 3-6 years, we know that discovery, trial and post-trial motions will take at least three more years. So in cases in which stays are granted early, which will be many, delays could total 6 to 9 years.
What such delays would do to patent values and the legion of companies that depend on patents for investment and growth is horrible to contemplate, as are the ill-effects on American prosperity and job creation.
In my opinion, the best solution is to drop Post Grant Review. It does not work well in Europe where long delays are common. And it is not needed here in view of the other methods to challenge issued patents. Three years would be saved. What would be lost? Mainly challenges based on pre-filing public use or on sale activities by the inventor, but they can better be adjudicated in court, anyway.
Moreover, the entire premise of adding PGR was that few alleged infringers used Inter Partes Reexamination. That was still true in 2000, a decade after Congress created it. Little surprise, then, that the National Academy of Science in 2004 recommended PGR. But since then, Inter Partes Reexamination requests have become the routine responses to an infringement suit or charge of infringement. In 2010 alone, 281 were filed. The need for PGR has disappeared. So should PGR.
Before patent reform legislation is finalized, this torpedo should be disarmed.