How to Protect Your Patent from Post Grant Proceedings
|Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
Blog | Twitter | Facebook | LinkedIn
Posted: March 19, 2014 @ 7:28 am
The American Invents Act (AIA) created three new ways to challenge the validity of claims in already issued patents. While the AIA was signed into law on September 16, 2011, the new post grant proceedings did not become effective until one year after the signing, on September 16, 2012. These three new post grant proceedings are post-grant review, inter partes review and covered business method review, which is a variety of post-grant review that is limited to business methods relating to the financial industry. Because post-grant review was specifically limited in applicability to patents that were examined under the new first to file law, only patents that have an effective filing date on or after March 16, 2013, are capable of being reviewed in a post-grant review proceeding. Therefore, so far the USPTO has only seen inter partes review and covered business method cases.
On August, 14, 2012, the United States Patent and Trademark Office promulgated final rules applicable to these new proceedings, and at that time the USPTO said that they anticipated that 420 petitions for inter partes review would be filed in fiscal year 2013. The USPTO also said they anticipated that in fiscal year 2014 there would be 450 petitions for inter partes review filed. See 77 FR 157 (August 14, 2012) 48713. The Patent Office severely under estimated the popularity of post grant proceedings, particularly inter partes review. Indeed, the PTAB is on pace to reach more than 1,100 administrative trials in FY 2014.
Inter partes review has been extraordinarily popular due to the fact that the rules are stacked in favor of the challenger. Indeed, recently Scott McKeown who is a partner at Oblon Spivak and co-chair of the Oblon post grant practice group wrote on his blog that the Patent Trial and Appeals Board (PTAB) “offers unprecedented speed with none of the patentee safeguards of the district court.” The biggest safeguard that a patentee enjoys at the district court is a presumption of validity. In other words, during a patent litigation in the district court the patent is presumed valid and will remain valid unless and until the challenger can demonstrate by clear and convincing evidence that the claim (or claims) are invalid. At the Patent Office, however, the patent does not enjoy any presumption of validity and the challenger need only meet a preponderance of the evidence standard, which is substantially less onerous than the clear and convincing standard in a patent litigation in the district court.
In addition to the rules being stacked in favor of the challenger, post grant proceedings have been popular because the Patent Office is granting petitions for such review in a high percentage of cases, and so far in the overwhelming number of cases the PTAB has found in favor of the challenger. Indeed, some 80% of claims challenged at the PTAB are instituted for trial, and upward of 85% of patent claims will be cancelled or amended before the PTAB. See The PTAB Roadblock to Patent Monetization. These statistics have lead Chief Judge Randall Rader of the United States Court of Appeals for the Federal Circuit to describe the PTAB as “acting as death squads killing property rights.”
What this means for the patent owner is this: If a post grant proceeding challenge is filed against your patent you should anticipate that the petition will be granted, an administrative patent trial will ensure, and you are in serious jeopardy of losing the challenged claims.
By the time you are challenged in a post grant proceeding there may not be much you as a patent owner can do other than take the challenge serious and fight like you’ve never fought before. There are, however, strategies available to attempt to ward off post grant challenges for those who have not yet had a patent issue, or who still have the opportunity to file a reissue application to broaden patents obtained, or who still have one or more pending applications open at the Patent Office.
Filing a post grant proceeding challenge is not inexpensive. This is not to say that filing such challenges is ordinarily cost prohibitive. When you compare the costs to fighting a patent in a patent litigation in the district court where even an average patent case can easily cost between $2 million to $3 million in attorneys fees to defend, the total cost of an ordinary post grant challenge is quite a bargain. Still, the filing fees for a petition alone are not irrelevant.
The petitioner in an inter partes petition must pay $23,000 for the right to challenge 20 or fewer patent claims. There is also an additional fee of $600 per claim in excess of 20 claims. The fees are even greater for covered business method petitions, where the initial filing fee is $30,000 for 20 or fewer claims challenged, with an additional fee of $800 for each additional claim challenged over 20. Add to this the fact that it will easily cost every penny of $300,000 start to finish for an inter partes review, and that some firms quote as high as $1,000,000 in fees start to finish, with a proper patent prosecution strategy you can make the post grant proceedings too expensive to pursue.
With this in mind, patent owners must modify their strategies during prosecution to make their patents and portfolios less susceptible to post grant challenges. This strategy must take into account the cost of filing a petition by a challenger. Patent owners must obtain enough claims and enough patents to make it extremely expensive for a challenger to go down the path toward an administrative patent trial where the deck is stacked against the patentee. This will require patent owners to obtain patent claims with numerous dependent claims that cover as many variations as possible, but also to ensure that the dependent claims build on one another little by little so as to create a claim set that refers back to as many previous claims as possible. Such a claim mosaic will raise the filing fee that must be paid to institute a post grant challenge.
The rub here is how does the USPTO determine how many claims are being challenged when challenged claims are dependent and refer back to one or more other claims. The USPTO explained: “for fee calculation purposes, each claim challenged will be counted as well as any claim from which a claim depends, unless the parent claim is also separately challenged.” 77 FR 157 (August 14, 2012) 48619. The USPTO went on to provide several examples:
Example 1: Claims 1–30 are challenged where each of claims 2–30 are dependent claims and depend only upon claim 1. There are 30 claims challenged for purposes of fee calculation.
Example 2: Claims 21–40 are challenged where each of claims 21–40 are dependent claims and depend only upon claim 1. As claims 21–40 depend from claim 1, claim 1 counts toward the total number of claims challenged. Thus, there are 21 claims challenged for fee calculation purposes.
Example 3: Claims 1, 11–20, and 31– 40 are challenged. Each of claims 1 and 31–40 are independent claims. Each of claims 11–20 are dependent claims and depend upon claim 9, which in turn depends upon claim 8, which in turn depends upon claim 1. As claims 11–20 depend upon parent claims 8 and 9, claims 8 and 9 would count as challenged claims towards the total number of claims challenged. As claim 1 is separately challenged, it would not count twice towards the total number of claims challenged. Thus, there are 23 claims challenged for fee calculation purposes.
Example 4: Claims 1, 11–20, and 31– 40 are challenged. Each of claims 1 and 31–40 are independent claims. Claim 11 depends upon claim 1 and claims 12– 20 depend upon claim 11. As each of the challenged claims is based on a separately challenged independent claim, there are 21 challenged claims.
In none of these cases is the filing fee going to be a real deterrent if the challenger has decided to pursue either inter partes review of covered business method review. Notice, however, that in each example the dependent claims challenged depended only on a single other patent claim. But what if you were to get a patent that had 50 claims and the most valuable claims were 41 through 50, each of which referred back to each of the first 40 claims in one way or another. That would mean that the filing fee for a single inter partes petition that would challenge claims 41-50 would cost $41,000. If there were 100 claims in the issued patent the filing fee would be $65,000.
Of course, due the page limitations what can and does happen is that the challenger would not file a single petition for inter partes review, but instead may file several simultaneous petitions to challenge the claims. In this scenario, if you have a large number of claims even if you do not strategically use dependent claims that incrementally build on each other you likely will force the challenger to need to file multiple inter partes petitions, which in and of itself raises the filing cost, as well as the cost of preparing and litigating. So if you have 60 claims and the challenger needs to challenge all 60 they may choose to file three separate petitions to lay out the case within the page limits, which would cost the challenger three separate filing fees, or $69,000.
But what if you don’t just have one patent with an above average number of claims, but what if you continually mine the disclosure to obtain hundreds of patent claims over a dozen or more patents? If the specification is written as an omnibus specification that is capable of fully supporting a real innovation there should easily be enough matter disclosed in the first filing to support hundreds, if not thousands of patent claims. Until now there has really been marginal benefit to seek protection on all of the various combinations that could be claimed because there are additional claim fees required in order to obtain those claims. Having said that, if you have a valuable patent property you absolutely must seek far more claims and far more patents than you ordinarily would in a world that didn’t have a PTAB killing patents.
Whether we like it or not there is a substantial backlash against innovators and at this moment in history patents are largely viewed as evil and unnecessary. In this climate it is necessary for innovators to strategically engage in patent prosecution to obtain more patents with more claims so that even the more favorable standard at the PTAB will not be enough to warrant challenging your patents in a post grant administrative trial at the USPTO. Of course, the other benefit of having so many patents and patent claims is that at some point even the PTAB should presumably be unable to in an intellectually honest way find that all of your claims are invalid.
At some point the PTAB will either need to find some claims valid or the entire mission of the USPTO will need to be reevaluated. If the PTAB is going to kill all claims in all commercially valuable patents what is the point? Until we get to that equilibrium, and perhaps until we get to a new Administration controlling federal government agencies and a more pro-innovation Congress, patent owners need to take matters into their own hands. That unfortunately will make obtaining a strong patent portfolio more expensive than a few years ago, but closing your eyes to existing reality and instead wishing for the past is not a winning strategy. If you are going to spend money to acquire commercially valuable patents you might as well spend enough so that the patents have the greatest chance of living through this patent-killing era.
If you need assistance please feel free to contact me.- - - - - - - - - -
For information on this and related topics please see these archives:
Posted in: Gene Quinn, IP News, IPWatchdog.com Articles, Patent Trial and Appeal Board, Patents, Post Grant Procedures, USPTO
About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.