New legislation is not needed to fix post grant procedures at the PTO

Better wayIt’s been five years since the enactment of the America Invents Act (AIA) which became law in 2011. Time has rocketed by! When it became law, the AIA was acclaimed as the most important patent legislation since the Patent Act of 1952. Most patent industry leaders discount the American Inventor’s Protection Act (AIPA) of 1999, enacted only a few years earlier. And no one believed that the patent legislation weary Congress would be debating new patent reforms almost immediately after the AIA.

While there were several provisions enacted by the AIA the most notable were the ramped up post grant review procedures: Post Grant Review (PGR); Inter Partes Review (IPR) and the Transitional Covered Business Method procedure (CBM).

PGR allows a petitioner to challenge an issued patent on any statutory ground. The basis for an invalidity determination under this process can include 101, 102, 103 or 112 or any other statutory basis under which a claim can be rejected. The patents that qualify for this procedure must be based upon applications filed under the new first to file system, so we are just beginning to see some results from these challenges. The post grant procedures are only available for the first nine months after the patent issues and a challenger under PGR needs to file her case before nine months has expired.

Inter Partes Review (IPR) permits anyone to challenge an issued patent anytime but limits the grounds of challenging to prior references that show that the invention was known or obvious before the applicant filed her application.

The Transitional Covered Business Method procedure (CBM) was created to handle a temporary problem in a specific subject matter area. When the courts clarified that patents could be issued on inventions relating to business methods in the financial sector several years ago, the USPTO was initially unprepared for the onslaught of applications. There was no comprehensive data base of prior art in this area and most of the examiners were unskilled in the known processes of the financial sector. Challenges under this program can be made under any statutory basis anytime, but the patent must claim a method relating to a financial service that does not include a technological invention. Because this process is meant to correct for a specific problem that was fixed over time, it was legislated to sunset after eight years.

We have learned much from our five years in toiling in the post grant fields. We have seen that instead of serving as an alternative to litigation, the procedures are another tool used to invalidate patents and are a regular adjunct to litigation strategy. Some have complained that the post grant procedures are “killing fields” for patents. And many have urged that the limited ability to amend a claim during the process and the use of the broadest reasonable interpretation as the standard for claim construction by the USPTO necessitate further legislation to correct the problems.

But legislation is not always what is needed.

5th-anniversary-200The history of patent bill development shows that frequently provisions that were intended to be included in patent legislation were remedied in the run up to enactment. Damage issues, venue, pleading requirements and discovery scope have all been carved out of legislation when courts act in a manner to address the issues. Sometimes the fix is not enough, but frequently it ends the need for legislation.

The enumerated problems with the post grant procedures could be bettered by both the courts and the USPTO. The courts have had an opportunity to change the standard for claim construction in the post grant procedures but have declined. But, recently, in Veritas Tech v. Veeam Software Corp, the Federal Circuit criticized the offices knee-jerk denial of a motion to amend in an IPR. And, the same court also just agreed to hear the appeal en banc of In re: Aqua Products Inc. to determine if the tight rules that the USPTO are using that deny too many amendments are consistent with the statute.

The USPTO can ameliorate the problem itself by providing for more liberal leave to amend. The rationale for BRI at the USPTO is that patentee can amend at the Office but not in court. The Office can more easily allow for claims that are further limiting and this would greatly reduce the problem. There may have been some concern about meeting the statutory time periods when the procedures were first implemented as the Office was flooded with IPR petitions and had few board members. But the successful hiring campaign for board judges has reduced that concern and the Office should rectify the problem.

It is usually better, if possible, to remedy problems through iterative changes by courts or the Administration rather than statutorily. Changing a statute is difficult and is usually the result of a negotiated agreement. Usually no side is happy. But if we can work through the system observing the results of the changes we make through case law and rule changes, we can greatly improve the system over time.


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8 comments so far.

  • [Avatar for Night Writer]
    Night Writer
    September 10, 2016 11:48 am

    @Curious: the new trade secret act means that we are going to go dark soon on anything that can be hidden. That is already the first question I get. How can we structure this to hide everything that we did. The patent system is worthless now. Reality.

  • [Avatar for Curious]
    September 9, 2016 02:10 pm


    You raise some great points. I’ve long written that the AIA should be renamed the America Infringes Action.

    Patents are (intangible) assets. Moreover, they are valued just like any other asset class. One of the most important factors when valuing any asset is the risk associated with that asset. Investors will always discount the value of an asset based upon increased risk.

    To take an invention from an idea to a full-fledged business takes capital. While this isn’t a problem for large corporations, for everybody else that is a huge hurdle to overcome. While some companies may have other collateral to put up to attract potential investors, in most instances, the only asset of any value is the intellectual property (e.g., the patents). Thus, their patents is what inventors use to attract capital to develop their business.

    Before the AIA (and some of the recent Supreme Court cases), if one had a patent, there was a reasonable expectation that a patent was valid and could be enforced against other parties. While there was some risk that the patent could be invalidated, it was nowhere near the expected outcome.

    After the AIA, however, and as Paul pointed out above, there is no presumption of validity. Moreover, the rules at the PTAB (e.g., during an IPR) are even more onerous than they are during the original examination of the patent. As such, for all intents and purposes, the original examination of the patent gets a patentee very little in terms of value. It might as well be an unexamined patent application, and anybody who works in the patent valuation business will tell you that unexamined patent applications have very, very little value.

    What the AIA has done is vastly increased the risk profile of issued patents. Every litigator I have talked to flat out expects that any patent in litigation will be subject to an IPR, which is an extremely costly procedure. While a patent litigation is also an extremely costly procedure, winning a patent litigation has an upside — damages. However, there is no similar upside in an IPR. Nothing prevents a patent from being subject to additional IPRs and it is fairly easy for well-heeled infringers to keep putting patents into IPR. Because of the high-costs associated with IPRs (and the poor success rate for patentees) there is an assumption that any patent subject to an IPR will suck significant resources from the company (so as to defend the patent) and the patent is also likely be invalidated. All of these are bad for patent holders. Another downside is that the intellectual property, while existing, may not even be asserted against infringers. The whole concept of “efficient infringement” is predicated upon the notion that because it is too cost-prohibitive to successfully assert patents against infringers, many patent owners will just sit on their patents instead of assert them.

    The end result is that patents, as an asset class, are extremely high risk assets right now. Moreover, the smaller the entity the owns that patent, the higher the risk because of the costs involved in defending the patent are too prohibitive. Consequently, patents are essentially worthless right now to small entities.

    If I was advising a small company right now looking to break into a market dominated by large corporations, I would explain to them that while they could obtain patent protection for their ideas, it today’s environment, it is nearly impossible to enforce that patent. As such, if they do bring a great product to market, they should expect the large corporations to immediately copy that product and there is a slim chance that patent protection will help prevent that.

    The AIA is set up to protect the moneyed interests of the world — plain and simple.

  • [Avatar for Night Writer]
    Night Writer
    September 8, 2016 10:37 pm

    Great post Paul.

  • [Avatar for Paul Morinville]
    Paul Morinville
    September 8, 2016 09:36 pm

    The premise of virtually all arguments I’ve heard about salvaging PTAB’s via new rules in the PTO and urging the courts to actually re-legislate the already screwed up legislation is that patents are really only about litigation.

    This thinking misses the whole point of the patent system. Sure patents get litigated and that is the time when there is a story worth publishing, but long before litigation, patents are used to attract investment to the very earliest stages of a startup so the invention can be commercialized. Without this initial investment, the patent (if it has any market value) is certain to be litigated eventually because the inventor cannot return her investment any other way. When a patent is valid, the startup can become the next Google as is evident in the story of Google.

    PTAB procedures cannot be repaired to both aid in litigation and to help startups attract capital. This is because as long as we have PTAB’s no patent is ever presumed valid. Fighting a PTAB burns hundreds of thousands of dollars and five years of the patents life. Even if it survives (and even if the odds are improved by PTO policy and court legislation) it is still never presumed valid because it can be challenged again and again, even by non-parties.

    Nobody invests in an asset that is not a presumed valid asset. So virtually nobody is investing in startups based on patents at early stages (the most important stage to new technology development and job creation) because patents are never valid under the current PTAB madness.

    If we want our job creation engine to fire up again, PTAB’s must be eliminated. I appreciate the authors perspective and if patent were solely tools for litigation, I would tend to agree. But, given his perspective, it seems he has never attempted to startup up a high risk early stage startup company and attract capital based on a sole asset of a patent.

  • [Avatar for Curious]
    September 8, 2016 03:37 pm

    The enumerated problems with the post grant procedures could be bettered by both the courts and the USPTO.
    With all due respects to the writer, but do you realize that at both the USPTO and the Federal Circuit, the expression “the only good patent is an invalid patent” reigns supreme. The USPTO, through their own rule making (e.g., broadest reasonable claim construction coupled with extremely limited opportunity to amend), has made it much harder for patentees to survive an IPR. Moreover, the Federal Circuit has blessed those changes.

    The current makeup of the Federal Circuit is about as anti-patent as I have seen in my couple decades of following the issues. They aren’t going to make things better anytime soon — on the contrary, I expect the Federal Circuit to make things worse. Moreover, with the slow turnover associated with the judiciary, it may be another decade or so before we see any real improvement there.

    Going back to the USPTO, I thought Dudas was as anti-patent as one could be for someone who heads the USPTO. However, Lee is arguably just as anti-patent if not more so. Remember, it was the USPTO that decided to institute all of these anti-patentee procedures.

    Hoping that Lee is going to turn over a new leaf is a poor strategy for instituting change (for the better). Granted, after the upcoming elections, we’ll more than likely see a change at the top of the USPTO. If Trump is elected, who knows who he will put in charge. I doubt he has given more than 10 minutes of his life thinking about intellectual property policy. As for Clinton, will she be more inclined to support the infringers of the world (e.g., Google & Facebook) or those companies (e.g., IBM) that depend upon their intellectual property? I don’t know. Regardless, I don’t see change happening at the USPTO anytime soon. If anything (and Lee has her way — err, I mean Google’s way), things will only get worse.

  • [Avatar for Anon]
    September 8, 2016 03:11 pm

    I think that allowing amendments almost necessarily needs an off-ramp to a proper examination of the amended (new) claim.

    Let’s remember that even “mere” narrowing amendments cannot be presumed to be valid unless the narrowing is the case of a previously examined dependent claim being put into indepdendent claim format.

    Any other claim – even narrower ones – cannot be presumed to be valid without having the executive agency actually charged with examination doing the examination.

    Being vetted by a third party simply is not “good enough,” since the law does not provide any grant power outside of the executive agency (and since the larger claim was deemed problematic enough to rescind grant, there can be no “grace” carried over from that now rescinded examination and decision to grant).

  • [Avatar for John White]
    John White
    September 8, 2016 02:41 pm

    And, now, back to our program…..this is pretty kind treatment of the trainwreck that is/are post grant proceedings. But, that said, allowing liberal amendment would help. If the claims are overbroad, narrow them to dodge the prior art. This keeps the patent upright and gives challengers room to compete. Perhaps when an amendment is filed there is an off ramp to reexam or something.

  • [Avatar for Night Writer]
    Night Writer
    September 8, 2016 11:59 am

    What a mistake to appoint his sister-in-law rather than him. J. Stoll is a nightmare who had a bad rep at Finnegan and was frankly mean and arrogant (from firsthand experience.) She appears to have been another Google selection.

    And the point being that no legislation is going to fix the Fed. Cir. except disbanding the Fed. Cir. which is stacked with Google judges.