With patent reform surprisingly stalled in 2016, one of the bigger news stories of the year may have been rollercoaster ride of the Patent Trial and Appeal Board (PTAB). The Supreme Court decided the much anticipated case of Cuozzo Speed Technologies v. Lee, siding with the Patent Office interpretation of the America Invents Act (AIA), and for much of the first half of the year the Federal Circuit did nothing more than rubber stamp PTAB decisions and interpretations of Patent Office rules of procedure.
Something curious started happing shortly after the Supreme Court decision in Cuozzo. Beginning in late summer 2016 the Federal Circuit started to push back rather dramatically on the PTAB, finding PTAB actions arbitrary and capricious relating to Board’s de facto rule prohibiting patent owners from amending claims during post grant proceedings, specifically inter partes review (IPR) proceedings. More recently the Federal Circuit overruled the PTAB for instituting a covered business method (CBM) review using a definition that would make practically every patent a CBM patent. Most recently, the Federal Circuit heard en banc oral arguments in In re Aqua Products, which relates again to the extraordinary difficulty patent owners face in amending claims during IPRs despite the statute providing explicitly for such amendments.
Ever since the very beginning there has been substantial questions relating to whether the PTAB is a fair forum that affords appropriate due process to patent owners. I thought the creation of these new methods to challenge issued patents was a mistake, and I think the PTAB process is hopelessly biased against patent owners. But not everyone shares that view.
“A fair evaluation of the statistics shows that settlement rates are much higher – more than double – than initial projections, which to me means that the process is achieving a similar objective as district court litigation of encouraging parties to settle matters on their own,” according to Brad Pedersen, a partner with Patterson Thuente Pedersen, P.A. and chair of the firm’s patent practice group. “The complete loss rates at the Board versus district court are also pretty similar, which to me means that allegations of a systemic bias in the Board’s process against patent owners and in favor of defendants/petitioners are not supported by an objective look at the statistics as a whole.”
Surprised by this viewpoint, I pressed Pedersen a bit during a prep call for our upcoming webinar discussing Inter Partes Review: Best Practices. Pedersen doesn’t disagree that the patent system is biased against the patent owner in that “the patent owner has to run the gauntlet,” referring to needing to prevail in every forum 100% of the time. That means prevailing by convincing a patent examiner a patent should be awarded in the first place, prevailing against any post grant challenges, prevailing at the ITC and in the district court, and ultimately prevailing at the Federal Circuit. Pedersen acknowledged that with the system we have as a whole even if at ever step of the way there is a 90% chance that the patentee would win by the time you calculate the percent of “running the gauntlet” with the patent unscathed you are down to 50-50 at best.
Personally, I don’t think patentees have a 90% chance at the board, or in front of patent examiners (especially in certain Art Units where allowance rates are well below 10%), nor do they have that high a chance in district courts clamoring to do away with lawsuits on motions to dismiss without any discover or even claim interpretation, and there is certainly not a 90% chance that patent owners will prevail at the Federal Circuit.
If you limit your consideration to the facts of any single post grant case there probably is not systemic bias. I think the days are gone when the Administrative Patent Judges thought they were hired to be death squad members, but the rules are in my opinion hopelessly one-sided and unfair. For example, certain inventors are subjected to serial challenges and even when institution is denied there is nothing to prevent a later institution on the same grounds over the same prior art, which has happened.
Furthermore, the statute gives the Patent Office 12 months to conduct these cases, but also allows another 6 months if necessary for a total of 18 months. I don’t know of that additional 6 months ever being used, but the Patent Office has so compromised any sense of due process in order to achieve a fast result it is impossible, in my opinion, to view the resulting procedures as anything other than biased against the patent owner.
It is certainly true that some of the biases have been rectified with changes to USPTO regulations during 2016, but allowing more pages and finally allowing the patent owner to submit evidence are hardly enough (and should have been a part of any system if it were fair from the start). Unfortunately, the Federal Circuit has said that the PTAB can ignore timely submitted evidence the party has a right to submit, which is so bizarre that ruling sounds like it is a fake news headline. The near complete refusal to allow amendments despite the statute specifically allowing for amendments to claims is another situation were truth has a fake news ring to it.
I understand the PTAB doesn’t want to examine claims, and they argue they are not equipped to examine claims and do not have enough time to examine claims. Unfortunately for the PTAB, none of that is at all relevant when the law says that the patent owner has the right to amend claims. That the PTAB is observing that Congress put an unreasonable burden on the Office is fine, but failing to faithfully discharge the law as it is written and to the detriment of the patent owner is unacceptable and exactly why the Board has rightfully been charged with being biased against patent owners, among other reasons.
Perhaps if the PTAB were to institute fewer challenges they would have more time to faithfully discharge their statutory duties without fundamentally compromising the rights of patent owners who have been granted a property right by the same agency that now seeks to strip that right away. If there isn’t enough time to examine amended claims that is an easy fix. Since the Board reports to the Director and are inferior officers of the United States having been appointed by the Secretary of Commerce, the Director can and should order the Board to devote its resources to reviewing only those truly awful and egregious patents that never should have issued in the first place. Getting rid of those truly bad patents was supposed to be what post grant proceedings were about in the first place, not a second opportunity to look at prior art or harass an innovator.
In any event, I am looking forward to this upcoming PTAB webinar and hope you will join me. It will take place on Tuesday, January 10, 2017, at 12pm ET. I will moderate the conversation and will be joined by Brad Pedersen and David Kappos, former Director of the United States Patent and Trademark Office and currently a partner at Cravath Swaine & Moore.
In addition to taking questions from the audience, we will discuss: (1) Whether there really is an inherent bias at the PTAB; and (2) Patentee estoppel – what is it and how can it be used by challengers to put patent owners at an even more serious disadvantage.