PTAB chief judge Ruschke discusses ex parte appeals, PGR reform and more with PPAC

PTAB Chief Judge David Ruschke addressing PPAC on May 4, 2017.

On Thursday, May 4th, the U.S. Patent and Trademark Office’s Patent Public Advisory Committee (PPAC) convened its quarterly meeting at the USPTO’s headquarters in Alexandria, VA. At approximately 1:30 PM, an update on operations at the Patent Trial and Appeal Board (PTAB) was given by PTAB’s Chief Judge David Ruschke. Despite recent reports of questionable ethics surrounding potential conflicts of interests of administrative patent judges (APJs) at PTAB (see here, here, here and here), the day’s discussion revolved mainly around appeal inventory, pendency rates and America Invents Act (AIA) trial proceeding trends at PTAB.

Slides presented by Ruschke at the PPAC meeting showed that judges at PTAB have been reducing the pendency of ex parte reexaminations across a range of tech centers. The most dramatic drop in pendency was seen in tech center 1600 for bio/pharma patents, decreasing from an average pendency of 33.2 months at the end of fiscal year (FY) 2016 down to an average pendency of 20.7 months at the end of FY 2017. Other tech centers seeing major reductions in average pendency over the past year include 2100, 2400, 2600 and 2800 for electrical/computer patents and 2900 for design patents. In one case involving tech center 3900, the central reexamination unit, average pendency actually increased slightly, from 7.1 months to 7.3 months. Overall, the average pendency for ex parte reexams dropped from 27.5 months at the end of FY 2016 to 19.2 months at the end of FY 2017.

Reductions in PTAB’s inventory of pending ex parte appeals have been accomplished along with the lowered average pendencies. PTAB’s pending ex parte appeals have dropped from a high of 26,484 pending cases at the end of FY 2012 down to an eight-year low of 14,611 as of this March 31st, the end of USPTO’s second quarter for 2017. Ruschke indicated that PTAB’s goal was to achieve a 12-month average pendency with a pending ex parte appeal inventory of 12,000 cases or lower. “We don’t want to hit zero, it wouldn’t be particularly useful for our judges,” Ruschke said. He added that, since PPAC’s last quarterly meeting, PTAB had completed every ex parte appeal docketed in FY 2013 and it only had 50 cases remaining from FY 2014.

Of course, it doesn’t seem the PTAB is in any risk of hitting zero given we are nearly halfway through 2017 and there are all those appeals docketed in 2015, 2016 and through the first half of 2017 still to resolve.

Ruschke also spoke to the hiring practices of administrative patent judges (APJs) at PTAB, noting that it was standard practice of having recent APJ hires to “spend a significant amount of time on ex parte work” before moving APJs over to AIA trial casework. Later, Ruschke would note that judges moving over to AIA trials are typically given an APJ experienced in AIA trials as a mentor. Judges which are then moved back to ex parte cases after having worked on AIA trials provided what Ruschke called “extensive firepower” for deciding ex parte appeal cases in an extremely efficient manner. A higher percentage of electrical cases on the AIA trial side of PTAB has led to increased hiring of judges with electrical expertise in recent months.

Currently, PTAB is operating with 275 APJs and Ruschke called that number “pretty static.” “We’re not planning on doing any hiring in judge ranks in the near future, except maybe for attrition,” he said. When the PTAB has hired judges in recent years, they have sought to hire judges with expertise in multiple areas, such as a judge who has a degree in electrical engineering but also has work experience in mechanical engineering. “It’s that kind of mining of the judge’s expertise that we use to realign their workloads,” Ruschke said. That line of thinking certainly seems to support why APJ Matt Clements would have been assigned AIA casework coming from a petitioner who Clements used to represent as an attorney. PTAB decisions finding something as tangible as an MRI machine to be an “abstract idea” are the natural consequence of assigning APJs to cases involving technologies outside of the core competencies (more on this below).

At least one voice at the meeting opined that the 12-month pendency goal was far too long in the eyes of some of their clients, noting that a year was “a lifetime” in certain business cycles. Ruschke noted that, in his discussions with PTAB stakeholders, some prefer a longer pendency while others prefer shorter. In either case, an average of 10,000 ex parte appeals are filed with PTAB each year, making reductions to the average pendency difficult to achieve. Ruschke said that while the current goal was to achieve a 12-month average pendency, PTAB might look at reducing pendencies to eight- or six-month averages. “It depends on the overall intake and the firepower of our judges,” Ruschke said.

The first quarter of 2017 saw a record number of petitions for inter partes review (IPR) proceedings at PTAB. Ruschke said that he couldn’t discern why 237 IPR petitions were filed in January alone as no single petitioner or patent seemed to be driving the upswing in petitions. Graphs included in Ruschke’s slides showed how February saw a large drop in IPR petitions but they spiked up again to higher than normal levels in March.

Discussion during the meeting also centered around the low number of post grant review (PGR) petitions filed at PTAB and changes to PGRs, which could encourage a greater number of filings. Estoppel provisions that prevent PGR petitioners from bring multiple petitions were considered as one aspect of those proceedings which could be changed to encourage greater filing activity. Later, members of the meeting discussed whether making PGR petitions anonymous, similar to ex parte review petitions, could encourage PGR filings from entities who don’t want to become “a target.”

Any patent owner who feels as though PTAB takes an extraordinarily dim view of their intellectual property rights could be forgiven for making that assumption, especially given this discussion on ways the Office can increase PGR petitions. Particularly alarming for patent owners will be any attempt to water down or do away with the PGR estoppel provision, which is a not too thinly veiled attempt at enabling perpetual challenges to any patent. Patent owners are already being harassed with gang-tackling by multiple petitioners, for example. What patent owner would want to encourage further validity challenges on a property right that was deemed valid when the USPTO originally granted it but is no longer even presumed valid when it is challenged?

The PTAB treats patents like they were piñatas. If a challenger’s first IPR petition wasn’t instituted, that entity gets to take swings at the piñata until an IPR is finally instituted. Now, PTAB is trying to think of ways to give petitioners even more cracks at a property right that, to many owners, increasingly feels like it’s made out of papier-mâché and not held together by the strength of the U.S. Constitution. Enough whacks and the patent is finally torn asunder, the candy falling to the floor for efficient infringers like Apple and Google and the rest of Silicon Valley to scoop up like greedy children.

Ruschke then spoke about institution rates for all trial types, which he said was stabilizing at about two-thirds of all petitions filed at PTAB. Of the 6,700 PTAB trials for which petitions had been filed through the end of this March, about half of the petitions (3,382) were instituted and less than one-quarter of all petitions filed (1,539) got to a final written decision. “The message is, two-thirds of your petitions are instituted, one-third are not,” Ruschke said. “Those never see the light of day of an AIA trial.” Of course, some might take away the message that final written decisions tend to be a death knell for patents, as 1,014 of the 1,539 trials reaching final written decisions found all claims to be unpatentable and only 269 decisions found that all claims were valid.

Of course, any talk of PTAB institution rates is incomplete without acknowledging the highly questionable manner in which the PTAB calculates statistics. It is not unheard of for a petition to be denied, but if a petition is denied the petitioner can refile again and again. In some cases the petitioner has refiled virtually the same petition over and over again and for reasons that are never explained on the 4th or 5th filing the petition is instituted. What is the institution rate in those cases? According to the PTAB it would either be 25% (1 in 4) or 20% (1 in 5). For the patent owner, the institution rate is worse than 100%. Not only was the patent ultimately instituted, but the patent owner had to deal with the same or very similar petition multiple times. For more on the questionable PTAB statistics see here, here and here.

“I can understand getting a patent and having it invalidated later on,” Ruschke said, noting that, as a chemical engineer who developed IP that his firm decided not to file on, he can understand a patent owner being dismayed by proceedings at PTAB. Quickly thereafter, however, he surmised reasons why patent owners might face PTAB petitions which almost made it sound like the patent owner is culpable in how many petitions are filed. “Let’s say that the patent owner sues 10 defendants,” Ruschke said. “Should the patent owner expect 10 petitions back?” Ruschke evinced a similar point of view for patent owners who sue and then amend the asserted claims. “If I sue on claims 1 through 10, and then amend to claims 11 through 20, should I expect two petitions? Maybe,” he said. PPAC member Julie Mar-Spinola questioned this logic, wondering aloud whether such validity challenges should be made on the merits and not simply the number of times the patent has been asserted. “Basically, the petitioner is saying that the PTO got it wrong 10 times,” Mar-Spinola noted. Ruschke noted that he had heard this argument before.

Another question was raised by another PPAC member on a common concern among clients that PTAB judges may not be well-versed in the subject matter of a case in front of them. Ruschke responded that, in ex parte appeals, PTAB only assigns judges who have a very specific technical expertise. “You will not see a chemist paneled on an electrical case,” Ruschke said. However, the analysis was more “multifactorial” when assigning judges to panels deciding AIA trials. “Judges like myself, my resume doesn’t reflect that I could probably do mechanical [cases], but judges, if they run into a case they’re uncomfortable with, they very frequently recuse themselves,” Ruschke said.

Ruschke’s claim that only PTAB judges familiar with the technology involved are assigned in ex parte appeals seems false based on what we know has happened in at least one high-profile matter. As previously mentioned, in Ex parte Hiroyuki Itagaki the PTAB ruled a magnetic resonance imaging (MRI) machine to be patent ineligible because it is an abstract idea. See PTAB rules MRI machine an Abstract Idea. Judge Hubert Lorin, who authored the opinion in Itagaki, has a B.S. in Chemical Engineering and a B.S. in Chemistry according to his LinkedIn profile. Similarly, Judge Matthew Meyers, who was also on the panel, has a B.S. in Biology according to his LinkedIn profile. The third judge, Judge Bibhu Mohanty, does not list his technical expertise on his LinkedIn profile, but we have been told his expertise is also in the chemical area. Therefore, the PTAB does in at least some cases assign cases to judges who are not technically trained in the technology area of the invention, which in and of itself would raise an interesting ethical question if the APJs were governed by the Code applicable to attorneys. 37 CFR 11.101, which mandates practitioners provide competent representation, explains that competent representation requires scientific and technical knowledge reasonably required for the tasks at hand.

PPAC chairwoman Marylee Jenkins also raised the topic of PTAB conflicts of interest, which we have been reporting on over the last several weeks (see here, here, here and here). Ruschke indicated that the topic of conflicts would be discussed at PPAC’s next quarterly meeting.