The Problem of Inter-Partes Review (IPR)

By Neal Solomon
August 8, 2017

EDITORIAL NOTE: This is part 5 of a multi-part series by author Neal Solomon. If you have missed previous installments please see part 1: The Myth of Patent Quality; part 2: Patent Quality Relies on a Fictitious Narrative; part 3: The Problem of Reducing Patentability to Novelty; and part 4: The Problem of Obviousness. In this installment Solomon tackles the problems with IPR challenges.

In 1981, Congress authorized patent reexams to review the validity of previously issued patents. The reexams were modeled on reissues in which a patent holder could modify claim language, including correction of errors. An ex parte reexam could be initiated by the patent holder and an inter partes reexam could be initiated by a third party. Both of these reexam regimes enabled claim amendment to repair errors in light of newly discovered prior art references in order to allow a patent to be non-obvious.  However, the PTO reexam process was indeterminable and cumbersome, with inter partes reexams sometimes dragging on for years. The problem of terminal examination indefiniteness required a substantive solution.

In 2011, the AIA restructured the reexam process by creating a Patent Trial and Appeal Board (PTAB) and replacing inter partes reexams with inter partes reviews (IPRs). In addition, the AIA established post-grant reviews (PGRs) for patents issued within one year and covered business method (CBM) reviews for financial services patents. The IPR process was based fundamentally on the mistake that patents are bad, weak and poor quality. The suggestion was that patent examiners were poorly prepared to process patent applications with limited PTO resources and that the examiners could not properly search for prior art or sufficiently examine patent applications. The patent critics – many supported by deep pocketed big tech incumbents – thought the PTO examination system was insufficient to produce a “golden” patent or one which was thoroughly vetted for prior art and examined. In order to endeavor towards the quest of the golden patent, IPRs were instituted as an oppositional process to provide tools for patent infringers to attack patents at any time in their twenty year life cycle. All IPR decisions are appealable only to the Federal Circuit.

When a patent was asserted in the federal courts, the alleged infringer could challenge the patent’s validity in an IPR at the PTO. The theory was that the PTO contained expertise to review patents, which expertise the federal district courts lacked, and that questions of validity were therefore best reviewed in the PTO. Hence, a second window of patent review was established in the PTO based on the theory that patent quality at the PTO was poor.

Beyond the main presumption that patents were bad or weak, IPRs brought the issue of patent validity out of the courts and back to the PTO. Since the big tech incumbents essentially wrote the AIA, there was an incentive to remove jurisdiction on patent validity determinations from the courts, which protected patent holders with due process rights.

In 2010, the Supreme Court opinion in i4i reiterated a century and a half of jurisprudence on patent validity and the presumption of validity (35 U.S.C. § 282) in a patent, according to which the clear and convincing standard was applied to challenging patent validity. The district courts treated patents as a property right and supplied due process to the challenge of issued patents.

The AIA changed this formula for challenging patent validity by returning the re-test for patent validity to the PTO, which viewed patent review as a hybrid form of continued examination. The PTAB review board developed a set of rules to interpret the AIA IPR process which generally denied patent holders due process of law. Rather than a patent being presumed to be valid, the patents were treated like patent applications, without a clear and convincing standard for challenge. In addition, once back at the PTO, there were limitations of claim interpretation, with the broadest reasonable interpretation (BRI) standard applied rather than the Phillips standard applied in district courts. Whereas the AIA statute specified the ability for patent holders to amend patent claims in an IPR, these were in reality instituted only in about one tenth of one percent cases. In addition, the AIA statute constrained estoppel provisions to limit continuous attacks on a patent, which have not been instituted by the PTAB. The combination of these features suggest that due process rights are not available to patent holders in the PTO compared to the district courts.

In addition to the procedural issues, IPRs introduced an asymmetric component which particularly burdens the patent holder by requiring a very expensive ten-fold higher cost to defend the patent in the PTAB relative to the alleged infringer(s) cost of initiating an IPR.

In sum, then, by writing the AIA for self-benefit, the big tech industry did an end run around i4i, breached the presumption of patent validity and pushed patent validity determinations back to the PTO with the objective to deny patent holders critical due process rights. The main impetus to persuade Congress to initiate this after grant review process lied in the false narrative of the big tech cartel that patents issued by the PTO are of a poor quality.

Because IPRs are applied to thousands of patents, with many claims from the majority of inspected patents ruled invalid, the after grant review process at the PTO has effectively destabilized the U.S. patent system. Ultimately, the IPR process has dramatically raised costs for patent holders, with adverse effects on the incentives to invent.

Interestingly, about a third of the companies instituting IPRs are the large technology companies that have a history of infringing patents, revealing that the IPR process was contrived to protect their monopoly profits and the subjugate their competitors to intensive attack legitimized by the imprimatur of the U.S. government. This situation is far more common in the Third World in which dominant corporations control economies that produce no progress. IPRs are a new game with rules written by big tech infringers and administered by pro-infringer and anti-patent ideologues.

Since the main motivation of the IPR process was to review bad quality patents, the main assumption of the AIA was that only a few patents were issued by the PTO without a proper examination and that the IPRs were organized to catch these. However, the IPR process was applied to all patents that were enforced in the courts, under the mistaken assumption that all patents issued by the PTO are of poor quality. The PTAB was driven by an inflexible anti-patent ideology promoted in PTO patent review policies. In general, the PTAB has been hostile to patent holder rights, further distorting PTO after grant review credibility. This one-sided view against patent holders delegitimizes the IPR process. For instance, there is a broad range of rules on institution decisions, claim interpretation, estoppel and lack of amendability that clearly benefits alleged infringers. Thus, rather than being viewed as a neutral arbiter that may fairly resolve disputes, the PTAB has politicized the issue of patent quality to benefit infringers, encourage efficient infringement and harm patent holders. The effects of IPRs are further delegitimized by the different outcomes realized from patent validity reviews from different standards applied in the PTO examination system, the PTAB and the federal courts. The dual and inconsistent patent validity tests in the courts and the PTAB is untenable. Ultimately, the adversarial approach entertained in the PTAB is blatantly unfair to patent holders without the due process protections of the district courts.

The legitimacy of the IPR process rests on the notion that a gold plated patent is good since it lies on the presumption that patent quality in the PTO is bad. Only a gold-plated patent will survive an IPR, according to this view. This view of a gold plated patent derived directly from the big tech anti-patent narrative that relies on the mistaken belief that patent quality is bad.

Perhaps not surprisingly, the main problem with IPRs lies in the problem of obviousness. Almost all patents attacked in IPRs rely on obviousness to remove patent claims. The loose interpretation of obviousness is at the root of the problems in the PTAB. The combination of prior art references that are not limited to the field of invention of a patent is clearly the source of the IPR problem. This explains why multiple companies work together to identify a broad range of prior art and relentlessly attack patent claims by combining multiple prior art references to invalidate claims.

Particularly without due process protections, the broad attack of patents with a very loose interpretation of prior art references for obviousness becomes the main challenge for patent holders in IPRs.

UP NEXT… Solutions for the IPR crisis, which are intended to balance the rights between the patent owner and petitioner.

The Author

Neal Solomon

Neal Solomon is CEO of Advanced System Technologies Inc. A prolific inventor of technologies involving semiconductors, communications, data management, imaging, robotics and healthcare, he holds degrees from Reed College and the University of Chicago.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 21 Comments comments. Join the discussion.

  1. Edward Heller August 8, 2017 11:59 am

    Neil, for your information, ex parte reexaminations could be and still are initiated by third-party petition. They too operated under broadest reasonable interpretation. One could amend freely, but amendments caused loss of past damages which is a fundamental purpose of forcing the patent owner back into the patent office under a regime of broadest reasonable interpretation in order that clarifying amendments must be introduced. Accused infringers greatly benefit even if completely valid, but narrower claims, issue from the reexamination.

    The one thing that can be said in favor of re-examinations versus IPRs is that the examiner’s are fair. In contrast, there is no semblance of fairness or due process from the PTAB. These folks are bullies and everybody knows that they are. They come from big firms or big corporations, and may return to work for them again. They protect the interests of their clients.

    So one talks about due process, such as procedures. The most essential aspect of due process is a completely unbiased judge/trier of fact. We go out of our way in court to assure that we have an unbiased judge and completely neutral jurors. The opposite is entirely true about the PTAB. Nothing is done to assure lack of bias either the hiring practices, limitations on returning to practice, sitting in judgment with respect to the petitions of former clients. What can we expect of such a system?

    We can fix the procedures all day long and never fix the problem.

  2. Night Writer August 8, 2017 7:29 pm

    @1 Ed. I think for once I agree.

    >We can fix the procedures all day long and never fix the problem.

    Well said.

  3. PTOIndentured August 8, 2017 7:47 pm

    Note, in the Goliath (Big Corp.) vs. David scenario above, where ‘Goliath Inc.’ pays the 1/10th amount for an IPR attack vs. what David (the inventor) will have to pay, that one or more additional orders of magnitude in disparity, will often also be the case and suffice to tilt the outcome: the cash reserves/resources available to Goliath Inc., versus those of David’s.

    US Patent Law, when Goliaths are Courted by the USPTO:

    The making of AIA ‘law’ is not unlike largest ‘property’ owners being invited to write America’s ‘property-ownership’ laws, under a premise that almost all small properties are ‘bad’ e.g., given a spiffy title like ‘America Owns Act’. Then ensure there’s an enforcement of the new ‘Act’, such that most small property owners meet only their demise under a gauntlet of new legal tools designed to make them fail. The law should also ensure unlimited use of the small properties ‘rent free’ (before, during and after any IPR-like provision).

    Oh, and the new Act will roll-out so much better, if there’s also an on-going campaign designed to make Americans think of all the ‘bad small property owners’ (with no proven ‘Golden Deeds’) as ‘trolls’.

  4. Bluejay August 8, 2017 7:57 pm

    The PTAB is unconstitutional and SCOTUS will hold that in Oil States.

  5. Edward Heller August 8, 2017 8:49 pm

    PTO, good analogy there. Imagine a real property system where the big boys could take your land for peanuts simply by filing IPRs to review your title all the way back to the original patent granted by some king or the like long ago. Can afford to defend the IPR? If not, your title is void. And, since I own the quitclaim deed from the king, I give you a 30 day notice to get off “my” property.

  6. KenF August 9, 2017 8:57 am

    Does the ability to amend in re-exam insulate re-exam from constitutional attack?

  7. Anon August 9, 2017 9:24 am

    KenF,

    It depends.

    Which particular constitutional attack did you have in mind?

  8. KenF August 9, 2017 9:35 am

    Question: how can I see latest comments? I posted a question and someone saw it and replied already, as evidenced by email notification I received, and I want to respond. However, the links in the email notification take me to comments that don’t show either my original post or the reply to it. Thanks.

  9. KenF August 9, 2017 9:36 am

    P.S. Cache is cleared on exiting browser, and I have always had this situation of not seeing the latest and greatest set of comments when following link in email back to the board.

  10. KenF August 9, 2017 9:37 am

    hmmmmmmm, now it shows….. patience, Ken!

  11. KenF August 9, 2017 9:43 am

    @Anon, 7. My understanding of the challenge raised in Oil States is that IPR is unconstitutional as a matter of separation of powers (Article II agency (PTO) versus Article III court taking away a property right) and, with that, failure of Due Process. Also, I think I have seen over the last several months discussion of the seemingly nugatory ability to amend in IPR — a problem that may not exist in e.p. re-exam — contributing to due process/constitutional concerns.

  12. Edward Heller August 9, 2017 11:03 am

    Ken, Oil States is based upon MCM, and I was the attorney on that case from the IPR to the Supreme Court.

    The two constitutional provisions involved are Article III and the Seventh Amendment. The property aspect is involved because of McCormick Harvesting – a case that ruled that re-examinations are unconstitutional for two reasons: Article III and due process. The court reasoned that patents are property and are due as much respect as patents for land where the court had previously ruled that only a court could revoke a patent for land for any reason.

    Since McCormick Harvesting directly involved re-examining the claims in an issued patent by an examiner in a reissue application where there is a full right to amend, I think the Supreme Court has already answer the question you raised.

  13. Paul F. Morgan August 9, 2017 11:50 am

    Yes, 103 is a big issue with IPRs, and claim amendments are now being made easier, but where is your factual support for your factual assertion of a “ten-fold higher cost to defend the patent in the PTAB relative to the alleged infringer(s) cost of initiating an IPR” ? I have never heard that from any expert IPR attorney, or seen it published in any study? Preparing an effective IPR petition requires a really thorough prior art search, claim charts, expert declarations, and arguments, and is not cheap. [Except as compared to the petitioner’s litigation defense costs, which are several times larger than the patent owners litigation costs, and are directly relevant since most IPRs are only filed in response to being sued or customer suits].

  14. Edward Heller August 9, 2017 12:03 pm

    Paul, I was surprised by that assertion as well. I think it might be true with respect to reexaminations that are conducted by the government after institution. But I do not understand how the cost to the petitioner can be less after institution of an IPR. I look forward to the answer.

  15. Paul F. Morgan August 9, 2017 2:03 pm

    Here is an actual statistical survey fact. In the AIPLA Economic Survey [just out] 67% of the respondents to the question of IPR et al post grant proceedings costs said that they are about the same for both parties. Not the alleged here ten to one.
    P.S. Average total patent litigation costs for both parties would also often be similar for patent suits that actually go all the way through jury trial and appeal. But less than 5% now do.

  16. Anon August 9, 2017 7:32 pm

    Mr. Morgan,

    It is beyond dubious to label a selective (and questionable) survey answer as “fact.”

    I for one, and no one that I know of, partook in that survey.

  17. Anon August 9, 2017 7:34 pm

    Oops, that should read: did NOT partake in that survey.

  18. Paul F. Morgan August 10, 2017 8:47 am

    Anon, as usual, you are twisting what someone said just to be able to say something critical. The statistical survey is the fact, not an “answer.” Nor is one individual’s failure to participate in a survey statistically relevant. If you have any rebuttal evidence we would all be happy to see it, since the cost of IPRs is a significant issue.

  19. Anon August 10, 2017 11:35 am

    Statistical surveys are NOT facts as that term is being attempted to be used.

    This has nothing to do with your perception (or attempted labeling) as somehow me twisting something. This has to do with your actual attempted presentation of “fact” as some conclusive evidence supporting a view that you espouse.

  20. Alex in Chicago August 11, 2017 2:59 am

    >he suggestion was that patent examiners were poorly prepared to process patent applications with limited PTO resources and that the examiners could not properly search for prior art or sufficiently examine patent applications.

    Well, this is true. Regardless of what you think of IPRs in particular, there needed/needs to be a way for infringed accusers to invalidate patents more quickly and cheaply than District court proceedings given the quota system at the USPTO. That is the long and short of patent quality.

  21. Edward Heller August 11, 2017 3:53 pm

    Alex, if legitimately believe a patent is invalid, you can say so the to patent owner, providing evidence, and more on. If they sue you for infringement and you prevail on validity based on the art and rationale given to the patent owner, I will offer that you should be entitled to attorneys fees.

    However, reexaminations, IPRs and the like are a callus fraud. They both removed the presumption of validity, dramatically lowering the standard of proof. They both use of broadest response interpretation designed to invalidate. Amendments designed to overcome the prior art because of the broad construction eliminate past damages.

    There might be ways to reduce litigation costs. Ever hear a motion for summary judgment? But IPRs and the like are a scam.

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