Legend #2: All companies have equal access in obtaining inter partes review of the patents of others.
Truth: Of the initial denials of inter partes petitions that we identified, 88% of them were directed at petitions filed by small entities.
David and Goliath by French painter James Tissot, 1904.
When the America Invents Act was first passed, it was contemplated by many that its post-grant challenge procedures would be “particularly useful for individuals, start-up companies, and small-to-medium enterprises.” See, Rantanen, Lee Peterbridge and Jay P. Kasen, America Invents, More or Less? (University of Iowa Legal Studies Research Paper, Number 12-09, p. 235, March 2012).
Our inter partes challenge data from pre- and post-passage of the AIA clearly show that of the relatively few initial denials made by the USPTO of an inter partes challenge request, most fell on entities that typically file as small entities. We found 88% of denied petitions for inter partes review were filed by small entities, while only 12% of those denials related to petitions filed by large entities (Fig. 6). That is, small entities are 7 times more likely to have their petitions for inter partes review denied than large entities. Of the large entity petitions for inter partes review that were denied, only one of them was by a company in the Global 2000+. It is unclear why this is occurring. It could be argued that small entities simply are not seeking the same high quality legal work that the large entities are employing. An alternative answer may simply relate to an ingrained bias in the USPTO for the reexamination requests of the largest companies (as inter partes review requests are not blinded), which is unwittingly leading to more small entity requests being denied.
I’m in New York City today at PLI headquarters on Seventh Avenue for the USPTO Post-Grant Patent Trials 2013 program. I will moderate a panel this afternoon, but as the day starts the first speaker is David Kappos, former Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office. Since leaving the USPTO at the end of January 2013, Kappos has landed at the New York offices of Cravath, Swaine & Moore, an extremely well regarded Am Law 100 firm and great place to land. It was good to see him, he says he is doing well, and he seems to have as much energy and enthusiasm as ever.
Kappos started by explaining that this is his first public speaking engagement since leaving the USPTO. From the outset he also explained that the slides he would be using for the presentation were prepared by the USPTO. This presentation was originally scheduled to be given by James Smith, Chief Judge of the PTAB, who had to beg off as the result of sequestration cuts.
This article is by no means a substitute for the presentation by Kappos. In 60 minutes he managed to bring everyone up to date on what is going on at the USPTO relative to Appeals and other post patent proceedings. Of course, there were a handful of things that particularly caught my attention, which are mentioned below, along with “my two cents.” To distinguish the Kappos presentation from my own thoughts I have put my own thoughts in italics.
David Kappos will speak about Post-Grant Trials at PLI in NY on March 27, 2013.
Next week on Wednesday, March 27, 2013, I will be once again in New York City at Practising Law Institute headquarters on Seventh Avenue, roughly between Central Park and Times Square. The program for the day is titled USPTO Post-Grant Patent Trials 2013, which will provide 6 CLE credits for attendees.
I am a moderator for the segment titled Practice Before the PTAB Roundtable, which will discuss the first trial petitions filed, motions practice, scheduling, the possible need for rule refinements and practice tips for practitioners. Robert Sterne of Sterne Kessler and Professor Lisa Dolak of Syracuse University College of Law will be the panelists.
A new addition to the program just announced today is David Kappos, who is the immediate former Director of the United States Patent and Trademark Office. Kappos, a life-long employee of IBM prior to taking charge of the USPTO, is now with Cravath, Swaine & Moore LLP in New York City. Kappos will discuss the Patent Trial and Appeal Board, specifically discussing ex parte reexamination, the remaining legacy inter partes reexamination cases, inter partes review and the transitional program relating to covered business method patents. His segment will run from 9:15 am to 10:15 am. In addition to being presented live in New York City the program will also be webcast.
For several years I was the lead attorney at a Taiwan company that manufactures technology and consumer electronic products, from light-emitting diodes to liquid-crystal displays. Every month we received a new demand for patent licensing or indemnification and it was my job to dispose of them at no cost, without licensing, litigation, or outside counsel. Usually it was possible, but occasionally we found ourselves mired in full-blown litigation.
It’s no secret patent litigation costs are immense. According to the American Intellectual Property Law Association, the cost of an average patent lawsuit, where $1 million to $25 million is at risk, is $1.6 million through the end of discovery and $2.8 million through final disposition. Adding insult to injury, more than 60% of all patent suits are filed by non-practicing entities (NPEs) that manufacture no products and rely on litigation as a key part of their business model.
However, whether one represents a plaintiff or defendant, manufacturer or NPE, there are actions one can take to help manage the costs. Below are some general guidelines.
The United States Patent and Trademark Office (USPTO) was granted fee setting and adjusting authority with respect to patent fees in the Leahy-Smith America Invents Act (AIA), which was signed into law on September 16, 2011. The fee setting (or adjusting) process is not a simple process. As you might expect, there are numerous hoops the agency was required to jump through before making the fees final. Those hoops have been jumped through and the final rules on patent fees will publish in the Federal Register on Friday, January 18, 2013.
Most of this final rules package on fees will go into effect 60 days later, with some portions not becoming effective until January 1, 2014. For example, in response to public comment, small and micro entity fee reductions for international application transmittal, filing, processing and search fees will be effective January 1, 2014 to permit adequate time for operational changes associated with international systems and forms.
One major step in the fee setting process was the publication of proposed fee rules in September 2012. In response to public comments received after those proposed rules were published the USPTO modified some of its revenue and performance targets in the final rule, allowing the agency to reduce certain fees.
Between the legacy issue of bad patents, patent auctions and the many who purchase patents, what has started to happen is that the patent system rewards those who have the finances and ability to game the system. But the problem is extraordinarily complex. What is clear, however, is that the enforcement of bad patents is a problem within the patent and innovation industry.
But at the same time it would really be GREAT if the media and anti-patent community would get a clue and understand that the problem with bad patents is largely a legacy issue. Those that say that the United States Patent and Trademark Office continues to hand out dubious patents like candy are flat wrong. The bad patents that we witness being used in unsavory shake-downs have not been granted over the last few years, but rather were granted many years ago, under a different patent regime and when there was little findable prior art for patent examiners to use.
Those that pretend that bad patents issue today by the dozen and for a dime are living in a fantasy world that does not approximate reality. Yet the misinformation continues, undaunted by reality. So if reality doesn’t support the mountains of misinformation about the patent system and how it operates today, what is going on?
The “miscellaneous” final rules primarily implement two things. First, section 6 of the AIA to provides for an estoppel that may attach to the filing of an ex parte reexamination request subsequent to a final written decision in a post grant review or inter partes review proceeding. See 37 CFR 1.510(b)(6). Second, the final rules expand the scope of information that a person may cite in the file of a patent to include written statements of the patent owner filed in a proceeding before a Federal court or the Office in which the patent owner took a position on the scope of any claim of the patent.
With respect to the first, relating to ex parte reexamination, USPTO rules will now require that a third party request for ex parte reexamination contain a certification by the third party requester that the statutory estoppel provisions apply to completed inter partes reviews and post grant reviews do not bar the third party from requesting ex parte reexamination. Cosmetically, the final rules also implement Section 3(i) of the AIA, which replaces interference proceedings with derivation proceedings, and replaces the title ‘‘Board of Patent Appeals and Interferences’’ with ‘‘Patent Trial and Appeal Board.”
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