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. For that reason I also provide my thoughts and comments in the format of comments from the peanut gallery, or perhaps as a patent attorney equivalent to Mystery Science Theater 3000. In order to differentiate my thoughts/comments from the FTC statement, my comments are italicized, colored, indented and tagged with the IPWatchdog logo.
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.”
President Obama signs the AIA. September 16, 2011.
The America Invents Act (AIA) was signed into law by President Obama on September 16, 2011. The AIA ushered in numerous changes to patent law, but there will be even more changes to patent practice and procedure. The way many things are done at the USPTO on behalf of clients will change, with the next wave of changes becoming effective on September 16, 2012, on the one year anniversary. Over the next several weeks we will be taking some detailed looks at these changes, as well as flashing back to remember the passing of patent reform.
We begin our journey today with the Supplemental Examination Final Rules, which were published in the Federal Register on August 14, 2012. Section 12 of the AIA amended chapter 25 of title 35, United States Code, to add new 35 U.S.C. 257, which permits a patent owner to request supplemental examination of a patent by the United States Patent and Trademark Office. The purpose of supplemental examination is to provide an avenue for the patent owner to ask the USPTO to consider, reconsider, or correct information believed to be relevant to the patent. Although supplemental examination goes into effect on September 16, 2012, it can be used for any patent issued on, before or after September 16, 2012.
On September 6, 2012, the United States Patent and Trademark Office published proposed rules in the Federal Register setting or adjusting fees for patent related services. In proposing patent fees the USPTO is for the first time seeking to exercise the fee setting authority established under Section 10 of the America Invents Act (AIA). According to the Federal Register Notice, the proposed fees are appropriate to cover patent operations at the Office, as well as create a “sustainable funding model” that will work toward further reduction in the patent application backlog. The fees are also set with an eye toward a necessary “upgrade [of] the Office’s patent business information technology (IT) capability and infrastructure.”
Now begins a two month public comment period. In order to ensure consideration, those wishing to submit written comments must do so no later than November 5, 2012. Comments should be sent by electronic mail message over the Internet addressed to: firstname.lastname@example.org. Further, these proposed fees will be fair game for discussion at the AIA Roadshows scheduled throughout the United States during the month of September.
The recurring theme will be decreased fees for those who qualify for micro-entity status, but increased fees for everyone else. Decreased fees for micro-entity status are appreciated, but they will not even apply to all independent inventors, but only a subset of independent inventors who are at the lowest end of the income scale and who have had very few patents or patent applications. Thus, even the professional garage inventor will be a small entity and will pay more — in some cases substantially more — than they pay now. Not to mention the small businesses that are the engine of the U.S. economy. These fees will be a real and substantial impediment to the patent process for those individuals and businesses that we need to be encouraging and incentivizing the most.
Well the proverbial cat is now “out of the bag.” The United States Patent & Trademark Office (USPTO) has issued its long awaited (and in many quarters, apprehensively feared) proposed patent fee changes pursuant to its new authority under Section 10 of the America Invents Act. I usually refer to the AIA as the “Abominable Inane Act” and this new fee setting authority is one reason for that characterization. These proposed patent fee changes are summarized in an 8 page Table to a 34 page Executive Summary which was submitted to the Patent Public Advisory Committee on February 7, 2012. For those true “masochists,” there’s an even longer 85 page detailed Appendix on these proposed patent fee changes to digest.
Page 11 of the Executive Summary provides what it characterizes as summary of the “significant changes” to the current patent fee structure. After getting over my initial “shock” at how high some of these proposed fees are (for the new supplement examination and new post-grant review procedures, as well as the existing ex parte reexamination procedure, these proposed patent fees can be characterized as “astronomical”), as well as how much these proposed fee changes increase current fees, I then asked this question: what do these proposed patent fee changes really mean?
The CAFC’s split panel decision this past week – In re Construction Equipment Company – extends the PTO’s authority to reexamine a patent even where its validity has already been adjudicated and confirmed by the courts. Yet the CAFC once again fails to explain how a PTO reexamination finding that a patent is invalid effects an earlier judicial determination that the same patent is valid and infringed.
In re Swanson
The authority of the PTO to reexamine a patent that has previously been found to be valid by the courts was established by the CAFC’s 2008 decision, In re Swanson. There, the patent owner sued for infringement. A jury found that the patent was not infringed, but additionally found that the patent was not invalid over the so-called Duetsch reference. The trial judge denied the various post-trial motions, confirming the jury’s verdict. And the CAFC affirmed the trial judge’s judgment regarding validity, explicitly finding that “Deutsch” did not anticipate the patent claims.
It is virtually impossible to in any intellectually honest way truthfully determine what the legislative intent of Congress was for any particular piece of legislation. Justice Antonin Scalia has railed against the use of legislative history for decades, saying “legislative history is irrelevant when the statutory text is clear,” and referring to the “legal fiction” that legislative history, including Committee Reports, actually reflect the intent of the Congress. This is, of course, because it is exceptionally easy to get something into the legislative history, so anything that appears in the legislative history may only be the view of one particular Member of Congress, or worse the view of a lobbyist paying for access. There is also the problem associated with Members of Congress saying things they simply don’t understand, and the reality that the legislative history cannot be cross examined. Even Committee Reports are at best the view of a majority of a group that makes up a small fraction of the overall Congress. It seems a fools errand to rely on legislative history in all but the rarest case, and Scalia’s view seems to be the prevailing view of this Supreme Court.
Notwithstanding the inherent unreliability of legislative history and the truly scary prospect of trying to get inside the head of Members of Congress, it seems fairly clear to me that the America Invents Act, which was signed into law by President Obama on September 16, 2011, contains at least a handful of things that can only be characterized as unintended consequences. Among them are: (1) U.S. patents issued from foreign filings will be prior art as of the foreign filing date; (2) commonly owned patent applications cannot be used against each other for novelty purposes; and (3) the creation of an post grant challenge limbo because of the delay in initiating post-grant review procedures.