Earlier this summer the United States Patent and Trademark Office published a Request for Comments on Trial Proceedings Under the America Invents Act Before the Patent Trial and Appeal Board. This request for comments pertains to the new administrative trial proceedings ushered in by the America Invents Act (AIA), which President Obama signed into law on September 11, 2011. The administrative trial proceedings at the USPTO did not go into effect immediately, but rather went into effect on September 16, 2012, the first anniversary of the signing of the AIA.
The administrative trial proceedings created by the AIA are: (1) Inter partes review; (2) post-grant review; (3) covered business method patents review; and (4) derivation proceedings. To bring these new proceedings into being, the USPTO issued a number of final rules and a trial practice guide in August and September of 2012. It is now time for the USPTO to take a step back and take account of these new proceedings, aided by public input. This is not an unexpected occurrence. Many will recall that during the rule making phase the USPTO held roundtable discussions in a number of cities across the country. During this timeframe the USPTO committed to revisiting the rules and practice guide once the Board and public had operated under the rules and practice guide for some unspecified period of time and had gained experience with the new administrative trial proceedings. With nearly two years of practical experience with these new proceedings, the time has now come for the USPTO to revisit and quite possibly revise the rules.
The American Invents Act (AIA) created three new ways to challenge the validity of claims in already issued patents. While the AIA was signed into law on September 16, 2011, the new post grant proceedings did not become effective until one year after the signing, on September 16, 2012. These three new post grant proceedings are post-grant review, inter partes review and covered business method review, which is a variety of post-grant review that is limited to business methods relating to the financial industry. Because post-grant review was specifically limited in applicability to patents that were examined under the new first to file law, only patents that have an effective filing date on or after March 16, 2013, are capable of being reviewed in a post-grant review proceeding. Therefore, so far the USPTO has only seen inter partes review and covered business method cases.
On August, 14, 2012, the United States Patent and Trademark Office promulgated final rules applicable to these new proceedings, and at that time the USPTO said that they anticipated that 420 petitions for inter partes review would be filed in fiscal year 2013. The USPTO also said they anticipated that in fiscal year 2014 there would be 450 petitions for inter partes review filed. See 77 FR 157 (August 14, 2012) 48713. The Patent Office severely under estimated the popularity of post grant proceedings, particularly inter partes review. Indeed, the PTAB is on pace to reach more than 1,100 administrative trials in FY 2014.
Inter partes review has been extraordinarily popular due to the fact that the rules are stacked in favor of the challenger. Indeed, recently Scott McKeown who is a partner at Oblon Spivak and co-chair of the Oblon post grant practice group wrote on his blog that the Patent Trial and Appeals Board (PTAB) “offers unprecedented speed with none of the patentee safeguards of the district court.” The biggest safeguard that a patentee enjoys at the district court is a presumption of validity. In other words, during a patent litigation in the district court the patent is presumed valid and will remain valid unless and until the challenger can demonstrate by clear and convincing evidence that the claim (or claims) are invalid. At the Patent Office, however, the patent does not enjoy any presumption of validity and the challenger need only meet a preponderance of the evidence standard, which is substantially less onerous than the clear and convincing standard in a patent litigation in the district court.
The patent litigation landscape forever changed on September 16, 2012. On that date the Patent Trial & Appeal Board (PTAB) was born. The precursor to the PTAB was the Board of Patent Appeals and Interferences (BPAI), which would hear appeals from applicants who had their patent applications rejected and also conducted interference proceedings. With the signing of the America Invents Act (AIA) the PTAB was born and the jurisdiction of the appellate body within the United States Patent & Trademark Office (USPTO) was greatly expanded.
This Board, the adjudicative body of the USPTO, consists of technically and scientifically trained administrative patent judges (APJs). The PTAB was created, in part, to adjudicate the new patent challenge mechanisms of the America Invents Act, which include Post Grant Review (PGR), Inter Partes Review (IPR) and Covered Business Methods (CBM). Since 2012 roughly 1,000 challenges have been filed as petitions for either Inter Partes Review or the transitional Covered Business Method challenge proceeding. Post Grant Review is only available for patents that were granted as the result of first to file, which did not go into effect until March 16, 2013, so there will be some time before we see Post Grant Review given the tremendous backlog at the Patent Office.
What follows is a portion of the written statement of Q. Todd Dickinson, Executive Director of the American Intellectual Property Law Association, republished here with permission. Mr. Dickinson testified today at the Senate Judiciary Committee hearing on “Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse.” To read Mr. Dickinson’s full prepared statement please see Testimony of Q. Todd Dickinson.
Q. Todd Dickinson, Executive Director of the American Intellectual Property Law Association.
A recurring theme that can be traced through the patent reforms of the AIA to the current debate over patent litigation abuse is the issue of patent quality. A key component of the reported abuses is the assertion of allegedly invalid or overbroad patents, the very abuse for which AIA post-grant procedures were created, in order to improve patent quality. These matters of patent quality are being addressed by the changes made to the law by the Judiciary and by Congress in the AIA, which are only now beginning to be felt.4 It may well be premature to conclude that they are not doing the job.
Take one major example, as a former Director of the USPTO in particular, I would support, as former Director Kappos did, giving the post-grant processes in the USPTO a chance to work.
They have only been in place for less than two years, and in the case of PGR, less than one.5 Early data suggests that they are performing in many ways as Congress intended, at least at the macro level, to provide an efficient, less expensive means to address potentially low quality patents. We believe that the prudent course is to give these reforms the chance to demonstrate their efficacy to deal with the concerns for which they were created before we consider making significant additional changes which may have their own unintended consequences. In support of this proposition to wait and see how they are working, we would simply point out that the AIA itself requires that USPTO study the reforms implemented by the AIA and report back to Congress by September 16, 2015. Those reports would serve as an important and more empirically-driven body of data which would allow for greater clarity and direction in making any necessary changes.
If you’ve decided that a PGC is right for you, there are a few other related strategic considerations that you may want to evaluate before proceeding: preliminary response, joinder, stay, and amendment.
You may want to consider keeping your cards in your pocket by not filing a preliminary response. If you file a preliminary response, it may provide the petitioner a road map to cure their deficiencies via a second petition or reveal the defects of your position to them. So if the petition is sloppy in some respects it may be in your best interests to not file. On the other hand, not filing a preliminary response may work against you. For every petition the PTAB goes through the preliminary claim construction based upon the evidence given. So if you put in your preliminary response, that will give the APJs additional information to consider when doing claim construction. “I might [initially] be guided by the petitioner’s insights if there’s no patent owner response. If you don’t file a response some times you read between the lines, and assume petitioner[‘s argument] is better,” says Judge Michael P. Tierney, Lead Administrative Patent Judge of the PTAB at the PTO. Then again, APJs thoroughness will likely and generally trump any bias. Just to give you perspective on what other people are doing, eighty-one percent filed a preliminary response with IPR and CBM in 2013, and as of November 21st of this year 77 percent filed a preliminary response, according to a recent AIA Progress Statistics report.
About a year after the introduction of the post grant challenge (PGC) options, you probably have some idea about PGCs and how to deal with the unique rules of this forum. (If you need a refresher on that, read here.) What a lot of us are left wondering is how exactly to decide whether to use one of these options. I’ll elaborate on one approach that may provide some guidance: 1) Weigh the pros and cons; 2) Think about the timing of filing; and 3) Evaluate the nature of your argument.
Assuming there’s enough at stake for your client to go this route, you’ll first want to weigh the pros and cons of filing a petition.
Advantages of PGCs
“From an in-house perspective there’s no question that the various new post grant challenge options under the America invents Act are really a major shift in strategy; it’s a major step in the right direction,” says Samir Pandya, Senior IP Counsel of the Global Litigation Group at SAP, at the 2013 AIPLA Annual meeting.
A goal of nearly every defendant is to lower the total cost of resolution of any legal issue. As counsel for the defendant, you have to weigh the settlement and licensing costs of a patent dispute against the total defense cost and how long it takes to resolve the dispute with certainty. Today, CBM, IPR, and PGR are the lowest possible cost options.
On Thursday, December 5, 2013, the United States House of Representatives passed the Innovation Act by a vote of 325-91.
Surprisingly, the Innovation Act (HR 3309) had only been introduced on October 23, 2013, and was marked-up on November 20, 2013. So what was the rush? This break-neck pace, which took place in a Congress that has been noted for its extraordinary inaction, is curious to say the least. Indeed, one Member of Congress went much further than raising a curious eyebrow. “This schedule suggests the fix was in,” said Congressman Dana Rohrabacher (R-CA) on December 3, 2013, “The clear message to little inventors: give thanks for your intellectual property rights, because you may not have them by this time next year.”
There is no doubt that Congressman Rohrabacher is correct, even if his criticism seems at first glance to be a bit over the top. There can be no serious disagreement over the undeniable truth that over the last 7 or 8 years there has been a steady erosion of patent rights both in the Courts and thanks to laws passed by Congress. There can also be little serious disagreement that the speedy process afforded the Innovation Act prevented those who favor strong patent rights from mounting a credible opposition to the bill. Unfortunately, the forces that seek to weaken patent rights are well funded and fight the battle each and every day. Even before the America Invents Act (AIA) was passed in 2011 there were efforts underway to plant the seeds of what will be the next “industry ask” of Congress, which is stripping the ITC of its patent jurisdiction or at the least preventing the ITC from issuing exclusion orders. See Follow the Moneyand Weakening the ITC Will Harm the US Economyand Are Some Patent Holders More Equal Than Others?
The Truth is that while innovators spend their time inventing and doing business, not focusing on what has been taken for granted in the United States since the days of Thomas Edison, which is a strong patent system. Indeed, in this round of patent reform Universities, small businesses, technology based start-ups and independent inventors were given no meaningful opportunity to express their views. At the one hearing on the bill David Kappos, former Director of the USPTO and now a partner at Cravath, Swaine & Moore, cautioned Congress about going to fast and pointed out that no independent inventors were even invited to testify. But there is no rest for those who seek patent reforms that make patents less valuable, they are hard at work on whatever the current attempt is to chip away at patent rights, but also working to lay the foundation for further erosion of patent rights.
EDITOR’S NOTE: What follows is a summary of the Goodlatte patent bill created by American Continental Group, which is a government affairs and strategic consulting firm in Washington, DC. Manus Cooney, a former Chief Counsel of the Senate Judiciary Committee is one of the partners at ACG, and is also frequent guest contributor on IPWatchdog.com. Cooney and his partners and associates worked to prepare this summary, which was described as a team effort. It is republished here with permission.
Manus Cooney, ACG
Sec. 3. Patent Infringement Actions
Pleading Requirements (p.2)
Amends Title 35 to establish heightened pleading requirements for patent infringement actions. A party alleging infringement must include in the pleading, unless the information is not reasonably accessible, the following:
Each patent allegedly infringed and each claim of each patent that is allegedly infringed
For each claim, which product, feature, method or process are allegedly infringed, including the name or model number; where each element of the claim is fount within the accused product/method; and how the terms of the asserted claim correspond to the functionality of the accused product/method.
Whether each element is infringed literally or under the doctrine of equivalents
A description of the direct infringement, the acts of the alleged indirect infringement that contribute to or are inducing direct infringement
A description of the right of the party alleging infringement to assert each patent identified and patent claim identified
A description of the principal business of the party alleging infringement
A list of each complaint filed, of which the party alleging infringement has knowledge, that asserts or asserted any of the patents identified
Whether each patent is subject to any licensing term or pricing commitments through any agency or standard-setting body
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.
Editor’s Note: This post is part 1 of 2 of an article written by Steven J. Moore and with the assistance of Marvin Wachs and Timothy Moore, also of the Kelley Drye & Warren Patent Department. Part 2 will be published on Friday, August 16, 2013. Please also see Moore’s recent 5 part series on Patent Trolls titled: A Fractured Fairy Tale: Separating Fact & Fiction on Patent Trolls.
David and Goliath by French painter James Tissot, 1904.
In this paper, we look at whether the AIA, via its ex parte reexamination and inter partes review provisions, and its transitional program for covered business method patents, has actually benefited small entity companies, as many in the press and in Congress had urged upon its passage.
This study began before passage of the AIA, and was originally designed to center on the reexamination world to determine whether the patents of small entities were actually fairing worse than those of large entities under this procedure. However, the study morphed into a larger project, as the America Invents Act changed inter partes reexamination to inter partes review, and added a new challenge procedure, the so-called transitional program for covered business method patents. The project also expanded as the USPTO raised fees exorbitantly high post-AIA, pursuant to its newly obtained fee setting authority to “recoup costs,” for all ex parte and inter partes procedures, including the transitional program for covered business method patents. In regard to reexamination/review we feared that the whole mix of filers was going to be different pre- and post-AIA. Of particular concern to us was the extremely large increase in fees associated with inter partes review which we thought might affect the ability of small entities to file inter partes challenges, the nearly three-fold increase in fees by the USPTO in regard to ex parte reexamination, and the extraordinarily high fees associated with the transitional program for covered business method patents. Thus, a study originally designed to look only at pre-AIA reexaminations, was altered into a study of the effect of the AIA on all ex parte and inter partes procedures at the USPTO. Completion of our study was held up, as we waited for more data to come out in respect of post-AIA ex parte reexamination and inter partes review, as well as the transitional program for covered business method patents.
Our study on inter partes proceedings was based on 201 random inter partes reexamination requests filed before the enactment of the inter partes review procedures of the AIA, as well as 230 inter partes review requests made after the passage of the America Invents Act. We compared these samples to determine how small entities, and small corporate America as a subset, has been affected by the new inter partes proceedings against third party patents.