As some will know, there are primarily two law firms that are handling the majority of administrative trials at the United States Patent and Trademark Office. While many firms practice in this area, Oblon Spivak and Sterne Kessler far and away do more administrative trials than anyone else. Kunin is co-char of the Oblon Spivak post grant practice group, so during our conversation we spent considerable time discussing Patent Office administrative trials. What follows is the part of our conversation relating to post grant proceedings.
Without further ado, here is part 2 of my interview with Steve Kunin.
QUINN: I get the fact why the PTAB is instituting such a high number of the petition. Because the fee is not insignificant, but it’s certainly a whole lot cheaper than fighting in district court.
KUNIN: So you’ve answered the question. That is the people who are willing to pay for inter parties review petitions are willing to pay for a high quality job of patentability review by the PTAB by filing petitions that will easily beat the reasonable likelihood of prevailing standard.
KUNIN: The reasonable likelihood of prevailing standard is applied to the petitioner’s showings before the patent owner can submit a rebuttal argument or evidence.
QUINN: Right, I totally understand. I totally get that. But then I go back to— why isn’t everybody doing this? Because it seems to me that if you really are going to be litigating, if this is really a dispute you almost have to file an IPR. You’re never going to get the standards any better than they’re going to be at the patent office as a defendant.
KUNIN: We’ve already stated for the record that our firm is one of the leaders in petitioning against patents and defending patents in inter parties review as well as cover business methods PTAB proceedings. But what is the one thing that can be a break the bank issue? What if the patent owner asserts eight patents against you in a litigation. Can you pick and choose which are the best patents among the eight to challenge? Or are you going to have to file and pay for eight IPRs? At what particular point does it actually become a financial burden for you to go after every asserted patent against you in that litigation in separate IPRs? Either you can try to strategically determine which are the patents which are most harmful to you and most vulnerable and go after them in IPRs, or try to go after all of them in IPRs. But if you go after all of them, you already explained how expensive it is, all right? So let’s assume for argument sake it’s a fairly complex proceeding and it’s costing $300,000 per IPR. So $300,000 times eight is the total cost. What’s the cost of the litigation in defending against all the asserted patents?
KUNIN: So at some particular point you go beyond the point of elasticity in deciding what is the cost-effective way to defend against the patents.
QUINN: I suppose, but at the end of the day at the patent office there’s not a clear and convincing evidence standard.
KUNIN: That is correct. You have technical APJs using a preponderance of the evidence standard and a broadest reasonable interpretation of the claims. So the odds are stacked in favor of the petitioner against the patent owner under these circumstances. So, yes, if you look at it on a petition by petition basis you’d see it is the on its face best way to go.
KUNIN: However, in the litigation you can attack all the patents in the same proceeding. Depending on who the patent owner is and whether there’s a reasonable opportunity for settlement you may not need the IPR to leverage the settlement. These strategies may depend on whether the patent owner is a patent assertion entity or a manufacturing entity.
QUINN: Yes. It will be interesting to see what winds up happening with patents being issued over the last year or so, and those that will continue to be issued, since the rules for IPR have been known for example and the cost have been known. Because the more claims that you need to raise in IPR the more the fee is. So not every applicant can do this but as you know there are all kinds of ways you could guarantee that you would have patents with all kinds of claims. You might not only have multiple patents, but you could have patents with hundreds of claims.
KUNIN: Right. And because of the page limitations in IPRs that may require filing multiple petitions against the same patent. And we’ve seen it in practice. If you review the IPR records in the PTAB’s PRPS system and look at who the parties are you can see that there is a whole block of IPRs filed by the same petitioner, against different claims of the same patent.
QUINN: Right. And you see Microsoft does that, right?
KUNIN: Yes, right.
QUINN: They’ll file four or five IPRs on the same day.
KUNIN: That’s correct. That’s because you have to go after lots of claims in a single patent, but are limited by the number of pages permitted in IPRs.
QUINN: Now do those get consolidated?
KUNIN: No, those mergers are due to different petitioners challenging the same patent. If you look at the merger rules, merger relates to multiple parties as petitioners against the same patent claims.
KUNIN: But I don’t recall anything in the statute or in the implementing regulations that deals with the authority of the PTAB to merge separate IPR proceedings filed by the same petitioner because it’s the same patent with different challenged claims. Presumably, even if you have the merged proceedings the page limits would apply to each of the separate petitioners. You would get the separate page limits that you had for the individual proceeding if the same petitioner’s matters were merged. Otherwise, there would be many oppositions to merger by the same petitioner that party is disadvantaged by being subjected to such severe page limits when so many claims are an issue. And also where there are many grounds at issue regarding patentability.
QUINN: Well, we certainly live in interesting times.
KUNIN: We do and it looks as though the times are going to continue to be interesting with all of the enthusiasm for more Congressional patent reform.
QUINN: Yes. If you operate inside the beltway, as we do, you know that more patent reform is coming regardless of what happens with current patent reform efforts. People openly talk about it and it is clear what it is that the industry wants. A lot of what they want isn’t even on the table in this round and will take at least one more, maybe two more rounds, to get. And after they continue to be successful they won’t stop. They’ll just keep adding to their wish list. And I don’t think a lot of people outside of the Northern Virginia/D.C. area realize that we are in a steady state of patent reform for the foreseeable future.
KUNIN: Which I think on balance is not a good thing. What is happening right now in Congress I would characterize as anti-patent. The forces to try to strengthen patents in a good way seems to be outweighed for the moment by all these patent reform efforts to essentially weaken the patent system. These changes will make it more difficult to obtain, maintain , and enforce patents. There will be lower opportunities for damage awards, and less opportunity for injunctive relief. What are the implications with respect to protecting innovation? Unless the pendulum starts swinging back to having a pro-patent system in the U.S. we may swing so far in the anti-patent direction that people are going to lose confidence in their ability to obtain and enforce their patents that are at the foundation of their ability to protect their capital investments in their innovation.
QUINN: Yeah. I see that. I hear that. I’m sure you do, too. People really wonder and question. And the quid pro quo seems to be gone because now it can take many, many, many years to get a patent out of the patent office.
KUNIN: Of course you can use prioritized examination if you need to obtain a patent quickly.
QUINN: I know there’s an extra cost, but prioritized examination doesn’t get used very much. My clients like the idea until it comes time to write the check. And I try to explain to them is this is going to save you money in the long run because the prosecutions are compressed and the allowance rate is higher. But that hasn’t been successful yet. Everybody likes it in theory, but the extra cost creates a problem. So if you’re not going that route then it’s going to take you many years and you’re application has long since published unless you file a non-publication request, which most people don’t do, even people who probably should, even people who really don’t have a strategy for foreign rights. And even if they do have a strategy for foreign rights what’s the harm in filing a non-publication request because, after all, you can rescind it. You can change your mind and seek foreign rights, but you can’t change your mind and ask for the application to remain secret and not publish. It doesn’t work that way. I have no illusions that this is going to happen but one thing that might change things would be if those people who really are not planning to go down a foreign path start filing non-publication requests because then the length of the patent process and the length of how long this stuff stays unaccounted for in the patent office becomes a modern day Lemelson problem again. And that is a problem for industry because right now the industry is calling all the shots here and gaining all the benefit. It’s the inventor, or the small startups, small business innovative community that are the ones that are taking it on the chin time and time again. Universities may be the most innovative group in our society and they are taking it on the chin as well. Universities may always publish, but others are giving away the keys to the kingdom in hope of getting a patent many years after initial publication. The quid pro quo has become grossly distorted.
KUNIN: There is always the fundamental question of how can you have patent quality when over 200,000 patents issue every year? How can you have patent quality when there’s 500,000 applications examined every year. If you have 8,000 examiners many of whom are very junior how can you expect that you’re going to have the level of quality examination across the board that you would have had you had a workforce of only experienced examiners less than half that size?
KUNIN: Such statistics result in bashing of the PTO when they don’t really deserve bashing when they’re trying to do their job the best they can. Now with respect to these administrative trials does it really matter how many patents issue and what their quality if the important ones are going to end up in these administrative trials. If these are the commercially important patents they will have to suffer the heat of battle and if they survive then they will be the gold-plated patents that deserve respect.
QUINN: I wouldn’t even have a problem with that. I mean you’re familiar with Mark Lemley’s rational ignorance?
KUNIN: Yes. In fact, some would argue that there should be no statutory presumption of validity for patents that haven’t been reexamined or challenged in an administrative trial.
QUINN: I disagree with that. Because then—it’s all about investment. There’s a community out there that will have their head in the sand and likes to say you can get investment with no patents. Those of us who live in the real world that advise real companies that see the struggles that they have, that talk to their CFOs and their CEOs, they talk to the inventors, talk to Hall of Fame inventors like Dean Kamen, everybody that’s knowledgeable about the industry says that it’s simply not true. Simply not true. Without a patent you cannot get past go. I mean it just doesn’t happen.
KUNIN: I agree in principle.
QUINN: So it is an investment. It is about job creation, it is an economy moving forward issue. So if you pull the presumption of validity what’s the point? The problem that I have isn’t that I don’t like the rational ignorance theory, but if we’re going to go down that path let’s go down that path, but you can’t have one foot on two different paths like I think Lemley does. Because if we’re going to go down the rational ignorance path then that’s fine, but then there’s no justification for it taking 5, 6, 10 or 12 years to get a patent, right? If you’re going up to the Board it’s going to take ten years or more. In a lot of technology areas prosecution isn’t going to be wrapped up until 5 or 6 years. You file several RCEs and trying to work it out, but then you have to wait for years on the appeal track, and then when you finally win and obtain a patent you’re going to survive through the whole post-grant processes. So I can buy rational ignorance, but what I can’t buy into the theory that we must get it right at every step of the way when we are only giving patent examiners 18, 20 hours or maybe a real complicated area, maybe 30 hours to work on the application. The forces examiners to require RCE after RCE, causes delay after delay, and ultimately all of the review in the Office to get the patent becomes meaningless when a post grant challenge is filed. Patent rights just never settle, which means patents are just not a property right.
KUNIN: An additional factoid that you have to consider is statistically what percent of granted patents are ones that have been licensed or enforced in any particular way?
QUINN: Well, right. I know what people who disagree with me are thinking right now is you’re ignoring the patent troll problem. These patents are being used, they’re being abused, blah-blah-blah-blah. And the reality is no they’re not for many reasons. One, you look at the data. Everybody that’s looked at this objectively with publically available data concludes that the patent troll problem is not nearly as large as they say it is. The only people that conclude that it is are the ones who are using proprietary confidential and private data which we can’t look at to verify what they’re saying. So I don’t think we have a patent problem. It is not a patent office problem either. It is a litigation abuse problem. I agree with Chief Judge Radar again, specifically what he said in the New York Times op-Ed, that district courts have the authority to stop this stuff and they just don’t do it. So it is not about the patent right, it is about using judicial inefficiencies and the tendencies of the district court judges who for many understandable constitutional reasons don’t want to say “you can’t sue”, or “this is frivolous” at a very early stage of the process.
KUNIN: One important aspect of the recent patent reform legislation has to do with requiring pleading specificity in patent infringement actions. Where historically the case is that you file a lawsuit you don’t even have to identify at the time you file the suit which claims you’re asserting and you don’t have to identify what the purported infringing products are and why you believe the products are infringing.
QUINN: That’s amazing to me. Because the complaint form in the appendix to the Federal Rules of Civil Procedure wouldn’t allow a judge to even award a default judgment. Because you say here’s my patent number, this is the name of the title of the patent, I believe you’re infringing. Well you don’t infringe a patent. So there’s not even enough in the complaints to award a default judgment. There’s something seriously wrong. What frustrates me is that there are paths forward, multiple paths we could take that would address all of the perceived problems and take into account the importance of innovation and the rights of the inventors and the companies that support the inventors. But we’re not going down any of those paths. Or we take one, two steps down the path and then have to circle back and take a couple steps down multiple paths. And we get this hodge-podge that just doesn’t work.
KUNIN: Yes. We owe a debt of gratitude to people like former Chief Judge Paul Michel who’s willing to educate Congress on the realities of the foundations of a strong patent system that rewards and protects innovation. We must be mindful when seeking patent reform not to “throw the baby out with the bathwater”.
QUINN: Yes. I agree.
TO BE CONTINUED…