Happy Birthday AIA: Celebrating an Unmitigated Disaster and the Destruction of American Innovation

Today is the fifth anniversary of the signing of the America Invents Act (AIA). Without any exaggeration, the AIA ushered in the biggest changes to U.S. patent law in generations. Truthfully, the sweeping and unprecedented changes brought into being by the AIA were the most radical changes to U.S. patent laws in the 226-year history of the U.S. patent system.

The single word that best describes the AIA is this: disastrous.

For those casually interested in patents the largest focus of the change was modifying U.S. laws from first to invent to first to file. For those in the industry who knew better this was a minor change that hardly affected day-to-day practice. In almost all situations the applicant who filed a patent application first was the party who received the patent, so why not just acknowledge what happened in more than 99.9% of all cases?

Without a doubt the biggest change brought into being by the AIA, and why the AIA has been an unmitigated disaster, is the creation of three new procedural challenges to issued patents. These post grant challenges – inter partes review (IPR), post grant review (PGR), and covered business method (CBM) review – give those who don’t like patents fresh new opportunities to seek the invalidation of property rights issued by the Patent Office. These new procedures are added to challenges already available in federal district court, as well as reexamination, which continues to be available at the Patent Office.

Does it strike anyone as odd that the Patent Office would require patent applicants to jump through a series of quite onerous hoops, spend tens of thousands of dollars and wait between five to ten years to get a patent issued only to then turn around and sell the opportunity to challengers to defeat the patents that the agency just ostensibly put their stamp of approval on and which are supposed to be statutorily presumed to be valid property rights? Welcome to the brave new world of the AIA! If the applicant actually has a commercially relevant innovation the Patent Office will put the applicants through round after round of torturous review only to get a patent that invites them to spend many hundreds of thousands of dollars defending in a post grant review process.

“The current implementation of PTO post issuance proceedings is undermining confidence in our patent system, chilling innovation at its roots, and, in eyes of some, giving the AIA a bad name,” wrote Phil Johnson, Senior Vice President for Intellectual Property Strategy for Johnson & Johnson. According to Johnson, one of the biggest concerns with respect to the administrative patent trials created by the America Invents Act is “whether these proceedings are providing the level of due process and fairness to all parties in them that they should be.” See Are PTAB Proceedings Fundamentally Unfair to Patent Owners?

What’s worse, the way the Patent Office reports what actually is happening at the PTAB in these post grant proceedings is so hopelessly misleading that it disguises the reality of the what is happening. For example, the Patent Office conveniently includes “claims remaining patentable and not subject to a final written decision” in their calculations of which claims survive post grant challenge. The Office can do this because the PTAB doesn’t have to issue decisions that address all claims they agree to consider. Technically those claims not subject to a final written decision do remain patentable, but those claims have NOT been determined to be patentable by the PTAB. The PTAB simply ignored those claims when they wrote their final IPR decision, which astonishingly is something they are allowed to do and do quite frequently. It is hardly a ringing endorsement of the continued viability of those claims moving forward, particularly given that the PTAB leaves standing an initiation decision that determined that those claims are likely invalid. Thus, it is disingenuous to rely on those ignored claims to suggest IPR outcomes are not devastating to patent owners as they actually are.

So why would the Patent Office clearly and objectively slant the way they report post grant proceeding statistics? Because commercially valuable patents are being killed at alarming rates.

These post grant proceedings have been so horribly one-sided that it is almost impossible to believe they are being carried out within an American system of any kind. The statute gives patent owners the right to amend patent claims, but the PTAB denies virtually all motions to amend because the PTAB interprets the statute that gives the right to amend as merely a right to file a motion to amend, which they nearly universally deny. Thankfully, the Federal Circuit has recently reversed a refusal to allow an amendment in an IPR as being arbitrary and capricious, and the entire Federal Circuit will soon review the PTAB amendment practice. In the meantime, the PTAB continues to operate as a kangaroo court doing whatever they want, operating in arbitrary and capricious ways.

So what should we do? That is a complicated question with differences of opinion. For example, Bob Stoll, former Commissioner for Patents, recently wrote that it would be a mistake for Congress to get involved and try and fix the problems of the AIA. Stoll argues that the USPTO and the Courts are the proper venue for change. Meanwhile, Alden Abbott, Senior Fellow at the Heritage Foundation, recently wrote that Congress must get involved to curb the IPR process, particularly given the Supreme Court decided not to do so in Cuozzo.

Both Stoll and Abbott are correct. The USPTO has set up a set of rules that are fundamentally unfair on a procedural level and the courts are unwilling, or unable, to address. Within our system of government it is absolutely imperative for Congress to step in and fix the mess they created. But the thought of turning to Congress to fix something they clearly do not understand, and do not seem to want to understand, strikes me as a patent specific definition for insanity. The options are both awful.

Meanwhile, post grant proceedings are simply not working as they were intended. According to Manny Schecter, who is Chief Patent Counsel for IBM, IPR statistics combined with the increasing phenomenon of efficient infringement suggests, “the post grant challenge proceedings as currently implemented are not a substitute for litigation and may, unfortunately, instead actually promote litigation.” Of course, the rise of efficient infringement and the ease with which to challenge patents and tie up patent owners has dramatically, and negatively, affected the value of patents. “In the wake of the AIA, the cloud of uncertainty hanging over patents is dark indeed,” wrote Ashley Keller, co-founder and Managing Partner of Gerchen Keller. “This uncertainty has depressed the value of patents and the returns to research and development, and may have broader ramifications that are yet to be seen.”

There were other things in the AIA that were mistakes, for example doing away with a real grace-period and instead creating a convoluted grace period that couldn’t possibly be useful in any real world scenario. See First to File Means File First! Similarly, it was rather idiotic to adopt a worldwide view of prior art that recognizes foreign filed patent applications as prior art as of their foreign filing date. By making these changes the U.S. went from being different from the rest of the world to being bizarre and just different in stupid ways.

None of the things that can and should be fixed in the AIA matter though as long as post grant proceedings exist in current form.

I’ve said it many times before and I’ll say it again. All of the post grant challenges ushered in by the America Invents Act (AIA) were a bad idea. They never should have been created in the first place. All the post grant proceedings have done is make infringing patents a more economical choice, while making it more costly for innovators to obtain and keep the protection they need to make innovating a worthwhile endeavor. It was all too predictable that a new tribunal would over assert its own jurisdiction, but the breadth of just how arbitrary, capricious and fundamentally unfair the process would be was simply not predictable. Still, if there was any doubt that there would be a predisposition toward killing patents that myth was burst early on when the then Chief Judge of the PTAB said at a public meeting of the Patent Public Advisory Committee (PPAC) that if the PTAB wasn’t doing death squading they weren’t doing their job.

For the rest of our AIA 5th Anniversary Series please see: The America Invents Act Five Years Later: Reality, Consequences and Perspectives.