The Increasingly Powerful PTAB: Underutilized Precedential Designations Undermines Efficiency and Consistency

By Kate Gaudry & Thomas Franklin
September 14, 2017

Businesses are often faced with risk-versus-reward decisions. Will the business conduct R&D towards a specific aim? Will the business invest in transforming a beta product into a full product? Will the business assert an intellectual property right against a competitor? With regard to many of these decisions, a pertinent factor can include estimating whether the technology can be (or is) protected with a valid patent. Crucial to this estimation is being able to identify the applicable patent law and depend on the patent law being consistently applied in a predictable manner. But the PTO has over 8,000 patent examiners and nearly 100 judges.[1] How can the PTO promote legal-interpretation predictability with this number of active decision-makers?

Beyond training efforts and publication of the Manual of Patent Examining Procedure (MPEP), one underutilized approach is to concentrate efforts at the Patent Trial and Appeal Board (PTAB or “Board”) to promote consistent understanding and application of patent laws. Via the America Invents Act passed five years ago, the Board was afforded even more authority. Not only do these judges handle ex parte appeals of examiner rejections to manage prosecution decisions, but they now hear post-grant proceedings to thereby make patent validity decisions. The examining corps is generally ill-equipped to perform legal interpretations with very few being lawyers. Precedential PTAB decisions could then be used to guide examiners (and other judges) as to how to apply statutory and case law to particular types of claims and technologies.

It appears as though the PTO has made some attempts to proceed in this regard. For the first aim, Gene Quinn has recently reported that the PTO has admitted to stacking PTAB panels to ensure that the Director’s policy positions are being enforce. For the second aim, the PTO has increased the number of Board decisions as being precedential (so as to serve as a binding authority) by 36% within the last two years.

But let’s dig a little deeper. With regard to the agency’s decision to promote consistency by carefully picking judges, in the words of Judge Taranto during the Oral Hearing of Yissum Research Development Co. v. Sony Corp. (Fed. Cir. 2015) where this was revealed: “You don’t see a problem with that?” Under this judge-cherry-picking approach, a least prevalent interpretation can reign as a result of the Director’s influence, even though the Director is not even given direct adjudicatory authority.

With respect to the increase in precedential decisions: while a 36% increase is substantial, that translates into only an additional 10 precedential decisions – 2 ex parte appeals and 8 IPRs. The current total number of precedential decisions is 38, broken down into 27 ex parte appeals, 2 interferences, 8 IPRs and 1 CBM. Compare these numbers to the number of ex parte appeals and AIA petitions received in 2017 alone (10165 ex parte appeals[2], 1853 IPR petitions, 54 CBM petitions, and 40 post-grant review petitions[3]). The high number of ex parte appeals suggests that many substantial areas of unsettled interpretation of patent law remain, despite the 38 precedential decisions. Though the PTAB may be frequently opining on the same legal questions and the same types of fact questions, without designating decisions as precedential, any individual decision has a reach of a single case. The Board can then expect to continue to receive ten thousand appeals to process per year.

We propose substantially revising the current approach. Rather than micro-managing judge selection, the Board should increase its precedential-decision designations. We proposed this same tactic two years ago[4],[5] but we will now add to that general recommendation: the Board should increase its precedential?decision designations by orders of magnitude.

Designating a decision as precedential requires that the Chief Judge, the majority of the Board’s voting members and the PTO Director concur with regard to the designation[6] An advantage of this process is that many players (as opposed to one) weigh in on quality and interest of decisions. A disadvantage is that it provides many opportunities for a “no” to thwart a precedential designation.

We propose that, when a new issue is before the Board and there is no precedential decision on the issue, the judge panel should reliably nominate the decision for precedential designation. Voting Board members and the Director should generally support the designation to promote clarity on legal issues and consistency. Precedential decisions can then be indexed according to issues at hand and used to improve predictability with regard to decisions to be made both by examiners and by other PTAB judges. Additionally, the process for approving decisions to be precedential is a better way to guide the jurisprudence than gerrymandering the panels by an Executive Branch appointee.

At a time when there are so many uncertain areas at hand (e.g., operation specifics of the still rather new post-grant proceedings, interpretation of patent eligibility, etc.), fully utilizing precedential decisions would have a tremendous impact on applicants, invalidity-asserting parties and the agency. Predictable PTO decisions can allow businesses to intelligently make decisions that involve new technology and/or existing patents. Further, consistent results across examiners and judges should reduce appeal frequency and the PTAB backlog. In sum, the PTAB is now a very powerful entity that frequently has a say in whether a patent application will be allowed to grant and whether a patent will be allowed to withstand an invalidity challenge. It is essential that the PTAB utilize precedential decisions to facilitate consistent results to provide predictability to businesses and to promote the efficiency of the patent system.

________________

[1] Performance and Accountability Report 2016, https://www.uspto.gov/sites/default/files/documents/USPTOFY16PAR.pdf.

[2] Fiscal Year 2017 Patent Trial & Appeal Board Receipts and Dispositions by Technology Centers Appeals, https://www.uspto.gov/sites/default/files/documents/2017%20og%20report%20july.pdf.

[3] Calculated by subtracting type-specific petition totals identified in PTO Trial Statistics from July 2016 and 2017, https://www.uspto.gov/patents-application-process/appealing-patent-decisions/statistics/aia-trial-statistics.

[4] Gaudry, K.S., Krieger, J. “The Patent Bar’s Role in Setting PTAB Precedence” Law 360, September 10, 2015, available at: http://www.kilpatricktownsend.com/~/media/Files/articles/2015/The%20Patent%20Bars%20Role%20In%20Setting%20PTAB%20Precedence.ashx.

[5] Gaudry, K., Franklin, T. “Only 1 in 20,631 ex parte appeals designated precedential by PTAB” IPWatchDog, September 27, 2015, available at: http://www.ipwatchdog.com/2015/09/27/only-1-in-20631-ex-parte-appeals-designated-precedential-by-ptab/id=61999/.

[6] Gaudry, K.S., Krieger, J. “The Patent Bar’s Role in Setting PTAB Precedence” Law 360, September 10, 2015, available at: http://www.kilpatricktownsend.com/~/media/Files/articles/2015/The%20Patent%20Bars%20Role%20In%20Setting%20PTAB%20Precedence.ashx.

The Author

Kate Gaudry

Kate Gaudry is a patent attorney at Kilpatrick Townsend and focuses her practice on patent prosecution, with an emphasis on software, computer systems, and quantitative biology technologies. Dr. Gaudry also routinely performs statistical analysis of clients’ patent portfolios to identify effective prosecution strategies. Further, Dr. Gaudry regularly empirically evaluates programs and performance of the United States Patent and Trademark Office so as to provide her clients with prosecution recommendations and to advocate for compact and fair examination.

CLICK HERE to visit Dr. Gaudry's firm bio page.

Kate Gaudry

Thomas Franklin is a partner in the Denver and San Diego offices of Kilpatrick Townsend. He focuses his practice on patent prosecution, licensing and intellectual capital management with more than fifteen years of experience with intellectual property. He is experienced in intellectual property audits, due diligence and strategic planning processes. Through an IP Asset Management plan, he tailors strategy to business goals, competitive pressures and funding constraints to leverage intangible assets with intellectual property. He uses IP protection to maintain the dominance of large companies or assist smaller enterprises who are vying to dominate.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 23 Comments comments. Join the discussion.

  1. Name withheld to protect the innocent September 14, 2017 12:22 pm

    I don’t mind precedential decisions with regard to the “operation specifics of the still rather new post-grant proceedings.”

    However, I highly disagree that the PTAB should be issuing precedential decisions regarding the “interpretation of patent eligibility.” In my mind, that is substantive law making, which is out-of-bounds for the USPTO.

    Imagine a scenario in which the PTAB issues a precedential decision on patent eligibility and the Patentee (or Applicant) cannot afford to appeal it so the patent (or application) dies without this precedential decision ever facing review by the Federal Circuit. Also imagine that the language of this precedential decision is written so broadly that it (negatively) impacts the patent eligibility of tens of thousands of patents/applications. Even if other Examiners or APJs disagree with that decision, at least the APJs are bound by that decision and Examiners are de facto bound by that decision.

    From my review, at least some of the “precedential opinions” issued by the Board involve substantive issues that were sua sponte presented by the Board (sometimes designated new grounds of rejection — sometimes not). In these instances, neither Applicant nor the Examiner had the opportunity to adequately brief the issue. This is not how substantive patent law should be developed. It should be developed in the Court system via our adversarial system — not imposed by fiat by the USPTO.

    While “provid[ing] predictability to businesses and to promote the efficiency of the patent system” is an admirable goal, let’s not forget that many of the decision makers at the USPTO are quite hostile to patents in certain fields (e.g., software and biotech), and if we allow the USPTO to issue precedential decisions regarding substantive law, it is highly likely that what will be predictable is that fewer and fewer patents will issue (or survive challenge) in those fields. Unless you are on the defense side, I’m not sure that is the type of predictability your clients are looking for.

  2. Bemused September 14, 2017 2:30 pm

    The problem with the PTAB issuing precedential opinions is that it precludes subsequent panels which are reviewing the same patent(s) with the same prior art asserted in previous petitions from reaching a different conclusion. And least anyone misunderstand what I’m saying: It precludes subsequent panels from invalidating patents on the same prior art that was asserted (and rejected) in previous petitions. And of course, the efficient infringer lobby can’t have that happening, now can it?

    Talk about asymmetric warfare – patent holders lose at the PTAB (which, much more often than not, results in a Rule 36 affirmance from the CAFC) and they are estopped from ever again asserting their patents. An infringer loses at the PTAB (which issues a non precedential decision) and they suffer no real consequences because other infringers can continue to file petition after petition asserting the same or similar prior art until they’ve killed the problematic patent.

  3. Judge Rich's Ghost September 14, 2017 2:33 pm

    “Name withheld …” is exactly correct on the point that the Board should not issue precedential decisions on substantive patent law. First, it’s beyond the power of the PTO because it is substantive rulemaking. Second, frustrates the common-law process for developing case law. No one in their right mind would suggest that one district court’s opinion should be precedent for very district court in the U.S., before the Federal Circuit has a chance to rule on the issue. But that, in essence, is what this suggestion is. Bad policy will lead to bad law.

  4. Gene Quinn September 14, 2017 3:56 pm

    Not surprisingly, Judge Rich’s Ghost is wrong. The Board absolutely should issue presidential decisions. They are Administrative Patent Judges. Their job is to decide cases on both the facts and law. The Board has LONG issued presidential rulings on issues of law. That is how our system operates. If the USPTO wants uniformity, which is fine, presidential decisions is the appropriate way to proceed. Not stacking panels in violation of the APA.

  5. Name withheld to protect the innocent September 14, 2017 5:12 pm

    The Board has LONG issued presidential rulings on issues of law.
    That’s not in dispute. However, the more salient question is should they be? Judge Rich’s Ghost is correct in saying that the USPTO does not have substantive rule making authority.

    If the USPTO is issues a precedential decision on substantive law, isn’t the USPTO, in essence, issuing a substantive rule?

    What happens if the USPTO issues a precedential Board decision that states the following:

    “As described in paragraphs [0031]-[0032] of Appellant’s specification, the claimed invention could be implemented in software. We deem any invention implementable by software as being directed to an abstract idea. For the reasons discussed in Section II of our Decision below, we do not believe that the additional limitations are substantially more than the abstract idea. Since the broadest reasonable interpretation of the claims encompass the use of software, the claims must be rejected under 35 U.S.C. § 101 as covering non-statutory subject matter. See In re Nuijten, 500 F.3d 1346, 1356-57 (Fed. Cir. 2007).

    What happens then? The Board (hypothetically) just issued a precedential opinion that says anything that could be implemented is software is non-statutory subject matter. Do we really what the Board to be doing something like that? What happens if the Appellant is poor and cannot appeal it and the application is abandoned? The Board could do this stealthily by not labeling the decision precedential until after the period for appeal has lapsed (BTW — the ex parte Mewherter Decision wasn’t labeled precedential when it was first issued.

    In the scenario I laid out, someone would eventually appeal a Decision on Appeal in which this precedential decision was cited, but it might take a year or so for the appeal to make it up Federal Circuit — in the mean time, the USPTO couldn’t literally shut down the issuance of patents across several Tech Centers based upon this precedential decision.

    While the scenario I laid out is a bit over-the-top, a more likely scenario would be for the Board to take nibbles and bites out of the patent eligibility pie rather than trying to eliminate software (or biotech) patents in one fell swoop. Because of the infrequency by which Board decisions are appealed to the Federal Circuit, the Board could easily wipe out huge swaths of technologies with little fear that these precedential decisions would be reviewed by the Federal Circuit.

    I’ve made this point regarding the recent discussion of Rule 36 affirmances and whether the Federal Circuit is required to issue decisions in ex parte appeals — “be careful what you ask for.” Asking the Board or Federal Circuit to issue more decisions or more precedential decisions in an anti-patent environment (at both the USPTO and the Federal Circuit) will only lead to more bad law. Imagine that the Federal Circuit, instead of issuing Rule 36 affirmances, issued precedential decisions on all the 101 cases that they’ve heard over the last 2 years. The number of cases that the USPTO could rely upon to tank your claim under 35 USC 101 would increase dramatically — this is not a good thing.

    Asking the Board to issue more precedential decisions when they are clearly working with an anti-patentee/applicant slant is only asking for trouble. I see very little positive coming out of it and a whole lot of bad.

  6. Gene Quinn September 14, 2017 7:09 pm

    Name Withheld-

    The fact that the USPTO does not have substantive rulemaking authority is a complete red herring. The USPTO is not engaging in rule making when the PTAB issues a decision even if it is a precedential opinion. A Board decision that is precedential would be binding on the Office. It is not binding on federal courts.

    Stacking a panel after the fact and denying decisional independence in violation of the APA is not the way in our system that uniformity is achieved.

  7. Anon September 14, 2017 7:31 pm

    Gene,

    Stacking a panel is fully within the authority of the Director – and has been for a VERY long time.

  8. Night Writer September 14, 2017 7:36 pm

    >>However, I highly disagree that the PTAB should be issuing precedential decisions regarding the “interpretation of patent eligibility.” In my mind, that is substantive law making, which is out-of-bounds for the USPTO.

    I looked at this about 4 years ago and came to this conclusion. Not only that I am pretty sure that Kappos came to this conclusion and that is why he didn’t set up precedential opinions. (I think he started to and then stopped.)

  9. Night Writer September 14, 2017 7:43 pm

    Gene: A Board decision that is precedential would be binding on the Office.

    Well, let’s think about that. What if a panel doesn’t follow the precedential opinion? What do you do? That is the problem. There would have to be another body like in Japan that is an appeal board. Otherwise, everything is discretionary on the part of the PTO and really the Director. So, what a mess then. The precedential opinions become like Director instructions on how to write appeals. I think that is why Kappos stopped making them. I am speculating on Kappos.

    (The CAFC would not be bound by a precedential opinion of the PTO.)

  10. Name withheld to protect the innocent September 14, 2017 7:48 pm

    A Board decision that is precedential would be binding on the Office. It is not binding on federal courts.
    That may be true, but what percentage of patent applications actually get appealed to a Federal Court? 0.1%? That means for 99.9% of applications, a precedential Board decision on substantive law becomes de facto substantive rule making.

    That aside, my point about having an anti-patent Board and anti-patent Federal Circuit issue more decisions (that can be used against Applicants/Patentees) still stands — I would rather that they don’t. The less they write, the less that can be used against my clients.

  11. Gene Quinn September 14, 2017 7:57 pm

    Name withheld-

    De facto substantive rule making is not rule making.

    The less that they write the less that we know that the decisions they make are arbitrary and capricious. The less that we know that they are ignoring timely submitted evidence. They less that we know that they are fundamentally misapplying simple obviousness concepts. We need these judges to write everything down and show their work step by step so we can dissect it and everyone can see it for the rogue tribunal that they are.

  12. Night Writer September 14, 2017 7:58 pm

    @10 >The less they write, the less that can be used against my clients.

    I agree with that. I also think the more decisions of 101 are slowly building up a stock of decisions that can be used to tank claims.

    Also, note that the way that 101 is developing piecemeal with very specific cases is very similar to the EP’s case law.

    @10: So, your panel doesn’t follow the precedential case according to you. What do you do?

    I think this is an exercise in understanding how an appellant court works.

  13. Night Writer September 14, 2017 8:48 pm

    Another thing to consider is that the patent judges are reviewed every year by their supervisor. So, how weird is that they you might evaluated based on how close to the precedential opinions your opinions are.

  14. Night Writer September 14, 2017 9:14 pm

    Still no answer from anyone on what do you do when your panel ignores the precedential opinion in your view?

    I think you are SOL.

  15. Anon September 15, 2017 6:26 am

    Night Writer,

    Similar question: What do you do when a panel of the CAFC rules differently than a prior panel of the CAFC (the issue at law not being a case of first impression for the second panel)?

    Remember, the CAFC is supposed to apply stare decises, and it is supposed to take an en banc panel to be able to rule differently on an issue of law that has already been addressed by a prior panel.

    And yet, we continue to play Russian roulette with draws of CAFC panels as critical questions most definitely long past the point of first impression continue to careen back and forth depending on the personal opinions of the various judges.

  16. Night Writer September 15, 2017 8:07 am

    @15: That is true Anon that there are other problems going on. And, the CAFC still has the Scotus to resolve the problems and ultimately decide which cases are the precedential cases.

    But how would it work at the PTO? You see the precedential opinions at the PTO have no meaning to the CAFC and they probably wouldn’t even reference them if you appealed to the CAFC. You can appeal to the CAFC and say you didn’t follow your precedential opinion. That is not a reason to appeal.

    You would have to appeal based on CAFC cases and Scotus cases. You see the problem yet?

  17. Night Writer September 15, 2017 8:09 am

    I meant to say, you cannot appeal to the CAFC and say the PTO failed to follow their precedential opinions. Well you could, but it wouldn’t have any meaning. The CAFC would say that precedential opinions are merely advisory for the CAFC.

    You need CAFC and Scotus cases to base your appeal on.

    (Your examples are another different type of problem.)

  18. Night Writer September 15, 2017 9:55 am

    https://e-foia.uspto.gov/Foia/RetrievePdf?system=BPAI&flNm=fd2016002806-08-30-2017-1

    Gene should check this out. Machines that are abstract ideas that are non-obvious, but abstract.

  19. Name withheld to protect the innocent September 15, 2017 10:48 am

    De facto substantive rule making is not rule making.
    For 99.9% of applicants it is.

    We need these judges to write everything down and show their work step by step so we can dissect it and everyone can see it for the rogue tribunal that they are.
    I’m in a firm believer in the phrase “knowledge is power.” However, I’m also pragmatic. The truth of the matter is that the Federal Circuit, with some exceptions, has pretty much blessed just about everything that the PTAB has done. The Supreme Court might take one or two important patent cases a year so the Federal Circuit gets a free pass on just about everything they do. Congress has been little help (rather, they’ve been the opposite) when it comes to reigning in the Supreme Court’s mangling of the law. With very few exceptions (and those are limited to blogs like yours), the media doesn’t care either because the likes of Google give them incentives to bash “trolls” and extol efficient infringers. The public doesn’t care because to really care requires a deeper understanding of the issues than most people are willing to invest in.

    While the exposing the ugliness coming out of the Board and Federal Circuit may (but not necessarily) cause reforms a decade from now, that isn’t going to help my clients today or anytime in the near future. More bad decisions by the Board & Federal Circuit = more bad cases that will get cited against my clients’ patents and applications.

  20. Gene Quinn September 15, 2017 12:57 pm

    Name withheld-

    You say: “More bad decisions by the Board & Federal Circuit = more bad cases that will get cited against my clients’ patents and applications.”

    Impossible to argue with that, or really anything else in your last comment. I just don’t know how else things get better though if we don’t have that capitulation moment where we hit rock bottom. Perhaps the Allergan deal with St. Regis, and those in the works that will soon follow, will be too much for Congress not to notice and do something about. Of course, for it to get better they will have to actually have their eyes open when they look at the root cause of why a patent owner would give their patents away and pay an Indian tribe millions of dollars simply for the cloak of PTAB immunity.

  21. Anon September 15, 2017 1:59 pm

    A captured Congress (think Citizens United) is just not going to take the type of notice that is needed.

    First order of business must be to reign in the outsized voice of juristic persons who simply do not have the same calculus (relationship and dependency of a sovereign actually prospering) as do non-juristic persons.

  22. Judge Rich's Ghost September 15, 2017 6:07 pm

    I see Gene is still sore that I got the better of him in the claim amendment issue. Here there are pros and cons of having the PTAB issue precedential decision, but I think the cons far outweigh the pros, and I”m surprised Gene disagrees, especially because of his well-known distrust of the PTAB. Encouraging and approving of the use of precedential decisions just lends more credibility to an adjudicatory institution that has been called a “kangaroo court” on these pages. Interesting indeed.

  23. Patent Investor September 15, 2017 10:16 pm

    Gene–

    “Impossible to argue with that, or really anything else in your last comment. I just don’t know how else things get better though if we don’t have that capitulation moment where we hit rock bottom.”

    I think it gets better by one of the other impossible dreams always promoted on this blog…the CAFC doing their job. Skipping the Rule 36 cop out and issuing precedential rulings by the truckload. Rock bottom will most likely come first.

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