PTAB Masters™ Day Four Features Judge Michel on How the PTAB is Working: ‘When Facts Change, Views Should Change’

By Eileen McDermott
April 22, 2021

“The doctrine of obviousness is supposed to ultimately be a question of law, and not deferentially reviewed on appeal, but reviewed de novo. As  far as I can discern, the Federal Circuit has basically jettisoned the final part of the assessment, and if they conclude that substantial evidence supports the underlying fact findings of the Board, the case is over, they affirm and the affirmance rate is something north of 90%.” – Judge Paul Michel

Gene Quinn (left), Meredith Addy and Judge Paul Michel (by phone)

The final day of IPWatchdog’s PTAB Masters™ 2021 program kicked off with more than 1,070 registrants and a discussion featuring retired U.S. Court of Appeals for the Federal Circuit Chief Judge Paul Michel, Meredith Addy of AddyHart, and IPWatchdog Founder and CEO Gene Quinn about the many obstacles facing patentees today in light of the Patent Trial and Appeal Board (PTAB) and an overburdened Federal Circuit. Michel said that, a decade after the America Invents Act (AIA) was passed, with the real-world knowledge we now have of the PTAB, “conclusions and practices should change in light of experience. When facts change, views should change.”

Michel explained that it has become clear that many of the assumptions made by Congress about how the AIA proceedings would work have been proven unreliable, so it’s time to go back and “make adjustments in design defects in the original legislation.” And adjustments need to made by the U.S. Patent and Trademark Office (USPTO) as well. “Both bodies should make these changes, because proceedings have turned out to be tilted in favor of petitioners,” said Michel. “The framework should be substantially amended to correct imbalances and to make the PTAB more consistent with what’s done in Article III courts.”

As a litigation expert, Addy said she tells her clients up front that defending their patent is going to be “really hard.” Largely because of the PTAB, it will be several years before a patentee can even begin asserting their patent, no one is going to take a license, and in the meantime, “you have to win every single battle; you lose once and it’s over,” Addy said.

Quinn commented that, although the AIA was meant to streamline patent enforcement, it’s still a “multi-headed monster.” Addy agreed and said that patentees have to realize that, in the current environment, their patent doesn’t mean much until it’s been tested via one or more wins at the PTAB and in the courts.

“We can send letters if you want, but they’re going to get ignore and you’re not going to get anyone to take a license and pay you money on your patent until they’re backed up against a wall and they have to,” Addy said. This is in contrast to a time in the 1990s when IBM, for instance, licensed tens of thousands of patents, netting billions of dollars, and they never had to file a single lawsuit, Michel said. “We had the honor system. What flipped the dynamic is the passage of the AIA. The world was turned upside down by the IPRs, as implemented at the PTO, and the Federal Circuit nearly always affirms whatever is done by the PTAB, so it’s become the most important tribunal on the planet.”

This is problematic because the PTAB virtually never hears live testimony, so the administrative patent judges (APJs) are making a credibility judgment based on “dueling” experts, who are never questioned by the judges or cross-examined by opposing counsel. “You have what has become in practice a declaratory judgment of invalidity trial in the PTAB, with none of the protections or process used in district court,” Michel said.

Even worse, the CAFC seems to give extreme deference to the PTAB based on the “substantial evidence” standard and has given short shrift to their obligation to review legal conclusions without deference. “The doctrine of obviousness is supposed to ultimately be a question of law, and not deferentially reviewed on appeal, but reviewed de novo,” Michel said. “As  far as I can discern, the Federal Circuit has basically jettisoned the final part of the assessment, and if they conclude that substantial evidence supports the underlying fact findings of the Board, the case is over, they affirm and the affirmance rate is something north of 90%.”

In addition to a massive increase in Rule 36 decisions, Addy said that, according to one estimate she has heard, sua sponte waiver of oral argument by the CAFC has become common in about 50% of the cases coming up from the PTAB—a figure Quinn called “astonishing.” And even when there are opinions on PTAB cases, they often are 5-7 pages with only 1-2 pages of analysis “parroting the PTAB precisely,” she added. Many times, the evidence cited also does not go to the letter of the “substantial evidence” standard either, because it doesn’t correlate to the issues asserted.

Quinn argued that one quick fix for the system would be to impose a much more discerning filter with respect to institution in order to vastly limit the number of inter partes reviews (IPRs) judges are handling. When the PTAB was created, there was a prediction that there would be about 500 IPRs per year, but it has been 3.5 to 4 times that number since almost the beginning. “Congress turned out to be wrong,” Michel said. “They thought IPRs would be rather rare, they turned out to be ubiquitous.” It’s now almost “malpractice” not to file an IPR, he added.

Addy explained just how high the burden is on patent owners who become the subject of a PTAB petition. While the petitioner has been plotting this for 6-9 months and has had the time for teams of lawyers to assemble the best document possible—a project that usually costs more than $1 million—the patentee only has 90 days to file an initial response “to hopefully short circuit what they spent a year on.”

She said that the CAFC could do a lot to fix the problems. “Not everything is substantial evidence. A few decisions from the CAFC could help. I’d like to see them take a couple of choice cases and help the PTAB’s direction. But I don’t see that happening either. I think it’s going to stay about the same in the next four years.”

While Michel argued Congress really needs to fix the mess, he agreed it would likely be “years and years” before that happens. “Ideally, at every step of the process, more time and intense analysis should be applied,” he said. “First by the examiner, then by the PTAB panel members, and ultimately by the CAFC, because superficial review favors the challenger.”

Congress should also inject money into the USPTO to help examiners to do a better job, Michel said. While China has vastly increased its examining corps and funneled significant amounts of money into its patent office’s IT systems, the USPTO remains user-funded, its tech systems are outdated by comparison, and examiner turnover is high. “The question in my mind is whether we’ll fix our patent system soon enough to avoid getting irretrievably behind other rivals, particularly China,” Michel said.

Quinn, Addy and Michel all agreed that a lot will depend on who the next USPTO Director is and whether that person continues the work done by former Director, Andrei Iancu. “It’s a tough road and I hope the new director will have as much courage as Iancu had,” Michel said. “It will be a very fateful decision.”

You can view the full keynote discussion and other content from the PTAB Masters™ program on our Virtual Programs page.

The Author

Eileen McDermott

Eileen McDermott is the Editor-in-Chief of IPWatchdog.com. Eileen is a veteran IP and legal journalist, and no stranger to the intellectual property world, having held editorial and managerial positions at several publications and industry organizations. She has acted as editorial consultant for the International Trademark Association (INTA), chiefly overseeing the editorial process for the Association’s twice-monthly newsletter, the INTA Bulletin. Eileen has also served as a freelance editor for the World Intellectual Property Organization (WIPO); as senior consulting editor for the Intellectual Property Owners Association (IPO) from 2015 to 2017; as Managing Editor and Editor-in-Chief at INTA from 2013 to 2016; and was Americas Editor for Managing Intellectual Property magazine from 2007 to 2013.

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 as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 13 Comments comments.

  1. CharlieSeattle April 22, 2021 7:17 pm

    PTAB is illegal because it was created to deny Due Process!

    PTAB must be abolished!

  2. Greg DeLassus April 23, 2021 12:31 pm

    Judge Michel is (as usual) right. Congress wrote the statute to achieve certain ends. Some of that statutory language has worked to achieve those ends, some of it has not.

    Now that we have the benefit of experience in seeing how courts and the PTAB apply that statutory language, Congress knows more than it did at the time that the statute was enacted. It is time to revise the statute in view of this information and experience to make the system function more like it was intended, and to effect the intended purposes more efficiently and reliably.

  3. PTO-indentured April 23, 2021 3:25 pm

    Ostensibly AIA was an ‘All New PTO System’ (alleged) to decrease patent costs

    REALITY: AIA shot patent defense costs through the roof — by an order of magnitude. How? By making valuable U.S. innovation subject only to a lowest-bar Need more P-O-E — use more 1-0-3! — a potent devaluator that ‘new APJs’ will be ‘obliged to wield’ — that preempts Philips — that District and FC court judges would too readily rubber stamp (and in recent years do so with less and less explanation). A projected ‘only 500 IPRs per year’, quickly rose to 1500-2500, essentially ensuring reduced time for deliberation, thoroughness: quality.

    Why did this just go on and on? Because (it was erroneously supposed) AIA would ‘self-correct’. No? Well, perhaps a year or so into AIA congress would surely see AIA significant shortcomings and promptly step up to correct them. No? … fast forward a decade later, and it’s still AIA’s:

    Invalidity? Easy as 1-0-3

    Hmm … 3 references? 5 references? + lowest-bar POE, and ‘what would a person of (extra) ordinary skill in the art do? Got it!

    Results:

    1. A well-proven most efficient patent devaluator yielding most efficient unrelenting infringement.

    2. Nearly a total degrading of honor toward U.S. IP. Where corporations routinely instruct their employees to not even look at a patent / innovation, let alone consider a license. Why? So the company can deny ‘ever seeing it’ — to thereby ‘use’ the IP for free — and, unless and until there is a $3M to $4M defense of the PO’s IP (per case) — which 99% of the time never happens: corporation gets U.S invention FOR FREE! A no-brainer equation (albeit: reliant on no honor).

    3. In view of 1 – 2 ibid: AIA has pertuated a prevailing Caste system enabling / ensuring an ongoing and improper double-standard, clearly biased toward biggest of companies to whom a $3M to $4M invalidation of PO IP is chump change — e.g., compared to paying such (or half that) amount to a PO.

    4. Law firms receiving $20K to $30K to build a PO’s portfolio, becomes a pittance relative to law firms receiving millions to invalidate such PO portfolios. Hmm … which side of this ongoing AIA-enabled windfall does one want their firm to be on?

    5. A PO’s IP or portfolio is subject to serial attacks — and just one with ‘POE 1-0-3’ (preempting Philips) suffices.

    6. Litigation funders won’t even consider a patent having $30 million in damages, to make the waterfalls there looking a multiple patents having in excess of $100M in damages. Again, 99% of U.S. inventors will never meet this bar.

    7. Congress has, by not acting (apparently) turned a blind eye to all of the above — for a decade. So: wrong projection (hope in vain?) that AIA law would self-correct under a stewardship by congress.

    Closing comment. I distinguish between there being a substantial ‘class’ of AIA disadvantaged U.S. inventors, versus a ‘Caste’ thereof, in that in a class you at least have some option of working your way out of it. In an AIA-enabled Caste 99% of U.S. inventors have no way of doing this. This is patently unjust, the bias is patently obvious.

  4. concerned April 24, 2021 8:04 am

    This article echoes a lot of what my application is experiencing.

    “Many times, the evidence cited also does not go to the letter of the “substantial evidence” standard either, because it doesn’t correlate to the issues asserted.”

    The PTAB appears to not have even read my official record nor reviewed the evidence. The court cases used in affirming the “new grounds” of rejection do not appear on point, appear to be the same “cut and paste” regurgitation of court cases used in rejections on other patents, and fail to make the connection. The PTAB might as well recited Moby Dick. Yes, Moby Dick is a whale, how does that relate to my patent? Yes, the courts ruled this way on other patents, where is the connection to my patent application?

    And when SCOTUS cases are submitted into evidence supporting the application, those cases do not even get mentioned in the PTAB rejection.

    Furthermore, when a process solves a substantial problem that has been in play for decades, the solution has been beyond the reach of millions of experts and working professionals, the examiner agrees, I concluded the process is more than insignificant post solution activity that the PTAB rules. Exactly what is the standard: One billion working professionals and experts? Ten billion experts and working professionals?

    So why did the (second) examiner reject the application when he agreed it solved the problem? I suspect because he was told to reject by the higher ups as that was the reason the (first) examiner was telling us before we mysteriously got another examiner assigned.

    Frankly, we do not have much of a (fair) patent system. The contributors to this article were just kinder and more professional in their assessments and remarks.

  5. Josh Malone April 24, 2021 10:11 am

    I would like to express my gratitude to the panelists for acknowledging that the PTAB is still broken.

  6. Anon April 27, 2021 4:50 pm

    The PTO should to chuck the entire
    “America Invents Act” AIA, and go back to where it was and worked for over 200 years. “If it ain’t broke, don’t fix it”!

  7. Anon April 27, 2021 6:35 pm

    Sister Anon,

    Please be aware that there was NO “going back to something” that was extant for ‘more than 200 years’ prior.

    There had been several significant changes, and your zeal misses the fact that the change of 1952 was extremely significant.

  8. Anon April 27, 2021 7:17 pm

    I’m not referring to 1952! What was so wrong with the PTO “right before” AIA was instituted?? Large, power obsessed corporations, wanted EVEN MORE POWER, and conceived of a means to get more power by invalidating the patents of independent inventors.

  9. Anon April 27, 2021 9:44 pm

    Sister or brother Anon,
    The PTAB may create a series of “unintended consequences” for the PTO, the United States, inventors, patent attorneys, and the public.
    1) Inventors who become aware that their inventions may be invalidated, would be loathe to invent.
    2)The United States may lose their world status in innovation.
    3)There may be decreased demand for patent attorneys.
    4)The public may lose out on innovative products.
    5) the PTO may lose revenue

  10. Anon April 28, 2021 10:19 am

    Anon at 6, 8, and 9,

    My comment at 7 is in direct reply to your words of, “go back to where it was and worked for over 200 years

    The point you now back-peddle to, “What was so wrong with the PTO “right before” AIA was instituted??negates the assertion of “for over 200 years“, and misses MY point that such ‘right before’ WAS a good period.

    I draw merely to the better understanding that there was NO “for over 200 years” in the sense of your assertion.

    I am fully happy with a discussion of the pitfalls of the AIA (of which, I have LONG been on record). I merely point out that not all hyperbole is helpful.

  11. Anon April 28, 2021 2:03 pm

    No problem, replace “200 years” with “decades”

  12. Anon April 28, 2021 2:52 pm

    I am interested in reading “the pitfalls of the AIA (of which, you have LONG been on the record)”
    Please provide the link.

  13. Anon April 28, 2021 5:49 pm

    Anon @ 12,

    Feel free to peruse the comments in the historical logs here. There is both an “Archives” mechanism, as well as a site Search function.

    MOST likely, when you see “Anon,” it will be from me (your recent use notwithstanding, that moniker has been largely of singular person use).