United States: Defending Against NPE Attacks Using Low-Cost IPRs

Chinese companies doing business in the U.S. often face litigation threads brought by non-practicing entities (NPEs), whose business model is to sue for patent infringement and collect settlement/license fees. Fearing the potentially daunting litigation cost, many Chinese defendants choose to settle without fighting, believing that any counter attacks would only pile up the legal bills. While it is tempting to settle early and eliminate future uncertainties associated with legal battles, it is not uncommon that NPEs price the settlement to be the same or slightly less than the cost of a regular inter parties review (IPR), which is not insubstantial and normally in the range from a quarter to one half million dollars. When initial settlement is not economical, a low-cost IPR approach may be considered to force the NPE to lower the settlement amount to a level at least lower than the difference between the initial amount and the IPR cost.

IPR was introduced in the American Invents Act and has become perhaps the most effective way to challenge the validity of an issued U.S. patent. An IPR proceeding is before the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office. The proceeding starts when a challenger, called the petitioner in IPR terms, files a petition to challenge the validity of one or more claims of a patent on grounds of novelty and nonobviousness based on patents or printed publications. The patent owner can file a preliminary response to defend the validity. If, however, the PTAB decides that the petition demonstrate that there is a "reasonable likelihood" that the petitioner would prevail as to at least one of the challenged claims, the petition will be granted and a "paper trial" will be instituted. After institution, patent owner needs to file a formal response to the petition, and optionally may file a motion to amend the challenged claim(s).  The petitioner then replies to the patent owner response, and opposes the motion to amend if needed. The patent owner then has a final chance to reply to the petitioner reply before oral argument is heard by a panel of administrative patent judges of the PTAB.  The final written decision is normally issued within one year of institution.

Generally speaking, the petitioner's major cost occurs in the petition preparation stage. A typical petition challenges almost all claims on the grounds of both novelty and nonobviousness based on several prior art references. To support the ground that a claim is obvious in view of a combination of multiple references, an expert declaration is usually provided.  However, such a "full scale" petition may not be necessary for the purpose of instituting the IPR trial and the cost of preparing the petition can be significantly reduced when the goal of the IPR is to force an NPE to lower the settlement amount. As long as the PTAB institutes the trial, the NPE is likely to significantly lower the demand and seek settlement to avoid the risk of claim invalidation, which in turn would curtail their ability to sue others. 

In NPE litigations, the odds of instituting a corresponding IPR petition before the PTAB favor the defendant-petitioner for at least two reasons. First, an NPE normally asserts a patent against multiple defendants and is more likely to adopt broad interpretations of its claims to allege infringement, making it easier to find prior art to prove invalidity. Second, the PTAB uses the "broadest reasonable interpretation" standard for claim construction, making a patent more likely to be invalidated at the PTAB than in the direct courts. Therefore, in order to institute the IPR trial, a petitioner needs not to challenge many claims. Instead, challenging the independent claim(s) should be sufficient for the purpose of institution.  Reducing the number of challenged claims can reduce the cost of petition preparation significantly, because often times the hardest invalidity position is for invalidating a feature-rich dependent claim.

Focusing on the independent claims can reduce IPR cost for another reason. It is easier to find a single prior art reference to disclose all elements of an independent claim than a dependent claim. If such a reference is available, challenging the independent claim on the ground of anticipation does not need an expert declaration. The cost relating to expert declaration is two-folded and constitutes a significant portion of the total IPR cost. First, including an expert declaration in the petition requires retaining an expert, preparing the declaration, and referencing the declaration in the petition, all of which adding to the initial cost of petition preparation. If no expert declaration is used in the petition, the initial cost of preparing the petition can be significantly reduced. Second, once the IPR trial is instituted, the patent owner will almost certainly to depose the petitioner's expert if a declaration is relied upon, adding the secondary cost of preparing and defending the expert to the total IPR cost. 

Even when the claims are challenged on the ground of obviousness, the risk of omitting an expert declaration is relatively low in some cases, especially when the technology involved is relatively simple. This is because the administrative patent judges in the PTAB are required to have scientific background to understand the references themselves. They can also make judgment as to whether it is obvious to combine multiple references. Therefore, when the challenged patent involves relatively simple technology, the patent judges can be seen as experts themselves.

In sum, challenging only the broadest claims and omitting the expert declaration to the extent of low risk can reduce the initial cost of preparing the petition to a fraction of what a typical IPR budget would require. If the IPR trial is instituted and the NPE seeks to settle, the cost associated with the later stages of the IPR proceeding is non-existence. Because of the leverage the petitioner gains after institution, the NPE is likely to lower the settlement amount significantly. In the end, the defendant-petitioner can be better off than taking the initial offer made by the NPE.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
23 Sep 2018, Seminar, Chicago, United States

Finnegan is a sponsor of the Intellectual Property Owners Association Annual Meeting, supporting the Women in IP Networking Brunch.

26 Sep 2018, Webinar, Washington, DC, United States

This latest series of webinars will explore emerging trends in the changing intellectual property (IP) legal environment in Europe and the United States.

26 Sep 2018, Webinar, Washington, DC, United States

This latest series of webinars will explore emerging trends in the changing intellectual property (IP) legal environment in Europe and the United States.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions