United States: PTAB Trials Evolving Toward The Litigation Alternative Congress Envisioned

The recent decision in SAS Institute v. Iancu — in combination with the proposed shift from a broadest reasonable interpretation (BRI) standard to the Phillips standard for claim construction used in district court — moves trials at the U.S. Patent Trial and Appeal Board toward being the most likely forum for deciding claim construction and patent validity. It also signals that PTAB trials are becoming a truer "alternative" to litigation, as Congress envisioned under the America Invents Act.

A New Trial is Born

Under the AIA, Congress created PTAB trials as a cost-effective alternative to district court litigation. See 35 U.S.C. §§ 316(b), 326(b) (2012). However, in the first five years since the trials went into effect, the result has been an increase in PTAB trials running concurrently with district court litigation pertaining to the same patent. The AIA did not expressly prohibit such redundancy; instead, it relied upon the district courts to decide whether to stay the concurrent litigation. Indeed, since the inception of PTAB trials, a majority of cases have had co-pending litigation.

For concurrent litigation and PTAB trials, the historic grant rate for contested stays has hovered around 60 percent. This percentage likely reflects the fact that many judges have considered PTAB trials as "simplifying the issues" for the litigation, which has been a key factor in district courts' decisions whether or not to grant such a stay. This is the case even in the context of inter partes review, in which the issues up for consideration by the PTAB are limited to challenges under §§ 102 and 103 based on printed publications.

Recent Patent Law Developments

Two recent legal developments are poised to have a profound impact on the interplay between PTAB trials and district court litigation: the U.S. Supreme Court decision in SAS and the new rules set forth by the USPTO Director Andrei Iancu in the Notice of Proposed Rulemaking dated May 9, 2018, which proposed a change to the Phillips claim construction standard for PTAB trials.

In the SAS decision, the majority held that instituting an IPR is an all-or-nothing decision, such that the PTAB must either institute for all challenged claims or deny institution entirely. The Court's ruling was based on the rationale that the AIA statutes entitle a petitioner to a final written decision addressing all challenged claims. Following SAS, the threshold for institution is whether the petitioner has presented a "reasonable likelihood" of prevailing on at least one challenged claim. If so, a trial is instituted on all challenged claims. In the USPTO Guidance issued following SAS, this position was taken a step further than the express holding of SAS, stating that "the PTAB will institute on all challenges," seemingly confirming that it will also institute as to all grounds included in the petition, not just all claims (emphasis added). As a practical matter, all claims and grounds now will be addressed in a final written decision, which will be appealable to the Federal Circuit.

The second recent legal development likely to impact the effect of PTAB trials on district court litigation is a set of new rules proposed by Iancu for a change to the claim construction standard. Responding to arguments that the overlap between patents that are considered at the PTAB and those that are the subject of litigation favors using a consistent claim construction standard, Iancu has proposed changing from use of the BRI standard in PTAB trials to the same Phillips standard used by courts.

Commentators have disagreed about how much of a disparity, if any, there is between the BRI and Phillips claim construction standards. Even judges have disagreed on this matter, with U.S. Court of Appeals for the Federal Circuit Judge Kimberly A. Moore having stated in PPC Broadband v. Corning Optical Communications RF that the broadest reasonable interpretation consistent with the specification is "not necessarily the correct construction under the framework laid out in Phillips." On the other hand, CAFC Chief Judge Paul Michel has stated that "[t]he putative claim construction standard between courts and the Patent Office is the same — with the one minor difference being that courts may apply disclaimers made by a patent owner during prosecution." Regardless of whether there is a true difference in the standards, what the rule change will mean is that when a patent is challenged both in court and at the PTAB, the PTAB is likely to become the first forum to construe a patent's claims under Phillips, due to the expedited timeline of PTAB trials.

As detailed below, the decision in SAS and the proposed change to Phillips-style claim construction may well increase the overall institution rate of PTAB trials and increase the stay rate in concurrent district court cases.

If the petitioner needs only show a reasonable likelihood of prevailing on one challenged claim, then under the SAS decision the bar is arguably lower for institution than it was previously, when each claim and ground was considered individually. Some have argued that SAS will not result in an increased institution rate, believing the PTAB will exercise its discretion in institution decisions to deny entire cases more often, for example if the evidence is weak for most claims. This outcome seems unlikely, for several reasons.

First, the PTAB's discretion has been largely criticized, when applied outside of contexts such as overly numerous unsupported grounds (e.g., Liberty Mutual Insurance Company v. Progressive Casualty Insurance Company and Zetec v. Westinghouse Electric Company) or 35 U.S.C. § 325(d) issues where the petition puts forth the same or substantially the same prior art or arguments, whether in the reexamination setting or for follow-on petitions. Some have even argued that SAS reduced the PTAB's discretion authority substantially. Rather, rules such as word count are likely to continue to provide a gating issue as to how many claims and grounds adequately can be addressed in a petition, with General Plastic Industrial v. Canon Kabushiki Kaisha clarifying the circumstances in which follow-on petitions are most likely to be allowed. Indeed, it's possible that petitioners worried about outright denial may decide to split up claims and issues between multiple petitions.

Second, it would be incorrect to argue that the SAS decision means more work for the PTAB at the institution stage. Rather, the PTAB can stop its analysis at a single independent claim under a single ground if it believes institution is warranted on that basis. The increase in work that is likely to occur, if any, would be in the PTAB's analysis in the final written decision, not at the institution stage.

Third, some commentators have argued that the SAS decision will lead to a decrease in patent owner preliminary responses, in view of the patent owner needing to show why the petitioner is wrong on every claim to avoid institution. If this argument ends up being correct, then the institution rate could very well increase in view of the petition being uncontested. Finally, it also seems unlikely that the PTAB would opt to increase its institution denial rate substantially based solely on SAS, in view of the post-institution stage providing a large portion of the fees for PTAB trials. Thus, each of these factors point to the change in the overall institution rate of PTAB trials resulting from SAS, if any, being an increase.

Another likely effect of the SAS decision, and one for which the impact likely would be increased by changing to a Phillips-style claim construction at the PTAB, is an increase of the stay rate in concurrent district court cases. For covered business methods, the factors that "shall" be considered in determining whether to stay concurrent litigation are governed by statute, at Section 18(b) of the AIA: "(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial; (B) whether discovery is complete and whether a trial date has been set; (C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party and (D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court."

In practice, district courts are not required by statute to consider these factors for other PTAB trial types, but they typically consider at least condition (A) — whether a stay "will simplify the issues in question" — in conjunction with consideration of the totality of the circumstances. Post-SAS, since all claims will be instituted if any are, the likelihood that the PTAB trial will in fact "simplify the issues in question" goes up dramatically. If a Phillips-style claim construction is used, then the issues for litigation are simplified even further by the PTAB trial.

Another factor that courts typically look to is the timing of the PTAB petition vis-a-vis the status of the district court case. Because PTAB trials proceed on an expedited timeline, institution early in the litigation timeline can be particularly advantageous for a petitioner looking to stay the district court litigation. Indeed, the PTAB may weigh in on claim construction under Phillips as early as six months after the filing of the PTAB petition, via the institution decision, which is likely to be well ahead of the typical timeline for a Markman hearing in the concurrent litigation. This timeline seems like yet another reason for courts to stay cases pending that construction.


These recent and proposed changes in patent law appear to be moving PTAB trials toward being the "alternative" to litigation that Congress envisioned. If all claims are instituted in a PTAB trial and a Phillips claim construction applied at the institution decision stage, litigation stays become much more likely, and ultimately, the PTAB will become the most likely forum for deciding claim construction and patent validity.

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.

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