Numerous articles and practitioners are touting inter
partes review (IPR) proceedings, and for good reason.
Here is a quick breakdown of why these proceedings are considered
pro-petitioner and why every patent infringement defendant should
give IPR serious consideration.
1. Presumption of
Validity Does Not Exist: Unlike in district court,
patents are not assumed to be valid at the Patent Trial and Appeal
Board ("PTAB"). See 35 U.S.C. § 282
("[a] patent shall be presumed valid"). In IPR,
patentability of the claims is being challenged, rather than
validity.
2. Burden for Finding
Unpatentability is Lower: The burden is lower for the
petitioner to challenge patentability in front of the PTAB than for
a defendant to challenge the patent's validity in district
court. In district court, a defendant must prove invalidity
by clear and convincing evidence. See Microsoft Corp. v.
i4i Partnership, 131 S. Ct. 2238, 2242 (2011). In
contrast, at the PTAB, the petitioner must prove unpatentability by
a mere "preponderance of the evidence" standard.
See 35 U.S.C. § 316(e).
3. Claim Construction
is Broader: The PTAB sets forth that claims will be
granted their "broadest reasonable construction in light of
the specification of the patent in which it appears." 37
C.F.R. § 42.100(b). This is broader than the
"ordinary and customary meaning" to a person of ordinary
skill in the art at the time of the invention, as applied at the
district court under Philips v. AWH Corp., 415 F.3d 1303,
1312-1313 (Fed. Cir. 2005). The broader the claim, the more
likely prior art exists that will render the patent anticipated or
obvious.
4. Time-Sensitive
Ability to Terminate Pressures Settlement: The
petitioner and the patent owner can reach settlement and request
that the PTAB terminate the IPR proceeding under 35 U.S.C. §
317. If the merits are yet to be decided, the PTAB must
dismiss the petitioner from the proceeding, but retains discretion
as to whether to dismiss the proceeding with respect to the patent
owner. 37 C.F.R. 42.74(a). When deciding whether to
terminate, the PTAB primarily considers how far along the trial has
proceeded. The longer the patent owner waits to settle, the
greater the risk that the PTAB will not terminate the proceeding,
and may cancel the claims despite a request to terminate.
Petitioners can use this time crunch to pressure the patent owner
into earlier settlement in order to save the patent from
IPR.
5. Statistics Show
the PTAB is Pro-Petitioner: Approximately 80% of
petitions for IPR have been granted for at least some of the
challenged claims, with about 60% of all challenged claims being
instituted. Further, a recent district court decision from
the Eastern District of Virginia explicitly states that the
USPTO's decision to institute an IPR trial cannot be overturned
by a district court. See Dominion Dealer Solutions LLC v.
Focarino, 3:13-cv-00699 (E.D. Va) (holding that the plain
language of 35 U.S.C. § 314(d) is "quite clear" that
the USPTO's decision to institute IPR is "final and
nonappealable"). The Federal Circuit ruled similarly on
April 24, 2014, that under the AIA, it does not have authority to
hear appeals on whether to institute IPR, at least not until after
a final decision, and perhaps not even then. See St. Jude
Medical, Cardiology Division, Inc. v. Volcano Corp., et al,
(Fed. Cir. Case No. 2014-1183, Appeal of IPR2013-00258) (pointing
to the plain language of the statute, 35 U.S.C. § 314(d),
particularly "whether to institute an inter partes review
under this section shall be final and nonappealable," and
holding that this language "may well preclude all review by
any route," and "certainly bars an appeal of the
non-institution decision here."). Once a petition is
granted, the outcome highly favors the challenger. In
approximately 70% of IPR trials, all instituted claims
were canceled, and at least some of the instituted claims were
canceled in the remaining 30% of cases. Out of the 40 final
decisions issued so far, only one IPR proceeding has resulted in
the PTAB finding all instituted claims patentable. See
ABB Inc. v. Roy-G-Biv Corp., IPR2013-00286, Paper 80 (April
11, 2014). However, it should be noted that these highly
favorable outcomes for petitioners may have resulted in part from
particularly strong cases being selected for the first IPR
petitions. The recent uptick in IPR petition filing may
indicate that petitioners are now bringing weaker cases, and could
result in the PTAB finding a higher percentage of claims to be
patentable.
6. The Patentee's
Ability to Amend the Claims is Limited: As IPR does
not provide for claim amendments as a matter of right, a patent
owner must move to amend its claims. See 35 U.S.C.
§ 316(d). First, the PTAB must grant authorization to
file a motion to amend. Second, the amendments are limited to
cancellation of any challenged claim and a "reasonable
number" of substitute claims. Id., 37
C.F.R. § 42.121. Third, a motion to amend is limited to
15 pages, which significantly limits the ability to amend. 37
C.F.R. § 42.24(a)(1)(v). Further, the PTAB has set a
high bar for the patentee to prove patentability of the amended
claims. Unlike initial patent examination or the old
inter partes reexamination procedure, the PTAB does not
examine the amended claims in IPR. Therefore, instead of
merely having to overcome the references identified by the
petitioner or the examiner, the patent owner in IPR has the burden
to prove "general patentability over prior art" in order
to amend. See Idle Free v. Bergstrom, IPR2012-00027
(Paper 26). A patentee cannot just show support in the
specification for the newly proposed claims and argue that the
limitations of the proposed claims were not taught or suggested by
the petitioner's identified prior art. Instead, in order
to establish patentability of the proposed substitute claims, the
PTAB has stated that a patentee must set forth the level of
ordinary skill in the art and what was previously known in the art
for each feature relied upon to show patentability. The
patent owner must either affirmatively state that it was the first
to have invented or developed that feature, or if not, where those
features existed in other contexts and how they worked.
See Idle Free v. Bergstrom, IPR2012-00027 (Paper
26). The burden to prove general patentability greatly limits
a patentee's ability to amend its claims. Nevertheless,
Chief Administrative Patent Judge James Donald Smith at a PTAB
roundtable discussion on April 15 hinted that an upcoming PTAB
decision will provide guidance for patent owners to amend claims
successfully.
7. Estoppel is
Limited: Although a petitioner is estopped from
rearguing the bases of invalidity argued (or that could have been
argued) at the PTAB, estoppel does not reach all invalidity
arguments. Only patents or publication prior art may be
raised in IPR proceedings, and therefore a petitioner can only be
estopped from arguing invalidity on those bases. A defendant
could still raise other bases for invalidity in district court,
such as non-patentable subject matter, statutory bars triggered by
public use or sale, or lack of sufficient written description and
enablement. Further, if the parties settle and the IPR trial
is terminated with respect to the petitioner, estoppel does not
attach to the petitioner. See 35 U.S.C. §
317(a). Similarly, if the USPTO decides not to institute the
IPR trial, estoppel does not attach to the petitioner.
See 35 U.S.C. § 315(e).
8. Timing is
Generally Faster: Median time to trial in district
court is around 2.5 years, with significant variations across
jurisdictions. PricewaterhouseCoopers LLP 2013 Patent Litigation
Study. In comparison, IPR trials are instituted within
six months after the petition is filed (37 C.F.R. § 42.107(b);
35 U.S.C. §314(b)), and the PTAB must come to a final
determination within one year of institution, with a possible
six-month extension for good cause. 35 U.S.C. §
316(a)(11).
9. It Could Save
Money: Initiating a proceeding at the PTAB costs
$9,000 to petition, plus a fee of $200 for each claim over
20. Once initiated, there is an additional $14,000 fee, plus
a fee of $400 for each claim over 15. From there, the fees to
take a PTAB proceeding through completion generally range from
$200,000 - $750,000. In contrast, a patent lawsuit costs an
average of $530,000 - $3.6 million through the end of discovery,
and $970,000 - $5.9 million through final disposition. AIPLA Report of the Economic Survey
(2013). In part, this may be because district court
litigation typically involves increased discovery costs, hearings
and additional issues, including infringement, which is not
determined at a PTAB proceeding. However, if the litigation
is not stayed, you may not save that money as IPR and district
court litigation may be forced to proceed concurrently.
10. PTAB Has
Technical Expertise: In contrast with most district
court judges and juries, the PTAB is staffed with experienced
patent attorneys with technical backgrounds. Familiarity with
patent law and greater technical understanding favors petitioners,
particularly where the technology or aspects of patent law at issue
are complex.
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.