Lessons From The First Year Of Post Grant Proceedings In The U.S.

By Tom Engellenner

Much has occurred during the first year after the America Invents Act (AIA) established several new procedures for the public to challenge issued patents and a new administrative court to hear these cases. Here are some observations on the first year of this evolving practice.

1. Many More IPR Petitions Have Been Filed Than CBM Review Petitions.

Although Congress expected the Covered Business Method (CBM) review process would be widely used by irate businesses tired of dealing with so-called “business method” patents, only 67 CBM petitions were filed during the first year compared to nearly 500 petitions for Inter Partes Review (IPR). Many practitioners thought the more expansive grounds for challenge in CBM review (permitting challenges based on prior public uses and sales as well as prior art publications) would have piqued more interest, especially in tandem with recent Supreme Court decisions roundly criticizing non-technological patent claims. However, IPRs have been more widely invoked, probably reflecting the much larger number of non-business method patents being asserted in litigation.

2. The PTAB is Quite Willing to Initiate IPR Proceedings when a Petition is Filed

Over 86% of the IPR petitions filed in the first year have been granted –at least in part. In some respects, the assumption that the standard for granting IPR review would present a higher hurdle than the old standard for granting inter partes reexamination was unfounded. Actually comparing the new and old standards is a bit like comparing apples and oranges. Under the old inter partes reexamination rules, a requestor had to prove there was a “significant new question of patentability” – the so-called “SNQP.” In contrast, the IPR petition must pass a “reasonable likelihood of success” test.

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The high percentage of trial that have been initiated masked another unexpected finding: Very few petitions (only 8.3%) are granted in full. The PTAB has in most cases whittled away the number of grounds that it will hear under a doctrine of “redundancy.” According to the emerging jurisprudence, if two different references are cited for the same argument (e.g., anticipation), the Board will find “horizontal redundancy” and will only consider one of the references unless the Petition provides a cogent argument that references provide substantially different teachings. Similarly, if a reference is cited for both anticipation and obviousness, one of these grounds will be denied consideration due to “vertical redundancy.”

3. Most IPR Petitions Have Been Filed Against Non-Practicing Entities

From September 16, 2012 to September 15, 2013, 483 petitions were filed. Of these 483 petitions, 61 percent were filed against non-practicing entities (NPE’s). If you consider universities as NPE’s, the number jumps to 65%.

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Additionally, most of the cases brought against the patents of NPE’s and universities involved patents that had been asserted in litigation and the petitioners were defendants in such litigation. During FY2013, 403 of the 483 petitions (83%), in fact, were related to litigation between the same parties.

4. Many Federal District Courts Are Willing To Stay Infringement Litigation for PTAB Review

Of those 403 petitions that were related to litigation, defendants sought to stay the underlying litigation in 159 of the cases and were successful almost three-quarters of the time:

If anything, the chances of a stay being granted are likely to go up as time goes on. Several of the decisions denying stays based on a petition being filed indicated a willingness by the court to revisit the issue if the petition is granted.

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5. ITC Actions Are Unlikely To Be Stayed for PTAB actions

Unlike patent infringement suits in the federal district courts, a section 337 action brought before the International Trade Commission (ITC) is subject to a statutory mandate that the trial be completed within one year of their initiation. The administrative law judges presiding over unfair competition trials against importation of goods that infringe patents have cited this mandate in denying stays in each instance sought by the respondents.

 6. The Use of Expert Declarants to Support Review Petitions Has Become the Norm

In most of the 180 decisions on petitions during fiscal 2013, nearly ninety percent of the petitions were supported by the written testimony of one or more experts who opined on what would have obvious to a skilled person in the art

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The use of experts was predicted (if not subtly encouraged) by the USPTO when promulgating the final rules for proceedings. The PTO’s Trial Practice Guide states: “The Board expects that most petitions and motions will rely upon affidavits of experts.”

Nonetheless, there is little correlation so far between use of an expert and favorable disposition. That is to say, petitions without expert declarants have resulted in initiation of review proceedings and petitions are being dismissed despite expert testimony that the patent is obvious.

The PTAB Trial Practice Guide explicitly provides a warning to parties who use experts: “[o]pinions expressed without disclosing the underlying facts or data may be given little or no weight.”

Since the principal issue in most review proceedings will be an inquiry into level of knowledge of a “person having ordinary skill in the art,” an expert can set the table by helping define the relevant art and level of knowledge expected by such a hypothetical skilled artisan.  Additionally, claim construction (the proper meaning of each limitation of the challenged claims) will typically be another important issue –and one where an expert can again bolster a petitioner’s case.

7. Filing a Preliminary Response is Usually a Good Strategy for the Patent Owner

If an IPR petition is weak, a preliminary response may dispose of the case entirely.  For example, if the petitioner has failed to address an element of a claim, asserts a very unreasonable claim construction or incorrectly identifies a reference as prior art, a response may bring this error into stark relief.

Another reason to file a preliminary response is to narrow the issues.  As noted above, several Board decisions have denied redundant or cumulative combinations of references.  A preliminary response can highlight a petitioner’s failure to distinguish various references from each other and thus set the stage for dismissal of many of the petitioner’s alternative grounds for invalidity.

According to one analysis, in cases where the patent owner filed a preliminary response, the PTAB granted trial about 85 percent of the time, and in contrast, for the cases in which the patent owner did not file a preliminary response, the PTAB granted a trial about 94 percent of the time.

 8. The PTAB Panels Are Very Reluctant To Grant Additional Discovery

Parties to post grant proceedings are entitled to “routine discovery,” i.e., the documents relied upon by the other side and an opportunity to cross-examine (via deposition) the opponent’s testimonial declarants (experts). All other discovery is considered “additional discovery” and must be approved by the Board. In most instances where a party has sought additional discovery, the PTAB has denied the request by applying an “interests of justice” standard, which is stringently applied. For example, in Garmin v Cuozzo, (IPR2012-00001) the board stated: “The mere possibility of finding something useful, and the mere allegation that something useful will be found, are insufficient” to satisfy the “interests of justice” standard. In fact, the Board went on to explain that “[t]he party requesting discovery should already be in possession of evidence tending to show beyond speculation that in fact something useful will be uncovered.”

9. Settlement Is Not As Easy As Most Practitioners Thought

The America Invents Act (AIA) seems to encourage settlement by providing: “[An IPR] shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner, unless the Office has decided the merits of the proceeding before the request for termination is filed.” However, terminating a proceeding with respect to the petitioner does not mean the case is over. Several PTAB panels have concluded that if the parties have each submitted their evidence, the PTAB can continue on to conclusion with or without the petitioner.

10. So Far, The PTAB Has Been Very Tough On Patent Owners

Twenty-two of the original 483 IPR proceedings have now reached final judgments. In 19 out of 22, the PTAB has found all of the challenged claims invalid. In the other three, the panels ruled partially in favor of the Petitioner and canceled some of the challenged claims. So far, no patent owner has successfully defended all of its challenged claims.

The situation is even more stark when the number of claims in issue are considered. The 22 final judgments so far have adjudicated 266 claims, of which 254 were canceled (94%) and only 12 claims (6 %) survived.

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