Kappos on Patent Trial and Appeal Board Trial Proceedings

David Kappos at PLI in NY, March 27, 2013.

I’m in New York City today at PLI headquarters on Seventh Avenue for the USPTO Post-Grant Patent Trials 2013 program. I will moderate a panel this afternoon, but as the day starts the first speaker is David Kappos, former Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office. Since leaving the USPTO at the end of January 2013, Kappos has landed at the New York offices of Cravath, Swaine & Moore, an extremely well regarded Am Law 100 firm and great place to land. It was good to see him, he says he is doing well, and he seems to have as much energy and enthusiasm as ever.

Kappos started by explaining that this is his first public speaking engagement since leaving the USPTO. From the outset he also explained that the slides he would be using for the presentation were prepared by the USPTO. This presentation was originally scheduled to be given by James Smith, Chief Judge of the PTAB, who had to beg off as the result of sequestration cuts.

This article is by no means a substitute for the presentation by Kappos. In 60 minutes he managed to bring everyone up to date on what is going on at the USPTO relative to Appeals and other post patent proceedings. Of course, there were a handful of things that particularly caught my attention. For that reason I also provide my thoughts and comments in the format of comments from the peanut gallery, or perhaps as a patent attorney equivalent to Mystery Science Theater 3000.  In order to differentiate my thoughts/comments from the FTC statement, my comments are italicized, colored, indented and tagged with the IPWatchdog logo.


Highlights of the Presentation

As of January 14, 2013, the USPTO has 164 Administrative Patent Judges and well on the way to doubling the size of the Board compared to where numbers were when hiring started. The USPTO’s goal for fiscal year 2013 is to hire an additional 60 APJs, bringing the total number of judges to over 200 by the end of FY 2013.

 MY TAKE: The USPTO has been on an impressive hiring run. The quality of the applicants is high, which means that the quality of the new APJs is outstanding. Many have had long and distinguished careers in the private sector, many have multiple scientific degrees, and many have PhDs. The quality of the PTAB APJs is excellent. One can really envision that the PTAB will be able to significantly dent the backlog in the coming years while still being able to deliver on the required timelines for completion of the AIA post grant trial proceedings. So far so good on timelines and scheduling. The USPTO seems to have quite accurately predicted the demand for these new proceedings and have staffed accordingly. Of course, Congress didn’t give the Federal Circuit any more resources to handle what will certainly be an increase in filings caused by the new USPTO post grant trial proceedings, but that is another story for another day.

The Board backlog crested at over 27,000 cases in October 2012, but has since come down and is now on a noticeable downward trajectory. At the USPTO the Board affirmance rate of examiners is 54%, with 29% reversed and 14% affirmed-in-part and reversed-in-part. Kappos said that this seems to be about right, and compared it with his knowledge of the affirmance rate of examiners in China. The rate of affirmance in China, for example, is upwards of 90%.

 MY TAKE: I don’t doubt these affirmance rates, but I think it is also completely appropriate to recognize that in more than a few cases patent examiners will prevent some applications from moving forward on appeal, instead pulling them back into prosecution. I have first hand seen some really atrocious rejections that are completely indefensible. These types of rejections are not allowed to go up on appeal because the examiners pull them back. It is unfortunate that some examiners game the system like this, but it is what it is unfortunately. Nevertheless, Kip Werking (one of our periodic Guest Contributors) has analyzed the data and has found that those who choose to appeal have over a 75% chance of obtaining a patent if you factor in those cases pulled back into prosecution. See 75% – The Real Rate of Patent Applicant Success on Appeal.

Kappos talked about some of the critics who complain that the new hires do not produce as much as those who are more experienced, whether they are APJs or new examiners. Kappos pointed out that this is exactly what you would expect to see anywhere, even at law firms. More experienced people produce more. In time Kappos said he has ever confidence that the newly hired Judges will be just as productive as the more senior APJs.

 MY TAKE: It should be self evident that those who are new do not produce as much. It is unrealistic to expect new employees anywhere to walk in and immediately produce at the level of more senior employees. In fact, if new employees can produce at the same or higher rate of senior employees that speaks volumes about the senior staff.

Kappos explained that the PTAB has started and will continue, in at least some cases, to issue shorter per curiam decisions, which will allow them to decide more cases and move through the backlog. Co-Chair of the program, Rob Sterne, asked Kappos whether this would present problems for those who might want to appeal to the Federal Circuit. Given the standards applied by the Federal Circuit will it be possible for an applicant ever be able to satisfy the standards? Kappos acknowledged that is a concern and why we will see hundreds of shorter per curiam decisions rather than thousands. Kappos explained that the USPTO wants these types of decisions issued only when the record is extremely clear, making a detailed decision of the Board less necessary.

 MY TAKE: I don’t know what I think about summary decisions. I understand that in some cases they need to be an option, where an appeal is brought for baseless reasons, for example. But if one goes through the effort of appealing a decision they believe is genuinely wrong I think that a summary decision that provides little analysis or insight makes one wonder whether they have received a fair shake, which is a greater issue for the administration of justice in a government that is supposed to be open and transparent. Perhaps what we need to do on all levels is to go back to a time when Judges were able to simply and straight-forwardly explain the decisions reached and why. Otherwise Courts and Tribunals on all levels are going to require far more resources, which seems sadly unlikely.

Kappos also discussed the reality that Congress required very tight timelines for the Board to complete their work within 1 year relative to the new post grant trial proceedings. He said this required the USPTO to adopt streamlined rules akin to the way that the International Trade Commission (ITC) approaches its work. Kappos suggested that what is really needed is to focus appropriately on the important issues rather than dumping all issues, including peripheral issues, which would only get in the way of the Board thoughtfully considering the issues that matter most.

 MY TAKE: I am a believer in moving forward with the best issues and not overloading any reviewing Judge or Court with superfluous issues. The reality is that going into any review it is difficult for any Judge or Court to believe that dozens of mistakes have been made, even if dozens of mistakes have been made. Of course, the temptation to raise every issue that could possibly be raised is sometimes too great. Obviously, the client has to buy into the strategy, but scatter shot appeals/reviews doesn’t seem likely to be a successful strategy for success.

What happens if one of these processes extends beyond 18 months? Kappos said, speaking for himself, thinks that there may be no jurisdiction for the USPTO for cases that take longer than 18 months. “Pencils down,” Kappos said. If the USPTO cannot get the case completed within 18 months the case may just be over unresolved, so there is real incentive for the USPTO to finish these things on time.

 MY TAKE: I have recently been wondering what would happen if the time maximum of 18 months was not satisfied. I’m not sure that it is a “pencils down” moment, but I don’t know what the outcome would be because I don’t see that the statute envisions the possibility that the USPTO would (or could) take longer than 18 months. My guess is eventually we will find out the answer after a case drags and either doesn’t get resolved or the decision gets rushed to the point where due process becomes an issue the Federal Circuit must address.

A question was asked about grant rate on post-grant petitions. The question suggested that the thought was the higher standard was intended to lead to more petitions being rejected rather than granted. The question said, however, that 24 of the first 25 IPRs have been granted. Kappos pointed out that with these post grant trial proceedings are playing in the big leagues, thus those who decide to move forward are serious, believe they have good prior art and have almost certainly hired extremely capable counsel.

Co-Chair Scott McKeown explained that when speaking with the Judges at the USPTO they are quite concerned that they will be viewed as “patent killers.” They have pointed out that in some cases where the petitions have been granted they have been granted to some, but not all claims.

Rob Sterne also raised in interesting question about “patent pirates,” asking whether there is any reason why one couldn’t just approach those with important patents and tell them that unless they are paid they would file post-grant trial proceedings against them. It seems to me that this could be an antitrust issue, not to mention just an old-fashion shake-down, but we know how well the patent litigation system has been at handling clearly shake-down, extortion-like lawsuits brought by the truly bad actors. More questions than answers on this topic, but stay tuned!


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One comment so far.

  • [Avatar for Old Examiner]
    Old Examiner
    March 28, 2013 11:36 am

    Everyone agrees the backlog at the Board needs to be reduced, but it shouldn’t be at the expense of of issuing quality patents. As has happened in the examination of applications where cases are transferred to art units unfamiliar with the art merely to reduce pendency, I know the same is true at the Board. Chemical Judges shouldn’t be deciding patentable subject matter in mechanical/electrical cases. It is unfair to the examiners, the applicants, and the public in general.