About a year after the introduction of the post grant challenge (PGC) options, you probably have some idea about PGCs and how to deal with the unique rules of this forum. (If you need a refresher on that, read here.) What a lot of us are left wondering is how exactly to decide whether to use one of these options. I’ll elaborate on one approach that may provide some guidance: 1) Weigh the pros and cons; 2) Think about the timing of filing; and 3) Evaluate the nature of your argument.
Assuming there’s enough at stake for your client to go this route, you’ll first want to weigh the pros and cons of filing a petition.
Advantages of PGCs
“From an in-house perspective there’s no question that the various new post grant challenge options under the America invents Act are really a major shift in strategy; it’s a major step in the right direction,” says Samir Pandya, Senior IP Counsel of the Global Litigation Group at SAP, at the 2013 AIPLA Annual meeting.
A goal of nearly every defendant is to lower the total cost of resolution of any legal issue. As counsel for the defendant, you have to weigh the settlement and licensing costs of a patent dispute against the total defense cost and how long it takes to resolve the dispute with certainty. Today, CBM, IPR, and PGR are the lowest possible cost options.
Speed is one of the biggest benefits. The statute requires that a PGC proceeding must be completed in 12 months after institution, and in rare cases this extends to 18 months if the PTAB exercises a good cause exception. APJs are motivated to stay on deadline. “We got… one case where a district court judge ordered us to decide in a certain amount of time [so he could justify granting a stay], and we were like we gotta do this in a certain amount of time. All of our heads were spinning,” says Acting Deputy General Counsel and Solicitor for Intellectual Property Law for the PTO, Nathan Kelley.
Next, there’s the favorable broadest reasonable interpretation (BRI) claim construction standard. With this standard you resolve all ambiguities in favor of a broader construction. Conversely in district court the claim is given “ordinary and customary meaning.” Phillips v. AWH Corp., 415 F.3d 1303, 1312-18 (Fed. Cir. 2005) (en banc) (describing the claim construction standard in district court litigation). The BRI claim construction standard helps in IPR, because it’s easier to invalidate a broader claim. It could help in district court litigation in the same way, and make it easier to invalidate on §101 or §112 grounds that cannot be addressed in IPR. There has been debate about whether or not it’s okay to have two different standards, one in the PTO and one in district court. (In fact there is proposal within the Innovation Act to change the BRI standard to the district court standard in PTAB proceedings.) The PTO has taken clear position that BRI is the standard to apply, since it’s the standard they apply before reexam. Many say that the sheer fact that you can amend the claim in a PGC justifies having two standards. “It’s certainly fair to have same standard that you had during prosecution,” says Pandya.
The PTAB is a better venue to litigate, because a lot of district court judges out there simply don’t understand patent issues. The PTAB is more perceptive on detailed specific issues. You can better litigate more arcane patent defenses/issues at PTAB, like patentability, patentable weight, effective filing date, and –in the case of CBM and PGR–§112 and §101 issues.
In addition to making PGC options a cheaper alternative, all of these factors contribute to better chances of winning. Although we don’t have enough information on PGCs yet to determine success on merits once instituted, we do have some stats on ex parte reexamination and inter parte reexamination, which would be the closest analogy to the new PGC options. According to the PTO’s Ex Parte Reexamination Filing Data report and the Inter Partes Reexamination Filing report, as of September 30th of this year, 31 percent of inter partes reexamination resulted in all claims being cancelled, whereas only 12 percent of ex parte reexaminations resulted in cancellation of all claims. The fact that the percentage of inter parte reexamination claim cancellation is more than double the ex parte reexamination gives us an indicator of likely success on IPR/PGR/CBM in place of litigating in district court.
More advantages exist outside the PGC proceeding itself. First is that using a filing or decision to institute a PGC will be more persuasive than using opinion of counsel to negate intent for willfullness or inducement, which lowers the risk of that being an issue. Second, pursuing a PGC can lower defense costs in concurrent litigation, because there’s less discovery required and either no or few invalidity defenses to prepare.
It seems PGCs could be the solution for the many large companies who are constantly dealing with threats of law suits, especially from NPEs. “It’s become so common that your management is tired of settling cases or disputes or paying license for things in small amounts, because volume is so high it gets to be too much,” says Pandya. “Really in a lot of these situations people want to fight on principle. They say, ‘If I pay this now I’ll [have to] pay 15 other guys.’” The new PGC options allow you to be in a better position to fight back– at a lower cost, with a better chance at success, for a lower total cost of resolution.
Disadvantages of PGCs
“I started to write a list, and there’s a lot more pros than cons,” says John Whealan, Dean for Intellectual Property Law Studies at the George Washington University Law School. So why shouldn’t you do it?
Well, you could lose. At the moment, there’s only one final decision. So despite all of the advantages that we can tell our clients about this forum, there isn’t really any predictability in this system yet. We can’t honestly say with any certainty to our clients that that there’s an X percent chance of winning here.
Before IPR/PGR/CBM were options, the PTO considered estoppel issues brought up by inter partes reexamination in Belkin Intl., Inc. v. Kappos, Appeal No. 2012-1090 (Fed. Cir. October 2, 2012). There the requestor argued against the PTO’s limitation of prior art, because he didn’t want to later be estopped in district court for something he “could have raised.” The PTO said that was too broad a view of estoppel but also that the district courts have the final say on that not the PTO. You can see how this situation would arise in PGC proceedings too. The Board is going to grant review in these PGC proceedings, after which some claims will be gone, some will be amended, and some may survive. Those that survive will create statutory estoppel, to address the situation where a petitioner also has a case in district court. “Just like congress is trying to give choices [of where to litigate] to petitioner, they’re also not trying to have the patentee get hit twice,” says John J. Marshall, law professor at Villanova University School of Law, previously Of Counsel at Drinker Biddle. IPR estoppel is for grounds of invalidity that were raised or reasonably could have been raised. So if you could have raised an invalidity argument but didn’t in the PTAB, you could be barred from pursuing this in district court in your noninfringement suit. We know that the PTAB isn’t going to be too concerned about the petitioner getting two bites at the apple. See Ariosa Diagnostics v. Isis Innovation Ltd., (holding that an affirmative defense of invalidity in district court did not bar the petitioner from filing for an IPR).
You might think that district court would interpret estoppel broadly in fairness to the patent owner, but actually the language of 35 U.S.C. § 315(e) in conjunction with 37 C.F.R. §42.1 et seq seems to have successfully conferred a narrow interpretation of estoppel. Estoppel is only going to apply to individual claims and only going to apply to grounds for which review was authorized. Estoppel with PGR would be a huge issue since you can only file for PGR in the nine months after the patent issues, and it seems unlikely that you’d want to even risk barring yourself from any invalidity defenses so far in advance of a potential infringement suit. The Innovation Act is supposed to change estoppel provisions of CBM, where currently you’re basically estopped for anything you could have brought. It’s trying to change that so you’re only estopped for issues you actually bring, which would likely lead to more post-grant review, says Marshall.
You could lose out on some of the benefits you would have had in district court if you choose the PTAB instead. For example the PTAB doesn’t look at every issue that you raise, since they’re focused on time. In district court, you at least get to look at more of the issues.
Some people argue that in practice the BRI standard isn’t actually that different than the district court standard for claim construction. In fact, in In re Giuffrida (Fed. Cir. 2013) (non-precedential), the Federal Circuit reversed a PTAB decision for applying an overly broad construction under BRI. Furthermore, given that there are proposals to change the BRI standard, maybe that means it’ll soon be lost anyways, or more likely, the district court standard and the PTO standard will converge. (On the other hand, we might have PTO deference issues, so we’ll have to see how this one plays out.)
The speed which this forum brags about may also soon expire. If we keep going on this trajectory and the number of petitions gets too high, we’ll have a problem with the PTO staying on deadline. It’ll likely be fine in the short term at two or three years out, but once we hit that five year mark the system might get back logged, and then all those benefits associated with timeliness could vanish.
After you have an idea of the pros and cons of filing for a PGC, you’ll need to take into account timing. (For example, the cons may outweigh the pros for your client if you file a petition after a Markman hearing.) Let’s talk about different times you can file a petition.
Right after you get threats to sue or license offers is a good time to consider using a PGC. Pandya spoke about a situation where he was approached by an NPE who made a threat against his company and also made threats against others, and it was petitioned by another company. Because of that pending petition, the NPE told Pandya why exactly they were suing, and the discussion became much more of a rational reasonable talk. “It’s certainly a great option to avoid litigation for yourself and for some other folks in a similar situation,” he says. Choosing a PGC option this early switches the conversation to more about how to resolve the case sooner on the merits or through settlement, and this could help you avoid litigation or negotiate better license terms.
You might also consider a PGC option when a customer of yours is being sued or threatened with suit. As a result of the large number customer lawsuits being filed by NPE’s, that’s a risk to think about as well, and a PGC could help you reduce that risk. Every time a customer gets sued they come to you for indemnification, and while the contract terms allow many companies to say they really don’t owe the customer any obligation, the customer relations benefit not just for one customer but for thousands across the nation may be worth the low(-er than litigation) cost of a PGC. Then again, if you aren’t obligated to indemnify the client and you don’t have to spend any money on helping them, even a PGC may be too big a cost to incur if the customer relations benefit isn’t big or if not many customers are affected by it.
Litigation is an obvious time to consider a PGC. Doing something very closely after you’ve been sued is a good time to use one of these options. If you file a petition early you’ll mostly likely get a stay in most district courts, whereas if it’s further along in the case the district court is less likely to grant stay. Filing immediately will allow you to focus on your invalidity arguments in the PGC proceeding. You’ll be opened up to all those advantages within PGCs that we discussed earlier–speed, better informed judges, and so on– and after the PGC proceeding concludes and invalidity options have been dealt with, you’ll get that lower cost of defense in district court litigation.
If you have a lot of claims and you have to wait to get the infringement contentions to know what claims refer to, you have to weigh the advantage of filing early and how valuable your stay is against not knowing enough about what the patent owner is going to allege you’re infringing. The downside of waiting too long is you might already be in a place where you’ve got Markman, and then you won’t get the advantage of a PTO proceeding’s BRI claim construction affecting you later on in Markman.
Something that’s unique to the nature of post grant challenges is they also lend themselves to being an attractive option even after you lose, says Pandya.
Evaluating the Nature of Your Argument
In choosing between the PTAB and district court, the question is whether the district court judges and juries, or three APJs trained in patent law are better suited to get the claims right. The technical expertise of the APJs mean the Board provides a more predictable result, again with the caveat that there isn’t much data on this yet. True you may lose in a PGC proceeding, but you also may lose in district court. “At least if you lose in PTAB, you’re more likely to lose for the right reasons,” says Marshall. That’s of course assuming that you have a strong invalidity argument.
If you’ve got a flimsy case then maybe you don’t want a technically informed patent judge who is better equipped to spot the holes in your argument. Maybe in that situation you’ve got a better chance with the jury at district court. You might save a bad case by putting it in district court and hoping the court errs in your favor. Maybe you pursue the more arcane patent issues in the PTAB and leave jury-appealing defenses for out of PTAB. That being said, that’s still a gamble since the Federal Circuit could correct that error. It might be worth the risk though, because if you have a mediocre invalidity argument and a strong noninfringment case, losing at the PTAB would have a hugely negative impact on the noninfringement case. If you lose on invalidity you’re likely still stuck with that broad construction, and then the patent owner can more easily get you on infringement in district court.
These factors will hopefully give you a general idea of whether a PGC option is right for you.