The PREVAIL Act Won’t Work Unless PTAB Incentives are Balanced

“By allowing both sides to file a petition, the PTAB’s invalidation rate can attract petitions from either side…. This opens the possibility to balance invalidation rates with the courts and not push the PTAB out of business.”

opinionThe PREVAIL Act addresses current rules that enable gamesmanship at the Patent Trial and Appeal Board (PTAB) by huge corporations against small inventors, startups and other patent owners, and that increase invalidation rates. It introduces standing requirements, establishes a clear and convincing evidence standard to invalidate a patent, ensures a code of conduct is put in place for administrative patent judges (APJs), and more.

While these changes are well-intended, due to the PTAB’s perverse incentive structure, the PREVAIL Act will only be marginally effective, and may have no real effect at all. In order to balance the PTAB’s currently astronomical invalidation rates, one option is to allow patent owners to petition the PTAB to review their own patents.

The Backdrop

The PTAB was established in the U.S. Patent and Trademark Office (USPTO) by the Leahy Smith America Invents Act (AIA). Its intent was to serve as an alternative forum for challenging the validity of issued patents that is faster and cheaper than federal court.

However, the PTAB has proven to be an utter failure, invalidating 84% of the patents it fully adjudicates, adding years to court cases, and increasing costs by hundreds of thousands of dollars.

The reason for this failure is an incentive system that drives the PTAB to invalidate patents at extremely high rates just to maintain its operations. Without tackling this underlying problem, no legislation will fix this failing experiment on the U.S. innovation engine.

PTAB Incentives Drive Patent Invalidation

The PTAB is funded by fees it collects for Inter Partes Reviews (IPR) and Post-Grant Reviews (PGR). It cannot sustain its operations without a significant number of petitions for IPRs and PGRs.

Only those seeking to invalidate patents – infringers and their agents – are permitted to petition the PTAB to challenge a patent’s validity. Patent owners are explicitly barred from petitioning on their own patents. When a petition is filed, a patent owner must defend their patent or abandon it. This one-sided framework means that the PTAB’s sole customers are those who seek to invalidate a patent – infringers and their agents.

Because the PTAB’s only function is to invalidate patents, its invalidation rate is the PTAB’s value proposition to attract petitions. To encourage enough petitions, the PTAB must maintain a significantly higher invalidation rate than federal courts. Failure to do so would result in a lack of petitions, jeopardizing the PTAB’s existence.

These incentives heavily bias the PTAB towards invalidating patents at an exceptionally high rate, creating a system that cannot prioritize a fair evaluation of patent validity.

The USPTO Acts on the PTAB’s Warped Incentives

Driven by these incentives, the USPTO has demonstrated it will take actions to increase invalidation rates while ignoring actions that could reduce invalidation rates.

For example, petition fees do not cover the PTAB’s cost of conducting IPRs and PGRs by as much as 50%. The USPTO has refused to bring its fees in line with its costs, presumably because increasing fees would reduce the number of petitions filed. In addition, the USPTO introduced incentives for infringers to file petitions by offering substantial refunds of the infringer’s petition fees if the PTAB does not institute the petition.

In other examples, APJs have no code of conduct and handle cases where their former employer is a petitioner. A conflict of interest of this sort increases the likelihood of invalidating the patent. Any USPTO Director since 2011 could have put in place a code of conduct, yet none have. On multiple occasions, when an original panel of APJs refused to invalidate a patent, the USPTO stacked the panel with new APJs so it would invalidate the patent. The USPTO then retaliated against a whistleblower who brought this to light. Incredibly, the USPTO implemented a bonus program for APJs that incentivizes higher rates of invalidation – APJs actually receive higher bonuses to invalidate patents than they do to hold them valid.

These are just a few examples.

The PREVAIL Act Will Not Help Unless It Addresses These Problems

The list of possible rules, policies, and incentives (collectively “rules”) at the PTAB is virtually unlimited.

It is impossible for Congress to write all the possible rules that can affect invalidation procedures at the PTAB. What Congress doesn’t specifically codify is left to the discretion of USPTO management to make rules, which will ultimately determine the effectiveness of the PREVAIL Act.

The USPTO will continue to act on the perverse incentive structure to keep invalidation rates high and will form new rules to that end. The USPTO has demonstrated a reluctance to engage in Administrative Procedure Act (APA) rulemaking, which has resulted in Big Tech and US Inventor each suing the USPTO on different fronts, unsuccessfully demanding that the USPTO adhere to APA rulemaking. When the USPTO puts rules (not codified in PREVAIL) in place and those rules prove harmful, Congress must pass yet more legislation to correct the errant rules.

Unless the incentives are balanced, this will repeat itself year after year until all the possible rules that can be written are codified by Congress to force the PTAB into a fair tribunal.

It’s anybody’s guess how many years that will take. In the meantime, investors, overall a pretty smart lot, will not invest in startups because patents covering their core technologies can so easily be destroyed.

Balancing Incentives

Fixing the PTAB’s astronomical invalidation rates absolutely requires balancing incentives.

The first step toward balancing incentives is to create opposing customers for the PTAB so petitions can be generated from either party involved in a patent dispute. This can be done by allowing patent owners to petition the PTAB to review their own patents. By allowing both sides to file a petition, the PTAB’s invalidation rate can attract petitions from either side. If the invalidation rate is higher than the courts, infringers will be encouraged to file petitions. If it is lower, patent owners will be encouraged to file petitions. This opens the possibility to balance invalidation rates with the courts and not push the PTAB out of business.

This can be accomplished by deleting just eight words “who is not the owner of the patent” from §311 Inter partes review and §321 Post-grant review:

(a) In General.—Subject to the provisions of this chapter, a person who is not the owner of a patent may file with the Office a petition to institute an inter partes review of the patent. …

However, that doesn’t change the incentive structure because infringers have significantly greater financial resources to pay petition fees than most patent owners. Since more petitions can be filed by those with more money, the PTAB is still incented to produce high invalidation rates.

The second step creates that balance by requiring mutual consent of both parties to initiate a petition. When an infringer petitions the PTAB, the patent owner must consent, and vice versa. This aligns patent law with copyright law and, importantly, takes invalidation rates off the incentive table.

If PTAB invalidation rates are not in line with the court, it will lose petitions because one party or the other will choose to avoid the PTAB and instead stay in federal court. On the other hand, if the PTAB brings its invalidation rate in line with the court, the PTAB’s value proposition becomes that it is faster and cheaper, as it was set up to be in the AIA, and both parties will consent to the petition.

This can be accomplished in §312 Petitions and §322 Petitions, the requirements that must be met to institute a petition, by simply adding an additional requirement: “(6) All parties, including the patent owner, consent to the petition.”

Rebalancing incentives encourages the PTAB to become an impartial forum because invalidation rates can no longer be used as an incentive to attract petitions. Instead, the PTAB becomes an alternate venue that must use its ability to be faster and cheaper to attract petitions, finally fulfilling the original intent of the AIA.

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Author: maxkabakov
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Join the Discussion

13 comments so far.

  • [Avatar for Fleur Tehrani]
    Fleur Tehrani
    August 16, 2023 01:38 am

    IPR procedures are disastrous for individual patentees and small businesses. I do not see many patentees challenging the validity of their own patents if this incentive is added to the bill. However, I can see very important provisions in the PREVAIL act such as introducing standing requirements and establishing a clear and convincing evidence standard to invalidate a patent. If this bill is passed, it will help many patentees in the US. I think PREVAIL needs to be supported by US inventors.

  • [Avatar for Tracy Neal]
    Tracy Neal
    August 13, 2023 06:00 pm

    One of my greatest concerns is that the PREVAIL Act is merely another method to stifling American Innovation. As an inventor and small business owner, it is a daunting task when you realize you may have to defend your patent(s) against the ravenous corporate lobbyist and their legal teams. I understand that individuals are motivated by incentives, however I truly believe that these incentives must be balanced if we are to foster a truly innovative landscape in America.

  • [Avatar for Anon]
    August 12, 2023 06:34 pm


    You are not correct – and there is no need for such. See 35 USC 282.

  • [Avatar for Jen Wallace]
    Jen Wallace
    August 11, 2023 04:39 pm

    A patent owner would seek to institute an IPR on their own patent if doing so might result in more certainty for prospective investors and licensees.

  • [Avatar for Jen Wallace]
    Jen Wallace
    August 11, 2023 04:38 pm

    A patent owner would seek to institute an IPR on their own patent if doing so might result in more certainty for prospective investors.

  • [Avatar for Pro Say]
    Pro Say
    August 11, 2023 12:07 pm

    The cancer which is the PTAB continues to spread throughout America’s innovation body.

    There is but one cure — one permanent cure — for this insidious, shape shifting cancer.

    The complete and total excising of this cancer — the abolishment of the PTAB.

    Nothing else will insure the Death Squad will never again infect and kill off American innovation. Nothing. Else.

    Second best treatment for this innovation cancer is the passage of the well thought out PREVAIL Act.

    With but one tiny (yet American innovation-critical), fair-to-both-sides addition:

    That both parties have to agree to have the PTAB adjudicate their patentability dispute.

    Just as is regularly and successfully done with mutually-agreed-to binding arbitration.

    That will be the quicker, easier, cheaper solution that Congress intended with the AIA / PTAB.


  • [Avatar for Anonymous]
    August 8, 2023 08:48 am

    The balance you seek is already available in federal district court. Venue statutes are presently read to favor the defendant, so, rightly or wrongly, accused infringers get their “home field” advantage. That is tempered by the patent owner’s right to a jury, reducing risk that an infringer in his hometown can politically control and overly influence the fact-finder.

    There is no balance achievable at the PTAB, since the jury is gone, by definition. APJs will always be subject to political bias, which is why no reasonable patent owner would ever consent to an APJ as fact-finder rather than a jury. And no patent owner would seek to institute an IPR on his own patent.

    An infringer’s desire to avoid a jury should never trump a patent owner’s right to a jury. Congress cannot explain how it can rightfully deprive a patent owner of a jury, other than Big Tech political favoritism and cronyism.

    If individual inventors must be forced to swallow PREVAIL, then there should not only be a standing requirement, but a 3-year time limit. A patent’s validity should be incontestable *at the PTO* three years after issue, leaving plenty of time in that 3 years for “wrongly issued” patents to be challenged via IPR. If a jury trial must be compromised away – a premise I don’t buy – then this limited-time compromise is the way to do it.

  • [Avatar for concerned]
    August 8, 2023 05:26 am


    My claims were rejected for three different reasons by three different government entities. My attorney argues as much as so does the amicus submitted by U.S. Inventor. Hardly a clear and just process.

    I agree 100% with you that the problem is not the practitioners. The court cases and process are so precarious and capricious that any outcome is possible, good or bad, on any claims.

    The posters on this forum, and there are several, who think their work is above others, can easily be shot down during their prosecutions by selecting certain court cases while ignoring the court cases that support their application.

    The Honorable Judge Michel calls it writing law in the judge’s own image.

  • [Avatar for EC DeSpain]
    EC DeSpain
    August 8, 2023 02:09 am

    This would be an excellent way to address the issues of the PTAB. Invalidation rates are too high (84%) vs regular courtrooms where patent holders succeeded (63 – 77%) of the time according to a study conducted by PricewaterhouseCoopers, “Big cases make headlines, while patent cases proliferate”.

    These proposals would do a great deal to bring the PTAB back into balance and allow inventors in the US to compete with their foreign inventor counterparts and companies on a more level playing field.

  • [Avatar for Lab Jedor]
    Lab Jedor
    August 7, 2023 02:33 pm

    “In my experience at least 80% of practitioners who write and prosecute software cases won’t do a good job of it. That the PTAB invalidates around 80% (many being software, I think), is of no surprise.”

    Not a surprise? It is a bloody shame. How in the world does the USPTO allow and issue patents on that scale that later are invalidated by the same USPTO. It suggests that something is seriously wrong with the USPTO, not with the practitioners.

    It is a repeat of unfounded allegations about software patents. The whole process inside the USPTO is so unpredictable that practitioners have no objective measure to assess the quality of an allowance by an Examiner. What is a practitioner to say after an Allowance: “Thank you Examiner but your reasons for allowance are incorrect. ”

    I would recommend that anyone with a case on a computer-implemented invention keeps the case alive with a continuation or continuation-in-part. If you can afford it. The USPTO cannot be relied upon. (80% makes the examination process fundamentally unreliable, especially as it concerns valuable inventions). And that is the sad truth.

  • [Avatar for Addy]
    August 7, 2023 10:35 am

    Interesting suggestions – it’s nice seeing something like this from US Inventor.

    Agree that the Prevail Act isn’t going to change much on its own, and many of your recommendations here make sense.
    – code of conduct for APJ’s – this is needed as similar codes of conduct for any judicial position. It’s appalling that the USPTO hasn’t adopted something yet…their faith in human nature is disturbing.
    – enabling any person to institute a PTAB proceeding; although I was “in the room” when the current language was developed, there was such a strong anti-troll sentiment that enabling the patent owner to institute was never contemplated. With the passage of time and wisdom of hindsight, we should revisit this, and other aspects. Agree that the patent owner should be able to institute.

    As to requiring consent of both parties – I’d need more to be convinced. While the notion that the PTAB is “faster and cheaper” is what we hear, the real intent was to give the USPTO (with its strong expertise in technology and patent law) another bite at the apple to take out patents that shouldn’t have been issued.

    As to the financial biases – is there a white paper presenting an opposing view you could point to? Hearing the side from US Inventor certainly makes it look bad (and maybe it is), and I’d like to see an opposing view.

    The one piece of the puzzle I’d like to throw in is choice of patent counsel for individual inventors and smaller businesses. All patent practitioners are not created equal, and just because a patent was issued doesn’t mean it should have been issued. This is especially true in software-based innovation.

    Patents aren’t stamped out like hubcaps, in spite of what everyone seems to think. Unfortunately, individuals, smaller businesses (and even many big businesses) don’t know how to choose good patent counsel for their software cases, usually going with a recommendation from a friend (who doesn’t know how to choose counsel), or a lawyer (who also doesn’t know…this includes many in house IP counsel).

    In my experience at least 80% of practitioners who write and prosecute software cases won’t do a good job of it. That the PTAB invalidates around 80% (many being software, I think), is of no surprise.

    In addition to your reforms, there needs to be something to get the patent bar up to snuff.

  • [Avatar for chris shaw]
    chris shaw
    August 7, 2023 10:14 am

    Hello Margaret. This is a vital topic, and I’m very interested in your view (as well as everyone else’s). Could you please restate it with more detail and less snark? Thanks.

  • [Avatar for Margaret]
    August 7, 2023 05:28 am

    Hmm, let’s re-make the old Board of Appeals and pack it with litigators from outside the Patent Office who have a completely different mentality about patents- what could possibly go wrong?