Legislation is Good, But the PTAB Needs a More Immediate Overhaul

Twenty years ago, Congress began hearing that the patent system needed a faster, cheaper way than district court suits to assess the validity of issued patents. Earlier procedures, particularly Inter Partes Reexamination, had proven unsatisfactory and were not widely used. Nor were they fast or inexpensive. Congress therefore decided to create a new procedure. What it came up with in the America Invents Act of 2011 (AIA) it called Inter Partes Review, or IPR.

The reviews were lodged in a new tribunal in the U.S. Patent and Trademark Office (USPTO) called the Patent Trial and Appeal Board (PTAB). Its administrative judges review patents based on less specific scientific expertise than the patent examiner that allowed the patent grant. However, the record before the PTAB is typically more extensive than what the examiner had, and both sides are represented by counsel. All the judges on that PTAB, though less expert, do have some technical training and are experienced in patent law and litigation. Their diligence is not doubted.

With a statutory deadline for completion of one year, IPRs have indeed proved faster. Because there is virtually no discovery of opponents’ documents or extensive motions practice, they are also far less expensive than full blown district court litigation. The AIA’s authors were concerned, however, that their new procedure would not harass patent holders and impose costs on them that might then be increased when a district court case is litigated. In line with this goal, Congress emphasized that the new procedure was to be “an alternative to expensive district court litigation.”

Intention versus Implementation

As implemented, however, the procedure nearly always opens a second attack on patents already being challenged in court. Thus, in many cases it is merely a way station to district court, not an “alternative”, adding risk and expense to owners of patents. Because repeated challenges are allowed and are common, the expense at the PTAB can greatly multiply. In addition to the defendant in infringement suits in district court, anyone at all can bring such a challenge, for any reason, at any time in the life of a patent. The challenger does not need to be threatened with enforcement of the patent or engaged in activities that could ever lead to being sued.

In court, only those injured or directly threatened may sue. Otherwise, they lack “standing.” Because PTAB reviews do not require standing, busybodies, ideological activists and even stock speculators have been allowed to attack patents. Nevertheless, most challenges are filed by Big Tech giants that are frequently sued in district court.

Importantly, the challenge can be mounted against all claims of a patent if even only one claim is thought to be likely to be held invalid. Most patents have a dozen or more claims. Often, one or more are intentionally broad enough to be possibly invalid. Consequently, many patents are easily brought into such challenges. Because one claim looks weak, all claims are placed in jeopardy.

The challenger needs only proof by a Preponderance of the Evidence (that the claim is more likely than not invalid), although in court proof by Clear and Convincing Evidence is required. That is a significantly higher burden of proof. Thus, it is easier to invalidate a claim in the PTAB than in court. Another effect is that sometimes the PTAB invalidates a claim already upheld in court. If there are conflicting decisions, it is the PTAB ruling that controls, an anomalous result since the courts are above the PTAB and review many of its decisions.

The lower burden of proof seemed justified because Congress was told the reviews were just a “second look” at the patent based on limited grounds. In examinations, claims may be freely and serially amended and even entirely replaced. Before the PTAB, though, amendments are rarely allowed, and there is nothing resembling the on-going “bargaining” between the examiner and the applicant over the allowable scope of claims.

IPRs begin with a petition which can be “instituted.” That leads to “trial”, but which in sharp contrast to court trials almost never have witnesses appear for live questioning. Thus, the three judges never see the experts who provided written reports and have no opportunity to hear them questioned by the attorneys, much less ask their own questions. Yet the panel often relies on the experts in its Final Written Decisions.

Congress’ Fix for Unintended Consequences Could Take Years

It seems doubtful that Congress expected such expert testimony because it strictly limited reviews to pre-existing documents, namely prior art patents and printed publications. In practice, however, most PTAB reviews feature “dueling” experts presenting diametrically opposing conclusions based on widely ranging opinions of what was known or obvious at the time the invention was made

As can readily be discerned regarding the features noted above, what Congress expected and what it got are fundamentally different, on many points—not merely different, but the opposite of what was intended.

The contrasts are sufficiently stark that Congress is now actively considering the PREVAIL Act, which conforms the conduct of IPRs to what Congress intended as well as more closely aligning them with practices in court. PREVAIL provides fixes for the AIA’s unintended IPR design defects.

As a Senate staffer from 1981 to 1988, I well recall how slowly bills usually advance. It is said that between a novel bill being introduced and final passage the lag time, on average, is five years. I predict that PREVAIL will ultimately be enacted. But it could take several years.

Meanwhile, many inventors are abandoning the patent system in favor of trade secrecy. That is bad for U.S. innovation because tech advances are withheld from others, shrinking their knowledge base. The excesses at the PTAB also discourage investors from funding innovation, fearing it cannot be reliably protected because the PTAB invalidates two-thirds of the patents it reviews. That rate is also suspicious because it vastly exceeds the rate for courts.

A Quicker Path to Reform

Fortunately, instant reform is available to exclude cases that do not belong in the PTAB, which was intended for plainly invalid patents, not close calls or ones that simply duplicate district court challenges. Section 314 grants the Director broad authority to deny petitions for a host of policy reasons. The Director (presently, Acting Director) at any time can issue guidance to the PTAB to deny petitions on specified grounds, including fairness.

For example, the guidance could mandate that a petition must be denied if a court case is co-pending unless, using the so-called Sotera stipulation, the petitioner agrees to forgo challenges of anticipation or obviousness in court. Then IPRs would instantly become truly “an alternative” to district court litigation.

Unless such actions are taken, the U.S. patent-driven innovation system will continue to degrade.  China will be the principal beneficiary. Our country urgently needs bold and immediate action.

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