The next several weeks will see much wringing of hands and gnashing of teeth about Allergan’s transaction with the Saint Regis Mohawk Tribe. Our point is not to engage in futile “what about-ism…” but rather to illustrate how the PTAB is inherently subject to gamesmanship — from all directions — that destroys systemic credibility, which is undeniably bad for all parties, not just the one whose ox got gored today. As an administrative tribunal, the PTAB isn’t limited to resolving actual “cases or controversies” between parties like Article III courts are. The gates are open to all comers, and so are the unintended consequences.
Those now familiar with IPR proceedings will already have recognized how little resemblance current IPR proceedings have to what most supporters of the AIA envisioned upon its passage. In current practice, the role of the Director as an independent IPR gatekeeper never materialized because the USPTO’s implementing rules bypass the Director altogether, assigning the institution function to the PTAB, which in turn routinely assigns both the institution and final decisions to the same three judge panel. As a result, most of the safeguards against patent owner harassment were lost…. By failing to adopt the implementing rules needed to carry out the intent of the AIA, and by adopting other rules and procedures that are plainly skewed towards petitioners, the PTAB has intentionally tilted its IPR proceedings against patent owners. While this has been good for the PTAB, which has quadrupled in size, it was neither Congress’s intent nor that of most of AIA’s supporters to create an unfair IPR patent “killing field.”
The numbers are stark. As recently as 1990, individual inventors were granted 17 percent of all patents. By 2000, they received 12 percent and only 6.8 percent in 2010. In 2015, individual inventors were granted only 5.8 percent of all patents. In sum, if there is any example of a nation squandering its technological seed corn, this systematic weakening of U.S. patent protections for some “guy in the garage” is it. The great irony is that most of the people behind the screen in all this got their start in that same “garage.” They know this all too well, which is why they’re relieved to see the garage all but Closed for Business.
I want to believe Congress ultimately sought to strengthen the U.S. patent system with the AIA by providing a mechanism to more easily remove a small percentage of granted patents that were being inappropriately used in litigation. Specifically, patents that were being asserted with claim constructions not contemplated when the patent was examined. After all, Congress had been heavily lobbied with the narrative that NPE’s had been stretching patents well beyond the four corners of the granted patent and hurting the integrity of the patent system.
Whether one celebrates or decries the PTAB, there can be little doubt that it has worked a profound effect on the value of American patents—and, concomitantly, on incentives to invest in research and development… Compared to their judicial counterparts, PTAB judges are biased in favor of invalidity. Personnel differences also explain a more disturbing phenomenon, mainly, that the Patent and Trademark Office seems to be at war with itself. Frequently, the PTAB invalidates claims based on prior art that examiners considered during initial prosecution. The only explanation for such discordant outcomes is that PTO examiners take a more pro-patent view of validity than the judges who make up the PTAB.
The five year experiment of the Patent Trial and Appeal Board (PTAB) is a colossal mistake. It is a failure to inventors, startups, early stage investors, job creation, economic growth, our national standing, and most importantly, our national security. The extraordinary damage of the PTAB on so many levels cannot be overstated. I’ve always believed that it’s okay to make a mistake. A mistake can be corrected. But the real sin is ignoring that mistake and watching it become a disaster. Congress made a huge mistake in creating the PTAB. If Congress ignores it, it will absolutely become a national disaster. And, we are on the brink of that national disaster right now.
In 2012, the American Invents Act established three new administrative procedures: post grant review (PGR), inter-partes review (IPR), and covered business method patent (CBM) review. In each of these proceedings, anyone may file a petition challenging the validity of an issued patent. Patent practitioners have long been trained to draft patents that survive litigation. It is no secret that most asserted patents now end up before the PTAB, and the PTAB tends to use different rules that favor the challenger. As we approach the five year anniversary of the PTAB, patent practitioners should reconsider long-held strategies. BRI and evidence standards adopted by the PTAB make surviving post-grant proceedings especially challenging. Pursue a narrowly-focused patent with clear and unambiguous terms, to avoid post-grant proceedings or survive them when instituted. A robust prosecution that addresses a range of issues, corrects Examiner’s errors, and places evidence on the record helps achieve the same goals.
As the challenge proceedings and the Patent Trial and Appeal Board mark their fifth anniversary, we should reflect on whether they have achieved their intended purpose. About a year ago I explained how inter partes review proceedings are no more a true alternative for litigation than the inter partes reexamination proceeding which they replaced and supposedly improved upon – nothing has happened since to change that view. Furthermore, a buffet of other meaty issues remains with respect to the post-grant challenge proceedings… I continue to support the original goals of the challenge proceedings and while changes in some areas are required, a wholesale restructuring of the procedures is not necessarily required. But I do look forward to changes that improve the balance between patentees and challengers.
Post grant procedures can be an effective and efficient way of promoting patent quality by invalidating weak, inappropriately granted patents. What we need now is thoughtful review and assessment, based upon five years of experience about what is working and what needs to be done to improve the system. The above issues need to be watched and analyzed, and, if appropriate, modifications need to be suggested and tried. Many improvements can be made by the USPTO itself through transparent rule-making. Some may need legislative intervention. But there is no need to throw out the entire process. We should learn from what has happened before and be willing to improve the system for the benefit of innovation in our country and the continued growth of our economy.
As we mark the fifth anniversary of the effective date of Patent Trial and Appeal Board trials on September 16, we find that the early years of the practice have been a learning experience both for the PTAB and for PTAB practitioners. Reflecting on the past five years, three key lessons emerge for practitioners, from practice and directly from the APJs presiding over these cases when they have spoken on topic: Follow the rules, including those that are explicit and those that are unspoken, know your audience, and focus on the facts.
Hiring senior associates to be Administrative Patent Judges was a mistake, hiring so many senior associates from the same firm was an even bigger mistake. Making it clear that their job was to kill patents at all costs was inexcusable. Interpreting the rules at every turn to be disadvantageous to patent owners is un-American, violates fundamental notions of fairness of procedure, and tilts the balance so heavily toward challengers that it has become more feared by patent owners than any government agency or body. In short, the PTAB has destroyed the U.S. patent system and the value of U.S. patents. In my opinion, the only solution for the very serious transgressions of the PTAB is to disband this runaway tribunal.
Perhaps the most challenging to accept is the notion that a tribunal created with a specific purpose of invalidation can be impartial to both the petitioners and the defendants. The AIA tribunal stands in contrast to the Court system, as their inherent mission is not to evaluate, but to challenge, contest, and invalidate. In addition, a “winners and losers” system, allowing one party to outspend the other, or to create joinders to outnumber the other, remains very damaging to the inventors, investors and small businesses.
As the above cases illustrate, PTAB decisions have affected district court cases in different ways. Determining whether the use of a PTAB decision is likely to be permitted or will have any effect requires a multifactorial analysis that considers at least the nature of the PTAB outcome (e.g., final or preliminary), factors contributing to that outcome (e.g., whether they were based on the merits of the case), and potential drawbacks attached to the requested use (e.g., jury confusion). Additional considerations might include, for example, the level of sophistication of the technology already being considered by the jury, which might factor into a court’s analysis of the likelihood of jury confusion. Parties seeking to rely on PTAB decisions in district court should consider these factors. The AIA has only been in place for five years and the law in this area will continue to develop over the next several years.
All of the post grant challenges ushered in by the America Invents Act (AIA) were a bad idea. They never should have been created in the first place. All the post grant proceedings have done is make infringing patents a more economical choice, while making it more costly for innovators to obtain and keep the protection they need to make innovating a worthwhile endeavor. It was all too predictable that a new tribunal would over assert its own jurisdiction, but the breadth of just how arbitrary, capricious and fundamentally unfair the process would be was simply not predictable.
Unfortunately, Mr. President, after five years I cannot report back that the AIA has yet ”improve[d] patent quality and help[ed] give entrepreneurs the protection and the confidence they need to attract investment, to grow their businesses, and to hire more workers.” The current implementation of PTO post issuance proceedings is undermining confidence in our patent system, chilling innovation at its roots, and, in eyes of some, giving the AIA a bad name.