Posts Tagged: "inter partes review"

Bill Cosby quipped ‘I brought you in this world, and I can take you out.’ The Patent Office makes similar arguments in court defending inter partes review. In a filing by the United States Patent and Trademark Office on June 26, 2015, in my clients’ case asserting the unconstitutionality of inter partes review, the Patent Office writes: “Because Congress may authorize the PTO to issue patents in the first instance, Congress may equally authorize the PTO to reconsider its patentability decisions and to correct its mistakes.”

Patent prosecution describes the interaction between applicants and their representatives, and a patent office with regard to a patent, or an application for a patent. (source: Wikipedia). It is a well-known term of art commonly used in the IP community. On the other hand, patent persecution describes the activities among various actors currently dismantling the US patent system, block by block. It is a recent phenomenon and seems to know no boundaries. (source: read the news!).

In this issue of the Federal Circuit Review: (1) A Patent Owner Must Show They Are Entitled to Amended Claims In an Inter Partes Review, Including in View Of All Prior Art of Record, and Known to the Patent Owner; (2) Federal Circuit Reverses Every E.D. Va. Claim Construction on Appeal in TomTom v. Adolph Mobile Tracking System Suit; and (3) Federal Circuit Overrule the “Strong Presumption” Embodied in § 112 para. 6 for Functional Limitations Expressed Without the Term “Means.”

Having to defend their patent in post grant reviews such as an IPR can easily cost patent owners between $700,000 to over $1 million when the subject matter of the patent under challenge relates to the biological or pharmaceutical sciences, due in part to the need to cast a wide net for relevant prior art, according to experienced practitioners like Brad Olson, a partner with Barnes and Thornburg, LLP. Such expenses are particularly threatening to new companies finding the patents that drive their business under attack just as they are desperately trying to raise money for their very survival. Given the track record of IPR’s as “patent death squads” potential investors or licensees can’t be blamed for waiting until the reviews are completed to finalize pending deals.

While some companies continue to wait and see, we saw a dramatic shift in late 2014. The most sophisticated companies on IP matters used the uncertainty to their advantage. They hypothesized the market couldn’t get much worse, and since they would eventually need to engage in licensing discussions, they used the negotiation leverage they had during a slow market to get the best deal. Similar to a “buyer’s market” in real estate, the IP market was (and continues to be for some) a licensee’s market as many companies sit back and wait to see how the uncertainty will shake out.

Although the latest version of the PATENT Act (S.1137) represents an improvement over previous versions of the legislation, it would still make all U.S. patents less enforceable and cast an ominous cloud over startups and small inventors… The latest version of the PATENT Act notably fails to address the critical overbreadth problems of the customer stay, heightened pleadings, and discovery provisions. Together these provisions place an undue burden on the enforcement rights of legitimate patent owners.

Patent reform is the new normal and we can expect that it will continually be raised in every new Congress for the foreseeable future. Currently there are four serious proposals for patent reform in various stages of consideration in Congress. They are: (1) The Innovation Act; (2) The TROL Act; (3) the STRONG Patents Act; and (4) the PATENT Act. There is also another bill – the Innovation Protection Act – that likely has no chance of passing but which is eminently reasonable. A summary of each of these five bills follows, along with one thing to watch for which could completely upset all predictions.

Microsoft applauded the introduction of the PATENT Act. Universities seem to be on the fence, recognizing that the Senate alternative is an improvement, but likely to support amendments. The Innovation Alliance opposes the bill, pointing primarily to customer stay language that could effectively immunize large corporations from patent infringement liability. Meanwhile, according to BIO, any patent reform bill that does not address abusive filings of inter partes review (IPR) petitions will be opposed.

the study determined that 73.5% of the challenged claims did not survive review in IPR proceedings that reached a final decision on the merits. The report also shows that, in final decisions from the PTAB, 37.5% of the claims initially challenged were found unpatentable under 35 U.S.C. § 102 (anticipation), while 57.6% of the claims were found unpatentable under 35 U.S.C. § 103 (obviousness). (Some claims were found unpatentable under both grounds.) In a recent study of patent decisions in district court cases, the district courts invalidated claims under Section 102 at a rate of 31.1% and under Section 103 at a rate of 27.8%.

Congress created AIA trial proceeding to combat trolls, not create an altogether new class of them. Since the initial filings of Hayman, the STRONG ACT has been introduced in the Senate and includes a provision that would require standing for IPR petitioners (presumably to thwart such filings). However, companies not only employ IPR as an alternative to ongoing litigation but as a due diligence tool to avoid such situations in the first instance. Innovators looking to develop a new product line, or new area of business should have the freedom to clear the landscape of improvidently granted patents via the PTAB without having to wait for a lawsuit, or threat of one. Such knee-jerk legislative fixes will have unintended, and unfortunate consequences.

Time and time again throughout the legislative history post grant proceedings were explained as being a faster, low-cost alternative to litigating validity disputes in Federal District Court. That being the case, it would seem extremely odd that any petitioner could bring a post grant challenge to a patent when that petitioner would not have standing to sue to invalidate the patent in Federal District Court. However, the statute does say that a person other than the patent owner can file a petition to institute an inter partes review.

Gulbrandsen’s chief complaint with the U.S. system centers around the fact that it has become enormously easy to challenge issued patents once they have been granted. In fact, organizations in pursuit of acquired technology are leveraging the kill-rate at the Patent Trial and Appeal Board (PTAB) at the United States Patent and Trademark Office (USPTO), to negotiate lower licensing payments. Threats are made that patents will be challenged in Inter Partes review, “so that you amend the license and reduce the fees,” Gulbrandsen explained. “So, immediately you know that devalues the patent and devalues the license agreement that you’ve got.”

The immediate modification to the page limits for motions to amend is more in line with reality given the high burdens placed on patent owners. Even when patent owners sought additional pages, the norm was a three to five page extension. So getting ten extra pages is a welcome change. Changing the page limits, alone, is unlikely to impact the calculus underlying the strategic choice to amend. But when the choice is made to amend, patent owners will be better able to meet their burden.

In 2014 there were 1,070 fewer patent lawsuits filed than during 2013. Furthermore, the number of patent cases filed in 2014 was lower than the number of cases filed in 2012 by some 433 cases. Therefore, the stories of continued run away litigation seem to be greatly exaggerated. Given the dramatic decrease in patent litigation it seems entirely premature for Congress to be considering additional patent reform at this early stage.

Inter partes review proceedings unconstitutionally assign to an Article I executive branch tribunal matters reserved for Article III Judges that make up the Federal Judiciary. This is in violation of Separation of Powers principles, which is particularly problematic given that we are talking about property rights being stripped from patent owners by administrative law judges in a proceeding designed to be a district court alternative. These administrative tribunals also adjudicate patent validity without a jury, in violation of patentees’ Seventh Amendment rights.