Posts Tagged: "post grant procedures"

The question presented in the petition for certiorari in Cooper v. Lee is whether 35 U.S.C. §318(b) violates Article III of the United States Constitution, to the extent that it empowers an executive agency tribunal to assert judicial power canceling private property rights amongst private parties embroiled in a private federal dispute of a type known in the common law courts of 1789, rather than merely issue an advisory opinion as an adjunct to a trial court. This case raises a constitutional challenge to new post-grant patent proceedings.

The Federal Circuit, in an opinion by Judge Dyk who was joined by Judge Taranto, first held that 35 U.S.C. § 314(d) did not preclude the Court from hearing Ethicon’s challenge to the authority of the Board to render a final decision. On the merits the panel held that neither the statute nor the Constitution precludes the same panel of the PTAB that made the decision to institute inter partes review from making the final determination. The Federal Circuit also found no error in the Board’s determination that the ’070 patent claims would have been obvious over the prior art. Judge Newman dissented, concluding that in order to restore confidence in the reliability of patents as “investment incentives” the USPTO must conform the inter partes review process to the statute.

The PTAB refused entry of the supplemental information because Redline did nothing to justify submitting it after filing the initial IPR petition and even after the institution decision was made, other than to say that submitting it then was cost effective. The PTAB pointed out that the authorization to submit supplemental information under 42.123 does not require the PTAB to accept such information even if it is timely, noting that the moving party bears the burden in all cases to demonstrate entitlement to the relief, a rule that patent owners seeking to amend are all too familiar with (i.e., despite there being a right to file an amendment the PTAB says there is no associated right to amend).

What’s stunning about this list is that almost nobody talks about reforming patent law to correct these biases! In general, the only biases that are socially and politically acceptable to correct are biases in favor of patent owners. It is profoundly unfair to correct biases in the patent system to protect accused infringers if we do not also correct biases in the patent system to protect inventors. It is interesting to ask why modern patent reform overwhelmingly protects accused infringers without also protecting inventors. I worry that the patent reform asymmetry fits within a larger trend of decline in the great Western traditions of innovation, due process, meritocratic competition in the race to invent, reliance on property rights and business investments, and strong support for intellectual property as distinct from real and personal property.

The PTAB has seen more than triple the number of inter partes review (IPR) petitions—now the preferred way for a company accused of infringement in court to challenge a patent’s validity—than it projected when the challenge first became available in 2012. But the fact that proceedings can run simultaneously presents challenges.

The early “death squad” hysteria persisted just long enough to catch the interest of hedge funds. The hedge funds saw an opportunity to utilize the PTAB to spook financial markets to their gain. The game plan involved establishing “short” positions in publically traded stocks that have their valuation closely tied to patents, as is the case in the Bio/Pharma sector. Given the PTAB’s early infamy, the bet was that the mere filing of an IPR would spook investors enough to move a stock price to the negative (i.e., quick profit for a short seller). Yet, as hedge funds targeting Bio/Pharma patents have quickly learned, gambling on patent challenges in the unpredictable arts is not a viable, long-term business model.

The NYIPLA asks the Court to grant the petition in order to make clear that judicial review is available when the PTO institutes an IPR proceeding and invalidates patent claims in violation of its statutory authority, and to determine the claim construction standard that the PTO should apply to determine patent validity. The NYIPLA explains that the Supreme Court’s review of both questions is critical at this juncture since to a large and increasing extent, IPRs are supplanting district court litigation as the forum for resolving issues of patent validity based on the prior art, and in proceedings below the Panel was split 2-1 with a vigorous dissent on both issues, and the Federal Circuit then split 6-5 in denying a petition for rehearing en banc.

The first bit of good news for Bass came with respect to his IPR petition against Celgene Corporation. Celgene Corporation filed a motion for sanctions against the Coalition for Affordable Drugs on July 28, 2015. On September 25, 2015, the PTAB, in a decision authored by Administrative Patent Judge Michael Tierney, explained that the purpose of the America Invents Act (AIA) was to “encourage the filing of meritorious patentability challenges, by any person who is not the patent owner, in an effort to improve patent quality.” Given that Bass and the Coalition for Affordable Drugs did not own the patent in question the law allows these types of challenges. The PTAB also shot down the argument that financial motivation is at all relevant, explaining on some level financial motivation is what drives all IPR challenges.

In siding with the patent owner the PTAB explained that the petitioner insufficiently made a case that the claimed invention was obvious. A proper obviousness argument must articulate some rational underpinning to support a legal conclusion of obviousness. Unfortunately for Volkswagen, the PTAB saw only conclusions and impermissible hindsight in the IPR Petition. Ultimately, the PTAB was not persuaded that the Petition demonstrated a reasonable likelihood that Petitioner would prevail.

The USPTO declined to initiate an inter partes review of two patents owned by Acorda Therapeutics, Inc. Acorda patents were challenged by the Coalition for Affordable Drugs, LLC, the entity formed by billionaire hedge fund manager Kyle Bass. I have to wonder whether this decision represents a shift in the worldview of the PTAB or whether they sought out a reason to deny the petition because it was filed by Kyle Bass. Unfortunately, I suspect these two denials have everything to do with who was behind the challenge and little to do with the merits of the challenge.

USPTO proposed rule changes would amend the existing rules relating to trial practice for inter partes review (IPR), post-grant review (PGR), the transitional program for covered business method patents (CBM), and derivation proceedings. By in large, the Office decided to stick with BRI, but not when the challenged patent will soon expire. The USPTO also adopted the comments from those who expressed satisfaction with the Board’s current rules and practices for motions to amend, which means there will be a right to file a motion to amend but no right to amend if these proposed rules go final.

According to Celgene, the Kyle Bass strategy of shorting a stock and filing an inter partes review challenge is an abuse of the process and not what post grant procedures were designed to accomplish. In a filing seeking sanctions filed with the Patent Trial and Appeal Board (PTAB) at the United States Patent and Trademark Office (USPTO), Celgene argues that the financial motivation for the IPR filing makes the filings by Bass’ Coalition for Affordable Drugs sanctionable. Bass calls this theory “curious,” pointing out that “at the heart of nearly every patent and nearly every IPR, the motivation is profit.”

Greenwood and Castellani will have two major problems as they seek relief. First, the IPR provisions do not include a standing requirement, which means that anyone can bring an IPR for any reason. The second problem is potentially more challenging. An IPR fix would create a so-called scoring problem with the Congressional Budget Office (CBO). What this means is that if this relief were provided for the biotech and pharmaceutical industries, as desired by Goodlatte and Castellani, it will cost the federal government money and increase the deficit unless it is offset.

Very few thought that the IPR procedure would be used by creative hedge fund managers to reap benefits for the price drop of pharmaceutical companies’ stock that have had their important drugs challenged in an IPR. Most would not have thought that small patent owners would be swamped by serial petitions to invalidate their patents. Others were very surprised at the limited manner in which the USPTO permitted the patent owner to amend her claims during the process. And many did not expect the USPTO to interpret statutory language of the AIA to include so much subject matter in what was intended to be a limited-scope CBM program.

Everybody has to be careful because you’re right if we undermine our patent system that is the only thing that allows America to remain strong competitively because China they just have labor rates that are a fraction of ours. We couldn’t possibly make products as cheaply as China. We need to make sure that Congress isn’t hearing so much about how bad the patent system is that they without intention undermine it in significant part and then hurt our competitive advantage against China. I mean that’s all possible. I agree. I share that concern. Are we going too far?