Inter Partes Review and Post Grant Review Are Game-Changers

Originally posted on January 8, 2013 on IP Law360.

Inter partes review (IPR) and post-grant review (PGR) “trials” at the U.S. Patent and Trademark Office have the potential to be game-changers in the way patents are challenged in the future. After several attempts at creating USPTO-based proceedings that are efficient and effective, there is much in the new IPR and PGR that lend credence to the notion that Congress finally hit on a combination of pure patent litigation and USPTO procedure that will be attractive to patent challengers. Patent owners are already gearing up to defend against these proceedings, knowing the advantages they present for patent challengers.

That is not, however, to say that IPR/PGR proceedings will be commonly filed and serve to weed out many “bad” patents, along the lines of European opposition practice. Their high cost (as compared to prior USPTO proceedings and EU opposition practice), as well as the strong estoppel that attaches upon the conclusion of the proceedings, will ensure that patent challengers will carefully pick and choose their opportunities to file IPR/PGR petitions.

For significant disputes between patent owners and alleged infringers, however, where litigation is pending, threatened or expected, inter partes review and post-grant review may become the norm. For at least the five reasons below, these proceedings have the potential to change the face of patent litigation forever.

1) Keep Control of Your Best Prior Art Via Pseudo-Litigation

Among the main attractions of the new inter partes review and post-grant review proceedings are their pseudo-litigation features. As compared to previous attempts by Congress to create cost-effective proceedings for challenging patent validity, via IPR/PGR, patent challengers can be more confident that they will remain in control of their best prior art, instead of throwing that art over the wall for the USPTO to handle (or mishandle), without the type of control and input that a patent challenger is used to in federal court litigation.

Principal among those pseudo-litigation features, include: (1) the ability to take discovery, (2) the extensive use of experts (to include their depositions), (3) the ability to make challenges to evidence (pursuant to the Federal Rules of Evidence), and (4) access to subpoena power to compel discovery from third parties. Indeed, even Rule 26(a)(1)-style initial disclosures and scheduling orders with strict deadlines are required by the Trial Practice Rules before the Patent Trial and Appeal Board.

In addition to these pseudo-litigation features, IPR/PGR has the potential to function as a mini-claim construction phase in an ongoing patent dispute. At threshold, like prior USPTO proceedings, claim terms in inter partes review and post-grant review proceedings will be given their broadest reasonable interpretation, consistent with the specification. Pursuant to this standard, reasonable disagreements regarding the scope of a particular claim limitation will be resolved in favor of assuming that the limitation is broadly construed. This standard, of course, is more likely to result in a finding of unpatentability as compared to a district court proceeding where such reasonable disagreements will default to a reading of a claim limitation that preserves validity.

But Congress has directly injected claim construction issues into inter partes review and post-grant review proceedings, as evidenced by the fact that each petition seeking IPR or PGR is required to set forth the petitioner’s claim construction position. The petitioner may simply state that the terms are to be given “their broadest reasonable interpretation in light of the specification.” But, strategic opportunities exist to raise specific claim construction issues in the petition that may force the patent owner to begin talking, in detail, about the scope of particular claim terms. Any such statements will, undeniably, find relevance in later claim construction arguments in federal court proceedings. For example, this strategy may be invaluable for a group of defendants facing the same patent(s) — claim construction statements in an IPR by the patent owner can ripple throughout many pending lawsuits.

Notably, for means or step-plus-function claims, more specificity is required in the petition. If a challenged claim has a means-plus-function limitation, the petition must also contain the specific portions of the specification that describe the structure, material or acts corresponding to each claimed function. It seems especially likely that, when 35 U.S.C. §112(f) limitations are at issue, a patent owner is going to be put in the uncomfortable situation of putting claim construction positions on the record.

In any event, by directly addressing claim construction issues in these proceedings, patent challengers have an opportunity to get patent owners to start talking about claim scope in a manner that may impact litigation positions, including later Markman proceedings.

2) Allure of a Low Burden of Proof and Broader Classes of Validity Challenges

Patent challengers will find the burden of proving a patent claim unpatentable in IPR/PGR to be an attractive alternative to federal court litigation — “preponderance of the evidence” before the Patent Trial and Appeal Board versus the “clear and convincing evidence” standard of district court litigation. Relatedly, some challengers may find value in avoiding juries that tend to have a higher degree of respect for patents than that of an administrative patent judge. While not technically a change, as compared to reexamination practice, the above factors will bias patent challengers toward IPR/PGR proceedings. This is especially so when highly technical arguments are presented or invalidity is a close call.

Further, the post-grant review proceeding gives patent challengers access to a much larger set of grounds for establishing unpatentability. Patentable subject matter challenges (§101), written description and enablement challenges (§112), as well as non-documentary prior art challenges, such as prior uses and sales (§102 and §103) are all possible under PGR practice. Indeed, under many circumstances, patent challengers will conclude that the PTAB is better situated to consider complicated §101 or §112 challenges, as compared to most district courts.

3) Short Timeline and Quick Litigation Stays

The streamlined nature of IPR/PGR proceedings are already proving to be attractive to district court judges considering stay requests from defendants in patent infringement lawsuits. Per the AIA, from the date of filing of a petition seeking inter partes review or post-grant review, a final, written decision must be rendered no later than 18 months (with the ability to extend the deadline up to six months). That 18-month timeframe may be shortened if the patent owner chooses to either waive its ability to file a preliminary patent owner statement or files such statement in less than the three months otherwise allowed. In addition, that time frame may be shortened if the Patent Trial and Appeal Board takes less than its allotted three months to decide whether to institute a trial.

At least one district court judge (Judge Joan Lefkow, Northern District of Illinois) granted a motion to stay within days of the filing of a petition seeking IPR, and without allowing any opposition briefing from the patent owner. District court judges, seemingly always willing to lessen the burden of their dockets, are likely to find the short, definitive timeline of IPR/PGR proceedings to be meaningful in determining whether to institute a stay of litigation. Patent challengers will be biased toward instituting inter partes review or post-grant review proceedings if the likelihood of getting a very early stay increases as compared to the protracted inter partes reexamination timelines.

4) Patent Owner Estoppel and Limited Ability to Amend

For patent owners with pending continuation applications, the novel patent owner estoppel provisions of IPR/PGR proceedings are significant. Per the Trial Practice Rules, a patent applicant or owner is precluded from taking action in a later proceeding that is inconsistent with an adverse judgment in an IPR/PGR. For example, a patent owner may not obtain a claim in a later patent application that is patentably indistinct from a finally refused or canceled claim.

Relatedly, one of the drawbacks of prior USPTO proceedings to challenge patent validity was the ability of the patent owner to draft virtually unlimited numbers of new claims to avoid the subject prior art, yet still get patent claims that are commercially viable. In IPR/PGR practice, however, there is no such unlimited ability to amend.

More specifically, as compared to ex parte re-examination or the now-obsolete inter partes re-examination proceedings, where dozens, or even hundreds, of new proposed claims were the norm, amendment practice in inter partes review and post-grant review is restricted. The presumption offered by IPR/PGR rules (§42.121 and §42.221) is that only one substitute claim would be needed to replace each challenged claim. This presumption may be rebutted by a demonstration of need, and decisions by the PTAB on this point will be interesting to flesh out the boundaries of this presumption, but the right to amend the patent has been severely curtailed.

Further, this presumption is another factor that ways in favor of heading down the path of inter partes review and post -grant review because patent challengers can strategically decide to only include a limited number of patent claims in the IPR to limit the ability of the patent owner to offer amended claims — the fewer challenged claims, the fewer substitute claims that can be introduced. Also notable, the patent owner’s amendment is due within three months of the institution of an IPR/PGR. Such an early deadline is another disadvantage for the patent owner.

Lastly, as in prior USPTO proceedings, claim amendments will work to give rise to intervening rights for any alleged infringer. In IPR/PGR practice, therefore, forcing a patent owner to make claim amendments can cut off a past damage claim. This is especially beneficial if the asserted patent is nearing the end of its patent term because the elimination of a large past damage claim, with little worry of infringing in the future.

5) Low Cost as Compared to District Court Litigation

USPTO proceedings to challenge the validity of patents have always carried a significantly lower price tag than district court litigation. Inter partes review and post-grant review proceedings have the same advantage, albeit slightly less so. Higher filing fees, the use of experts, discovery costs (including deposition costs), are all factors that lead to projections that overall fees for IPR/PGR will range from $150,000 to as much as $300,000 per party. The advantages offered to patent challengers in these proceedings, however, as discussed in detail above, are a bargain when compared to the average cost of patent litigation in the federal courts.

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In sum, inter partes review and post-grant review proceedings are not likely to become garden-variety tools to weed out “bad” patents, in the way that EU opposition practice is often used. However, for significant disputes — where litigation is ongoing, contemplated or expected — patent challengers with legitimate invalidity defenses will find access to the above-referenced features of IPR/PGR, even at a somewhat higher price tag, to be a true bargain. At a cost that is up to an order of magnitude less expensive than district court litigation, expect patent challengers to dive into the lower burden, higher likelihood of success inter partes review and post-grant review.

Welcome to Litigation Practice at the USPTO

We welcome the arrival of Inter Partes Review (IPR), as of September 16, 2012, and Post Grant Review (PGR) as of March 16, 2012.  It is open for debate as to whether the America Invents Act (AIA) is true patent reform, but what is absolutely clear is that the AIA has changed patent practice forever.  Check back often for updates and blog entries, including a close watch on IPR filings and orders.  In the meantime, enjoy the presentation found HERE of a timeline of events to occur in an inter partes review and post grant review.  There are many, many details that simply cannot be displayed in such a format, as well as precedent to be watched at the Patent Office as the Patent Trial and Appeals Board (PTAB) begins to handle its first cases.  But, this overview provides a fairly in-depth perspective on what patent owners and patent challengers can expect with these new proceedings.  Happy Litigating at the Patent Office!