Study of the Post Grant Procedures Is Needed Now

By Robert Stoll
July 19, 2015

analysis-watch-335The procedures created by the America Invents Act (AIA) for challenging patents at the United States Patent and Trademark Office (USPTO) have now been in place for a couple of years. These procedures include: Inter Partes Review (IPR); Post Grant Review (PGR) and Covered Business Methods (CBM). As of June 2015, over 3500 petitions had been filed for the combined procedures. The numbers are way above what the Office expected, but the Patent Trial and Appeal Board (PTAB) has been churning through the petitions at a rapid rate. The new methods for challenging patents are statutorily required to be completed within a year of institution in most cases, so we are beginning to collect data and discern patterns from those settled or decided cases.

We are seeing that when the claims are considered individually, the PTAB is instituting the procedures 70% of the time and that once instituted, most claims will not survive the procedures.

We are also seeing the development of a body of case law from some of the decisions emanating from the PTAB. Several decisions relating to issues including: joinder, real party of interest; limits on discovery; limits on claim amendments; claim construction standards; and, the scope of estoppel after written decision, are being fleshed out. And the blogosphere is full of comments and concerns about these developments. These discussions have led to legislative proposals relating to these procedures that have found their way into the patent reform bills that are moving through Congress.

There have been proposals on the Hill to change the standard for claim construction from the broadest reasonable interpretation, a standard used at the USPTO, in part, because the claims can be amended, to the Phillips standard used by courts. There are proposals that would make it easier to amend the claims during the procedure and legislative language to establish the presumption of validity. There is also language in some bills that change the estoppel in post grant procedures from “raised or reasonably could have raised” to just “raised” permitting sequential attacks on the same patent claims by the same petitioner. There has also been an unwarranted – and unsuccessful – effort to extend the temporary CBM program.

But what is really needed right now is a comprehensive study of the entire system of challenging patents before the USPTO to determine what modifications would make our whole post grant system better.

The USPTO has already made some “Quick Fix” Rules to remedy complaints learned through Federal Register inquiries about the operation of the system. These have ranged from increasing page limits to routine discovery to requiring specific fonts to prevent the need for a magnifying glass for the judges to read the documents.

None of those changes cause any great concern. But with the importance of these procedures, as evidenced by their usage, we need to understand how the procedures are being used, what behaviors we want to encourage and discourage and, what the likely long term consequences of any change will have on our system.

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.

As implementation of the AIA has shown, the system of patent review is complex and has many interwoven parts. Changing one aspect may have profound and unintended consequences. Our patent system – including post-grant administrative review — is critical to job creation and economic growth and changes should not be made haphazardly in a piecemeal fashion.

It is time to review and assess the AIA’s post-grant processes. We don’t know all of the facts. We need a detailed analysis about what is working and what needs to be modified and how the processes should be improved. In the meantime, if Congress is set about doing something on the post grant procedures, it should authorize the funding and direct that a study should be undertaken. Alternatively, the USPTO or interested stakeholders should undertake detailed analysis of the post grant system soon.

The Author

Robert Stoll

Robert Stoll is a partner with Drinker Biddle and is co-chair of the Intellectual Property Practice Group.

Bob retired from the USPTO as Commissioner for Patents at the end of 2011 after a distinguished 34-year government career. He was instrumental in the passage of landmark patent legislation, the America Invents Act, and lauded for his efforts to reduce patent pendency and improve patent quality. Having risen from the rank of examiner to lead the 8,000-employee organization, he has spent his career improving the intellectual property system.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 24 Comments comments.

  1. Curious July 19, 2015 2:00 pm

    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.
    I agree.

    Most would not have thought that small patent owners would be swamped by serial petitions to invalidate their patents.
    I think that is one of the intended selling points of reexaminations — make it so cost prohibitive for a small inventor to even get into court (most court cases are stayed pending reexamination), that only the well-heeled can use the court system.

    Others were very surprised at the limited manner in which the USPTO permitted the patent owner to amend her claims during the process.
    Meh … if there is a way the USPTO can scr ew over patentees, they’ll do it.

    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.
    See the above answer, the USPTO is an agency that would be happy to remove “high technology” from their workload — they would rather deal with simple mechanical inventions, like the cotton gin and buggy whips.

  2. Edward Heller July 20, 2015 8:18 am

    John, are you oblivious to the fact that these post-grant proceedings as currently structured are unconstitutional? The Supreme Court has many times ruled that the PTO cannot revoke a patent and does not even have standing to sue to revoke a patent for invalidity. Patlex you say? Even the Federal Circuit believes Patlex is overruled. See, Nies dissent to en banc in Lockwood.

  3. Curious July 20, 2015 9:39 am

    John, are you oblivious to the fact that these post-grant proceedings as currently structured are unconstitutional?
    Ned … anybody who reads patent blogs is well aware of your opinion on the matter since you’ve posted it everywhere (many times).

    If you read the article (outside of your own biases), I think you’ll find that the author and yourself are generally on the same team. The fact that he doesn’t call for the outright abolishment of reexaminations doesn’t take away from the fact that he does raise many (negative) issues about reexaminations.

  4. Edward Heller July 20, 2015 9:53 am

    My opinion?

  5. Night Writer July 20, 2015 5:51 pm

    (*) preponderance
    (*) BRI
    (*) no claim amendments (in effect).

    So, basically a super-duper Office Action that is fueled by 100’s of K of outside money to find better art. Not really fair to the patentee.

    Probably be OK, if the patentee could go back into examination and amend the claims.

  6. Night Writer July 20, 2015 7:23 pm

    Maybe one of the Google judges would step down so Bob Stoll could be appointed to the Fed. Cir.

  7. Paul F. Morgan July 20, 2015 7:47 pm

    Bob, a “study” of post-grant practice would be fine, of course. But the more important question is who would be doing it, what are their qualifications, and who are their major clients? There are a lot of patent attorneys [and companies] who have already formed strong opinions on this subject due to personal or client financial impacts, one way or the other.
    Also, there is some relevant data already in the ratio of Fed. Cir. affirmances to reversals of appealed post-grant proceedings from the PTAB. Especially as to IPRs which are now by far the most common. Even some former and current judges have already expressed strong opinions on the subject. So getting yet-unbiased but sufficiently cognizant study members may not be easy.
    Besides the “quick fix” rule changes you have noted, other formal rule changes are reportedly going to be announced shortly, and they would also need to be considered in any study.
    Meanwhile, we have members of Congress actively proposing statutory changes to post grant proceedings in pending legislation without the benefit of any such study.

  8. Night Writer July 21, 2015 6:30 am

    Paul, there are plenty of outside business consulting firms that could perform an unbiased study of the post grant procedures.

    But, it does point to how bad our system has become that no academic could be trusted to perform the study.

  9. Night Writer July 21, 2015 6:34 am

    To my point of the super-duper Office Action: maybe it shouldn’t be surprising that the rate of invalidating patent claims is so high. If the examiner’s had a 100’s of hours to spend on an office action, then the claims would likely be very different.

    Note too: that what post grant procedures really do is shift the work to the applicant. I.e., you can’t trust that the PTO is going to find the best art if you don’t want to be invalidated in a post grant procedure with an opponent that has 100’s of K to find the best art. So, if you want a good patent now you have to do what Kappos was trying to make us all do.

    So, we have really become a registration system. In effect, 15K to register your patent and 500K to defend it.

  10. Edward Heller July 21, 2015 6:45 am

    Paul, so long as the executive branch is making the decision, there can be no fair, unbiased trial and no trial by jury that is guaranteed by the 7th Amendment before one’s patent is revoked. Basic, fundamental rights of the patentee are totally being ignored.

    The idea that patents are infected with a public interest in validity does not justify stripping patent owners of rights.

    The idea that patents are infected with a public interest does not justify the implicit accusation that courts are incompetent to properly judge the validity of a patent.

    The idea that patents are infected with a public interest does not justify removing the requirement of standing for a challenger to file a complaint.

    Reexaminations, IPRs and the like are not “low costs alternatives.” They are collateral attacks, multiplied and multiplied again until the patentee is exhausted financially. They are designed to be abused and are in fact abused. Justice is not the goal.

    These new proceedings are fundamentally wrong as wrong can be.

  11. Night Writer July 21, 2015 7:49 am

    That is all well and good Ned, but we need a plan B. And seriously—do you think the Royal 9 that wrote Alice are going to grant cert to Constitutional challenge of post grant reviews? Will not happen.

  12. Anon July 21, 2015 7:55 am

    Mr. Heller,

    With all due respect, your oft repeated mantra of what can be – and importantly what can be not – expected to be “fair” leaves out the critical notion that the Supreme Court itself is not fair to patent holders.

    This is not a singular historical occurrence. Doe the phrase “The only valid patent is one that has not yet appeared before us” ring a bell?

    You blind yourself with the notion that because an Article III court is involved, then the result MUST be fair, while ignoring the travesty of justice that the highest court in the land is sowing with its own meddling in patent law for that same “public interest” ends that the Court is pursuing.

    If you truly want Justice to be the goal, then you need to open your eyes to history, and realize that the means to whatever desired end you want are just as important as the end itself. “Trusting” the Supreme Court as is implicit in your oft-stated posts across the blogosphere is simply not appropriate when the objective evidence of their activism and breaching the separation of powers is so abundant. That, good sir, is abuse just as much as the abuse you do wish to highlight.

  13. Edward Heller July 21, 2015 12:13 pm

    Night, are you serious? When the Federal Circuit holds that IPRs are unconstitutional, surely the government will petition the Supreme Court and surely they will take the case.

  14. Edward Heller July 21, 2015 12:33 pm

    anon, both the Supreme Court and the Federal Circuit issue decisions that I strongly disagree with. The point I make here is quite different. Only the courts are structured to be unbiased. There is no such requirement for the PTO — they are political and make decisions for political reasons. They have no business being in the “court” business.

  15. Night Writer July 21, 2015 3:28 pm

    >>When the Federal Circuit holds that IPRs are unconstitutional

    You must be kidding?! The Google appointed stacked court? They will never so hold. This lot said that “module” is a nonce word. This lot has no respect for the law and couldn’t understand science and patent law even if they cared to, which they don’t.

  16. Night Writer July 21, 2015 3:30 pm

    Where you are going to be left my friend is losing at the Fed. Cir. with Google judges fabricating nonsense, which somehow they think they are so clever coming up with their nonsense as if anyone buys it. And then a cert to the Royal 9. The Royal 9 will not take cert. No way will the Alice writers take cert.

    There you go….a prediction. I don’t think any of my predictions have turned out wrong yet.

  17. Curious July 21, 2015 9:02 pm

    Where you are going to be left my friend is losing at the Fed. Cir. with Google judges fabricating nonsense
    They’ve been fabricating nonsense long before the so-called “Google judges” were appointed. Moreover, once appointed they owe no loyalty to anybody. Don’t get me wrong, I’m not thrilled with this set of judges but please realize that this isn’t a new problem.

  18. Night Writer July 22, 2015 10:33 am

    >Don’t get me wrong, I’m not thrilled with this set of judges but please realize that this isn’t a new problem.

    Well Curious, you realize that only 2/7 Obama appointments have any science background. You realize that most of the judges Obama appointed were vehemently against patents before being appointed despite their ignorance.

    I know they are free to do what they will now that they are appointed, but they were ignorance biased creeps when appointed and the chances of that changing are slim to none. I also wonder if we have reached the dystopian phase when a fed. cir. judge will jump over to Google to collect $50 million for having burned the system down. Maybe it hasn’t gotten that bad yet—maybe.

  19. Anon July 25, 2015 8:09 am

    Mr. Heller,

    With all due respect, you are off on two regards.

    Agency actions even in the executive branch are required to be fair.
    Your “not liking the results” of certain judicial actions is besides the point, and does not address the fact that the Court – “designed” or not – very much is a political body. As is often pointed out, the Founding Fathers were careful to not apportion too much power in any one branch. Your rather relentless expression of rather one-sided views concerning the judicial branch are an affront to the balance required both by the mechanisms of separation of powers and by the historical notion of sustainability.

    To use a different visual analogy, there is no one leg of a triangle that is separate from the triangle.

  20. MikeH July 28, 2015 5:34 am

    It’s frustrating to see people with a vested interest speaking out against post grant procedures.

    Put yourself in someone else’s shoes. You’re a small software business owner, you worked hard to develop your product. Someone in 2001 managed to get a patent through for, what essentially distils down to, ‘commenting on a website’ or ‘licensing a software product’ or ‘listing items for sale on a website’. (All real world examples that have been litigated over). Patent owner wants 200k to go away.

    Your lawyer tells you that defending this in court will cost 2M, but an IPR might cost 100-200k. CBM Review maybe 50-100k if the patent owner blinks first.

    For software patents at least, these PGRs are essential to clean up the mess that the Patent Office caused by issuing so many bad patents from 1998-2010. If anything they should be cheaper and easier to file; the Patent Office should bear more of the cost for reviewing their bad work.

  21. Anon July 28, 2015 8:11 am

    MikeH,

    It is even more frustrating to see those with a vested interest ignoring the problems with the law as written.

    The “put yourself in the (infringer’s) shoes” simply is not compelling. No matter how hard you may have worked to independently invent, such has never been a patent infringement defense.

    You are falling prey to the fallacy of “the ends justify the means.”

    They do not.

    It really is that simple.

  22. MikeH July 29, 2015 8:46 am

    Anon,

    Well, unfortunately it’s not ‘that simple’ or these PGRs wouldn’t exist. Of course “independently inventing” isn’t the small business’s defence, being sued over an invalid patent is.

    If we take a terrible software patent, such as Uniloc’s “check name on a list for permission to do something” (but done over the internet so it’s oh so novel), you can either

    a) Let this company continue to shake-down smaller companies for using anything even remotely similar to their patent

    b) Put procedures in place to allow small businesses to have the patent reviewed without full legal proceedings

    You argue for (a), presumably because the natural trend of (b) is less patents, less litigation, less billable hours and that may be damaging to your business.

    Is (b) fair to the patent holder? Yes, completely, they shouldn’t have the patent in the first place.

  23. Anon July 30, 2015 6:51 am

    MikeH,

    We will have to agree to disagree, as I have seen the opposite of what you state, here and elsewhere in the patent blogosphere.

    Yes, there is such a thing as nuisance suits, but that is not a function of patent law as much as it is a function of court costs, so band-aids in the patent world really won’t achieve the desired affect that many claim to want.

    As to “bad patents because they just automate what went before,” we will have to agree to disagree on that as well, since there is NO de facto rule that mere automation necessarily makes the patent a “bad patent.” Context and individual fact patterns matter very much. Our history strongly supports a patent for “mere automation” in countless regards.

    Your “choices” are clearly biased and worded excessively poorly. It is not worth my time to engage you when you are so clearly already possessed by such bias. The fact that you want to automatically impugn my work as being purely derivative of billables is really offensive – my “business” is not such a function, but rather a function of the value that I create for my clients. I suggest that if you want to hold a real conversation that you first check your emotional baggage at the door and take a more realistic tone of the subject matter.

  24. MikeH July 31, 2015 10:44 am

    Anon,

    “won’t achieve the desired affect that many claim to want.”
    “are clearly biased and worded excessively poorly”.

    I think you mean “effect”, being as it’s a noun, but what do I know as a mere pleb who can only manage to string excessively poorly worded sentences together.

    “It is not worth my time to engage you”

    Not billable, right?

    Your condescending tone reaffirms every stereotype I’ve internalised about the legal profession. Don’t assume that because someone uses a semi-colloquial tone in a blog comment box they posses a lower IQ than you.