The Patent Trial and Appeal Board (PTAB) was created by Congress as part of patent reform legislation under the Leahy-Smith America Invents Act (AIA) signed into law in September 2011. PTAB is the administrative law body of the United States Patent and Trademark Office (USPTO), which is authorized to determine issues of patentability for patent applications.
Formerly known as the Board of Patent Appeals and Interferences, the PTAB consists of a Trial Division that is empowered to hear post-issuance matters, third party (inter partes) reviews and post-grant reviews; and an Appeals Division with over 100 administrative patent judges who render decisions on appeals taken from patent interferences, patent examiner decisions and post-issuance challenges to patents. But before one dismisses the PTAB as merely “old wine in a new bottle,” it is wise to consider the significant changes that AIA brings to the patent application and review processes. An overview of those changes and some concerns about the PTAB are presented here for our Greenberg & Lieberman clients.
First to File: A Break with the Prior Process
Under prior U.S. patent law, the USPTO operated under a system known as “first to invent,” which — as the term implies — meant that a party who could prove that it was the first inventor of a patentable invention would obtain the patent rights to it. Most of the patent offices around the world still function under that system. As of March 2013, however, AIA provides for a “first to file” system that essentially protects the applicant who is first to race to the USPTO to file an application regardless of who was the first to invent. Although proponents of the new system point to the fact that it opens up a much larger body of prior “art” to a claimed invention — meaning that body of evidence showing that an invention is already known or previously described — critics note that the system also increases the opportunities for challenging the patent.
New Inter Partes Challenges
Prior to 2012, Inter Partes Reexamination (IPX) was the procedure by which a third party could challenge the issuance of a patent, and it was viewed as a prosecutorial type of examination. The new procedure, called Inter Partes Review (IPR), is deemed to be an adjudicative proceeding consisting of a trial-like process considered to be more cost- and time-effective. Like the IPX system, IPR allows a third party to file for review of an already issued patent with the goal of proving invalidity; and as with the IPX method, the IPR challenger is prohibited from filing for review of a patent that he or she previously challenged either in litigation or in a prior re-examination proceeding. While an IPX proceeding could be initiated at any time, an IPR challenger must wait nine months after the grant or reissue of a patent or after the termination of post-grant review —whichever occurs later — to file the petition.
However, the differences are not merely nuanced but manifest as well: The revised proceedings before PTAB allow a company that is engaged in a patent lawsuit to skip over the issue of patent infringement — and cut to the underlying issue of whether the patent should have been issued in the first place.
IPX vs. IPR: Difference in Mechanics
Under the old IPX process, reviews were conducted by a USPTO patent examiner from the same “art unit” as the original patent examiner. In accordance with the new IPR procedures, reviews are considered by a three-judge panel composed of technically trained PTAB administrative patent judges. Furthermore, IPR allows the patent owner to file a preliminary response to the petition to initiate a review proceeding and to provide reasons why an IPR request should not be granted. PTAB decisions as to whether to institute a trial are final and non-appealable.
A Constitutional Challenge to PTAB
In June 2014, a major U.S. patent-licensing firm filed suit against the USPTO in which it claimed that the IPR provision violates the Seventh Amendment to the U.S. Constitution because it takes the issue of patent validity out of the purview of a jury and places it in the hands of the PTAB. In the complaint, the plaintiffs alleged that IPR proceedings essentially allow the executive branch to assert judicial power, thus violating constitutional principles of separation of powers. “[The plaintiff’s] rights have become subject to nullification without trial by jury,” maintains the complaint, which seeks declaratory judgment declaring the IPR process unconstitutional. The case was prompted when a U.S. district judge overseeing federal court patent litigation granted a motion to stay the case pending the outcome of the IPR before PTAB.
Some Troubling Statistics
The plaintiff’s lawyers in the Seventh Amendment case have pointed out that almost all IPRs completed to date have invalidated the subject patent claims. That allegation was echoed in a report last March that out of the first 25 written decisions of the PTAB, claims that challenged patents had been upheld only once. “It’s basically where patents go to die,” said the plaintiff company’s founder and CEO. “The patent office, as part of the executive branch, is reflecting the anti-patent bias of the executive branch.”
After just two months of AIA’s new IPR process being in effect, an East Coast patent law firm’s review of PTAB’s performance noted that:
- Unlike district court litigation, PTAB is deciding which grounds it believes are most likely to prevail;
- PTAB is granting trials but on far fewer grounds than proposed in IPR petitions;
- PTAB decides which grounds on which to proceed to trial;
- PTAB denies the petitioner the right to pursue what it perceives to be the best invalidity arguments;
- PTAB has denied trial even where the petitioner has satisfied statutory thresholds.
In a display of sensitivity to legal practitioners’ complaints, the PTAB held roundtables around the country this past spring for the purpose of soliciting feedback on AIA trials conducted to date. What came out of the feedback was the USPTO’s announcement of June 27, 2014, formally seeking public comment on AIA trials. Both developments are seen as positive steps that, hopefully, will correct various flaws in the PTAB trial practice rules. The deadline for submitting comments is on or before September 16, 2014.