Patent Act Rewritten to Appease Bio/Pharma Lobby

In a surprising change of course, the Senate bill known as the 'The Patent Act" (S.1137) has morphed into a PTAB reform bill. The initial version of the Bill hardly touched the patentability trials of the USPTO's Patent Trial & Appeal Board (PTAB). A competing bill, known as the "Strong Act," — on the other hand— proposed gutting these highly effective patent challenge mechanisms. After the Manager's Amendment to the Patent Act on Tuesday (here), at least with respect to the PTAB, both bills now propose significant alterations to the PTAB's patent challenge mechanisms.

As a reminder, the impetus behind the AIA of 2011 was to thwart abusive litigation fueled by weak patents. It was argued pre-AIA that patents were issuing from the USPTO of overly broad scope and on questionable technology. These patents were then used as tools by extortionists (patent trolls) to extract large settlements from the domestic tech industry. This cottage industry was spawned from an over abundance of such patents. And, since defeating these patents in a district court was quite difficult (due to the deferential treatment of U.S. patents) and expensive, settlement was the only option. The AIA provided relief from these practices by introducing a low-cost, expedited "opposition" to such patents at the PTAB known as Inter Partes Review (IPR) and Post-Grant Review (PGR). That is, the PTAB challenge proceedings of the AIA were designed to weed out weak patents, quickly and cost effectively. These proceedings have been very effective to the delight of some of America's largest tech companies (i.e., serial defendants).

Since enactment of the AIA, however, many have realized that when presented with appropriate evidence, the PTAB does not discriminate. It is not just weak troll patents that are being cancelled, and this has a bunch of folks, especially the Bio/Pharma lobby, up in arms.

The Manager's Amendment to S.1137 adds some 17 pages in PTAB changes, below is a list of the major changes proposed with my quick thoughts on each:

  1. Preliminary Responses may include evidence, and petitioners can seek leave to file a reply.

(A similar proposal is expected from the PTAB next month, likely moot)

  1. Director given discretion to deny petitions in the "interests of justice." Also, the Director may deny filings that seem to simply leverage the difference in evidentiary standards. (i.e., collateral attack on an earlier court finding of no invalidity)

(Presumably this is directed at the hedge fund filings. Not the cleanest way to attack this problem, but, ok)

  1. Exception to 12-month IPR window for amended complaints that add new claims

(This would address a common issue joinder situation, and is a sensible idea)

  1. Apply Philips claim construction. Claim construction will be binding in a later proceeding.

(I have written about this idea extensively, we already know about the potential for issue preclusion from B&B Hardware. Patentees will regret pushing for this change, if it happens)

  1. Clarify that parties can get live testimony, if the PTAB panel agrees it would be helpful.

(This doesn't seem to change the status quo. Also, a similar clarification is expected from the PTAB in July, likely moot)

  1. Providing the ability to amend as a matter of right if narrowing, supported, and responsive to trial ground. Petitioner has burden on unpatentability.

(Also, expecting similar proposal from PTAB in July, likely moot)

  1. Force Amendment within 30 days of trial institution.

(Strange idea. Why would a patentee amend before it has even deposed the petitioner's expert? What value does accelerating this decision bring to anyone?)

  1. Presumption of validity to be accorded to challenged patent.

(A presumption serves one basic function, to allocate the burden of proof and accompanying evidentiary standard, The burden of proving unpatentability is presently on the petitioner. Absent application of a clear and convincing standard, which is not discussed in the bill, what exactly does this presumption change? (other than to create unnecessary confusion)

  1. Only one judge in common with Institution Order and Final Written Decision (FWD).

(The PTAB has already announced a similar initiative, moot)

  1. Removing "reasonably could have raised estoppel" from PGR

(Bio/Pharma must have been asleep on this one. Will encourage a far greater use of PGR, which given 101 and 112 grounds cannot be a Bio/Pharma wish.)

  1. Fix CBM grounds to include 102(e).

(The most sensible fix in the bill)

Most of the practice changes noted above would be made effective (according to The Bill) at the PTAB within 6 months from enactment, the remainder at 12 months. The changes would be prospective only. So, if the presumption of validity and claim construction changes make it into law (far from certain), there would likely be a massive crush of filings in the weeks before the changes to avoid the practice uncertainty to follow.

With the exception of the changes to the statutes (last two changes, and the 12 month window change), the PTAB already has the power to address all these issues. In fact, in most instances above, these changes are now imminent. Is Congress not talking to the USPTO? This seems like a very wasteful legislative exercise to me. In any event, there will undoubtedly be a lot of hearings and debate in the months ahead. Bills will be rewritten, House bills will appear and be rewritten. This is a long road that may never end, and at a minimum will take us into 2016. Also impacting the legislative dynamic will be opposition lobbying, PTAB rules changes, CAFC rulings, and the approaching change in administration.