Patent reform is a 2015 hot ticket item in Congress. There are some very well intentioned and hardworking legislators who want to address the problems with the system. The world changes and past solutions have now taken root – some proven effective and others not. Patent reform in 2015 should focus on what has proven effective in curbing litigation and clearing out bad patents.
The AIA created two very effective and efficient mechanisms for clearing out bad patents (or bad claims in otherwise good patents): the covered business method review (CBM) and the inter partes review (IPR). In fact, the problem of patents over methods of doing business has been largely dealt with by CBM review (combined with the Supreme Court’s CLS Bank v. Alice decision which invalidates patents that combine abstract or known ideas with known technology; such as a business method on a computer).
Why has covered business method review been effective in dealing with litigation? Two things: first, any ground can be raised by anyone at any time to challenge a patent. Second, the addition of a statutory provision to stay a patent lawsuit on the patent absent extraordinary circumstances. These points need to be implemented into the AIA’s IPR provisions.
First, the stay rule: right now, IPR has no statutory stay provision and stays are granted by courts on an uneven basis in their discretion in managing their dockets. Where stays are denied, there is no coordination between the court case and the IPR, which means the first proceeding to final resolution trumps the other. Also, could there be a bigger waste of public and private resources than two concurrent proceedings in different forums dealing with the same patent with absolutely no coordination between them?
Here is the point: three administrative law judges specializing in patent law after full briefing and argument by the parties, in a proceeding specially tailored to evaluate whether a claim should have issued, might find a patent or a claim never should have issued, but if a lay jury decides the person sued failed to prove to them by clear and convincing evidence that the patent is invalid, it is the proceeding where all appeals are resolved first that controls the outcome. In effect, chance ultimately decides if a bad patent is eliminated as a millstone on the market by the PTO or payment is required by the defendants because lay people did not find the patent invalid under the difficult standards and practical constraints in a jury trial. Happenstance controls the out-come, the only “bankable” result is one process will have proven to be a waste.
By importing the statutory stay provision from the covered business review procedure into the IPR procedure, we stop this waste and we let the administrative judge panels at the PTO and an appeal to the United States Court of Appeals to the Federal Circuit first determine which claims are valid. The patent judges only “institute” these proceedings on a likelihood that a specific claim in a patent is likely unpatentable, on a claim by claim basis. It is not uncommon for the administrative law judges to “institute” on some claims in a patent but not all of them. So an IPR is not a loose process.
The CBM statutory stay provision is not, however, mandatory. This allows the district court go forward in the exceptional case notwithstanding institution of review of the claims. This safety valve will left exceptional cases or circumstances be excepted from the stay. Nonetheless, a tweak is needed here across the board. Where there has been a full administrative trial and final decision by three administrative law judges that finds a claim of a patent never should have issued, at that point all pending litigation involving the same claim in all courts and administrative agencies involving any parties should be automatically stayed until the appeal of the PTAB decision is over and the claim is either cancelled or the decision reversed. There is no reason a court or the ITC should use its resources on a patent (or a claim) when three administrative law judges after full proceedings created specifically for the purpose of evaluating the patentability of claims, have issued a final opinion that a claim never should have issued – unless and until reversed by the Federal Circuit.
A patent owner may have a choice if the administrative law judges declined to institute review of a claim in its patent, even if it instituted on other claims: The patent owner can avoid a stay and go forward on those claims that were found acceptable (IPR not instituted). This clears out bad patents, gives patent owners whose patents have good claims a jury, and avoids the final consequence to the defendant being decided by the happenstance of which proceeding ends first (the administrative law review and appeal or the jury trial and appeal).
Stay tuned for Part II and Part III of “Focus Further Patent Reform On Improving What Is Starting to Work.”