Patentees Back Themselves Into a Corner at PTAB

Both patentees and challengers alike were displeased with inter partes patent reexamination prior to the America Invents Act (AIA). Inter partes patent reexamination was too slow to serve as a true alternative to litigation for patent challengers, and patentees argued the system was biased against them. In formulating the AIA Congress fashioned a replacement, Inter Partes Review (IPR).  The IPR statutes, not surprisingly, mandate speed, and include mechanisms directed to the perceived lack of fairness of the old reexamination model.  

Patentees argued that inter partes patent reexamination procedure favored patent challengers since: (1) Declarants in reexamination were not subject to cross-examination; and (2) a patentee was unable to respond to a request for reexamination before it was ordered by the USPTO. Specifically, patentees urged that had they an opportunity to respond to the reexamination request before the USPTO made a decision, years of harassing/expensive reexamination and appeal proceedings could be avoided.  Further, they argued the ability to cross-examine a challenger 's declarants would also help expose baseless expert theories assailing their patented claims. For this reason, the IPR statutes provides for cross-examination of declarants as well as a "preliminary response" from patentees. 

Yet, even with the added IPR mechanisms, patentees are not faring much better as compared to the days of inter partes patent reexamination. As a result, patentees have lobbied for further changes. These changes, some of which are now proposed as formal rule changes by Patent Trial & Appeal Board (PTAB) may only make matters worse for some patentees.

Over the first few years of IPR, patentees were quick to point out that the preliminary response does not truly level the playing field since new expert testimony is prohibited. That is, since the petitioner request may include testimonial evidence, but a preliminary response may not respond in kind, patentees argue that it is not surprising that trials are being instituted at a high rate.  

Of course, if this patentee criticism were valid, far more trials would conclude favorably to patentees once such evidence is entered (it is permitted later, during trial). Nevertheless, responsive to this criticism, the PTAB now proposes to eliminate the prohibition against evidence in the preliminary response.

§ 42.107 Preliminary response to petition. (a) The patent owner may file a preliminary response to the petition. The response may set forth the reasons why no inter partes review should be instituted under 35 U.S.C. 314 and can include supporting evidence. The preliminary response is subject to the word count under § 42.24. 

Given the lack of controversy over this proposal, it will almost certainly become a final rule in the months ahead.  But, will it make a difference?

Probably not much, at least not for IPRs in the predictable arts.  

As alluded to above, if patentee evidence were as game-changing as urged, far more trials would conclude in favor of patentees once all evidence is considered. The statistics do not show a wide variation between institution rates and final cancellation rates. (Note: Some official statistics may be hard to follow in this regard since settled cases, requests for adverse judgment, and disclaimed claims are considered as findings of patentability)

Keep in mind that the vast majority (70-80%) of IPRs are in the predictable arts. Expert testimony, before an expert agency of engineers and scientists is nowhere near as critical as the same testimony in a district court.  Remember that thousands of decisions come out of the ex parte appeal section of the Board every year with no testimonial evidence of any kind. Simply stated, the Board doesn't need the technology explained to them. They are not, in most cases, picking a "winning expert." Instead, more often than not, judges are deciding technical issues based on their own experience and training in the predictable arts.

In the unpredictable arts, different story.  In those IPRs the new preliminary response option will have obvious benefits. While the Board is also technically skilled in the unpredictable arts, unpredictability lends itself more to outside guidance of experts in many niche technologies (Bio/Parma fields in particular).

But, what about the argument "ok, but it certainly can't hurt to have a more robust option in the predictable arts to present your case prior to institution."  

Actually, this change can hurt, here's why. First, if you have presented arguments and evidence in your preliminary response, and the trial is instituted anyway, that institution decision (ID) now has more weight behind it.  In other words, within 6 months of filing, a panel of three technically trained judges, after hearing arguments and evidence from both sides, still finds the claims unpatentable—quite a sobering development for a patentee. Sure, the trial is still to come, but the argument that procedure has somehow unfairly colored the ID outcome will be lost to patentees.    

The ability to argue the asymmetry in evidence has been of value to patentees also in co-pending litigation (which is most cases).  When facing a stay pending IPR in the district court, the argument that the ID is without the benefit of patentee evidence will be gone. The argument to the district court judge that the preliminary decision is wrong, and will change at trial, would seem less forceful. Moreover, given the ID weighs both sides evidence, isn't the argument to stay the case upon mere filing of an IPR now stronger?  Why not wait the short six months for this newly improved and balanced feedback of the expert agency?