On August 19, 2015, the Director of the USPTO released a blog post reporting on the state of post- grant review proceedings created by the Leahy- Smith America Invents Act of 2011 and announcing a set of potential changes to those proceedings go- ing forward. Those involved in or considering inter partes review proceedings should take note of these significant changes that are now on the horizon at the PTAB.
Inter Partes Review: By the Numbers
The Director’s blog post confirms that, since be- coming available in 2012, post-grant review proceedings – particularly inter partes reviews – have become very popular among those seeking to challenge the validity of a patent. The PTAB re- ports that it has received a total of 3,655 post-grant review petitions, the vast majority of which (90%) are petitions for inter partes review.1 The Director noted that this “reflect[s] around three times more than what we initially anticipated.” Thus far, the PTAB has kept pace with the filings, maintaining a perfect record of issuing timely final decisions with- in the mandated period of one year from institution.
Whether those decisions tend to favor petitioners or patent owners is less clear. As is often the case with statistics, it depends on how the numbers are sliced. Some have sharply criticized inter partes review as eliminating too many patent claims. Likely aware of that criticism, the PTAB has seemingly down- played the rate at which claims have been found unpatentable.
For example, the blog post states that “[o]f the first IPRs to reach a conclusion, 12 percent of total claims available to be challenged (4,496 of 38,462), were determined by the PTAB to be unpatentable in a final written decision.” However, this appears to include – as “available to be challenged” – claims that were never challenged in a petition and there- fore were not reviewed by the PTAB. The blog post goes on to state that “[o]f the first IPRs to reach a conclusion, 25 percent of claims actually challenged (4,496 of 17,675) were found to be un- patentable.” The meaning of “to reach a conclusion” for purposes of this statistic is unclear. However, it appears to include petitions that were denied, dismissals, settlements, and other termina- tions prior to a final decision on the merits. As such, neither of these statistics reflects the rate at which PTAB panels are deciding that the patent claims before them are unpatentable.
Settlement is a particularly significant factor influ- encing the above statistics because the claims at issue in IPRs terminated by settlement remain pa- tentable with no decision from the PTAB. Approximately 20% of the 3,277 inter partes re- view petitions filed thus far have settled prior to a final decision on the merits. That percentage appears to be on the rise. The ratio of IPRs settled to IPRs filed has increased each year over the past three years, i.e., 7% in 2013, 16% in 2014, and 28% so far in 2015.
Looking instead at the key decision points – institu- tion decisions and final written decisions – a couple of trends appear to be emerging. First, the PTAB has instituted inter partes review and found claims unpatentable at a fairly high rate. Of the institution decisions thus far, 71% have resulted in institution of an inter partes review.2 And, of the 447 cases where trial has completed, 84% resulted in some or all of the instituted claims being found unpatenta- ble.3
The second trend, however, is that the percentage of petitions being denied is on the increase, from 13% in 2013, to 26% in 2014, to 33% so far in 2015. While it is possible that the PTAB is turning a more critical eye to petitions in response to the unexpect- edly large volume, it is also possible that petitioners targeted particularly vulnerable claims in early peti- tions or that the initial success of petitioners has encouraged more aggressive petitions that cannot meet the “reasonable likelihood to prevail” stand- ard.
Proposed Rule Changes
The proposed changes announced in the Director’s blog post are the second round of modifications to the PTAB’s rules and guidance since they were first issued in 2012. The first round of changes, which the Director previously described as “relatively simple in scope,” were announced in March 2015 and finalized in May 2015. They included in- creased page limits for briefing on motions to amend and petitioner’s reply brief, required use of Times New Roman font, and clarification that mul- tiple back-up counsel may be designated.
The newly announced proposed rule changes are more substantive. Included in the proposed changes are:
- Preliminary Response: The rule changes would allow presentation of evidence in the patent owner’s preliminary response. Any fact dis- putes between the petition and the preliminary response would be resolved in favor of the peti- tioner for purposes of the institution decision. The rule change also would clarify that the peti- tioner may move for leave to file a reply to the patent owner’s preliminary response.
- Policing Misconduct in Filings: The rule change would require a Rule 11-type certification for PTAB filings.
- Claim Construction: The rule change would clarify the that Board will use a “broadest rea- sonable construction” standard for patents “that will not expire before a final written decision is issued.” The PTAB also noted that the Trial Practice Guide would include guidance on how to determine the correct standard and sought comments on questions such as guidelines for determining which claim construction standard applies and whether the Board should entertain briefing on which standard applies.
- Time to Review Demonstratives: The rule change would allow seven days (instead of just five) before oral argument for exchange of demonstratives.
- Word Count Limits: The rule change would move to a maximum word count for key filings instead of a page count. The petition, patent owner preliminary response, and patent owner response would receive 14,000 words (instead of 60 pages) and the petitioner’s reply to the pa- tent owner’s response would receive 5,600 words (instead of 25 pages).
Apart from the rule changes, the Board confirmed that it plans to continue using the Garmin factors for discovery. The Board also noted that there is no deadline for raising a real party-in-interest dispute, but that it should ideally be raised early in the pro- ceeding. If the challenge arises late in the proceeding, the Board will consider the impact of the delay when deciding whether to take up the is- sue.
The proposed rule changes were the subject of a number of AIA Roadshows in late August. Com- ments on the proposed rules may be submitted to the PTO until October 19, 2015.
Pilot Program for Institution Decisions
The Director also announced in the blog post that the PTAB was considering a request for comments “related to the staffing of the PTAB panels for the institution phase of the proceedings.” Shortly thereafter, on August 25, 2015, the PTAB did issue such a request, proposing a pilot program under which a single Administrative Patent Judge (in lieu of the current three-judge panel) would determine whether to institute an inter partes review.4 Under the proposal, two additional Administrative Patent Judges would be added to the panel only if a trial is instituted.
As noted in the request for comment, the PTAB has attempted to meet the demand for AIA post grant proceedings “by hiring additional judges.” Howev- er, the PTAB is concerned that “[e]ven with continued hiring...increases in filings and the grow- ing number of cases may strain the PTAB’s continuing ability to make timely decisions and meet statutory deadlines.” According to the PTAB, the proposed solution of allowing a single judge to make the institution decision “would allow more judges to be available to attend to other matters, such as reducing the ex parte appeal backlog and handling more post grant proceedings.”
This program is significant in part because the AIA prohibits appeals of institution decisions. See 35 U.S.C. § 314(d) (“The determination by the Direc- tor whether to institute an inter partes review under this section shall be final and nonappealable.”); In Re Cuozzo Speed Technologies LLC, 793 F.3d 1268, 1273 (Fed. Cir. 2015). The PTAB did not state how requests for rehearing would be handled, but did specifically seek public comment on that issue.
Comments on the proposed rules may be submitted to the PTO until October 26, 2015.