Two years ago, the Leahy-Smith America Invents Act (AIA) introduced new administrative proceedings with new strategic benefits and new tradeoffs. These proceedings, called inter partes reviews (IPRs), allow third parties to challenge validity in the United States Patent & Trademark Office (USPTO) of issued patent claims under certain defined circumstances.
Before passage of the AIA, IPR was touted as a vehicle to allow mistakenly issued patents to be addressed early in their lives, before they disrupt entire industries or result in expensive litigation. The Patent Trial and Appeal Board (PTAB) within the USPTO administers IPR proceedings. Highly trained administrative law judges with appropriate technical backgrounds decide these validity challenges. There is no presumption of validity. Challenged claims are struck down as invalid if the PTAB finds a preponderance of the evidence shows them to be anticipated by or obvious over prior art patents and printed publications. By statute, these IPRs proceed under an expedited timeline that will result in a final written decision within 16-18 months after the petition is filed.
Nonetheless, many were skeptical of IPRs. Earlier administrative proceedings for challenging patent validity (reexamination) had not proven popular. These skeptics were wrong, and nearly two thousand IPR petitions have been filed through September 19, 2014. The early IPR experience provides important insights for when and how to lodge such challenges.
IPR Institution Decisions
To trigger an IPR, petitioners must demonstrate a reasonable likelihood that he/she would prevail as to at least one of the claims challenged. The PTAB has instituted IPR proceedings at a very high rate. From inception, the PTAB has granted (at least in part) some 79 percent of all petitions.
But, the more recent data does not paint such a rosy picture for petitioners. The IPR petition institution grant rate has decreased significantly. Over the past three months, only about 58 percent of such petitions were granted. And this is part of a consistent, longer-term trend.
The PTAB is closely scrutinizing IPR petitions, perhaps because of the overwhelming volume of such petitions. Therefore, it is critical that petitioners clearly explain their proposed claim construction and where each claim limitation is found in the prior art. This is particularly important when arguing that the claims are anticipated. When claims are said to be obvious, petitioners also need to describe carefully why one of ordinary skill would have been prompted to combine the particular references.
IPR Final Decisions
Through September 19, 2014, the PTAB has issued 117 final decisions in IPR proceedings. These decisions have addressed nearly 1,700 patent claims in 107 different U.S. patents. On a cumulative basis, 66 percent of the challenged claims were found by the PTAB to be not patentable, 13 percent of the claims were cancelled by the patent owner, and 21 percent of the claims were confirmed. By comparison, federal district courts historically have invalidated about half of patents litigated to a final determination. See John R. Allison & Mark A. Lemley, Empirical Evidence on the Validity of Litigated Patents, 26 AIPLA Q.J. 185, 205–06 & n.52 (1998) (46 percent litigated patents found invalid); Kimberly A. Moore, Judges, Juries, and Patent Cases – An Empirical Peek Inside the Black Box, 99 MICH. L. REV. 365 (2000) (litigated patents found invalid in 33 percent of cases in study sample).
However, these cumulative numbers do not tell the whole story. Patent owners are now finding more success in the IPR final decisions. Initially, very few patent claims survived IPR. Between September 16, 2013 and March 31, 2014, just 27 patent claims survived IPR out of a total 380 claims involved in those proceedings (i.e., less than 7 percent challenged claims survived IPR). However, between April 1, 2014 and September 19, 2014, the statistics are quite different, with 325 claims surviving IPR out of a total 1312 claims, or about 25 percent. These quarterly IPR statistics are depicted to the right.
IPR proceedings have proven to be enormously popular with patent challengers during the first two years of their availability. The PTAB now appears to be closely scrutinizing IPR petitions. Failure to select prior art carefully or to explain invalidity grounds precisely may lead the PTAB to deny institution of IPR requests. Even if an IPR is instituted, PTAB final decisions show that, while IPR proceedings are enormously challenging for patent owners, strong, valid patent claims can survive IPR. Weaker IPR challenges may do more harm than good for petitioners. Practitioners need to understand and continue to learn from these early IPR experiences.