2014 PTAB Institution Rate Retreats to 70% Range

To date, a major patentee criticism of Inter Partes Review (IPR) & Covered Business Method (CBM) patent challenges has been their high rate of institution. Patentees were quick to point to the 85+% institution rate of the Patent Trial & Appeal Board (PTAB) as evincing an anti-patent bias. This dull roar was then amplified by then CAFC Chief Judge Rader labeling the PTAB a patent “death squad.” In response, the PTAB patiently explained the relatively small sample size of instituted proceedings, the fact that trial does not always go forward on all claims, and that there was a natural selection of weak patents in the early days of IPR and CBM. The PTAB suggested that in the months ahead, the institution rate would normalize. Yet, these reassurances fell on mostly deaf ears.

Now that a larger sample size is available (and soon to be growing by 100+ decision every month), the PTAB predictions are beginning to materialize.

As shown below, the institution rate has fallen, on average, by roughly 10 percentage points in the past year. (Click to Enlarge)

Click here to view table.

Of course, cynics will argue that the PTAB has only become more stingy as a result of their growing workload; and/or the PTAB is bowing to political pressure. On the contrary, I would argue that the drop in institutions is a result of several market factors.

First, a broader cross-section of patents is now coming to the PTAB. While Congress may have created IPRs with NPEs in mind, the PTAB’s speed in resolving patent disputes in a cost effective manner is attractive to any accused infringer. True competitor disputes, such as the narrowly tailored patent claims of Bio/pharma battles are now finding their way to the PTAB. An IPR petition directed to a true innovator patent is not the same “turkey shoot” as a three (3) line patent troll claim.

Second, with increased filings come attorneys that are not only unfamiliar with the PTAB, but unfamiliar with PTO practice altogether. The “one-shot” nature of most IPR petition filings leaves little room for on-the-job-training.

Critics will still urge that even a 70%, the institution rate is still too high (i.e., “how is it that 70% of issued patents are bad!?”). But that criticism fails to account for the fact that many institution orders are only going forward on a subset of challenged claims.

The sky is not falling.