Key Notes:

  • The Supreme Court decided April 24 that the Patent Trial and Appeal Board (PTAB) can invalidate patents without violating the U.S. Constitution.
  • The Court also decided on April 24, in a separate case, that the PTAB must issue a decision on the validity of every patent claim that is challenged.
  • In light of these decisions, a PTAB challenge may now be a more useful and cost-effective option for companies that are (a) paying a royalty for use of a questionable patent or (b) being prevented from offering a new product or service by a competitor’s questionable patent.

The Decisions

In Oil States v. Greene’s, the Supreme Court held that the U.S. Constitution does not prevent the United States Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) from invalidating unworthy patents. Streamlined PTAB procedures have been used since 2012 to successfully challenge thousands of patents for a fraction of the cost of a patent lawsuit in federal district court. The PTAB has found at least one claim of a challenged patent invalid 81 percent of the time, and all claims invalid 67 percent of the time.

In SAS Institute Inc. v. Iancu, the Supreme Court held that the PTAB must go further to address challenged patents. Previously, the PTAB did not always decide the validity of all patent claims that were challenged. This practice sometimes left the overall validity of a patent unresolved, notwithstanding a favorable PTAB decision. From now on, the PTAB must issue a decision on every challenged claim.

What’s the Practical Effect?

Oil States removes a cloud that has been hanging over PTAB challenges, and SAS requires new PTAB procedures that help eliminate the risk of a costly patent infringement suit after a favorable PTAB decision. PTAB challenges are useful if you think you might be paying a royalty for use of a patent that should have never been granted, or if the risk of infringing a bad patent is preventing you from offering a new product or service. Recent court decisions have weakened patent rights in business method, software and certain biotech technologies, so a decision to respect patent rights in the past might be out of date.

What’s the Typical Cost?

Costs include attorney fees, government fees and sometimes expert and testing fees, and vary depending primarily on the complexity of the technology. A petition for Inter Partes Review (IPR) can typically be filed for less than $100,000, and in 37 percent of IPRs to date, further costs are avoided because patent owners agree to forfeit their patent rights or settle at that stage, or because the PTAB does not institute review. Only 28 percent of IPRs continue through to a final decision, and in most cases, the PTAB makes final decisions for the same reasons given at the outset of the IPR, when the PTAB decides to institute the review. The costs of patent challenges before the PTAB are much lower than the costs of challenges brought in U.S. district courts.

What’s the Time Frame?

A company can expect to receive a final PTAB decision on validity within 18 months of filing the IPR petition. However, as discussed above, patent owners often agree to forfeit or narrow their patents early on during the proceeding.