Bar News - June 15, 2016
Intellectual Property Law: Patent Validity Challenges Lead to Supreme Court Review
By: Peter Nieves
By now, even if not familiar with patent law, most attorneys have heard of the America Invents Act (AIA). Brought forth by the legislative branch, the AIA is a federal statute that was introduced in the Senate by Patrick Leahy on Jan. 25, 2011, and signed into law on Sept. 16, 2011. AIA introduced many changes to patent law and procedure, including a new way to challenge validity of patents after issuance via use of Inter Partes Review (IPR).
At a time when non-practicing entities (i.e., so-called patent trolls) were threatening litigation against parties that could not afford patent litigation, and when owners of overly broad patents were doing the same, IPR provided an option to attack the validity of a patent without patent litigation. IPR has turned into a patent litigation tool, where a party seeking to stop patent litigation expenses and destroy an asserted patent can file an IPR petition, obtain an institution of the IPR from the Patent Trial and Appeal Board (PTAB), and then move the district court to stay the litigation while awaiting an answer regarding validity of the challenged patent.
Many judges will grant a stay after an IPR has been instituted. After all, why continue with pending litigation if the very object of assertion (i.e., the patent-in-suit) may be declared invalid, and the PTAB has declared that there is a reasonable likelihood that the petitioner would prevail, with respect to at least one of the claims challenged in the petition (35 USC Section 314(a))?
IPR became available Sept. 16, 2012, and allows a party to challenge the validity of patent claims by using printed publications and patents in a trial before the PTAB. For patent applications filed before March 16, 2013, IPR can be filed immediately after issuance of the patent. However, for patent applications filed on or after March 16, 2013, IPR can only be filed after nine months have passed since issuance of the patent.
Unlike lengthy and expensive patent litigation, the IPR proceeding has a set time limit, and costs are a fraction of the cost for patent litigation. For instance, a patent infringement lawsuit in the Federal District of New Hampshire may take three years from filing to completion. By comparison, the statutorily defined time limit for an IPR is to have a decision regarding whether the PTAB will institute the IPR within six months of IPR petition filing (an IPR may be instituted upon a showing that there is a reasonable likelihood that the petitioner would prevail with respect to at least one patent claim challenged), and to issue a final decision regarding allow-ability or invalidation of the challenged patent claims within one year of IPR institution. This means that within a year and a half of filing an IPR petition, a final decision regarding validity or invalidity of the challenged patent claims will be rendered.
As mentioned, IPR takes place before the PTAB. The PTAB falls under the executive branch. Institution of IPRs has increased demands on the PTAB so much that the board has more than tripled in size over the past four years. Not only has size of the PTAB grown quickly with the AIA’s introduction of IPRs, but also the number of invalidated patents has grown quickly.
As of April 2016, a total of 4,424 IPR petitions had been filed. Of those, 3,009 were completed by April 2016, of which 1,511 IPR trials were instituted. Of the IPR trials instituted, 72 percent of the IPR petitions resulted in not a single challenged patent claim being found valid. Only 14 percent of all IPR trials instituted resulted in all patent claims being confirmed as allowable. This data means that IPR trials are granted for almost 50 percent of the IPR petitions filed, with there being a more than 70 percent chance of all patent claims challenged being invalidated. These numbers are astonishing. While those sued for patent infringement may be happy about the IPR statistics, patent owners now have more concern when enforcing patents, especially if overly broad claims were granted by the United States Patent and Trademark Office.
A Different Standard
So, why are so many challenged patents being invalidated? After all, the chances of invalidating a patent in federal district court is low, although the US Supreme Court’s decision in Alice v. CLS Bank (2014) seems to have increased the number of patent invalidations. Part of the answer may lie in the fact that the PTAB is applying a different standard of review for determining the meaning of patent claims than that applied by the courts.
The PTAB applies the broadest reasonable interpretation (BRI) standard to patent claim construction, as statutorily provided. Under the BRI standard, claim terms are given their broadest reasonable interpretation in view of the specification of the patent to one having ordinary skill in the art at the time of the invention, without importing limitations into the claims from the specification. A broader interpretation of the claims results in more prior art being available to invalidate patent claims, and therefore, potentially more of a chance of patent claims being declared invalid.
Alternatively, district courts provide a presumption of validity to a patent being reviewed, as prescribed by 35 USC Section 282(a). Not only is the presumption of validity not used by the PTAB, but the standard applied to claim construction is the standard used in Phillips v. AWH Corp. (Fed. Cir. 2005). The Phillips standard for claim construction uses the ordinary meaning of the language of the claims themselves and other intrinsic sources like the claims, specification, and prosecution history of the patent. Extrinsic evidence, such as dictionaries and expert testimony, are of secondary importance.
SCOTUS Enters the Ring
Simply stated, in comparison to the PTAB, only the district court provides a presumption of validity to a construed patent, as well as using a more detailed analysis when determining patent validity. Whether this difference in standard of review is “fair” is for the reader to decide. However, one particular group has decided to let their voice be heard on this issue. Welcome the Supreme Court to the fight.
Noticing the discrepancy in review, the United States Supreme Court has decided to weigh in on whether it is appropriate for the PTAB to apply the BRI standard, as opposed to the Phillips standard. The case of interest being reviewed by the United States Supreme Court is Cuozzo Speed Technologies LLC v. Lee.
The Supreme Court will be reviewing two issues relating to patentability trials conducted by the PTAB: 1) the correct claim construction standard to apply in PTAB trials, and 2) whether a PTAB decision to institute a trial can be reviewed after final decision of the PTAB. The decision of the Supreme Court will have great significance to patent challengers and holders alike. Essentially, the judicial branch (Supreme Court) will be reviewing the implementation process of the executive branch (PTAB), the result of which may conflict with original executive branch (PTAB) interpretation of the legislative branch law (AIA).
Clearly, the last few years have been filled with changes in patent law as newly implemented law is stretched and sized to work properly for all involved. Expect additional changes and modifications to take place and maintain close communication with a patent attorney so that you are well aware of how these changes will impact your clients.
Peter Nieves is a shareholder with Sheehan Phinney Bass + Green. He practices within the patent law, and intellectual property and technology groups of Sheehan.