Patent office passes the scalpel

Procedural changes to post-grant review should help patent owners

The America Invents Act’s (AIA) reform of post-grant opposition procedures was supposed to improve patent quality while providing a low-cost and quicker alternative to district court litigation. But patent owners have been scathing in their criticisms, arguing that inter-partes, post-grant and covered business method reviews have made it too easy and cheap to invalidate patents.

The statistics back up these claims. Inter-partes review, which can be brought nine months after grant by third parties, remains the most popular form of post-grant challenge, according to Unified Patents, making up 91.1 percent of petition types. Almost 60 percent of patent claims challenged in inter-partes review proceedings have been cancelled or found unpatentable during 2014 and 2015, Fitzpatrick, Cella, Harper & Scinto has found. That figure is based on the law firm’s analysis of US Trial and Appeal Board (PTAB) proceedings, which all final written decisions through 2015 and all decisions denying institution issued through 2014.
Of inter-partes review proceedings that made it to a final written decision, patent owners had only a 14.7 percent chance of surviving a review. Covered business method reviews only had a 2.4 percent chance of survival.

The firm’s findings might serve as an explanation for how the PTAB earned its ‘death squad’ nickname. An earlier Fitzpatrick report found that the PTAB ‘killed’ patents three quarters of the time in 2014.

In a bid to appease critics, the US Patent and Trademark Office (USPTO) announced procedural changes to the inter-partes review, post-grant and covered business method processes. The USPTO made initial changes to the opposition systems last year after a US-wide outreach programme was conducted to collect feedback.

Those changes allowed a claims appendix to be filed with a motion to amend and expanded page limits for certain filings.
From 6 May, the PTAB will use the same claim construction standard as district courts for patents due to expire during a proceeding and use ‘broadest reasonable interpretation’ for all other patents. A Rule 11-type certification for papers filed in a proceeding will also be added, and the current page limit will be replaced with a word count limit for major briefings.

The biggest change will see patent owners being able to submit expert testimony with their preliminary responses.

“Patent owners have been clamouring for a chance to put in expert testimony to prevent institution for quite some time,” says Cyrus Morton, partner at Robins Kaplan.

Slifer of the USPTO said the change addresses concerns that patent owners are disadvantaged by limitations on the evidence that could be presented with their preliminary responses.

Justin Oliver, partner at Fitzpatrick, Cella, Harper & Scinto, says the changes should help patent owners, in theory.

“The question is how much will it help patent owners? It may be tough to tell because the statistics show that the decisions denying institutions have been going up each year anyway.”

“Just over 13 percent of petitioners’ applications were denied in the fiscal year 2013, 25 percent in 2014 and more than 34 percent in the fiscal year for 2015,” he explains.

Oliver argues: “If there’s a genuine issue of material fact created by such testimonial evidence it will be viewed in a light most favourable to the petitioner. So, if there’s an expert saying ‘yes’ and the other expert is saying ‘no’, it will go in favour of the petitioner.”

Expert testimony simply disagreeing with the petitioner’s will not be particularly helpful, according to Oliver: “What will be more helpful to the patent owner is expert testimony that addresses issues that the petitioner failed to address. The absence of competing testimony will make the patent owner’s testimonial evidence more compelling.”

“The impact of the changes will depend on the quality of the evidence a patentee can generate within the three-month period for filing a preliminary response,” says Stephen Maebius, partner at Foley & Lardner.

“Given the short time period, patent owners who believe they have patents that may be targeted in AIA proceedings will want to consider lining up experts in advance and collecting evidence that may be useful to include in a preliminary response,” he adds.

Patent owners have a lot to chew over, including the pressure of time, quality of the testimony considered, as well as an awareness that the PTAB will favour the petitioner.

“The new rule is like a tool: it’s not a hammer, it’s a scalpel. It won’t work in the patent owner’s favour each time, but in many situations it will favour the patent owner. The trick is knowing how and where to use it effectively,” says Oliver.

Of course, post-grant review since the implementation of the AIA is about a lot more than procedural changes, with the Federal Circuit, Supreme Court and Congress all grappling with further reforms.

But, for now at least, US patent owners will be pleased that changes are being made in their favour.
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