Potential Consequences for Patent Challengers Filing with the PTAB

This article appeared in the February 4, 2015 Edition of The Legal Intelligencer

As an alternative to litigating in federal court, the America Invents Act (“AIA”) vests the U.S. Patent Trial and Appeal Board (“PTAB”) with power to conduct post-grant proceedings in which accused infringers can challenge a patent’s validity in a trial-like procedure at the Patent and Trademark Office.1 Considered a quicker and more economical route, post-grant proceedings have dramatically altered the United States patent litigation landscape in the last two years.

Currently, the PTAB stands as the second most popular forum for patent disputes, behind only the Eastern District of Texas.2 According to statistics, the number of post-grant proceedings filed in the PTAB nearly tripled from 564 in 2013 to 1,494 in 2014.3 Over the same time period, the number of federal court patent complaints filed in other primary patent jurisdictions remained relatively static.4

The PTAB’s rapid ascent as a preferred patent venue is partly attributable to the success rate of those who have elected to have their validity disputes heard in this forum. In 2014, for example, 668 petitions to institute were granted, and of the first 126 final decisions that issued, 65 percent of those decisions invalidated all challenged claims of the subject patent(s)5. Patent challenger success rates in federal courts, on the other hand, are generally lower.6

Yet another reason patent challengers elect the PTAB is its ability to resolve validity issues much quicker than a district court and at significantly lower cost. Indeed, the PTAB’s mandate is to complete a post-grant proceeding within twelve to eighteen months.

Despite the PTAB’s attractiveness, post-grant proceedings are not necessarily a silver bullet. Unlike federal court, only certain invalidity grounds can be raised in a post-grant proceeding, and the type and amount of discovery parties are allowed to take are more limited. Nonetheless, because of its relative affordability and the shorter time to decision, the PTAB is likely to remain a forum of choice for challenging patent validity, at least in the near term.

Post-grant proceedings come with their own unique rules and complex procedures. Following are some of the considerations to take into account when evaluating whether to file a post-grant petition with the PTAB.

Post-Grant Decisions as Evidence in District Court

Accused infringers should be prepared to have an adverse PTAB decision offered into evidence in support of validity in a district court dispute involving the same patent. For example, the Central District of California has ruled that a patentee may use a PTAB decision that denies institution of a proceeding as validity evidence when accompanied by an appropriate jury instruction on the differing legal standards applicable to post-grant proceedings and district court.7 Although the Middle District of Florida rejected this type of evidence in another case because of unfair prejudice, an adverse PTAB decision is relevant evidence and generally will not be excluded in a federal court action absent a compelling reason.8

Although more petitions to institute post-grant proceedings are granted than denied, a decision to not institute can compromise an accused infringer’s settlement strategy, particularly if the PTAB issues a strong statement supporting patentability. For example in the recent Motorola Mobility decision, the PTAB, in denying a post-grant petition, stated it was “not persuaded [p]etitioner ha[d] shown that the claimed subject matter taken as a whole does not recite a technological feature that is novel and unobvious over the prior art.”9 Statements like this reinforce a patent’s validity and easily could cause a patent owner to increase the dollar value of a settlement demand and otherwise bring settlement talks to a standstill.

Moreover, because a PTAB decision to not institute a post-grant proceeding is not appealable, it is important to maximize the likelihood of the PTAB granting a post-grant petition.10 Unlike the relatively liberal pleading requirements of federal court, petitioners in post-grant proceedings are required to plead their invalidity cases with “particularity.”11 For example, if alleging that a claimed invention is obvious, the petitioner must explain which parts of each prior art reference read on each claim element.12 If a petitioner only quotes a prior art reference without explaining how the prior art reference reads on the particular claim element, this will likely result in the PTAB denying the petition.13

Expert declarations are also required when filing post-grant petitions. The expert’s declaration should be meaningfully developed – and cited in the petition – so the PTAB can accord the testimony its proper weight.14 If the petitioner remains concerned about the strength of its invalidity case, the period between the filing of a post-grant petition and its institution may be the best time to negotiate resolution of the infringement dispute.

Adverse Claim Constructions

An adverse claim construction ruling in a PTAB proceeding can leave a patent challenger without an invalidity defense and in jeopardy of losing its non-infringement defense in a district court case. For example, a PTAB petitioner might advocate a broad claim construction to support its argument that prior art reads on a given claim term. At the same time, the petitioner may propose a narrower construction for other claim terms to minimize an adverse infringement ruling in subsequent litigation.

In the example above, instead of a broad interpretation for the first claim term, however, the PTAB adopts a narrow construction. And instead of adopting a narrow construction for the second claim term, the PTAB adopts a broad construction. Although federal courts are not bound by PTAB claim construction decisions, PTAB petitioners should exercise caution in advancing a narrow claim construction for a term critical to a non-infringement defense. Unless the narrow construction is supported by an explicit definition in the patent specification or a disavowal in the prosecution history, advancing an unduly narrow construction may not be worth the risk, as it could limit the patent challenger’s ability to argue either non-infringement, invalidity, or both.

One-Year Statutory Time Bar on Inter Partes Review

Certain post-grant proceedings, namely inter partes reviews, must be filed within one year of service of an infringement complaint.15 This one-year time bar precludes an accused infringer from filing an inter partes review if the accused infringer, real party in interest, or privy of the accused infringer was served with a patent infringement complaint more than a year before filing the petition.16 Service of an amended complaint or consolidation of two actions does not restart the clock where the patent at issue continues to be asserted.17

An exception to the one-year bar is if the original complaint was dismissed without prejudice and puts the parties in a position “as though the action had never been brought.”18 This exception, however, has been applied sparingly and it is unclear whether the AIA supports this exception. Thus, to avoid falling outside the one year period, an inter partes review should be filed promptly after a complaint is filed.

Conclusion

Although the rate at which the PTAB cancels patent claims has decreased somewhat in light of the PTAB’s increased caseload, for better or worse, the PTAB is still perceived by many as a sort of patent “death squad.” Whether the label is deserved or not, the PTAB can be an effective alternative to litigating patent validity issues in federal court.

When considering this venue, a patent challenger can minimize the risk of an unsuccessful PTAB decision spilling over to a district court litigation by (i) including ample explanation of the invalidity grounds within its petition, along with pinpoint citations to detailed expert declaration testimony, and (ii) advancing a narrow non-infringement claim construction when the construction is supported by an explicit definition in the patent specification or a disavowal in the prosecution history. Finally, petitioners should remain aware of the one-year time bar for filing an inter partes review.


[1] The AIA replaced inter partes reexamination with three types of adversarial proceedings requiring involvement of the requester: inter partes review, covered business method review, and post grant review. All three reviews are conducted before the PTAB. Upon instituting a post-grant proceeding, the PTAB issues a final determination within one year, although this time period can be extended up to six months for good cause.
[2] See Patent Public Advisory Annual Report at 48 (Nov. 3, 2014), available at http://www.uspto.gov/about/advisory/ppac/PPAC_2014_AnnualReport.pdf (hereinafter, “PPAC Rpt. 2014”).
[3] See Patent Public Advisory Annual Report at 41 (Nov. 4, 2013), available at http://www.uspto.gov/about/advisory/ppac/PPAC_2013_AnnualReport.pdf (hereinafter, “PPAC Rpt. 2013”); PPAC Rpt. 2014 at 48.
[4] See PPAC Rpt. 2013 at 41; PPAC Rpt. 2014 at 48.
[5] AIA Progress at 4-5 (Jan. 22, 2015), available at http://www.uspto.gov/ip/boards/bpai/stats/012215_aia_stat_graph.pdf; see also Trends from Two Years of AIA Post-Grant Proceedings (Sept. 29, 2014), available at http://www.law360.com/articles/581512/trends-from-2-years-of-aia-post-grant-proceedings
[6] See 2013 Patent Litigation Study at 9, available at http://www.pwc.com/en_US/us/forensic-services/publications/assets/2013-patent-litigation-study.pdf
[7] See Universal Elecs., Inc. v. Universal Remote Control, Inc., No. 8-12-cv-00329, (C.D. Cal. Apr. 21, 2014, Order) (Guilford, J.).
[8] See NXP B.V. v. Research in Motion Ltd., et al., No. 6:12-cv-00498, slip op. at 15 (M.D. Fla. Mar. 25, 2014).
[9] See Motorola Mobility LLC v. Intellectual Ventures LLC, Case CBM2014-00083, Paper No. 17 at 4 (Aug. 6, 2014).
[10] See St. Jude Medical, Cardiology Division, Inc. v. Volcano Corp., 749 F.3d 1373, 1375-76 (Fed. Cir. 2014).
[11] See 35 U.S.C. § 312(a)(3).
[12] See TRW Auto. US LLC v. Magna Elecs. Inc., IPR2014-00293, Paper No. 21 at 3-5 (Aug. 28, 2014).
[13] See Heart Failure Techs. LLC v. CardioKinetix Inc., IPR2013-00183, Paper No. 12 at 12 (July 31, 2013).
[14] 37 C.F.R. § 42.104(b)(5).
[15] 35 U.S.C. § 315(b).
[16] See id.
17] See Universal Remote Control, Inc. v. Universal Elecs., Inc., IPR2013-00168, Paper No. 9 at 6 (Aug. 26, 2013).
[18] See Macauto U.S.A. v. BOS GmbH & KG, IPR2012-00004, Paper No. 18 at 15 (Jan. 24, 2013).