An “IPR” (a/k/a “Inter Partes Review”) is a relatively new procedure at the USPTO to challenge the validity of a U.S. Patent. It has proven to be a very effective tool that can be used in response to litigation, and also to assist in obtaining leverage in licensing negotiations with competitors.
The IPR procedure originated with the America Invents Act (“AIA”) which ushered in the era for “first inventor to file” that became effective for U.S. patent applications on March 16, 2013. The IPR is unquestionably the most popular of the new AIA post-grant proceedings available to challenge U.S. patents. To date, over 2,400 Petitions for an IPR have been filed at the USPTO which must decide the case within 12 months from initiating the administrative trial. In those cases for which final decisions have been issued, reportedly over 80% have invalidated patent claims. This led the USPTO Patent Trial And Appeal Board (“PTAB”) Chief Administrative Judge James Smith to remark at a panel discussion in March, 2015 that “too many” patents are being invalidated when the IPR petitioners win, but that the PTAB judges are following the AIA as written.
There are several facets unique to the IPR procedure that partially explain its popularity. An IPR can be used to challenge any U.S. patent. The challenge is not heard before patent examiners, but will be decided by APJs (“Administrative Patent Judges”) at the new PTAB (“Patent Trial and Appeal Board”). Initially, a panel of 3 APJs will hear the case. Discovery is significantly limited compared to federal district court patent cases, but depositions of experts that provide declarations in the case and certain limited document requests are allowed.
An IPR is initiated by a person or company that is not the patent owner filing a “Petition” with the PTAB seeking to challenge at least 1 claim of a U.S. Patent. The petition may be supported by the declaration of an expert. The grounds for an IPR are limited to essentially obviousness and anticipation arguments based on prior art: (1) patents; or (2) printed publications. The PTAB will initiate the trial if it finds there is a “reasonable likelihood” that the petitioner will prevail in its challenge with respect to at least one claim of the patent. The PTAB has reportedly found this standard has been met in roughly 70% of the Petitions filed based on currently available data. This has earned the PTAB judges the title of “Patent Assassins” by one former Federal Circuit judge.
The Chief Judge of the PTAB, James Smith, held a “boardside chat” available over the web during February, 2015. He indicated that the PTAB IPR proceedings were functioning well. To date, the PTAB has met its target to decide cases within 12 months of the initiation of the trial. He explained that there are currently about 230 PTAB judges with a goal of getting to 250 by the end of the year. The PTAB judges are also responsible for deciding appeals from reexaminations and certain prosecution matters, as well as certain other post-grant procedures; however, the USPTO will devote the necessary resources to stay within the statutorily required 12-month period for resolution of IPRs, even if this has created a roughly 25,000 backlog for reexamination appeals. Judge Smith indicated the current pace of filing of petitions for IPRs is about 200 per month.
Three issues important to patent owners that Judge Smith highlighted were: (1) the patent owner’s option to cancel claims and submit amended claims is a difficult hurdle that has been met only three times to date, but that the requirement to demonstrate that the amendment is patentable over prior art does not require a showing with respect to “all” known prior art, just the prior art known to the patent owner; (2) parties should not expect the broad discovery scope that applies in federal district courts such that discovery, including document requests, must be very limited in IPR proceedings so that the 12-month schedule can be maintained; and (3) the USPTO is considering refining the rules applied to IPR proceedings, and a rules package for public comment is forthcoming.
IPRs promise to continue to rise in importance as a preferred forum to challenge U.S. Patents. Notably, while the number of IPR petitions in 2014 filed with the USPTO was rising, the number of patent lawsuits filed in federal district court has been falling.
IPR’s are being used in several contexts. Once a patent infringement suit has been filed, one or more defendants may file an IPR which would likely be decided by the PTAB prior to trial in the litigation. This can also result in a stay of the federal court litigation depending on the circumstances, including the number of other patents or causes of action in the litigation. IPR’s are also being filed in advance of a dispute reaching the federal courts. In some circumstances, it can be strategically beneficial to send a draft of the IPR to the other side, so that the specific arguments made will not become public record. Even if the IPR is filed, several PTAB judges have indicated that early settlements between the parties are favored, but that once the PTAB has invested substantial resources in a matter, the PTAB may decline to allow a settlement that would leave the patent at issue in force.