Making progress

Recent PTO changes have made headway

Grant's Take on IP Law

Grantland Drutchas

Grantland Drutchas, a founder and current managing partner of McDonnell Boehnen Hulbert & Berghoff, currently serves as chair of the firm’s patent trial and appeals board trials practice group and of the litigation  and appeals practice group. He also teaches in the IP program at IIT Chicago-Kent College of Law.

December 2019

Those who have read my articles have noticed me discuss some of the changes in patent practice brought about by the Leahy-Smith America Invents Act of 2012, most notably about the introduction of patent review proceedings before the Patent Trial and Appeals Board of the Patent and Trademark Office. These are known as inter partes reviews, post-grant reviews and covered business method reviews.

They were contentious from the start, due to their high patent invalidation rate. Not long after their introduction, then-Chief Judge of the Federal Circuit Randall Rader, described the PTAB as “acting as death squads, killing property rights.”

Active steps have been taken both in the patent office and the U.S. Supreme Court to change that perception. A recent constitutional wrinkle, issued by the Court of Appeals for the Federal Circuit, has placed the inter partes review process in jeopardy, at least temporarily.

Inter partes reviews are 93% of PTAB proceedings. They allow a challenger to invalidate an issued patent based on printed prior art and patents in a relatively low-cost proceeding. The patent board also differs from courts because it doesn’t presume issued patents are valid or apply a proof by clear and convincing evidence standard, thus making challenges in inter partes reviews easier.

However, an inter partes review does give rise to estoppel against patent challengers. If the patent board finds in a final written decision that the patent challenger did not meet its burden of proving the patent claims are invalid, the patent challenger is barred from raising any arguments it reasonably could have raised in the inter partes review. Patent board proceedings are a two-step proceeding: an institution decision after some initial briefing then, if instituted, and after additional briefing and a potential hearing, and a final written decision.

Although the institution rates for inter partes reviews were initially high, 87% and 75% in fiscal year 2013 and 2014, they have dropped precipitously since, to 60% and 62% in fiscal year 2018 and 2019, respectively. If an inter partes review gets all the way to a final written decision, the chances of some or all challenged claims being invalidated, however, is still substantial (more than 70%).

A rehearing request before the patent board is unlikely to net a reversal as it must be shown to have misapprehended or overlooked an issue. Chances of success in a rehearing request are less than 10%; less than 1% if the challenge is based on a factual issue as opposed to a legal issue.

Nor are the chances on appeal much better. In rough numbers, the patent board has 75% affirmance rate, with a challenge having only a 10% to 15% chance of being reversed or vacated an adverse patent board decision outright.

But the patent office, with some nudging from the Supreme Court, has made some attempts to move the fairness needle back to the middle over the last year or so. In October 2018, the patent office changed how broadly claims are to be interpreted in patent board proceedings to match the standard applied in litigation. The patent board had been using a “broadest reasonable interpretation” standard that was, well, broader than what courts applied and, subject to criticism.

In June 2018, the patent board also changed the procedures for making claim amendments in inter partes reviews to make them more patent owner-friendly after the original procedures proved nearly impossible to successfully apply.

When that did not move the needle far enough, the patent board introduced a new pilot program in March that allowed patent owners to get early feedback on claim amendments and revise their motion to amend accordingly.

The combination of these procedures have increased the grant rate of patent owners’ motions to amend by more than 50%, but the overall numbers remain low (12.3% grant at-least-in-part rate in fiscal year 2019 vs. 8% through March 2018).

In April 2018, based on a decision by the Supreme Court, SAS Institute v. Iancu, the patent board was required to abandon its practice of only instituting inter partes reviews on those claims where it believed the challenger had shown it was reasonably likely to prove the claims were invalid.

A recent decision by the Federal Circuit has, however, ground the entire inter partes review regime to a halt, albeit temporarily. In Arthrex Inc. vs. Smith & Nephew Inc. (2019), the court found that under the patent act’s statutory regime, patent board judges had significant discretion and too much independence from the director of the Patent and Trademark Office, and the director, in turn, had limited power over removal of the patent board judges.

These judges would need to be appointed by the president and confirmed by the Senate under the appointments clause of the Constitution. The court struck down as unconstitutional the statutory removal provisions patent board judges, thus giving the director or the secretary of Commerce the right of removal without cause. In any event, the current constitutional challenge appears to be only a temporary setback, and PTO has been taking positive steps to make the inter partes review regime as a whole more fair and balanced.

Challenges remain for patent owners, however, as they navigate through these proceedings and test the limits of these recent rule changes.