By: Mark Stepanyuk
Challenging the validity of a patent versus patent infringement
If you have a patent and you think somebody is infringing on that patent, you may be able to sue them for patent infringement. Alternatively, if you think somebody has an inadequate patent, you can prospectively challenge its validity. Although historically these two causes of action have largely overlapped, they are very much distinct. This blog post is about the rise of a relatively new mechanism for challenging patent validity in the United States.
What is the PTAB?
The Patent Trial and Appeal Board (PTAB) was formed in 2012 as part of the Leahy-Smith America Invents Act (probably most known for changing the U.S. Patent system from “first-to-invent” to “first-to-file.”) The PTAB replaced the Board of Patent Appeals and Interferences at the U.S. Patent and Trademark Office (USPTO). In general, PTAB handles appeals and conducts trials. Appeals proceedings mostly involve cases where applicants wish to review the examiner’s decisions regarding their patents or claims (such as rejections).
PTAB trials, on the other hand, are where the magic happens in challenging patent validity. The PTAB’s trial division handles proceedings such as Inter-Partes Reviews (IPR) and Post Grant Reviews. They also used to handle Covered Business Method reviews, which was historically the second most popular proceeding, but that program sunsetted and ended in September 2020. The vast majority of trial petitions filed at the PTAB are IPR’s (which accounted for about 93% of PTAB trial proceedings in 2021.)
How do you actually challenge patent validity?
If you’re a business competing with someone who holds a patent that you think is inadequate or you are worried that what you are doing may infringe on their patent, you can attempt to invalidate their patent(s) or claim(s). Generally speaking, this can be done by bringing a case either to Federal District Court or to the PTAB (also in some circumstances, you can go to the Court of Federal Claims or the International Trade Commission.) Sometimes parties also choose to bring their case to multiple courts, although there are notable limits. Each choice has its own set of requirements, costs, and benefits. For instance, filing in Federal District Court requires a “case or controversy.” At the PTAB, there is no such requirement. However, there is a petition phase and a trial phase. Not all petitions become instituted and make it to the trial phase, though parties may file multiple petitions (there are differences between institution rates by “petition” and “patent.”) Also notably, the USPTO has been cracking down on “serial petitioners” (i.e., parties filing multiple petitions targeting the same patent.)
Why have PTAB trials gained traction as a tool to challenge patent validity?
In the last decade, initiating PTAB trials has become a viable strategy for some businesses seeking to invalidate or weaken the patent portfolios of their competitors. There are many reasons for this. First, the average cost of filing and prosecuting a PTAB trial proceeding (IPR) is averaging far less than doing so in Federal District Court. If the expected value of initiating an IPR proceeding exceeds its cost, the firm is more likely to undertake the proceeding. Second, it’s easier to invalidate a patent at the PTAB than in Federal District Court. The presumption that a patent is valid does not exist in the PTAB and challengers only need to show by a “preponderance of the evidence” that claims are unpatentable to invalidate. Whereas in Federal District Court, challengers need to overcome the much higher standard of “clear and convincing evidence” to invalidate the patent, due to the jurisdictional presumption that the patent is valid. Third, there has been broader claim construction at the PTAB which has led to increased invalidation under Section 103 (non-obviousness) because it allowed for more prior art to be considered – although now the PTAB uses the Phillips standard for claim construction (the same as in Federal District Courts.) Fourth, standing is not required to initiate a PTAB trial proceeding. In the case of IPRs, any third party that has not already filed and has not been served with a complaint alleging patent infringement more than one year prior may initiate the proceeding. Most other PTAB trial rules and standards can be found here. For these reasons and likely others, it’s become a relatively more popular tool in handling patent disputes for patentees and non-patent holders alike.
The PTAB has been controversial since its inception as part of the AIA in 2012
The constitutionality of the PTAB has been challenged on multiple occasions and in each case it has been upheld. In Oil States Energy Services, the Supreme Court held that Congress has significant latitude to assign adjudication of public rights to entities other than Article III Courts (i.e., the PTAB). The closest constitutional challenge to the PTAB was probably in United States v. Arthrex. In that case, the Supreme Court held that the PTAB’s structure was unconstitutional (by violating the Appointments Clause in which Administrative Patent Judges were not appointed “principal officers”), but this was easily remedied by having the Director review final decisions at the PTAB. Other controversy stems from disparate economic consequences of PTAB trials. Many inventors that are patent-holders are not fans of this emergent mechanism to challenge patent invalidity. These inventors complain that the PTAB has turned into a predatory regime with a bias against unsophisticated patentees. Ultimately, they argue that PTAB trials have become an anti-competitive tool for large companies to bully or threaten start-ups. One inventor argues that in part due to repeatedly filed petitions, patents that have been subject to a PTAB final written decision have an 84% invalidation rate.
The goal of patent law and the way forward
The administrative tradeoff between expeditiousness and thoroughness in the U.S. patent law system has been evident from the time of the “Commissioners for the Promotion of Useful Arts.” In an early letter, Thomas Jefferson wrote, “[of the law of granting and refusing patents] I saw with what slow progress a system of general rules could be matured.” Indeed, the America Invents Act was yet another iteration aiming at maturity. Congress’s goals for the PTAB part of the America Invents Act was: to create a faster and less costly alternative to Article III court-based patent litigation; to sweep away low hanging fruit (weed out patents that probably should not have been issued in the first place); and to lighten the dockets of federal district courts, which have been overwhelmed with Non-Practicing Entity (i.e., “patent troll”) suits. To a significant extent, many of these goals were achieved, and pretty much any bright-line rule is bound to discriminate against edge cases. This is why we have general rules and specific rules, and specific rules are more easily changeable.
As the specific rules within the PTAB will continue to evolve, many disagree about the direction and pace of change. Here’s a paper that argues for more specific reforms likely to be addressed within the USPTO. The authors argue that the current benefits of PTAB proceedings do not necessarily outweigh its costs and point out inefficiencies. They call for more changes to deal with “uncertain estoppel litigation rules” (i.e., serial IPR petitioners, and other costs associated with doubling-up.) Other arguments call for more drastic reform such as repealing the PTAB.
Since its inception in the United States in 2012, the PTAB has risen in popularity as a tool to challenge the validity of patents. Despite parties being able to challenge patent validity in other forums, the PTAB’s advantages have made it an economically viable candidate for many patentees and non-patent holders alike. Although it has been the subject of controversy, the PTAB and the U.S. patent law system more generally will continue to mature and be shaped by American jurisprudence. As for now, exposure to the filter of the PTAB will continue to be part of the patent bargain between an inventor and society.