Monday, July 22, 2019

New USPTO trial practice guidelines overshoot as they seek to restrict parallel PTAB IPR petitions challenging the same patent

Since taking office, Undersecretary and United States Patent & Trademark Office (USPTO) Director Andrei Iancu, who previously managed a major patent litigation firm, has been on a crusade against inter partes reviews of issued patents by the Patent Trial and Appeal Board (PTAB). It will take more than one blog post to explain and comment on Director Iancu's various anti-IPR initiatives, all of which share a common goal: to keep as many weak patent claims alive as possible, contrary to the political goal of the economically most important part of the America Invents Act (AIA). Giving leverage to patent holders even though the asserted patents were obtained without an actual contribution to the state of the art is a total misallocation of resources and incentivizes legal gamesmanship while discouraging true innovation.

This month, the USPTO published the latest update to its PTAB Trial Practice Guide (PDF). The section on "Parallel Petitions Challenging the Same Patent" starts on page 26, and its first paragraph is already very telling:

"Based on the Board's prior experience, one petition should be sufficient to challenge the claims of a patent in most situtations [sic]. Two or more petitions filed against the same patent at or about the same time (e.g., before the first preliminary response by the patent owner) may place a substantial and unnecessary burden on the Board and the patent owner and could raise fairness, timing, and efficiency concerns. See 35 U.S.C. § 316(b). In addition, multiple petitions by a petitioner are not necessary in the vast majority of cases. To date, a substantial majority of patents have been challenged with a single petition."

I don't mean to attach too much importance to the typo ("situtation") in the first sentence. I usually have typos in my posts. But in an official document of this kind, typos are unusual, and most often found in sections that underwent edits until shortly prior to publication. That said, the issue here is one of substance.

The "substance" of that paragraph just amounts to vague terms expressing frequencies of occurrence ("most", "vast", "substantial", "rare", "unlikely"). Not even numbers. Just words.

As a matter of policy, that's not the way to provide workable and meaningful instructions to judges. Judges have to make decisions, and they need criteria, possibly examples, that help them do their job. Words like "most" and "unlikely" don't constitute or properly describe criteria, much less a standard, for anything.

What should the PTAB judges do then? Should they keep statistics of the cases before them and strive for a particular distribution of decisions, based on whatever range of percentages a given judge believes to be consistent with guidelines like "unlikely" and "substantial majority?" So after someone grants two petitions challenging the same patent, they'll have to reject at least the next ten?

When outsiders like bloggers or financial investors (especially risk arbitrageurs) try to predict an outcome, it's an inherently probabilistic exercise. But applying the law is different from placing bets on one outcome or the other. It should be all about the merits, not a numbers game.

The section on parallel petitions has many more paragraphs, and some do talk about criteria for whether a petition should be granted, with a particular emphasis on reasons weighing in favor of rejection. But before the reader reaches that point, the new Trial Practice Guide takes the position that two parallel petitions challenging a given patent should be "rare," and three or more should be "unlikely" to be justified--"unlikely" regardless of how many claims a patent has, how complex the relevant technology is, or how many prior art references are presented.

The good news here is that the PTAB judges can still grant parallel petitions if they deem them justified. But Director Iancu will achieve his objective of dissuading many petitioners from even trying to bring parallel petitions now.

I can think of at least four reasons why parallel petitions are sometimes not only justified, but even necessary:

  1. There are maximum word counts for PTAB petitions and related filings. However, some patents have so many claims that parallel petitions are necessary. Qualcomm's envelope tracker patent is a good example: it was challenged by four petitions, each of which targeted different claims. And all four petitions were granted based on a likelihood of having merit.

  2. Petitions are typically brought in response to infringement lawsuits, and such petitions must be filed within a year of the complaint. However, plaintiffs often have more time to decide which claims to ultimately take to trial, so defendants should be able to challenge all claims of an asserted patent.

  3. In light of the Supreme Court's SAS ruling, the USPTO should actually welcome a partitioning of IPR petitions. Under SAS, all challenged claims must be reviewed even if a likelihood of success has been identified with respect to only one of them. Multiple petitions per patent, however, are a means of still giving the PTAB some flexibility.

  4. Sometimes defendants identify additional prior art references after an initial petition.

The PTAB's enemies such as former Federal Circuit Chief Judge Randall Rader have used the highly pejorative term "death squad" because of a high invalidation rate (80%). Here again it should be about the merits, not about the numbers. The proper conclusion from a high invalidation rate would be to reject more applications in the first place. Instead of greater legal certainty through higher patent quality, Director Iancu's vision is to have ever more patents (including junk patents), ever more litigation, and ever more leverage for patent holders because defendants will face many roadblocks such as page limits, maximum word counts, the next best thing to a prohibition of parallel petitions, unfavorable claim construction standards, and so forth. While some (such as the firm Mr. Iancu used to run) stand to gain from such policies, it's bad news for legitimate innovators, for the economy at large, and for the general public.

It's very, very hard to convince a jury that a patent should be deemed invalid. Jurors have too much respect for "the Government" in a context like this. PTAB IPRs, however, can solve the problem, unless the process is sabotaged by means of a Trial Practice (Mis)Guide.

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