Is Inter Partes Review Good for the Patent System?


The America Invents Act (AIA) ushered in a new era for patent law and procedure at the United States Patent and Trademark Office. Among the changes that took effect were the much-debated shift away from the first-to-invent standard and to a first-to-file standard that is far more consistent with the rest of the world, although not identical.

Philosophically, the shift to a first-to-file system represents a major shift, but in truth, the U.S. had a de facto first-to-file system already. It had been years since a small entity (i.e., a company with 500 or fewer employees) had been able to prevail by demonstrating that they invented before another party filed a patent application. For the most part, much of the focus on first-to-file has done nothing more than divert attention from the most significant change from the patent owners perspective….

There is little doubt that the largest change ushered in by the AIA was the creation of administrative patent trials, namely Inter Partes Review (IPR), Post Grant Review (PGR), and Covered Business Method (CBM) Review.

Post Grant Review, Inter Partes Review and the Transitional Program for Covered Business Method Patents were instituted with the goal of improving patent quality by giving third parties ways to challenge patents that are less expensive and less involved than litigation. Each of these procedures is a trial before the Patent Trial and Appeal Board (Board), composed of Administrative Patent Judges and subject to Part 42 of 37 C.F.R. (Trial Practice Before the Patent Trial and Appeal Board).  These trials allow for limited discovery, which was not available in Ex Parte or Inter Partes Reexamination (the prior existing procedures for challenging patents in the U.S. Patent and Trademark Office).  Because discovery is limited, it is unlikely that these new procedures will be used in cases where large amounts of evidence may be needed to prove patent invalidity.

More specifically, CBM is a variety of PGR that is only available for financial software patents. PGR has been used very little because it is only available to challenge patents issued under the first-to-file regime, i.e., patent applications that have a priority date on or after March 16, 2013. Given the backlog of applications at the USPTO, there are few of these patents that have been granted, and so few available to be challenged. Thus, administrative trials at the USPTO have overwhelmingly been IPRs to date.

IPRs have been the subject of great debate and discussion, with patent owners wondering at what point in time a patent actually becomes a property right if it is susceptible to challenges even after issue. But Congress wanted to create a cheaper, faster, and better means to challenge low-quality patents at the Patent Office. The level of IPR filing is much greater than expected, with 2,552 petitions filed by February 26, 2015. When the new IPRs became available on September 16, 2012, the expectation was that there would be less than 400 IPRs filed per Patent Office fiscal year for the first four years of availability. The present filing rate is 2.5 times the expected maximum rate. And present trends do not indicate that the peak has been hit. In fact, it is not uncommon for there to be two or more IPRs filed against a single patent, with some examples of many more than two. This multiple-attack phenomena has been referred to by some eminent commentators as “gang tackling” of the patent using the new IPR proceeding.

Recently on a panel at an IAM event in Washington, DC, Phil Johnson, who is Senior Vice President for IP Policy and Strategy with Johnson & Johnson, as well as President of the Intellectual Property Owners Association (IPO), talked about the reality of IPR statistics, including the fact that all claims were found invalid in 70% of these proceedings, and at least some claims were found invalid in another 15% of cases. “It becomes the IP equivalent of a hanging judge, and when you go in front of a hanging judge in the Wild West, everybody knows that it’s probably not going to be good for you.”

In this author’s opinion, inter partes review was a terrible mistake. It should not have been adopted, and has become a process that seems dramatically slanted against the patent owner. Yet, the post grant proceedings seem to be here to stay, at least for the time being.


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