Authored by Michael J. Flibbert and Jennifer Johnson, Ph.D.
The recently enacted Leahy-Smith America Invents Act1 creates two new procedures for challenging U.S. patents: post-grant review and inter partes review.2 Beginning in September 2012, these reviews will be handled by the Patent Trial and Appeal Board at the Patent and Trademark Office.3 To prepare for the expected influx of petitions for post-grant review and inter partes review, the PTO plans to hire 100 new administrative patent judges for the PTAB.4
The AIA gives the U.S. Court of Appeals for the Federal Circuit exclusive appellate jurisdiction over all appeals from final decisions of the PTAB.5 Unlike the PTO, however, the Federal Circuit cannot expand the number of judges sitting on the court without action by Congress.6 This raises the basic question of whether the Federal Circuit will have adequate judicial resources to handle a potentially large number of appeals from the PTAB once the new procedures for challenging patents are implemented.
The Attractive Features of Post-Grant Review
Prospective patent challengers should find post-grant review to be a highly attractive procedure in many respects. Notably, post-grant review will allow challengers to raise a broad range of grounds of unpatentability, including anticipation, obviousness, lack of enablement, lack of written description, indefiniteness, and nonstatutory subject matter.7 This is far more expansive than current reexamination practice and the new inter partes review procedure, both of which are limited to arguments concerning prior art patents and printed publications.8 Consequently, post-grant review promises to give patent challengers a much more robust arsenal for attacking vulnerable U.S. patents than that currently available in administrative proceedings before the PTO.
Equally important, petitions for post-grant review will only have to establish unpatentability by a "preponderance of the evidence" rather than the more stringent "clear and convincing evidence" required in federal district court.9 Also, the PTO must give claims their broadest reasonable interpretation.10 Thus, at least in theory, it should be easier to prove invalidity in a post-grant review than in a district court litigation. Post-grant review should also be more expeditious than litigation because, by statute, the PTO must complete the review within one year from institution (extendible by the PTO by not more than six months for good cause shown).11
Post-grant review should therefore provide businesses with certainty in a shorter period of time than litigation. In addition, the cost of post-grant review should be significantly lower than the cost of a typical district court patent litigation.
Gradual Implementation of Post-Grant Review
Although the effective date for post-grant review is Sept. 16, 2012, it will initially be available only for business-method patents and for certain pending interferences.12 The first appeals from post-grant review decisions should begin to reach the Federal Circuit late in 2013.
After this initial period of restricted availability, post-grant review will be available for all patents granted under the new "first-inventor-to-file" system, which goes into effect on March 16, 2013.13 Because the first-inventor-to-file system is not retroactive, however, it may take another year to 18 months before large numbers of newly issued patents will be available for challenge through post-grant review. In addition, the AIA gives the PTO discretion to limit the number of post-grant reviews instituted in the first four years.14 Whether the PTO will use that discretion to gradually implement post-grant review remains to be seen.
Appeals From PTAB Decisions in Post-Grant Reviews
The AIA provides that any party dissatisfied with the final written decision of the PTAB in a post-grant review may appeal to the Federal Circuit and that all parties may participate in the appeal.15
Once post-grant review is fully implemented, how many petitions for post-grant review are likely to be filed each year and how many Federal Circuit appeals will the ensuing PTAB proceedings generate? Statistics from Europe may provide some initial guidance, as the new post-grant review procedure, in certain respects, resembles a European opposition proceeding.16 In 2010, about 5 percent of patents granted by the European Patent Office were opposed, and the appeal rate for opposition proceedings was about 45 percent.17 If 5 percent of the 219,614 utility patents issued by the PTO in 2010 had been challenged through petitions for post-grant review, and the appeal rate was 45 percent, that would correspond to an astonishing 4,941 Federal Circuit appeals.18 By comparison, the court received only 87 appeals from the PTO in 2010, and its total caseload that year comprised only 1,208 appeals from all sources of its appellate jurisdiction (including about 425 appeals from district court decisions).19
Two procedural aspects of post-grant review, however, will likely reduce its use as compared to European oppositions. First, before the PTO will institute a post-grant review, the petitioner will have to establish that the information presented in the petition, if not rebutted, shows it is "more likely than not" that at least one claim challenged in the petition is unpatentable or that the petition raises a novel or unsettled legal question that is important to other patents or applications.20 A European opposition, on the other hand, may be initiated without meeting a similar substantive threshold requirement.21
Second, and perhaps more importantly, if the PTAB issues a final written decision in the post-grant review, the petitioner will be estopped in any subsequent district court, International Trade Commission, or PTO proceeding from asserting any ground of unpatentability that it "raised or reasonably could have raised" during the post-grant review.22 Concerns about this potential estoppel effect may deter some patent challengers from using post-grant review. No analogous estoppel appears to apply to arguments advanced during an unsuccessful European opposition.23
Nonetheless, even if only 1 percent of U.S. patents are challenged through post-grant review, and the appeal rate is only 25 percent, for example, that would still correspond to several hundred additional Federal Circuit appeals per year. Thus, appeals from post-grant review proceedings could eventually become a significant new part of the court's overall caseload.
Other AIA Provisions
Other AIA provisions may also affect the Federal Circuit's caseload. The legislation, for example, restricts when accused infringers may be joined together in one action.24 This may force some plaintiffs to pursue separate actions against individual accused infringers, potentially leading to multiple Federal Circuit appeals involving the same patent.
The AIA also abrogates case law that had previously allowed the regional circuits to decide certain appeals involving compulsory patent counterclaims.25 As a result, in the future only the Federal Circuit will have appellate jurisdiction over these relatively uncommon cases.
Although interferences are being phased out under the AIA, appeals from the derivation proceedings created by the AIA may potentially replace at least some of these cases.
Further, it is unclear what effect the replacement of inter partes reexamination with inter partes review will have on the court's caseload. Unlike post-grant review, inter partes review will be restricted to arguments concerning patents and printed publications, which may limit the ability of this procedure to generate patent challenges that would not have been made under prior law. On the other hand, the number of requests for inter partes reexamination has greatly increased in recent years.26 If inter partes review continues this trend, its use may grow to quite significant levels.
An Expanded Federal Circuit?
In preparing to implement the AIA, the PTO seems to be banking on a major increase in its own workload as reflected in its plans to hire 100 new administrative patent judges.27 It seems logical to expect that a portion of that increased workload will ultimately be passed to the Federal Circuit. Since the court cannot hire new judges, the question is whether it will have sufficient resources to deal with a rising tide of appeals from the PTAB.
We believe so—at least for now. The Federal Circuit reviews decisions from a number of sources, including the district courts, the Merit Systems Protection Board, the Court of Appeals for Veterans Claims, the Court of Federal Claims, the PTO, and the Court of International Trade. Consequently, its overall caseload varies each year depending on the particular mix of appeals it receives from these diverse sources. From 2000 to 2010, for example, the court's caseload fluctuated up and down from year to year with no general trend.28 The total number of Federal Circuit appeals filed during that period ranged from a low of 1,208 (in 2010) to a high of 1,772 (in 2006).29
Thus, if the Federal Circuit eventually receives a few hundred appeals per year from the PTAB, the court should have adequate resources to handle them. Further, to the extent necessary, the court could manage an increased caseload and conserve judicial resources by: (1) increasing its use of visiting judges;30 (2) increasing its use of nonprecedential opinions and affirmances without opinion under Federal Circuit Rule 36 in appropriate cases; (3) denying oral argument where the panel concludes that the facts and legal arguments are adequately presented in the briefs and record and the decisional process would not be significantly aided by oral argument;31 and (4) expanding the court's existing alternative dispute resolution program, which has proved highly successful.
Of course, if post-grant review eventually becomes as popular as European oppositions, the Federal Circuit could experience a dramatic increase in its caseload. If that occurs, it may be necessary for Congress to expand the size of the court. When Congress established the Federal Circuit in 1982, it provided for 12 judgeships, and the size of the court has remained unchanged for nearly 30 years.32 Adding one or more additional judgeships would enable the court to better handle a growing caseload resulting from implementation of the AIA.
The Judicial Conference of the United States, which provides recommendations to Congress on new judgeships, should monitor the Federal Circuit's caseload over the next few years to determine whether the court needs additional judges. Should a substantial increase occur, Congress should be requested to make provisions for additional judges as necessary.
Post-grant review will have several attractive features, including its broad range of available grounds of alleged unpatentability, lower burden of proof, speed, and modest cost, which should be appealing to many patent challengers. It may take several years for post-grant review to be fully implemented and accepted by the patent community. But once that happens, the Federal Circuit may experience an increase in its caseload, particularly if the trend of increasing use of inter partes reexamination continues with inter partes review.
If the court cannot efficiently handle these cases with the tools already available to it, Congress may then need to provide for one or more additional judgeships.
1 Pub. L. No. 112-29, 125 Stat. 284 (2011).
2 AIA Section 6.
3 Id. at Sections 6, 7.
4 Tony Dutra, "Obama Signs Patent Reform Legislation; Attention Turns to PTO Funding, Rulemaking" (82 PTCJ 681, 9/23/11) (reporting comments of PTO Director David J. Kappos).
5 See, e.g., AIA Section 7 (amending 35 U.S.C. §141 to provide that a party to an inter partes review or post-grant review may appeal the PTAB's decision "only to" the Federal Circuit).
6 See 28 U.S.C. §44 (providing that the president shall appoint 12 circuit judges to the Federal Circuit).
7 AIA Section 6 (creating 35 U.S.C. §321).
8 See id.; 37 C.F.R. § 1.552.
9 AIA Section 6 (creating 35 U.S.C. §326(e)); Microsoft Corp. v. i4i Limited Partnership, 131 S. Ct. 2238, 2242, 98 USPQ2d 1857 (2011) (82 PTCJ 182, 6/10/11).
10 Phillips v. AWH Corp., 415 F.3d 1303, 1316, 75 USPQ2d 1321 (Fed. Cir. 2005) (70 PTCJ 309, 7/17/05).
11 AIA Section 6 (creating 35 U.S.C. §326(a)(11)).
12 AIA Sections 6, 18.
13 AIA Sections 3, 6.
14 AIA Section 6.
15 Id. (creating 35 U.S.C. §329).
16 For example, both post-grant review and European oppositions allow patent challenges within nine months of grant. See Rule 99(1), European Patent Convention.
17 Four Offices Statistics Report 2010 at 57, available at http://www.trilateral.net/statistics/tsr.html.
18 See id. at 23 (reporting total U.S. patents granted in 2010).
19 See U.S. Court of Appeals for the Federal Circuit—Appeals Filed, Terminated, and Pending (2010), http://www.cafc.uscourts.gov/the-court/statistics.html.
20 AIA Section 6 (creating 35 U.S.C. §324(a), (b)).
21 See Rules 76 and 77, European Patent Convention.
22 AIA Section 6 (creating 35 U.S.C. §325(e)).
23 See, e.g., Buehler AG v. Chronos Richardson Ltd.  18 R.P.C. 609 (EWCA).
24 AIA Section 19 (creating 35 U.S.C. §299).
25 Id.; Holmes Group Inc. v. Vornado Air Circulation Systems Inc., 535 U.S. 826, 62 USPQ2d 1801 (2002) (64 PTCJ 124, 6/7/02).
26 For example, while only 70 requests for inter partes reexamination were filed in 2006, 281 such requests were filed in 2010. See Inter Partes Reexamination Filing Data—June 30, 2011, http://www.uspto.gov/patents/IP_quarterly_report_June_2011.pdf.
27 Supra n.4.
28 See Historical Caseload, http://www.cafc.uscourts.gov/the-court/statistics.html.
30 Since September 2006, 48 circuit and district court judges have sat with the court. See Federal Circuit Announcement, http://www.cafc.uscourts.gov/announcements/visiting-judges-sitting-with-the-federal-circuit.html.
31 See Fed. R. App. P. 34(a)(2)(C).
32 See Chronological History of Authorized Judgeships in U.S. Courts of Appeals, available at http://www.uscourts.gov/JudgesAndJudgeships/Viewer.aspx?doc=/uscourts/JudgesJudgeships/docs/appealschronol.pdf.
Reproduced with permission form BNA's Patent, Trademark & Copyright Journal, 83 PTCJ 309,01/06/2012. Copyright © 2012 The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.