June 2016
CIPA Journal
Authored by Daniel F. Klodowski and Timothy P. McAnulty
Since the passage of the America Invents Act (AIA) over three years ago, post-grant proceedings at the U.S. Patent and Trademark Office (USPTO) have changed the landscape of patent litigation. These proceedings offer an avenue for petitioners, often alleged patent infringers, to contest the patentability of patents at the USPTO in a process designed to be faster and less expensive than doing so in a comparable district court litigation. Petitioners can challenge all U.S. patents before the USPTO in one (or more) post-grant proceedings: inter partes review (IPR) is available for all pre-AIA patents and all post-AIA1 patents following the period for post-grant review (PGR); covered business method review (CBMR) is available for patents claiming financial products or services that have been asserted in litigation; and PGR is available for all post-AIA patents within nine months of issuance.
IPR proceedings are by far the most common filings, with nearly ten times more IPR petitions being filed than CBMR petitions as of 31 March 2016.2 To date, only 22 PGR petitions have been filed, with none reaching a final written decision according to the USPTO.3 The relatively low number of PGR petitions is largely influenced by the relatively low number of post-AIA patents granted to date.
All proceedings start with the filing of a petition and progress through two general phases, a pre-institution phase and a post-institution phase. The USPTO’s Patent Trial and Appeal Board (PTAB) must decide if the petition raises sufficient grounds to institute a full review in view of any arguments submitted by the patent owner in a preliminary response. To warrant institution in IPRs, a petitioner must demonstrate that there is a reasonable likelihood that at least one challenged claim is unpatentable.4 To warrant institution in CBMRs and PGRs, a petitioner must meet the (somewhat higher) standard that it is more likely than not that at least one challenged claim is unpatentable.5
While the rate of institution fluctuates by technology, the percentage of institution ranges between 55% and 75% on a per-claim basis.6 If the PTAB determines the petition warrants institution, it issues a written institution decision and proceeds with trial. At the conclusion of trial, the PTAB issues a written final written decision. To date, and as discussed in more detail below, the IPR and CBMR proceedings have strongly favored petitioners at the expense of patent owners. While case outcomes vary by technology, on average, less than 20% of the claims that are instituted survive a full trial.
In the first three and a half years since the AIA went into effect, post-grant proceedings have been considerably more favorable to petitioners than patent owners. In the 747 IPR final written decisions issued by the PTAB by 1 April 2016, the Board cancelled 7,987 (76.32%) of the instituted claims and maintained just 2,108 (20.14%) of the instituted claims.7 Through the same period, patent owners conceded 370 (3.54%) of the instituted claims through motions to amend or disclaimers. This is a significant number of cancelled patent claims in a relatively short period.
On a per-case basis, the majority of IPR final written decisions result in all instituted claims being cancelled. Considering all IPR final written decisions issued by the PTAB up to 1 April 2016, 541 (72.42%) of the decisions resulted in all instituted claims, or substitute claims proposed in a motion to amend, cancelled. Conversely, just 113 (15.13%) IPR final written decisions resulted in all of the claims maintained. A mixed outcome, where at least one instituted claim was cancelled and one instituted claim maintained, occurred in just 93 (12.45%) IPR final written decisions. Based purely on statistics, there is a high likelihood that if claims are instituted, they will be cancelled. This reality has led many patent owners to focus more efforts early in the proceeding when preparing preliminary responses to at least reduce the number of claims or grounds that the PTAB institutes. In line with this strategy, new PTAB rules went into effect on 2 May 20168 and now permit patent owners to submit new testimonial evidence from technical and industry experts, before the PTAB decides whether to institute trial.
Unlike IPRs, which allow a petitioner to present only patents and printed publications as prior art references, CBMRs (like PGRs) provide additional avenues for challenging patents, such as challenging subject-matter eligibility9 or written description10. And patent owners have generally fared substantially worse in CBMRs than IPRs. In the 97 CBMR final written decisions issued by the PTAB up to 1 April 2016, 1,622 (93.65%) of the instituted claims were cancelled and just 59 (3.41%) of the instituted claims were maintained. Through the same period, patent owners conceded 51 (2.94%) of the instituted claims through motions to amend or disclaimers. Less than 5% of the instituted claims survive a full CBMR.
On a per-case basis, a significant majority of CBMR final written decisions result in all instituted claims being cancelled. Considering all CBMR final written decisions issued by the PTAB up to 1 April 2016, 86 (88.66%) of the decisions resulted in all instituted, or substitute claims proposed in a motion to amend, cancelled. Just one (1.03%) CBMR final written decision resulted in all claims maintained. A mixed outcome occurred in only ten (10.31%) of the CBMR final written decisions. While CBMR is reserved only for subset of eligible patents (e.g., a patent that claims a method or apparatus for performing a financial product or service), these claims are significantly at risk. Indeed, most of the CBMR petitions raise patent eligible subject-matter grounds in view of the U.S. Supreme Court’s recent decisions in Alice and Mayo that many practitioners believe have a devastating effect on business method patents.
Combining the outcomes of both IPR and CBMR final written decisions issued by the PTAB up to 1 April 2016, the Board cancelled 9,613 (78.79%) of the instituted claims and maintained just 2,167 (17.76%) of the instituted claims. Patent owners conceded 421 (3.45%) of the instituted claims through motions to amend or disclaimers. In total, about 80% of the instituted claims were cancelled. On a per-case basis, for all combined IPR and CBMR final written decisions issued by 1 April 2016, 627 (74.29%) of the decisions resulted in all instituted claims cancelled, 114 (13.51%) of the decisions resulted in all instituted claims maintained, and 103 (12.20%) of the decisions resulted in a mixed outcome.
In all post-grant proceedings, patent owners are entitled to propose substitute (i.e., amended) claims either by conceding the unpatentability of the corresponding instituted claims outright along with the proposed substitute claims, or by making the Board’s consideration of the substitute claims contingent on the instituted claims first being held unpatentable. To date, patent owners have struggled to obtain substitute claims for patents reviewed by the PTAB. By 1 April 2016, the PTAB has issued only 26 (4.76%) of 546 proposed substitute claims raised in motions to amend. In the last year, from 1 May 2015, to 1 April 2016, the PTAB granted just four substitute claims.11
Against this backdrop, it is perhaps not surprising that the number of patent owners pursuing substitute claims appears to be decreasing over time. This is likely because patent owners have struggled to address the PTAB’s requirements and sufficiently demonstrate patentability.12 Before the PTAB, patent owners bear the burden to show that the proposed substitute claims are patentable and must do so over a variety of art (both in the record and presented during original prosecution)13 within relatively strict page limits (even after the May 2015 rule change increasing the maximum length of a motion to amend from 15 pages to 25 pages).14 For instance, patent owners must demonstrate patentability for substitute claims over all of the prior art of record in the IPR or CBMR, not just the prior art raised against the original claims, and over prior art not of record in the IPR or CBMR but known to the patent owner, e.g., prior art made of record during prior examination.15
Amendment practise may be changing before the Board to make the practise more favourable for patent owners. For example, the Board recently approved the practise of grouping prior art references together in a motion to amend according to the references’ particular teachings, rather than requiring the patentee to explain each individual reference in detail.16 In general, however, it seems that practitioners are increasingly choosing to forgo amending claims during IPRs or CBMRs in favour of other strategies. For example, and regardless of PTAB actions or trends regarding motions to amend, patent owners are well served to maintain pending continuing patent applications in the U.S. to provide opportunities to seek claims of varying scope, to adjust to patentability challenges raised in post-grant proceedings, and develop claim strategies and portfolios in view of (likely) challenges post grant.
IPR and CBMR petitions are sorted among the various Technology Centers at the USPTO, including: 1600 (biotech and organic chemistry); 1700 (chemical and materials engineering); 2100 (computer architecture and software); 2400 (networking, multiplexing, cable, and security); 2600 (communications); 2800 (semiconductors/memory, circuits/measuring & testing, optics/photocopying, printing/measuring & testing); 2900 (designs); 3600 (transportation, construction, electronic commerce, agriculture, national security and license & review); and 3700 (mechanical engineering, manufacturing and medical devices/processes).17 By 1 April 2016, the top three Technology Centers by number of final written decisions were, respectively, electrical systems (149 decisions, 18% of total), communications (146 decisions, 17% of total), and transportation and e-commerce (141, 17% of total). Taken together, electrical-based technologies represent 638 (75.77%) of all post-grant proceedings. The smallest Technology Centers include design patents (five decisions, less than 1% of total) and biotechnology and organic chemistry (51, 6% of total).
Although the PTAB has generally cancelled instituted claims about 75% of the time, the PTAB has not cancelled claims at the same rate across all technologies. Survival rates of claims in certain Technology Centers deviate substantially from the mean.18 For example, instituted claims in Technology Center 1600, which covers patents in the fields of biotechnology and organic chemistry (including pharmaceuticals), have had the highest instituted claim survival rate at 44.46%. This is approximately 2.5 times higher than the average survival rate for all technologies combined and perhaps due to the unpredictability of this subject-matter. At the other end of the spectrum, however, no instituted claim has survived in Technology Center 2900, which covers design patents. Somewhat interestingly, these Technology Centers also have the smallest number of final written decisions. Up to 1 April 2016, patents in the design patent Technology Center have only received final written decisions in five IPRs, while there have been 51 IPR final written decisions in biotechnology and organic chemistry.
Conversely, the instituted claim survival rates for the top three Technology Centers by the number of issued final written decisions, 2800 (Electrical), 2600 (Communications), and 3600 (Transportation & E-Commerce), each fall within 3% of the average instituted claim survival rate. The survival rates for the remaining Technology Centers fall within 7% of the overall survival rate.
IPR and CBMR proceedings before the PTAB have thus far generally favored petitioners over patent owners. On average, less than 20% of the instituted claims survive PTAB review through final written decision. These statistics will change over time due to the ever-expanding number of PTAB cases, the likelihood that the most questionable patents were challenged first, adjustments in prosecution strategies from applicants, increasing numbers of decisions from district courts and the Federal Circuit, and continued changes in the PTAB’s rules and processes. For example, both the "broadest reasonable interpretation" claim construction standard used by the PTAB for post-grant proceedings and the inability of the Federal Circuit to review the institution decisions are presently under review by the Supreme Court.19
Looking forward, despite the fact that the PTAB post-grant proceedings have been relatively decimating for patent owners, several factors may suggest that the pendulum will swing in the other direction. For example, the new PTAB rules permit patent owners to submit more evidence pre-institution, which may persuade the PTAB to deny institution for a larger number of claims, the PTAB has started providing additional resources and guidance to patent owners to help make successful claim amendments in IPRs and CBMRs,20 and the Supreme Court may adopt a more patentee-friendly standard (that is currently applicable in the district courts). Stay tuned as we following this developing area of U.S. patent law.21
1 Pre-AIA patents are patents issued from applications with effective filing dates before 16 March 2013; post-AIA patents are patents issued from applications with effective filing dates on or after 16 March 2013.
2 "Patent Trial and Appeal Board Statistics," dated 31 March 2016, US Patent and Trademark Office, available at: www.uspto.gov/sites/default/files/documents/2016-3-31%20PTAB.pdf, at 2.
3 Id. at 12.
4 35 U.S.C.§ 314(a).
5 35 U.S.C.§ 324(a).
6 Id. at 7.
7 Unless otherwise noted, all statistics cited herein were compiled by Daniel F. Klodowski and David C. Seastrunk of Finnegan, Henderson, Farabow, Garrett & Dunner. See Section VII for more information regarding the methodology used for calculating these statistics. Additional statistics are available at www.aiablog.com.
8 81 Fed. Reg. 18750, 18766 (amending 37 C.F.R. §§ 42.107, 42.207).
9 35 U.S.C. § 101.
10 35 U.S.C. § 112.
11 See "Patent Owners Proposing Fewer Substitute Claims During IPR Proceedings," Daniel F. Klodowski, AIA Blog, May 19, 2015.
12 Id.
13 See Nike v Adidas, No. 2014-1719 (Fed. Cir. Feb. 11, 2016).
14 "USPTO Updates PTAB Rules to Adjust Page Limits and Reflect Current Practice," Joshua L. Goldberg and Cory C. Bell, Finnegan IP Updates, 20 May 2015, available at: www.finnegan.com/ipupdates/pubdetail.aspx?pub=28eb5eb7-dff3-4912-944d-4c1fb423eb57.
15 See Nike, No. 2014-1719, at *5-6; Idle Free Sys., Inc. v Bergstrom, Inc., No. IPR2012-00027, Paper 26 at 7 (P.T.A.B. 2013).
16 See "PTAB Approves Grouping of Representative References in Granting Motion to Amend," Neelaabh Shankar, AIA Blog, 29 April 2016.
17 "Patent Technology Centers Management," U.S. Patent and Trademark Office, available at: www.uspto.gov/patent/contact-patents/patent-technology-centers-management.
18 These numbers represent claim survival rates in both IPR and CBM proceedings. The minor discrepancy between the claim survival rate in the IPR/CBM chart and the Technology Center chart is due to the incomplete labeling of cases as belonging to certain Technology Centers on the USPTO’s PRPS system.
19 See Cuozzo Speed Techs., LLC v Lee, Case No. 15-446.
20 See USPTO AIA Blog, accessible at: www.uspto.gov/blog/aia/entry/uspto_ptab_message_how_to.
21 The statistics referenced and relied on in this article provide several perspectives on post-grant practice at the USPTO, and additional statistics are available at Finnegan’s AIA Blog at www.aiablog.com. Various other PTAB metrics collected and generated by Finnegan are reserved for the use of Finnegan and its clients.
The information in this article was compiled from all PTAB final written decisions on the merits published on the USPTO’s Patent Review Processing System as of 1 April 2016. Each discrete final written decision is counted as a separate case, even where multiple decisions address the same patent. On the other hand, when multiple cases are joined into a single final written decision, such cases are considered to be a single decision.
These statistics do not include settlements, requests for adverse judgment, motions to terminate, still-pending cases, requests for rehearing, or appellate outcomes. The statistics reflect case outcomes on both a per-claim and per-case basis, and incorporate a number of decisions and assumptions designed to eliminate redundancy while providing the most impartial, accurate, and useful information possible. While care has been taken to ensure the accuracy of this data, these numbers should be treated as an estimate. This information is a purely public resource of general information that is intended, but not guaranteed, to be correct and complete. It is not intended to be a source of solicitation or legal advice.
This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. The laws of different jurisdictions may be implicated, and facts and circumstances can vary widely. Therefore, the reader should not rely or act upon any information in this article, but should instead seek legal counsel for individualized legal advice.
Originally printed in CIPA Journal in June 2016. 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.
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