Challenging Issued Patents After September 16, 2012

The latest revision of the US patent laws, known as the America Invents Act (AIA) was signed into law on September 16, 2011, but some of its provisions do not take effect until September 16, 2012 and March 16, 2013.  As of September 16, 2012, the AIA replaces inter partes reexamination with two quite different proceedings, namely inter partes review (IPR) and post-grant review (PGR), these proceedings being collectively referred to as post-grant proceedings.

After September 16th of this year, an IPR may be initiated by a third party challenger (the Petitioner) with respect to any issued patent nine months after the patent has issued or reissued unless a PGR is in progress, the Petitioner has filed a civil action attacking a claim of the patent, or more than one year has passed since the Petitioner was served with an infringement complaint.  In order for an IPR to proceed, the Petitioner must show that, based on issued patents and/or printed publications, there is a reasonable likelihood of invalidating at least one claim under 35 U.S.C. 102 or 103, i.e., the claimed invention was anticipated by or obvious from the prior art, respectively.

A PGR may be initiated by a third party within nine months of patent issuance or reissuance (new or amended claims only), provided the challenged claim(s) have an effective filing (priority) date on or after March 16, 2013.  Thus, patent applications filed before this date will avoid the possibility of being challenged by a third party PGR filing.  For a PGR to proceed, the Petitioner must show that, based on any ground of invalidity, including those under 35 U.S.C. 101, 102, 103 and 112, the invalidation of at least one claim is more likely than not, or that there is presented a novel or unsettled legal question important to other patents or applications.

Under implementing rules proposed by the U.S. Patent and Trademark Office (Patent Office), the trial phase of both the IPR and PGR proceedings are basically the same and the stages thereof may be summarized as follows: 

1.  The Petitioner files an IPR or PGR Petition along with a filing fee, the amount of which is likely to be in the tens of thousands of dollars.  The Petition must be supported by prior art patents and/or other published documents.

2.  Within two months, the patent owner files a Preliminary Response as to why the Petition should not be granted.  The Preliminary Response may present reasons why an IPR or a PGR should not be instituted.  However, the Preliminary Response may not present any supporting testimonial evidence.

3.  Within three more months, the Patent Office renders a decision on whether the Petition has met the requirements for instituting an IPR or PGR proceeding.  If the decision is positive, the case is assigned to an administrative judge of the newly created Patent Trial and Appeal Board (PTAB), and the trial proceeding begins as described below.  A positive decision granting an IPR confirms that the Petitioner has shown “a reasonable likelihood to prevail on one claim.”  A positive decision granting a PGR confirms that Petitioner is “more likely than not to prevail on one claim,” or that the Petition raises “a novel or unsettled legal question important to other patents or applications.”

4.  Following a positive decision, the proposed trial rules provide four months for discovery by the patent owner.  Before the end of this time period, the patent owner files a Response to the Petition and possibly a motion to amend one or more claims.

5.  The Petitioner then has two months for discovery, before the end of which the Petitioner files a Reply to the patent owner’s Response, including any opposition to proposed claim amendments.

6.  The patent owner then has an additional one month of discovery, before the end of which the patent owner may reply to any opposition by the Petitioner to proposed claim amendments.

7.  After the patent owner’s reply, the Petitioner must request the setting of a date for an oral hearing and then motions may be filed by either party to exclude evidence.

8.  An oral hearing is then held, at which neither the Petitioner nor the patent owner may present any new evidence, any new arguments, or any live witness testimony except in very special and limited circumstances.

9.  After the oral hearing, the administrative judge issues a final written decision.  Although the time periods for requesting and scheduling the oral hearing and thereafter for issuing the final written decision are not yet set as of this writing, the proposed rules provide that the entire trial proceeding, from a positive decision on the Petition to issuance of the final decision, must take place within no more than 12 months, although this may be extended by the PTAB for an additional six months for cause.

Deciding on whether to challenge a patent in a post-grant proceeding, or instead in a civil action, involves a number of strategic considerations.  A primary consideration is the estoppel that results from the final written decision of the administrative judge in either an IPR or a PGR.  Upon issuance of this decision, the Petitioner (and any real party in interest or privy to the Petitioner) may not assert in any other proceeding, including a civil action, that a previously challenged claim is invalid on any ground that was raised or reasonably could have been raised by the Petitioner in the post-grant proceeding (see sections 315 (e),(2) and 325 (e),(2) of 35 U.S.C.).  The true scope of these estoppels is uncertain at present and subsequent determination thereof will likely require years of litigation.

For example, the IPR estoppel presents the question of whether the Petitioner must search every patent office and library in the entire world to ensure that all of the relevant prior art has been located and identified in the Petition.  Similarly, the PGR estoppel presents the question of whether the Petitioner must have identified all grounds of invalidity in the entire world under sections 101, 102, 103 and 112, either before filing the Petition (within nine (9) months of patent issuance) or within the two months of discovery allowed the Petitioner under the proposed trial rules as summarized above.  The unusual and uncertain breath of these estoppels, as illustrated by the above questions, is unfortunate in that it may therefore be inadvisable to initiate a post-grant proceeding to challenge newly issued patent claims on the basis of just a few issues believed to be the most significant at the time, such as indefiniteness and/or lack of enablement (PGR only), and/or one or two relevant new references (PGR or IPR).

The current statutory estoppel presents particularly serious drawbacks for PGR’s due in large measure to the very short periods of time (as noted above) for obtaining discovery and asserting challenges on the basis thereof.  Because of the unknown breadth and potentially far reaching effects of the PGR estoppel, many potential petitioners may forgo a PGR proceeding in favor of challenging the patent in an IPR proceeding, an ex parte reexamination proceeding, or a civil action, such as by instituting a declaratory judgment action or defending an infringement action.  In view of the possible dire consequences of both IPR and PGR estoppels, it is believed that the public interest would be better served by amending the AIA to significantly narrow the scope of these estoppels, such as limiting their scope to the issues actually presented and decided.

In addition to deciding whether to have an experienced administrative patent judge instead of a civil action judge or jury as the decision maker, there are many other strategic considerations related to the choice of forum, including the relative costs of the respective proceedings; the separation of invalidity and infringement issues; the intervening rights of others with related commercial enterprises if any claims have been amended; and substantial differences in the scope of discovery, the claim construction standard, the burden of proof, and the speed of obtaining a decision.

It has been estimated by the Patent Office that the potential cost range for a post-grant proceeding is $400,000 to $800,000.  This cost will include an expensive filing fee, possibly in the range of $20,000 to $30,000.  However, the Office estimates that the filing fee and discovery costs of a post-grant proceeding will turn out to be substantially less than the costs of the extensive discovery efforts and the lengthy trial proceedings associated with a patent case before a U.S. District Court.  With respect to the time required for a decision, it has been estimated that the average time for a district court trial is significantly greater than two years in many jurisdictions, whereas the average time for a post-grant proceeding is currently estimated to be seventeen (17) months.

As already mentioned, the choice of forum involves the choice of the decision maker for considering the evidence and issues presented and then rendering a timely decision.  An administrative patent judge in a post-grant proceeding may be more knowledgeable and adept with respect to these matters than a judge or jury in a civil action and is likely to render a decision more quickly.  In addition, the burden of proof in a post-grant proceeding is the preponderance of the evidence of invalidity, which is lower than in a civil action where the burden of proof is clear and convincing evidence of invalidity.   On the other hand, in a U.S. District Court, there is the likelihood of discovering and introducing a substantially greater range of invalidity evidence before the judge or jury than before the administrative patent judge.

With respect to claim construction, the proposed rules for post-grant proceedings indicate that the Patent Office will apply the broadest reasonable construction of the claim language consistent with the patent specification, which is currently the construction standard applied in ex parte reexaminations.   On the other hand, there is a possibility of convincing the district court in a civil action that the claim or claims should be more narrowly construed in order to uphold the patent in view of any newly cited prior art references.

Another important aspect of post-grant proceedings relative to civil actions is that both an IPR and a PGR are limited to and therefore concentrate on patent validity or invalidity, whereas civil actions usually combine validity, infringement and damages issues, unless the district court grants a motion for bifurcation of one or more of these issues.  Any one desiring to challenge a patent claim should consider this focus on patent validity or invalidity in determining whether their interests would be served best by a post-grant proceeding instead of a civil action.  Also, both parties to a post-grant proceeding need to carefully consider how their arguments on validity or invalidity (and on any other issue) before the Patent Office may affect desired positions in future litigation.

With respect to intervening rights, the AIA indicates that such rights may exist with respect to any amended or new claims incorporated into a patent following a post-grant proceeding.  Thus, if the scope of a claim changes during a post-grant proceeding, this could adversely affect claim construction arguments asserted in a subsequent civil action for infringement.

There are also distinct advantages and disadvantages between an IPR and a PGR, particularly with respect to the scope of challenges available to one or more claims and the scope of discovery.  In addition to claim challenges under section 102 and 103, a PGR makes available challenges upon any ground, including under sections 101 and 112 and also on the basis of alleged fraud or inequitable conduct.  The standards for the scope of discovery are also different in an IPR and a PGR under the presently proposed rules.  For IPRs, the standard is what is necessary in the interest of justice and this includes the depositions of witnesses and submitting affidavits and declarations.  For PGRs, discovery is limited to evidence directly related to factual assertions made by either party, and the extent to which depositions will be permitted is not clear at this time.  In addition, the extent of discovery permitted in both post-grant proceedings will probably be discretionary with the administrative judge in view of the significantly short discovery periods provided.

Other strategic considerations include timing issues related to when the respective PGR and IPR proceedings may be instituted (nine months or less, or greater than nine months) and commencement of either or both of these proceedings relative to a patent enforcement action which might be stayed on the basis of a post-grant proceeding.  The AIA provides that, if the Petitioner files for a post-grant proceeding after instituting a civil action challenging the validity of the same claims, this civil action will be automatically stayed unless the patent owner moves to lift the stay or files a claim or counterclaim alleging infringement of the same claims.  However, the AIA does not provide a standard for issuing stays in other civil actions, except for a transitional program for certain business method patents.  In such other circumstances, it is believed that district courts in other civil actions will consider the granting of stays in the same manner as previously exercised in view of ongoing ex parte reexaminations, namely, consideration of the grounds presented on a case by case basis.

Because of the present uncertainty as to the limits of discovery in both of the post-grant proceedings, these proceedings may appeal primarily to Petitioners bringing challenges where little or no discovery is anticipated.  An obvious advantage of pursuing an IPR instead of a PGR is that the former is likely to involve a much narrower scope of estoppel because of this proceeding’s much narrower scope of challenge relative to that of a PGR.  In other words, in an IPR there should be no risk of being estopped from bringing other defenses in a civil action, such as those available under sections 101 and 112.   Furthermore, the time period for searching prior patents and publications to develop 102 and 103 challenges is much greater for IPRs than PGRs.

Both parties to a post-grant proceeding should very carefully consider how their presentations before the Patent Office may affect any future civil action, particularly in view of the risks of estoppel inherent in the former with respect to any ground that “reasonably could have been raised.”  Because of such estoppel effects, it is believed that the scope of overlapping issues between a post-grant proceeding and a possible future civil action is a very serious concern and must be carefully addressed before undertaking either a post-grant review or an inter partes review.  Also, anyone currently thinking about filing for a patent should consider completing and filing their application well in advance of March 16, 2013, to avoid the possibility of having their subsequently issued patent challenged by a post-grant review.