The Leahy-Smith America Invents Act (AIA), enacted in September 2011, established two new procedures for challenging the validity of an issued patent before the Patent Trial and Appeal Board (PTAB) within the United States Patent and Trademark Office (USPTO). One of these procedures, inter partes review (IPR), is available to challenge the validity of any patent, though the grounds for invalidity are limited to anticipation and obviousness of the patent, based on patents and printed publications.
IPRs can provide valuable leverage when defending against allegations of patent infringement. Notably, the standard of proof to demonstrate invalidity in an IPR is lower than it is in district court litigation. In most cases, the PTAB will also apply a broader construction to challenged claims than will a district court, potentially opening up additional prior art for use in an IPR proceeding. (The propriety of the PTAB’s broader construction is presently on appeal to the Supreme Court and scheduled for argument on April 25, 2016.)
This column explores various considerations for patent challengers hoping to use IPR proceedings as an adjunct to district court litigation.
1. Don’t file a declaratory judgment of invalidity before filing your IPR petition. This may seem painfully obvious, but, when you forget the obvious, it often ends up being painful. The statute is clear: “An inter partes review may not be instituted if, before the date on which the petition for such a review is filed, the petitioner . . . filed a civil action challenging the validity of a claim of the patent.” Note that the prohibition extends to all claims of the patent, even if the declaratory judgment action only challenges some of those claims – challengers cannot attempt an end run by challenging half of the claims in district court and the other half before the PTAB.
2. Watch the clock. An IPR petition must be filed within twelve months of the service of a patent infringement complaint.
3. Identify the real party in interest. Every IPR petition must identity “all real parties in interest” to the proceeding. Failure to do so means the petition is incomplete, and the PTAB will not institute review.
Seems easy, right? Not necessarily so. If the patent owner raises ‘failure to identify the real party in interest’ in its preliminary response, the PTAB may or may not allow the petitioner to reply. Indeed, the PTAB has shown a willingness to deny institution, and even terminate ongoing proceedings, when the petitioner does not identify its holding company as a real party in interest.
To be clear, not every parent holding company is a real party in interest. The PTAB will consider many factors, including the level of control the parent has over the subsidiary, corporate blurring between the entities (e.g., Do they have a common board of directors?), and whether the parent is funding or directing the proceeding, when deciding whether the holding company is a real party in interest. Nonetheless, out of an abundance of caution in response to these cases, many petitioners have taken to listing their parent holding companies as real parties in interest.
4. Contemplate timing for two. Suppose a petition is denied institution because of the petitioner’s failure to identify the real party in interest. Is a do-over possible? Maybe.
The patent owner has three months to file a preliminary response to the petition (Note to patent owners: It is very uncommon for the PTAB to deny institution, except on procedural grounds, where the patent owner declines to file a preliminary response). The PTAB has another three months from the patent owner’s preliminary response to make an institution decision. Both of these dates, however, are measured from the PTAB’s acceptance of the petition, which can be anywhere from two to four weeks after the petition is actually filed. That means there’s about a seven month “tail” on IPR petitions, allowing a petitioner a second try if the first petition is filed early enough (i.e., within four to five months of the service of the complaint).
Second efforts may also be desirable if the PTAB takes an unexpected position on claim construction, or otherwise institutes on fewer than all grounds and/or claims sought.
5. Consider the district court’s schedule, part 1 – cost. The schedule in the co-pending district court litigation can be a powerful counterbalance to a petitioner’s desire to file early enough to get a second try (if the first petition is not instituted, or is incompletely instituted). Patent office fees alone start at $23,000, and escalate rapidly with additional claims. On top of that, current PTAB rules place strict page limits on IPR petitions; shortly, these will be replaced by equally strict word count limits.
Yet, in many instances, the patentee will not have offered infringement contentions or narrowed its asserted claims within the four- to five-month window discussed above. This may leave the petitioner with too many targets to attack, and/or too many possible patentee positions to anticipate on a cost-effective basis via IPR, early on in the counterpart district court litigation. Depending on what the district court’s schedule will require of the patent owner in the first twelve months, it may make sense for a patent challenger to wait until the dispute is narrowed before filing an IPR petition, even at the expense of a possible second try.
6. Consider the district court’s schedule, part 2 – relief. Once the PTAB has instituted an IPR proceeding, it has twelve months to reach a final decision. As such, the nominal lifespan of an IPR from filing to disposition is eighteen months, not counting any appeal to the Federal Circuit. PTAB rulings within that time can be used in different ways in the counterpart district court litigation.
First, PTAB rulings can be persuasive in district court. For example, the PTAB might deny institution on the basis that the challenged claims cannot be construed — in other words, that they are indefinite under 35 U.S.C. § 112. Even though the PTAB cannot invalidate claims for indefiniteness in an IPR, the district court might take the PTAB’s views into consideration when ruling on validity.
As another example, issues of priority can be teed up for resolution by the PTAB as part of the board’s consideration of whether a petitioner is “reasonably likely” to succeed as to a particular reference or combination of references. Once again, the district court may find the PTAB’s decision probative.
This works both ways, however. For instance, if the PTAB denies institution over certain prior art, the district court may view an invalidity argument based on that same art unfavorably. In certain districts, the fact of non-institution is even admissible evidence.
PTAB rulings also have the potential to wipe out adverse district court judgments by invalidating claims that were found valid and infringed at the district court. Timing is critical here, however: If the judgment has already been executed and is no longer subject to appeal (or has been affirmed on appeal) by the time of the PTAB’s final decision, it will be difficult, if not impossible, to vacate a damages award.
In sum, IPRs can be a powerful tool for patent challengers. They can serve as leverage towards a favorable settlement; they can offer opportunities for better outcomes on certain critical issues (e.g., claim construction, priority, indefiniteness); and they can even be used to overcome adverse district court judgments. Yet, to paraphrase Justice Oliver Wendell Holmes, Jr., patent challengers must be sure to cut square corners, as the IPR rules are precise, and the sanctions for failing to follow them can be draconian.
A Brief Follow-Up...
In January, I wrote about the impact of 3D printing on the intellectual property (IP) landscape. I noted that 3D printing technology could, in the future, reduce or eliminate traditional barriers to market entry, such as development lead time and capital expenditures, potentially leading to a disruptive model where consumers make, rather than buy, their medical devices. That future may be closer than I anticipated: CNN recently featured a college student who saved thousands of dollars by 3D printing his own aligners.
About The Author
Scott Felder is a partner at Wiley Rein LLP and the head of the firm’s Patent Prosecution practice. He counsels clients in connection with the acquisition, protection, management, and enforcement of intellectual property rights, including representing clients before the United States Patent and Trademark Office, including the Patent Trial and Appeal Board. Scott received his J.D. from the University of Virginia, Order of the Coif.