After years of advocating the introduction of a post-grant patent review mechanism in the U.S. patent system, the 2011 enactment of the America Invents Act retains current reissue and Ex Parte Reexamination proceedings, replaces Inter Partes Reexamination with Inter Partes Review, and adds new Post-Grant Review and Supplemental Examination proceedings. These five proceedings allow the USPTO to take a second look at an issued patent, make changes to the claims, and reconsider information that both had or had not been considered in the original examination of the patent. Congress's intent in making these proceedings available was to reduce the burden on the judiciary and to lower litigation costs by moving the determination of validity back into the USPTO. In this short overview I will discuss the current state of the U.S. Patent System, the former alternatives for challenging the validity of a patent pre-AIA, and end with an overview of the new inter partes review and post-grant review proceedings.
USPTO
It is no secret that the USPTO is currently overburdened and subject to limited resources. There has been a rapid and consistent increase in the number of patent applications over the years, leading to a greater workload for each examiner at the Patent Office. The number of utility patents has risen from about 100,000 per year from 1970 through 1980, to about 330,00 in 2001, and almost 500,000 in 2010. A parallel increase in patent litigation has been seen as well, suggesting that the number of valuable patents is increasing and that greater uncertainty surrounds the scope of claims and validity of patents in general. Experts suggest that the patentability standard in the U.S. patent system has declined and resulted in the issuance of patent claims that are too broad in scope and whose validity are in question.
Uncertainty over the validity and breadth of a patent claim can lead to several negative results. Ambiguity in what inventions and features are protected in a patent can deter innovators in a particular field because they fear litigation by competitors who hold large numbers of patents in that area. This fear is particularly problematic in fields characterized by cumulative inventions, where an inventor's technical advance relies on previous inventions in their field. In order to protect the innovation incentive the patent system was designed to enforce, there needs to be sufficient review of applications during the examination process and post-grant review mechanisms which catch errors soon after patents have issued so that the public can have confidence in the validity of patents and make important business decisions accordingly.
Alternatives to Challenge the Validity of a Patent
Litigation is currently the predominant mechanism used to challenge the validity of a patent. Reexamination was created by the 1980 Act to Amend the Patent and Trademark Laws and was envisioned to be a cheaper and faster alternative to litigation. The procedures for ex parte reexamination became effective on July 1, 1981, permitting the patent owner or any other party to notify the USPTO and request reconsideration of the grounds upon which a patent was originally issued. In order to initiate reexamination, the patent owner or third party must submit previously undisclosed "new" and relevant prior art to the Patent Office. The prior art considered is limited to prior art patents or printed publications under §§ 102 or 103. Then, a request for reexamination is granted only if the Patent Office finds a "substantial new question of patentability." A third party requestor has no right to participate in the reexamination process after notifying the USPTO of the triggering prior art. The inability of the requestor to play a meaningful role in the reexamination proceedings after initiating the process led to the enactment of inter partes reexamination procedures in 1999. Inter partes reexamination follows the ex parte procedures listed above with a few exceptions. First, all documents filed by the third-party requester will be served to the other party. Second, whenever a patent owner files a response to an action on the merits from the USPTO, the third-party requestor has the opportunity to file a written comment regarding issues raised in the action. Finally, a third-party requestor is estopped from raising any issues they raised or could have raised during the inter partes reexamination proceedings in a later civil action regarding invalidity of any claim.
Since the establishment of ex parte and inter partes reexaminations, there has been a slow increase in the number of requests for reexamination filed. For ex parte reexamination, since July 1, 1981 through June 30, 2011 there have been 11,604 requests for reexamination with 33% requested by the patent owner and 66% requested by third parties. To date 92% of total requests have been granted and of those 23% resulted in all claims confirmed, 11% resulted in all claims cancelled, and 66% resulted in amendment to at least one claim. The average pendency for reexamination (filing date to certificate issue date) is 25.7 months. For inter partes reexaminations, the total number of requests filed between November 29, 1999 and June 30, 2011 is 1,286 and 95% have been granted. Only 13% resulted in all claims confirmed, 44% resulted in all claims canceled, and 43% resulted in amendments to at least one claim.
Although the increase in number of reexamination requests over the years suggest that alleged infringers are beginning to recognize reexamination as a viable alternative to litigation, potential patent challengers are clearly not taking advantage of this proceeding even though 77% and 87% of ex parte and inter partes reexamination requests respectively result in some amendment to the claims. Reexaminations require only a preponderance of evidence to prove invalidity, where as litigation has a much higher bar of "clear and convincing evidence." Unlike litigation, patents are not presumed valid in reexamination proceedings.
Several disadvantages to reexamination have led to its under-use as an alternative to litigation. In reexaminations, alleged infringers can only rely on prior art patents and printed publications to prove invalidity. In litigation, an alleged infringer can also purport invalidity or unenforceability based on prior use or sale, §112, inequitable conduct, and patent misuse. However, the most controversial issue regarding reexamination are the estoppel effects. If a third party decides to pursue reexamination of a patent and later files an invalidity suit in the district court as well, they are estopped from raising issues they raised or could have raised during reexamination.
The limitations and disadvantages of the reexamination process has led many experts to recommend a post-grant opposition procedure similar to that currently used in the European Patent Office. For years, several policy review boards have advocated the introduction of post-grant review mechanism and finally, this past September, a patent reform bill was passed that puts several post-grant review processes in place to re-examine recently issued patents.
Overview of New Proceedings under the AIA
As a result of the enactment of the America Invents Act ("AIA"), there are now five separate post-grant review proceedings available: Reissue, Supplemental Examination, Ex Parte Reexamination, Post-Grant Review, and Inter Partes Review. While the reissue and ex parte reexamination procedures have been available and are largely unchanged, both supplemental examination and post-grant review are entirely new. Inter partes review replaces the old inter partes reexamination with a few key changes from the old reexamination process. For the purposes of this paper I will focus on the new inter partes review (IPR) and post-grant review (PGR) proceedings.
IPR is effective September 16, 2012 and applies to all patents regardless of their application filing date. The main function of IPR has not changed, it gives third parties the opportunity to cancel one or more claims on the grounds that the claims are anticipated or obvious in view of prior art consisting of patents or printed publications. However the procedure has greatly changed from inter partes reexamination. Unlike inter partes reexamination, a request for IPR will not be granted if the requesting party has already filed a civil action challenging the validity of the patent claim. If the petitioner files a civil action challenging the validity of a claim after filing a petition for reexamination, the civil action is subject to an automatic stay that can be lifted only under special circumstances. The old reexamination process encouraged strategic behavior from third parties who would initiate reexamination requests and civil proceedings at the same time, hoping that litigation would be over before the reexamination certificate issued so that they could circumvent the estoppel effects of reexamination. The new proceeding no longer allows third parties to engage in this type of strategy. The estoppel effects of the IPR are largely the same, a third party may not challenge the validity of a claim in a later civil action on any grounds they could have raised during reexamination. Whereas the old reexamination proceeding could be requested at any time during the enforceability of the patent, IPR requests must be filed after the later of 9 months after patent grant or termination of post-grant review. Another notable change is the elevated threshold that must be met for review to be granted. The AIA raises the threshold from "a substantial new question of patentability" to "a reasonable likelihood that the petitioner would prevail" with respect to a least one challenged claim. While most of the changes to IPR does not take effect until September 16, 2012 when the AIA is fully in effect, the change in the threshold is effective immediately for all patents and not just those issued after the law was enacted. The higher threshold will require petitioners to provide stronger evidence and be fairly certain of the invalidity of at least one claim before requesting review. The "reasonable likelihood" test is currently used in evaluating whether a party is entitled to preliminary injunction and effectively requires the petitioner to present a prima facie case justifying rejection of the claims in the patent. The AIA allows the PTO to develop rules concerning discovery, which is limited to depositions of anyone submitting an affidavit or declaration during the proceeding or where it is necessary in the interest of justice. Finally, a final determination in an IPR must be issued within one year and may be extended for up to six months upon a showing of good cause. By speeding up the IPR process and allowing for limited discovery, it will be a more attractive option for third parties who want a quick resolution. However, the Patent Office will have to carefully define the limits of discovery in order to realistically meet the one year turnaround time frame.
The other major proceeding for challenging the validity of a patent under the AIA is the PGR. PGR applies to patents issued from applications having an effective filing date of March 16, 2013 or later. While similar to IPR proceedings, PGR is more broad because it is not limited to invalidity arguments based on prior art patents and publications. It permits a third party to raise any grounds for invalidity including lack of patentable subject matter, anticipation, obviousness or lack of an adequate written description (except best mode). The estoppel effects are the same as IPR: PGR may not be instituted if the petitioner has already filed a civil action challenging the validity of the patent, any civil action filed after a PGR has been granted will be automatically stayed and lifted only under special circumstances, and the petitioner is barred from challenging the validity of a claim on any grounds he could have raised during the PGR process after a final decision has been made. The threshold for granting PGR is whether the petitioner demonstrates that "it is more likely than not that at least 1 of the claims challenged in the petition is unpatentable." The petition for PGR must be filed within nine months and a final determination must be issued within a year with up to six months extension for good cause. PGR also allows for limited discovery for evidence directly related to factual assertions advanced by either party in the proceeding.
While the PGR provision of the AIA was meant to identify invalid patents earlier by allowing any party to petition review within nine months of the patent being issued, it remains unclear whether third parties will utilize this proceeding and how effective it will be. The patent reform bill calls for the USPTO to establish the procedures for a faster and more expansive post-grant review process that will likely be difficult for the agency to transition into and places new burdens on patent owners and challengers. It may not be easy for third parties to identify patents they'd like to challenge within the nine month time frame. While PGR is supposed to be a cheaper alternative to litigation, it will likely still be considerably expensive for patent owners to defend against since it can involve discovery and oral hearings. This puts individual inventors and start-up companies at a disadvantage because attorneys are unlikely to work on a contingency fee basis since there are no infringing products on the market from which to seek damages. This may weed out good patents whose owners simply do not have the funds to defend them. PGR also imposes a heavy estoppel burden on patent challengers. Since petitioners are able to assert a broader range of invalidity arguments such as lack of patentable subject matter and §112 issues, they are estopped from making any invalidity argument they asserted or could have asserted during PGR in a later civil proceeding. The estoppel provision for IPR is more narrow since they may only raise §§ 102 or 103 invalidity arguments, and therefore are free to raise other issues later in civil proceedings. The fear of being barred from raising an invalidity argument in civil litigation may be enough for many potential patent challengers to forgo PGR and choose to litigate instead.
While Congress had noble intentions in setting up IPR and PGR, it is unclear whether potential patent challengers will utilize these proceedings. A larger concern is the ability of the USPTO to handle the enormous task that Congress has put on their plate. For years the Patent Office has been receiving more applications than it can handle and as a result many believe that the quality of review has diminished, leading to patents being granted for claims that have uncertain scope and validity. The Patent Office is currently understaffed and underfunded, and to task them with the job of new proceedings seems unfair and doesn't address the problem at it's core. In order to have a more efficient and reliable patent system we need to prevent errors before patents issue instead of coming up with new ways to correct them after the patent is granted.
