Bill Would Effectively End PTAB

The STRONGER (Support Technology & Research for Our Nation’s Growth and Economic Resilience) Patents Act was unveiled in the U.S. Senate this week. This is the newest incarnation of a previously stalled bill known as the "STRONG Patent Act of 2015." The new bill, like its predecessor, proposes significant modifications to the patentability trial mechanisms of America Invents Act (AIA). These modifications, if adopted, would for all practical purposes end AIA trial proceedings at the Patent Trial & Appeal Board (PTAB) — the apparent goal of the organizations backing this legislative effort.

Notably, this same agenda prevented the 2015 bill from gaining any real traction. While the new bill does include some improved proposals for amending claim at the PTAB, oddly, it also doubles-down on its anti-PTAB agenda.

The draft bill is found (here)

A summary of the PTAB provisions are provided below along with my commentary on each:

Section 102A: Change to Philips Claim Construction – Mandates the PTAB apply a Philips claim construction.

Rationale Given: "Harmonize" PTAB with courts
Unstated Goal: Overrule Cuozzo

Practical Impact: None.
-As I have stated here ad nauseum, and as the PTAB has demonstrated in every expired patent it interprets, this change would not lead to the same highly nuanced constructions of the courts.

Section 102B: Change Burden of Proof – Mandates that the Board presume patents are valid and require “clear and convincing evidence” to demonstrate unpatentability.

Rationale GIven: "Maintaining" presumption of validity and "clarifying" that district court standards apply to PTAB
Unstated Goal: Repeal AIA Trial Proceedings

Practical Impact: Would effectively end PTAB trials.
-The existing RLP standard would still be used at IPR institution, then, during trial the standard would change to clear and convincing. Paying $23k to secure an institution decision under a RLP standard only to lose at trial on a higher standard (and be estopped on the full universe of patent and printed pub. art. See (f) below) is why this would shut down the PTAB overnight. Moreover, the judges of the USPTO would be effectively deferring to a patent examiner on questions of patentability, turning the Board's traditional mission on its head. Amendment would also still be offered, which is inconsistent with these concepts. These proposals will be non-starters for the tech lobby.

Section 102C: Article III Standing – Requires Article III standing to file an AIA trial petition

Rationale Given: Minimizing abuse and eliminating privateering (i.e., Kyle Bass)
Unstated Goal: A bit of the above, mixed in with a lot of interest in making proactive challenges more difficult.

Practical Impact: To avoid debates over DJ standing, petitions will be likely delayed until after a lawsuit has commenced.
-The Kyle Bass experiment ended in disaster (as I predicted it would). While there may be a few still toying with this business model, there are other ways to address this problem without taking away a valuable due diligence tool. Parties often proactively file before litigation to increase the chances of a stay, or to simply address problem patents before investing and launching a product that may be accused of infringing. This change would have the unfortunate consequence of making litigation inevitable, where at present, it can often times be avoided.

Section 102D Limitation on Reviews – Mandates that the PTAB may only conduct one AIA trial per claim of a patent.

Rationale Given: Reduce repetitive and harassing attacks
Unstated Goal: Prevent multiple parties of a lawsuit from mounting individual IPR defenses

Practical Impact: Even a settled, but instituted IPR would stop all later IPR challenges
-This bill argues for "harmonization" with district court practices inconsistently. Here, the PTAB would have a completely different "first-filer" system.

Section 102E: Interlocutory Appeals from Institution Decisions to CAFC – Patentees may seek interlocutory of institution decision, petitioners may not.

Rationale Given: Institution decisions can have a negative impact on patent owners regardless of trial outcome
Unstated Goal: None

Practical Impact: More expense for all, more work for CAFC. Unlikely to move the needle in any material regard for the vast majority of cases.
-The CAFC has enough additional work from the PTAB and the trial would proceed in parallel, which is inefficient. A simpler solution would be to allow for a rehearing to a different PTAB panel (for a fee).

Section 102F: Absolute Estoppel Covering Full Universe of Prior Art - If you lose an IPR, you cannot raise any invalidity grounds on any patents and/or printed publications.

Rationale Given: Eliminate duplicative proceedings
Unstated Goal: Make estoppel absolute

Practical Impact: Coupled with the new standards discussed above, kill the PTAB.
-This change is not highlighted in the summary materials accompanying the bill, and for good reason. This is a radical departure from current practice.

Section 102F: No Second Petition for a Patent - A petitioner may not file a second IPR (for example, against different claim) unless sued on those claims after the first was filed.

Rationale Given: Eliminate repetitive proceedings
Unstated Goal: Remove Board discretion to accept secondary filings.

Practical Impact: Second petitions of a same party are already a rarity, but can proceed on a discretionary basis (i.e., determined case-by-case by Board)
-The Board should make Conopco precedential so there is more predictability; not all panels follow this case.

Section 102G: Routine Discovery for Real-Party-in-Interest – Broadens concept of the RPI to an entity making financial contributions to challenge is a real-party-in-interest estopped from future challenges, ensuring that no entity gets multiple bites at the apple to challenge a patent. Also broadens routine discovery to explore issue.

Rationale Given: No second bite at the apple
Unstated Goal: None

Practical Impact: More discovery, more costs.
-Unlikely to move the needle in the vast majority of cases. The Board is best suited to determine the need for additional discovery on a case-by-case basis.

Section 102H: Exclude Patents Upheld in Federal Court From USPTO Review – If a district court reviews the validity of a patent before the PTAB, the post-issuance
proceeding should not start, if that determination occurs during the PTAB proceeding the PTAB should pause pending appeal.

Rationale Given: Priority given to ITC and federal court decisions
Unstated Goal: Carve out to benefit pharma patents

Practical Impact: Strangely elevates the decision of one administrative agency with expertise in trade matters (ITC) over the USPTO.
-Would create a race between the courts and PTAB like we had with inter partes reexamination, which IPR was designed to improve. This is a clear attempt to roll back portions of the AIA

Section 102I: Amendment of Claims – Provides a pathway for patent owners to enter into an “expedited” examination procedure instead of amending claims before the PTAB.

Rationale Given: Provide expedited examination procedure
Unstated Goal: None

Practical Impact: This is a needed change.
-I proposed this idea three years ago.

Section 103 Tracks 102, but for PGR

Section 104: Composition of PGR and IPR Panels - Mandates that U.S. Patent and Trademark Office (USPTO) adjudicators who decide whether to permit a post-grant proceeding are distinct from the PTAB judges who will decide the outcome of a petition.

Rationale Given: Clarify intent of AIA
Unstated Goal: None

Practical Impact: More expense for PTO, more expense for public. Unlikely to result in statistically significant changes to PTAB trial outcomes.
-A more sensible way to provide the same relief is to allow for a rehearing option that would include a new panel, but at an appropriate fee. Building this same control into every trial as a default will unnecessarily increase costs for the public and the agency.

Section 105: No Anonymous Reexams + One Year Window - Eliminates ability to file anonymous reexamination and adds 1 year window requirement to reexamination.

Rationale Given: Harmonize reexamination with AIA trials
True Goal: Eliminate reexamination as an option for most patent challengers

Practical Impact: Reexamination is an ex parte proceeding, one of the the only strategic benefits over IPR (an inter partes proceeding) is anonymity. This loss of anonymity, coupled with the one year window would have a chilling effect on third party filings.
-Reexamination has existed for 30+ years and is primarily a tool for patent owners. These changes are simply unnecessary.

What's Next?:

This bill, like its predecessor is not likely to get very far (Bio/Pharma and small inventor organizations will face off against the tech lobby). Is it a valuable starting point for a broader conversation on patent rights in the U.S.? I'm not so sure. Starting the conversation on an extreme end of the spectrum hasn't been working very well for the folks in Washington — who, it would seem, have some bigger legislative fish to fry in the months/years ahead.

Scott A. McKeown is an author of the Patents Post Grant.