To IPR or not to IPR

The days of fight or settle are over for companies facing patent litigation.  During the last several years, the US patent landscape has shifted dramatically, opening up an entire ecosystem of new solutions for companies dealing with accusations of patent infringement.  While going to court to fight it out, or settling to make the problem go away are still valid options, new, more efficient, and less expensive choices are now available.

When a company is sued for patent infringement, there are essentially three paths available:

1. Fight - Hire a lawyer, go to court, and fight to convince a jury that you have done no wrong.  Courts can determine that any patent is invalid and/or not infringed. This is generally the most costly option.
2. Settle - Negotiate with the organization asserting the patent against you and come to a licensing or other settlement agreement. This removes the immediate lawsuit, but leaves the patent intact.
3. Challenge - Many patents asserted in litigation are “bad patents” meaning that they are either overly broad or obvious, or that they were not truly novel at the time they were originally issued by the USPTO.  These patents can be eliminated, which permanently removes the threat.

One of the key options to keep in mind as an alternative to litigation or settlement is the set of post grant review options available through the USPTO since 2012’s America Invents Act, most notably the inter-partes review (IPR). An IPR is a trial held before the USPTO Patent Trial and Appeal Board (PTAB) that allows parties to challenge the validity of a patent on a lack of novelty over prior art.

In 2014, traditional patent litigation declined, and while it is looking like it will rebound to a new all-time  high in 2015, these fluctuations pale in comparison to the growth in IPR filings.  Since IPRs were initially made available in 2012, filings grew by 631% year over year in 2013 and then another 114% in 2014. Through October, the numbers show no signs of slowing down in 2015. IPRs have been highly successful so far with 25% of claims challenged (4,496 of 17,675) found unpatentable, according to USPTO reports.

There are a number of benefits to using an IPR for companies facing patent litigation. First of all, successful IPRs eliminate bad patents, ending the threat of continued assertion once and for all. One of the issues with paying a settlement to a plaintiff is that the patent is left to be asserted again, which not only harms business and the economy, but allows patent assertion-based business models to flourish and come back stronger against companies with new claims of infringement.

IPR cases are also designed specifically for patents, rather than the broader legal system, which is less technical and more generalized. IPR cases are heard by USPTO administrative patent judges, who hold a high degree of technical expertise, rather than a panel of citizen jurors who may or may not be able to grasp and assess the finer technical points of a patent validity argument.

IPRs are much less expensive than litigating in a traditional court. While major technology companies may have an army of lawyers to martial when they are sued, and a mountain of patents to counter-assert against their accusers, IPRs are accessible even to small companies without millions to spend and who would otherwise be forced to settle.  Some newer models are even improving the accessibility of IPRs by bringing together coalitions of defendants to share the cost of eliminating the threat.  Additionally, by filing an IPR, defendants are often able to push the settlement number down if they eventually choose to go that route.

IPRs also move quickly. Court battles can take years, while an IPR will be over within 18 months.  IPRs are denied or instituted within 6 months of filing the petition, and then decided within 12 months of institution. Another benefit of that quick timeline is the possibility to get the case stayed in court pending the outcome of an IPR. If an IPR is filed shortly after a case, a stay is likely to occur before some of the more expensive district court undertakings, such as a Markman hearing, have a chance to develop.

Many of the models that have been used over the past several years to challenge patent infringement cases and assertion-based business models have ended up compounding the problem.  Organized approaches to patent purchases “feed the beast,” as they show bad actors that if they assert patents they will be rewarded for their efforts.  Settlement offers similarly unproductive incentives to come back for payoff after payoff.  

By fighting back, companies can break the cycle of settlement and help change the behavior across the IP landscape. Traditional litigation, with its high price tag, made fighting back an often impractical option for small to midsized businesses. With IPRs, there is an attainable, affordable option to eliminate the threat and break the cycle of frivolous patent litigation. With new options, such as an IPR, available to them, companies can escape from the lose-lose litigate or settle conundrum.