Patexia Insight 21: IPR Institution Denial Rate is Rising
Every month the Patent Trial and Appeal Board (PTAB) releases their AIA Trial statistics which includes the Inter-Partes Review (IPR) denial and institution rates as well as other stats. The most recent PTAB stats from October 2016 shows that the IPR institution denial rate was about 48 percent.
This week, our Data Science Team decided to examine the PTAB data at the case level. We learned that depending on how we look at this data, the denial rate could vary and in fact could be much lower. For example, we learned that while the IPR institution denial rate has been rising year-over-year, it was approximately 42 percent for 2015. This is about 6 percent lower than the PTAB October stats and about 8 percent lower than the PTAB January stats.
Inter-Partes Review (IPR) has garnered a lot of attention lately to the extent that risk of IPR is now included in the valuation and validity analysis of key patents in the portfolio is part of a regular due diligence performed for licensing and monetization by valuation experts.
This week we decided to take a closer look at the IPR cases to better understand the institution and denial rates. We learned that the denial rate has been rising year-over-year which may have several interpretations such as change in the PTAB review process or better understanding of the process by the patent owners who are interested in monetization, licensing or enforcement of their portfolios.
The method PTAB uses to calculate the institution rate is based on the cases that have reached a final disposition. For example, after reviewing the recent AIA Trial Stats (i.e., slide 10 of October 2016 stats), we learned that from the total of 3,770 petitions that had been filed and reached a final disposition, only 1,799 or 48 percent were denied the institution. Given that it usually takes about six months to re deny or institute a case and after the institution it takes about a year to reach the Final Written Decision status, in this calculation method, there is always some missing cases that have already been instituted and most likely will reach the Final Written Decision status at some point in the future but were not included in the analysis since they had not reached a final disposition.
To compensate for this, we decided to take another look at earlier years as almost all cases have now reached a final disposition. For this analysis, we included the IPR data from 2012 through 2015 and excluded 2016 as most of the recent cases are still pending.
PTAB has recently updated the status types used to define different phases of the process. The new types now include three different termination statuses: Terminated-Denied, Terminated-Dismissed and Terminated-Settled. Our focus for this study was on those cases with Terminated-Denied status which includes cases that did not get instituted as the petitioners failed to establish a reasonable likelihood that they would prevail with respect to their challenge.
| Case Status | 2012 | 2013 | 2014 | 2015 |
|---|---|---|---|---|
| Terminated-Denied (%) | 9.4% | 29.8% | 40.8% | 41.7% |
| Terminated-Denied (#) | 9 | 209 | 612 | 690 |
| All IPR Cases | 96 | 702 | 1501 | 1655 |
The above table summarizes the denied cases. From the total of 3,954 cases we examined (comparable to 3,770 cases included in the PTAB stats from October), the overall institution denial rate was 38 percent which is 10 percent lower than what was reported by the PTAB. However, the year-over-year comparison shows that the denial rate is gradually rising meaning that patent owners are learning the process and do not enforce low quality patents.
In the coming weeks, our Data Science Team is going to release a number of new studies and uncover some unknown facts about IPR by analyzing the data not only at the case level but also at the patent and claim levels. As you may have noticed, we are gradually adding the challenged, instituted and invalidated claim numbers to each of the cases to Patexia Lawsuits and PTAB Database. This is performed through manual and automated review of PTAB documents including Institution and Final Written Decision documents. We plan to release a comprehensive report on all IPR cases which includes ranking of law firms and attorneys based on both quantity and quality of their work at the case, patent and claim levels. Stay tuned!