Happy Anniversary PTAB?

Transformative Clients: Temple Therapeutics
October 17, 2017
Tribal Innovation
November 3, 2017

Happy Anniversary PTAB?

Whether it is an Anniversary Worth Celebrating May Depend on Who is Considering the Question

September marked the 5th year anniversary for the USPTO’s Patent and Trial Appeal Board (PTAB) and inter partes review (IPR).  Whether it is an anniversary worth celebrating may depend on who is considering the question.  While some tout the benefits of the PTAB and its proceedings for revieing patents, for many innovators the new forum for patent disuptes and the procedures that came with it only increased the risk, cost, and complexity of the patenting process.  Regardless of which side you are on, there is no doubt that the PTAB has had a big impact on US patents and we do not expect that to change anytime soon.


Introduction:  History and Terminology


Five years ago, a key component of the America Invents Act (AIA) took effect.  The AIA was the biggest revision in US patent law in about 60 years.  With the AIA becoming law, the PTAB division of the US Patent and Trademark Office (USPTO) was born, along with its primary procedure the inter partes review (“IPR”) and the IPR’s rarer cousins the covered business method (CBM) proceeding and a proceeding that is just starting to take root, but which we expect will also be very important in the future, the post grant review (PGR).  We will cover PGRs later in a separate posting.  The main business of the PTAB today and for the last five years has been the IPR.

According to the USPTO an IPR is a trial proceeding conducted in the PTAB and that is designed to review the patentability of one or more claims in an issued patent.  The only grounds for bringing an IPR are lack of novelty and lack of inventive step, and only on the basis of prior art consisting of patents or printed publications (for example, prior sales don’t get considered in an IPR).

For post-AIA patents (those with an effective filing date of later than March 16, 2013), IPRs must be brought within 9 months of issuance.  This is becoming more important with each passing month as more and more post-AIA patents are now issuing.  It’s for this reason that we suggest that innovators have a serious patent landscape monitoring program, such as the landscape monitoring services that Transformative offers its clients.

For pre-AIA patents, an IPR can be brought at any time.

While there was a somewhat similar procedure for reviewing patents in the USPTO before the AIA, it was rarely used.  This has not, however, been the case with IPRs.

While many predicted the impact of the PTAB would be minimal, the impact has in fact been quite significant.  The USPTO collected and summarized program data in March of this year.  Here are the highlights we gleaned from that data:


How Common are PTAB proceedings?

About 6,700 petitions have been filed to start some kind of inter partes proceeding in the PTAB to date.  That may not sound significant considering about 275,000 US patents are issued each year; however that number represents a huge increase over the prior procedure which was applied for less than 1,000 times in an 11-year period.  It’s also worth noting that about 6,000 of these IPR actions were brought in just the last 3 years (it took that long for the procedure to catch on).  All of this recent action also means that the PTAB is now the number one forum for patent disputes in the USA (according to recent numbers published by Patexia).

Of these petitions, 92% (6139) of them were IPR, or inter partes review, petitions, 7% were CBM (covered business method) petitions and a mere 1% were PGR (post grant review) petitions.


What Kind of Patents are going to IPR?

The breakdown by technology of these 6700 applications has remained fairly consistent over the 5-year period.  The electrical/computer field owned approximately 60% of petitions, followed by a little over 20% related to mechanical/business methods, 11% from bio/pharma, 7% related to the chemical field, and 1% coming out of design technology. While we haven’t made a direct number-to-number comparison, these numbers appear to be roughly in line with general patenting activity in the US, with reportedly just over 50% of patenting activity tied to software-related patents.


Are petitions being accepted?

The PTAB doesn’t have to start an IPR just because someone filed a petition.  Indeed, not all of these petitions for an IPR or other PTAB proceeding have been accepted by the PTAB, but most are.  Of the 5 technology areas, only 1 has a petition institution rate below 50%.  In fact, for both electrical/computer and mechanical/business methods petitions, the institution rates are at or above 70%.  Design field petitions have the lowest institution rate of 42%.


What is coming out of the IPR trials?

As of March 2017 when this data was collected, 4,563 total IPR petitions were considered complete.  Before looking at the completed petitions, let’s take a quick look at what is happening with settlements.

First off, IPR settlements have been steadily declining over the past 3 years.  This is true for settlements that occurred both before and after institution.  This means that the number of cases making it through to a full trial is going up.  Why?  We know a lot more about the odds of winning an IPR now than we did in 2015.  This knowledge means there is less motivation by petitioners to settle these kind of cases.

What about the cases that do not settle?  When looking at the disposition of completed IPR petitions, almost half (2157 out of 4563) did not go to a board trial, with petitions either denied or terminated prior to an institution decision.  In looking at the 2406 IPR petitions that did have trials instituted, 1029 or 43% were found to have all instituted claims unpatentable.  That is, 23% of total IPR petitions, 43% of trials instituted, and 65% of final written decisions found all instituted claims unpatentable.  In other words, about 2/3rds of the issued patents that have gone into IPR did not come out of IPR!

It’s worthwhile noting here that in district court, patents are presumed valid, and those challenging patent validity must provide clear and convincing evidence that the patent is not valid.  In contrast, a PTAB petitioner must demonstrate that the claims in the challenged patent are more likely than not unpatentable, based on the preponderance of the evidence.  With the bar being significantly lower, it means that most patent challenges have enough grounds for the petition to be instituted.


Digging into the claims:

The petition institution rate leaves 4851 IPR petitions to be reviewed by the board.  Altogether they represented 36,790 claims that were analyzed and settled through a written decision (note that some cases are dismissed, settled, etc.).

Of these, the PTAB found the following claims unpatentable in a final written decision:

  •                47% of mechanical/business methods claims
  •                55% of electrical/computer claims
  •                86% of design claims
  •                62% of chemical claims
  •                36% of biotechnology/pharma claims

Taking a step back, of the 4563 IPR petitions filed, there were 156,096 claims available for challenge; 70,060 of which were challenged, representing about 45% of all available claims.  Of those 32,777 (47%) went to a PTAB trial and 16,688 (just over 50% of those going to trial) were found unpatentable.


3 high level take-aways:

What can innovators takeaway from all of this data coming out of five years of PTAB proceedings?

  1. PTAB increased the cost, risk, and complexity of patenting for innovators.The data is pretty straightforward.  A large number of patents are being successfully challenged in IPRs despite making it through examination at the USPTO.  What’s more, there is a big overlap in IPRs and district court litigation, meaning that innovators will often have to deal with two proceedings now, instead of one, to enforce their rights.
  2. An issued patent does not necessarily mean an enforceable patent.While this was true before the AIA, the data above clearly show that with the PTAB in place, there is an open forum available for challenging issued patents that is inviting to patent challengers which often costs much less than going to court.  If you have an idea or a technology pursuit in mind, and you see issued patents blocking your path, a careful evaluation of the validity of that patent is worth investigating.  If grounds exist, perhaps a challenge to the patent would open up the landscape enough to generate freedom to operate.
  3. Traditional patenting approaches are resulting in poor outcomes for innovators.\With the number of claims being found invalid in IPRs, something clearly has to change in the way patents are constructed to ensure they hold up under PTAB exam before innovators can feel secure that an issued patent means an enforceable patent.  Writing a patent with this new landscape in mind is critical to protecting intellectual assets.  This is why Transformative takes a very different approach to patent drafting and prosecution than many other organizations.  We work to make patents that will survive IPR scrutiny.


Reference: https://www.uspto.gov/sites/default/files/documents/AIA%20Statistics_March2017.pdf