The America Invents Act (AIA) has been in effect from more than a year and half. Now, many have begun to ask if the patent office trials the AIA created are living up to their promise of lowering patent litigation costs and streamlining the litigation process.
After only a little more than eighteen months, it may be too soon to say. Still, an analysis of the cases handled by the Patent Trial & Appeal Board (PTAB) over the past year and a half demonstrates that, at least for now, the proceedings do not appear to offer all of their hoped-for cost savings.
The Plan for Inter Partes Review Cost Savings
It’s no secret that patent litigation is expensive. The issues are complex, high-priced experts are often a must, and the process can take years. And just when you think the multi-million dollar ride will stop, the Federal Circuit Court of Appeals can change the claim construction and remand the case for another trial.
With the AIA, the plan was to create a new litigation alternative that allows for streamlined litigation on the validity of the patent in the patent office. For an accused infringer, the ideal path is clear: file for inter partes review (IPR), stay the litigation, win the IPR canceling all claims, and move forward unencumbered. This path results in costs in the low-to-mid six figures, as opposed to low-to-mid seven figures or more in district court. Unfortunately, this path is wrought with challenges.
#1: Transparency as a Requirement
The decision to file an IPR is not as easy as it might seem. The Patent Trial & Appeal Board (“PTAB”) requires you to take positions on claim construction and include an expert declaration in the petition if you intend to rely upon one (about 70% of petitions do). In other words, contrary to common defense strategy in litigation, you have to put your cards on the table early.
Although technically the PTAB applies the broadest reasonable interpretation of the claims, and the district court is not bound to follow that, any patent challenger would be wise to avoid harming a solid position on non-infringement by arguments made in an IPR. The quality of the prior art, or lack thereof, can also push the patent challenger to take positions that could hurt down the road in district court. Obviously, if you decide IPR is not the right choice, you’ll find yourself back in court.
#2: Knowing How Many IPRs to File
Just one IPR can run into the hundreds of thousands of dollars. But patent litigation these days often involves multiple related or, sometimes unrelated, patents. In a five-patent case the filing fees alone to file on each will be at least $115,000. Even then, the question arises whether one IPR per patent is enough.
Several factors have led companies in high-stakes litigation to file two or more IPRs on a single patent. For instance, the PTAB is strict about its 60-page limit, which can make it difficult to cover all of the claims in one petition. Additionally, the PTAB typically goes forward on a very limited set of prior art grounds in a single IPR, refusing to consider grounds it finds to be redundant. In these situations, some risk-averse petitioners have found it necessary to assert different prior art grounds in separate petitions on the same patent to cover all of their bases.
#3: Stays are not Increasing at the Expected Rates
Stays were where IPR was supposed to really come through. IPRs are required to be completed in about 18 months, and it was thought that stays would become the norm. So far, however, the rate has only gone from about 60% to about 70%.
While a 10% increase is still an improvement if you are the one seeking a stay, it is no guarantee. And your actual chance of getting a stay is highly dependent upon what court you are in and what judge you draw.
It is possible stay rates are lower than expected so far because, in many cases, litigation was already well along before IPR became available, and because defendants were not always ready to file early in the case. If more defendants file early in litigation, and more courts come to view IPRs as effective, it is likely that stay rates will increase.
The Million Dollar Question: Is IPR a Cheaper Dispute Resolution Option?
At this point, the answer to that question is unclear. Even if the initial petition is granted and the case is stayed, a negative final decision results in no cost savings because you are back in court. But that expenditure delay, and the time delay that goes along with it, may be helpful in providing you with the time necessary to develop a design-around option. Of course, what will actually happen depends on the facts of each case, and the quality of the lawyering.
As of the end of April 2014, in 36 of 45 final written decisions the PTAB found that the challenged claims were invalid. Of the remaining 9 decisions, only 2 were total wins for the patent owner where all claims challenged in IPR emerged unscathed. Most of the victories are small – a few claims surviving here and there. At a claim level, 72 out of 789 claims have survived. And, to date, amendments to challenged claims have been wholly unsuccessful. It is too early to conclude that the poor claim survival rate will continue its trend. But if one is successful in defending claims in IPR, or in achieving a claim amendment, the challenger is still back in court and facing a much stronger patent.
While it may be too early to conclude that IPRs will make patent litigation much cheaper on average, you can trust that it will result in potentially significant savings for some clients. Patience is the virtue of the day, here, as it may take another 18 months or more to determine which types of clients and cases will benefit under the AIA moving forward.