Inter-Partes Patent Proceedings

A long and expensive U.S. federal court lawsuit isn’t the only way for a business accused of patent infringement to get claims in an issued U.S. patent cancelled. It is possible to send the patent back to the United States Patent & Trademark Office (“USPTO”) for review and cancellation: This can be far quicker and less expensive than a lawsuit. But which avenue of attack against an invalid patent claim is best in a particular case requires careful consideration.

No patent owner likes to admit it, but the USPTO does make mistakes when issuing patents: The USPTO occasionally issues a patent with claims that it shouldn’t have allowed. In theory, this shouldn’t happen because trained patent examiners at the USPTO examine patent applications to ensure compliance with the legal requirements for a valid patent: This is the primary justification under the law for the presumption of validity that issued patents enjoy before the courts.

This presumption of validity means that in a court lawsuit the burden of establishing invalidity of a patent rests on the party asserting it (usually the accused infringer). See 35 U.S.C. §282: This requires the party challenging patent validity to produce clear and convincing evidence that the patent claims are invalid. See Microsoft Corp. v. i4i Ltd. Partnership 564 U.S. 91 (2011): This is often an onerous burden of proof for a challenger to meet:

Legal Burden of Proof	Requires A Judge or Juror To. . .
Beyond A Reasonable Doubt	Be firmly convinced, with there being absolutely no reasonable doubt.
Clear and Convincing Evidence	Believe that it is highly probable, even if there may be some reasonable doubt.
Preponderance Of The Evidence	Believe that it is more likely than not, even if it is not highly probable.

See e.g., the Manual of Model Civil Jury Instructions for the District Courts of The Ninth Circuit §§ 1.6 and 1.7, and the Manual of Model Criminal Jury Instructions for the District Courts of The Ninth Circuit §3.5.

Recognizing this burden on litigants and the courts and the economic harm that can be caused by invalid patents, the U.S. Congress has provided an option for third parties to litigate patent validity through the USPTO rather than through the courts. These options include the relatively recently introduced Post Grant Review (“P.G.R.”) and the Inter Partes Review (“I.P.R.”) proceedings in the USPTO. See generally 35 U.S.C. §§ 311-329.In both the P.G.R. and I.P.R. proceedings, the USPTO reviews and considers challenges brought by third parties to the validity of an issued patent. These are adversarial proceedings where both the challenger and the patent owner participate and “litigate” their validity case before the USPTO. Procedurally an I.P.R. and P.G.R. are largely identical proceedings, but there are some important differences which have been highlighted in Appendix Table I below. The end result of either an I.P.R. or P.G.R. will be a final written decision by the USPTO to confirm or cancel the challenged patent claims.For a patent challenger (e.g., an accused infringer), there are some potential advantages to pursuing a P.G.R. or I.P.R. in the USPTO. However, there are also important caveats that any business considering seeking a P.G.R. or I.P.R. in the USPTO should consider.

ADVANTAGES OF I.P.R. AND P.G.R. PROCEEDINGS

A Lower Burden Of Proof

In a P.G.R. or I.P.R. proceeding, the burden of proof is by a preponderance of the evidence, which is lower than the clear and convincing evidence standard a challenger would have to meet in a lawsuit. See 35 U.S.C. §§ 316(e) and 326(e). See also Microsoft Corp. v. i4i Ltd. Partnership 564 U.S. 91 (2011).

More Technically Qualified Decision Makers

In a federal court lawsuit, either a district court judge or a jury decides a challenge to patent validity. In most cases, judges and jurors in a lawsuit do not have backgrounds or educations in science or engineering. Many federal court judges do have extensive legal experience, including sometimes with patent law. However, the average U.S. district court judge has a docket with at least several hundred civil and criminal cases pending (the vast majority of which are not patent cases), and thus limited time to devote to any particular case. For a patent trial, jurors are selected randomly from the local population’s citizens to serve involuntarily.

By contrast, with a P.G.R. or I.P.R. proceeding, a panel of at least three administrative patent judges from the Patent Trials and Appeals Board (“PTAB”) will review and consider the submitted evidence and arguments concerning the challenged patent claims being invalid. By law, an administrative patent judge of the PTAB must be of competent legal knowledge and scientific ability. See 35 U.S.C. §6. Most administrative patent judges have years of legal training and experience focused on patents, and most also have formal education and training as scientists or engineers. Furthermore, while administrative patent judges also have heavy caseloads, the only types of cases they handle are patent cases assigned to their particular technology section.

A Potentially Much Quicker Resolution

With an I.P.R. or P.G.R., absent an extension for good cause, the USPTO must issue a final written decision of the PTAB within a year of instituting the proceeding. See 35 U.S.C. §§ 316(a)(11) and 326(a)(11). By contrast, it typically takes about two years for a patent case to get to a jury trial in federal court and even longer for entry of a final judgment after trial.

Possible Savings from A Stay of Related Patent Infringement Lawsuits

The district courts have inherent power to manage their dockets and stay lawsuits before them, including the authority to order a stay pending the conclusion of a USPTO proceeding like an I.P.R. or P.G.R. See Ethicon, Inc. v. Quigg, 849 F. 2d 1422 (Fed. Cir. 1988). Indeed, courts frequently will stay a patent infringement lawsuit pending resolution by the USPTO of an instituted P.G.R. or I.P.R.

Thus, the P.G.R. and I.P.R. proceedings in the USPTO offer some significant potential advantages over a court proceeding to a third-party interested in challenging patent validity: A lower burden of proof, more technically qualified decision-makers, a quicker resolution, and a stay of expensive and burdensome patent infringement lawsuits. Nonetheless, a business considering seeking the institution of an I.P.R. or P.G.R. should be aware of some important caveats.

SOME IMPORTANT CAVEATS WITH I.P.R. and P.G.R.

High Upfront Expense

The upfront expense of preparing and filing a petition for a P.G.R. or I.P.R. in the USPTO is relatively high compared to asserting a claim or defense of patent invalidity through a lawsuit in court. The average expense for preparing and filing an I.P.R. or P.G.R. petition is more than $100,000. However, the total expense of an I.P.R. or P.G.R. proceeding averages about $500,000. While not exactly “inexpensive”, this is still substantially less than the average total expense of defending a patent infringement lawsuit: The average total expense for a patent lawsuit starts at $700,000 when there is less than $1 million at issue. However, the average total patent lawsuit expense increases into millions of dollars when the amount in dispute is higher.

It Is A Risky Investment

The USPTO does NOT grant all petitions to institute an I.P.R. or P.G.R., and its decision on the grant or denial of the petition is final and non-appealable. See 35 U.S.C. §§ 314(e) and 324(e). Much of the investment in preparing and filing a petition may still have value as leverage in settlement negotiations and court proceedings. However, if the USPTO denies the petition, the petitioner will lose at least the USPTO petition request fee of $19,000 - $20,000. In the fiscal year 2020, the USPTO only granted 56% of the petitions filed. The USPTO has issued a final written decision finding all of the challenged claims unpatentable in 62% of I.P.R. and P.G.R. proceedings it instituted: Thus, even in granted petitions, 38% of the time some of the challenged patent claims are confirmed as valid by the USPTO.

By contrast, a federal court must consider a well-plead challenge to patent validity if there is constitutional standing, personal jurisdiction, and proper venue (i.e., there is a 100% acceptance rate in such circumstances). However, according to anecdotal reports, federal court litigation challenges to patent validity are successful only about 30% of the time: If accurate, this means that approximately 70% of the time, the patent survives a court lawsuit.

The Timing Must Be Right

There are deadlines to instituting a P.G.R. or I.P.R. under the law.

For a P.G.R., which is more expensive but offers a much broader basis on which to challenge a patent’s validity than an I.P.R., a petitioner must file the petition before nine months have elapsed since the patent issued. See 35 U.S.C. §321(c).

For an I.P.R., a petitioner can only file a petition after nine months have passed since the patent issued or any instituted P.G.R. of the patent has concluded. A petitioner must also file an I.P.R. petition within one year of the petitioner or their privies being served with a lawsuit alleging infringement of the patent. See 35 U.S.C. §311(c).

The USPTO can’t institute an I.P.R. or P.G.R. if the petitioner or their privies filed a lawsuit in federal court seeking a declaratory judgment before filing the petition. See 35 U.S.C. §§315 and 325.

There Will Be Estoppel

Once there is a final written decision in an I.P.R. or P.G.R., the decision binds the petitioner and their privies in all other USPTO, federal court, and I.T.C. proceedings. More specifically, a petitioner and their privies will not be allowed in another proceeding to argue that the patent claims are invalid on any ground that the petitioner raised or reasonably could have raised during the P.G.R. or I.P.R. See 35 U.S.C. §§ 315(e) and 325(e). For this reason, it is essential that no viable grounds for challenging validity in an I.P.R. or P.G.R. be overlooked.

CONCLUSION

A business confronted with a problematic patent has some critical and time-sensitive decisions regarding bringing a challenge to the patent’s validity. If there is an actual legal controversy between a patent owner and the business, typically comprising an allegation of patent infringement, the business may challenge the patent’s validity through a lawsuit in the federal courts.

But a business should be aware that there are alternatives to a lawsuit that may be available through the USPTO, the government agency that issued the patent. Such “return to sender” proceedings can, in appropriate cases, offer advantages to a party challenging the validity of a patent, with certain essential caveats.

Whether and when to seek the institution of an I.P.R. or P.G.R. proceeding is a highly case-specific decision. It requires considering many complex factors, and a business should timely consult with a qualified registered U.S. patent attorney.