Yestrday, BIO 2014 presented a session entitled "Navigating Patent Challenges Under the America Invents Act" during which the presenters analyzed the differences between patent challenges in Federal District Court and before the Patent Trial and Appeals Board ("PTAB"). The panelists that discussed this issue were Judge Dana Sabraw of the U.S. District Court for the Southern District of California; Lead Administrative Patent Judge Michael Tierney of the PTAB, Trial Section; and Cliff Ford, Executive Director and Senior Patent Counsel at Isis Pharmaceuticals, Inc. Meaghan Kent of Venable LLP moderated the event.
Ms. Kent began by providing some interesting statistics. As of June 18, 2014, there have been 1,542 Inter Partes Review ("IPR") petitions filed, and of those, 87 related to biotechnology and pharmaceutical patents. Even though this only represents 6% of the total, it is much more than anyone expected when the America Invents Act ("AIA") was passed. In addition, the statistics suggest that IPRs are becoming more popular every month. IPR petitions make up about 88% of all post-grant patent challenges, while the Transitional Program for Covered Business Method Patents ("CBM") constitutes about 12%. There have been no Post-Grant Review ("PGR") petitions to date, most likely due to the fact that they are only available to patents issuing from applications filed since March 16, 2013.
Judge Tierney then provided an overview of the IPR and PGR proceedings. As readers of this blog are likely aware, IPR petitions can only include challenges under 35 U.S.C. §§ 102 and 103, and be based only on patents, published applications, and printed publications. The legal standard for institution is a "reasonable likelihood" that the petitioner would prevail with respect to at least one of the claims. As Judge Tierney explained, if the decision maker is on the fence (50%), the case should be instituted. This is in contrast to the standard for PGR, which is "more likely than not" that at least one claim is unpatentable. This is a higher threshold, because if the decision maker is on the fence (50%), the proceeding should not be instituted. Instead, it is a greater than 50% standard. In addition, unlike IPRs, PGR challenges can be based on 35 U.S.C. §§ 101, 102, 103, and 112 (except for best mode), and the 102 and 103 references are not as limited as for IPRs. Judge Tierney noted that PGR might prove valuable for challenging biotechnology patents because of the section 112 issues that they can present.
Judge Tierney than answered a series of questions from the audience. One participant inquired whether the denial of a PGR petition would estop a challenger from filing an IPR. The simple answer was that if the review was not instituted, there would be no final written decision, and therefore estoppel would not apply. The next question dealt with whether the PTAB has ever proceeded to a hearing despite a settlement agreement by the parties. Judge Tierney explained that such a circumstance is rare, but it has happened in at least one CBM review in which the parties settled on the eve of the hearing. Interestingly, because of the settlement agreement, when the case went forward, the petitioner did not participate. Therefore, only the patent holder was present at the hearing. There was question whether the Board has every handled section 112 issues in IPR proceedings. Even though it is very rare, it has come up in the context of claim construction. For example, Judge Tierney described a case in which a district court had already determined that the claims did not satisfy 35 U.S.C. § 112, ¶ 6 because of a lack of structure in the specification. Even though that court's determination was not binding on the PTAB because of the different standards used by the two institutions, the PTAB also found it could not construe the claims, and therefore could not apply it to the prior art. Finally, someone asked if the Myriad guidelines would be controlling on the PTAB. Judge Tierney explained that the guidelines were just interpretations of case law, so they might be persuasive, but they would not be binding. Whereas those in attendance appeared to approve of this answer, it is unclear if it will be any solution to the problem. After all, eligibility challenges are not permitted in IPRs.
Judge Tierney next outlined the IPR proceeding. With regard to whether a patent owner should file a response before institution, he explained that there were reasons for either strategy. For example, if the patent owner didn't want to tip his hand, he might not want to file a response. On the other hand, if there were serious holes in a petitioners challenge, it might be beneficial to point this out to the Board. Judge Tierney also explained that the institution was on a claim by claim basis and that the PTAB was not required to institute the proceedings based on all ground found in the petition. Part of the reason is because of the short timeframe to resolution – one year. Someone in the audience asked whether there would be estoppel to the grounds not instituted. Judge Tierney admitted that this has not come up yet, but that it would probably be dealt with on a case-by-case basis. Judge Sabraw, however, indicated that district courts would probably apply the estoppel because the entire point of the IPRs is to streamline litigation, and therefore estoppel will likely be liberally applied. A discussion about whether the PTAB was a "death squad" followed. Judge Tierney stated that he believed that, even though initially the PTAB appeared pro-petitioner, things were getting better for the patent owner. For example, IPRs are being instituted less, and the patent owners are winning more often – 8 final written decisions have now left the patent unscathed.
The topic then switched to pending legislation. Judge Sabraw was asked about the 60-70% pass rate to grant motions to stay. He pointed out that in his approximately 10 years on the bench, these new proceedings are a "game changer." In determining whether the institute a stay, Judge Sabraw explained that district courts previously looked to three factors; whether it will streamline the issues in the case, the status of the case, and the prejudice to the parties. In the case of IPRs, he indicated that the streamlining factor was neutral, and required a prediction of whether the PTAB would alter the patent. As for the status of the case, Judge Sabraw pointed out that it was important to bring the petition early. If there has been no claim construction and minimal discovery, the chance of a stay would be significantly higher. With regard to the impact on the non-moving party, he pointed out that in the case of non-practicing entities ("NPEs"), there would generally be no real prejudice. Finally, Judge Sabraw explained that the AIA required a fourth factor when considering a stay – whether the stay will reduce the burden of litigation. This is always "yes," according to the judge, because the litigants will not need to proceed in two forums, and it will decrease the resources required by the district courts. On the subject of stays, Mr. Ford explained that defendants will almost always want a stay, because all of the focus for the next year will be on the validity of the patent, and not on infringement. He did, however, admit that there were cases in which the defendant might not want a stay, such as when inventorship was an issue, so that the notebooks of the patent owner might be desired, or when the accused infringer has deep pockets and wants to keep the pressure on the patent owner.
When asked which forum is better, Judge Sabraw acknowledged that the courts could improve, but that there were already signs that they were. For example, his court in San Diego strives to complete trial in 18 months. This includes streamlining discovery to avoid the proverbial "David and Goliath" effect. Also, the introduction of the patent pilot program and the proliferation of local patent rules were cited as a positive step by the judge. In response to the same question, Judge Tierney explained that the PTAB was meant to be an alternative to litigation. Even though the reports are currently only anecdotal, he believes that IPRs must be cheaper than litigation, and they certainly are timelier. Mr. Ford hypothesized that the accused infringer would almost always prefer the PTAB. This is because the preponderance standard is much easier to meet, and the use of the broadest reasonable interpretation for claim construction is advantageous. However, there are times where presenting the issues to a jury might be advantageous over the patent judges. The only real concern is the estoppel concern, but as Mr. Ford pointed out, it a petitioner loses at the PTAB, they were likely going to have lost at the district court also.
In making the case for who is better suited to review the validity of a patent, Judge Tierney pointed to the patent judges years of experience reviewing patents, which makes them well suited to make these determinations. Judge Sabraw acknowledged that district court judges were not specialists, but that they bring their own skills to bear on the issue. For example, even though trials may be longer and more expensive, both sides have an adequate opportunity to make their case. Also, federal judges are able to use the skills that they have obtained hearing the various cases that they do. Finally, when asked whether these new post-grant review proceedings were good for patents, Mr. Ford pointed out that they were meant to troll-busting provisions, and so they have been successful. However, it was the high tech sector that wanted these procedures, but the problem is that the biotech and pharmaceutical community is stuck with them now also.
