Congress should preserve the IPR process

As Congress debates the latest patent reform legislation, some are proposing changes to Patent Trial and Appeal Board (PTAB) practice that may undermine one of the success stories from the 2011 patent reform law.

The changes seem motivated by the perception that the PTAB’s cancellation rate is either too high or that the Board has been hijacked by hedge funds for personal gain.  But the forces behind this latest push for “reform” (many of whom have financial interests in the outcome) may just want a poison pill aimed at preventing passage of the legislation. I believe amending or changing these new proceedings should be based on accurate data, rather than fear and anecdote.

{mosads}The proposed changes take aim at the popular post-grant review proceedings before the PTAB, in particular inter partes review (IPR).  These reviews, patent quality improvement measures passed into law as part of the America Invents Act, increase patent quality and reduce expensive litigation. An IPR allows petitioners to challenge patents before the PTAB, a technically trained board of judges.  

The PTAB has proved popular. Filing for an IPR costs tens of thousands of dollars in fees. Though hardly cheap, these processes are far less expensive than litigating patent cases in court. A patent litigation typically costs $1.3 to $1.75 million for a small to medium company, not including the cost of any appeal, damages, or settlements. 

While winning in court may invalidate low-quality patents, trials often last more than three years. The PTAB averages six months to decide if it will hold a trial. If it opts to review the patent, the trial typically takes one year, far faster than almost all district courts.  And many of these cases have settled, likely for far less than they would have settled in district court. 

Due to its speed, efficiency, and technical bent, the PTAB has proved a popular alternative to litigation for many Fortune 500 businesses, such as Ford, Microsoft, TRW Automotive, Medtronic, Intel, Google, Gillette, and Samsung, which have collectively filed thousands of petitions.  

Opponents now suggest that IPRs are ‘out of control’ and might be canceling valid patents. But the data show, if anything, how judiciously the PTAB is being used.  To date, the PTAB has been asked to review less than one tenth of one percent of all issued patents, most subject to related litigation. More telling, of the approximately 13,000 patents asserted in District Court since creation of the PTAB, only about 12 percent have been before the PTAB, demonstrating careful selection (i.e., only bringing IPR where prior art and solid arguments against validity exist). Given this selection bias, one would expect rather high invalidity rates at the PTAB.  Instead: 

• Where trial is granted and the case does not settle, 25 percent of claims are found valid;
• When including claims denied institution, more than 60 percent of challenged claims are unaffected; 
• Claims related to the high tech and bio/chem/pharma sectors are even more likely to be unaffected.

This suggests that the PTAB is weeding out patent claims that should have never been granted while protecting and strengthening patents of merit.

The critics’ argument that IPR has been frequently abused simply doesn’t add up. Action before the PTAB, while more cost-efficient than the courts, is still neither cheap nor easy. Challenging a patent before the PTAB costs hundreds of thousands (and occasionally millions) of dollars, and lasts approximately eighteen months. Petitioners are barred from making the same or similar arguments later if they lose.  The PTAB offers a worthwhile alternative because it takes these cases out of federal court, and puts the patent before technically trained judges. 

Improving patent quality requires protecting innovation. It is the reason that Congress passed America Invents Act, and why Congress is considering further patent litigation reform. The IPR process allows the office to review information that has come to light post-grant or was missed during the initial application process.

The IPR process continues to improve patent quality by removing some patent claims that should have never issued. The number of denied petitions, patentable claims, and settlements proves the PTAB is doing its job methodically. IPR is working. It is protecting businesses from costly assertions of likely invalid patents. 

Jakel is the founder and CEO of Unified Patents, which is a member-based organization that seeks to mitigate the risk and cost of patent troll litigation by protecting broad areas of technology.