Return To Sender: Litigating Patent Validity At The USPTO
David M. Kleiman – U.S. Patent Attorney

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.

APPENDIX TABLE I


A comparison of I.P.R. and P.G.R. proceedings is shown in the table below. The significant differences are highlighted in yellow.

Post Grant Review (P.G.R.) Inter Partes Review (I.P.R.)
A Petition That Requests the USPTO To Institute A Proceeding Must Be Filed:
  • Before 9 months have elapsed since patent issued; AND
  • Before the petitioner, real party in interest, or their privy files any civil action in court challenging the validity of the patent.
  • After 9 months have elapsed since the patent issued;
  • Before the petitioner, real party in interest, or their privy files any civil action in court challenging the validity of the patent; AND
  • Within one year of the petitioner, real party in interest, or their privy being served with any complaint for infringing the patent.
Grounds for Filing the Petition All grounds and evidence that could be asserted to render a patent invalid. Grounds are limited to an alleged lack of novelty and nonobviousness over patents and printed publications.
USPTO Fees That Must Be Paid When Petition Is Filed At Least $47,500 (may be more depending on number challenged patent claims) At Least $41,500 (may be more depending on number challenged patent claims)
Deadline for Patent Owner to File Optional Preliminary Response Arguing Against Instituting Proceeding 3 Months from Petition Filing Date 3 Months from Petition Filing Date
USPTO Standard for Granting Petition to Institute Proceeding. The petition, if unrebutted, demonstrates that it is more likely than not that at least one of the patent claims challenged in the petition is unpatentable; or the petition raises a novel or unsettled legal question that is important to other patents or patent applications. The petition supporting the ground would demonstrate that there is a reasonable likelihood that at least one of the patent claims challenged in the petition is unpatentable.
Date for USPTO Decision on Whether to Grant Petition and Institute Proceeding Within 3 months of patent owner preliminary response, or if no preliminary response is received 3 months from petition filing date. Within 3 months of patent owner preliminary response, or if no preliminary response is received 3 months from petition filing date.
Is the USPTO Decision to Institute or Not Appealable? No. No.
Are USPTO Fees Refundable If the Petition to Institute A Proceeding Is Denied? If the petition is denied, then the petitioner may request a refund from the USPTO of the post-institution fee ($27,500) that was paid. If the petition is denied, then the petitioner may request a refund from the USPTO of the post-institution fee ($22,500) that was paid.
Once the proceeding is instituted who will decide the case? A panel of at least three administrative patent judges from the USPTO Patent Trial and Appeal Board (“Board”). A panel of at least three administrative patent judges from the USPTO Patent Trial and Appeal Board (“Board”).
Due Date for Patent Owner to File an Optional Opposition to The Validity Challenges Set Forth in Petition. By default, any patent owner opposition is due three months after the date the PGR is instituted. By default, any patent owner opposition is due three months after the date the IPR is instituted.
Does The Patent Owner Have The Ability to Cancel, Amend or Substitute Challenged Claims? Yes, by motion filed no later than the Patent Owner Opposition and after conferring with the Board. No new matter is allowed, and no enlarged scope of claims is allowed. Yes, by motion filed no later than the Patent Owner Opposition and after conferring with the Board. No new matter is allowed, and no enlarged scope of claims is allowed.
Is Discovery Available? Yes. Generally, the same types of discovery that are available under the Federal Rules of Civil Procedure. Yes. Generally, the same types of discovery that are available under the Federal Rules of Civil Procedure.
Is There A Hearing? Each party to a PGR, if they request it, will be afforded an opportunity to present their case orally before at least three members of the Board. Otherwise, the Board will decide the case on the written record before it of the proceeding (e.g., the petition, patent owner responses, filed documentary evidence, and the filed testimony of expert and fact witnesses submitted through declarations and deposition testimony transcripts). If there is an oral hearing, it will usually be at the USPTO in Alexandria, Virginia. Generally, no new evidence or arguments may be introduced at the oral hearing, and an hour of argument per side is provided at the hearing. Each party to an IPR, if they request it, will be afforded an opportunity to present their case orally before at least three members of the Board. Otherwise, the Board will decide the case on the written record of the proceeding (e.g., the petition, the patent owner responses, filed documentary evidence, and the filed testimony of expert and fact witnesses submitted through declarations and deposition testimony transcripts). If there is an oral hearing, it will usually be at the USPTO in Alexandria, Virginia. Generally, no new evidence or arguments may be introduced at the oral hearing, and an hour of argument per side is provided at the hearing.
When Will The USPTO Make A Decision? Unless the case is settled or dismissed beforehand, the Board will enter a final written decision not more than one year from the date a PGR is instituted. This may be extended by up to six months for good cause. The Board will also issue a PGR certificate that will either cancel or affirm the original patent claims and add any new or amended claims. Unless the case is settled or dismissed beforehand, the Board will enter a final written decision not more than one year from the date a IPR is instituted. This may be extended by up to six months for good cause. The Board will also issue an IPR certificate that will either cancel or affirm the original patent claims and add any new or amended claims.
May the Decision of the Board Be Appealed? Yes. Any party has the right to appeal an adverse ruling in the Board’s final written decision to the Federal Circuit appeals court. Yes. Any party has the right to appeal an adverse ruling in the Board’s final written decision to the Federal Circuit appeals court.
What Is The Estoppel Effect? To prevent re-litigation, PGR is subject to a strong estoppel provision. Specifically, if the PGR proceeds to a final Board decision, the petitioner is estopped from bringing a subsequent request based on any grounds that were, or could have been, raised during the first review. Further, PGR has an estoppel effect. The petitioner cannot raise any ground in any court, patent office, or ITC action that the petitioner raised, or reasonably could have raised, during that PGR. To prevent re-litigation, an IPR is subject to a strong estoppel provision. Specifically, if the IPR proceeds to a final Board decision, the petitioner is estopped from bringing a subsequent request based on any grounds that were, or could have been, raised during the first review. Further, IPR has an estoppel effect. The petitioner cannot raise any ground in any court, patent office, or ITC action that the petitioner raised, or reasonably could have raised, during that IPR.
Are There Intervening Rights? The doctrine of intervening rights applies to claims that have been modified or substituted during a PGR. Specifically, no person can be held liable for, or enjoined from, performing an act commenced by them prior to the issuance of an amended or new claim in a PGR certificate and which act is an infringement of the amended or new claim, unless such act would have been an infringement of a valid claim present in the patent prior to issuance of the PGR certificate. The doctrine of intervening rights applies to claims that have been modified or substituted during an IPR. Specifically, no person can be held liable for, or enjoined from, performing an act commenced by them prior to the issuance of an amended or new claim in an IPR certificate and which act is an infringement of the amended or new claim, unless such act would have been an infringement of a valid claim present in the patent prior to issuance of the IPR certificate.
2021-08-02T13:08:24-07:00January 22nd, 2021|