Inter Partes Review and Inter Partes Reexamination: More Than Just a Name Change

On September 16, 2012, Inter Partes Review (IPR) replaced Inter Partes Reexamination (IPX) as an avenue for third party patentability challenges in the United States Patent and Trademark Office (PTO).[1] Arising from the 2011 Leahy-Smith America Invents Act (AIA), this change has transformed inter partes challenges “from an examinational to an adjudicative proceeding.”[2] In other words, the old “prosecution-like” IPX practice has given way to a streamlined “mini-trial” IPR process that could provide cost and time benefits to challengers and patentees alike. As IPR just passes its one year anniversary, this article aims to compare IPR with the old IPX process, provide an update of the most recent case law, and offer relevant IPR practice tips.

Comparing Inter Partes Review (IPR) and Inter Partes Reexamination (IPX)

Both the old IPX and the new IPR processes serve the same primary function – providing a mechanism for a third party to petition the PTO to institute a review proceeding of an issued patent in an effort to establish invalidity based on anticipation and/or obviousness.[3] Like the old IPX system, the IPR system does not allow a petitioner to challenge the patent on the basis of 35 USC §§101 or 112.

Both IPR and IPX bar parties from instituting a review of patents they have already challenged in a prior reexamination proceeding or in litigation. However, IPR also bars real parties in interest or privies of the petitioner who file more than one year after being served with a complaint alleging patent infringement.[4] Furthermore, while an IPX could be requested “at any time,” potential IPR petitioners must now wait to file their petitions either: a) nine months after the grant or reissue of a patent; or b) after the termination of post-grant review, whichever occurs later.[5]^,[6]

The most important difference between the old IPX and the new IPR is the how the PTO performs its patent validity review function. In the old IPX process, requests were adjudged by a patent examiner (other than the original examiner) in the same art unit involved in the initial prosecution.[7] If an IPX request was granted, the granting examiner usually conducted the formal reexamination.[8] In contrast, IPR petitions and patentability questions are weighed by a panel that includes three technically-trained Administrative Patent Judges from the newly-formed Patent Trial and Appeal Board (“PTAB”).[9] Further unique to IPR, in response to a petition to initiate a review proceeding, the patent owner may file an optional preliminary response to provide reasons why an IPR should not be instituted.[10] Generally, when determining whether a petition should be granted, the PTAB uses a standard of “a reasonable likelihood that the petitioner would prevail as to at least one of the claims challenged.”[11] This standard is not substantially different from that used by the examiner in evaluating a petition under the prior IPX system. PTAB decisions regarding whether to institute a trial are final and nonappealable.[12]

After March 19, 2013, the fee for filing an IPR petition was lowered to $9,000 plus $200 for each challenged claim over 20 claims.[13] If a petition is granted, the post-institution fee is $14,000 plus $400 for each claim reviewed over 15.[14] In contrast, IPX request fees were $8,800 with no fees after grant of the IPX request.

Another key difference between the prior IPX process and the current IPR process is that the IPR process is designed to be a true adversarial process. While the old IPX process allowed for the parties to submit declarations in support of their positions, the opposing party could not test the veracity of those declarations. In contrast, once instituted, the formal IPR proceeding includes an important new provision for discovery, which may include mandatory initial disclosures, document production, and deposition testimony.[15] Additionally, either party may file supplemental information within one month of the IPR being instituted.[16] The patent owner may file a response and claim amendments after the institution of an IPR, typically within 3 months.[17] IPR proceedings may also include an oral argument.[18] In contrast, oral argument was previously available to parties in an IPX proceeding only on appeal to the Board of Patent Appeals and Interferences after a final determination by the examiner in the reexamination.

Yet another important difference between the IPX and IPR processes is the length of time between filing of the petition requesting initiation of the review and a final resolution of that review. While the IPX process was handled “with special dispatch” by the Patent Office, it still took an average of three years to reach a final decision that could be appealed to the Court of Appeals for the Federal Circuit. This time period was due to the fact that the IPX process was essentially a two stage process, with the first stage being handled by the examining core and the second stage being the appeal to the Board. By eliminating the first stage of the process and establishing statutory deadlines, the total IPR process should take approximately eighteen months from filing of the petition to a final appealable determination.

At a Glance: Old IPX v. New IPR

Some IPR Statistics

Through July 31, 2013, 403 IPR petitions had been filed with the PTAB, 126 trials had been instituted, and no final decisions have been made.[19] The PTO statistics indicate that the PTAB instituted trials in 83.4% of the petitions it had addressed (126 trials instituted, 25 trials not instituted), which is somewhat lower than the rate at which the PTO had historically granted inter partes reexaminations (~90%). In July 2013, the last month of published data prior to this article, the PTAB dramatically increased the number of petitions it denied.[20] Going forward, it will be interesting to note whether the Board will continue its increased rejection rate.

PTO statistics indicate that electrical/computer technology patents make up the majority (some 70.7%) of all AIA petitions (of which IPR petitions comprise 90.6%).[21] Mechanical (11.7%), Chemical (9.8%), Bio/Pharma (7.3%), and Design patents (0.5%) made up the remainder of AIA petitions.[22]

IPR Decisions from the Patent Trial and Appeal Board

Since no final decisions have been issued by the PTAB, most published opinions have dealt with whether IPR petitions should be granted. The PTAB looks closely at both the claims at issue as well as the prior art to determine whether to grant IPR petitions. While the vast majority of petitions have been granted, the PTAB denied at least one petition where the petitioner failed to demonstrate a “reasonable likelihood that it would prevail with respect to at least one of the claims challenged in the petition.”[23]

Under the old IPX system, once a reexamination was initiated by the PTO, neither the third party initiator nor the patentee could stop the process. In contrast, the IPR process allows for the parties to jointly terminate the proceedings. This ability for the parties to jointly terminate when they have reached a settlement has already been utilized in some of these initial IPR proceedings.[24]

Federal Court Case Law Related to IPR

At this early stage, district courts have dealt with issues related to IPR proceedings relatively few times. However, issues of jurisdiction, judicial deference, and motions to stay have appeared in the case law regarding IPR thus far.

At least one court has found lack of jurisdiction to review a PTAB decision that granted an IPR proceeding.[25] In addition, at least one claim construction ruling has been made by a district court after a PTAB decision to grant IPR.[26] In Continental Auto, the district court gave the PTAB’s decision to grant IPR apparent weight when it concluded that the patentee actually disavowed a particular time-shifting method important to the infringement contentions. [27]

District courts have also dealt with IPR when considering motions to stay in related patent litigations. When considering a stay, most courts apply a three-factor test that considers: 1) the stage of the litigation proceeding; 2) whether issues in question will be simplified; and 3) whether the nonmoving party would be unduly prejudiced or accrue a clear tactical disadvantage. Some courts seem to be generous with granting stays when an IPR is pending, or in some cases even before an IPR petition has been granted by the PTO.[28] Other courts have denied stays pending IPR despite finding that issues would be simplified in an IPR proceeding.[29] In at least one case, a court denied a motion to stay at least until the PTO decided to initiate an IPR proceeding, at which time the court may consider a new motion to stay.[30]

IPR Practice Tips

While the facts and circumstances of each case may vary, patent owners facing a pending IPR petition should almost certainly file a preliminary response if for no other reason than to set forth its strongest arguments why the PTAB should not grant the petition.[31] Specifically, in a preliminary response, patent owners could raise issues of timeliness and standing. For example, parties are precluded from filing a petition if the party had been served with a complaint alleging infringement more than one year previously.[32] Further, petitioners could be precluded from filing petitions that do not raise new grounds for reconsideration (e.g. grounds that had not been explored in patent prosecution). Although PTO data indicates that patent owners have waived a preliminary response on 37 occasions (out of a possible 437 petitions), it is hard to imagine a good reason to waive an opportunity to short-circuit the IPR process at an early stage.

Because of the fast timing of IPR proceedings, a petitioner would be well-advised to prepare for discovery as much as possible ahead of filing their petition. This includes both the discovery that they anticipate requesting from the patent owner as well as the discovery that they anticipate to that the patent owner will request from them. In contrast, for a patent owner who is enforcing his/her patent against a potential infringer (particularly in the electronic/computer arts area), preparation for an IPR filing should become a standard part of pre-litigation preparation.

Conclusion

Inter partes patent disputes have been changed remarkably by the new IPR provisions in the America Invents Act. Specifically, the new attributes of IPR include a panel of technically-trained judges, discovery, oral hearings, tight timeframes, and relatively low fees. These elements combine to make IPR an attractive route for parties hoping to mount patent challenges. The same factors could lead petitioners and patentees alike to forego or stay costly district court litigations in favor of speedier PTAB adjudications. Such PTAB rulings may prove determinative with regards to claim construction at the district court level and may lead to accelerated settlements.

Aaron V. Gin, a 2013 summer associate with MBHB, co-authored this article.

© 2013 McDonnell Boehnen Hulbert & Berghoff LLP

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