Patent Procedure & The Continuing Importance of Forum - A Report from the APLI:SV, Part 2

By TAP Guest Blogger

Posted on January 4, 2016


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This is the second report in a 7-part series from The 16th Annual Advanced Patent Law Institute: Silicon Valley.

The report is written by Kevin Hickey, Microsoft Research Fellow, Berkeley Center for Law & Technology at Berkeley Law School.

 

From the Northern District of California to the Eastern District of Texas, from the ITC to the PTAB, it has long been a truism that the choice of forum has a tremendous impact in patent litigation. Several panels at the Advanced Patent Law Institute: Silicon Valley (APLI:SV) highlighted recent developments in how the forum affects the procedures, substantive standards, and the ultimate relief available to patent litigants.

 

The most notable development in this area is the increasing use of the Patent Trial and Appeal Board (PTAB) as a forum for patent disputes. A panel led by Sean DeBruine, Eric Lamison, David O’Brien, and Terry Rea addressed current trends in PTAB proceedings, common questions about the different PTAB actions, and new Federal Circuit caselaw defining the scope of judicial review of PTAB decisions.

 

The 2011 America Invents Act provides a number of different procedures by which third parties can challenge patents before the PTAB in a streamlined administrative process. This “alphabet soup” of actions includes inter partes review (IPR), post-grant review (PGR), and covered business method (CBM) review. Each of these actions differs in scope, the timing to bring a challenge, the available grounds for invalidity, and the standard for judicial estoppel. Slide 8 of the panel's presentation provides a terrific summary of the key differences. For example, the CBM procedure is generally very favorable to challengers, so patent defendants are strongly advised to pursue that route if the patent at issue relates to “financial products or services.”

 

As the panel explained, proceedings before the PTAB offer several advantages to patent challengers relative to district court litigation. The typical timeline for resolution of a case is only 18 months, patents are not granted a presumption of validity, and the decision maker is a panel of 3 administrative judges instead of a jury. Moreover, litigants can often—though not always—obtain a stay of related litigation pending the resolution of a PTAB action. As a result, the PTAB has surpassed the ITC to rank as the second most common forum for patent disputes, trailing only traditional district court litigation.

 

The empirical data presented suggests that IPR is, far and away, the most important of the new PTAB procedures. Of over 4000 petitions filed, 90% are IPRs, with 10% being CBMs and a trivial number (13 in total) being PGRs. Unsurprisingly, the subject matter of IPRs is heavily slanted toward the technical fields rendered suspect by the Alice decision: 63% are in the electrical/computer area, and 23% relate to business methods or mechanical inventions. (See slides 10–12 for all the details.)

 

The challenger-friendly nature of IPRs has given rise to a perception that the PTAB is a patent “death panel.” The evidence presented by the panel showed mixed evidence for this view. On the one hand, 86% of the final IPR decisions at PTAB resulted in the invalidation of at least one challenged claim, and fully 72% of the decisions find all of the challenged claims invalid. However, these numbers suffer from several important selection effects. Only 43% of challenges to claims are “instituted” by the PTAB (i.e., deemed worthy of a trial and decision), patent defendants likely pick the weakest claims to challenge, and many cases settle before a final PTAB decision. All that said, however, once a challenge is instituted at the PTAB, the odds are not very good for the patentee. And the chances on appeal are not any better—the Federal Circuit has so far applied a deferential standard of review, such that most PTAB decisions are summarily affirmed.

 

In the district courts, the most important recent procedural development is the new pleading standards for patent complaints. A session led by Michael Hendershot, Richard Hung, and Christian E. Mammen discussed the impact of these changes, with a particular focus on the elimination of Form 18 from the Federal Rules of Civil Procedure. Effective December 1, 2015, this “bare bones” form for patent complaints—which did not require much detail beyond naming the asserted patents—was eliminated in favor of the more stringent “plausibility” standard established by the Supreme Court in Twombly and Iqbal.

 

What precisely do Twombly and Iqbal require in the patent context? Must the patentee, for example, specifically identify all the patent claims asserted, all the accused products, and/or include an element-by-element infringement analysis in the complaint? Will representative claims or products suffice? This is the big question, and the panel’s conclusion was that no one will know for sure until courts begin ruling on how much detail is required under the new standard. For now, the safest practice for plaintiffs is to adhere to the specific (and fairly demanding) requirements set out in the Innovation Act (H.R. 9) or the PATENT Act (S. 1137), even though this proposed legislation has not yet been enacted into law. There is similar uncertainty as to whether the plausibility standard will also apply to affirmative defenses pleaded in the defendant’s answer.

 

What is clear is that, as a practical matter, patent litigators see these new standards as critically important. This is evinced by the huge spike in “last minute” patent complaints in late November 2015—fully 202 complaints were filed just on November 30, the day before the new rules went into effect. (Slide 22 of the pleadings presentation shows this dramatic spike.) Presumably, these filings were motivated by a hope to obtain the benefit of the older, less stringent pleading requirements. However, the panel noted that circuit precedent suggests that the new rules may apply retroactively to these last minute filings anyway. All of these questions will be litigated in multiple fora in the coming years, and conflicting answers are likely in different jurisdictions. As a result, the panel emphasized that forum selection will remain as important as ever.

 

In particular, several panelists noted the uniquely plaintiff-friendly aspects of litigation in one important jurisdiction: the Eastern District of Texas. Judges in that district are perceived to be less likely to grant motions to dismiss based on the Alice decision and less likely to grant stays of litigation pending the result of a related IPR, for example. Not coincidentally, almost all of the last minute complaints were filed in this one jurisdiction, which now accounts for fully 45% of new patent cases in the federal district courts. (See slide 21.) The Eastern District of Texas thus offers a particularly stark example of the continuing importance of forum and procedure in patent litigation.

 

Related Resources

Sean DeBruine, Eric Lamison, David O’Brien, and Terry Rea – The Rise of the PTAB: Hot Topics and Strategies
Michael Hendershot, Richard Hung, and Christian E. Mammen - Drafting and Attacking Pleadings Under the New Standards

 

Read more on the Advanced Patent Law Institute: Silicon Valley

 

This conference summary was written by Kevin Hickey. Mr. Hickey is the Microsoft Research Fellow, Berkeley Center for Law & Technology at Berkeley Law School.

 


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