How to Lose Your Billion: The America Invents Act, Inter Partes Review and the Law of Unintended Consequences

How to Lose Your Billion: The America Invents Act, Inter Partes Review and the Law of Unintended Consequences

Dipanjan Nag, Jessica Morton

 

It is often said that two forces drive markets: greed and fear.  All of us have a fear of the unknown.  This principle allows the insurance industry to function profitably.  In light of recent Patent Reform, enacted by the America Invents Act (AIA) in 2011, a new fear has entrenched the world of business as well as technology transfer.  Under the AIA, any party may request to cancel, as unpatentable, one or more claims of a patent via a petition for Inter Partes Review (IPR).

Prior to IPR under the AIA, a party could challenge the validity of an issued patent via inter partes reexamination at the United States Patent Office (USPTO).  However, inter partes examination was slow to institute and decide, included multiple levels of appellate review, and most importantly, was relatively expensive, due to the fact that the process was prolonged and district courts were often reluctant to stay concurrent litigation.

IPR was enacted in order to be faster, less expensive and more efficient for patent validity challenges.  IPR decision time is faster, with an initial determination on institution no more than 6 months after petition.  IPR will be instituted If the petitioner establishes that there is “a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged in the request.” AIA  § 6.  This simply means that there is a reasonable likelihood that patent may be invalid due to prior art patents and/or publications presented by the petitioner.

Institution of an IPR is a meaningful event.  Since IPR was enacted in September 2012, 94% of all instituted claims were found to be unpatentable.

The intended goal of IPR was to present a faster and cheaper alternative to litigation.  However, the high invalidity rate has made a lot of professionals and businesses nervous and fearful of an IPR challenge.   Since the threat of an IPR exists outside of litigation alone, this fear is not unfounded.  For example, a petition for IPR was filed against Kyoto University against some of the university’s fundamental stem cell patents.  IPR institution against such high value patents has created what some believe to be an environment of “reverse trolling.”

Key things to know about an IPR:

  • If you have a patent of value you need to know about how IPR can invalidate your patent and significantly affect your business (yes, even if you are not a patent attorney)
  • It costs approximately $50,000 as opposed to $2M-$5M for a patent declaratory judgment lawsuit
  • Compared to a declaratory judgment, IPR gives the petitioner a faster resolution, lower costs, a higher chance of success and a lower burden to prove invalidity
  • An IPR can be filed by anyone – yes, even your competitor or someone funded by them
  • The basis of an IPR is a showing by petition that one or more claims of a patent are unpatentable on a ground that could be raised under § 102 or § 103 and only on the basis of prior art consisting of patents or printed publications.
  • The IPR process takes place entirely at the Patent and Trademarks Appeals Board (PTAB) and is appealable to the Federal Circuit
  • PTAB IPR proceedings include claim construction, depositions of declarants (expert and fact), discovery and oral hearings.

Although the intended purpose of the IPR legislation was to create an alternative to litigation and reduce the number of weak patents, it has resulted in an environment of fear for businesses and universities.  Those entities with valuable patent protection may fear IPR as a form of reverse trolling to remove their monopoly from the marketplace.

IPR_monthly