Balancing the Competing Functions of Patent Post-grant Proceedings

• Jurisdiction: United States,Federal
• Citation: Vol. 25 No. 2
• Publication year: 2018

Balancing the Competing Functions of Patent Post-Grant Proceedings

Michael Xun Liu

ARTICLE

BALANCING THE COMPETING FUNCTIONS OF PATENT POST-GRANT PROCEEDINGS

Michael Xun Liu^*

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Since the 1980s, the United States Patent and Trademark Office has amended or revoked patents through post-grant proceedings. These are quasi-judicial proceedings that are often used to resolve patent disputes. But aside from adjudicating private disputes, post-grant proceedings also aim to protect the public against invalid patents, create more certainty in patent rights, and bolster confidence in the patent system. These functions are often described as "examinational" because they rely on the PTO's ability to reexamine the validity of issued patents.

This Article explores the extent to which post-grant proceedings under the America Invents Act (AIA) perform examinational functions. Although post-grant proceedings have proven effective at adjudicating patent validity during litigation, they have been less effective at fulfilling their examinational functions. In particular, several provisions of the AIA undermine the patent office's ability to protect the public from invalid patents, while others discourage early resolution of patent validity and scope. To assess the potential benefits and drawbacks of reform, this Article also looks at the European Patent Office's experience with post-grant proceedings. Despite their problems, European proceedings have been fairly successful at screening patents and improving patent quality. As such, they may offer useful insights for the U.S. patent system.

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I. INTRODUCTION.....................................................................................................159

II. COMPETING FUNCTIONS OF POST-GRANT PROCEEDINGS........................163

A. THE EXAMINATIONAL FUNCTION...................................................................165
B. THE ADJUDICATIVE FUNCTION.........................................................................169
C. THE "HYBRID" APPROACH UNDER THE AMERICA INVENTS ACT......172

III. LIMITS OF THE EXAMINATIONAL FUNCTION UNDER THE AIA..............176

A. LACK OF INDEPENDENT EXAMINATION.....................................................179
B. ESTOPPEL EFFECTS OF AIA REVIEWS..............................................................185

IV. COMPARISON WITH THE EUROPEAN MODEL..............................................190

A. POST-GRANT PROCEEDINGS IN EUROPE......................................................192
B. LESSONS FROM OPPOSITION PROCEEDINGS...............................................195

V. CONCLUSION........................................................................................................200

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I. INTRODUCTION

During Supreme Court arguments in Oil States Energy Services v. Green's Energy Group, Chief Justice Roberts asked whether counsel believed that "[i]f you want the sweet of having a patent, you've got to take the bitter that the government might reevaluate it at some subsequent point."¹ Setting aside any constitutional problems with this logic, it seems reasonable to assume that if the Patent and Trademark Office ("PTO") decides whether to grant patents, then the agency should also correct its own mistakes by amending or revoking improperly issued patents. Nevertheless, the task of reviewing issued patents has been traditionally left to district courts, and the PTO has only been able to revoke improperly granted patents through post-grant proceedings in the past few decades.² How the PTO conducts post-grant proceedings, and whether its procedures are consistent with underlying policy goals, remains a contentious topic.

Since the America Invents Act (AIA) became law, the PTO's Patent Trial and Appeal Board (Board) has started playing a much larger role in reevaluating patents.³ Through AIA Reviews, the Board now decides validity in a significant number of patent disputes, thus taking on a task that was previously reserved almost exclusively for district courts.⁴ Viewing post-grant proceedings as only a substitute for litigation, however, overlooks important policy goals. Unlike district court litigation, post-grant proceedings should do more than adjudicate private disputes—they are also intended to protect the public from overbroad patents and promote certainty in patent rights.⁵ These functions have been described as "examinational" because they rely on the PTO's ability to reexamine the validity of issued patents.⁶ Substantively and procedurally, there are differences between an adjudicative proceeding and one that is more examinational. For example, a proceeding that protects the public from overbroad patents should give the PTO wide discretion to revoke patents that

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were improperly granted.⁷ By contrast, a proceeding that is solely adjudicative is more likely to limit PTO's role to assessing the parties' arguments, much like a district court judge or jury.⁸

Compared to pre-AIA proceedings like ex parte reexaminations, AIA Reviews are meant to be more adjudicative than examinational.⁹ Arguments are made to a panel of administrative patent judges instead of patent examiners, and the proceedings allow for limited discovery and an oral hearing.¹⁰ In other respects, however, AIA Reviews remain somewhat examinational. For example, the PTO does not give a presumption of validity for challenged claims.¹¹ And "[p]arties that initiate the proceeding need not have a concrete stake in the outcome; indeed, they may lack constitutional standing."¹² Because of these mixed characteristics, AIA Reviews are typically described as "hybrid" proceedings with both adjudicative and examinational elements.¹³

Whether AIA Reviews actually achieve the policy goals of a "hybrid" proceeding, however, remains debatable. In theory, AIA Reviews advance policy goals consistent with patent examination, such as protecting the public from overbroad claims and promoting certainty in patent rights.¹⁴ But in practice, the Board's role in AIA Reviews tends to be more limited.¹⁵ The Board does not independently evaluate validity, and relies almost exclusively on the parties' arguments.¹⁶ Although patent owners have the right to amend their claims, few succeeded in doing so within the first few years of the AIA.¹⁷ So instead of narrowing claims to keep "patent monopolies . . . within their legitimate scope,"¹⁸ the Board's decision is usually limited to affirming or invalidating challenged patents, just like district court decisions. Moreover, the majority of AIA Reviews are conducted alongside litigation involving the same patents, and the district court proceedings are often stayed pending the Board's decision.¹⁹

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Therefore, one commonly held view is that AIA Reviews essentially supplant district court validity litigation with an administrative proceeding that is more favorable to challengers.²⁰

Accordingly, the reality of AIA Reviews can seem inconsistent with its policy goals. This Article examines the source of this disconnect, and identifies two issues that undermine the examinational function of AIA Reviews. First, the Board's ability to independently evaluate patentability is limited, so it relies almost exclusively on the petitioners' arguments to revoke claims.²¹ From the standpoint of protecting the public against invalid patents, this becomes problematic if the patentee settles with the petitioner or amends the claims in a way that eliminates the risk of infringement for the petitioner. In these circumstances, the petitioner may not have any reason to argue for invalidity. This issue was partly why the PTO initially decided to require patent owners to prove the patentability of proposed amended claims in AIA Reviews.²² By doing so, the Board tried to protect the public from invalid patents by forcing patent owners to show that its new claims are patentable, since the Board cannot examine the claims itself.²³

Second, the AIA's estoppel rules discourage early resolution of patent validity. Post-grant proceedings were created in part because improperly granted patents have negative social and economic consequences even if they are not litigated.²⁴ Thus, it was important to provide a means of challenging invalid patents before they are asserted in court.²⁵ Likewise, early resolution of validity is also beneficial because that is "when patent holders have invested the least resources and the opportunity for third parties to change course in the market is

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greatest."²⁶ The AIA, however, does little to encourage early challenges to patent validity. Instead, the statute imposes broad estoppel for post-grant review ("PGR") petitions, which pushes parties to wait and challenge validity through IPR, and often only after litigation becomes imminent.²⁷ So even though an important advantage of post-grant proceedings is the ability to resolve patent rights before litigation, the reality is that most AIA Reviews are directed to patents that are being adjudicated in district court anyways.²⁸

The U.S. patent system is not alone in trying to balance competing policy visions of post-grant proceedings. Like the PTO, the European Patent Office ("EPO") also provides a "first window" to challenge the validity of recently issued patents.²⁹ Since the 1980s, third-parties in Europe could file an opposition proceeding to challenge patent validity within nine-months of issuance.³⁰ These proceedings have their own problems, including their tendency to drag on for years.³¹ Nevertheless, EPO opposition proceedings provide a useful contrast with AIA Reviews. Around five percent of all European Patents are opposed, and this procedure has become an important tool for challenging validity, particularly with respect to economically important patents.³² Although it is neither feasible nor desirable to make AIA Reviews the same as EPO oppositions, the PTO could adopt certain features like narrowing estoppel for PGR to...