EFFECT OF THE REGULATORY ACCOUNTABILITY ACT OF 2017 ON INTER PARTES REVIEW: A LOOK AT TELEBRANDS CORP. V. TINNUS ENTERS. LLC.

AuthorPanek, Ashley E.
Position2016 Patent Trial and Appeal Board decision

INTRODUCTION

Josh Malone, a devoted and hardworking father, was looking for a means to entertain his children on the weekends. (1) Loving water balloon fights as a child, Josh thought his children would share in his childhood nostalgia, however Josh despised the process of filing each balloon with water. (2) Whenever Josh found a few minutes of free time, he contemplated creation of a machine to fill multiple water balloons at once. (3) Subsequently developing a prototype designed to fill 100 water balloons quickly, he sought and obtained patent protection for his invention. (4)

Becoming the fastest selling spring and summer toy for children had its downsides, as others quickly infringed his patent, developing almost identical and cheaper versions of his invention. (3) Those other companies soon brought suit against Josh to challenge the validity of his granted patent through post-grant proceedings (such as, inter partes reviews, covered business method challenges, derivation proceedings, and post-grant reviews), akin to adjudicatory hearings, in an attempt to avoid any liability for patent infringement. (6) Unfortunately, the federal agency of the United States Patent and Trademark Office (hereinafter "USPTO") that granted Josh a patent later found his patent invalid, showcasing a lack of definiteness and consistency in the organizations' assessment of patentable subject matter. (7)

Created by statute, (8) the administrative panel of the Patent Trial and Appeal Board (hereinafter "PTAB") is tasked as the last line of defense at the USPTO to determine the validity of granted patents via trials, appeals, and interferences, as well as post-grant proceedings. (9) Since a patent does not conform to Schrodinger's paradox (10) and cannot be both valid and invalid at the same time, (11) confusion arises when a patent's validity is upheld by a court and is then later invalidated at the PTAB. A recent study shows that out of 220 patents upheld as valid in court and also subject to a final written decision at the PTAB, the PTAB only agreed with the court's ruling on fifty-two occasions--indicating a 76% error rate by the PTAB. (12) Blatant errors (13) and inconsistent rulings (14) have forced parties to invoke their statutory right (15) to seek judicial review by the United States Court of Appeals for the Federal Circuit (hereinafter "Court of Appeals"). The need to oversee the decision-making authority of the PTAB has never been clearer, and this Note proffers that this can be met through passage of the Regulatory Accountability Act of 2017 (hereinafter "Regulatory Accountability Act"). (16)

Specifically, Part I of this Note discusses the historical foundation of the United States patent law system and Part II discusses the varying levels of deference and differing patentability standards of review between the district court, the Court of Appeals, and the PTAB. Part III discusses one specific instance of an inconsistent ruling by the PTAB in Telebrands Corp., u. Tinnus Enters., LLC. Moreover, Part IV discusses the PTAB's vanishing deference in response to the proposed legislation of the Regulatory Accountability Act and the effects the Act will have, specifically in relation to the Tinnus case and post-grant proceedings.

  1. HISTORICAL FOUNDATION OF THE U.S. PATENT LAW SYSTEM

    Federal recognition of intellectual property rights in the United States began with the adoption of the United States Constitution on September 17, 1787, with Article I, Section 8 providing that, "[t]he Congress shall have Power... [t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (17) Since this adoption, the patent system in the United States has been a vehicle used to encourage competition and innovation, in exchange for granting inventors a limited duration monopoly to exclude others from "making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States." (18)

    A significant change to the United States patent system came with the United States Patent Act of 1952, which sought to, "foster[] innovation and competition primarily through examining patent applications and determining which inventions warrant the grant of a patent." (19) However, the federal circuit continuously refused to grant deference to the USPTO's interpretations of the Patent Act, and as such, this Act showcased the lack of "robust substantive rule-making authority" of the USPTO. (20) Therefore, it is not surprising that the USPTO has been previously regarded as a "weak administrative agency." (21)

    1. Federal Leahy-Smith America Invents Act

    The most significant change to the United States patent law system since the Patent Act came with the creation of the America Invents Act (hereinafter "AIA") in 2012. (22) First and foremost, the AIA expanded the USPTO's power and reshaped the United States patent litigation landscape. The AIA additionally changed the way in which patent applications are examined and the number and scope of post-grant challenges available to test the validity of an issued patent. (23) Moreover, the AIA extinguished the main judicial body at the USPTO, the Board of Patent Appeals and Interferences (hereinafter as "BPAI"), with the creation of the PTAB on September 16, 2012. (24)

    1. Post-Grant Proceedings

    Between September 16, 2012, and August 7, 2014, 1,793 post-grant proceedings were instituted to question the validity of granted patents, and of those challenges, 1,585 were inter partes reviews, 201 were covered business method challenges, six were derivation proceedings, and one was a post-grant review. (25) Both trial proceedings conducted by the PTAB, post-grant review and inter partes review replaced inter partes reexamination on September 16, 2012. (26) Though post-grant review and inter partes review differ with respect to several aspects, (27) both proceedings result in a "final written decision with respect to the patentability of any [challenged] patent claim." (28)

    A challenger may petition for the institution of an inter partes review within nine months of the issuance of a patent to review one or more claims on a patentability ground raiseable under 35 U.S.C. [section][section] 102 or 103 on the basis of prior art (e.g., printed publications or patents). (29) The USPTO will institute this proceeding if the USPTO Director determines that the challengers' petition meets the threshold "show[ing] that there is a reasonable likelihood that the [challenger] w[ill] prevail with respect to at least [one] of the claims challenged." (30)

    Alternatively, the scope of post-grant review is broader than inter partes review, as a post-grant review challenge may be sought on any ground challenging the validity of one or more claims in an issued patent (except for failure to disclose the best mode). (31) For a post-grant review, bases to challenge the validity of an issued patent include: (a) other patents; (b) printed publications; (c) evidence of prior public use; (d) evidence of prior on-sale activity; and/or (e) other prior public disclosures. (32) A post-grant review proceeding will be commenced if the USPTO Director determines the challengers' petition reaches the threshold "that it is more likely than not that at least one of the claims challenged" will be found to be invalid. (33)

  2. DISTINCTIONS AMONG THE COURTS

    With the available post-grant proceedings in mind, one must next assess the varying levels of deference afforded and the differing patentability standards of review between the district court, the Court of Appeals, and the PTAB. (34) These levels of deference and differing patentability standards of review lead to confusion for parties bringing claims, where parties are often unsure of: (a) what court is bound by the decisions of another, (b) how the party may utilize these patentability differences to shape an outcome favorable to the party, and (c) what procedural ramifications occur due to these differences. A firm grasp of these concepts will be an imperative tool to use during the assessment of alleged violations at the PTAB.

    1. Deference Afforded

      1. Chevron (35) Deference

        As the patent system has maintained a strained relationship with administrative law, courts have traditionally been held responsible for defining and expressing patent policy. (36) Though courts generally fail to apply deferential regimes to the USPTO, a groundbreaking and influential analytical and deferential framework was derived from Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc. (31) In Chevron, the Court developed a test governing judicial review of agency interpretations. (38) Under the Chevron test, the court must first determine if Congress has answered a specific question at issue. (39) If Congress has done so and if there is no ambiguity in the Congressional intent of that decision, the court and agency must follow that intent. (40) If the specific question remains unanswered by Congress, the interpretive power shifts to the agency, where the agency may provide a reasonable interpretation of that statue and the court must defer to that interpretation. (41) Essentially, Chevron's "reasonableness" standard creates a framework for appellate court review.

        Though Chevron deference may remedy executive agency overreach, this review is not free from fault, as it additionally raises constitutional separation of powers concerns. (42) In a famous concurrence, Supreme Court Justice Neil Gorsuch, while sitting on the Tenth Circuit, condemned this doctrine and heralded it as, "a judge-made doctrine for the abdication of the judicial duty," as the second step in the Chevron test explains that, "an executive agency [must be allowed] to resolve the meaning of any ambiguous statutory provision," which is especially troubling when judicial deference to agency...

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