Redundant Prior Art References and Their Prejudicial Effects on Post-issuance Review Petitioners

• Publication year: 2015

Redundant Prior Art References and Their Prejudicial Effects on Post-Issuance Review Petitioners

Bob High

REDUNDANT PRIOR ART REFERENCES AND THEIR PREJUDICIAL EFFECTS ON POST-ISSUANCE REVIEW PETITIONERS

Abstract

The recent passing of the America Invents Act came with the creation of three brand new forms of post-issuance review: inter partes review, post-grant review, and covered business method patent review. Through the first three years, inter partes review has been widely utilized, while covered business method patent review has received considerable attention as well. Part of the reason for their popularity is the statutorily required one-year mandate of issuing a final decision from the date the Patent Trial and Appeal Board elects to institute proceedings. The quick adjudication and minimal discovery that goes into these proceedings makes these proceedings a cost-effective alternative to litigation for third parties.

However, the PTAB has created a procedural tool not explicitly included in either the statutes or regulations. When instituting review of one or more patent claims, the PTAB may allow the proceeding to continue based on certain grounds it deems has a reasonable likelihood of success, while also denying review on other equally favorable grounds of unpatentability, declaring these grounds redundant to those on which the PTAB grants review. In the extreme, this tool makes sense, as the PTAB could not adjudicate the proceeding within one year if it had to make determinations based on hundreds of grounds of patentability; but, the PTAB often uses this to dispose of only one or two grounds of unpatentability that would not significantly burden either the PTAB or the other parties.

The issue with this procedural tool is the costly estoppel effects it could have on the petitioner in the event of an unfavorable decision either at the PTAB or Federal Circuit level. A decision not to institute proceedings is final and non-appealable, which would apply to grounds not instituted due to redundancy. This means that if a petitioner receives an unfavorable decision at the PTAB level, the petitioner is only permitted to appeal based on the non-redundant grounds. Furthermore, if the petitioner receives an unfavorable decision on appeal, it is estopped from asserting those redundant grounds again at the PTAB level or even in concurrent or subsequent litigation.

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Because these proceedings are still in their infancy, no appeal regarding these issues has made its way through the Federal Circuit.

One solution to this problem would be for the PTAB to conditionally institute proceedings on all grounds it agrees shows a reasonable likelihood of success, have the petitioner choose what it thinks are the strongest grounds for unpatentability, and continue the proceeding based on those grounds. This would strike the correct balance between promoting efficiency and inexpensive alternatives to litigation and preserving the petitioner's rights on those grounds. Another solution would be to interpret the statute so that determinations of redundancy are appealable to the Federal Circuit, allowing the petitioner to subsequently assert those grounds of unpatentability if it can demonstrate that they are not redundant.

Introduction

With the recent adoption of the America Invents Act (AIA), Congress set out to improve the quality of the patents in the United States patent system by expanding the ways in which third parties can invalidate patents that should never have issued in the first place. For a patent to issue, the Patent and Trademark Office (PTO) examines the patent application to determine if the application relates to patentable subject matter and is useful, novel, and non-obvious.¹ The application must also adequately disclose what the invention is and contain claims sufficiently definite so that it puts the public on notice of the invention and so that it teaches a person having ordinary skill in that field how to make the invention.² These requirements are designed to promote innovation while at the same time protect information already in the public domain. However, this examination system is not adversarial in nature.³ Due to the PTO's limited time and resources to review patent applications, it is inevitable that some patent applications will issue because the examiner could not find the invalidating prior art.⁴

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To help remedy this situation, Congress created new post-issuance proceedings, held before the Patent Trial and Appeal Board (PTAB), which allow third parties to challenge the validity of a patent, even if that third party has not yet been threatened with a lawsuit.⁵ Post-grant review (PGR) and covered business method patent review (CBM review) allow a third party to challenge a patent's validity on any ground, whereas inter partes review (IPR) only allows a third party to challenge validity for novelty or non-obviousness reasons.⁶ The AIA, designed to provide a relatively quick and inexpensive alternative to litigation, limits the duration of each of these proceedings.⁷ Through the first two years, these proceedings have been widely utilized, with the results statistically favoring the petitioner thus far.⁸

In an effort to meet its one-year time limit from the date it issues proceedings, the PTAB has created a procedure that, from the perspective of petitioners, is concerning for the future. When the petitioner submits its petition, it may list multiple grounds to invalidate individual patent claims, and each of these grounds may be meritorious.⁹ When this is the case, the PTAB often trims down the material it must review in the post-issuance proceeding by instituting the proceeding based on some of the meritorious grounds but not others, declaring the latter grounds redundant.¹⁰ For the remainder of the proceeding, the redundant grounds cannot be considered.¹¹

This procedure created by the PTAB could lead to substantially unfair outcomes for the petitioner due to the estoppel that attaches in both the current and subsequent proceedings. Upon a final written decision, the challenger is precluded from raising any issues in district court litigation that it raised or could have raised in front of the PTAB.¹² As a result, a finding of redundancy leaves the challenger with only some of its grounds for unpatentability, and the PTAB never considers the challenger's "redundant" grounds.

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When taken to the extreme, the PTAB must have some way to avoid reviewing hundreds of potentially valid grounds of invalidity, or else it would have no way of meeting its one-year statutory mandate.¹³ More often, however, the PTAB uses this device to avoid deciding only one or two grounds of unpatentability.¹⁴ The minimal amount of time which the PTAB saves by declaring only one or two grounds of unpatentability redundant does not justify precluding the challenger from asserting those grounds in any subsequent proceedings, whether on appeal or in concurrent district court litigation.¹⁵ This procedure is not in line with the AIA's intended purpose of providing an inexpensive proceeding to invalidate patents that never should have issued in the first place.¹⁶

Ultimately, the PTAB must move away from this procedure. It can eliminate these potentially critical side effects while maintaining its goal of quickly resolving disputes if it simply institutes proceedings on all meritorious grounds and limits the resulting proceeding to grounds it deems non-redundant. This would preserve the petitioner's right to an appeal while making the proceeding as quick and efficient as possible. If the PTAB does not mitigate this issue, the Federal Circuit should step in and either disfavor the procedure or declare redundant grounds appealable. This Comment will (1) give a history of post-issuance proceedings and the background of the AIA; (2) explore the redundancy doctrine and its potential negative effects on third-party requesters; and (3) present proposed solutions to those problems.

I. History of Post-Issuance Proceedings and the Background of the AIA

Patent litigation has recently come to be known for its extremely high litigation costs, highlighted even more during the recent onslaught of patent assertion entity (PAE) cases. PAEs, more negatively referred to as patent

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trolls,¹⁷ generally look to acquire "vaguely worded, broadly defined patents" but never actually conduct any business related to the inventions in the patents.¹⁸ Instead, much of their income comes from threatening to sue the companies who may be infringing their patents. Typically PAEs are "more interested in negotiating a license than enforcing [their] patent rights."¹⁹ PAEs have virtually no discovery costs and their attorneys often work on contingency fee,²⁰ so there is a huge disparity in the costs of litigation between the PAEs and the accused infringers, leaving defendants little leverage for settlements.²¹ With this in mind, Congress set out to improve the pre-AIA inter partes reexamination proceedings, seeking to create inexpensive alternatives to litigation that allow accused infringers to challenge a patent's validity and possibly dispose of the dispute in a timely fashion.²² The PTO's subsequent regulations have reflected this emphasis.²³ Through the first few years of these post-issuance reviews, the reforms have been largely effective, as petitioners have been successful more often than not.²⁴

To better understand how the PTAB has developed this practice of declaring grounds of unpatentability redundant, it is first important to understand how post-issuance proceedings have developed since their creation. While initially intended to be an alternative to litigation, the post-issuance administrative proceedings available to third parties prior to the AIA had not lived up to their purpose. Ex parte reexaminations did not allow third-party participation beyond the initial filing of the petition.²⁵ While inter partes ...