The Patent Trial and Appeal Board’s (PTAB) inter partes review institution rate has dropped every year since the launch of IPRs, and so far in 2019, is at 54%, as compared to above 80% in 2013, the first full year of the Board’s modern set-up. See https://portal.unifiedpatents.com/ptab/annual-report?year=2019.

Analyzing the data shows a significant portion is attributable to the PTAB’s increase in procedural denials. Indeed, the percentage of procedural denials as a percentage of all decisions has almost doubled from 2016 (5.2%) to 2019 (11.8%). A closer examination of all those denials shows that most of that rise is due to the Board exercising their discretion under 35 U.S.C. § 314(a).

Figure 2 - § 314(a) Denials by Year Total

The PTAB’s has rapidly expanded the exercise of its institution discretion under 35 U.S.C. § 314(a) (and to a lesser extent, § 325(d)) in just the past two years. Using a raft of precedential opinions—like Gen. Plastic Indus. Co., LTD. v. Canon Kabushinki Kaisha, Becton, Dickinson & Co. v. B. Braun Melsungen AG, and NHK Spring Co., Ltd. v. Intri-Plex Techs., Inc.—and agency edicts, the Board has implemented binding rules, the upshot of which dramatically limits the petitions the agency will institute.

The Board has now denied institution of hundreds of petitions without looking to the merits for scheduled copending trial dates and ITC actions (even when those dates are later moved or cancelled) (NHK Spring), has drastically curtailed the number of grounds and pages parties can bring together at the outset (Comcast v. Rovi), has denied petitions for not explaining a delay (General Plastic), and has prevented defendants from challenging patents themselves once unrelated parties have had their say (various Uniloc cases). It does not do so in every case; but careful analysis of their institution decisions of the past three years reveals that even as the number of PTAB filings has fallen and the institution rate has dropped to 54% this year, discretionary denials as a percentage of institution denials has risen dramatically, and are on pace to almost double again this year.

Importantly, these newfound requirements almost exclusively impact petitioners. Panels rarely consider the nature of the patent owner in their calculations, and often are critical of petitioners who do not spend pages defending the agency-imposed policy rationales governing filings.

Consider the Board’s precedential decision in NHK Spring Co., Ltd. v. Intri-Plex Techs., Inc. Under that decision, the agency will deny petitions where there is an impending trial date scheduled, citing conservation of resources. (Interestingly, even in the underlying litigation, the trial date there was moved, a frequent occurrence.) Note that this favors litigants who file first in districts with aggressive time-to-trial that are unlikely to stay cases in light of IPRs—like the Western District of Texas, which schedules Markman hearings six months after a case management conference, with trials roughly 18 month after the conference. It also encourages gamesmanship in terms of when parties file, on which patents they file, and where, in effect funneling cases to the Western’s docket; it’s no shock, then, that 80% of the explosion of filings in that jurisdiction are brought by NPEs—where they are on pace to see 600 complaints filed this year.

The rise in these new discretionary doctrines has meant that in 2019, the Board denied roughly 11.8% of all institutions regardless of merit—up from 9.1% in 2018 and just 5.3% in 2017—closing the doors of the agency to many legitimate challenges and allowing potentially questionable patents to drive extortionate settlements based on the costs of discovery in a favorable forum. Unified has identified hundreds of denials under § 314, § 325, and other procedural means of denying review, and that number is rising. Our analysis is preliminary, but reveals that the Board has increasingly relied on its discretion to deny petitioners for policy reasons at the get-go.

The following chart compares the rise in discretionary denials (under § 314 and otherwise) with the overall drop in institution decisions (almost half of which end up denied):

Figure 3 - Procedural Denials vs All Decisions

Per the numbers, over the life of the Board, it has denied institution on 8.6% of all petitions to date for purely procedural reasons—including denials of joinder, § 314, § 325, and other procedural requirements.

Of all denials over the entire life of the Board, roughly 5% of all denials have been over § 314(a), and 5% have been over § 325(d); but the number of § 314(a) denials has exploded since 2018, particularly as a percentage of the (falling) filing numbers and institution rates.

Figures 5 and 6 - § 314(a) and § 325(a) Denials

In 2016, by the most conservative count, just 5 petitions were denied under the Board’s § 314(a) authority; in 2017, it was 15; by 2018, it was 45; and in 2019, it was 75. It is set to be more than double that in 2020.

What this makes clear is that the multiple precedential Board orders focusing only on the behavior of the petitioner have had a clear and serious impact on filings—one would assume as they were intended to—and have lowered the overall institution rate as well as the denied otherwise meritorious petitions fair consideration before the agency. Conversely, the agency generally will not consider the nature of the patent owner—for instance, as a serial filer or a non practicing entity—when considering whether review is warranted, though they could.

Unified Patents’ Portal now tracks § 314 and § 325 denials to show the impact of these denials at the PTAB.

Unified Patents is launching a monthly Insight Webinar to discuss activity at the PTAB and Litigation. The first will be discussing these findings further on May 28, 2020, in a webinar titled, “Recent PTAB Discretionary Denials Rulings - Changes to § 314 and § 325.” Jonathan Stroud, Chief IP Counsel at Unified Patents, along with Mark Taylor, Assistant General Counsel at Microsoft, and Joshua Stern, Partner at WilmerHale, will discuss the recent changes to § 314 and § 325, focusing on General Plastics, NHK Spring, and data and practice tips around them. The group will also discuss the possibility of the future APA challenges to the de facto rules. Finally, they will look at the factors in the patent owner’s behavior that the Broad is free to consider, and will recommend changes. For more information or registration, please click here.