By: Tova Werblowsky — Legal Intern, Unified Patents
The institution of the inter-partes review (IPR) process established in 2012 by the passing of the Leahy-Smith America Invents Act (AIA) created tremendous opportunities for post-grant challenges of weak and unused patents.[1] The frequent use of these patents as powerful legal weapons wielded by non-practicing entities in costly infringement lawsuits has resulted in clogging of the Federal court system, huge litigation costs for large and small companies, and disincentivization of technological innovation and development. The passage of the AIA eased the way for third party challenges of patents through an adversarial procedure at the USPTO’s Patent Trial and Appeals Board (PTAB), based on defects in novelty (§102) and obviousness (§103) features.[2] To initiate an IPR procedure, a third party challenger is required to show a reasonable likelihood of ability to prevail with respect to at least one claim of the patent, and is subject to denial of the challenge based on merit if this bar is not met.[3] In addition to merit-based denials, the Board can also deny requests based on purely procedural issues.[4] Congress has given the Director of the USPTO complete discretion with respect to institution or denial of an IPR petition,[5] but by regulation, the Director has delegated this authority to the Board itself to which he appoints administrative patent judges (APJs).[6] The Board then determines whether institution or denial of the petition would promote efficiency and fairness in each case, in light of its substantive merits. A recent set of precedential decisions based on the presence of parallel concurrent litigation of the same patents in the Federal District Court system NHK Spring Co. v. Intri-Plex Techs., Inc.[7] and Apple Inc. v. Fintiv, Inc. [8] discussed both the relative timing of the Federal court and PTAB case filings in addition to issue/party overlap and prior investment of the parallel court and parties among other factors. In Fintiv, a procedural hurdle was created for IPR challenges by subjecting petitioners to respond in detail to a 6-factor test upon a request by the patent owner for discretionary denial, which would allow the PTAB to determine whether pending parallel district court litigation of the patent should disqualify the challenger from a concurrent IPR.[9]
The decision by the Board is the last word with respect to the Patent Office decision- the Director has no control over the final outcome. The only recourse for a party who is dissatisfied with a final PTAB decision is to seek judicial review in the Court of Appeals for the Federal Circuit, at which point the Director is able to intervene before the court to defend or disavow the Board’s decision.[10]
The statistics since Fintiv have already shown that discretionary procedural denials of IPR review are increasing and will likely continue to do so as a result of the subjectivity of the requirements introduced by this precedent case.[11] This outcome seems to run counter to the goal of post grant review, which is to prevent the proliferation of bad patents, and thereby to discourage excessive litigation and encourage innovation.
The recent landmark Supreme Court decision, U.S. v. Arthrex, offers a new potential avenue for solution of this problem by forcing a rebalancing of power within the USPTO itself. The Arthrex case questioned the fundamental validity of the IPR process by challenging the authority of the APJs to make final decisions regarding patent validity on behalf of the Executive Branch of the government. The argument by the patent owner in Arthrex was that any Board decision is ultimately delegated directly by the President and therefore can only be made by “superior officers” of the Executive branch, who are appointed directly by the President and confirmed by the Senate, as Constitutionally required by the Appointments Clause. While the Director of the PTAB is appointed by the President with Senate approval, the APJ’s are appointed by the Secretary of Commerce, placing them in the role of “inferior officers” of the Executive Branch who therefore should not be allowed to make final, incontestable decisions. The patent owner in Arthrex argued that since APJs are inferior officers the entire structure of the IPR process is therefore inherently unconstitutional.[12] The Supreme Court majority in Arthrex held that the remedy for this status discrepancy would be to give back the power of review of all Board decisions to the Director of the USPTO, and this way “the President remains responsible for the exercise of executive power—and through him, the exercise of executive power remains accountable to the people.”[13]
The implications of the Arthrex decision for Fintiv-like procedural denials are tremendous: removing sole discretion for denial of an IPR petition from the Board and placing review power back into the hands of an appointed official means that the public—and therefore patent owners and corporations—can once again have a say in the institution of patent review through the democratic process. The subjectivity of the 6-factor Fintev test for individual cases can be mitigated by placing ultimate control back in the hands of the Director, who is not necessarily the technical expert but who can assess the overall ramifications of IPR denials in the broader political and technological landscape. By doing so, the goals of the AIA and IPR process can be better achieved, while at the same time conforming to the Constitutional aims of democratic process.
[1] https://www.uspto.gov/sites/default/files/aia_implementation/20110916-pub-l112-29.pdf
[2] https://www.uspto.gov/patents/ptab/trials/inter-partes-review.
[3] 35 U. S. C. §314(a).
[4] Id.
[5] Id.
[6] 35 U.S.C. §143.
[7] IPR2018-00752 (Paper 8) at 20 (P.T.A.B. Sept. 12, 2018)
[8] IPR2020-00019, Paper 11 (P.T.A.B. Mar. 20, 2020)
[9] Id. at 6.
[10] 35 U.S.C. § 143
[11] https://www.unifiedpatents.com/insights?offset=1625698876172
[12] U.S. v. Arthrex 594 U.S. 594 (2021
[13] United States v. Arthrex 594 U.S. 617 (2021)