Module 3: Patent Office Proceedings

Even after a patent is issued, a number of USPTO (which we’ll refer to sometimes as the Patent Office) proceedings can impact the enforceability and scope of the patent. Let’s say, for example, that Google just obtained a patent on a new smart speaker, and Amazon is concerned that Google will sue Amazon for infringement.  Amazon could pursue a Patent Office proceeding to force the Patent Trial and Appeal Board (an arm of the USPTO) to consider the validity and scope of Google’s new patent.  These proceedings are typically faster, more efficient and less expensive than district court litigation. In this module, we will look at seven types of post-issuance proceedings.

The 2011 America Invents Act provided sweeping reform of the patent system.  Among many changes, the Act added four new Patent Office proceedings that can be used to challenge issued patents -- Post-Grant Review, Inter Partes Review, Covered Business Method Patent Review and Derivation proceedings. Some commentators believe that these new avenues to challenge patents have weakened the patent system and made patents less valuable. Still, a patent that emerges from any post-issuance proceeding might be stronger than before because it received a second blessing from the Patent Office.

Among these new proceedings, Inter Partes Review is by far the most popular, constituting about 92% of such petitions.[1] In contrast, Grant Review petitions constitute only about 2%. 

Post-Grant Review

A petition for Post-Grant Review must be filed by a party other than the patent applicant, such as Amazon in our earlier example. It must be filed within nine months of the challenged patent’s issue date.[2]  Alternatively, if the filing party (Google) had made a specific charge of infringement against an Amazon product, Amazon could opt to file a District Court action seeking a declaratory judgment of invalidity of the patent.  Note that Amazon can only choose one of these two maneuvers.  If Google had first sued Amazon for infringement, Amazon could defend the action and may additionally file a petition for Post-Grant Review. 

After a Post-Grant Review petition is filed, the patent owner may file a preliminary response. The Patent Trial and Appeal Board has three months to decide whether to institute the Post-Grant Review proceeding. This decision is based on whether the petition has established that it is “more likely than not” that at least one of the challenged claims is unpatentable.[3]  Historically, Post-Grant and Inter Partes proceedings settle approximately 15% of the time after petitions are filed, are denied approximately 25% of the time and are instituted about 50% of the time.[4]

A Post-Grant Review petition can challenge one or more claims of a patent based on any ground for invalidity, including subject-matter eligibility,[5] anticipation,[6] obviousness[7] and insufficient written description.[8]

If and when a Post-Grant Review is instituted, the patent owner has the right to engage in discovery, which can include document production and depositions. This discovery is much more streamlined than in district court litigation, and it is limited to evidence directly related to a factual assertion by either party.  After a 3-month discovery period, the patent owner has the option to file a substantive response, which often includes expert witness declarations regarding the validity of the disputed claims. The patent owner can also file a motion to amend the claim or claims in response to the grounds for invalidity raised by the petition, but the amendment cannot enlarge the scope of the claims or introduce new subject matter. 

Following the patent owner’s response and any motion to amend claims, the petitioner can engage in discovery for an additional three months. Then, the petitioner may reply to the patent owner’s response.  If the patent owner filed a motion to amend, the petitioner can file an opposition. If so, the patent owner can conduct related discovery for one month and can file a reply in support of the amendment.

Oral hearings are typically scheduled a month or two following the final filing.  Just as in litigation, all parties to a Post-Grant Review can file motions to exclude evidence from the hearing.  A petitioner cannot typically raise new arguments in the hearing that were not raised in the initial petition.  At the hearing, each party has only an hour or so (set by the board) to present its case, so it is rare to present any in-person or video testimony. The hearings resemble appellate oral arguments, and the judges often interrupt attorneys’ presentations to ask questions.

The Patent Trial and Appeal Board must issue a decision within one year of the filing date. The burden of proving invalidity of a patent claim is the preponderance of the evidence.[9]  After receiving the final written decision, both parties have the right to appeal the Board’s decision to the Court of Appeals for the Federal Circuit.

Post-Grant Reviews are typically more expedient and less expensive than district court actions, but they are not cheap.  The Patent Office fee for filing a petition is (as of 2019) $16,000, and an additional fee of $22,000 is charged if Post-Grant Review is initiated.[10]  In addition, as in litigation, the legal fees associated with discovery, brief drafting and trial can be significant.  Finally, the concept of estoppel is an important consideration in determining whether to seek Post-Grant Review. Once a Post-Grant Review is instituted, the challenging party will be estopped in any subsequent district court proceeding from asserting any grounds for invalidity that it raised or reasonably could have raised during the Post-Grant Review.

Inter Partes Review

If a challenging party wants to challenge one or more claims of a patent issued more than nine months earlier, it can opt to file a petition for Inter Partes Review. Just as in Post Grant Review, an Inter Partes Review cannot be filed by a party who previously filed a declaratory judgment action in district court for invalidity of the same patent.  In addition, an Inter Partes Review petition cannot be filed more than one year after a party is sued for infringement of the challenged patent.[11]

An Inter Partes Review will be instituted if the petition shows a reasonable likelihood that the petitioner will be able to invalidate at least one of the challenged claims.  This is a somewhat easier standard to meet than the Post-Grant Review’s standard.  However, when compared with Post-Grant Review, the available grounds for invalidity are limited.  The Board can only consider prior art that is either a printed publication or another patent.[12] In addition, the only available grounds for invalidity are anticipation and obviousness. Thus, an Inter Partes Review cannot entail subject-matter eligibility considerations or insufficient written description, and many prior art products cannot be used as a basis for invalidity.

The timing and typical documents filed in an Inter Partes Review mirror those of a Post-Grant Review.  However, discovery is even more limited.  The only automatically allowed discovery involves depositions of witnesses submitting declarations or affidavits as part of the petition or response.  Parties can seek additional discovery, but they must establish that such discovery is necessary in the interest of justice.  In practice, this is a fairly difficult standard to meet.

Inter Partes Review hearings are also similar to those of Post-Grant Review, and the parties have a similar right to appeal any decision to the Federal Circuit.  Also, as in Post-Grant, estoppel applies in future proceedings to bar any grounds that were raised or reasonably could have been raised in the petition.

Overall, an Inter Partes Review is somewhat less expensive than a Post-Grant Review.  The limited grounds for invalidity, limited scope of prior art, and limited discovery typically result in a more streamlined process.  As a result, attorneys’ fees can be lower than for Post-Grant Review.  In addition, the Patent Office fees for instituting an Inter Partes Review petition are slightly lower than Post-Grant -- $15,500 for filing the petition, and another $15,000 if the proceeding is instituted (as of 2019).

Covered Business Method Review

A third Patent Office proceeding created by the America Invents Act is known as Covered Business Method Review.  As the name suggests, this proceeding only applies to patents that claim certain business methods pertaining to financial products or services. It does not pertain to any technological invention.  The Board has interpreted the “financial services” requirement broadly, even allowing review of a patent directed at a computerized method and a system to provide personalized nutrition information.

A Covered Business Method proceeding can be filed at any time after the 9-month Post-Grant Review period expires. Unlike the proceedings discussed earlier, only third parties who have been sued or specifically threatened with an infringement lawsuit can file Covered Business Method petitions. [13]

In addition to the requirements discussed earlier, a Covered Business Method proceeding will be instituted if the Board determines that it is probable that at least one claim is invalid.  The proceedings move at a similar schedule to the other proceedings, and discovery is available on for any evidence directly related to any factual assertion by either party.

The Covered Business Method review provides several advantages over an Inter Partes Review.  First, the claims can be challenged based on any ground for invalidity as in the case of the Post-Grant Review.[14]  Second, any parallel district court case is stayed until the conclusion of the Covered Business Method proceeding. Third, the estoppel impact is not as severe as in the other types of review we focused on earlier, extending only to grounds that were actually asserted in the proceeding, not grounds that reasonably could have been asserted. 

Filings for the Covered Business Method Review have been on the decline and, as of this writing, it is scheduled to be phased out in late 2020.[15]

Derivation Proceedings

The fourth type of new proceeding created by the America Invents Act is known as a Derivation Proceeding. This proceeding is a trial conducted by the Patent Trial and Appeal Board to determine two important issues:  first, whether an inventor named in an earlier application derived the claimed invention from an inventor named in the petitioner's application; and second, whether the earlier application claiming such invention was filed without authorization.[16]  The necessity for this new proceeding arose from the switch from a first-to-invent system to a first-to-file system. 

For example, suppose that the inventor of Google’s new smart speaker had actually derived the invention from someone at Amazon, but that Google filed the first application. Obviously, any such filing would not have been authorized by Amazon, and Amazon -- as the first true inventor -- should be able to block Google’s patent.  The Patent Office has a variety of potential remedies it can apply in a derivation proceeding.  The Patent Office could, for example, declare that Amazon owns Google’s patent.

An applicant subject to the first-to-file provisions may file a derivation petition only within a year of the first publication of a claim to an invention that is substantially the same as the earlier application's claim.  In addition, the derivation petition must be supported by substantial evidence that the claimed invention was derived from an inventor named in the petitioner's application.

Despite the potentially broad remedies for a derivation proceeding, the first proceeding was not instituted until more than five years after the America Invents Act was enacted. The Patent Trial and Appeal Board denies the vast majority of derivation petitions. Due to the expense of having attorneys prepare and file the petition, many inventors and companies have decided not to pursue this option.

Before derivation proceedings were an option, inventors could pursue patent interference proceedings to challenge the inventorship of another’s patent.  Interference proceedings now apply only to older patents that are not subject to the America Invents Act, and they result from the previous first-to-invent standard.  In an interference proceeding, the Patent Trial and Appeal Board determines which party actually invented the claims in the challenged patent.[17]  “First to invent” generally means the first to conceive and the first to reduce the invention to practice. However, one is also considered first to invent if one was first to conceive and one worked on the invention with reasonable diligence from a date prior to the other party’s conception. As with the other proceedings, an interference proceeding includes briefing, motions, depositions and a hearing before the Board.

Reexamination

Before Post-Grant Review and Inter Partes Review were options, an Ex Parte Reexamination was the most common method of challenging an issued patent with the Patent Office. Reexaminations remain possible even after passage of the America Invents Act.

Any person or entity, including the inventor or owner of the patent, can file a request for Ex Parte Reexamination at any point during the period of enforceability of a patent.  The Patent Office will order the reexamination if the request presents new prior art that raises a substantial new question of patentability.[18]  As with the Inter Partes Review, the prior art submitted for a reexamination is limited to patents and printed publications.

The reexamination is conducted by a panel of three experienced examiners. The patent owner has the right to submit a first response and then the proceeding is conducted largely without input from any party.

Not surprisingly, the number of Ex Parte Reexaminations dropped significantly following passage of the America Invents Act.  However, reexamination remains an attractive option in many situations. First, a reexamination can be performed on any patent, including those issued prior to the passage of the Act. Second, the patent owner can request the reexamination if, for example, he learns of new prior art.  Although this presents some risks, any patent that survives a reexamination will emerge stronger.  Third, reexaminations are substantially less expensive than the Post-Grant Review or Inter Partes Review. In addition to the relatively low filing fee, the only other expenses are attorneys’ fees for preparing the request.  Fourth, reexaminations now typically proceed more quickly than the other forms of post-grant proceedings.  Finally, reexaminations do not trigger estoppel. However, if the Patent Office sustains a patent in the face of the new prior art, it might be even more difficult to invalidate the patent in a later district court action.

Supplemental Examination

The America Invents Act created one additional avenue that can be used by patent owners to potentially strengthen their patents and possibly prepare for litigation, known as Supplemental Examination. A patent owner can request supplemental examination and ask the Patent Office to consider, reconsider or correct information that the patent owner believes is relevant.[19]  The Patent Office can initiate a supplemental examination if the request raises a substantial new question of patentability and the remainder of the process is nearly identical to reexamination.

Unlike reexamination, a supplemental examination can be based on any prior art -- not just printed publications and patents -- and it can address other potential reasons for invalidity, including subject-matter eligibility and written description.

Only patent owners can request supplemental examination, and other parties cannot participate in the process.  So why would a patent owner want to subject his patent to a second look at the patent office, possibly resulting in claims being invalidated?  There are three primary reasons.  First, as in reexamination, any claims that survive will be very strong, doubly blessed by the Patent Office.  Second, supplemental examination can give patent owners a chance to “test-drive” validity arguments prior to litigation. Third, nothing that the patent owner discloses can later be used in a district court proceeding as a basis for rendering the patent unenforceable due to inequitable conduct. 

For example, suppose that Google knew of certain material prior art but failed to disclose it when obtaining its original smart speaker patent.  If Google sued Amazon and Amazon discovered this error, the patent could be rendered unenforceable due to this inequitable conduct.  But if Google obtained a supplemental reexamination of the patent, and if one or more of the claims survived, it could sue Amazon without worrying about the failure to disclose.

In our next module, we’ll turn to patent maintenance, transfer and enforcement.