PTAB: no longer a death squad

Once accused of being a patent killer, the Patent Trial and Appeal Board (PTAB) has faced its fair share of criticism.

Blasted as “a death squad” for patents by Randall Rader, the former chief judge of the US Court of Appeals for the Federal Circuit, statistics now suggest that the landscape has changed.

In September 2011 then President Barack Obama passed the America Invents Act (AIA) into law, introducing new procedures for challenging patent validity at the US Patent and Trademark Office.

The following September, the inter partes review (IPR) became available, allowing any person to challenge a patent before a panel of administrative judges at the PTAB.

Is the PTAB still a patent killer? Has it ever truly been one?

"The worst offence, he says, is the failure of the expert or lawyer to explain why the expert reached their conclusion—which essentially destroys credibility and makes a declaration worthless."

Scott Kamholz, of counsel at Covington & Burling and a former PTAB judge, doesn’t think so. The PTAB has never been “out to get” patents, he says, adding that his deliberations with other judges were always focused exclusively on the merits of each case.

Kamholz believes that even Rader, the author of the “unhappy phrase”, has stepped back from it.

“We understood at every step of the proceeding that it was the petitioner’s case and that they must prove their allegations. We didn’t hesitate to order the cancellation of patent claims that a preponderance of the evidence proved to be unpatentable,” he says.

Kamholz explains that petitioners were never given the benefit of the doubt.

He does add, however, that a few cases were vacated on appeal because of an inappropriate shift of burden to the patent owner, although they are isolated examples.

“On the other hand, from a practitioner’s point of view, the PTAB is still weighted towards the party opposed to the patent, although it’s become a lot more reasonable over time,” says Thomas Kohler, director at Downs Rachlin Martin, who adds that looking solely at the statistics today, the PTAB may look like a defendant-favoured forum, but it’s certainly not a patent killer.

The statistics seem to back this up—the case institution rate has fallen from 87% in fiscal year 2013 to 64% so far in fiscal year 2017. Since September 2016 up until the end of February, 4,345 IPR petitions were filed, and just 989 of the trials found that all instituted claims were unpatentable (23% of total petitions), while 234 trials found some claims to be unpatentable (5%).

“I wouldn’t say it’s become easy for patentees to win IPR cases, but it’s become possible,” explains Kohler.

This is the result of several factors. It’s partly a predictable trend, because IPRs originally targeted vulnerable patents, he says.

Kamholz adds that the earliest petitioners might not have been willing to risk an unknown proceeding against “anything other than the very lowest-quality patents”.

These patents are now out of the system, with Kohler explaining that it’s now reaching a more stable state, having cleaned out the “bottom tier of patents”, with only patents that are legitimately disputable remaining.

“It’s also possible that the existence of these reviews may be discouraging patent owners from asserting their ‘iffy’ patents, while emboldening petitioners to use the IPR even when they perceive a borderline likelihood of success because of low costs and potential benefits,” explains the former judge.

What is reasonable?

Kamholz believes that the judges’ perceptions of what constitutes “a reasonable likelihood of success”, the standard for instituting review, may have evolved.

Peter Chen, also a partner at Covington & Burling and a former PTAB judge, adds that more patent owners are filing preliminary responses which are generally more detailed and substantive than in the first couple years of the AIA.

What has yet to be seen is the impact of decisions such as Alice v CLS Bank and Mayo v Prometheus on patents being written with these rulings on patent-eligible subject matter in mind.

There are ways to write a patent to largely avoid problems with Alice and USC 35, section 101 in terms of how you present the claims and the detail you add to the specification, explains Kohler.

Over time, Kohler expects greater success for patentees in that area, because they will have learned their lessons surrounding drafting.

In terms of covered business method (CBM) reviews, numbers continue to dwindle, making it difficult to identify any underlying trends.

CBM reviews expire in September 2020, and Kamholz says he wouldn’t be surprised if Congress allows the measure to expire, rather than renewing it.

Kohler estimates that within the next two years, the number of CBM petitions coming in will diminish to less than one per month on average.

One development that may affect these reviews is the Federal Circuit decision in Unwired Planet v Google, which could cause a chilling effect on CBM petitions, adds Chen.

In Unwired Planet the court substantially limited the definition of qualifying CBM patents, saying that the board’s interpretation had rendered the limits Congress placed on the definition as “superfluous”.

“So while Unwired may be critical for some individual patent owners, I don’t see it having a huge impact overall on PTAB proceedings in the future,” explains Kohler.

Times are changing

It’s tempting to ask whether the trial procedures have changed that much over the past few years.

Not according to Kamholz, who believes they’ve changed “remarkably little”, mainly because of the nucleus of judges tasked with handling AIA cases (initially about 20 in total) taking considerable pains at the beginning to work closely together and compare notes.

“I remember discussing all sorts of issues in those meetings, such as how we were going to interpret certain rules, basic policies we were going to adopt in interpreting statutes, how to structure hearings, how to handle interlocutory matters, and many other things,” he says.

The judges in the nucleus became the managers of a wider circle of judges as the AIA team was expanded to meet the demand, meaning that a diverse group of around 100 judges learned how to work harmoniously and consistently together.

For Kamholz, the only risk he foresees is that AIA judges have now become stratified by technology, with a small group of judges handling biopharma, while another group handles electronics.

He warns that there is some risk of these groups diverging, but the board has the same stratification in the appeals jurisdiction, and he’s never sensed a divergence of procedure.

In 2016, the PTAB rules were amended, mostly to codify certain preferred practices.

This includes, according to Kamholz, construing expiring claims in a narrower manner than a district court would and switching from page limits to word count limits.

The word count change has “ensnared some counsel who have attempted to manipulate the rule by various means”, but this has not escaped the board’s notice and “immediate admonishments”, says Chen.

He was on the task force that helped draft the rule changes, helping to formulate the board’s positions and presentations for its 2015 “roadshows” and 2016 “stadium tours”, and regularly advising the chief judge on how to improve board operations.

The change considered most significant at the time—to permit patent owners to submit new testimonial evidence with the preliminary response—has in large part fizzled out, according to Kamholz.

He explains that cases with preliminary response declarations are instituted at the same rate as cases without them.

Although Chen agrees with Kamholz generally, he explains that there are exceptions.

In one of his last panels at the board earlier this year, Chen found the testimony of a patent owner’s declaration to be “highly persuasive” and denied institution as a result.

Aside from the updated rules, one potentially significant change to procedure could occur in the upcoming decision from the Federal Circuit in the case In re Aqua Products, concerning a patent owner’s ability to amend claims during trial.

An eye for detail

How can parties improve their chances at the PTAB? One sure-fire way is to pay far closer attention to ensuring that their experts explain the basis for their conclusions.

“Many (and I mean very many) expert declarations read like a brief rewritten in the first person and appended with a perjury warning,” says Kamholz.

During his time as a judge, he often questioned whether the expert did anything more than read over the brief and sign, which of course damages credibility.

The worst offence, he says, is the failure of the expert or lawyer to explain why the expert reached their conclusion—which essentially destroys credibility and makes a declaration worthless.

Although it may come as a surprise to lawyers accustomed to district court litigation, PTAB judges view experts as “guides through the jungle of prior art”.

Despite all PTAB judges having a science or engineering degree, they hesitate to substitute their judgment for an expert’s, explains Kamholz.

“If the expert doesn’t explain his or her basis for saying why something is so, the judges will not try to figure it out. They will just give the expert’s testimony little or no weight and move on.”

Petitioners and patent owners can do a lot better in that department, he concludes.

Chen focuses more broadly, saying that in many AIA trials, claim construction is a dispositive issue.

“Parties should carefully analyse whether and how to propose constructions for key terms in the challenged claims,” he explains.

The parties should also supply relevant evidence—Chen says that in most of the trials he’s presided over, the parties spent hours deposing each other’s declarants, yet “very often those hundreds of pages of testimony resulted in nothing worth citing to the board”.

Chen makes it clear that whether you are a patent owner or petitioner, it’s vital not to “sandbag” the board with late arguments or evidence, running the risk of exclusion at trial or reversal by the Federal Circuit.