The difference is
knowledge

Texas Lawbook: Is PTAB a Patent Death Squad?

Posted on October 5, 2016

© 2016 The Texas Lawbook.
By Jeff Bounds
 
(July 22) – Some labels stick far beyond the point where they’re accurate. Such is the case with the Patent Trial and Appeal Board, or PTAB. The U.S. Patent and Trademark Office launched PTAB almost four years ago as an alternative to litigating the validity of patents.
Within a little more of than a year, PTAB got branded with a label. Randall Rader, then the Chief Judge of U.S. Court of Appeals for the Federal Circuit, foisted the term “death squads” onto the three-member panels of administrative patent judges who decide patents’ fates.
While Rader’s stamp has stuck on PTAB, numbers from legal analytics provider Lex Machina suggest that the truth is more gray than black and white.
 
Only about 14 percent of the 5,236 petitions-plus PTAB has fielded since its inception have resulted in written decisions invalidating all claims on a patent, Lex Machina data show. (Claims define what owner of the patent has the right to exclude others from making, using or selling, according to Brown & Michaels.)
 
By contrast, PTAB judges have declined to hold trials on about 15 percent of all petitions, decisions that effectively killed those 793 challenges in the cradle.
PTAB allows trials only when its judges believe the petition has a “reasonable likelihood of prevailing” on its challenge to at least one of the patent’s claim – a fairly strong filter, attorneys say.
 
“Recent studies show only a miniscule number of patents have been affected by the PTAB,” said William Munck, managing partner at Munck Wilson Mandala in Dallas.
 
Down the Rabbit Hole
In a similar vein, it’s difficult to draw sweeping conclusions about the impact at PTAB of a 2014 ruling from the U.S. Supreme Court that some believe has made it easier to kill software-based patents.
 
The Justices’ decision in Alice vs. CLS Bank said patents are not valid if they cover the implementation of an “abstract idea” on a “general interest computer.” Section 101 of the U.S. Patent Act prevents patents from covering abstract ideas, although neither the Supreme Court nor legislators have ever defined what an “abstract idea” is in the patent arena.
 
To be sure, Lex Machina data suggest Alice appears to have prompted a spike in PTAB petitions seeking to invalidate patent claims on section 101 grounds.
 
In 2013, PTAB’s first full calendar year of operation, 65 petitions were filed seeking invalidation of one or more claims on a patent, Lex Machina data show. That number nearly doubled, to 116, in 2014, the year Alice came out, and flattened out at 113 in 2015.
 
The problem comes in assessing how Alice has impacted PTAB judges’ views of each patent’s validity.
 
Since Alice came out on June 19, 2014, PTAB judges have issued 72 decisions based on section 101 challenges, Lex Machina data show. In 68 of those cases, they held all claims in a patent to be invalid.
 
However, before Alice surfaced, PTAB judges issued only three decisions based on section 101 challenges. All three of those decisions invalidated all claims in a patent.
 
“There are so few pre-Alice decisions that a meaningful comparison is tough,” said Brian Howard, legal data scientist at Lex Machina.
 
To make things murkier, the rate at which PTAB judges have launched trial proceedings on a section 101-based petition has fallen slightly since Alice.
 
They instituted trials on 88 percent of section 101 challenges pre-Alice (44 trials on 50 petitions). Since Alice, that rate has dropped to 80 percent (118 out of 147 petitions.)
 
Howard believes this difference in the rates may not be large enough to be significant. The rate at which PTAB has launched section 101-based trials may have fallen after Alice “because petitioners were greedy after the Justices’ ruling and filed more 101 challenges on marginal claims,” he said.
 
“Alternatively, it could be that most of the egregious patents were put into PTAB in the earlier period, and thus only ones of better quality were left for later.”
 
Lousy Patents Help Bring About PTAB
PTAB’s genesis stemmed from concerns about the U.S. Patent and Trademark Office issuing poor-quality patents, lawyers say.
 
A 2011 law, the Leahy-Smith America Invents Act, or AIA, created the agency. An arm of the USPTO, PTAB offers an ostensibly better, faster and cheaper way to challenge patents’ validity. (The USPTO’s recently opened Dallas office includes PTAB functions.)
 
“The dot-com era generated a watershed of business method patents that were insufficiently developed, poorly crafted and confusing,” said David McCombs, the Dallas-based firm-wide chair of Haynes and Boone’s technology practice. “The AIA created the PTAB in large part to address this problem.
A key benefit of PTAB is that the three-judge panels are made up of experts in the technical field that the patent covers. In courts, patents’ fates hinge on judges and juries, most of whom lack technical training.
 
The “death squad” moniker notwithstanding, lawyers who work with PTAB say they haven’t seen any evidence that the agency’s judges are biased.
 
“I have found PTAB judges to be extremely knowledgeable about the subject matter of the proceedings, and quick to ask tough questions to both sides during the oral argument,” said Daniel Moffett, San Antonio-based senior counsel at Akin Gump Strauss Hauer & Feld.
 
Moffett added that patent owners do face an “uphill climb in PTAB proceedings. “But I believe this is due to the PTAB’s standards of review and claim construction, not any bias on the part of the judges.”
 
In the bigger scheme of things, lawyers say, the root cause of the problem is the low quality patents that the USPTO has issued at times.
The agency’s director, Michelle Lee, has been working to attack this problem, McCombs said. For instance, the USPTO has issued guidelines to its examiners to address how section 101 affects the eligibility of a patent application in the wake of Alice.
 
“These guidelines are now beginning to pay off, and produce better patents for stakeholders in the software industry,” McCombs said.
 
Ultimately, Munck said, everyone with a stake in the system must do more to get the quality of America’s patents up to snuff.
 
“The real solution is a greater investment in the patent application and prosecution process, both in the public and private sectors,” he said.
 
© 2016 The Texas La