Since the America Invents Act (“AIA”) established a new venue for hearing patent disputes, the Patent Trial and Appeal Board (“PTAB”), much ink has been spilled regarding the impacts of this forum on patent litigation and the overall intellectual property strategies employed by both patentees and challengers. The Promoting and Respecting Economically Vital American Innovation Leadership (“PREVAIL”) Act was recently sent to the Senate from the Committee of the Judiciary after an 11-10 vote, and it proposes regulations that could significantly change the ways that PTAB proceedings are conducted. What follows is a summary of the Act’s most substantive proposals.
The Act would implement a standing requirement for petitioners in line with what is required to bring a declaratory judgement action for invalidity in Article III courts. The Act also sets forth regulations that would estop challengers from raising arguments that were previously asserted in another PTAB proceeding or Article III court against the same patent; and challengers would no longer be able to assert invalidity against the same patent in both forums at the same time. The Act would also broaden the PTAB’s standard for determining the real parties in interest to a dispute.
In addition to new standing requirements and procedural definitions, the Act would raise the burden of proof at the PTAB to match that of an Article III court, i.e, a challenger would have the burden to prove patent invalidity by a clear and convincing standard, rather than a preponderance of the evidence.
Proponents of the PREVAIL Act argue that it is necessary to restore fairness to the PTAB by preventing multiple challengers from working together to bring separate or repeated challenges against a single patent or patent owner. Those in support of the Act also argue that it is necessary to harmonize the laws applied at the PTAB and Article III courts. Senator Coons, who introduced the bill, provided the following explanations for how the Act would solve problems with PTAB trials:
Problem: Currently, anyone can challenge a patent in the PTAB, even if they are not facing a lawsuit or the threat of a lawsuit. Multiple parties can also work together to bring separate or repeated challenges against a single patent or patent owner—including small businesses or independent innovators with limited resources.
Solution: Require standing for PTAB challengers and limit repeated petitions. The PREVAIL Act requires challengers to have been sued or threatened with a patent infringement lawsuit before filing a PTAB challenge. The bill also limits multiple PTAB challenges against the same patent by prohibiting any entity financially contributing to a PTAB challenge from bringing its own challenge.
Problem: Although a party must file a PTAB challenge within one year of being sued for infringement, a loophole allows a time-barred party to challenge patents after the PTAB filing deadline expires by joining a PTAB proceeding brought by another party.
Solution: Close the loophole. The PREVAIL Act establishes a rebuttable presumption against joinder for a time-barred party and prohibits such a party from maintaining the proceeding after the original challenger settles.
Problem: Currently, the same party can file multiple petitions against the same patent, allowing challengers to paper over weaknesses in their case and increasing costs for patent owners defending their rights.
Solution: Require a party to raise all arguments in one challenge to protect a patent owner’s right to “quiet title” over the invention. The PREVAIL Act limits serial petitions by applying estoppel at the time the challenge is filed, rather than after a PTAB final written decision.
Problem: When validity of a patent is challenged in district court, “clear and convincing” evidence is needed to invalidate the patent. But at the PTAB, a petitioner need only show invalidity by a “preponderance of the evidence” standard. Further, until recently, the PTAB interpreted patent claims under a different standard than the district court. These differences often lead to inconsistent results between the two tribunals.
Solution: Harmonize PTAB claim interpretation and burden of proof with federal district court. The PREVAIL Act requires the PTAB to find a patent invalid by “clear and convincing” evidence and requires the PTAB to interpret claims using the same “plain and ordinary meaning” standard used in federal district court.
Problem: Some aspects of PTAB proceedings lack transparency. For example, no rules prevent the Director from meddling in a PTAB panel’s decision.
Solution: Increase transparency. The PREVAIL Act requires the USPTO Director to issue separate written opinions when rehearing PTAB decisions to increase transparency and reduce concerns that the Director unfairly influences PTAB decisions. The bill also prohibits the Director from influencing PTAB panel decisions and requires the Director to establish a code of conduct for PTAB judges.
Problem: Currently, at least 85% of PTAB proceedings have a co-pending proceeding in another forum, like federal district court. Challengers get several bites at the apple by raising the same or similar validity challenges at the PTAB and the other forum.
Solution: End duplicative patent challenges. The PREVAIL Act requires a party to choose between making its validity challenges before the PTAB or in another forum, such as federal court. The bill also requires a party that is already involved in a separate proceeding to agree not to pursue the claims in their PTAB petition in that court, or any other forum.
Problem: Often, another forum, such as a federal district court, reviews a challenger’s validity challenge to a patent and enters a final judgment on validity before the PTAB completes its review. Instituting or maintaining a PTAB proceeding after the district court already has decided validity is duplicative, inefficient, and may lead to inconsistent decisions between both tribunals.
Solution: Prioritize prior patent validity decisions. The PREVAIL Act requires the PTAB to deny a petition or dismiss a proceeding if another forum—such as a federal court—has already upheld the validity of the patent at issue.
Problem: A PTAB challenge or a reexamination request often will assert the same prior art or arguments that the USPTO already considered during another Office proceeding. Multiple proceedings asserting the same prior art and arguments are costly and inefficient.
Solution: Limit duplicative challenges to a patent within the USPTO. The PREVAIL Act requires the USPTO to reject a PTAB challenge or a request to reexamine a patent where the challenge or request includes arguments that were previously considered by the USPTO, absent exceptional circumstances.
Problem: Since 2010, approximately $409.8 million in user fees have been diverted from the USPTO.
Solution: Eliminate fee diversion. The PREVAIL Act ends the practice of diverting fees collected by the USPTO to other unrelated federal agencies and programs by establishing a new revolving fund in the U.S. Treasury to ensure the USPTO has the funding necessary for timely and quality examination.
Problem: Small businesses do not always have the resources they need to navigate the patent system.
Solution: Support innovative small businesses. The PREVAIL Act supports small businesses by requiring the Small Business Administration to draft two reports examining the impact of patents and abusive demand letters on small businesses. The bill also expands access to patent-searching databases currently available only in-person at public search facilities.
Critics of the PREVAIL Act are concerned that it would tilt the balance too far in favor of patentees, potentially undermining the goals of the patent system to promote innovation and fair competition. Among many others, critics are concerned about the impact the Act’s standing provisions would have on individuals who currently have the right to challenge patents at the PTAB (e.g., non-practicing entities), but may lose that ability under the Act’s more restrictive criteria, potentially limiting access to this important mechanism for addressing questionable patents. Others argue that the Act would raise consumer drug prices by making it harder for patient advocacy groups and generics manufacturers to increase competition by challenging wrongfully issued drug patents. Further, critics argue that by restricting access to PTAB proceedings, the Act could reduce the number of challenges brought against questionable patents, allowing invalid patents to remain unaddressed and creating barriers to competition. In addition, critics contend that the provisions could shift patent litigation to federal courts, where proceedings are often more costly and time-consuming than PTAB reviews, which could disproportionately burden smaller businesses and startups with fewer resources. Also, while the PTAB has been touted as a tool in combating abusive practices by “patent trolls” by providing a relatively efficient and cost-effective means of invalidating overly broad or weak patents, critics argue that limiting access to the PTAB could embolden these entities to assert low-quality patents more aggressively. Overall, critics believe the Act would erode the effectiveness of the PTAB, increase litigation costs, and shift the balance of the patent system in a way that harms competition and innovation. They argue that reforms should focus on improving patent quality and accessibility rather than limiting the avenues for challenging questionable patents
In sum, the PREVAIL Act would change how patent challengers and patent owners proceed before the PTAB. We will continue to monitor and report on the Act as it moves through the Senate. In the meanwhile, potential challengers and patent owners should assess their litigation strategies and planned timing in light of potentially significant changes in PTAB trials.
Sources:
https://www.congress.gov/bill/118th-congress/senate-bill/2220/text