Death to All Patents? Really? Why Inter Partes Review Shouldn’t Be Controversial

By Matt Levy on November 6, 2015

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I’ll be speaking on November 17, 2015 at IAM’s Patent Law and Policy event. (It looks to be a really interesting day.) My panel has the provocative title, Death to all patents! The realities of the USPTO’s review procedures, which expresses a point of view I hear all too often.

It amazes me that a procedure like inter partes review has become so controversial, with the Patent Trial and Appeals Board being called a “patent death squad” and people talking about patent “kill rates.” The argument typically goes something like this: a high percentage of patent claims are invalidated in inter partes review (the exact percentage claimed varies), therefore the PTAB is killing patents.

While I don’t think that the evidence supports the 70% or 80% “kill rate,” the invalidation rate alone doesn’t say much about the job the PTAB is doing. Let’s look at two possible explanations:

Explanation 1:

The entire procedure is stacked against patent owners. There’s no presumption of validity and a challenger only has to prove that a patent claim is more likely than not to be invalid. Moreover, claim construction is broader than in district court, which makes it easier to invalidate claims. Plus, Administrative Patent Judges seem to have a bias against patents; it may be an unconscious bias, but it’s there. If IPR is a substitute for district court, we should get the same result either way.

Explanation 2:

Petitioners have a strong motivation to be selective about which patents to petition for review. Inter partes review may be cheaper than district court, but it isn’t cheap. Between PTO fees and legal fees, a single IPR can easily cost over $100K. Plus, failing in an IPR is very costly: 1) no court is likely to invalidate a patent if the PTO didn’t even institute an IPR; and, 2) if the PTO institutes an IPR and affirms the challenged claims, the petitioners are estopped from challenging them again, anywhere. Given the cost of being wrong, we shouldn’t be surprised that petitioners are choosing which patents to challenge fairly well.

The people who buy into some variant of the first explanation are generally the ones complaining about patent death squads. Certainly, it’s true that the PTAB uses a broader claim construction and a lower burden of proving invalidity than a district court.

But the second explanation I’ve offered is far simpler, and I think it’s more likely. Why do I think that?

First, if the PTAB was issuing consistently bad decisions, we’d expect to see a decent number of them reversed by the Federal Circuit. Nearly every PTAB IPR decision has been affirmed.

Second, even though the standards may be different from district court, there’s an important safeguard against poor decisions: there are three Administrative Patent Judges on every panel. Each judge is an experienced practitioner, and the PTAB tries to have at least one judge with relevant technical expertise on the panel. Three people on a panel means that it’s less likely that a decision will be way off. In a district court, the single judge generally has no technical expertise and the jury doesn’t either. If you read PTAB decisions in IPRs, you’ll find that they’re typically very thorough and well-reasoned, much better reasoned than district court opinions.

I understand that patent owners are upset at having the playing field leveled somewhat. They must feel like the rules of the game have changed, and, to be fair, they have to some extent. But a patent is not real property and it’s not an entitlement. It’s a temporary grant of exclusivity by the government in exchange for sharing one’s invention with the public, assuming that the invention is novel and non-obvious. If it turns out that the original patent issuance was wrong, i.e., someone else came up with the invention first, you have to give up that grant.

It’s no consolation to a patent owner whose patent has just been invalidated, but this is the right policy. We don’t want people enforcing invalid patents. IPRs are helping prevent that.

Patents are a crucial part of our economy, for both startups and existing companies. Members of my own organization, the Computer & Communications Industry Association, received over 4.5% of all patents issued in 2014. This isn’t about killing all patents; it’s about making sure we’re careful about which patents are out there.

As I’ll be talking about at my panel, I think that overall the PTAB is doing its job well. I hope you’ll come and hear what promises to be an interesting discussion.