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The America Invents Act, which was signed into law on Sept. 16, 2011, made the most significant changes to United States patent law in decades. For example, on March 16, 2013, the AIA will transform the U.S. patent system from a “first-to-invent” system to a “first-inventor-to-file” system, in which the first inventor to file a patent application will have priority over another inventor who conceived of an invention first, but did not file a patent application until after the first inventor filed. Also, the AIA contains provisions that curtail patents directed to tax strategies, eliminate the ability to invalidate a patent due to lack of disclosure of the “best mode” of practicing the invention, and eliminate certain lawsuits based on falsely marking goods as “patented.”
Furthermore, sweeping changes in the AIA are directed to the manner in which the validity of patents may be challenged in the United States Patent and Trademark Office (USPTO) after issuance. Under the AIA, patent validity may be challenged post-issuance using a new inter partes review process, a new post-grant review process, or using the existing ex parte re-examination process. Also, the validity of “business method” patents may be challenged under a transitional program for covered business method patents.
Post-Issuance Patent Validity Challenges Prior to the AIA
Prior to the enactment of the AIA, there were two primary proceedings that could be instituted to challenge the validity of a patent in the USPTO. The first proceeding, ex parte re-examination, may be requested by either the patent owner or a third party. In the case of a request by the patent owner, the request is often made to present relevant prior art that was not considered by the USPTO when determining whether to grant the patent. In the case of a request by a third party, the request is often made to attempt to invalidate the patent due to a threat or a perceived threat of litigation by the patent owner against the third party. As the name implies, an ex parte re-examination proceeding is conducted between the patent owner and the USPTO, with no opportunity for participation, beyond the original re-examination request, by the third-party requester. Ex parte re-examination is still available under the AIA.
The second proceeding that existed prior to the enactment of the AIA was the inter partes re-examination proceeding, which could be requested by a third party to challenge the validity of the patent. In an inter partes re-examination proceeding, both the patent owner and the third-party requester could participate in the proceeding. Inter partes re-examination has been eliminated by the AIA in favor of the new inter partes review and post-grant proceedings.
New Post-Issuance Validity Challenges under the AIA
The AIA establishes authority for the USPTO to conduct inter partes review proceedings, post-grant review proceedings and proceedings to determine the validity of “business method” patents. A new administrative board has been created at the USPTO to handle such proceedings — the Patent Trial and Appeal Board (PTAB).
1. Inter Partes Review
The new inter partes review (IPR) proceedings will replace inter partes re-examination on Sept. 16, 2012. As with inter partes re-examination, prior art patents and publications may be used to invalidate a patent based on anticipation or obviousness of the claimed invention. An IPR proceeding will be initiated if the USPTO determines that there is a reasonable likelihood that the third-party petitioner will prevail with respect to at least one challenged claim in the patent. The determination is made by the USPTO after review of a petition by the third-party petitioner and a preliminary response, if any, that is filed by the patent owner. Once an IPR proceeding is initiated, a “preponderance of the evidence” standard must be met to invalidate a patent, whereas a higher “clear and convincing” standard must be met when attacking the validity of a patent in federal court.
An IPR proceeding may be requested more than nine months after issuance (or reissuance) of the patent, or after termination of a post-grant review of the patent, if such a review was conducted. An IPR proceeding may not be initiated or maintained after the third-party petitioner has filed a lawsuit in federal court challenging the validity of any claim in the challenged patent, i.e., the third-party petitioner has filed a declaratory judgment action seeking to invalidate the patent.
IPR proceedings will be conducted by the PTAB, according to regulations that will be promulgated by the USPTO later this year. Both the patent owner and the third-party petitioner may engage in limited discovery (subject to sanctions for harassment or abuse); both parties have a right to an oral hearing before the PTAB; and disclosure of confidential information is governed by a protective order. Direct testimony may be given by affidavit (or deposition when compelled), and cross-examination of affiants may be made by deposition.
A potential downside for a petitioner attacking the validity of a patent via an IPR proceeding is that certain statutory estoppels apply after a final written decision on the merits by the PTAB. The third-party petitioner is estopped from further challenges in the USPTO, a U.S. district court or the United States International Trade Commission to the validity of any previously reviewed claim on any ground that was previously raised or reasonably could have been raised in an IPR proceeding.
IPR proceedings may be settled by a joint request of the third-party petitioner and the patent owner, and decisions of the PTAB may be appealed by either party to the U.S. Court of Appeals for the Federal Circuit.
2. Post-grant Review
The new post-grant review (PGR) proceedings added by the AIA are designed to provide third-party petitioners with the ability to challenge the validity of a patent on more expansive grounds than those permitted in IPR proceedings. In particular, not only may validity be examined by the USPTO based on prior art patents and publications, but also based on other issues such as prior invalidating public use and sales, the presence of nonstatutory subject matter in the patent claims and inadequate written description or lack of enablement. The USPTO PGR proceedings will be similar to European “opposition” proceedings, which have been available for many years to test the validity of European patents.
PGR proceedings may be initiated on any patent that is issued from any patent application that is filed after March 16, 2013. However, PGR proceedings must be initiated within nine months of issuance of the challenged patent. A PGR proceeding will be initiated if the USPTO determines that it is more likely than not that at least one of the challenged claims is unpatentable or that there is a novel or unsettled legal question that is important to other patents or patent applications. Once a PGR proceeding is initiated, the “preponderance of the evidence” standard must be met to invalidate a patent.
PGR proceedings will be conducted by the PTAB in a similar manner as IPR proceedings, but discovery may be more expansive because the issues raised by PGR proceedings may be more comprehensive. Likewise, PGR proceedings have similar estoppel issues, but the estoppel may be more expansive because the scope of the issues that were raised or reasonably could have been raised in a PGR proceeding is more comprehensive.
As with IPR proceedings, PGR proceedings may be settled prior to conclusion, and adverse decisions may be appealed by either party to the Federal Circuit.
3. Transitional Program for Covered Business Method Patents
The AIA established a new type of proceeding, the transitional program for covered business method patents (TPCBMP), which may be used after Sept. 16, 2012, to challenge the validity of covered business method patents, which are those patents that do not claim “technological inventions.” Such patents do not recite a “technological feature” that is novel and unobvious over the prior art and do not solve a “technical problem” using a “technical solution.” Congress left it to the USPTO and the Federal Circuit to define which types of business-related patents are sufficiently “technical” to avoid this type of proceeding.
In order to institute a TPCBMP proceeding, the third-party requester must have been sued for infringement of the challenged patent. The third-party petitioner may obtain a stay of the litigation if certain statutory factors, such as whether the burden of litigation is reduced and whether a stay will simplify the issues and streamline the trial, are met. The prior art issues that may be raised in a TPCBMP proceeding are statutorily set, and the third-party petitioner is estopped from raising any invalidity issues in a district court proceeding or an ITC proceeding that were raised in the TPCBMP proceeding.
The America Invents Act has added specific post-issuance patent challenge provisions, including inter partes review, post-grant review and covered business method patent review, in addition to preserving ex parte re-examination. Parties who would like to challenge the validity of a patent should weigh various factors in determining whether it is advantageous to institute a challenge in the USPTO, or whether civil litigation is a more attractive forum. The potential benefits of the USPTO proceedings include the lower burden of proof required to invalidate a patent, the expected shorter time to reach a final outcome and the likely lower cost associated with post-issuance proceedings in the USPTO as compared to litigation in federal court. However, the risks of pursuing the USPTO proceedings include the potential impact of estoppel on subsequent civil litigation.
Patent owners and parties that are contemplating or are involved in patent infringement litigation should be aware of the new proceedings that may be used to challenge the validity of patents at the USPTO, and should consider how such proceedings could impact their future business direction and patent litigation strategy.