“Practical Strategies for Using Patent Office Inter Partes Reviews in Business Decisions”
Inside Counsel 03/16/15 By Raye L. Daugherty
Your company can use patent inter partes reviews (IPRs) either offensively or defensively to achieve business goals. On offense, you can eliminate a competitor's patent by filing a petition to have the patent reviewed again by the Patent Trial and Appeal Board. On defense, you may have to defend the validity of your patent after sending a cease and desist letter or filing a complaint alleging patent infringement. IPRs have resulted in about 70 percent of patent claims being invalidated — great when you are on offense but, obviously, not so great when you are on defense.
IPR proceedings were introduced in September 2012 as part of federal patent reform. IPRs allow a third party to challenge the validity of a patent, but based only on a few grounds and written prior art. The objectives of IPRs were to reduce patent litigation expenses, to reach a final resolution in patent disputes more quickly than litigation in federal court and to give companies a way to combat aggressive patent trolls.
When your company is conducting freedom-to-operate patent searches, you may run into a competitor's "blocking patent." A blocking patent is one that is very difficult to design around while still being able to compete in a particular market. In this situation, you may want to consider filing an IPR petition to try to invalidate the competitor's patent. One strategy is to file an IPR petition on the same day as filing a declaratory judgment (DJ) action in federal court in which you allege invalidity of the patent. The DJ action helps prevent your competitor from asserting the patent in a jurisdiction of its choosing.
By filing the IPR petition, your company has some clear advantages. First, the patent claims will be given their broadest reasonable interpretation (BRI). This BRI standard is easier to satisfy than the standard used in federal courts, where patents are more difficult to invalidate. We have found that the claim construction adopted by the patent board when they institute the IPR can be extremely difficult to change during the course of the 12-month IPR proceeding.
Second, you can fully prepare your arguments in advance of filing the IPR petition, including obtaining an expert to support your claim construction and your grounds for invalidating the claims. Your competitor, the patent owner, will not have that luxury. You may be able to catch your competitor off guard, forcing it to play catch up during the entire proceeding. If, when they institute the IPR, you can convince the patent board to adopt your claim construction arguments, you greatly improve your chances of success. Moreover, one of the unwritten rules in an IPR is that your petition must put forth some type of claim construction argument. Even if you believe claim terms should be given their plain and ordinary meaning, you may get a call from a patent board clerk telling you to construe at least one claim term. Knowing this before you file a petition helps in making strategic decisions with respect to which terms to construe and which prior art to apply to those terms. The final step is engaging an expert to provide credibility for your arguments.
There are a few other nuts and bolts to think about when preparing an IPR petition. First, if the blocking patent has a large number of claims, your patent counsel may advise you to file two or more IPR petitions. Petitions are strictly limited to 60 pages, and many times there is not enough page space to cover all claims in a single petition. This will result in double or triple the patent office filing fees of $20K+ per petition and potentially more time spent on expert depositions and brief preparation. Second, every ground of rejection that you propose needs to be a ground that you can live with if it is the only one adopted by the patent board. We have found that after proposing ten or more grounds for rejection, the patent board may merely adopt one. The patent board may adopt the ground that is more procedurally simple rather than one based on the best prior art, or vice versa. Either way, you need to propose only those grounds that you can live with during expert depositions and oral argument.
Obtaining patents can cost your company considerable time and money. You may spend a decade building a solid patent portfolio creating barriers to entry in key markets. Thinking you are on offense, you may send a cease-and-desist letter or file a complaint, only to be hit with one or more IPR petitions, putting you on defense. The best way to prepare for this situation is to know that it will most likely happen when your patents have proven to be valuable. You can prepare more robust patent specifications, prosecute multiple claim sets having varying scopes, maintain pending continuation patent applications and cite as much prior art as possible to the patent office. Even then, when you assert your patents, you need to be ready to defend them in IPR proceedings.
First things first — as patent owner, you only have 21 days to respond to the petition. You need to select your patent counsel quickly, preferably someone who is familiar with your technology and your business. Patent attorneys like to argue about whether IPRs are "litigation" or "prosecution" but, at bottom, they are both. You need a lead counsel who has a patent office registration number, and you need a back-up counsel who can first chair expert depositions.
The second step is putting real effort into convincing the patent board not to institute the IPR proceeding. Any and all arguments should be made in what is called the Patent Owner Preliminary Response, which is due three months from the petition's filing date. As patent owner, you are again at a disadvantage at this stage, because you cannot submit an expert declaration to counter any expert declarations filed by the petitioner. That does not mean you do not need an expert — you need one immediately, preferably one who has experience being deposed in patent litigation. However, your expert's arguments will have to wait for the next briefing deadline, which comes about three months after the IPR is initiated.
Recently, the Federal Circuit decided the first appeal of an IPR decision by the patent board. At least for now, the BRI claim construction standard will remain. One procedural issue in the first appeal was whether the patent owner is given the same opportunity to amend the claims as in the previous inter partes reexamination procedure. So far, the Federal Circuit appears to say "yes," even though the IPR rules make it difficult, if not impossible, to amend the claims. You only have 15 pages to propose one-to-one replacement claims that cannot be broader in any respect to the original claims and to explain why those new claims are patentable. The only real way to deal with this situation is to keep a continuation patent application pending in which you can amend the claims to overcome the IPR grounds for rejection. This may result in having to file another lawsuit once the continuation patent application issues as an enforceable patent, and it could certainly result in another IPR being filed against you.
Both parties are given an opportunity to depose experts who provide declarations in support of the other party's briefs. The petitioner ultimately gets to submit the final brief. The patent owner is stuck submitting a few so-called "observations" directed toward the petitioner's expert deposition, without the ability to file a substantive brief after the final deposition. An oral hearing will take place at the patent office before a panel of three judges who will hear roughly an hour of arguments total for each IPR. They may ask tough, detailed technical questions of both sides. A final determination is generally delivered right at the 12-month date from when the IPR was instituted. Since the patent board is already proceeding over the IPR, the only avenue for appeal is directly to the Federal Circuit.
For both sides, IPRs can be significantly more cost effective and quicker than litigation in federal court. However, IPRs are not geared toward patent owners, and the odds clearly favor the petitioner.