Inter Party Reviews (IPRs) and Covered Business Methods
The American Invents Act (AIA) introduced several important changes to US patent practice in late 2012 and 2013. This post explores the implementation of Inter Party Reviews (IPRs) and Covered Business Methods Review (CBMs), which provide mechanisms for challenging issued patents in a faster and less costly manner than through litigation. In tomorrow’s post I address the new mechanism for challenging a patent application through third party submissions pursuant to 37 CFR 1.290.
On Thursday, November 21, 2013 I had the opportunity to attend the Vancouver chapter Licensing Executive Society meeting with speaker Mike Lee, a US based IP attorney. Mike succinctly summed up the implementation and operation of Inter Party Reviews (IPRs) and Covered Business Methods Review (CBMs) – all stats listed herein are courtesy his presentation.
Both the IPRs and the CBMs were introduced in response to Rule 42.1(b) of the American Invents Act (AIA), which sets out the new mandate for “just, speedy, and inexpensive resolution of every proceeding”; and accordingly, section 316(b) explicitly cites the language of Rule 42.1(b) in prescribing how the board will conduct inter party reviews. To date, the board appears to be keeping apace with this mandate, with impressive results.
Both of these review methods are not usually engaged until a challenge is brought against a patent owner in relation to one or all of the claims pending in a patent application. Preparing a challenge can require considerable effort and expense, but will often be worth it, as the total costs are significantly less than litigation (often by a factor of 10 or more). For filing an IPR the challenger needs to prepare a submission identifying grounds sufficient to indicate that there is a reasonable likelihood that at least one of the challenged claims in the patent is unpatentable. Currently 86% of the challenges filed have been accepted.
Not surprisingly, over the first year both IPR’s and CBM’s have generally been filed by parties that are already involved in litigation. The statistics of co-pending litigation for both IPRs and CBMs are exceedingly high, with CBMs at 100% of 86 cases filed and IPRs at roughly 80% of 652 cases filed since last September’s implementation. These figures denote a healthy or even successful achievement of the underlining purpose of the IPRs and CBMs as parties will now be able to use these review mechanisms as a conduit to a better view and assessment of their chances at defending or opposing claims.
The IPR procedure has some significant benefits that are otherwise not available under the old inter partes reexamination. First and foremost to date district courts appear to be willing to stay corresponding litigation once an IPR has been granted by the USPTO. This is a phenomenal change compared to the old regime as a stay can be extremely cost efficient and, of course, allow for the resolution of the dispute outside of of litigation, either through settlement or through the outcome of the IPR procedure.
Another benefit of the IPRs and CBMs is that proceedings and decisions are reached and published quite efficiently, so as to live up to the “speedy” mandate under Rule 42.1(b). This reduces business uncertainty over the potential validity or invalidity of a claim, and can in some cases avoid litigation costs.
There are some disadvantages to the new procedure though. While the streamlining of issues and specialization of the board allow for cheaper legal fees relative to litigation the USPTO fees associated with an IPR are considerable (a minimum of 9,000 USD to file a request, and a further 14,000 USD if the request is granted). Total costs for a challenger are likely to be in the range of 100,000 USD.
Another concern will be the correctness of the decisions. A petitioner in an IPR may not assert in a subsequent action any invalidity ground that they raised or reasonably should have raised in the IPR. As such the ‘just, speedy, and inexpensive’ resolution may be the only resolution that the parties receive in practice. This may end up resulting in cases where ‘just’ is sacrificed for ‘speedy’ or ‘inexpensive’ to the significant harm of one of the parties (if for example the limited discovery provisions fail to produce evidence which would otherwise invalidate the patent).
Though the procedures have been operating a little over a year, the information to date provide us with valuable insight and realistic observations of how these proceedings have been carried out and what they really mean in the course of patent strategy planning or response. The new review proceedings are becoming a popluar option for parties seeking to challenge the validity of patent claims, and the evidence to date suggests they will continue to be sought after, as they provide a far faster and more economic avenue than the district courts.
Should you have questions concerning the potential use of the IPR or CBM procedure please contact us. If you want more Information about the procedure information can be found from the USPTO, and further statics can be found at ptolitigationcenter.com