Understanding the PREVAIL Act
Understanding the PREVAIL Act
Proposed changes to PTAB and IPR could change the calculus of patents
In 2012, the America Invents Act, or AIA, began to reform nearly every part of the American patent system. While it is most notable for harmonizing the U.S. patent system with other global patent systems, particularly in the move from first-to-invent to first-to-file, it also changed the way that patent litigation works. In particular, it created the Patent Trials and Appeal Board, or PTAB, which had the ability to review patents for nonobviousness and novelty objections using written materials in an inter-partes review, or IPR. Previously, the only USPTO body that covered this topic was the Board of Patent Appeals and Interferences, which became obsolete under the first-to-file system. The purpose of IPRs was to help eliminate low-quality patents.
In practice, the IPR process has arguably become something much bigger than was originally intended. To address these concerns, Senator Coons, who is also behind the Patent Eligibility and Restoration Act (which we previously covered), has put forth the PREVAIL Act. The central idea behind the PREVAIL Act, as proponents put it, is to raise the bar for IPR; as opponents put it, it is to strengthen patent trolls by making junk patents easier to defend. What is actually at the center of the PREVAIL Act is turning a fundamentally administrative proceeding and turning it into something closer to a more standard-fare judicial proceeding. This week on Nonobvious, we are going to cut through the noise and cover what the PREVAIL Act, in its current form, will do.
IPR Hugging Closer to Litigation
Before going into the PREVAIL Act, let us do a brief review of why IPR is structured the way it is. On a fundamental level, IPRs are an administrative proceeding overseen by administrative patent judges, of which there are over 100. An article from Fish Richardson explains that they all have patent law experience, including a typical 10-15 years of litigation experience. Thus, APJs are actually, on average, more experienced than the judges in a typical district court on patent matters specifically. Typically there are three APJs, but their decisions can be appealed to the Federal Circuit; additional, the Director of USPTO can also issue opinions in the PTAB’s behalf under U.S. v. Arthrex, Inc., 594 U.S. ___ (2021).
The PTAB was created in a particular place and time. Fundamentally, the PTAB was created at a time that people were concerned about patent trolls—although patent trolls have a long history, the early 2010s were the era of peak concern. Patent litigation was spiking; 2012 had nearly twice as many patent cases commenced as 2007. Companies were living under the specter of odd patents in software and biotech, specifically. When the PTAB was founded, RPX Corporation was 4 years old, Myriad was a year away, and Alice was two years to come. The U.S. Senate and House were more concerned with patent trolls stifling innovation than inventors being able to protect their patents. As a result, they needed a cheap way for small businesses and startups to quickly challenge, for lack of a better term, bad patents. The IPR was a way to do that quickly. In fact, that is one reason it only covers 102 and 103 issues—those are the most common causes of rejections tracked by USPTO in nearly every art unit and may be perceived as indications of quality. When practitioners expressed concern over Amazon’s 1-click checkout patent, they mentioned 102 issues, not 101!
Furthermore, IPRs were created as an alternate pathway that sidestepped litigation. As Patent Planet’s Robert Moll pointed out, the standard of proof for IPR was low because Congress intended for IPRs to function more like prosecution than litigation, with ample opportunity to amend claims. Clearly, that hasn’t happened; according to USPTO, 83% such motions are denied. And in any case, once they are granted, a process that was designed to address solely novelty and nonobviousness then becomes open to issues of indefiniteness through evaluating the newly proposed claim language. For that reason, an IPR can be conducted in parallel with a 337 proceeding at the International Trade Commission and a district court case. This makes it seem like rather than a way to streamline litigation or address bad patents, it is simply creating a duplicative proceeding. And one small inventor, Molly Metz, wrote about going through the process, reporting an astounding $300,000 cost despite IPR’s aim at creating a cheap process.
The PREVAIL Act has numerous changes. By and large, they fall into a few categories:
Limits to IPR initiation, including changing standing requirements in IPR to those who have standing through an infringement lawsuit or threat of lawsuit, creating a rebuttable presumption against joinder, limiting challenges to the same patent, and others
Preventing duplicative actions that are substantially the same, including estoppel changes connecting IPR to district court litigation and 337 proceedings, limiting dual-use invalidity defenses, closing off the PTAB after a court decision, and others
Changing the standard of proof to clear and convincing, which harmonizes the IPR standard with district court and ITC standards, imposing a presumption of validity, and allowing for ex parte reexamination
What these changes make clear is that the purpose of the PREVAIL Act is not merely to change a claimant’s likelihood of success with an IPR; it is also to change the place that IPRs have in a post-AIA world of litigation. IPRs were designed to allow the market a way to clear out invalid patents used by patent trolls; TC Heartland seems to have done more on that front. In a world where American innovation leadership may be impacted by weaker patents, proponents argue that legislation like this is economically vital and just fair treatment. But not everyone agrees. The Judiciary Committee focused on this topic, specifically the IP Subcommittee, held hearings on the PREVAIL Act on November 8, 2023 and found arguments for and against. What nearly everyone agreed on what the IPRs had become part of the litigation process rather than an alternative to it. What that suggests is that regardless of your views on whether IPRs should be bolstered or curtailed, it is clear that they have at least somewhat strayed from their original purpose.
As currently written, the PREVAIL Act somewhat turns an IPR into something of a parallel hearing in patent litigation that addresses certain types of invalidity reviews by technically skilled judges and tie it more closely to litigation proceedings. That would further subsume IPRs into the litigation process; perhaps the future of IPRs is even deeper integration into litigation or formal incorporation. Either way, even if IPRs do not become de jure part of standard fare patent infringement litigation, it seems that it is increasingly becoming de facto part of it.
Prior Art
A few weeks ago, we covered USPTO’s proposed fee increases. The fee increases are large but also not uniform; areas affecting pharma are disproportionately increased. This is best thought of as partly an extension of the Biden Administration’s efforts to curtail pharmaceutical patent practices as well as a way to shore up USPTO’s operating reserves to cover newly required outlays from Congress starting in 2025.
Since then, it has received a flurry of criticism. Here is an article in the National Law Review by Frank Bernstein from Squire Patton Boggs describing the likely disparate impact of fee increases, especially on terminal disclaimers, on continuing applications for small inventors. And here is an interview in Voice of IP with Michael Abramson of Jordan IP Law describing how the fee increase could decrease revenue at USPTO.
What these both come down to is the idea of price elasticity of demand. In other words, if filers are close to their breaking point, you will lose more volume than you gain from price increases. We will see what USPTO actually does, and what the results are, in the coming years.
Weekly Novelties
The FDA added another 300 Orange Book patents to its “junk patent” case, including 10 Ozempic patents (Fierce Pharma)
The United States International Trade Commission is launching a probe into potential infringement of GoPro’s patents by a Chinese company (Reuters)
The Federal Reserve revived a lawsuit between Intellectual Tech and Zebra over standing in an RFID patent case (Bloomberg Law)
Japan started to pilot its own system for closing off patents relevant to national security; this is similar to secrecy orders in the United States (Japan News)
Datang successfully won a lawsuit in Germany arguing that Samsung was an unwilling SEP licensee in 4G networks (Juve Patent)
Acuitas Therapeutics and CureVac have settled a large lawsuit over COVID-19 patents (Reuters)
Nokia reached a patent licensing deal with a large Chinese automaker, including its first Chinese 5G licensing deal (IAM Media)