Posts Tagged ‘covered business method’

Are Patent-Friendly PTAB Decisions On the Rise?

Monday, February 6th, 2017

Patent litigation changed with passage of the America Invents Act. Overnight the PTAB became a new venue for challenging patent claims using IPRs, CBMs and PGRs. The initial reaction by the patent bar to the PTAB’s “take charge” approach to instituting review and canceling patent claims was met with approval by businesses under attack by patent trolls and with disdain by patent owners whose patents would have likely sailed through the assertion before the AIA. Some commentators blasted the PTAB for a high percentage of patent claims invalidated in PTAB proceedings.

Those who tried to paint the actions of the PTAB with a broad brush in the first years of IPRs were bound to be both right and wrong. Yes, institution rates were at an all-time high, but factors such as these made the first years of PTAB practice particularly hard to characterize:

  • the patent bar and the PTAB were learning how to litigate these new patent trials for the first time;
  • litigation teams did not have the luxury of seeing how the PTAB viewed patents under review, and to tailor their litigations accordingly; and
  • a number of patents already in litigation were selected based on a pre-AIA (pre-IPR) enforcement economic model:
    • discovery and litigation costs established a minimal nuisance settlement value (now it is the cost of IPR);
    • thinly capitalized patent owners who previously had to outlay only minimal investment in the litigation suddenly had to secure counsel to defend patent rights in these patent reviews for the first time; and
    • the patents under review were drafted to survive district court scrutiny and enjoy the presumption of validity and a clear and convincing standard of review (and many still are).

Public sentiment was a moving target, but so was practice before the PTAB. After witnessing the PTAB’s heightened scrutiny of patentability, rather than file new suits many patent owners decided to wait and watch from the sidelines or take their assertions outside the U.S. Regardless, patent owners quickly learned the benefit of analyzing and selecting patents more likely to survive an IPR, CBM or PGR lodged by a defendant-petitioner before engaging in a patent litigation.

Now, with PTAB institution rates moderating, it remains to be seen whether the Board is easing its scrutiny on patentability or whether higher caliber patent assertions are being lodged in view of that heightened scrutiny.

For example, the PTAB recently rendered some decisions that might give patent owners reason to reconsider:

CASE STUDY 1: IPR2016-01453 – U.S. Patent 7,358,679 – Wangs Alliance Corp. d/b/a WAC Lighting Co. v. Philips Lighting North America Corp., Paper 8, (Feb. 2, 2017)

On February 2, 2017, the Board denied the ’679 IPR Petition filed by Petitioner Wangs Alliance Corp. (“WAC”) challenging Patent Owner Philips’ Lighting patent. The backstory of the dispute between Philips and WAC is quite interesting:

Philips has been embroiled in patent litigation with WAC since May, 2015. Koninklijke Philips N.V. et al. v. Wangs Alliance Corporation, Case No. 14-cv-12298-DJC (D. Mass.). Philips sued WAC for patent infringement of eight patents (not including the ‘679 patent) relating to lighting products and systems relating to LED lighting devices. WAC filed IPR petitions on seven of the eight patents, but obtained institution of only six of the seven IPR petitions. In January 2016, the district court litigation was stayed pending the outcome of the IPRs.

WAC later filed two IPR petitions against the ‘679 patent.  The ’679 patent does not appear in the litigation documents, but WAC identified it as claiming priority to U.S. 7,352,138 (which is in the litigation) and as related to U.S. 7,039,399 (also in the litigation).

The ‘679 patent relates to an LED-based lighting unit that resembles a conventional MR16 bulb having a bi-pin base connector configured to engage mechanically and electrically with a conventional MR16 socket. Claim 1 is representative:

 1. An apparatus, comprising:

at least one LED;

a housing in which the at least one LED is disposed, the housing including at least one connection to engage mechanically and electrically with a conventional MR16 socket; and

at least one controller coupled to the housing and the at least one LED and configured to receive first power from an alternating current (A.C.) dimmer circuit, the A.C. dimmer circuit being controlled by a user interface to vary the first power, at least one controller further configured to provide second power to the at least one LED based on the first power.

WAC’s ’679 IPR petition was denied when the Board adopted a claim construction of “alternating current (A.C.) dimmer circuit” that was narrower than the one proffered by Petitioner WAC.

WAC argued that “A.C. dimmer circuit” means “a circuit that provides an alternating current (A.C.) dimming signal.” WAC further asserted that it requires only receipt of an A.C. signal and the provision of power (A.C. or D.C.) to a light source. Patent Owner Philips countered that “A.C. dimmer circuit” requires an AC output from the AC dimmer circuit. The Board agreed with Philips, based on arguments and claim constructions from a related IPR (IPR2015-01294 which relates to U.S. 7,038,399), and because Patent Owner argued that “every instance of “A.C. dimmer circuit” in the ’679 patent’s specification describes an A.C. output from the A.C. dimmer circuit. (See Prelim. Resp. 4–5.)

A summary of the Philips patents and their IPR outcomes thus far (note: several decisions are still on appeal) shows that Patent Owner Philips is defending its patents well in these proceedings:

* The ’679 Patent is not appearing in litigation documents, but a claim of priority from U.S. 7,352,138 and a relationship to U.S. 7,039,399 is noted in WAC’s petitions. The ’679 IPR outcome is not yet determined because even though the -01453 IPR petition was unsuccessful the -01455 IPR institution decision remains to be decided and is not expected until later this month. Note: several of these decisions are on appeal, so these are not final results.

Philips’ IPR results are comparable to historical statistics when it comes to the number of IPRs instituted, but its results are substantially better than the statistical outcomes associated with IPR final written decisions from 2016 data. For example, early Board practice saw a very high percentage of IPR institutions (starting at ~90% in 2013 and dropping to ~70% in 2016). Upon institution, a patent owner’s chances of losing all claims if the IPR were to reach a final written decision would be roughly 70%.

In this Philips case study, the percentage of IPRs instituted remains relatively consistent with IPR institution outcomes (ignoring the ‘679 IPRs because they are not yet final, we get 5 out of 7 IPRs were instituted or ~70% ); however only one of the institutions resulted in a cancellation of all claims, which is much closer to 17% than the 2016 expected 67% cancellation rate for IPRs instituted which end in a final written decision (again, the results of the Federal Circuit appeals will not be known for some time). However, the data also shows a mixed claim decision outcome in 2 out of 6 IPRs (~33%), which equates to roughly double the typical percentage of mixed claim decisions (typically ~15%). Of course, mixed claim decisions are very hard to evaluate, because one has to know which claims are more likely to be infringed with substantial damages to know if the mixed result was a winner or a loser for a patent owner.

The Philips patent IPR outcomes are not yet final, but as of today Philips is substantially ahead of the 2016 percentages.

Let’s consider another case study:

 

CASE STUDY 2: IPR2015-01769, — U.S. Patent 7,793,433 — Zero Gravity Inside, Inc. v. Footbalance System OY, , Paper 49, (Feb. 3, 2017)

Footbalance System OY sued Zero Gravity Inside, Inc. et al. alleging patent infringement in May, 2015 and filed amended complaints, including a third one filed on October 21, 2016. Footbalance alleged patent infringement of its US Patents 7,793,433 and 8,171,589. The patents related to apparatus and method for producing an individually formed insole.

In response, Zero Gravity filed two IPR petitions challenging claims of each patent on August 19, 2015. Both IPR challenges failed.

The ’589 IPR petition alleged obviousness of claims 1-3, but was not instituted in a Decision Denying Inter Partes Review dated January 13, 2016 (IPR2015-01770, Paper No. 17, January 13, 2016).

The ’433 IPR petition was instituted based on alleged obviousness of claims 1-7, but on February 3, 2017, the Board found that Petitioner Zero Gravity failed to show by a preponderance of the evidence that claims 1-7 of the ’433 patent were unpatentable under 35 U.S.C. § 103. Footbalance managed to maintain its claims despite institution of the IPR.

The Board decided Petitioner failed to show that the prior art taught “wherein the at least one layer of thermoplastic material is configured to reach out from under a heel of a foot only to the metatarsophalangeal joint of the foot”, as recited in Claim 1 (“the MTP limitation”).

According to the Final Written Decision, Petitioner first asserted that the MTP joint extended approximately ¾ of the way down the foot, but Patent Owner countered that a person of skill in the art would understand the MTP limitation requires a precise anatomic location of the MTP joint and not an approximation or average, such as ¾ the length of the foot. The Board found that Petitioner then shifted its argument to assert that the prior art, which taught a pad before the ball of the foot was “so close to the requirements of the MTP limitation that the MTP limitation would still have been obvious to a POSA in light of either of these teachings.” Paper 48, 8-9 (italics in original). The Board was not persuaded:

Petitioner’s contentions in the Petition are not persuasive because they are not based upon the broadest reasonable construction of the MTP limitation. As discussed above, we construe the MTP limitation to require a layer formed to extend to, but no further than, the location of the MTP joint of a specific foot. [ ]. Petitioner, however, does not sufficiently show that an insole having a ¾-length moldable support layer teaches a layer formed to extend to, but no further than, the location of the MTP joint of a specific foot. [ ]

Petitioner’s contentions in its Reply also are not persuasive. Dieckhaus discloses that thermoplastic layer 6 “extends from the back or heel portion of the insole, to approximately just short of the ball section of the foot” [ ].  Approximately just short of the ball section of the foot is not the location of the MTP joints (i.e., the location of the heads of the metatarsal bones and the corresponding proximal phalanx). [ ] Further, Petitioner does not sufficiently show that it would have been obvious to one of ordinary skill in the art to modify Dieckhaus’s thermoplastic layer 6 to extend to, but no further than, the location of the MTP joint of a specific foot. Petitioner’s assertion that such a modification would have been obvious because Dieckhaus’s disclosure is “so close” is a mere conclusory statement. “To satisfy it burden of proving obviousness, a petitioner cannot employ mere conclusory statements. The petitioner must instead articulate specific reasoning, based on evidence of record, to support the legal conclusion of obviousness.” In re Magnum Oil Tools Int’l, Ltd., [cites omitted].

The Footbalance litigation is still in its very early stages, so it is too early to tell how the litigation may turn out, but the Board did not cancel claims from either patent.

These recent outcomes do not establish a trend, but they do show that some patent owners are succeeding despite the heightened scrutiny of PTAB proceedings.  They also show that the PTAB will provide relief to patent owners at both institution and final written decision stages of the PTAB trial.  They also give lessons on better patent drafting, which will be the subject of future posts.

 

PTAB Relies on the Federal Circuit’s Recent § 101 Decision to Deny CBM Institution

Monday, June 6th, 2016

On May 12, 2016, the Federal Circuit issued a decision on 101 patent eligibility  that overturned a summary judgment finding of § 101 invalidity for software used for databases.  Enfish, LLC v. Microsoft Corp., No. 2015-1244, 2016 WL 2756266 (Fed. Cir. May 12, 2016).  The Enfish v. Microsoft decision interpreted the “abstract idea” first prong of patent eligibility under the Mayo/Alice line of cases.  It reversed the district court’s grant of summary judgement based on § 101, finding that the data storage and retrieval system for a computer memory recited by five claims on appeal of U.S. Pat. No. 6,151,604 were patent-eligible.

Two weeks later, in a CBM review, the Patent Trial and Appeal Board (PTAB) denied institution on the reviewed claims of U.S. Pat. No. 6,006,227 on § 101, referencing Enfish v. Microsoft.  Apple v. Mirror World Technologies, CBM2016-00019, Paper 12, May 26, 2016.  Mirror World’s ‘227 patent covers a “Document Stream Operating System,” as represented by claim 13:

13. A method which organizes each data unit received by or generated by a computer system, comprising the steps of:

generating a main stream of data units and at least one substream, the main stream for receiving each data unit received by or generated by the computer system, and each substream for containing data units only from the main stream;

receiving data units from other computer systems;

generating data units in the computer system;

selecting a timestamp to identify each data unit;

associating each data unit with at least one chronological indicator having the respective timestamp;

including each data unit according to the timestamp in the respective chronological indicator in at least the main stream; and

maintaining at least the main stream and the substreams as persistent streams.

The Board determined that the ‘227 was a covered business method patent eligible for review under AIA § 18, but that the claims do not recite an abstract idea.  The Board based its decision on a number of reasons, including:

  • Patent Owner demonstrated that the claims recite a solution to a problem that is “necessarily rooted in computer technology,”
  • Patent Owner identified a number of problems solved by the claimed invention that did not exist in the pre-computer world, and
  • The Board was persuaded by Patent Owner’s assertion that the claims cannot be performed entirely by the human mind or with pen or paper, and that certain steps of the claims specifically call for operations that must be performed by a computer.

The Board then relied on this excerpt from Enfish:

We do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two. Indeed, some improvements in computer-related technology when appropriately claimed are undoubtedly not abstract, such as a chip architecture, an LED display, and the like. Nor do we think that claims directed to software, as opposed to hardware, are inherently abstract and therefore only properly analyzed at the second step of the Alice analysis. Software can make non-abstract improvements to computer technology just as hardware improvements can, and sometimes the improvements can be accomplished through either route. We thus see no reason to conclude that all claims directed to improvements in computer-related technology, including those directed to software, are abstract and necessarily analyzed at the second step of Alice, nor do we believe that Alice so directs. Therefore, we find it relevant to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea, even at the first step of the Alice analysis.

Decision at p. 16 citing Enfish v. Microsoft at *4,  (emphasis added).

The Board concluded that the first prong of the Mayo/Alice test was not met.  The Board also went on to find that the second prong of the Mayo/Alice test was not met, noting DDR Holdings.  Consequently, the Board issued its order denying CBMR.

As noted in earlier posts, the Board has been known to rapidly adopt decisions from the courts, and this case demonstrates the velocity at which decisions are integrated into practice before the Board.

New PTAB Trial Practice Rules Effective May 2, 2016

Monday, May 23rd, 2016

On April 1, 2016 the PTO published its final rule on Amendments to the Rules of Practice for Trials Before the Patent Trial and Appeal Board.  A small correction to these Amendments was published on April 27.  I presented a summary of these rule changes at the AIPLA Spring Meeting in Minneapolis, MN on May 18, 2016.  The slides from my presentation are attached.

The comments in the final rule make it clear that the PTAB will be publishing an updated Office Patent Trial Practice Guide to address these new rules and changes in practice since publication of the first Office Patent Trial Practice Guide.

IPRs And Settlement of Patent Infringement Cases

Sunday, February 14th, 2016

The passage of the AIA is still relatively recent, yet statistics are starting to emerge that demonstrate the effective use of IPRs to settle patent infringement cases.  IAM magazine recently published an interesting report by Unified Patents showing that IPRs have the effect of increasing the median time to settle litigations (from 211 to 420 days), but when viewed from the time that the first IPR filing is made, the median time of the “adjusted duration” (163 days) is shorter than the median time for litigations without IPRs (211 days):

For the 15,000 cases filed between 2012 and 2014 that settled before the end of 2015, the median duration was around 211 days. By contrast, for the much smaller subset of 1,100 cases which were identified as related matters to at least one inter partes review proceeding, the median overall duration was 420 days.

At first glance, this result seems counter-intuitive and contrary to the America Invents Act’s efficiency and cost-saving goals. However, a closer look at this subset of 1,100 related matters reveals that most settled within 180 days of the earliest inter partes review filing date. Specifically, the median adjusted duration for these cases was 163 days as of the end of 2015.

This timing data demonstrates that settlement is statistically likely before an institution decision is made (which can take place as late as 6 months after the filing date of the petition).  The report offers a few explanations for the observed data:

One explanation for the increase in pre-institution settlements may be that settling the dispute earlier allows patent owners to eliminate the risk that an adverse decision could be used as grounds for institution in a later case. [ ]

A second explanation may be that defendant petitioners have an increased incentive to settle claims before institution due to the low rate of institution – although this seems less likely.

Other potential reasons why IPRs encourage settlement include:

  • Weak patent assertions are more likely to attract IPR petitions by defendants.
    • Well-educated defendant petitioners are incentivized to file IPR petitions to combat weak patents.
    • As long as there is an inexpensive validity challenge option, weak patent assertions are inherently easier to settle than cases involving strong patents.
  • IPR filings quickly inform the parties about the strengths and weaknesses of each other’s case.
    • Strong IPR petitions educate the patent owner about any potential weaknesses of the challenged patent.
    • Weak IPR petitions inform the patent owner about the weakness of the publication prior art.
    • Expectations of each party will converge more quickly if they learn more about their case early in the patent contest.
  • IPRs require the parties to communicate relatively early in a patent assertion.  These communications provide more opportunities for the parties to understand their case and to discuss and settle the dispute.

Those active in post-grant proceedings know that IPRs also provide a limited mechanism for settlement before the IPR petition is filed.  Of course, it is difficult to account for settlements that occur before an IPR petition is filed, but pre-filing settlements were discussed in an earlier post, and will be part of a half hour presentation I will be making for Patexia’s webinar series on March 24, 2016: “Posturing IPRs for Early Settlement.”  More information about that seminar can be found by clicking on this link.

Patent Trends to Watch in 2016

Friday, January 29th, 2016

2016 is starting off with a bang!  A number of interesting new developments have occurred as we enter into this new year:

AIA 2015 Stats

 

So we will monitor practices by the courts, the PTAB, stakeholders, and patent practitioners to observe the effects and interplay of these decisions and actions over the course of the year.  In particular, it will be interesting to see how the Board and the courts handle claim construction issues knowing that BRI may be revised by the Supreme Court.  Also of great interest is how parallel patent infringement trials will be impacted by the PTAB proceedings on the underlying patents.

 

Board Guidance on its View of Petitioner Estoppel: Westlake Services v. Credit Acceptance Corp:

Tuesday, July 21st, 2015
July 21, 2015

Last week, the Board provided an opinion to offer guidance on its view of the scope of petitioner estoppel.  The Westlake Services v. Credit Acceptance Corp. decision relates to the scope of estoppel to a Petitioner following a final written decision from a first petition.  Westlake Services v. Credit Acceptance Corp., CBM2014-00176, Paper 28 (PTAB May 14, 2015). 

This case addresses the question of the scope of Petitioner estoppel when only part of the claims in a CBM proceeding are instituted for trial.  In short, the first petition set forth grounds to challenge the patentability of all claims of U.S. Pat. 6,950,807.  Only some claims were instituted for trial.  Later, the Petitioner filed another petition to challenge claims that were not instituted for trial in the first proceeding.  A final written decision was issued by the Board in the first proceeding finding the instituted claims unpatentable under § 101, and the Patent Owner sought to block the second petition based on petitioner estoppel under 35 U.S.C. § 325(e)(1):

The petitioner in a post-grant review of a claim in a patent under this chapter that results in a final written decision under section 328(a), or the real party in interest or privy of the petitioner, may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that post-grant review.

The Patent Owner obtained permission to brief the Board with its reasons why the Petitioner was estopped from filing the second petition.  The Patent Owner argued that § 328(a), provides “[i]f a post-grant review is instituted and not dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.”  In this case the Patent Owner wanted estoppel to apply to all claims to prevent Petitioner from coming back for a second bite on the claims that were not instituted for trial.  After all, the petition was trying to challenge every claim of the patent and the Board did not institute on several claims.  So the Patent Owner relied on this language to assert that the estoppel arising from the Final Written Decision applied to all claims.

Here is the Patent Owner’s logical syllogism:

A.  The Petition challenged all claims.

B.  § 328(a) provides a Final Written Decision is with respect to “any patent claim challenged by the petitioner.”

C.  Therefore, the Final Written Decision applies to all claims, even though institution was only to a subset of the claims.

D.  § 325(e) provides estoppel to all claims because the Final Written Decision is to all claims in (C) above.

E.  Accordingly, Petitioner is estopped from challenging all claims.

The Board denied the Patent Owner’s logic.  Essentially, it determined that § 328(a) and § 325(e) apply on a claim-by-claim basis, and therefore estoppel applies only to the claims instituted for trial.  The Board wanted to clarify estoppel applies only to a claim in a patent that “results in a final written decision” under § 328(a).  So the Board’s logic is different:

A.  The Petition challenged all claims.

B.  Trial was instituted to only some claims.

C.  The Final Written Decision under § 328(a) is only to the instituted claims.

D.  § 325(e) provides estoppel to “a claim in a patent” that “results in a final written decision” under § 328(a), therefore estoppel is only to the instituted claims.

E.  Accordingly, Petitioner is estopped from challenging the instituted claims.

The Board’s guidance about the scope of estoppel allows all parties to make informed decisions about how to better litigate their cases.

Are Your Patent Procurement Guidelines Outdated?

Sunday, May 3rd, 2015

 

I saw a bumper sticker that said:  “Change is inevitable, but growth is optional.”  This is true in many facets of life, and it is true for patent practice.  The changes of the past few years are numerous and far-reaching.  Is your patent portfolio strategy growing with these changes?

changes

One Simple Exercise

If you are responsible for your company’s patent portfolio, try this simple exercise:  look at your patent procurement guidelines to find out when they were last updated.  If they were last revised over two years ago, chances are they do not contemplate options like:

  • Track One filings in the USPTO for faster patent examination,
  • steps to use the USPTO’s After Final Consideration Pilot (AFCP) program to rapidly resolve pending prosecution, and
  • procedures to improve your future patent filings in order to survive claim challenges from IPRs, CBMs, and PGRs under the America Invents Act.

All of these options provide tools that can issue more meaningful and robust patents for your company and trim your patent portfolio’s bottom line.

Why Are These Tools Important?

Each of these tools can provide strategic advantages for your portfolio, depending on your goals.  For example:

  • Track One filings may be used in a campaign of patent filing to rapidly assemble issued patent rights in a strategic area, to bolster an ongoing enforcement campaign, or to offset expected or pending AIA patent challenges.
  • The after final consideration pilot program (AFCP) can be used to avoid needless and expensive RCE practice and to accelerate issue of valuable claims.
  • Drafting measures that enhance your patents’ ability to survive (or even avoid) AIA patent trials will become increasingly important–especially if Congress passes legislation to moderate post-grant review estoppel.  Your company saves hundreds of thousands of dollars each time your patents avoid an AIA patent trial — not to mention the potential recoveries that the patent brings when it is clear to the challenger that it is valid and infringed.

Act Now

Of course, there are many more tools for your procurement guidelines and the ones listed above are only some examples.  Every business requires different tools and approaches to match the patent practices and opportunities of that industry.

It takes time to assemble a good set of guidelines.  Even after the guidelines are complete, know that procedures to generate better patents can take time to implement.

When asked to audit patent filings for various companies, I was surprised by a pattern of reluctance to adopt new filing practices observed with preparation and prosecution counsel.  I heard various excuses to resist change, such as “we have been drafting claims like this for years.”   That was undoubtedly true prior to the AIA; however, the scrutiny that patents receive in AIA patent trials is substantially different than prior reexamination and litigation proceedings.

AIA post-grant proceedings are not going away any time in the foreseeable future.  Therefore, we are in a new patent enforcement paradigm and patent procurement practices have to change to adapt to this new enforcement paradigm.  Make sure that your patent prosecution practices are updated to generate the most effective rights possible.

[Editor’s Note:  Additional installments on patent preparation and prosecution in light of the AIA will be posted in the future.  Subscribe for updates.]

The Settlement Effect of PTAB Proceedings and Recent Patent Office Trial Statistics

Monday, December 29th, 2014

December 29, 2014

The Patent Trial and Appeal Board (PTAB) released statistics for AIA Patent Office trials as of Dec. 18, 2014.  Different commentators have recently reported that the institution rate for these proceedings has dropped to about 60-70 percent, depending on how you calculate it.  Those familiar with PTAB trial practice (IPR, CBM, PGR and derivation proceedings) understand that the trial statistics are moving targets, but they do provide some insight to interesting trends.

Based on the Dec. 18, 2014 data provided by the PTAB, it appears that the rate of denied petitions is approaching the rate of party settlements.  If the denial and settlement data are normalized to the number of filed trials (excluding the filings prior to decision on institution), the statistics show about a 20:20:60 percent relationship between settlements, denied proceedings, and instituted proceedings (ones that do not settle), respectively.  That means for every five petition filings, approximately one proceeding will be denied, one will settle early, and three will complete their trials.

But the filing of a petition is not always required to reach settlement between parties — the threat of a petition can provide all the impetus needed for settlement between parties.  This settlement effect of PTAB proceedings provides another opportunity for parties to attempt to settle their differences prior to the formal filing of an IPR, CBM, PGR or DER petition.  Frequently, the petition will be prepared to posture the matter for final discussion prior to its filing.  Once filed, the petition serves as valuable information for all other stakeholders interested in defeating the Patent Owner and its patent.  So a Patent Owner with some concern about the patentability of its patent has an incentive to settle with the prospective Petitioner before any petition is filed.

Of course, the PTO statistics cannot account for the cases where parties settle without filing a petition (“non-filed settlements”), so if the number of non-filed settlements is significant, then the PTO statistics underestimate the overall efficacy of post-grant proceedings for settlement of disputes between parties.

If you poll attorneys actively filing these petitions about the number of non-filed settlements they have accomplished compared to the number of petitions actually filed, you will get very different anecdotal responses.  Depending on that number, the impact on settlements of disputes in general (both formal proceedings and prior to formal proceedings) can be significant.

The following table shows how the settlement ratios change using different percentages of the number of matters that settle without any petition filing (percentage of non-filing settlements to that of post-filing settlements).  For example, if you estimate that for every 5 filed petitions, about 1 settlement occurs without a filed petition, refer to the 20% entry in the table below to find the aggregate percentage of disputes settled (including both pre-filing and post-filing disputes).  Using this 20% estimate, the aggregate percentage of disputes settled rises to roughly 33%, the percentage of denied cases drops to roughly 15%, and the percentage of matters going through full trial drops to roughly 48%.  This means for every six disputes, roughly two will settle (one with and one without a petition), one will be denied, and three will complete their trials.  Thus, by viewing disputes from a settlement perspective, including settlements obtained without filing a petition, the aggregate denial and institution rates necessarily fall and the efficacy of the challenges from an overall dispute perspective is enhanced, regardless of the win:loss ratio experienced by the parties at trial.

Of course, this is only a crude first approximation of settlement dynamics.  More information is needed to know the magnitude of the settlement effect of patent office trials on party settlements.  That information will be difficult to ascertain due to the confidential nature of such settlements, but each stakeholder can make its own approximation based on its experience.  Regardless, these settlements amplify the efficacy of the PTAB proceedings and their effect can be as significant as the known settlements arising from the PTAB proceedings themselves.

Table 1

U.S. Bancorp CBM Results in Cancellation of Retirement Capital Access Management Co.’s Patent Claims

Friday, August 29th, 2014

In 2011, U.S. Patent 6,625,582, entitled Method And System For Converting A Designated Portion of Future Social Security And Other Retirement Payments To Current Benefits, was assigned to Retirement Capital Access Management Company LLC.  Benefit Funding Systems LLC asserted the ‘582 patent against U.S. Bancorp in June of 2012.  Benefit Funding Systems LLC v. U.S. Bancorp, Case No. 1:12-cv-803-LPS (D. Del. filed June 22, 2012).  In response, U.S. Bancorp filed a CBM petition requesting review of claims 1, 13, 14, 18, 30, and 31 of the ‘582 patent on March 29, 2013.  U.S. Bancorp asserted that the ‘582 patent qualified for CBM review under 35 U.S.C. § 324 and Sec. 18(a) of the Leahy-Smith America Invents Act, Pub. L. 112-29, 125 Stat. 284, 329 (2011), and that these claims were invalid under 35 U.S.C. § 101.

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Lex Machina’s 2013 Patent Litigation Report Shows Disparity Between Litigated Patents and those under PTAB Review

Wednesday, May 14th, 2014

Litigation and post-grant proceedings often go hand-in-hand. A new litigation report published by Lex Machina summarizes patent litigation data for 2013 and prior years.  It is an interesting report and very easy to digest.  Two findings caught my eye.  The first one relates to the overall number of patent litigation cases filed in 2013:

Plaintiffs filed 6,092 new patent cases in U.S. District Courts in 2013 . . .

The second finding is the number of U.S. Patents at issue in those filings:

4,917 patents were at issue in all cases filed during 2013.

That second number is surprising, because if understood correctly, the findings indicate that about 5 out of every 6 lawsuits filed in 2013 relate to different patents.  That ratio seems high — especially in view of the AIA litigation joinder provisions.  However, if we assume these numbers are roughly correct, they show a large difference between the number of patents asserted and the petitions filed in the PTAB.

For example, compare Lex Machina’s reported 4,917 patents at issue in 2013 suits with the 1,312 total IPR and CBM petitions on file in the PTAB from September 16, 2012 to May 8, 2014.  These numbers indicate that  at most about 1 out of 3 patents in litigation are the subject of a PTAB petition.  If true, that means several patents in litigation have not been submitted for review by the PTAB.

Of course, bear in mind that this is just a rough, unscientific approximation because:

  • not every petition in the PTAB relates to a new patent,
  • not every patent being challenged in the PTAB is in litigation, and
  • this crude approach does not attempt to correlate the petitions before the PTAB with a certain year of patent assertion.

Not every patent in suit is eligible for a post-issuance proceeding in the PTAB, so there is no reason to expect that every patent in suit will be the subject of a petition.  But, this data seems to indicate that there is still a large number of litigated patents that could be subject to future post-grant challenges. Readers are invited to contact me with better data than this admittedly rough approximation.  Please send me that information and I will try to post it to give a more accurate representation of patents in litigation versus those challenged in the PTAB.