Early Statistics Show NPEs Seeking Escape Hatch from PTAB
The Patent Trial & Appeal Board (PTAB) has the power to terminate an Inter Partes Review (IPR), Post Grant Review (PGR), or Transitional Proceeding for Covered Business Method Patents (CBM) upon request of the parties. This discretionary power to terminate a patentability challenge by agreement (37 C.F.R. § 42.74) is a new concept for the USPTO. Historically reexamination proceedings could not be terminated by agreement. In reexaminations (inter partes) where the contesting parties settled their dispute, the challenging party would simply drop out of the inter partes reexamination, but the Office would continue with the reexamination in the interests of public policy. (cf. terminating an inter partes patent reexamination by operation of estoppel).
Many wondered if patentees would find value in the ability to walk away from such a public proclamations of patent weakness by agreement. For example, where a PTAB trial is ordered for IPR, three (3) technically trained judges of the PTAB will have found at least one claim reasonably likely to be unpatentable. This public record undoubtedly places a considerable “cloud” over the challenged patent.
If 2013 statistics are any indication, non-practicing entities (“trolls” to lazy typists like me) are thankful to keep their suspect patents intact as long as possible.
Of the 44 IPR settlements for FY 2013, 75% of such involve non-practicing entity patentees. (Click to Enlarge)
In some cases, the NPE IPRs settled were initiated by a single defendant of a Joint Defense Group (JDG). In these cases, settlement enables the NPE to continue their litigation against the other members of the JDG without fear of a follow-on IPR (as the coat tail riding defendants find themselves outside of the 12 month window for a quick follow-on IPR filing).
In JDG scenarios the cloud over the patent that is created by the incomplete IPR is insignificant compared to the asymmetrical, litigation cost burden. This imbalance is the main club wielded by trolls. Patent strength is immaterial in the more abusive NPE assertion cases. As such, the ability to shake out a few more settlements from industry is far more valuable than clearing one’s name at the PTAB.