Failed PTAB Bill Reemerges For a 6th Time

Yesterday, U.S. Senators Chris Coons (D-Del.),Thom Tillis(R-N.C.), Dick Durbin (D-Ill.), and Mazie Hirono (D-Hawaii) introduced the Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act (here). Also yesterday, some of the very same senators introduced the Patent Eligibility Restoration Act of 2023

The co-introduction of these bills suggests a plan to drive compromise on patent eligibility.

Having made significant legislative investment in 101 legislation to date only to see that significant effort consistently fail in the face of the divergent views of the Bio/pharma and Tech lobbies lawmakers are seemingly bringing an anti-Tech stick to the table. That stick is the proposed provisions of the PREVAIL Act.

The PREVAIL Act is a collection of pro-litigation/anti-Tech proposals that would do far more harm to the U.S. Tech industry than the liberalized 101 standard of the Patent Eligibility Restoration Act. And given that 101, post-Berkheimer, is not the same magic bullet for Tech that it once was, it would be unwise for Tech to continue to fight 101 in the face of more significant threats (i.e., available amendments to that 101 bill courtesy of the PREVAIL Act).

As to the viability of the PREVAIL Act as a stand-alone bill, it is a re-packaged version of the so-called STRONGER Patents Act of 2015, 2016, 2017, 2018 and 2019. The one-sided proposals of those past bills were largely an exercise in pro-patent virtue signaling. The lopsided nature of those bills kept them from gaining any meaningful legislative traction.

Now in newly minted form, some of the same failed proposals of the STRONGER Patents Act are repackaged in the PREVAIL Act and presented as tools needed to win the technology race with China (“fact” sheet here). (Evidently, it is critical to the race with China that U.S. industry spend more money on patent lawsuits.) But, much like the AIA being a “jobs bill,” this China sales pitch is just a gloss for the uninformed public. Despite the new spin, the bill isn’t going anywhere on its own. This is just a shot across the bow to expected opposition to the 101 Bill from Tech.

In the battle between these two powerful lobbies, Bio/pharma will gladly take the 101 Bill given the PTAB is a relatively minor annoyance to it in comparison.

As to the PREVAIL Act, there is a nice section by section break down of the proposals (here).

In fairness, not all of the PREVAIL Act ideas are bad. But the bulk of the good ideas are directed to issues long since resolved by the agency, committing existing regulations to statute, or fairly inconsequential changes from an impact perspective.

I’ll comment on each proposal below as presented in the section-by-section breakdown linked above.

  • PTAB Code of Conduct and Transparency – Directs the United States Patent and
    Trademark Office (USPTO) to establish a code of conduct for the Patent Trial and
    Appeal Board (PTAB), provides for greater transparency in changes to PTAB panels, and ensures that PTAB panels make decisions independent of political influence.

This would help silence the conspiracy crowd. A code of conduct that is specific to the PTAB makes sense. My understanding is that the agency is working on this anyway.

  • Ineligibility to Hear Review – Establishes that PTAB judges who decide whether to institute a post-grant proceeding are distinct from those who will decide the outcome of the proceeding

This would likely cost the agency more to implement (to staff 6 judges on a case instead of 3). In my opinion, if anything, this would just make claim cancellation more likely, not less. For example, a panel of PTAB judges decide appeals from examiners (different initial decision makers) every day; reversal is not common. Reminds me a lot of the debate over BRI, and how if the PTAB would just adopt Philips everything would change. It did, and nothing has changed. I don’t see this being impactful even if it were adopted.

  • Standing – Establishes a standing requirement in inter partes reviews (IPR)—as in district court—to ensure that a petitioner has a business or financial reason to challenge patent validity. This requirement reduces incentives for privateering or extortion of nuisance settlements. The standing requirement for IPR is the same as in district court, while there is no standing requirement for post-grant reviews (PGR) to encourage early challenges to a patent’s validity

The justification for standing is illogical. What nuisance settlements? I have never encountered a Patent Owner that paid money to a petitioner to terminate an IPR. Why would a petitioner spend six figures to file an IPR and look for a “nuisance settlement” in return? Completely nonsensical. This isn’t the district court where you can file a notice-based complaint for a few hundred bucks and kick off asymmetric expenses for a target. As the accompanying materials to the PREVAIL Act highlight, 85% of IPRs have standing as already being in litigation. This is a solution in search of a problem. In any event, requiring standing for IPR would just shift challenges to reexamination, and the AIA was designed to replace that practice. Bad idea.

  • Real Party in Interest – Establishes that any entity financially contributing to a PTAB validity challenge is a real party in interest who cannot bring future challenges, ensuring that no entity can make multiple PTAB challenges as a silent financial contributor.

This is addressing member organizations that are generally supported by member fees, but do not accept money for a particular challenge (not clear from the above summary explanation). This is a policy call that the legislature can make. But, in my personal view such organizations are a very helpful policing mechanism for the most unscrupulous and prolific of NPEs.

  • Imposes statutory deadlines for the Director to issue trial certificates, and for the PTAB to issue decisions on rehearing and remand, to make IPRs and PGRs faster. Provides for Director review of PTAB decisions by adopting the structure the Supreme Court suggested in Arthrex to fix the appointments of the Administrative Patent Judges under the Appointments clause and requires the Director to issue a separate written opinion when rehearing a PTAB decision.

Good idea. Arthrex fix needs to be committed to statute at some point, and the timing is all over the map on certificates and rehearing.

  • Joinder – Closes a loophole that allows otherwise time-barred petitioners to skirt the time bar by establishing a rebuttable presumption against joinder for a time barred petitioner and prohibiting such a petitioner from becoming the lead petitioner in an IPR or PGR.

35 U.S.C  § 315(b-c) expressly provides for joinder, and that the one year bar does not apply in cases of joinder. Calling a statutory provision directly on point a “loophole” is disingenuous. This is an obvious proposal to roll-back the AIA on joinder. This proposal seems like an overreaction to the OpenSky debacle. Bad idea

  • Single Forum – Replaces the PTAB’s Fintiv precedent, in part, by requiring petitioners to choose between the PTAB and other forums, but not both. If and when the Director institutes an IPR, the petitioner and related parties cannot raise or maintain in another forum any validity arguments against the patent based on earlier publications or patents. If and when the Director institutes a PGR, the petitioner and related parties cannot raise or maintain any validity arguments against the patent in another forum. In view of these new forum provisions, the Director cannot use co-pending litigation as a basis for denying institution. These new provisions also obviate the need for the civil action estoppel provisions.

As stated in the last sentence above, this makes estoppel absolute. No rationale is offered to justify such a move as courts are capable of applying estoppel and determining what is fair and what is not. Indeed, the word “reasonable” was added to the AIA statutes to improve over the previous inter partes reexamination estoppel (which was argued as being potentially absolute in scope). This is yet another AIA roll-back. Bad idea

  • USPTO Proceedings – Requires parties to notify the Director of other proceedings in the USPTO involving the patent and the Director to determine the manner in which all of the USPTO proceedings shall proceed. Specifies that the Director shall reject petitions that raise the same or substantially the same prior art or arguments that were previously presented to the USPTO absent exceptional circumstances. Requires the Director to issue standards for demonstrating exceptional circumstances.

The PTO already requires mandatory notices and the agency applies 325(d), which is already part of the AIA. This seems an attempt to extend 325(d) to petitions to different parties. Of course, no such analysis is done in the district courts between invalidity cases of different parties, and there is likewise no reason to do it in different IPR filings. Bad idea.

  • Estoppel – Limits serial IPR and PGR petitions by applying estoppel at the time the petition is filed, rather than after a final written decision. A petitioner will have to bring its best arguments in one petition, unless that petitioner is later charged with infringement of additional claims. These requirements further clarify that a joined petitioner is subject to the same estoppel as a lead petitioner and that the scope of estoppel includes any ground that the petitioner raised or reasonably could have raised during the proceeding or in the petition requesting the proceeding.

Making the scope of estoppel the same for joined petitions is somewhat sensible – the rest is not. The agency already prevents parallel filings, and has been doing so for years. It is fine to commit this practice to statue in some manner, but branding such a control as “estoppel” is just overcomplicating a simple idea. Likewise, if someone is later charged with infringement of different claims, it typically cannot refile anyway as it is outside of its 1-year window. This is another undeveloped concept. Bad idea.

  • Priority of Validity Determinations – Clarifies that a petitioner’s IPR or a PGR should not be instituted or maintained if another forum has issued a final judgment on validity prior to the PTAB completing its review of the petitioner’s (or related parties) challenge. This prevents duplicative PTAB review after another forum has made a validity determination

Still another roll-back of the AIA. Here the proposal is to go back o the old inter partes reexamination statutes. This two-way estoppel was specifically dropped in the AIA as it created races between forums. Likewise, PGRs are filed within 9 months of issuance, and those early filings are to be encouraged (as the standing provision explains above). Here, the message is to file in the ITC, EDVA or other rocket docket upon patent issuance to avoid PGR. Bad Idea.

  • Motions to Amend – Provides patent owners more opportunities to amend claims challenged at the PTAB by codifying USPTO practice that allows the PTAB to
    provide guidance on patent owner motions to amend and patent owners to revise their motions after receiving that guidance.

Commits Motion to Amend PTAB Pilot to statute. Non-event, this is already the current landscape.

  • Burden of Proof – Adopts the “clear and convincing” standard used in district court proceedings for validity issues to harmonize burdens in the two forums. This standard gives appropriate deference to the USPTO’s expert determination to issue the patent after examination—which inventors, patent owners, and investors rely upon. For substitute claims proposed in a motion to amend, the petitioner bears the burden of persuasion by a “preponderance of the evidence,” consistent with Federal Circuit law.

One of the most impractical ideas of the Stronger Patents Act somehow remains. The clear and convincing standard is applied in courts for assessing validity because the input of the agency is not present, and, there is a presumption of validity applied for that reason. When assessing patentability, on the other hand, we are asking a completely different question than validity. Namely, what would the examiner have done in retrospect, using the original examination standards, with the submitted art (i.e., would those claims have been found patentable and issued?) The standards can’t be the same because the questions are not the same. Examiners do not assess validity, they assess patentability. This is why the previous version of this bill went nowhere for six years.

  • Claim Construction – Harmonizes the standard used in post-issuance proceedings at the PTAB with the plain and ordinary meaning standard used in district court litigation, codifying the USPTO rule change intended to reduce gamesmanship.

This is already done, no big deal to put in a statute.

  • Harmonizes reexamination proceedings with IPR and PGR proceedings to provide clear guidelines as to real parties in interest and Director discretion to deny a reexamination request that raises the same or substantially the same prior art or arguments previously presented to the USPTO or uses an earlier PTAB decision as a roadmap to bolster a previously unsuccessful challenge.

The SNQ standard applied in reexamination already addresses same or substantially similar questions. The balance of reexamination changes proposed eliminate anonymous reexam filings, set a one year window when there is associated litigation as is done in IPR, and require naming RPIs. Aside from making reexamination less accessible to challengers, there is no rhyme or reason why this is being proposed, especially given the relatively low amount of reexaminations filed per year. This is another solution in search of a problem. Bad idea.

The remaining provisions:

  • End PTO fee diversion
  • Allow universities to file as micro-entities

Of course, I support ending fee diversion. But, also recognize this is never going to happen. Congress loves a slush fund.

As to special micro-entity treatment for universities, not sure where this is coming from, but its a slippery slope. The current financial-based controls seem more sensible to me than playing favorites. Many universities bring in massive amounts of patent licensing revenue.

That’s it. As I note above, I don’t see this as stand-alone legislation that will get serious consideration, perhaps one of the more sensible provision is appended to the 101 bill, or some of the more extreme are used as a stick. Stay tuned.