September 22, 2019 Feature

Frequent Filers? What the Data Says about Parallel PTAB Cases

Roshan S. Mansinghani and Robert K. Jain

©2019. Published in Landslide, Vol. 12, No. 1, September/October 2019, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

Few other changes in patent law have caused as much uproar as the creation of the Patent Trial and Appeal Board (PTAB) under the 2011 America Invents Act (AIA). The PTAB was created to more efficiently address the swelling patent litigation docket of the time via proceedings in the U.S. Patent and Trademark Office (USPTO) that often occur in response to, and run parallel to, district court patent litigation (AIA challenges). “In 2018, the PTAB was the most common venue for patent disputes overall, having received more new patent disputes than the top three district courts combined.”1 Here, we analyze patterns and trends in the use of AIA challenges by district court litigants.

Open PDF of this article's tables and charts.

AIA challenges are an efficient mechanism for challenging patent validity and result in the cancellation of at least one patent claim just shy of 60 percent of the time.2 Multiple reports estimate that somewhere between 80 and 90 percent of these challenged patents were previously asserted in district court.3 This has led some to surmise that patent owners are too often facing AIA challenges when asserting claims in district court. A closer examination of the data, however, indicates that this risk is much smaller than one might expect.

This study assesses the impact that AIA challenges have on district court patent litigation to assist patent lawyers and in-house counsel in developing an informed patent litigation strategy. Previous studies have focused on the sheer volume of AIA challenges and the overlap between litigated patents and patents subject to such challenges, but they have not specifically considered how many defendants accused of infringement in district court have actually filed an AIA challenge against the asserted patent(s). In this study, we first provide this critical piece of missing information and then continue to examine how defensive use of AIA challenges in patent litigation has changed over time. Last, we consider how changes in patent law and USPTO policy have affected the defensive use of AIA challenges.

Parameters

This study considered each district court patent assertion filed between January 2012 and December 2017 as well as all PTAB proceedings filed between September 16, 2012 (formation of the PTAB) and December 2018.4 Although district court litigation data for 2018 was available at the time of this research, it was largely excluded from this study due to the remaining availability to file AIA challenges within the one-year time bar of 35 U.S.C. § 315(b).

In this study, each district court patent assertion starting in 2012 was individually reviewed to determine if any named defendant filed an AIA challenge on any patent involved in that litigation. Thus, the data examines how often a district court defendant files an AIA challenge and whether that defendant selectively targets certain patents or instead decides to challenge each asserted patent as part of its defensive strategy. Further, this study analyzes the effect of legal changes in both district court patent litigation and PTAB litigation on the trends in defendants’ use of AIA challenges.

Defensive Use of AIA Challenges

It is useful to begin looking at this data from a broad perspective. First, the oft-repeated statistic that 80 to 90 percent of AIA challenges involve patents asserted in district court litigation5 is brought into context by this data, which reveals that only around 18 percent of patents asserted in district court since 2012 have been challenged in an AIA proceeding. That number goes up to around 20 percent for patents asserted in district court since 2015. Hence, while the vast majority of PTAB litigation involves underlying assertions in district court,6 only a small minority of patents asserted in district court are separately challenged at the PTAB (see fig. 1).

In fact, since 2012, only around 10 percent of district court cases have a corresponding AIA challenge at the PTAB (see fig. 2). This was determined by identifying whether any named defendant in a district court case filed an AIA challenge against at least one patent asserted against it in the district court. When split further, the data reveals that 7 percent of district court proceedings had corresponding AIA challenges against all asserted patents, and 3 percent of district court proceedings had only some of the asserted patents challenged in an AIA challenge.

A year-by-year analysis reveals that although the total proportion of cases involving a defensive AIA challenge has been fairly consistent at about 10 percent, this proportion has varied from year to year. One important result of this data is contextualizing anecdotes7 regarding the perceived unfairness of having to face AIA challenges alongside a patent owner’s district court litigation: it is likely that this will only occur in one out of 10 cases.8 And in many of these cases (about 30 percent), the defendant is only challenging some of the asserted patents. Thus, the data does not support the idea that AIA challenges are being pursued on a wide scale to heap cost upon patent owners that file infringement lawsuits.

This conclusion does not change when the type of patent owner is taken into account. Interestingly, the data further indicates that nonpracticing entities (NPEs) are facing AIA challenges at a lower rate than practicing entities. For example, between 2015 and 2018, a district court litigant filed an AIA challenge against an NPE just 8.8 percent of the time, whereas operating companies in the same time period faced AIA challenges 16.1 percent of the time. This may be explained by the fact that NPEs are characterized by filing many lawsuits and settling quickly.9

Factors Affecting Rates of Defensive AIA Challenges

While the overall average of patents asserted in district court being challenged before the PTAB is around 10 percent, that number increased slightly over several periods of time. In 2013 and 2014, the use of AIA challenges grew to an average of 13.7 percent of district court cases having corresponding AIA proceeding(s). This is likely explained by the comparative success petitioners had at the PTAB in that time frame: institution rates were between 75 and 87 percent, and final written decisions holding claims unpatentable were over 90 percent (see fig. 3).10

The use of defensive AIA challenges dropped by 30 percent in 2015. One reason for this could be the impact of the U.S. Supreme Court’s 2014 Alice decision, which led to greater success for accused infringers in convincing district court judges to dismiss patent lawsuits prior to discovery due to the patent’s claiming of ineligible subject matter. In 2015, 51 percent of such motions were fully granted, while 18 percent were partially granted.11 Another reason that litigants chose to use AIA challenges less in 2015 may be the decline in petitioner success: the institution rate fell to 68 percent.12

Litigants appeared to change course in 2016 and 2017. In those years, the use of AIA challenges by district court litigants rose 20 percent year over year. And those litigants did not fare as well with Alice motions—average success dropped to around 44 percent of such motions being fully granted, while around 12 percent were partially granted. Notably, the growth through 2016 and 2017 of the use of post-grant proceedings was also in the face of falling success rates at the PTAB.

District court litigants in the first quarter of 2018 behaved very differently than in the previous two years: on average, only around 10 percent chose to use AIA challenges. Unlike in other years where successful Alice motions could account for the decline in the use of AIA challenges, this decline occurred in a time frame in which Alice motions were less successful: 35 percent were fully granted, while 20 percent were partially granted. Two changes in the law may explain this result.

First, the Supreme Court’s 2018 SAS Institute decision—which held that the PTAB must institute on all claims challenged in the petition and not just some—led to concerns regarding estoppel. Prior to SAS Institute, a petitioner benefited from the PTAB partially instituting a petition because the petitioner would not be estopped from challenging the noninstituted claims or grounds of challenge using the same or similar art in co-pending district court litigation.13 After SAS Institute, a petitioner would not enjoy the same benefit: the PTAB must institute on all claims and all grounds of challenge even if it indicated in its institution decision that the petitioner had not met its burden to show that some of the claims are likely unpatentable. Thus, the increased risk for petitioners of facing estoppel if the PTAB disagreed with their challenges may have led to increased reticence to use AIA challenges.

Second, on November 13, 2018, the PTAB changed its claim construction standard from the broadest reasonable interpretation standard (BRI) to the same standard used in district court litigation (i.e., the Phillips standard).14 This rule change was first proposed on May 8, 2018, and became effective on November 13, 2018.15 Previously, a petitioner could assert one construction at the PTAB (e.g., identifying a broader construction under BRI) and a different construction at the district court (e.g., identifying a narrower construction under Phillips). Since the change, a petitioner has to advance constructions under the same standard as in co-pending district court litigation. A petitioner has to consider both its noninfringement positions as well as its invalidity positions when advancing constructions in either forum. Some petitioners may have been dissuaded from filing AIA challenges due to these competing concerns.

Another factor affecting whether a defendant will file an AIA challenge is venue (see fig. 4). Notably, the rate at which AIA challenges were filed by accused infringers in the Eastern District of Texas was nearly half of the average, while defendants in the Northern District of California filed AIA challenges at a rate nearly double the average. This may be explained by the availability of stays in those venues based on AIA challenges: in the former, stays are typically granted only after institution of most claims at issue; in the latter, stays are typically granted prior to institution.16

Impact on Settlements

Finally, the data indicates that AIA challenges affect settlement. District court cases with AIA challenges settle much later than cases without such proceedings (see fig. 5). This trend has been previously observed17 and may be explained by a petitioner’s incentive to wait and see if a favorable institution decision may increase its bargaining power before agreeing to a settlement. The petitioner’s ability to secure a stay in district court also likely contributes to a higher average time to settlement for co-pending district court litigation.18

For cases without post-grant proceedings, there has been a marked decline in settlement times. This decline is occurring because of the increase of cases that are settling both within three months and between three and six months of the litigation being filed (see fig. 6).

But for cases with post-grant proceedings, there is a different trend (see fig. 7). For cases filed in 2013–2016, about half of the cases with an AIA challenge settled around two years from when the complaint was filed. We found that the average time for a district court litigant to file an AIA challenge was six to seven months from the filing of the complaint. Thus, in those years, half the time parties were willing to wait until a final written decision on the AIA challenge, while the rest of the time parties appeared to be willing to settle soon after an AIA challenge was filed or soon after an institution decision was received (approximately 18 months after the filing of the proceeding).

For cases filed in 2017, however, a different trend is occurring even though all of the data is not in yet.19 Over half of the cases are settling well before two years, indicating that parties are willing to settle before the final written decision in the corresponding AIA challenges. Parties appear to be satisfied with the institution decision in such cases. One reason for this could be that PTAB institution rates and final written decision rates have been steady over the past couple of years compared to the first few years of AIA challenges (see fig. 3).

Conclusion

The impact of AIA challenges on district court patent litigation can hardly be understated. This study addresses this impact over time by pairing district court litigations with corresponding AIA challenges based on the parties that filed the challenges and the patents that were challenged. This new analysis reveals the rate at which AIA challenges are being used by district court litigants, how that rate has changed over time in view of changes in litigating patent eligibility and changes in PTAB practice, and how AIA challenges affect average settlement time of corresponding district court litigations.

Importantly, this study found that only one out of 10 district court defendants file an AIA challenge. This number is even lower for district court defendants facing an NPE. The rate at which defendants file an AIA proceeding declined in view of successful Alice motions and changes in PTAB rules that affected positions that could be taken in district court. Finally, while it is intuitive that an AIA challenge provides leverage to a district court defendant, AIA challenges significantly lengthened the amount of time it takes for a case to settle even though recent data is suggesting that trend may be changing.

Last year was a banner year for procedural changes at the PTAB, and there have been a number of significant changes in the first quarter of 2019.20 In Congress, there has been an increased effort to address patent eligibility legislatively.21 As this study indicates, such changes will likely significantly impact whether, how, and when district court litigants use AIA challenges.

Endnotes

1. 2018 Patent Dispute Report: Year in Review, Unified Pats. (Jan. 2, 2019), https://www.unifiedpatents.com/news/2019/1/2/2018-patent-dispute-report-year-in-review.

2. Unified Patents’ Portal shows that, as of May 30, 2019, out of the 5,299 AIA challenges that have reached an institution decision and were not settled, pending, or otherwise procedurally terminated, 3,126 (58.99 percent) resulted in a decision holding at least one challenged claim unpatentable. See Unified Pats. Portal, https://portal.unifiedpatents.com/ (last visited May 30, 2019).

3. See, e.g., Matthew Bultman, Most PTAB Petitions Involve Underlying Litigation: Report, Law360 (Feb. 12, 2016), https://www.law360.com/articles/758761/most-ptab-petitions-involve-underlying-litigation-report; Matthew Bultman, PTAB Taking Note of Parallel Litigation in Review Decisions, Law360 (Oct. 24, 2018), https://www.law360.com/articles/1095512/ptab-taking-note-of-parallel-litigation-in-review-decisions.

4. The study also considered routine changes in venue to avoid double counting cases that are transferred and consolidated.

5. See Bultman, Most PTAB Petitions Involve Underlying Litigation, supra note 3. This number has been somewhat overstated. Our analysis reveals that approximately 83 percent of PTAB proceedings filed before 2019 involved patents asserted in district court. This aligns with the PTAB’s analysis that between 80 and 90 percent of post-grant proceedings involved patents asserted in district court litigation.

6. David P. Ruschke & William V. Saindon, U.S. Patent & Trademark Office, Chat with the Chief: An Analysis of Multiple Petitions in AIA Trials 10 (Oct. 24, 2017), https://www.uspto.gov/sites/default/files/documents/Chat_with_the_Chief_Boardside_Chat_Multiple_Petition_Study_20171024.pdf.

7. E.g., Alden Abbott et al., Regulatory Transparency Project, Crippling the Innovation Economy: Regulatory Overreach at the Patent Office (Aug. 14, 2017), https://regproject.org/wp-content/uploads/RTP-Intellectual-Property-Working-Group-Paper.pdf; Michael Rosen, Dueling Trends Epitomize Patent Office Trial Conundrum, AEIdeas (Nov. 16, 2018), https://www.aei.org/publication/dueling-trends-epitomize-patent-office-trial-conundrum/.

8. This study did not quantify the amount of times that third parties filed an AIA challenge against a patent asserted in district court; however, the volume of AIA challenges filed by third parties does not appear to indicate that it will affect the overall trends identified in our study.

9. Lauren Cohen et al., Patent Trolls: Evidence from Targeted Firms 2 (June 8, 2018), http://www.umitgurun.com/wp-content/uploads/2018/06/patentlitigation.pdf.

10. U.S. Patent & Trademark Office, Patent Trial and Appeal Board Statistics 7–11 (Apr. 30, 2015), https://www.uspto.gov/sites/default/files/documents/2015-04-30%20PTAB.pdf; PTAB Analytics, Unified Pats. Portal, https://portal.unifiedpatents.com/ptab/analytics/case-level/by-status-and-phase?up_status=Terminated&up_termination_date=2013-01-01--2014-12-31 (last visited Aug. 8, 2019). Note that only five AIA challenges terminated in 2013.

11. Sanford E. Warren Jr., Update on Alice and Motions to Dismiss, Int’l Risk Mgmt. Inst. (Sept. 2018), https://www.irmi.com/articles/expert-commentary/update-on-alice-and-motions-to-dismiss.

12. U.S. Patent & Trademark Office, Patent Trial and Appeal Board Statistics 7–11 (Jan. 31, 2016), https://www.uspto.gov/sites/default/files/documents/2016-01-31%20PTAB.pdf; PTAB Analytics, Unified Pats. Portal, https://portal.unifiedpatents.com/ptab/analytics/case-level/by-status-and-phase?up_status=Terminated&up_termination_date=2015-01-01--2015-12-31 (last visited Aug. 8, 2019).

13. 35 U.S.C. § 315(e)(2); see also Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293, 1300 (Fed. Cir. 2016) (holding that a petitioner was not estopped from raising noninstituted grounds of challenge in either a later inter partes review proceeding or at the district court).

14. Changes to the Claim Construction Standard for Interpreting Claims in Trial Proceedings before the Patent Trial and Appeal Board, 83 Fed. Reg. 51,340 (Oct. 11, 2018).

15. Id.

16. Jim Warriner, Measuring the Success of Motions to Stay Pending IPR, Law360 (June 6, 2017), https://www.law360.com/articles/928654/measuring-the-success-of-motions-to-stay-pending-ipr.

17. See Jonathan Stroud, Shawn Ambwani, Sam Jaffna & Robert Jain, How PTAB Proceedings Are Driving District Court Settlements, Intell. Asset Mgmt. (Feb. 1, 2016), https://www.iam-media.com/litigation/how-ptab-proceedings-are-driving-district-court-settlements.

18. In calculating the average time to settlement for district court litigation, the data was normalized to account for outliers by excluding those cases falling outside of one standard deviation. In this instance, approximately 95 percent of cases fell within one standard deviation.

19. As of March 2019, the percentage of 2017 cases that have settled is already greater than the percentage of 2016 cases that have settled. Thus, the sample size of the 2017 cases that have settled is large enough to begin observing trends even though more cases will likely settle throughout 2019 and beyond.

20. Matthew Bultman, A Look Back at the PTAB’s Busy Two Weeks of Precedents, Law360 (Mar. 20, 2019), https://www.law360.com/articles/1140855/a-look-back-at-the-ptab-s-busy-two-weeks-of-precedents; Eliot D. Williams, USPTO Director Iancu’s First Year Marked by Big Changes at the PTAB, Recorder (Jan. 30, 2019), https://www.law.com/therecorder/2019/01/30/uspto-director-iancus-first-year-marked-by-big-changes-at-the-ptab.

21. Stuart P. Meyer, No Shortage of Opinions on New USPTO Eligibility Guidance, Law360 (Apr. 12, 2019), https://www.law360.com/articles/1149320/no-shortage-of-opinions-on-new-uspto-eligibility-guidance.

Entity:
Topic:

Roshan S. Mansinghani is a senior patent counsel at Unified Patents Inc. in Dallas, Texas. He manages legal strategy, litigation, and licensing for Unified, including PTAB proceedings and appeals.

Robert K. Jain is in-house counsel at Unified Patents Inc. and specializes in high-tech PTAB proceedings and patent analytics.