Giving the Federal Circuit a Run for Its Money: Challenging Patents in the PTAB

Rochelle Cooper Dreyfuss*

Passage of the America Invents Act of 2011 (AIA)¹ inaugurated three new procedures for challenging patents in the U.S. Patent and Trademark Office (PTO). Inter partes review (IPR) supplements the ex parte reexamination system and replaces its variant, inter partes reexamination;² the transitional program for covered business methods (CBM) institutionalizes what had been a more informal mechanism for reviewing such claims,³ and postgrant review (PGR) initiates a way to challenge patent claims immediately upon issuance.⁴ The increased importance of knowledge production throughout the global economy, coupled with the popularity of the Patent Cooperation Treaty, which eases the burden of filing in multiple countries,⁵ had expanded the number of patent applications and swamped the PTO’s examination resources.⁶ The resulting thickets of patents—and especially the increase in patent assertions by nonpracticing entities (NPEs)—were thought to be imposing a high tax on innovation. At the urging of the National Academies of Science and with substantial support from the American Intellectual Property Law Association (AIPLA),⁷ Congress adopted these procedures to improve the likelihood that invalid patents would be quickly weeded out of the system.

To be sure, there are other ways to tackle the problem of low-quality patents. Increasing PTO resources would give examiners more time to search the literature and ensure that all the requirements for patentability are satisfied before patent rights are granted. Indeed, the AIA did some of this as well: it gave the PTO the power to set fees and retain them.⁸ But there are limits to that approach. As Mark Lemley has convincingly argued, many patents have little commercial significance; examining them more thoroughly wastes social resources.⁹ Furthermore, there are inevitable distortions in the process. Although examination is intended to protect the integrity of the public domain and the interest of the public in full disclosure of protected inventions, examiners deal only with those aspiring to acquire protection. While the PTO no longer follows an avowed “customer service paradigm” aimed at satisfying applicants,¹⁰ systematic contact with only one constituency can lead to unconscious bias. Furthermore, as Melissa Wasserman, Michael Frakes, and Rob Merges have demonstrated, factors such as the pressure to earn maintenance fees, time constraints, informational asymmetries, metrics for rating examiners’ performance, and high examiner turnover can create other pathologies that lead to over-granting.¹¹

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© 2015 Rochelle Cooper Dreyfuss. Individuals and nonprofit institutions may reproduce and distribute copies of this Article in any format at or below cost, for educational purposes, so long as each copy identifies the author, provides a citation to the Notre Dame Law Review, and includes this provision in the copyright notice.

*Pauline Newman Professor of Law and Co-Director of the Engelberg Center on Innovation Law and Policy. I am grateful to the co-directors of the Engelberg Center and to Rachel Barkow, Annemarie Hassett, Helen Hershkoff, Patricia Martone, and John Pegram for their helpful comments, and to David Kappos for arranging a panel discussion with Judge Faith Hochberg and Micky Minhas, where I learned a great deal. The Filomen D’Agostino and Max E. Greenberg Research Fund of NYU provided financial support for this research.

1 Leahy-Smith America Invents Act (“AIA”), Pub. L. No. 112-29, 125 Stat. 284 (2011) (codified in scattered sections of 35 U.S.C.).

2 35 U.S.C. §§ 311–19 (2012) (supplanting the inter partes reexamination procedure; 35 U.S.C. §§ 311–17 (pre-AIA—enacted in 1999); 35 U.S.C. §§ 301–07 (supplementing ex parte reexamination). These systems were generally perceived as underutilized, see Dale L. Carlson & Robert A. Migliorini, Past as Prologue for Patent Reform: Experience in Japan with Oppositions Suggests an Alternative Approach for the U.S., 88 J. Pat. & Trademark Off. Soc’y 101, 105 (2006) (noting that only fifty-three requests for inter partes reexamination were filed between 2001 and 2004); Allan M. Soobert, Breaking New Grounds in Administrative Revocation of U.S. Patents: A Proposition for Opposition—and Beyond, 14 Santa Clara Computer & High Tech. L.J. 63, 66 (1998), or inadequate to protect patent quality, see Brian J. Love & Shawn Ambwani, Inter Partes Review: An Early Look at the Numbers, 81 U. Chi. L. Rev. Dialogue 93, 95–96 (2014).

3 AIA § 18 (codified at 35 U.S.C. § 321 note). For the earlier procedure, see Patent Quality Improvement: Expansion of the Second-Pair-of-Eyes Review, U.S. Patent & Trademark Off., http://1.usa.gov/OQZfEj (last modified Sept. 6, 2015). See generally David Orozco, Administrative Patent Levers, 117 Penn St. L. Rev. 1 (2012) (discussing the tightening of the patent review process in the area of business patents).

4 35 U.S.C. §§ 321–29.

5 Patent Cooperation Treaty, Preamble, June 19, 1970, 28 U.S.T. 7645, 1160 U.N.T.S. 231.

6 See U.S. Patent & Trademark Off., Performance & Accountability Report 142–52 (2014), http://www.uspto.gov/about/stratplan/ar/USPTOFY2014PAR.pdf.

7 See generally Stephen A. Merrill et al., A Patent System for the 21st Century loc. ii (2004) (ebook) (discussing patent reform), http://www.nap.edu/openbook.php?record _id=10976; Joe Matal, A Guide to the Legislative History of the America Invents Act: Part II of II, 21 Fed. Cir. B.J. 539, 601 (2012) (citing Patent Quality Improvement: Post-Grant Opposition: Hearing Before the Subcomm. on Courts, the Internet, and Intellectual Prop. of the H. Comm. on the Judiciary, 108th Cong. 29 (2004) (statement of Michael Kirk, Director, AIPLA)).

8 AIA § 10 (codified at 35 U.S.C. §§ 41–42).

9 Mark A. Lemley, Rational Ignorance at the Patent Office, 95 Nw. U. L. Rev. 1495 (2001).

10 James Farrand et. al., “Reform” Arrives in Patent Enforcement: The Big Picture, 51 IDEA 357, 437 (2011) (internal quotations omitted) (noting that the PTO viewed patent applicants as the PTO’s customers “without adequately recognizing the interests of the public.”); see also, e.g., U.S. Patent & Trademark Off., Performance and Accountability Report 2 (2000), http://www.uspto.gov/sites/default/files/about/stratplan/ar/USPTO FY2000PAR.pdf (noting a “rise in customer . . . satisfaction”).

11 See generally Michael D. Frakes & Melissa F. Wasserman, Does Agency Funding Affect Decisionmaking?: An Empirical Assessment of the PTO’s Granting Patterns, 66 Vand. L. Rev. 67 (2013) (analyzing the impact of funding on USPTO decisionmaking); Robert P. Merges, As Many as Six Impossible Patents Before Breakfast: Property Rights for Business Concepts and Patent System Reform, 14 Berkeley Tech. L.J. 577 (1999) (analyzing how business concept patents overload the patent system); Melissa F. Wasserman, The PTO’s Asymmetric Incentives: Pressure to Expand Substantive Patent Law, 72 Ohio St. L.J. 379 (2011).