10.2 Patent office and administrative review proceedings
10.2.1 United States Patent and Trademark Office
The USPTO examines patent applications and issues patents. The patent examination procedures are set forth in the Manual of Patent Examining Procedure.32
Figure 10.1 shows the total number of patent applications (direct and Patent Cooperation Treaty national phase entry) filed with USPTO from 2000 to 2021. In 2021, the USPTO received 591,473 patent applications, a significant increase over the 425,966 applications filed in 2006.
Although the U.S. patent system has authorized the USPTO to correct defects and adjust patent scope through a reissuance process,33 Congress did not authorize the USPTO to reexamine or revoke patents until 1980. As a result of the AIA, administrative patent review is now a robust and commonly used mechanism to challenge patent validity.
In 1980, Congress established an ex parte (one party) reexamination process that enabled patent owners or third parties to request the USPTO to review the validity of issued patents.34 The review process was limited to the review of novelty and nonobviousness based on a limited range of prior art (patents and printed publications). The process was conducted ex parte – that is, only the patent owner participated in the proceeding with the USPTO.
For several reasons, the ex parte reexamination process was only rarely invoked. For example, it often took years to complete. As a result, district courts were reluctant to stay enforcement proceedings pending completion of reexamination. Furthermore, many potential challengers perceived that the process was tilted toward upholding validity. Consequently, most accused infringers did not consider ex parte reexamination to be a viable alternative to litigation.
In 1999, Congress established a more balanced inter partes (between parties) reexamination procedure that allowed third-party challengers to comment on patent owner responses.35 This process, however, also failed to gain much traction: it was slow and barred challengers from raising any ground that could have been raised during the reexamination in subsequent civil litigation.
The bursting of the dot-com bubble in March 2000 caused start-ups to declare bankruptcy, resulting in their software and internet-business-related patents being put up for auction. A new breed of patent-assertion entities scooped up these assets and pursued a wave of nonpracticing entity lawsuits. The havoc wrought by these cases, some of which threatened to enjoin substantial business units, spurred technology companies to pressure Congress to reform many aspects of the patent system. Amid this turmoil, in 2005 the USPTO established the Central Reexamination Unit (CRU), which expedited reexaminations and resulted in greater usage of the USPTO’s reexamination processes. Nonetheless, district courts were still reluctant to stay parallel cases, leading to costly duplication of administrative and judicial resources.
Passing comprehensive patent reform proved difficult. As the Supreme Court and the Federal Circuit addressed some of the thornier issues, such as tightening the standard for obtaining injunctive relief and the nonobviousness standard, Congress focused its reform on a less controversial issue: administrative patent review. Following the logic of patent oppositions in the European Patent Office, Congress expanded and expedited administrative patent review as a key component of the AIA.
The AIA established three principal review procedures: (1) inter partes review (IPR) – which replaced inter partes reexamination with a streamlined and more robust review process;36 (2) covered business method review – a transitional review proceeding focused on weeding out dubious business method patents;37 and (3) post-grant review (PGR).38 The AIA left ex parte reexamination in place.39 It also established supplemental examination – an expedited procedure for the USPTO to consider, reconsider or correct information believed to be relevant to the patent40 – and it added a special proceeding (derivation proceeding) for determining whether a patent application “derived” a claimed invention from another person or persons and whether it was therefore patentable by that applicant.41 Covered business method review expired in September 2020. The AIA left the CRU in place; it now handles patent reissuance, ex parte reexamination, and supplemental examination.
10.2.1.1 Representation at the United States Patent and Trademark Office
To represent parties at the USPTO – including in patent review proceedings – a practitioner must be a member of the Patent Bar.42 To qualify for membership, a person must possess the requisite scientific and technical training and pass the Patent Bar examination, which tests an applicant’s knowledge of patent law and procedures.
10.2.1.2 Central Reexamination Unit
As noted above, the USPTO established the CRU in 2005 to expedite and elevate the credibility of ex parte and inter partes reexaminations. The CRU is staffed with senior primary patent examiners and supervisory patent examiners, who have a wide range of technical expertise and advanced patent legal knowledge.
The AIA supplanted and augmented the prior administrative review processes. Most importantly, the AIA replaced inter partes reexamination with a streamlined and expeditious IPR, which is handled by the PTAB (see Section 10.2.2.4). The AIA retained ex parte reexamination with the CRU with modest adjustments. It also added supplemental examination, a post-grant proceeding that provided patent owners with a new process for requesting supplemental examination of an issued patent to “consider, reconsider, or correct information” believed to be relevant to the patent. In 2014, the USPTO transferred the responsibility and oversight for all reissue applications to the CRU.
10.2.1.3 The Patent Trial and Appeal Board
The AIA significantly expanded the USPTO’s patent review authority through its establishment of several review proceedings under the auspices of the PTAB, a new review authority within the USPTO. The PTAB is divided into an Appeals Division and a Trial Division. The Appeals Division handles appeals of patent examiner rejections, with specialized sections adjudicating different technology areas. The Trial Division handles contested cases such as IPRs, PGRs, and derivation proceedings. The PTAB employs approximately 200 Administrative Patent Judges (APJs), who have scientific or engineering technical training as well as legal training and patent litigation experience.
Most importantly, the AIA replaced inter partes reexamination with a streamlined, expeditious IPR trial proceeding that can be pursued at any time after nine months following the patent grant.43 Within a few years of the AIA’s passage, IPRs reshaped the patent enforcement landscape. The IPR mechanism for challenging patent validity proved popular among accused infringers. In its first full year of operation (2012), the PTAB received over 1,000 petitions. The PTAB instituted reviews for over 80 percent of these petitions and invalidated many of the reviewed claims. The institution and invalidation rates have since leveled off. Of the 13,927 IPR petitions filed through October 2022, the PTAB instituted review of approximately 60% of the petitions challenging 8,578 patents. The PTAB has invalidated at least one claim in 2,749 of those patents and fully invalidated 890 patents.
The AIA also added PGR, a patent challenge that is available within nine months of patent issuance.44 Although broader in scope than an IPR, PGR is not widely used due to its high cost and uncertain benefits. The IPR provides a more certain potential benefit: revoking a patent asserted against the challenger.
With the shift to a modified first-to-file novelty standard, the AIA provided for derivation proceedings to adjudicate inventorship disputes.45 These proceedings replaced interference proceedings, which more commonly arose when the United States used a first-to-invent novelty regime. Derivation proceedings have been relatively rare.
10.2.2 Administrative review proceedings
10.2.2.1 Patent reissuance
The patent reissue provision enables a patent owner to request the USPTO to reissue a patent that is “wholly or partly inoperative or invalid, by reason of a defective specification or drawing, or by reason of the patentee claiming more or less than they had a right to claim in the patent.”46 The error must have been made without any deceptive intent, and the patent owner may not introduce new matter into the application for reissue.
10.2.2.2 Ex parte reexamination
The AIA retained and modestly reformed ex parte reexamination. Any person may, at any time, file a request for reexamination by the CRU of any patent claim on the basis of any:
prior art consisting of patents or printed publications which that person believes to have a bearing on the patentability of any claim of a particular patent; or  statements of the patent owner filed in a proceeding before a Federal court or the [USPTO] in which the patent owner took a position on the scope of any claim of a particular patent.47
Within three months following such a filing, the USPTO Director determines whether a substantial new question of patentability (SNQ) – which requires a showing that a reasonable examiner would consider the item of information important in determining the patentability of any claim – is raised by the request.48 If the Director finds that an SNQ is raised, then the patent owner is given at least two months from the date of the determination to file a statement on the question, including any amendment to the patent.49 If the patent owner files such a statement, the requester is provided a copy and may file a reply, after which the CRU conducts a prompt reexamination proceeding.50 No proposed amended or new claim may expand the scope of the patent. Such reexamination decisions can be appealed to the PTAB51 and to the Federal Circuit with respect to any decision adverse to the patentability of any original or proposed amended or new claim of the patent.52
10.2.2.3 Supplemental examination
Augmenting ex parte reexamination, supplemental examination affords a patent owner a three-month procedure during which the CRU may consider, reconsider or correct information believed to be relevant to the patent.53 The patent owner may request consideration of any basis for patentability. Unlike ex parte reexamination, the information that forms the basis of the request is not limited to patents and printed publications, and may include other references (“offers for sale,” “public disclosures,” or “public uses”) and issues (such as eligibility, utility, and written description). The standard for granting the request is whether one or more items of information raises an SNQ.
10.2.2.4 Inter partes review
A patent challenger may pursue IPR to cancel as unpatentable one or more claims of a patent “only on a ground that could be raised under section 102 or 103 and only on the basis of prior art consisting of patents or printed publications.”54
Figure 10.2 shows the number of IPR petitions filed each year, from fiscal year 2012 (the first year in which IPR proceedings were available) through May 2022.55 These statistics reflect the rapid rise in IPRs filed after enactment of the AIA in 2011.
During the petition phase, the PTAB decides whether to institute an IPR. The patent owner may file a preliminary response to the petition prior to the institution decision, within three months of filing of the petition. The PTAB must decide whether to institute the IPR proceeding within three months of receiving the preliminary response (or three months from the last day on which such a response can be filed).57
The threshold for institution – whether “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition”58 – is lower than the prior SNQ standard for initiating inter partes reexamination. The AIA requires the PTAB to make the institution decision within three months of the patent owner’s preliminary response (if any). The PTAB’s institution decision is not subject to appeal.59 If the PTAB institutes review, the trial phase commences, and the PTAB provides the patent owner and the petitioner challenging the patent with a sequenced discovery process.
PTAB trials are administered by panels of three APJs. The USPTO established the rules for PTAB proceedings based on the AIA and the Administrative Procedure Act (APA). The USPTO has, from time to time, amended those rules.60
10.2.2.4.1 Forum selection: inter partes review or declaratory relief
Unless a patent challenger has been sued for infringement, the challenger must elect between pursuing an IPR or a declaratory relief action in district court.61 If the challenger files an IPR after it has filed a declaratory relief action in district court, then the district court civil action will be automatically stayed until either: “(A) the patent owner moves the court to lift the stay; (B) the patent owner files a civil action or counterclaim alleging that the petitioner […] has infringed the patent; or (C) the petitioner […] moves the court to dismiss the civil action.”62 The rationale behind this rule is to spare the patent owner from having to defend both the declaratory relief action and the IPR simultaneously. The AIA further provides that an IPR may not be instituted if the petition requesting the proceeding is filed more than one year after the date on which the petitioner is served with a district court complaint alleging infringement of the patent.63
The standard for instituting IPR is whether “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.”64 This standard is a “lower threshold than a ‘more likely than not’ requirement.”65 Nonetheless, the PTAB has significant discretion in deciding whether to institute an IPR. It must, however, either allow review on all grounds raised or completely deny review. The petitioner must file a separate petition for each patent challenged.
The parties to an IPR may request a conference call within a month from the date of institution of the trial to discuss the scheduling order and any motions that the parties anticipate filing during the trial. The PTAB has developed rules and a standard scheduling order for sequenced discovery of information reasonably necessary for IPRs. The AIA provides that IPRs are generally open to the public, but a party may file a motion to seal confidential documents. The AIA also provides for protective orders to govern the exchange and submission of confidential information.
10.2.2.4.3.1 Claim amendments
The PTAB permits patentees to amend claims in IPR proceedings. Amendments may cancel any challenged patent claim, propose a reasonable number of substitute claims, or do both. Motions to amend must be filed no later than the filing of a patent owner response, three months after the institution decision.66
10.2.2.4.3.2 Expert witnesses
Although the AIA limits the PTAB review to prior art patents and printed publications, the PTAB permits expert testimony in the form of a declaration to be submitted with the petition, with the preliminary response, and at other appropriate stages in a proceeding as ordered or allowed by the panel overseeing the trial. Expert opinion testimony is generally permitted where the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue.
10.2.2.4.3.3 Claim construction
As of 2018, the PTAB applies standards set forth in Phillips v. AWH Corp.67 This policy harmonizes the PTAB’s claim construction framework for IPRs with the standards applied in district court cases.
10.2.2.4.3.4 Oral hearing
Each party has the right to request an oral hearing as part of an IPR. Such hearings, however, are far more streamlined and limited than district court or USITC patent trials. The PTAB expects to ordinarily provide for an hour of argument per side for a single proceeding. Oral hearings are set on request.
10.2.2.4.3.5 Standard of review
Petitioners bear the burden of proving that a patent is invalid by a preponderance of the evidence in the IPR.68 Thus, unlike district court proceedings, the patent owner does not benefit from a presumption of validity in IPR proceedings.
The PTAB promotes settlement of IPRs. The panel is available to facilitate settlement discussions and, where appropriate, may require a settlement discussion as part of the proceeding.
10.2.2.4.3.7 Final written decision
The panel will enter a final written decision not more than one year from the date a trial is instituted, except that the time may be extended up to six months for good cause shown.69
PTAB final trial decisions (but not institution decisions) can be appealed to the Federal Circuit.70
The AIA provides that the petitioner in an IPR is barred from raising “any ground that the petitioner raised or reasonably could have raised” during that IPR in district court or subsequent administrative proceedings.71
10.2.2.5 Post-grant review
PGR petitions must be filed within nine months of patent issuance or reissuance and may seek invalidation of patent claims on any basis and without any limitations on prior art references.73 Any person who has not filed a civil action challenging the validity of a claim of a patent may file a PGR petition challenging the patent’s validity. The standard for institution of a PGR is that the information presented in the petition would demonstrate that it is more likely than not that at least one of the claims challenged in the petition is unpatentable.74 In addition, the PTAB may institute a PGR if the petition raises a novel or unsettled legal question that is important to other patents or patent applications.75 In most other respects, the PGR trial process and ramifications parallel IPR proceedings. If the PGR is instituted and not dismissed, the PTAB will issue a final determination within one year (extendable for good cause by six months).
Table 10.1 compares the key characteristics of IPRs and PGRs.
|AIA review||Inter partes review||Post-grant review|
|Evidentiary standard||Petitioner to prove invalidity by preponderance of the evidence|
|Grounds for review||35 U.S.C. §§ 102–03||Any defense relating to invalidity|
|Prior art limited to:||Patents and printed publications||No limits|
|Threshold to institute review||Reasonable likelihood that one or more claims are invalid||More likely than not that at least one claim is unpatentable, or petition raises a novel legal question of patentability|
|Time to file||More than 9 months after issue or reissue, or after post-grant review||Within 9 months of issue or reissue date|
|Time to decision||Maximum of 12–18 months from institution decision|
|Claim amendments||Patent owner may cancel claims or propose a reasonable number of substitute claims; presumption that only one substitute claim will be required for each challenged claim|
|Claim construction||“Ordinary and customary meaning”1|
|Estoppel in subsequent civil action||Any ground raised or reasonably could have been raised|
|Effect of settlement||Estoppel provisions do not apply|
1 Phillip v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc) standard.
10.2.2.6 Derivation proceedings
The AIA authorizes the PTAB to conduct derivation proceedings to determine whether (i) an inventor named in an earlier application derived the claimed invention from an inventor named in the petitioner’s application and (ii) the earlier application claiming such invention was filed without authorization.76 An applicant initiates a derivation proceeding by filing a petition setting forth the basis for finding that an inventor named in an earlier application derived the claimed invention from the petitioner. The petition must be filed within one year of the date of the first publication of a claim to an invention that is the same or substantially the same as the earlier application’s claim to the invention.
Upon completion of the proceeding, the PTAB issues a written decision that states whether an inventor named in an earlier application derived the claimed invention from an inventor named in the petitioner’s application without authorization. A party dissatisfied with the PTAB’s final decision may appeal to the district court or the Federal Circuit.
The constitutionality of PTAB trial proceedings and, in particular, IPR, has been challenged on multiple occasions and grounds. Parties have argued that these proceedings authorize the taking of private property rights without due process and that the appointment of PTAB judges does not comport with constitutional separation-of-powers requirements. In 2018, the Supreme Court held that the IPR process does not violate Article III or the Seventh Amendment of the U.S. Constitution.77 More recently, the Supreme Court determined that the APJs sitting on PTAB panels had been appointed in violation of the Appointments Clause in Article II of the Constitution.78 To remedy this Constitutional violation, the Supreme Court rendered inoperative the portion of the governing statute79 that prevented the USPTO Director from reviewing the final IPR decisions of APJs and made clear that the Director “may review final PTAB decisions and, upon review, may issue decisions himself on behalf of the Board.”80 As the USPTO Director is appointed directly by the president, this “tailored solution” remedied the violation.