How to succeed at every stage of an inter partes review

In the five years since they were established, inter partes reviews have caused a dramatic shift in the way that patent disputes are litigated – and settled. The Patent Trial and Appeal Board (PTAB) is now the most popular venue for litigating patent disputes in the United States, and inter partes reviews are a common first step in many litigations. As the America Invents Act celebrates its fifth birthday, the inter partes review process remains an essential weapon in the arsenal of an accused infringer.

Given the importance and popularity of inter partes reviews, this article develops practical guidance to help practitioners devise strategies for inter partes review proceedings at each phase. This comprehensive review – covering inception through appeal and remand – considers data, statistics and trends compiled from 2012 to the present.

A practical perspective shapes our extensive analysis of trends and decisions which influence practitioners’ strategies. Because practitioners are generally stuck with the art and arguments made in the petition, inter partes review proceedings can be heavily frontloaded for petitioners. Having a complete understanding of each phase of the process provides insight on how to prepare and defend cases.

Phase one: filing petitions

Since 2012, the PTAB has become the default venue from which to launch invalidity challenges. Inter partes reviews gained an initial reputation as so-called ‘patent killers’ and while five years later this moniker is no longer completely accurate, filing rates have continued to rise over three of the last four years. Preparing and filing the petition is the cornerstone of the inter partes review. If you select the wrong art or fail to appreciate alternative claim constructions, there is a good chance that your petition will not be instituted – a decision that cannot be appealed. Even if your petition is instituted, your ability to argue outside the art and arguments presented in it is limited. Therefore, practitioners are best served by devoting significant analysis into and time on assessing the prior art and various claim constructions and anticipating counterarguments.

After a slight dip in 2016, the annual growth in filings since the inception of the America Invents Act has now resumed. The year 2017 has yielded the greatest number of inter partes review filings yet – a total of 1,724, an increase of 5% over 2016 and 4% over 2015, the second-highest filing year.

The first quarter of 2017 saw a particular spike in filing rates, with 548 inter partes review petitions filed during this period. This is an increase of 22% from the final quarter of 2016 and the highest-filing period by a margin of 18%. Indeed, the first two quarters of 2017 alone accounted for 985 petitions.

Timing

Litigants have one year from serving a complaint to file an inter partes review petition. So when is the best time to file? Some litigants opt to file early in order to maximise their chance of obtaining a stay of the district court litigation or to leave enough time to file a second petition in order to correct issues that did not fare well initially. While this strategy may have worked in the early years of inter partes reviews, PTAB case law has evolved to limit these perceived second bites at the apple.

Other litigants prefer to file an inter partes review petition toward the end of the one-year grace period. This allows them to obtain a better understanding of the litigation and claims at issue. It also provides more time to carefully evaluate prior art and non-infringement arguments in order to minimise future estoppel. According to our data, over the past five years an overwhelming majority of parties preferred to file their petitions in the last three months of the one-year grace period.

Figure 1. Comprehensive inter partes review timeline

Phase two: institution and discovery

While accused patent infringers continue to flock to the PTAB to challenge asserted patents, the overall institution rates have declined steadily. This section examines the grounds for institutions, factors that affect institution rates and trends for discovery in instituted trials.

Institution rate trends

When inter partes reviews first became available in 2012, over 92% of petitions were instituted, earning the PTAB the moniker “patent death squad”. Since then, the number of institutions has fallen steadily, reaching a low of 68% in 2016. However, as of November 2017 institution rates appear to be experiencing a slight uptick, perhaps signalling a levelling off.

Analysing the institution rates by year in connection with pre-institution settlement rates reveals a potential explanation for the fall in institution rates over the past five years. Pre-institution resolutions, particularly settlements, may have had a significant impact on those rates. As the inter partes review process developed, stronger petitions led to earlier settlements, which then left weaker petitions in the pool and ultimately led to lower institution rates.

When inter partes reviews first became available in 2012, only 2% settled before the issuance of an institution decision. In subsequent years, the settlement rate climbed to 9% in 2013, 16% in 2014 and 15% in 2015. In 2016 pre-institution settlement rates steadied at 16%. However, the first three-quarters of 2017 appear to show a slight decrease in these early settlements. With nearly 60% of petitions still pending, only 6% of petitions filed in 2017 have been resolved through settlement.

Another likely factor behind the decreasing institution rate is the increasing sophistication of patent owners in preparing preliminary responses. In the early days of inter partes review practice, filing a preliminary response did not statistically change the likelihood of institution, and patent owners often waited to present patentability arguments until after institution, when arguments could be supported by expert testimony. As PTAB practice matured, patent owners developed a number of successful techniques to use in preliminary responses, which included:

• explaining how a petition fails to account for at least one challenged claim element;
• pointing out defects in motivation to combine;
• arguing a dispositive claim construction issue; and
• challenging follow-on petitions for raising substantially the same arguments or prior art previously considered by the USPTO.

As these techniques have gained traction, institution rates have declined.

Effectiveness of preliminary responses

Filing a preliminary response vastly improves a patent owner’s chances of avoiding institution.

Approximately 5,000 inter partes review petitions have resulted in an institution decision, of which patent owners filed a preliminary response in over 80% of cases. There is a strong correlation between filing a preliminary response and institution rates. When patent owners do not file a preliminary response, 92% of inter partes review petitions are either fully or partially granted. When patent owners do file a preliminary response, the institution rate drops to 70%.

Figure 2. Inter partes review filings by year

Expert declarations in preliminary responses

In May 2016 an important rule change came into effect that allowed patent owners to submit expert declarations in support of preliminary responses. Some welcomed the change, contending that it would level the playing field between parties and encourage the full disclosure of rebuttal evidence by patent owners. Others pointed out that because the PTAB views genuine issues of material fact in the light most favourable to the petitioner when deciding on institution, expert declarations submitted with preliminary responses would have no significant impact on PTAB proceedings.

Since the PTAB’s rule came into effect, over 1,300 patent owner preliminary responses have been filed. However, the majority of patent owners did not include expert declarations at this early phase. Moreover, patent owners which did submit expert declarations saw no substantial impact on resulting institution rates.

In short, the submission of expert declarations appears to have had scant influence on institution. Since May 2016, the institution rate has remained at 64% when a preliminary response is filed, regardless of whether that response is supported by expert testimony.

Institution decisions by grounds

When preparing a petition, it is helpful to know which type of invalidity ground will fare better before the PTAB. Historically anticipation had been the preferred invalidity challenge in district court litigation because the proof may be more straightforward for juries to grasp. However, when it comes to invalidity arguments before tech-savvy PTAB panels, practitioners prefer to challenge claims using obviousness grounds.

As Figure 9 shows, year over year, the number of Section 103 obviousness challenges far exceeds the number of Section 102 anticipation challenges. Moreover, whether a petitioner relies on Section 102 or 103 has no significant impact on the chances of institution. In 2016, 50% of petitions relying on Section 102 resulted in institution, while 51% of petitions relying on Section 103 resulted in institution. This statistical 50/50 allocation varies only slightly year over year.

Figure 3. Inter partes review filings by quarter

Figure 4. Timing for filing inter partes review petitions over one-year statutory period

Figure 5. Institution numbers (by petition filing year)

Figure 6. Institution trends by year

Figure 7. Institution trends: preliminary response versus no preliminary response

Inter partes reviews with preliminary responses filed	%	4,095
Instituted	70%	2,879
Denied	30%	1,216

Inter partes reviews with no preliminary responses filed	%	751
Instituted	92%	694
Denied	8%	57

Figure 8. Institution trends: preliminary responses with and without expert declarations

Patent owner preliminary response, accompanied by expert declaration	%	479
Instituted	64%	305
Denied	36%	174

Patent owner preliminary response, without expert declaration	%	868
Instituted	64%	558
Denied	36%	310

Conducting discovery at the PTAB

Once a petition is instituted, the discovery portion of phase two begins. During this period, both the petitioner and patent owner are allowed to conduct routine discovery. At the outset, there was significant concern that inter partes review discovery might morph into the all-encompassing and costly discovery associated with district court litigation. However, over the past five years, the PTAB has maintained tight control over its discovery procedures.

The PTAB rarely grants requests that would expand discovery beyond the minimum allowed by the rules, including:

• producing exhibits cited in proceeding testimony or papers;
• cross-examination of any declaration testimony; and
• discovery with regard to relevant information that is inconsistent with a position advanced by the party during the proceeding.

While the parties may agree to provide other discovery without such an agreement, a party desiring additional discovery must seek permission from the PTAB.

The PTAB is a stringent gatekeeper. As with most types of PTAB motion, a party must first request permission from the board to file a motion seeking additional discovery. This is carried out via a conference call with the PTAB and the non-moving party. The PTAB typically grants permission to file the requested motion approximately 77% of the time. However, parties are not guaranteed the right to seek additional discovery and 21% of such requests are denied on the merits.

Once the moving party has permission to file, the motion must explain why routine discovery is insufficient and how any additional discovery is in the interests of justice. Because Congress intended the inter partes review process to provide a more efficient and cost-effective alternative to district court litigation, the PTAB is conservative and seldom grants these motions. Indeed, over the past five years, the PTAB’s record for granting such motions, either in full or in part, is approximately 42% and the chances of success are closely tied to the type of discovery being sought.

For example, written discovery is the most common type of discovery requested by parties and granted by the PTAB. Requests for written discovery are often used by the patent owner to bolster real party-in-interest defences, while petitioners typically seek discovery regarding conception and reduction to practice.

On the other hand, requests for additional depositions are rarely granted. Under PTAB rules, witnesses who submit declarations – including third parties (eg, expert witnesses), inventors, librarians, former employees and even persons outside the United States – must be made available for deposition. Thus, requests for depositions usually fail because the witness’s testimony is either unknown or too speculative, or else written discovery will suffice.

In determining whether additional discovery is in the interests of justice, the PTAB analyses the five Garmin factors:

• The moving party’s request must be based on more than a possibility or mere allegation. Rather, the moving party “should already be in possession of evidence tending to show beyond speculation that in fact something useful will be uncovered”.
• The moving party should not ask for litigation positions or the underlying basis of those positions, as this is viewed as an attempt to subvert the PTAB’s established rules and procedures regarding disclosures.
• The moving party should not be able to gather or generate the information by any other means.
• Requests must be easy to understand and allow the responder to “answer efficiently, accurately, and confidently”.
• Requests cannot be overly burdensome and must be “sensible and responsibly tailored according to a genuine need” (Garmin Int’l Inc v Cuozzo Speed Techs LLC, IPR 2012-00001, Paper 26 at 6-7 (PTAB March 5 2013)).

Regardless of who propounds the discovery, a party seeking additional discovery should expect an uphill battle at the PTAB. To maximise its chance of success, the moving party must analyse each of the five Garmin factors and narrowly tailor requests to information that the movant needs and knows exists. Likewise, parties opposing such requests should emphasise any Garmin factors that are lacking, particularly if the discovery is speculative or burdensome.

Figure 9. Institution decision outcomes for Section 102 and 103 grounds

Note: Year denotes the year in which the petitions were filed

Figure 10. Motions for leave to request additional discovery

Figure 11. Success rates: motions for additional discovery

Requests for rehearing

Phase two of the inter partes review trial provides parties with the opportunity to challenge a PTAB decision on institution and other decisions by filing a request for rehearing. Any party to an inter partes review can file a request for rehearing within 14 days of a non-final decision or a decision to institute trial. The petitioner can also file for rehearing within 90 days of a decision not to institute trial. The PTAB aims to respond to these requests within one month, although it may take longer as there is no mandated response time.

It is rarely worth the effort and expense of filing a rehearing request. In fact, since the inception of inter partes reviews, 87% of these requests were denied in their entirety, with only 13% being granted in whole or in part. This pattern of high rejection rates for rehearing requests has held steady year over year, indicating that the PTAB is unlikely to change course.

We also examined the subject matter of the rehearing requests and found that the vast majority were directed to institution decisions or the final written decision. Indeed, 72% of rehearing requests related to institution decisions, while 16% related to final written decisions. Other categories accounted for fewer than 12% of the rehearing requests.

In addition to being the most common subject of rehearing requests, institution decisions and final written decisions were also the most frequently rejected, with rates of over 90%. Less common subject matters, such as rehearing requests related to discovery, supplemental information or motions to exclude or expunge, had better success rates but were still granted infrequently.

A request for rehearing must specifically identify all matters that the party believes the PTAB has misapprehended or overlooked, as well as the place where each matter was previously addressed in the briefing.

Figure 12. Types of additional discovery and chance of success

Figure 13. Requests for overall outcomes (inter partes reviews)

The PTAB reviews rehearing requests under an “abuse of discretion” standard. It also requires a showing of good cause to allow admission of any new evidence. These requirements form a high bar that few requests meet and are designed to discourage old arguments from being rehashed, as well as new arguments or evidence from being raised. Parties are most likely to be successful if they can show that:

• a decision is based on an erroneous interpretation of law;
• a factual finding is not supported by substantial evidence; or
• an unreasonable judgment is made in weighing relevant factors, such as by failing to recognise existing factual support for testimony, or misreading the claim language.

Requests for rehearing also offer the PTAB a chance to correct its record and justify any factual statements.

Figure 14. Percentage of cases requesting oral hearing

Because final written decisions can be appealed directly to the US Court of Appeals for the Federal Circuit and factual statements are reviewed under a substantial evidence standard, a PTAB decision on a rehearing request could potentially undermine an otherwise viable argument. Consequently, even when the high standard for a rehearing request on a final written decision standard is met, a party should carefully evaluate the costs and risks of filing a request for reconsideration versus a direct appeal to the Federal Circuit.

Figure 15. Final written decision outcomes (2012-2016)

Phase three: prevailing at hearings and final written decisions

Once discovery ends and briefing is complete, the parties conduct an oral hearing before the PTAB and then await its final written decision.

The parties must request oral argument before the PTAB. If only one party submits a request, the PTAB is still statutorily required to conduct the hearing.

Arguments presented during an oral hearing are limited to the issues and evidence presented in the inter partes review pleadings. New arguments or evidence may not be presented – a rule strictly enforced by the board. Indeed, if there is any indication of new material, the PTAB will ask for citations to the record to support the points presented during argument.

Oral hearing provides a final chance for parties to clarify their arguments and possibly sway the panel in their favour. Unsurprisingly, over the past five years, oral hearing has been requested in 85% of cases that reach this final stage.

Figure 16. Final written decision outcomes

Note: Year denotes the year in which the petitions were filed

Figure 17. Final decision outcomes for Section 102 and 103 grounds

Figure 18. Inter partes review appeal filing trend (2014-2017)

Final written decisions

The PTAB is statutorily required to issue a final written decision within one year of instituting an inter partes reviews. The chief administrative patent judge may extend the one-year period in certain cases, but only for good cause. Unlike institution decisions, the PTAB’s final written decision is appealable to the Federal Circuit.

In its final written decision, the PTAB may cancel all or some of the instituted claims or find the claims valid. Currently, it is required to issue a final written decision as to the patentability of the instituted claims, not every claim challenged by the petitioner. However, this interpretation of US Code 35, Section 318(a) is a hotly contested issue and is currently under review before the US Supreme Court (SAS Institute v Matal).

Figure 19. Inter partes review appeal resolution (2015-2017)

We analysed the statistics surrounding final written decisions and found a prominent trend: once a trial is instituted, the patent owner’s chance of success falls dramatically. In fact, in nearly 60% of instituted cases, all claims that were instituted for trial were also found unpatentable in a final written decision.

This stands in sharp contrast to the 17% of patent owners who are able to convince the PTAB that all instituted claims are valid. Once the PTAB decides that a petitioner has shown a reasonable likelihood that a claim is unpatentable in its decision on institution, the PTAB is also likely to reach the same conclusion in its final written decision. This statistic may be unsurprising in that the decision on institution, by its nature, weeds out grounds that are unlikely to succeed although it further underscores the importance of the preliminary response for patent owners.

Figure 20. Prevailing party

However, wins by patent owners at final written decision appear to be on the rise in the past two years. Initially, patent owners did not fare well in final written decisions. From 2012 through 2014, the PTAB found all instituted claims unpatentable in final written decision at a rate of 65%, while finding instituted claims patentable at a rate of 12%. However, in 2015 this rate fell to 53%, while the number of complete patent owner wins (in which all instituted claims were upheld) climbed sharply to 22%. The declining rate may be explained by settlements and requests for adverse judgments, which weed out the stronger petitions and leave the closer calls, thus resulting in lower petitioner success rates. Time will tell if this trend continues.

Because of the approximately 18-month time to final written decisions in the PTAB, only limited data is available for petitions filed in 2016 and even this may be skewed by a disproportionate number of instances in which claims were amended or disclaimed. As of December 2017, patent owners seem to be faring reasonably well with regard for 2016 filings. Ignoring the cases in which claims were amended or disclaimed, 23% of cases filed in 2016 appear to be complete patent owner wins.

Figure 21. Federal Circuit appeals: petitioner win percentage by judge (for judges with 15-plus decisions)

Final written decision – outcomes by grounds

We also looked deeper into which grounds were prevailing at the final written decision stage. In other words, we analysed whether an anticipation challenge or obviousness challenge is more likely to succeed. According to our analysis and similar to our above findings regarding institution, for instituted claims the percentage of times that Sections 102 and 103 result in unpatentability is approximately equal year over year. For example in 2015, 71% of the instituted Section 102 challenges were successful, while 68% of the instituted Section 103 challenges were also successful. The major differentiator is that instituted Section 103 grounds far exceed the number of instituted Section 102 grounds.

Final written decision – by market sector

To better understand the true impact that inter partes reviews have on various markets, we analysed outcomes for final written decisions on a market sector basis. The market sector is calculated using RPX Corporation’s proprietary data, which determines a market sector for patents asserted in district court litigation based on a review of the accused products, named defendants and asserted patents involved in the litigation. Because over 80% of inter partes reviews challenge patents asserted in district court and the district court proceedings can reveal more information about what technologies and markets are at issue, using this data provides a more useful picture of the sectors ultimately affected by inter partes reviews filed against the asserted patent.

Figure 22. Remand decision breakdown

Table 2 identifies the number of petitions where all claims survived an inter partes review challenge per market sector, compared to the number of petitions that proved fatal to the instituted claims. For example, inter partes reviews have had a significant impact on the e-commerce and software sector, with 88% of petitions resulting in claim cancellation.

Phase four: Federal Circuit appeals

A party in an inter partes review may appeal a final written decision of the PTAB to the Federal Circuit. It can then affirm the PTAB’s decision, in whole or in part, or it can remand the decision to the PTAB to address certain issues.

Few anticipated the popularity of inter partes review or indeed the sheer volume of appeals that these proceedings would create for the Federal Circuit. As of November 2017, more than 232 inter partes review decisions were appealed to the court (approximately 12% of the petitions that reached final written decision), with 87% of those appeals in 2016 and 2017 alone.

The PTAB enjoys substantial deference from the Federal Circuit, as evidenced by the high rate of affirmances. It affirmed the PTAB on every issue in 77% of inter partes review appeals. In 9% of appeals, the Federal Circuit reached a mixed result, where at least one issue was affirmed and another issue was reversed or vacated. In 3% of appeals, the court reversed the PTAB and in 8% of appeals it remanded the case for further consideration. Finally, in 2% of appeals, the court dismissed the appeal without reaching a decision on the merits. Dismissals often occur when the parties settle. However, the court may also dismiss for lack of jurisdiction to hear the appeal. For example, the Federal Circuit may lack jurisdiction in instances where a petitioner proactively challenged a patent that was not involved in district court or ITC litigation.

With 77% of inter partes review appeals affirmed and another 10% partially affirmed, a party seeking to reverse an outcome at the PTAB faces an uphill battle.

Moreover, even if the appealing party is successful in overturning a portion of the PTAB decision, it will face the board again in a remand proceeding. Victories in obtaining a complete reversal occur only rarely – the rate is 3%. Tellingly, parties considering an appeal must understand that the Federal Circuit will likely uphold the PTAB decision or, at the very least, they will face more time before the PTAB without a guarantee that the outcome will be different.

Over the past few years, the Federal Circuit has relied heavily on Rule 36 affirmances to manage its ever-expanding docket. This allows affirmance of a PTAB decision without requiring the court to issue a full written opinion. Over the past two years, the Federal Circuit issued Rule 36 affirmances for almost 50% of all appeals on its docket, meaning that nearly two-thirds of all affirmances issue under Rule 36.

We also analysed who is ultimately prevailing at the Federal Circuit. Overall, petitioners do well there, with a win rate of approximately 69%, which is perhaps unsurprising given the petitioner success rate at final written decision and the level of deference accorded to the PTAB by the Federal Circuit.

Finally, we analysed how Federal Circuit judges are ruling on inter partes review-related appeals. Figure 21 shows how often the petitioner wins before each judge who has presided over 15 or more inter partes review appeals – this data includes Rule 36 affirmances.

To date, Judges Mayer and Reyna find for the petitioner in 84% and 88% of inter partes review appeals respectively. On the other hand, Judges O’Malley and Moore side with the patent owner more often.

Phase five: remanding to PTAB

Phase five of the inter partes review process is invoked in limited situations only. The remand phase occurs when the Federal Circuit vacates a PTAB decision and sends it back to the PTAB for further consideration. As of the time of writing, the Federal Circuit has remanded only 17 cases for a new final written decision.

In the majority of remanded cases, the Federal Circuit found fault with the board’s claim interpretation. Erroneous application of the law accounts for 36% of remanded cases, while lack of due process, failure to consider evidence and inadequate explanation by the board are also reasons supporting the Federal Circuit’s decision to bounce a decision back to the PTAB for further consideration.

While the USPTO has a bevy of statutes, regulations and case law that guide practitioners through inter partes review trials, there were no formal rules on how the PTAB must handle an inter partes review decision remanded from the Federal Circuit – until now. On November 29 2017 the PTAB released Standard Operating Procedure 9 (SOP 9), which offers procedures and guidance for both the board and practitioners on how to handle remanded cases.

Importantly, SOP 9 establishes a goal to issue a decision on remanded cases within six months of receiving the Federal Circuit’s mandate. It also addresses key questions of when additional briefing, arguments and new evidence will be allowed in a remand proceeding.

The SOP provides a detailed appendix explaining what type of procedures practitioners should expect when they find themselves in various remand situations. For example, if a decision is remanded for erroneous claim interpretation, a practitioner may secure additional briefing unless the claim interpretation to be applied was fully briefed in the original inter partes review trial. Similarly, a practitioner can expect the board to decline requests to introduce new evidence or for supplemental oral argument when re-addressing claim construction on remand. Table 3, provided in the PTAB’s SOP 9 Appendix B, details new briefing, new evidence and new argument procedures for common remand scenarios.