The National Pulse

Patent lawyers ponder the changed post-grant process

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The U.S. patent system hasn’t seen anything like it before. And attorneys aren’t quite sure what to make of it.

Some say post-grant review, which went into effect Sept. 16, will alter patent practice dramatically. “It is a real game changer,” says Matthew I. Kreeger, a partner with Morrison & Foerster in San Francisco.

Others think the impact of post-grant review will be minimal. “Few people will use it,” says Scott A. McKeown, a partner with Oblon, Spivak, McClelland, Maier & Neustadt in Alexandria, Va., and chair of the Committee on U.S. Patent and Trademark Office Affairs (Post Grant and Inter Partes) of the ABA Section of Intellectual Property Law.

Post-grant review is a new method of challenging a patent’s validity, combining aspects of litigation and administrative review. Other types of proceedings before the PTO review the validity of issued patents, but those proceedings allow patents to be attacked only on the basis of prior art and only when such art is found in patents or printed documents.

By contrast, post-grant review is far less restrictive. A patent’s validity can be challenged for lack of written description, lack of enablement, lack of novelty, or anticipation by any form of prior art. A patent can also be challenged on the basis of patent-ineligible subject matter, according to the PTO and many attorneys.

“It is a new type of animal,” says Janet S. Hendrickson, a partner with Senniger Powers in St. Louis and vice-chair of the Patent Legislation Committee of the ABA Section of Intellectual Property Law. “You can raise all sorts of arguments that you couldn’t raise before, except in litigation,” Hendrickson says.

Post-grant review is like litigation in other ways, too. Whereas other PTO proceedings on patent validity are conducted initially by patent examiners, each post-grant review will be heard by a panel of three administrative law judges from the PTO’s new Patent Trial and Appeal Board, who are empowered to render decisions on matters beyond the authority of patent examiners.


Post-grant review will use a variety of litigation-style procedures, including “direct testimony of fact and expert witness testimony in the form of declarations, cross-examination depositions [and] limited discovery—greater than current USPTO proceedings but less than district court litigation,” says Janelle D. Waack, a partner in the Houston office of Novak Druce Connolly Bove + Quigg.

Post-grant review, however, should be much faster than litigation. The PTO, which has hired scores of new administrative law judges, has declared that each post-grant review will be decided within 12 months. This would compare quite favorably with patent litigation in district courts, where the median time to trial is 2½ years, according to a 2011 study by PricewaterhouseCoopers.

Post-grant review also should be significantly cheaper than district court litigation. This will enable many medium-size businesses to challenge dubious patents, according to Kreeger.

Then there’s the matter of expertise. Post-grant reviews will be decided by administrative law judges who know a great deal about both technology and patent law, so these proceedings will provide a “much more sophisticated review of patent validity than you would see from a jury or possibly a judge that only occasionally handles these types of issues,” says Eric Sophir, a partner with SNR Denton in Washington, D.C.

Finally, courts and the PTO apply very different burdens of proof. District courts presume patents are valid and will overturn them only when challengers present “clear and convincing” evidence of invalidity. In post-grant review, however, patents receive no presumption of validity, and they will be overturned if a preponderance of the evidence indicates invalidity.

Despite all the advantages post-grant review provides to those challenging patents, relatively few businesses will use this process anytime soon. That’s because before 2015, post-grant review can be used on only a small fraction of patents.

At the moment, post-grant review can be used to challenge only “covered business-method patents.” These patents, according to the PTO, claim “a method or corresponding apparatus for performing data processing or other operations used in the practice, administration or management of a financial product or service.” This covers patents on methods used in the financial service industry, but it might also apply to financial methods used in other industries.

“It is clear that a method of distributing money between accounts is a covered business method, but is a method for collecting money for online advertisements a covered business method?” asks Marc S. Kaufman, a partner with Reed Smith in Washington, D.C.

For patents that do not include covered business methods, post-grant review won’t be available for a while. It can be used against only those patents that result from patent applications filed on or after March 16. “The typical pendency for an application … is 2½ to four years, so these patents won’t be issuing until 2015 at the earliest,” Hendrickson says.

(She notes there is a small exception: If an applicant who files on or after March 16 pays extra for a prioritized patent examination, any resulting patent should issue within one year. Such prioritized patents could be subject to post-grant review in late 2013 or early 2014.)


Even when all patents become subject to post-grant review, three factors may significantly restrict how often this process is used. First, anyone seeking post-grant review for a patent resulting from an application filed on or after March 16 must file a petition within nine months of the patent’s issuance. This petition must contain “the complete challenge with all the evidence lined up,” Kreeger says.

Many small and medium-size businesses will find it hard to meet this nine-month deadline. “It takes a lot of infrastructure to watch when your competitors’ patents issue and to file a petition for post-grant review within the nine-month window. So larger entities are more likely to be involved in this, especially those in highly competitive industries,” Hendrickson says. By contrast, covered business-method patents that result from applications filed before March 16 are not subject to the nine-month window, allowing challengers more time to prepare.

The second and more important reason that businesses may shy away from post-grant review is estoppel. A party that uses post-grant review to attack a patent’s validity is thereafter estopped from raising any issues the party could reasonably have raised in the proceeding.

“If you lose, you’ll be estopped from challenging the patent on almost any ground,” McKeown says. “It is an all-or-nothing bet. You won’t be able to challenge the patent if you are [subsequently] sued in court for infringement.”

This broad estoppel will deter many from using post-grant review, according to experts. “People will be unlikely to file for post-grant review unless they have a very strong case,” Hendrickson says.

A third factor is uncertainty. A company that wishes to attack a patent may be reluctant to rely on a legal process that has no track record—especially when it entails significant costs and a risk of broad estoppel.

“There’s a huge amount of uncertainty about how effective this process will be [for challengers]. Until people see how this process works out, I think people will hesitate to use it,” Kreeger says.

Yet even skeptics expect post-grant review may see significant use against covered business-method patents because, for those patents, post-grant review creates estoppel on only the issues actually asserted in the proceeding.

This narrow estoppel renders post-grant review far more appealing. Against covered business-method patents, post-grant review can be “the ideal choice,” McKeown says.


An Ocean Apart

Europe has had post-grant patent review for years, and the process has proved quite popular. Approximately 5 to 8 percent of all patents issued by the European Patent Office are challenged in post-grant review, according to patent attorney Janet S. Hendrickson of Senniger Powers in St. Louis. This might not sound like a lot, but if patents in the U.S. were challenged at the same rate, that would produce annual challenges to about 10,000 to 13,000 patents, she estimates.

It’s no surprise that challengers use the EPO’s post-grant review so frequently. They have a high probability of winning. “Two-thirds of the time the [challenged] patent is either completely revoked or its claims are narrowed,” Hendrickson says. “When you have a two-thirds chance of success, that’s pretty good odds.”

Moreover, obtaining post-grant review is relatively cheap. The EPO subsidizes these proceedings, so the total cost to a challenger is about $20,000, according to Hendrickson. The process is easy, at least for challengers. A challenger can petition for review and then basically walk away, leaving the EPO to do the work. A challenger “can choose whether to participate,” says attorney Matthew I. Kreeger of Morrison & Foerster in San Francisco.

Finally, there’s almost no downside to seeking post-grant review from the EPO. A challenger can bring its challenge anonymously, using a front. And there’s no estoppel. A challenger that loses an EPO post-grant review can challenge the patent later in court on the exact same grounds, according to Kreeger.

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