Strategic Decision Making in Dual PTAB and District Court Proceedings

Abstract:     

The post-grant review proceedings set up at the U.S. Patent and Trademark Office’s Patent and Trial Appeal Board by the America Invents Act of 2011 have transformed the relationship between Article III patent litigation and the administrative state. Not surprisingly, such dramatic change has itself yielded additional litigation possibilities: Cuozzo Speed Technologies v. Lee, a case addressing divergence between the manner in which the PTAB and Article III courts construe patent claims, will soon be argued at the U.S. Supreme Court.

Of the three major new PTAB proceedings, two have proven to be popular as well as controversial: inter partes review and covered business method review. Yet scholarly analysis of litigant behavior in these proceedings has been limited thus far to descriptive data summaries or specific policy perspectives on these types of post-grant challenges, such as their impact on the well-rehearsed patent troll debate. In this article, we present what is to our knowledge the first comprehensive empirical and analytical study of how litigants use these inter partes review and covered business method review proceedings relative to Article III litigation.

A major normative argument for administrative ex post review is that it should be an efficient, accessible, and accurate substitute for Article III litigation over patent validity. We assess the substitution hypothesis, using individual patents as our general unit of analysis as well as investigating patent-petitioner pairs and similar details in greater depth. Our data indicate that the “standard model” of explicit substitution — wherein a district court defendant subsequently brings an administrative challenge to patent validity — occurs for the majority (70%) of petitioners who bring inter partes review challenges. An important implication of this effect is that the PTAB should use a claim construction standard that mirrors that of the district court, so that substituting administrative process for judicial process does not lead to substantively different outcomes.

Notably, however, standard substitution is not the only use of the PTAB: particularly in the area of inter partes reviews, we also see a surprising percentage of cases (about 30%) where the petitioner is not the target of a prior suit on the same patent. The frequency of these nonstandard petitioners, as well as their tendency to join the same petitions as an entity that has been sued, varies by technology. Our data on nonstandard petitioners provide some insight into the extent to which patent challengers are engaging in collective action to contest the validity of patents. Depending on the details of how nonstandard petitioning and collective action are being deployed, this activity could provide a social benefit or constitute a form of harassment.

Number of Pages in PDF File: 61

Keywords: patent, administrative, empirical, inter partes review, covered business method, collective action, America Invents Act, IPR, CBM, PTAB, USPTO, AIA

JEL Classification: D23, D73, K23, K41, O31, O34, O38