Last year marked the tenth anniversary of the enactment of the America Invents Act (AIA). This act created a number of new procedures for the public to challenge issued U.S. patents.  Over the past decade, the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office (USPTO) has received over 12,000 petitions for review of issued patents.  Last year, the PTAB received over 1,000 petitions, and held trials on roughly 65% of the petitions that were considered.  Once a trial was initiated, only about 25% of challenged claims survived PTAB review.  Many of the aggrieved patent owners appealed to the Court of Appeals for the Federal Circuit and some sought further review from the U.S. Supreme Court.  The following is a brief summary of some of the more important and court and administrative decisions in 2021.

Supreme Court says AIA patent trials are legit

In June, 2021, the Supreme Court finally answered the question of whether administrative patent trials under the AIA were lawful.  Many litigants over the past decade (mostly patent owners whose patents had been invalidated) have tried to cast doubt on the legitimacy of the Patent Trial and Appeal Board (PTAB) but none got so far as Arthrex, Inc., the owner of a patent on a knotless suture system. 

Shortly after its patent issued in 2015, Arthrex sued Smith & Nephew.  The defendant, Smith & Nephew, filed a successful petition for inter partes review under the AIA, and a PTAB panel of administrative law judges found the challenged claims of the Arthrex patent lacking in novelty and, hence, were unpatentable.  Arthrex appealed and presented a novel theory for the first time before the Federal Circuit based on the “appointments clause” of the U.S. constitution.

In 2019 the Federal Circuit ruled on the appeal and concluded that the way administrative patent judges (APJs) were appointed to the Patent Trial and Appeal Board (PTAB) was unconstitutional and vacated the decision with a remand that the case be heard again by another PTAB panel. The case was Arthrex v. Smith & Nephew No. 2018-2140 (Fed. Cir., Oct. 31, 2019).

The decision cured the problem going forward by severing a portion of the enabling legislation that prevents the administrative judges from being fired except for cause. The Fed. Circuit decision essentially makes all PTAB judges subject to dismissal by the secretary of Commerce without cause.  Because they lacked job protection, that made the judges “inferior” officers, rather than “superior” officers, under the U.S. Constitution and, hence, were deemed properly appointed (without the need for Senate confirmation).

Needless to say, not many people were happy with the Federal Circuit’s “fix” – not the less of whom were the 300 plus administrative judges who found themselves without tenure.  The Federal Circuit decision also created a bit of a conundrum for the USPTO by concluding that Arthrex (and many other similarly situated patent owners in other already decided cases) were entitled to rehearings.

On appeal, the Supreme Court agreed with the Federal Circuit that the USPTO’s appointment of APJs was constitutionally flawed but disagreed on the remedy.  Rather than strip APJs of all job security, the Court concluded that the Director of the USPTO should have the authority to review all PTAB decisions.  Arthrex was entitled to review of its PTAB decision by the USPTO Director but not a new trial.

The USPTO implemented interim rules shortly after the Arthrex decision to enable parties to seek review of PTAB decisions by the USPTO Director.  During the half year following the interim rules, about 80 requests for Director review were filed.  Although most of the requests for Director review so far have been unsuccessful, in two cases the Director did reverse a PTAB panel decision and remand the case to the Board.  In December, 2021, the USPTO clarified its interim rule to make it clear that parties could seek review not only of final written decisions but also of the initial decisions of PTAB panels on whether or not to institute a trial.

Discretionary Petition Denials by the PTAB Continue to be Controversial

The USPTO has taken the position since the beginning of patent challenges under the AIA that has plenary authority to deny inter partes review (IPR) and post grant review (PGR) as a matter of discretion.  For almost a decade, various PTAB panels have expounded reasons for why a petition (typical an IPR petition) should be denied a trial even when the arguments have merit.  The pleura of rationales for discretionary denials led to a 2017 decision in General Plastic Co., Ltd v. Canon Kabushiki Kaisha, IPR2016-01357 (PTAB Sept. 6, 2017) that the PTAB has deemed “precedential.”  In the General Plastic case, the PTAB asserted its authority to deny “serial” petitions by the same petitioner and listed seven factors to be considered.

Despite the General Plastics decision being deemed precedential, the PTAB has continued to layer on more reasons for discretionary petition denials.  In 2019, the PTAB began denying parallel petitions against the same patent by different petitioners and updated its rules of practice to assert an expectation of only one IPR per patent.  Also in 2019, another decision, NHK Spring Co. Ltd. v. Intri-Plex Techs. Inc., IPR2018-00752 (PTAB Sept. 12, 2018) was likewise deemed precedential and set out more factors for discretionary denial, e.g., when prior art or arguments had previously been raised during prosecution or were being presented in co-pending Federal District Court litigation.

In 2020, the PTAB designated yet another decision, Apple Inc. v Fintiv, Inc., IPR 2020-00019 (PTAB May 13, 2020) as precedential.  This decision spawned six more reasons for denying petitions when co-pending litigation has already started.  The Fintiv decision required PTAB panels to take into consideration whether the parties or issues overlap, the state of the federal court litigation and whether a trial date is set earlier than the projected PTAB decision, among other things.

The net result has been a steadily declining trial institution rate at the PTAB.  A study by Unified Patents has estimated that nearly 19% of all IPR petitions were denied in 2020 as a matter of discretion.  This surge in “procedural” denials prompted the USPTO to request public comments in late 2020 on the Fintiv factors. 

In January 2021, the USPTO published a summary of the comments showing that there was widespread dissatisfaction with its “case-specific” approach to discretionary denials, i.e., allowing individual panels to rationalize their discretionary denials and then approving some decisions as “precedential.”  Many commenters urged the USPTO to abandon this approach and instead engage in formal rule-making to govern discretionary denials.  Since the USPTO has shown no interest in replacing its case-specific approach, some parties are now requesting that Congress review this practice and, possibly revise the AIA.

New Rules for Motions to Amend

In January 2021, the USPTO finalized rules codifying a Federal Circuit decision in Aqua Products, Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017) (en banc), addressing the party’s burdens of persuasion when a patent owner wishes to present an amendment to the patent claims in response to a petitioner’s arguments.   The final rule “assigns the burden of persuasion to the petitioner to show, by a preponderance of evidence, that any proposed substitute claims are unpatentable.”  On the other hand, the final rule assigns the burden of persuasion on the patent owner “to show, by a preponderance of the evidence, that the motion to amend complies with certain statutory and regulatory requirements for a motion to amend,” i.e., rules that preclude a patent owner from widening the scope of claims, introducing new matter, or proposing an unreasonable number of substitute claims.

The final rule also asserts a right to reject an amendment “in the interests of justice” even when it is not opposed by the petitioner, e.g., due to a settlement or withdrawal by the challenger.  A decision by a PTAB panel to deny a motion to amend in such circumstances must be supported by “readily identifiable and persuasive evidence of record.”

Ex Parte Reexams on the Rise

The USPTO reported that there were 273 requests for ex parte reexamination filed in fiscal year 2021 versus only 168 in fiscal year 2020. According to the Chief Judge of the PTAB, David Ruschke, the number of ex parte reexam requests had been fairly stable from 2016 to 2020 but last year the PTAB saw “quite an uptick.”  The increase in ex parte reexam requests may be in response to the increasing number of initial determinations where the PTAB panels has exercised their “discretion” to deny inter parte reviews under the AIA.