PTAB’s patent review system places disproportional costs on the patent holder

At the outset, it is worth noting that today's clamor over "low quality patents" is by no means a new complaint. Indeed, allegations that the Patent Office issues "useless patents" that result in "onerous litigation" have been with us for over 200 years. 4And while it is true that the PTO can make mistakes or be defrauded by unscrupulous applicants, there is no evidence that "low quality" patents are overly-prevalent today or that they cause any significant economic problems. 5Indeed, there is not even a settled definition of what constitutes a "low quality" patent (as opposed to "high" or "medium quality" one). 6To be sure, there are plenty of anecdotes and popular press stories about silly patents, such as patents claiming a "Method for Exercising a Cat" or a "Method for Swinging on a Swing." What is absent is any reliable empirical evidence that low quality patents actually present a significant problem in our patent system.

All of this means that when Congress created the AIA's post-issuance review mechanisms to solve the "problem" of "low quality patents," it was far from clear that there was actually a problem in need of solving. Even assuming that there was a problem, and that it was serious enough to warrant a legislative solution, the solution offered ended up imposing costs on legitimate patent holders that appear way out of proportion to the alleged problem of bad patents. Moreover, the AIA's post-issuance review mechanisms have significantly amplified [*52] opportunities for patent challengers to abuse the system to the detriment of legitimate patent holders. To understand why, it helps to first look at the arsenal of weapons that are available to invalidate a patent.

Historically, when the government issued a patent, the patent had a presumption of validity and only a court could invalidate it. 7Link to the text of the noteIn 1981, after decades of debating the issue, Congress created a new system that allowed patents to be invalidated in administrative proceedings-the ex parte reexamination process ("reexamination"). 8Link to the text of the noteCongress' primary goals in creating the reexamination process were (1) providing more certainty about patent validity, and (2) creating a cheaper substitute for litigation. 9Link to the text of the not

In many ways, the reexamination process resembles the procedure used to obtain a patent in the first place. Once the PTO orders the patent into reexamination, the process proceeds ex parte and the patent holder is put in the same position as a patent applicant, which includes the ability to amend the claims. 10Link to the text of the noteThe only major difference between reexamination and the original process for obtaining a patent is the limits placed on reexamination. Whereas an initial patent application can be rejected for failure to comply with any of the Patent Act's requirements, reexamination can only address questions of novelty and obviousness (Sections 102 and 103 of the Patent Act, respectively). 11Link to the text of the noteThis limitation has generated significant criticism over the years. As soon as reexamination was created, a leading patent practitioner argued that "reexamination will come up short, and actually fail to perform its intended function of 'improv[ing] the reliability of reexamined patents.'" 12Link to the text of the noteImportantly, because of its limited nature, reexamination is not a full substitute for litigation. At the same time, the reexamination procedure can be, and frequently is, used to impose significant costs and delays on patent holders. 13Link to the text of the note

The reexamination process begins with a patent challenger submitting a petition to the PTO that outlines why the patent in question is invalid in light of prior patents or publications (the "prior art"). The PTO then evaluates the petition and grants reexamination if there appears to exist a "substantial new question of patentability" with respect to any of the patent claims identified in the petition. While on the surface, the "substantial new question of patentability" seems like a significant bar, in reality it is not. The PTO grants more than 90% of all reexamination petitions. 14Link to the text of the note

Once a reexamination petition is granted, the process is conducted without participation by the third-party requester. That means that the cost to the requester of the examination is simply the fee for the request plus the cost of the prior art search and the opinion letter explaining why the claims are invalid in view of the discovered prior art. 15Link to the text of the noteThe cost to the patent holder, on the other hand, is much more significant. Not only will the patent holder have to respond to the initial reexamination filing, he will also have to spend significant resources to essentially re-prosecute the claims in the Patent Office. 16Link to the text of the note

Furthermore, even if the patent holder successfully defends against a reexamination challenge, that does not insulate him from subsequent challenges. Indeed, some attorneys have advised their clients to withhold a handful of prior art references during the initial reexamination request so that they can request additional reexaminations (at substantial cost to the patent holder) should the first proceeding be resolved in the patent holder's favor. 17Link to the text of the noteThe marginal cost to the challenger for these piecemeal submissions is minimal (beyond another reexamination request fee), but the cost to the patent holder is roughly the same for each individual proceeding. This reexamination "stacking" allows challengers to keep patents in limbo for indefinite periods of time. And while a patent in the midst of a reexamination does remain enforceable, in practice most judges will stay litigation while reexamination is pending. All of these factors result in reexamination being an adjunct rather than an alternative to litigation. 18Link to the text of the note

The upshot is that reexamination failed to achieve Congress's goals. Because of its limited nature, it failed to provide a substitute to litigation. As a result, it increased, rather than decreased the costs and duration of disputes, 19Link to the text of the notein direct contradiction of Congress' intent in creating the system. It also failed to provide more certainty about the validity of issued patents. Surviving reexamination does not insulate a patent holder against litigation, nor does winning a judgment of validity in litigation insulate against reexamination. 20Link to the text of the noteIndeed, on average, a patent that is subject to reexamination is reexamined twice, with some being reexamined as often as four, five, or even six times. 21Link to the text of the noteAll of these shortcomings stemmed from the following flaws in the patent reexamination system: 1) the lack of a meaningful threshold to initiate the process; 2) the lack of estoppel provisions either in civil suits or in subsequent proceedings at the PTO; which in turn results in 3) the lack of certainty about the validity of the patent following reexamination; 4) disproportionate costs on the patent holders; and 5) excessive length of the process itself.