This time we have an interview with Felicia Boyd about the PTAB (Patent Trial and Appeal Board) and some interesting patent enforcement statistics from Europe.
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Rolf Claessen and Kenneth Suzan
Episode 13 – October 17, 2014
FB = Felicia Boyd of Barnes & Thornburg LLP
RC = Rolf Claessen
KS = Kenneth Suzan
Hi. This is Alex Butterman at Staas & Halsey LLP in Washington, D.C. I love podcasts because they help me survive my long commute and I love a podcast by a couple of colleagues who are helping me stay up-to-date with IP Law. You are listening to IP Fridays. Thank you Rolf and Ken.
KS: Hello and welcome to this episode of IP Fridays. Our names are Ken Suzan and Rolf Claessen and this is THE podcast dedicated to Intellectual Property. It does not matter where you are from, in-house or private practice, novice or expert, we will help you stay up-to-date with current topics in the fields of trademarks, patents, design and copyright, discover useful tools and much more.
RC: Welcome to Episode 13. This episode will be completely about patents. We have an interview with Felicia Boyd, who is a partner with Barnes & Thornburg LLP, about the PTAB and I will tell you a little bit about patent enforcement statistics in Europe. But first I want to ask you to leave a review for us on iTunes. You can go to www.ipfridays.com/itunes, or leave us a review on Stitcher at www.ipfridays,com/stitcher and if you really like us, you can leave us a review and that would really help spread the word about this podcast. So, without further ado, I turn over the mic to Ken Suzan who has the interview with Felicia Boyd.
KEN SUZAN’S INTERVIEW WITH FELICIA BOYD
KS: Thank you Rolf. I am joined today by Felicia Boyd who is a partner with Barnes & Thornburg in the firm’s Minneapolis office where she is a member of the Firm’s Intellectual Property Department. Ms. Boyd focuses her practice on complex intellectual property litigation and has lead plaintiff and defense litigation on a large variety of claims related to patents, copyrights, trademarks and trade dress. Her litigation experience spans several industries including medical devices, software, music, pharmaceuticals and manufactured goods. Her victories on behalf of clients have included preliminary injunction motions, summary judgment motions, favorable settlements and jury verdicts at trial. She is a registered patent attorney with a bachelor’s degree in chemistry and has represented clients in contested proceedings before the United States Patent and Trademark Office. Felicia received her B.A. cum laude from St. Olaf College in 1984. She earned her J.D. magna cum laude in 1987 from the University of Minnesota Law School. Felicia, welcome to our program.
FB: Thank you Ken.
KS: Thank you. So we are going to talk today about an article which is the cover story of the September 2014 issue of Managing Intellectual Property. Can you tell our listeners a little bit about what is known as the “PTAB” (the Patent Trial and Appeal Board)? What is it? What do they do? And why do businesses need to know about this Board?
FB: Sure Ken. We call it the “PTAB” rather than the “P-T-A-B”. So, the PTAB, or the Patent Trial and Appeal Board, was formed as part of the America Invents Act and that Act went into play September 16, 2012, and the intention was to set up a process where people could challenge the validity of a patent. They wanted it to be faster and less expensive than court proceedings. It really was done as a way to handle some of the cases that were filed by patent trolls and to get some of what they thought were shaky business method patent claims reviewed again by the Patent Office and try to deflect a lot of pressure on the courts. So that’s how it was set up and the process was intended to be pretty quick. You know, you file your petition for a determination of patentability based upon whether or not the claims were invalid in view of certain patents or printed publications, the Patent Office then decides (the PTAB) whether or not you have met your burden of showing them that it is reasonably likely that more than one of the claims is invalid in view of the art cited, and then a procedure or a trial is instituted and the patentee gets an opportunity before a trial is instituted to say “oh no, they’ve got it all wrong, our claims are valid”, and then it would proceed for a year to trial, once they decide to institute a trial, and a written decision would come out from the PTAB as to whether or not the claims 1, 2, all are valid or invalid. So that is what was contemplated and at the time it was thought that there would be some time for discovery that would be more limited than the District Court discovery and that this would be really focused on some of the business method patents that were the subject of patent troll litigation.
KS: Now, the headline of this article reads “The Surprising Rise of PTAB.” Why is this so surprising? What’s the big surprise?
FB: The big surprise is many surprises here. People did not anticipate how popular this procedure would be and that it’s become at the time – you have to go back – before they had the PTAB proceedings and what they called the IPRs (Inter Partes Reexamination Proceedings) you had old-time reexamination proceedings. Those proceedings were done before the Patent Office, the Board of Patent Appeals and Interferences, and they would go on for four or five years. Very long procedures. You know, 95% of those petitions for reexamination were accepted and they just thought they were putting into place a new process that would be a little faster, a little more efficient. But that’s not what happened. What happened instead is that the number of filings are HUGE. They are significant. And there are charts and graphs that are fabulous and they show that they are filed at a rate of three to four times more petitions than they had in the older reexamination proceedings and that rate of filing is increasing. So you are looking at averaging out somewhere between 1,500 and 2,000 petitions per year being filed. So that has been a big deal. The other thing that has happened, and there are going to be changes and those changes will come down probably within the next year or two is, you know, they really did want to have this thing fast, so it’s one year guaranteed from the time the trial is instituted until the end. Well, as a result of that speed, and you have the increased number of petition filings, you have a back-log that is possible. It hasn’t quite happened yet because the Patent Office has been very aggressive in hiring new judges.
KS: That is good to hear.
FB: That is good to hear in this economy that you have new judges. So you have more judges being hired to handle all the petitions that are being filed. But I think what was really unexpected was that when the first decisions started coming out, the claims were being invalidated and they were being invalidated at such a rate that even the former Chief Judge Rader said that the Patent Trial and Appeal Board was really a death squad for patents. That was very harsh and that was definitely not what people thought would happen and maybe it will level out as the different types of patents get considered in the proceedings. So that is one thing. One was the success of the whole process – more people took advantage than they thought; two, the result that more claims were being invalidated than anyone thought possible; and the third thing was discovery. When the process was set up, people thought there would be some discovery. You have to remember, when you are in District Court litigation, that you have expansive discovery rights. When they created this process, they contemplated that there would be some form of routine discovery that could happen in a very short window of time and that’s not happening. The PTAB has basically denied the ability to do anything outside of cross examination of experts for people who file declarations in support of their positions.
KS: So is that sort of a game changer or how does that impact strategy?
FB: It’s huge because your time is going to be tight, you are not going to have access to documents or interrogatories, you do have the right to file a Motion for Discovery if you believe discovery is necessary in the interests of justice, and that’s a standard, but the Motions are generally being denied. So, I do think that you are going to see some changes to the types of discovery that you can get but right now it’s pretty much locked down. The other big thing is that the process allows you, as a patentee, to amend your claims. When you are caught off guard as a patentee and oh my gosh someone is challenging my patent that I spent a ton of money on and you want to be able to defend that — you see their prior art and you see that that looks kind of close to what I have claimed. Under the process, you should be allowed to amend your claims to narrow the scope of your claims and still have something left over that is patentable. It’s not always possible but generally it’s something that is contemplated by the entire process. What has happened, however, is that there are strict page limits, really strict page limits – it’s 15 pages.
KS: 15 pages?
FB: 15 pages. And in those 15 pages you have to lay out all the original claims, all the proposed amendments, the prior art impacted, why you think this is still patentable. The list of five or six items you have to hit in those 15 pages is almost impossible and I think looking at what has happened so far, there’s probably been only one or two companies, of the more than one thousand petitions that have been filed, that have been able to successfully get through that hurdle and amend a claim.
KS: Wow. That is a tight amount of space to fit all that information.
FB : I know! You understand the page limits that you are dealing with. But that is tight.
KS: When should people consider using PTAB? Is it optional? Is it mandatory in certain circumstances?
FB: Well, it’s not mandatory. It’s an option available to people that are defending a claim of patent infringement or someone who is looking at a competitor’s portfolio and gets a charge of infringement and is concerned about potential litigation. So, it’s optional. But there are some time limits that you need to consider. If you get sued for patent infringement, you only have one year from the time that Complaint is filed until the time that you can file the Petition for Inter Partes Review proceeding before the PTAB. One year. The other thing is that that window is actually shorter if you try to bring in a counterclaim or something for invalidity, then you can’t go to the PTAB. So if you are going to try to institute a declaratory judgment action, then you are cutting off your ability to go to PTAB. If you have waited too long after you have been sued, then you can’t go to PTAB.
KS: That’s something to keep in mind.
FB: You have to. Every defense lawyer who does this work knows it is an option and they really have to consider whether that’s the best approach. You have to remember that it’s not available in every case. Some patent cases you are challenging the validity of a patent because the inventorship is wrong, or you think there is fraud, or there is an indefiniteness problem. So you have certain grounds but you don’t have prior art that is defined under the statute. Well, IPR procedures are for prior art. It’s not for the other types of invalidity challenges that exist – invalidity or unenforceability challenges. It’s a way to handle one type of challenge and it’s the most common. 102 and 103 defenses are the most common and this is one way to get a streamlined take at it.
KS: What about patent trolls Felicia? We talk about them all the time here at the Firm. Was PTAB designed to deal with patent trolls and what have we seen so far in connection with the war against patent trolls?
FB: It was set up as a way to get rid of patents that are on shaky grounds and they have been very effective in eliminating a lot of the claims and invalidating most of the claims that have gone through trial. Some claims, however, have survived. I think the bigger surprise is that people are actually using the process to tackle innovator patents. You know, big companies are becoming the subject of PTAB proceedings from one of their competitors because it is a pretty quick way to take a poke at your competitor’s patent portfolio.
KS: That speed is very important, particularly in this industry and in this economy.
FB: Yes. And I think that the investment community, Wall Street, is looking at an unexpected outcome here which is that you are looking at a potential devaluation of the patent portfolios of some very large companies – 3M, Microsoft or Apple. What they thought were the crown jewels are now the subject of a very quick procedure for the Patent and Trademark Office that can invalidate them without any benefits in place to protect them. See, that is where the really big difference is. It’s not about being faster. It’s not about having the same standards. The standards are actually different. In District Court litigation, the standards protect the patentee and make it harder for defendants to challenge the validity of the patent. Patents are presumed valid. The claims are construed in a way that looks at the narrowest way to maintain validity and then looks at the patent as a whole. If you go over to the PTAB, there’s no presumption of validity. You are now on an even playing field and the claim construction is the broadest reasonable construction putting aside all prior art and everything.
KS: It changes everything.
FB: It changes everything because now you can interpret the claim in such a way as to actually make it invalid and they can then force the patent owner, if they can get into the 15 page limit, to narrow the claims if they can achieve that. So that difference is HUGE.
KS: And it makes sense to me. This is going to be a popular thing in going forward as the years go on that will be used and talked about.
The article talks about a parallel race between U.S. District Courts and PTAB. What is that race and what do practitioners need to know about the parallel race?
FB: This has happened where you get sued by a troll, we will just use a troll as our example, and you decide — I want to file a petition before the Patent Office in order to institute an IPR and I do that and they accept my petition. Now, that’s not that unusual as the rate is around 80% of acceptance. But they accept. Well, I have in the District Court a schedule and the schedule says that I have to have my discovery done by this date, I have dispositive motions on this next date, I have trial on this next date and that calendar at the District Court is about 18 to 24 months and it is expensive. But now I have a chance to go over to a PTAB proceeding which takes about one year. Well, I want out. I definitely do not want to be running two proceedings as a defense person. I want out. Otherwise you have this parallel proceeding going on. So typically what you do is file in the District Court a Motion to Stay the District Court proceedings and then that would stop. Then you would go over to the Patent and Trademark Office or the PTAB and usually that Motion to Stay is granted more than 50% of the time, and the Federal Circuit has made it clear in recent decisions that it is not a good idea to deny that Motion even if you are on a rocket docket file in the District Court. They are saying you know that is an abuse of discretion and you really need to let people come over but still you have this problem. Now, if you do have two proceedings going on at one time, you can have a really weird result because you have in District Court a trial go forward, you could become liable for patent infringement, the patent could be found invalid and then a couple of weeks later you can get a decision from the PTAB saying that all of the claims are invalid. So now what happens?
KS: Yes, it’s conflicting.
FB: It is conflicting and the Federal Circuit has said, most recently, that it basically gets you off the hook in the District Court case and the claims are invalid.
KS: That’s helpful to know.
FB: But that’s the race. You don’t want to have two proceedings — you want to have one and if you do have two you definitely want to be pushing one – the PTAB proceedings – and trying to delay on the District Court proceeding.
KS: Felicia, will the growth of PTAB cases continue to rise as rapidly as we have seen on these charts or is this a passing fad with initial interest and then it eventually dies down?
FB: I think it will continue at least at this pace because there is no reason not to. It is more expensive up front because you have to do your petition and get your ducks all in a row, but the chances of success are so high that you want to take that path in order to avoid liability for patent infringement. The downside risk of patent infringement cases is so large that you’ve got to do what you can to avoid trial and an adverse decision.
KS: Felicia, very insightful indeed. How can our listeners get in contact with you if they want to learn more or talk with you?
FB: Any time anyone can give me an e-mail at email@example.com or they can contact me directly at (612) 367-8729 which is the office based in Minneapolis, Minnesota.
KS: Thank you Felicia for joining us today.
FB: Thank you.
RC: Thank you Felicia for this great interview. In the beginning I promised to tell you more about patent enforcement in Europe and I want to give you some numbers first. So, in total there are about 2,000 patent infringement cases going to court every year in Europe (that’s an approximate number) and out of these 2,000 cases, 1,250 cases are dealt with before German courts so the vast majority of these cases, about two-thirds of all patent infringement cases, are handled by German courts and the second strongest country is France with 280, Italy with 260, Great Britain with 53, the Netherlands with 50, and there are about 14 member states with less than 10 cases and another 10 EU member states with exactly zero cases per year. So, why is this so? My best guess is that the German patent infringement system, basically the legal system, is capping the costs. So if you are going to court in Germany for patent infringement, the maximum costs would be around 70 to 100,000 Euros and that is the cost for both parties and the court because you have to know that the losing party pays all so if you are winning the case you don’t pay basically anything and if you are losing the case you also pay the attorneys fees of the other side and the court fees.
Another reason could be that the German patent infringement legal system usually insures that the first instance ruling or decision will be made within one year so this is much quicker than in many other European countries. By the way, all of the numbers that I give you are from an article in the German law journal, GRUR, of last year and I have written this article together with Thomas Kühnen who is president of a senate within the higher regional court in Düsseldorf and you have to know that the court in Düsseldorf is actually handling about a quarter of all patent litigation cases in Europe so that is a huge number and the court in Düsseldorf is by far the most frequented courts in the whole of Europe for patent litigation. It happens to be the case that this court is actually only 25 miles away from our office so once in a while we have the opportunity to be present at the court there. So, if you want to read the article that I mentioned, you can go to www.ipfridays.com/grur.
So, what happens when you are sued in Germany for patent infringement? The automatic thing that you usually do is file a cancellation proceeding against the patent that is asserted against you. You can do that at the Federal Patent Court in Munich, Germany. I can give you some statistics from the Federal Patent Court in cancellation proceedings as well. In 2011, about 50% of all patents were revoked, another 35% of all patents were partially revoked, and the remaining cancellation proceedings were rejected. In this article, we also made a comparison with the European Patent Office. If you are opposing a patent at the European Patent Office, the statistics are a little bit different. The patent is revoked in about 32% of all cases and the patent is partially revoked in about 39% of all cases. The opposition is rejected in 29% of all cases. Another thing that might be interesting for you is that about 65% of all plaintiffs in Düsseldorf were foreign so 65% of all filed patent infringement cases came from foreign plaintiffs and another interesting thing is, to my surprise, only about half of the asserted patents are challenged with cancellation proceedings. So that is enough statistics for today. If you are interested in further information about patent infringement and statistics in Europe and in Germany, feel free to contact me anytime. I thank you very much for listening to this episode and hope you tune in next time. Bye-bye.
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