January 2019

Use of Arbitration In Place of Inter Partes Review Proceedings

An IPR might be more efficiently accomplished through arbitration than through a PTAB proceeding, so it should be considered by practitioners.

An inter partes review (IPR) might be more efficiently accomplished through arbitration than an IPR through a Patent Trial and Appeal Board (PTAB) proceeding, so it should be considered by practitioners. An IPR Arbitration process can be completed in less time and result in a binding decision. In response to the Supreme Court’s SAS ruling that arguably has resulted in a more complex IPR system, litigants may substitute an IPR Arbitration to obtain a patentability ruling in a shorter, less expensive, and less complex manner.

Supreme Court: SAS Institute v. Iancu

The Supreme Court in SAS Institute v. Iancu, 584 U.S. ___, No. 16-969 (April 24, 2018), held that all claims asserted by an IPR petitioner must receive adjudication through a full PTAB review including a final ruling. As a result, in August the U.S. Patent and Trademark Office (USPTO) announced that in view of the SAS decision, fees for PTAB trials are to increase by roughly 25%. So the filing fee for an IPR filed in 2019 is likely to rise to nearly $20,000 (plus $18,750 Post-Institution fee, both up to 20 claims). The USPTO announcement noted that as a result of SAS, the PTAB will no longer be able to institute an IPR on less than all claims challenged in a petition, leading to the fee increase due to significant additional work for a given instituted IPR.

The SAS ruling effectively ended the PTAB’s partial institution practice — which allowed only part of the claims originally challenged by a petitioner to be adjudicated. Many attorneys have predicted that SAS will increase the patent holder’s expenses resulting from the requirement to defend all the asserted patent claims. Small to midsize companies and start-ups who could have mustered the resources to participate in an IPR pre-SAS might now be unable to participate fully in an IPR due to the increased filing fees and attorney’s fees now required to withstand a more involved PTAB proceeding and even lengthier appeal.

The SAS ruling has been described as having the practical effect of forcing the PTAB to institute fewer IPRs (to avoid potentially causing further backlog) in order to preempt the inevitable overwork required when all claims must be fully adjudicated in each IPR.

As a result of the SAS ruling, the overall fees and time to challenge a patent, beginning with an IPR, will increase — especially attorney’s fees for appeal to the Court of Appeals for the Federal Circuit (CAFC). Between 2012 and 2015, appeals from the USPTO to the CAFC increased from about 100 to 400. The CAFC’s workload will likely increase further in light of SAS. The PTAB can no longer dispose of a subset of challenged claims at the institution phase (a decision that is not subject to appeal). Rather, all challenged claims must be addressed in the final decision, providing additional appealable issues for the CAFC to decide.

Efficiencies via IPR Arbitration

By using an IPR Arbitration process that mirrors an IPR proceeding at the PTAB, parties can take control of the process and institute measures to save costs and time. Using arbitrators with significant patent trial experience, including former PTAB judges, allows for a carefully planned process and thoughtfully crafted award/ruling. All such arbitration awards must be respected and enforced by the USPTO under 35 U.S.C. §294 (with respect to the parties in the arbitration).

If the parties agree, an IPR Arbitration timeline can allow for the completion of the invalidity process within six months. The proceeding includes opposer’s/petitioner’s disclosure of asserted prior art and a briefing schedule for patentee’s motion to amend, and claim construction leading to a claim construction order; all within 90 days of the initiation of the IPR Arbitration. In the final 90 days, the opposer files its final assertion of claims, final asserted prior art and invalidity contentions leading up to the arbitration hearing and award. Such a compact schedule could be open to modification upon agreement of the parties.

During an arbitral proceeding, a party would be entitled to raise as defenses any or all of the defenses set out at 35 U.S.C. §282, such as noninfringement, unenforceability, patent or claim invalidity or other similar defenses. The arbitration award in such a proceeding would be enforceable just as any other arbitration award, as provided in 9 U.S.C. §9, provided that proper notification of the award has been previously given to the Commissioner of Patents, as required by 35 U.S.C. §294(d). The IP