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Five Years In: The AIA’s Effects on Patent Litigation (Perspective)

Sept. 8, 2016, 5:32 PM

Editor’s Note: The authors are IP lawyers at a large law firm.

By Daniel Zeilberger, Michael Stramiello, Joseph Palys, and Naveen Modi, Paul Hastings LLP

The Leahy–Smith America Invents Act (AIA) became law in September 2011, with its provisions forinter partesreview (IPR), covered business method review (CBM), and post-grant review (PGR) proceedings taking effect one year later. This article considers the potential impacts those proceedings have had on (1) the number of infringement complaints and declaratory judgment actions; (2) discovery costs; and (3) validity findings and settlement.

Complaints and Declaratory Judgment

The number of infringement complaints climbed from 2009–13, but has since fallen:[1]

[Image “AIA image” (src=https://bol.bna.com/wp-content/uploads/2016/09/AIA-image.png)]

Perhaps the 2013 spike was an anomaly. But it might mark a reversal that began as early PTAB decisions became known — many allegedly painting such a grim picture for patent owners that former Federal Circuit Chief Judge Randall Rader in October 2013 likened PTAB panels to “death squads, killing property rights.”[2]

There has also been a drop in declaratory judgment actions versus complaints:[3]

[Image “AIA image2" (src=https://bol.bna.com/wp-content/uploads/2016/09/AIA-image2.png)]

This plunge may reflect would-be defendants’ mid-2011 acknowledgement (upon the AIA’s passage) that post-grant proceedings would be unavailable to parties that have already sought declaratory judgment of invalidity. Notably, actions for declaratory judgment of non-infringement do not similarly preclude post-grant proceedings, even if an affirmative defense of invalidity is raised in response to a counterclaim of infringement.[4]

Discovery Costs

On average, challenging patents costs tenfold less before the PTAB than in district court.[5] This is in large part due to lower discovery costs in PTAB cases, where routine discovery typically consists of deposing expert witnesses, with additional discovery limited in scope and availability.[6] Indeed, accused infringers may experience huge savings when an early stay in district court precedes a PTAB decision to cancel the asserted patent.

But savings are not guaranteed. There is a large disparity in the frequency with which district courts have granted stays pending post-grant proceedings, even in the most popular patent litigation venues. For instance, as of March 2016, the Northern District of California had granted 70 percent of contested motions to stay pending IPR, compared to the Eastern District of Texas’s 28 percent.[7] Moreover, district courts often wait for the PTAB’s decision to institute a trial, which usually takes six months after a petition is filed, before deciding to stay a case.

Validity Findings and Settlement

Many would argue the PTAB has been a challenging venue for patent owners. Indeed, as of July 31, 2016, PTAB final written decisions have found unpatentability in most cases:[8]

[Image “aia image3" (src=https://bol.bna.com/wp-content/uploads/2016/09/aia-image3.png)]Given these numbers, some would say it is unsurprising that settlements constitute nearly one third of the 3,410 IPRs resolved as of July 31, 2016[9] — a figure that does not reflect deals struck before a petition has been filed.

Conclusion

AIA-created post-grant proceedings are changing the landscape of patent litigation. Complaints and declaratory judgment actions are down. Potential cost savings for accused infringers are huge. And PTAB outcomes historically disfavor patent owners, who have appeared willing to settle a large percentage of disputes. It remains to be seen whether these trends will continue as PTAB practice evolves, guided by an expanding body of caselaw and potential legislative tweaks.

[1]Judicial Facts and Figures (US Courts).

[2]“Rader Regrets CLS Bank Impasse, Comments on Latest Patent Reform Bill,” Patent, Trademark & Copyright Law Daily, Bloomberg BNA, October 29, 2013.

[3]Docket Navigator; Judicial Facts and Figures (US Courts).

[4] See Ariosa Diagnostics v. Isis Innovation Ltd., IPR2012-00022, Paper No. 20 at 8 (Feb. 12, 2013).

[5]Report of the Economic Survey 2015 (AIPLA).

[6]37 C.F.R. § 42.51(b).

[7]LegalMetric Nationwide Report, Stay Pending Inter Partes Review in Patent Cases, August 2012–March 2016.

[8]Patent Trial and Appeal Board Statistics, July 31, 2016 (USPTO).

[9] Id.

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