The topic of inter partes reviews (IPRs) has dominated conversation in patent circles for the last several years (see our archive for some of our past articles on the subject). As uncertainty grows in the biopharma community about IPR procedures and the future of innovation, BIO will make IPRs a major topic of discussion at our upcoming IP and Diagnostics Symposium (BIO IPDX) as well as BIO’s IP Counsels Committee Meeting in November.
An administrative proceeding created by the 2011 American Invents Act, IPRs allow anyone to challenge an existing patent as invalid before a panel of administrative patent judges in the Patent Trial and Appeal Board (PTAB) at the United States Patent and Trademark Office (USPTO).
In the last three years alone, 90% of the more than 5,000 patent challenges filed have been IPRs. Only 15% of patents that undergo an on-the-merits proceeding and reach a final decision survive unscathed—in fact, most are invalidated. A federal judge has compared the PTAB Board judges to property killing death squads.
The biotech community is understandably concerned about IPRs and the impact they may have on innovation. Patent protection is crucial for investment and product development, and large investments may have been made in reliance on a patent that was examined and granted by the USPTO. Such a patent may have been re-examined and again confirmed valid by the USPTO, even confirmed valid in district court litigation, and still the PTAB will give it a euphemistically-termed “fresh look.” If a patent challenge is rejected, new petitions may be filed, trying different arguments, until the PTAB decides to start an IPR proceeding. The PTAB will also re-decide cases that were already decided in district court.
Innovative businesses have gotten the message that they should have no confidence in a prior patent examiner’s, or PTAB judge’s, or federal judge’s decision.
For a split second, there appeared to be hope. A January report analyzing all PTAB decisions from its first three years found that patents are surviving the process 66% of the time. Were IPRs no longer the patent threat we once feared?
Unfortunately, a spike in settlements and disclaimers is driving up the “survival rate.” Knowing that bad things happen when a PTAB panel reaches the merits of a validity dispute, patent owners face great settlement pressure – one out of three IPR petitions is settled along the way rather than letting the PTAB get to a decision. Close to 10% of patent owners just give up and disclaim their patents.
What the current process proves is that USPTO, which insists it has unbounded discretion in the way it manages and decides these proceedings, is on track to claim an astounding amount of power over the way patent law is shaped in the United States.
Unless we make significant changes to the IPR system, these abuses will continue, and innovation will suffer the consequences.