US patent chief seizes control of patent reviews

The number of inter partes reviews by the U.S. Patent and Trademark Office is expected to decline dramatically in the wake of a decision Friday by the agency's new director, John A. Squires, to take personal control over whether patents' validity will be reviewed.

Unless Squires' decision and proposed rulemaking is struck down by a court challenge, the America Invents Act - a 2011 law that established the Patent Trial and Appeal Board - will effectively be repealed by administrative action, legal observers said.

"I think this is another major step backwards, and may spell the death knell for IPRs in the Trump administration," wrote Mark A. Lemley, a Stanford Law School professor and partner at Lex Lumina LLP, in an email. "There is no way the Director can actually give careful attention to all the IPRs that are filed."

Squires also is proposing a new rule that will limit the opportunities for challengers to patents by allowing district courts, for example, to decide the validity of a patent before the patent office gets to it - a process that takes about 18 months.

That will encourage plaintiffs to file in venues that move quickly - such as the Western District of Texas, Eastern District of Texas, and Eastern District of Virginia - to decide cases before the patent office, assuming Squires allows the PTAB to consider them at all.

The rule would also limit defendants to a "one and done" process in which the patent office will deny inter partes review if the case was already decided by district court, the International Trade Commission, a prior PTAB proceeding or ex parte reexamination.

Squires argued in Friday's proposal that the rule will encourage inventors to put money into what they discover. "If investors lack confidence that a patent will be found valid when it is enforced, the patent will not give them the assurances they need to invest," he wrote.

The combination of the Squires' limit on inter partes review and the proposed rule would largely undo that changes made in the AIA, a hard-fought legislative compromise that technology companies - often defendants in patent infringement cases - said put necessary limits on patent holding companies that file many infringement complaints.

Critics, however, said the AIA went too far, protecting well-heeled Silicon Valley companies at the expense of small inventors by allowing companies accused of infringement to get a "second window" to invalidate an already-approved patent.

"It's the biggest sea change we've seen in patent litigation since the America Invents Act," said Bijal V. Vakil, a Palo Alto-based partner with Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, in a phone interview.

Dennis D. Crouch, a professor at the University of Missouri School of Law and creator of the Patently-O Blog, said inter partes review has been a valuable tool for defendants in patent infringement complaints, especially Silicon Valley companies, by allowing them to invalidate patents before the patent office instead of fighting claims in court.

"IPRs have been a powerful tool that accused infringers have used to invalidate thousands of patents over the past decade," Crouch wrote in an email.

Crouch said inter partes review by patent office judges offer three key advantages: a lower "preponderance of the evidence" standard to meet, expert judges and a fast process.

"In district court litigation, patents are presumed valid, and challengers must prove invalidity by clear and convincing evidence - a high bar," he added.

Vakil and other attorneys predicted that patent litigation would return to "pre-AIA" days, with defendants trying to file lawsuits for declaratory relief in friendlier jurisdictions, such as the Northern District of California, instead of relying on the Patent Trial and Appeals Board to invalidate patents.

He said that defendants should expect juries, not the PTAB, to decide whether questionable patents are invalid, boosting the leverage of patent assertion entities and enacting "a tax on innovation."

The Trump administration has been friendlier to patent owners, in its first term, but this is a step beyond anything tried during the president's first term. Squires' action, and his proposed rule - which won't be adopted for a few months - is a major win for AIA opponents.

They lost in 2011 but are winning now, legal observers said.