Jim Nelson
Schwegman, Lundberg & Woessner

Weak electronic and business method claims are the rights being invalidated in the US IPR system, according to Jim Nelson of Schwegman, Lundberg & Woessner

Is litigating through the IPR system a cheaper alternative to traditional court litigation in the US?

The inter partes review (IPR) system is a cheaper alternative to district court litigation and that’s why the US put it into place.

In US litigation, attorneys’ fees can cost up to $5 million for each party and the average cost per patent can be $4 million to $8 million. If the litigation concerns a pharmaceutical and it’s a commercial patent, the parties will fight to the end because the financial incentive is huge.

When looking at typical business method cases, however, the financial incentive is not so large. Typically, the patent won’t cover the whole smartphone or all of the software because it is focused on a single component. Therefore, a plaintiff won’t lose a large amount in sales and they have other patents that cover the technology.

While an IPR is a lot cheaper, it’s also faster. The Patent Trial and Appeal Board (PTAB), which hears IPR petitions, has a 12-month turn around process. There has been some consternation about whether that year is sufficient, but the PTAB has allowed discovery and deposition, which is typically part of jurisprudence, but it is curtailed relative to the trial.

Also, the PTAB only focuses on validity from the point of view of printed references. You can’t challenge a patent because of prior sales or allegations that the claims are vague. That’s another reason why it speeds through the PTAB—all the other issues that are raised in district court litigation are not part of an IPR.

Finally, it’s worth remembering that the PTAB is a tribunal. The chief judge of the PTAB has said that the judges do not examine patents, and they are not there as patent examiners. That is why they almost always do not allow amendments: they’re there to judge both sides. It’s an administrative adjudication of the facts as they’re presented and not an examination of a patent that happened to be going back into re-examination. It’s a review of the patent as it stands.

Some patent owners have argued that the IPR system is unfair—why do you think that is?

That is a question of perspective. Overall, including business method patents, patent owners have won IPR cases about 15 percent of the time, so alleged ‘important’ claims have been shot down. That statistic looks very unfair. But for pharmaceuticals and biotechnology, the success of the patent owner is significantly higher, with 36 to 40 percent of the cases filed in life sciences being won.

That’s quite a difference. Why is it so large?

There’s a chasm between the way business method and life sciences patents are written. Firstly, business method patents are predictable—they are man-made inventions.

Life sciences inventions, on the other hand, are largely unpredictable. This feature makes it more difficult to defeat a life science patent.

Secondly, business method patents tend to be very short in length. In the life sciences, however, some patent documents are incredibly long. Pharma patents, for example, can contain 300 pages that explain the claims in minute detail, with a plethora of examples of varying scope, so that if one claim fails, another will still cover the overriding invention and the patent will stand up to scrutiny.

That’s why the IPR can be seen as unfair to patent owners. The fact is that weak, electronic and business method claims are the ones that are lost—they shouldn’t have been issued in the first place. But as this process continues, you’ll see an evolution within business method claims and they will be better able to withstand the challenge of an IPR.

While IPR challenges can currently only be based on anticipation and obviousness, the Supreme Court and Court of Appeals for the Federal Circuit have recently issued significant case law around Section 101, including the Alice and Myriad decisions, covering business methods and biotechnology, respectively.

One possibility for the future is that IPRs may be expanded to include this Section 101 argument.

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