Saturday, June 06, 2015

Forbes considers mark-up to the PATENT Act to include "pharma’s poison pill"

In a post titled Patent reform inches onwards but poison pill could kill it, Jeff John Roberts at Forbes implies that modifications made in the mark-up of the PATENT Act could be a "poison pill":

But despite evidence from scholars that the process has invalidated a relatively small number of patents, the pharma industry has persuaded Grassley in the Senate to adopt an amendment that would effectively sabotage the challenge system.

According to Krish Gupta, counsel for cloud storage giant EMC, the amendment changes the evidence and pleading rules for the inter partes review process. According to Gupta, this will make the challenge process akin to full-blown patent litigation, and eliminate the incentive for companies to use it. For companies like EMC , which has been a frequent target of patent trolls, this would be a major setback.


The price of pharma’s poison pill may be too high for the tech and retail coalition, according to a person familiar with the legislation. After seeing patent reform fail twice in five years, the coalition may prefer to walk away than to grant a concession that would amount to giving away as much as it gets, said the person who spoke on condition of anonymity.

As to the issue of third parties using IPR to manipulate stock prices, Roberts is disingenuouly silent over the stock swing Acorda faced when Ampyra was challenged by Kyle Bass:

The Bass challenge does not appear to have dented Jazz’s stock, but just the threat was enough for the pharma lobby to stick its very long nose into the patent reform effort underway in Congress. The concession it asked was an enormous one: The industry demanded that Congress effectively cripple the process at the Patent Office where Bass had challenged the Jazz patent.

Roberts is not so clear on how the IPR process is "effectively crippled."

The blog patentpostgrant interprets the changes to the PATENT Act:

The Manager's Amendment to S.1137 adds some 17 pages in PTAB changes, below is a list of the major changes proposed with my quick thoughts on each:

1. Preliminary Responses may include evidence, and petitioners can seek leave to file a reply.
(A similar proposal is expected from the PTAB next month, likely moot)

2. Director given discretion to deny petitions in the "interests of justice." Also, the Director may deny filings that seem to simply leverage the difference in evidentiary standards. (i.e., collateral attack on an earlier court finding of no invalidity)
(Presumably this is directed at the hedge fund filings. Not the cleanest way to attack this problem, but, ok)

3. Exception to 12-month IPR window for amended complaints that add new claims
(This would address a common issue joinder situation, and is a sensible idea)

4. Apply Philips claim construction. Claim construction will be binding in a later proceeding.
(I have written about this idea extensively, we already know about the potential for issue preclusion from B&B Hardware. Patentees will regret pushing for this change, if it happens)

IPBiz is not sure of what "patentpostgrant" is saying here. As noted in the IPBiz post titled A marked-up PATENT Act leaves the Senate Judiciary Committee on 4 June 2015 The new version of the bill would require the PTAB to stop using the "broadest reasonable interpretation" standard for claim construction in AIA reviews, which makes it relatively easy to invalidate patents.

Instead, the bill would require the board to use the same claim construction standard as district courts, where invalidating patents is more difficult. That change is already included in a companion patent bill in the U.S. House of Representatives. [Goodlatte's Innovation Act]
The change from BRI to "district court" standard clearly favors patentees!

5. Clarify that parties can get live testimony, if the PTAB panel agrees it would be helpful.
(This doesn't seem to change the status quo. Also, a similar clarification is expected from the PTAB in July, likely moot)

6. Providing the ability to amend as a matter of right if narrowing, supported, and responsive to trial ground. Petitioner has burden on unpatentability.
(Also, expecting similar proposal from PTAB in July, likely moot)

IPBiz notes the right to amend is a very big issue. From the IPBiz post
CAFC in Cuozzo: § 314(d) prohibits review of the decision to institute IPR even after a final decision

Judge Newman brought up the freedom to amend issue:

This court has approved the use of “broadest reasonable
interpretation” as an expedient in examination and
reexamination, but our approval was based on the unfettered
opportunity to amend in those proceedings. That
opportunity is not present in Inter Partes Review;
amendment of claims requires permission, and since the
inception of Inter Partes Review, motions to amend have
been granted in only two cases, although many have been

7. Force Amendment within 30 days of trial institution.
(Strange idea. Why would a patentee amend before it has even deposed the petitioner's expert? What value does accelerating this decision bring to anyone?)

8. Presumption of validity to be accorded to challenged patent.
(A presumption serves one basic function, to allocate the burden of proof and accompanying evidentiary standard, The burden of proving unpatentability is presently on the petitioner. Absent application of a clear and convincing standard, which is not discussed in the bill, what exactly does this presumption change? (other than to create unnecessary confusion)

9. Only one judge in common with Institution Order and Final Written Decision (FWD).
(The PTAB has already announced a similar initiative, moot)

10. Removing "reasonably could have raised estoppel" from PGR
(Bio/Pharma must have been asleep on this one. Will encourage a far greater use of PGR, which given 101 and 112 grounds cannot be a Bio/Pharma wish.)

11. Fix CBM grounds to include 102(e).
(The most sensible fix in the bill)

Most of the practice changes noted above would be made effective (according to The Bill) at the PTAB within 6 months from enactment, the remainder at 12 months. The changes would be prospective only. So, if the presumption of validity and claim construction changes make it into law (far from certain), there would likely be a massive crush of filings in the weeks before the changes to avoid the practice uncertainty to follow.

With the exception of the changes to the statutes (last two changes, and the 12 month window change), the PTAB already has the power to address all these issues. In fact, in most instances above, these changes are now imminent. Is Congress not talking to the USPTO? This seems like a very wasteful legislative exercise to me. In any event, there will undoubtedly be a lot of hearings and debate in the months ahead. Bills will be rewritten, House bills will appear and be rewritten. This is a long road that may never end, and at a minimum will take us into 2016. Also impacting the legislative dynamic will be opposition lobbying, PTAB rules changes, CAFC rulings, and the approaching change in administration.


Roberts' "evidence from scholars" is a link to Professor Chien:


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