PTAB Trends and Predictions: Looking Back at 2020 and Forward to 2021

2020 was a busy year at the PTAB. Despite the many issues facing us all during the COVID-19 pandemic, the overall number of AIA-trial filings increased in fiscal year 2020 (reversing a two year declining trend), the PTAB transitioned seamlessly to a fully-remote oral-argument format, and the Office was busy finalizing rule packages and creating new case-law precedent.  This article looks back at some of the notable PTAB developments in 2020 and offers the authors’ insight into where things may be heading in 2021.

Number of Filings

As mentioned above, the number of new IPR, CBM, and PGR petitions in all technology areas increased slightly in fiscal year 2020 over previous years, but generally holds steady around 1,500 filings per fiscal year:

Despite the overall increase in filings in most subject matter areas, petitions in the biotech/pharma TC1600 space have reached an almost all-time low.  Petitions in TC1600 rose steadily to a high in 2017, and then have continued to drop off dramatically, with 2020 having only 67 petitions—barely more than in the first full year of the program’s existence: 

With respect to outcomes, across all subject matter areas, patent challengers won a higher number of proceedings in 2020 as compared to 2019, and mixed case outcomes were also higher in 2020 as compared to previous years.  However, once a case is instituted, there remains at least an 80% chance that one or more claims will be found unpatentable.  Out of the 413 patents receiving a final written decision in 2020, 345 of those lost one or more claims, and 111 patents were found unpatentable in their entirety.  Thus, a patent owner’s best bet in surviving a patentability challenge before the PTAB is to avoid institution altogether.  Institution rates hover around 60%, which is generally where we expect things to remain in 2021 unless discretionary denial practice continues to expand (discussed below).  As to settlements, they were at an all-time low in 2020 (approximately 20% of the PTAB’s cases were resolved by settlement).   This may be due to patent owners asserting patents of higher quality than in the past and thus feeling less pressure to quickly snuff out strong patentability challenges.  

In 2021, we expect the number of IPRs to continue to increase, generally tracking greater numbers of district court litigations.  That being said, as the Western District of Texas in Waco continues to be the new patent hotspot, defendants may not be as motivated to file IPRs, particularly if the PTAB’s discretionary denial practice continues to expand.  With Judge Albright making it clear that he will not stay litigation based on co-pending IPRs, and that he intends to beat the PTAB to a determination if at all possible, some defendants may view their IPR strategy as a validity hedge that may not be worthwhile in all instances.  However, given the very low rate at which juries invalidate patents, having a validity hedge before the PTAB is likely worth the cost in the vast majority of cases.   

In the biotech/pharma area, we predict the number of petitions in TC1600 to stabilize and likely increase, based on the changes to the Purple Book.  In December, 2020, the Purple Book Continuity Act was passed, which requires the FDA to create an electronic, searchable compendium of all licensed biologic products with all relevant information, more similar to the existing Orange Book.  Of particular interest, it also requires product sponsors who engage in the patent dance to provide the number and expiration date of each patent listed by the sponsor in either original list or any supplemental list to the FDA which then must be added to the Purple Book.  This new public disclosure of biologic patents related to commercial products may inspire third parties to challenge blocking patents in the hopes of entering the market unencumbered.  

Of course, CBMs were sunset in September, 2020, so practitioners will not see any more of those proceedings unless Congress decides to change the law and implement CBMs once again.

Precedential Decisions and Guidelines

The PTAB designated twelve decisions as precedential and another twelve as informative in 2020.  Almost half the precedential decisions address discretionary denial under Section 314(a), as the PTAB continues to rely on and refine its reasoning under the Fintiv factors.  Fintiv and its ancestors/progeny have been discussed here and by other commentators, and won’t be discussed in great detail, other than to note that the Fintiv factors are typically applied to deny institution of a potentially meritorious IPR when a co-pending litigation might outpace the PTAB.  As noted above, Judge Albright in the Western District of Texas will not likely stay litigation based on co-pending IPRs and intends to beat the PTAB to a determination if at all possible, surely affecting how parallel proceedings filed in his Court will be considered by the PTAB in a Fintiv analysis.  The USPTO Director has also been sued in the Northern District of California based on allegations that the PTAB’s discretionary denial practice violates the Administrative Procedures Act.  We predict discretionary denials under Fintiv to continue to be an actively-litigated issue going forward, also likely increasing the rate at which patent owners file preliminary responses (if for no other reason than to argue that a given petition should be denied based upon the Board’s discretion). 

Some of the precedential/informative decisions are directed to more niche areas.  For example, to the extent secondary considerations are at issue in a trial, parties should not neglect the information contained in Lectrosonics, Inc. v. Zaxcom, Inc., Case IPR2018-01129, Paper 33 (Jan. 24, 2020) (designated precedential April 14, 2020), which discusses nexus to objective indicia of non-obviousness.  Two informative decisions also address objective indicia of non-obviousness, Ex parte Whirlpool Corp., 2013-008232 (Oct. 30, 2013) (designated informative April 14, 2020) (nexus, industry praise, commercial success, long-felt need, copying), and Ex parte Thompson, 2011-011620 (March 21, 2014) (designated informative April 14, 2020) (obviousness analysis includes considering objective indicia of non-obviousness).

On December 4, 2020, the PTAB’s decision in SharkNinja Operating LLC v. iRobot Corp., IPR2020-00734, Paper 11 (Oct. 6, 2020) was designated as precedential, which holds that if a real-party-in-interest (RPI) dispute does not implicate a statutory time bar or estoppel issue, the PTAB is not required to determine whether an allegedly unnamed RPI is, in fact, an improperly unnamed RPI or privy of the petitioner.  This decision may lessen the number of RPI disputes raised by patent owners going forward; however, given that the Federal Circuit has now definitively stated that the PTAB’s RPI determinations are final and non-appealable, we suspect this issue to continue to be raised with some frequency.

With the departure of Director Iancu from the USPTO, it is a bit hard to predict whether the Office will continue to aggressively promulgate what have been perceived as patentee-friendly rules, but we do predict that the next Director (and maybe even the interim Director) will continue to designate cases as precedential and informative at a similar pace in an effort to provide further guidance to parties and stakeholders.

In January, 2021, a memorandum was issued explaining that the Nautilus standard for indefiniteness would apply to PTAB proceedings going forward.  Nautilus replaced the “insolubly ambiguous” standard and holds that “a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.”  While this marks a change in PTAB practice, we predict it will have little significance in 2021 and going forward because indefiniteness is very rarely the deciding issue in PTAB proceedings (at least with respect to a “run-of-the-mill” IPR without a contingent motion to amend). 

COVID-19 Issues

Since March, 2020, video/telephonic hearings, depositions, and conferences have become the norm in PTAB proceedings.  Consensus is that these procedures are largely working well, likely because the PTAB had already permitted counsel to appear remotely in ex parte appeals to save costs and time for applicants, and up to two of the three judges assigned to any PTAB proceeding have appeared remotely, supporting hoteling and the satellite offices.  The public can listen to hearings by obtaining dial-in information ahead of time, unless the parties express concerns that confidential information will be shared.  

We predict the PTAB to remain virtual for most, if not all, of the coming year.

Additional Issues

The Supreme Court granted certiorari in United States v. Arthrex to answer two questions:  (1) whether PTAB judges are principal or inferior officers, and (2) whether, if they are principal officers, the Federal Circuit cured any appointments clause defect by severing application of 5 U.S.C. § 7513(a) related to employment protection.  The Federal Circuit found that the PTAB judges were principle officers, but were not properly appointed and confirmed by the Senate under the Appointments Clause.  But, to limit the potentially wide-ranging effect of this decision, the Federal Circuit severed APJ employment protections, allowing the Director to remove APJs for any or no reason.  Cases where Arthrex was properly raised on appeal could be then remanded to a new panel that would be considered properly appointed.  This issue appears to have impacted less than 100 cases and, of those cases remanded to the PTAB, all have been put on hold pending judicial resolution of this issue.  Oral argument is scheduled for March 1, 2021, with a decision likely issuing in the summer. 

In March of 2019, the PTAB began its pilot program for motions to amend, which provides patent owners the option to receive preliminary guidance from the PTAB on its motion to amend, as well as to file a revised motion to amend after receiving petitioner’s opposition to the original motion to amend and/or after receiving the PTAB’s preliminary guidance (if requested).  Although the pilot program has not increased the overall frequency upon which motions to amend are filed (approx. 10% of cases), patent owners that have opted into the pilot program have fared much better than those that did not.  In fiscal year 2020, patent owners opting into the pilot program successfully obtained amended claims approx. 40% of the time, whereas only 9% of patent owners outside of the pilot program did the same.

As is customary with a change in administration, Andrei Iancu resigned from his post as Undersecretary of Commerce and USPTO director.  Director Iancu was generally regarded as pro-patentee and worked to transform elements of the PTAB to reflect this position.  For example, he is credited with changing claim construction from the broadest reasonable interpretation to the district court Philips standard (although this likely had little impact).  Under his leadership, and as discussed above, the Office also created a motion to amend pilot program to make it easier for patentees to amend claims during PTAB proceedings.  Perhaps most significantly, the Precedential Opinion Panel gave the Director a vehicle to issue precedent quickly, which he did, often with respect to discretionary denials, providing a clear framework for judges to use in evaluating petitions.

In the past, the Director position has remained open for some time before being filled, so time will tell who the new Director will be and whether he or she will continue to shape the PTAB in any notable manner.

Conclusion

As evident from our discussion above, 2020 was an exciting and busy year for the PTAB, and we expect the same for 2021 as the Office continues to refine practice before the nation’s busiest patent court.