Biden administration emphasizes 'quality; in patent proposals

This past summer, President Joe Biden issued an Executive Order on Promoting Competition in the American Economy. This executive order focused on patent quality and curbing alleged misuses of the patent system, in particular with respect to generic drug and biosimilar availability and drug pricing. The Biden administration's focus on improving the patent system has continued into the fall. In late October, President Biden announced a long-awaited nomination for undersecretary for intellectual property and director of the U.S. Patent and Trademark Office at the Department of Commerce. Kathi Vidal, President Biden's pick, is currently the managing partner of Winston & Strawn's Silicon Valley Office. Vidal is an IP litigator with experience in a number of "high-tech" technologies, including semiconductors, telecommunications, computers, software, circuits and internet applications. With a background similar to former Patent & Trademark Office Director Michelle Lee, Vidal has previously praised Director Lee's tenure, including her patent quality and diversity initiatives at the PTO. Senate Judiciary Committee chairman Sen. Patrick Leahy (D-Vt.) congratulated Vidal in a statement and said he looked forward to hearing about her ideas for "continuing to improve patent quality while curbing abuse of the patent system" and "expanding access to the patent system to Americans from all backgrounds."

Other changes to the U.S. patent system are potentially on the horizon. In the last week of September, Leahy and Sen. John Cornyn (R-Texas) introduced a new bill, the "Restoring the America Invents Act," proposing changes to the post-grant proceedings originally introduced by the America Invents Act 10 years ago. According to Leahy and Cornyn, the RAIA would "bring more transparency into the PTO review process, prevent politicized meddling with PTO decisions, and ensure that these important PTO proceedings are widely available to the public." The pair's announcement of the RAIA proposal emphasized that "poor-quality patents can be abused, costing start-ups, small businesses, American manufacturers, and nonprofits huge sums every year" and "drive up the cost of prescription drugs." They also touted the prior success of the AIA post-grant proceedings as "the tool that ultimately ensured that [poor-quality] patents would not be abused again in the future."

A review of the RAIA indicates that the Leahy and Cornyn proposals aim to further expand the ability of the PTO to review (and cancel) claims of patents after they have been issued. The RAIA looks to do this most notably by expanding the grounds via which the Patent Trial and Appeal Board can find claims of a challenged patent unpatentable and limiting the PTAB's ability to decline to hear a challenge when an adequate case has been presented by a petitioner. Other provisions of the RAIA seek to clarify procedures for internal review of PTAB decisions and prohibit the PTO from issuing claims that are not patentably distinct from claims cancelled by the PTAB in post-grant proceedings or a district court during litigation.

Expanded grounds for IPR petition. The most common type of challenge at the PTAB is inter partes review, typically referred to as an IPR. In an IPR, a party challenging whether the patent claims should have been issued by the Patent Office files a detailed petition presenting its position why the challenged claims should be cancelled. Today these petitions are limited in the types of attacks that a petitioner can make against issued patent claims to arguments that the claims were not novel or were obvious based on preexisting patents and printed publications. The RAIA would expand the grounds that challengers of patents can raise in IPRs, to add statutory or obviousness-type double patenting grounds, such that petitioners could argue that a patentee improperly expanded their patent monopoly of one issued patent via a follow-on patent. The RAIA would also expand the available "prior art" for an IPR challenge from preexisting patents and printed publications to include admissions regarding the preexisting state of the art made by the in the patent specification, drawings, or claims.

Loss of discretion to deny institution. The U.S. Supreme Court has supported the PTO's view that as currently structured in the AIA, the PTAB has vast discretion on whether to hear a particular challenge or whether to use their discretion to deny institution of a trial. See Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2140 (2016). Under former PTO Director Andrei Iancu's tenure, a line of case law at the PTAB developed that empowered PTAB panels to decline to hear cases that they deemed to be procedurally unfair to patent owners and inefficient for the patent legal system. See Apple Inc. v. Fintiv, Inc.,, IPR2020-00019, paper 11 (PTAB, Mar. 20, 2020). Specifically, where a co-pending district court or International Trade Commission case would reach a trial on validity issues before the PTAB would in a copending IPR trial, the PTAB panel could opt not to hear the case and deny institution of a trial. Since the PTAB's decision in Fintiv, discretionary denials of petitions for IPR have increased significantly. A recent study by Unified Patents found that approximately 38% of denials of institution in 2021 were based on PTAB discretion, including under Fintiv. The RAIA seeks to do away with the PTAB's discretionary denials, in all but very limited circumstances.

More concretely, the RAIA would modify the IPR institution standard (under 35 U.S.C. Section 314(a)) to mandate institution if there is a reasonable likelihood that the petition would prevail, "subject only to the discretion of the Director under section 325(d)(4)." Significantly, under new subsection Section 325(d)(4), discretion to deny institution would be considerably curtailed, limiting discretion to the single basis that "the same or substantially the same prior art or arguments previously were presented to the Office."

Fewer bars to IPR. In conjunction with expanding the grounds for IPR, the Leahy-Cornyn RAIA proposal would also remove certain bars to filling IPRs based on district court filings made by the parties as part of a larger dispute. First, the AIA effectively required a patent challenger to choose a venue to challenge a patent -- either an IPR at the PTAB or a district court declaratory judgment action, but not both. Under 35 U.S.C. Section 315(a) at present, an IPR cannot be instituted if the same part or a real-party-in-interest has previously challenged that claim in a civil action. Similarly, timing relative to a patent owner's filings presents a bar under Section 315(b), where an accused infringer in a civil action is required to file an IPR petition within one year of service of the complaint or its petition must be denied. Both of these scenarios present an absolute bar to a later IPR challenge, even if the filing party rethought their district court strategy and withdrew its filing via a dismissal without prejudice.

The RAIA would soften these bars to filing an IPR, allowing a petition to be instituted in either circumstance -- a prior declaratory judgment patent challenge or accusation of infringement -- so long as the complaint in the civil action has been dismissed without prejudice.

Other provisions. The RAIA contains a number of other provisions that are intended to make it easier for patent challenges to succeed. For example, the proposed amendments to Section 315(e)(2) would reduce the instances when IPR estoppel (i.e., limitations on arguments a petitioner is permitted to make in the trial court based on their pursuing a PTAB challenge) would apply against a petitioner in a later civil action by limiting estoppel to cases having an adverse final written decision on the merits (i.e., involving a finding that "that the claim is not unpatentable"). This provision seeks to fix a PTAB oddity where a petitioner who won at the PTAB would still be disadvantaged in the defenses that it could present in the trial court despite proving the claims asserted against them to be unpatentable. Additionally, new Section 315(e)(1)(B) would prohibit the Patent Office from issuing new claims that are not patentably distinct from any claim that was found to be unpatentable or cancelled in any PTAB proceeding before the PTO. The Leahy-Cornyn proposals also include new stay provisions for civil actions by a patent owner asserting infringement of a patent challenged in IPR, which set forth the factors that a district court would be allowed to consider in deciding whether to stay a parallel infringement proceeding.

The RAIA would also clarify the procedure for review of PTAB decisions by the PTO director, a direct response to the recent Arthrex decision addressing the constitutionality of PTAB review. Among these new provisions are explicit authorization for the PTO director to "review, and modify or set aside" final decisions on his/her own initiative or at a party's request, and a requirement that any decision on director review be made publicly available in a separate and reasoned written opinion.

Several industry groups have spoken out in favor of the Leahy-Cornyn proposals and applauded the nomination of Kathi Vidal to PTO director. In response to the nomination of Vidal, the Computer & Communications Industry Association President Matt Schruers stated that "Ensuring quality examination and maintaining a strong second-look review program in IPR are crucial to helping the U.S. continue to be a leader in innovation." The CCIA also indicated its support of the RAIA, with CCIA Patent Counsel Joshua Landau criticizing former PTO Director Iancu's leadership, and concluding that the RAIA "would improve IPR, ensuring that bad patents don't get to stay in force and allowing innovators to take the money they would have spent on legal fees and use it to hire new people and create new inventions."

The Coalition Against Patent Abuse similarly stated that "[t]he USPTO will play a significant role in expanding access to affordable life-saving medications for millions of American patients, and CAPA looks forward to working with Kathi Vidal to ensure tackling patent abuse to lower drug prices is a top priority." Regarding the RAIA, CAPA Executive Director Matthew Lane stated: "It's been ten years since the America Invents Act was passed with the goal to balance the value of innovation with price-reducing competition. Unfortunately, continued patent abuse by many major pharmaceutical companies has tilted this balance away from pro-patient, pro-consumer competition and drug pricing. Now, it is up to Congress to enact meaningful legislation to lower drug costs and make true innovation sustainable for generations to come, and this is a strong step towards that goal."

Other industry groups that might feel significant effects from the RAIA if passed, such as the Pharmaceutical Research and Manufacturers of America and the Biotechnology Innovation Organization (have so far not issued public statements regarding the RAIA, or the nomination of Kathi Vidal.

While Vidal still faces confirmation and the RAIA remains in its infancy, these developments have shown some interest in the Biden administration to tweak the patent system in furtherance of its agenda. Although the impact of all of these proposed changes to the U.S. patent system may not be clear for months or years, what is clear is that there is desire in the current administration to nudge the patent system and PTO policy such that patents are likely to face increased quality scrutiny over the coming years.

The views and opinions set forth herein are the personal views or opinions of the authors; they do not necessarily reflect views or opinions of the law firm with which they are associated.