Jones Day Talks: PTAB’s Busy Docket and What’s Changed After SAS Institute
Jones Day’s Dave Cochran and Matt Johnson discuss recent developments in patent litigation and appeals, including the continuing importance of the PTAB as a jurisdiction of first choice for patent disputes in the United States, and the impact of the Precedential Opinion Panel (“POP”) introduced late last year.
They also describe how filing strategies, as well as preliminary response strategies, should be altered as we mark one year since the U.S. Supreme Court’s landmark decision in SAS Institute v. Iancu.
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Read the full transcript below:
Dave Dalton:
Since its inception in September 2012, the United States Patent and Trademark Offices' Patent Trial and Appeals Board or PTAB, has become the go to jurisdiction for patent disputes in the US. We'll talk with Jones Day's Dave Cochran and Matt Johnson about what the PTAB filing numbers so far in 2019 tell us. They'll also update us on what's changed in patent litigation as we mark the one year anniversary of the SAS Institute decision. I'm Dave Dalton, you're listening to JONES DAY TALKS®.
Dave Dalton:
Matt Johnson is one of the firm's primary contacts on practice before the PTAB. Matt has consulted on nearly every one of Jones Day's nearly 300 PTAB cases to date. He currently serves as co-chair of Jones Day's PTAB practice. For more than 20 years, Dave Cochran has provided clients with a full range of patent legal services, including as lead counsel in more than 75 post grant trials at the PTAB. Dave was part of the three lawyer Jones Day team that prevailed at the Supreme Court in SAS Institute Inc v. Iancu, fundamentally changing PTAB litigation practice at the US Patent Office. Matt, Dave, thanks for being here today.
Dave Cochran:
Oh, thanks Dave.
Matt Johnson:
Thanks Dave. Good to talk to you again.
Dave Dalton:
I keep thinking on one of these calls, when we do these updates every quarter or so, you're going to say, "Yeah Dave, not really much happening since last time we talked, it's been really quiet on the patent litigation front." But that's never the case, is it? Lots going on. Lots going on. We've talked again and again about the popularity of the PTAB as a forum for adjudicating the validity of patents. Matt, what are the numbers looking like so far this year?
Matt Johnson:
Sorry to disappoint you, Dave, but our numbers are still high flying.
Dave Dalton:
Still robust.
Matt Johnson:
Yeah, actually there has been a little drop from the past three years. We're on pace this fiscal year for about 1,625 filings. It's down a little bit from around 1,700 the past three years, but it's still early in the year. We're just barely halfway through it so I'm not totally convinced that there's actually going to be a material difference by the time we get through the end of 2019. But these are numbers that I've really been keeping an eye on because last year, 2018 was such a busy year at the PTAB with a lot of changes, starting from the SAS victory back in April of 2018, changes to the claim construction standard in November of 2018 and then a number of other procedural adjustments along the way.
Matt Johnson:
I've been curious whether there's going to be an effect on how often petitioners are going to look to come to the board to have a patent validity taken a look at. And so far the numbers are still very high. It's again, the PTAB is going to be the busiest patent forum in the nation. The big change in 2018 that I thought might have an effect, a downward effect on petition filings was the claim construction standard change, where we changed from the broadest reasonable interpretation standard. That was pretty beneficial for petitioners, patent challengers to the Phillips standard, which now aligns the claim construction standard at the PTAB and in district court. That changes the bit patent owner friendly and it makes petitioners make some interesting and often difficult strategic decisions early in cases. But the downtick in petition filings is very small, maybe even smaller than I thought it might be.
Matt Johnson:
Overall, the number of cases that are in the system it's from the PTAB through appeal is very high. In 2018, 35% of federal circuit appeals were appeals from the PTAB. That was up from 32% in 2017. And 2019 so far where we're at 40% of all cases that the federal circuit hears our appeals from the PTAB. The PTAB is very busy itself and keeping the federal circuit busy as well.
Dave Dalton:
And this is all still fairly new, right Matt? These recent developments are the last couple years and I imagine the trend will hold for a while, I think. If the economy stays strong and innovation stays strong, people are going to be litigating patents. This is probably a trend we can look forward to seeing for a while, I would guess.
Dave Cochran:
Yeah, I think it's going to continue. Overall, the number of patent cases filed is actually down pretty significantly since 2012, maybe about 20% or so. But 2015, 16, 17 and 18 are all high flying at the PTAB and really little signs of it slowing down.
Matt Johnson:
Dave, further on the federal circuit point, give a little more color of how amazing this is, is you've got 94 district courts in the United States and you have only one Patent Trial and Appeal Board, but yet there are more appeals to the federal circuit from just the PTAB than all of the 94 United States district courts.
Dave Dalton:
Geez.
Matt Johnson:
It's become a major source of work for the federal circuit, has become appeals from the Patent Trial and Appeal Board.
Dave Dalton:
I don't expect this to be on the front page of USA Today, but in terms of legal publications and legal scholars and so forth, are they aware of this massive, what kind of, I don't want to use the word burden it's part of the process, but are people aware of this? Or is it just us talking, people like you guys?
Matt Johnson:
I think it's mostly people like us guys, people that are in the patent bar and that are following this stuff and further to your point about the massive number of appeals and what it means to the federal circuit, which all appeals in patent infringement cases go to the federal circuit. They decide all the appeals. They don't go to the various appellate courts in the United States. They all go to the federal circuit. And so what that means for the federal circuit is they've got about 300 more cases per year that they have to deal with. It's a pretty substantial increase. And Dave, there's only a certain number of federal circuit judges.
Matt Johnson:
And so what's been happening there is we're seeing a lot more of what are called Rule 36 affirmances. And if you're in appellant and you're trying to get a decision below, whether it's at the district court or at the Patent Trial and Appeal Board, if you're trying to get that turned around, that's the worst thing that can happen is you get a Rule 36 affirmance because it means you lost. And not only did you lose, but the federal circuit issues a piece of paper which has one word on it, affirmed. You don't even know why you lost.
Matt Johnson:
It's kind of a controversial practice, but we're seeing a lot more of these summary affirmances, particularly in PTAB matters. The practical result of all this is that it's really important that you do a good job when you're at the Patent Trial and Appeal Board, because it's really hard to get a decision overturned at the federal circuit. And so about 75% of the time the federal circuit will affirm and a lot of those are these Rule 36 affirmances, which can be really disappointing for the appellate.
Dave Dalton:
You said 75%? Geez.
Matt Johnson:
75% of the time, the federal circuit will affirm. And a bunch of those, a large percentage of those will be this Rule 36, where they just say that it's affirmed. It becomes really difficult when you're appealing to the federal circuit out of a PTAB case. You've got to look for, there's certain kinds of issues that they've been gravitating towards. One is the claim construction. What do the claims of the patent mean? And the reason that that's a good issue for appeal is because it's a question of law and the federal circuit won't defer to the PTAB as to the meaning of the claim terms. For issues like fact issues, like whether one expert says the patent's obvious, the other expert says it's not, that ultimately underlies a question of fact and the federal circuit will look at that and the standard there is substantial evidence. It's much more likely that the PTAB will get affirmed in a situation where you're appealing an issue that's a fact issue, as opposed to a question of law.
Dave Dalton:
Interesting. Sounds like we've got a structural issue here in terms of capacity. Let's go to Matt for a second. How does PTAB manage the workload? Their workload? Litigants' workload? Are they doing anything to streamline this process with the PTAB?
Dave Cochran:
You're exactly right. There's only a limited number of PTAB judges. The board and the patent office has said they're happy with the number of judges that they have. They don't want to decrease the quality of the ALJs by hiring more. They think they have a good stable of highly trained administrative law judges, but there is a bandwidth issue. And the board only has enough time to hear and write opinions and administer full trials for a certain number of cases per year. There are a couple practical effect that we've seen over the past couple of years.
Dave Cochran:
One of those is the rise in discretionary denials of institution of trials. If your PTAB petition as a petitioner has some flaws in it, maybe looks like it's going to be very complicated for the board to consider so that they would have to expend a lot of resources in your trial, more so than another trial, even if there's some merit to your challenge, the PTAB may use its broad discretion that Congress has given to deny institution of your matter and just decide that, that one looks too difficult for us. We're going to pick another one to here.
Dave Cochran:
Another thing that the patent office has taken some affirmative steps, Director Iancu is really looking to increase predictability and streamline the process. One of the things interesting that they did in 2018 was they introduced a concept called a Precedential Opinion Panel. It's a panel that helps the board identify precedential and informative decisions that future litigants can cite to when arguing issues. With so many cases going through the PTAB, you have thousands of cases per year, thousands more opinions per year being drafted on all these different topics, it's very common to have conflicts among those decisions and the Precedential Opinion Panel streamlines the designation of informative and precedential opinions, where originally that process was very complicated. You had to have a case be nominated and then voted on and 50% or more of the judges had to agree that that case should be precedential or informative.
Dave Cochran:
Now that processes is significantly streamlined. And as a result, we've had many more precedential opinions being identified in a shorter amount of time. Just in the last three months, I see 10 precedential opinions identified where in past years we were seeing maybe three or four in an entire year.
Dave Dalton:
Okay, so sounds like they're trying to make progress in terms of addressing the volume of potential matters they're looking at, but let me ask you both candidly, is this discouraging to clients? Look at what they're up against in terms of, oh my gosh, my case might not get heard for a while. And there's a 75% chance it's going to say it's affirmed. What kind of feedback do you get from a client in terms of, all right, here's the process, but I got to be realistic sometimes in terms of what might happen, what you hear from people?
Matt Johnson:
I'll go back to one of our earlier podcasts we talked about the advantages for the petitioner in particular, Dave, and those still exist today, that if you're faced with a patent infringement lawsuit in the United States and you're the defendant, which typically then means you would be the petitioner at the Patent Trial and Appeal Board challenging the patent, you've been accused of infringing, that the probability of knocking that patent out at the Patent Trial and Appeal Board is twice or more better than if you're in front of a jury in the district court. That still remains. And also the cost is a significant factor.
Matt Johnson:
We've talked about this before. The cost of patent infringement litigation in the United States is extremely high. And by contrast, conducting a matter at the Patent Trail and Appeal Board, although it's not inexpensive on its own, is much less expensive than in a district court case. As things continue to evolve, the advantages for the petitioner, the challenger, is still remain. And I think that's why you're seeing this year a large number of these petitions being filed. And I think that's going to continue for the foreseeable future.
Dave Cochran:
I think the numbers still are in the petitioner's favor. Cases are still getting instituted 65% of the time. And once instituted, claims are still getting knocked out at 80% of the time. It's a bit harder for petitioners these days. There's some more hurdles, but I think at the end of the day, if the numbers are still good for petitioners, petitioners are still going to head to the PTAB.
Dave Dalton:
Good enough. Good enough. Makes a lot of sense. Let's go back to Dave for a second. It seems like in every one of our programs, we come back round to the SAS Institute victory. Justifiably so. Monumental decision and Jones Day was there with the client from day one. Give us an update, Dave, on some of the effects of SAS Institute. It's been what? Almost a year and a half now?
Dave Cochran:
We're coming up on just a year from the decision.
Dave Dalton:
A year, okay.
Dave Cochran:
Believe it or not, Dave, there's actually people like Matt and I, who practice in front of the Patent Trial and Appeal Board. We actually have our own bar association now. There's this organization called the PTAB Bar Association, which has been around for a couple years now, but they have an annual meeting in March. And I just came back from it couple of weeks ago. And I can tell you, it was wildly attended. There was five to 600 people who attended the PTAB Bar Association meeting this year. It was literally standing room only at the ballroom down in Washington. It was literally all SAS, all the time.
Dave Dalton:
Really?
Dave Cochran:
Every single panel was talking in some way, shape or form about the SAS case. The question of, well what impact has it had? What are the effects of it? Is still being worked out.
Dave Dalton:
You told me a year ago, you said, "This is big. This is bigger than anything. This is big." Not that I doubted you, but you're telling me now that that was the focus of this conference, right?
Dave Cochran:
They literally spent two days talking about a lot of topics, but the SAS case infects almost every issue. And so it's an ongoing thing. What we are starting to see though and I thought about our first conversation back in June of 2018, when we talked about the decision. And at that time I said that I thought that the SAS case would ultimately have a number of benefits. And one of the benefits which we're starting to see is that people are starting to focus their petitions. Instead of petitioners coming in with five or six or eight different attacks on the patent, some of which are meritorious, some of which are not so good. They're starting to focus more on just a couple that are really good. And part of the reason they're doing that is that the PTAB has discretion whether to institute at all.
Dave Cochran:
And so if you come in with a petition that has a couple of good things, but also has a bunch of garbage in it, they can just say, "You know what? We're not going to deal with this. We're going to deny the petition." And starting to see some cases come out where the Patent Trial and Appeal Board, although they could have gone forward, because they have the discretion to do so because the petition was not so good in other respects, they said, "You know what? We're not going to take the time to deal with this one and so it's denied in total." One of the things we're starting to see is that the SAS case has had a positive impact on the quality of petitions, which I think is a good thing.
Dave Dalton:
Yeah, people are cleaning up their arguments a little bit, it sounds like. Being a little more efficient and smart about it, maybe. What about for patent owners, Matt? Any change from SAS Institute for them?
Matt Johnson:
I think the big one is at the institution phase. A lot of folks think and the numbers bear it out that your best chance of getting out of a PTAB challenge against your patent is to get institution denied because once you're going to trial, it's an uphill battle. And so early on after SAS, where now the board has to institute an entire trial as presented by the petitioner or not at all, the thinking was that as a patent owner in your preliminary response, you would only present arguments that would be wholly dispositive of the petition and things that would knock the entire petition out. Or if you were only going to go after and make arguments that would rescue a dependent claim or two, but there would still be other matters present in the case, you would think, well, the board has to institute the whole thing. They're going to do that if any of the grounds are good enough to go forward so we're going to limit the arguments we make in our preliminary response to those that are a 100% knockout.
Matt Johnson:
As Dave was mentioning there, the board's discretion has come into the calculus and even some of the recently designated precedential and informative decisions have talked about how the PTAB has this discretion and yeah, they have to institute the entire case or not at all but if 80% of the case is bad and only 20% of it is good, the PTAB has the discretion to deny institution. Now that we're a year out from SAS, the thinking maybe is bending back towards making some of those arguments that part of this petition is bad or most of this petition is bad and even if a little bit of it as good, the board should exercise its discretion and deny institution. It's interesting to see if the flux in the popular strategies evolve on a weekly or a monthly basis as more decisions come out and we see what's worked for other folks.
Dave Dalton:
Sure, sure. Do you see that coming by the way? You mentioned some flux and there some pushback, things progress, things go back. Did you predict that? Or do you think the trend was just going one direction?
Matt Johnson:
I think if the board starts exercising their discretion less then maybe we head back in the other direction, but folks are keeping an eye on decisions on a day to day basis. And there are a number of blogs, including our PTAB litigation blog that are tracking these things and putting out articles three, four times a week, so that people really have a pulse on this and strategies are adapted on a weekly basis, like I said, depending on what's working that day.
Dave Dalton:
Sure. And I'm not just saying this, you don't believe me run down to my office. I've got it in my notes. I was going to say, "Ask them to plug the PTAB blog." Where can people find that again?
Matt Johnson:
It's at ptablitigationblog.com.
Dave Dalton:
Ptablitigationblog.com, sounds great. Hey, we will do this again next quarter, if not sooner. In the meantime, we'll make sure we link to the PTAB blog when we push this podcast out, the previous podcasts, your publications. You guys do an outstanding jobs so thanks so much. It's always great talking with you two.
Dave Cochran:
Yeah, thanks for having us, Dave.
Dave Dalton:
All right, see you.
Matt Johnson:
That was fun. Thanks, Dave. Take care.
Dave Dalton:
All right. See you next time. Thanks.
Dave Dalton:
For more information on intellectual property law at Jones Day, visit jonesday.com. Subscribe to JONES DAY TALKS® on Apple Podcasts, Android, Google Play and Stitcher. And one more time, don't forget to check out Matt and Dave's blog at ptablitigationblog.com. Thanks for listening to JONES DAY TALKS®. I'm Dave Dalton. We'll talk to you next time.
Speaker 4:
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