The Patent Trial and Appeal Board (PTAB) instituted trial for 68% of the America Invents Act (AIA) review petitions addressed in Q2, down from that same quarter last year (during which the institution rate was 71%) but up from the preceding quarter (65%). The institution rate held steady for the first half of 2023, at 67% (the same as 1H 2022).
One of Q2’s most important institution-related developments came in April, when the USPTO released an Advance Notice of Proposed Rulemaking (ANPRM) that detailed a potentially sweeping revamp of AIA review proceedings. Through that ANPRM, the agency sought comments on rules that would codify and possibly expand upon a variety of discretionary denial practices currently followed under the NHK-Fintiv rule, exempt petitions from such denials if they meet a new “compelling merits” standard, and impose sweeping requirements with respect to party relationships and mandated disclosures, among other changes.
The proposal has proven controversial across the spectrum. As reflected in some of the numerous comments submitted by the June 20 deadline, a large group of licensees and industry organizations, and even some licensors, have argued that certain aspects of the USPTO’s proposal overstep the boundaries set by the AIA. Especially controversial was the “compelling merits” standard, which a host of licensees criticized as effectively overriding the default “reasonable likelihood” standard applicable at institution with a higher one, in violation of the statute. Even some stakeholders engaged in patent licensing and assertion, as well as certain industry groups, argued that the standard introduces too much uncertainty due to its apparent subjectivity, has too much potential for arbitrary enforcement, and could possibly trigger a wave of additional litigation in each proceeding.
Another area of focus for commenters were provisions related to standing—i.e., what types of entities may and may not file PTAB petitions—based on an expanded view of corporate relationships and certain exceptions concerning business models. In particular, the ANPRM floats a potential new “substantial relationship” test that opponents argue could result in a far greater range of parties than just a petitioner’s real party-in-interest or privy being bound by the outcome of prior petitions. That test would in part cover instances where “multiple entities are defending infringement claims in district court litigation”, under which the USPTO notes that parties may pool their resources to file a single challenge to a patent, and might also bar certain third-party organizations from filing IPRs.
This aspect of the ANPRM has also attracted extensive pushback, as shown by comments submitted in response—some of which argue that the “substantial relationship” test would violate the AIA, as the statute does not include a standing requirement (which was initially considered but rejected for the final bill). Some arguing from the licensee/petitioner side have further contended that this test is problematic for its breadth; Amazon, for instance, argues that it encompasses “at least litigation co-defendants and parties that are in a supplier-customer relationship”. Others, including Apple, Ciena, and Red Hat, have asserted that the rule could encourage gamesmanship by incentivizing patent owners to target under-resourced alleged infringers, in the hope that those companies would file inadequate and thus unsuccessful IPRs that would then reduce the options of subsequent defendants to challenge the same patents’ validity at the PTAB.
See RPX Insight for a deep dive into these and other issues addressed in comments responding to the ANPRM. More on other trends impacting patent litigation in Q2 and 1H 2023 can also be found in RPX’s second-quarter report.