Federal Circuit Decision Allows IPR Challenges to Pre-AIA Patents

The 2011 America Invents Act (AIA) created a robust procedure, known as Inter Partes Reviews (IPRs), brought in the Patent Office to challenge issued patents on the grounds of anticipation and/or obviousness. Since then, defendants in patent suits have used IPRs to great effect to challenge the validity of patents.

But what if the patent was issued prior to the AIA? A recent Federal Circuit decision, Celgene Corp. v. Peter (Fed.Cir. 2019), upheld a Constitutional challenge to an IPR proceeding brought against a patent issued before the AIA.

Experience has shown that IPRs can be a powerful tool for companies to defend themselves against charges of patent infringement – often significantly less expensive and less burdensome to company operations than litigation.

Companies are often confronted with claims of patent infringement, whether by patent trolls or competitors, and that in turn raises the spectre of onerous and expensive litigation. The Celgene decision re-emphasizes that a powerful defensive weapon – IPRs – is available for all unexpired patents. Even the threat of initiating an IPR might be employed to fend off or compromise a claim of patent infringement. Companies faced with claims of patent infringement should be aware of this procedural tool.

The America Invents Act of 2011 introduced two new procedures to challenge patent validity: Post-Grant Reviews (PGRs) and Inter Partes Reviews or IPRs. Parties accused of infringement (or having an interest in a patent’s validity), can petition the Patent Trial and Appeal Board to institute, and then try, issues of patent validity.

These procedures have proven to be very powerful procedural weapons for those accused of infringement. In fact, the former Chief Judge of the Federal Circuit characterized PTAB panels as “patent death squads.”

For significantly less cost than litigation, party charged with infringement can file a petition, and if that is granted, the PTAB will then institute an administrative trial to review the patent’s validity.

There are several advantages to an accused infringer of a PGR or IPR (with a concomitant disadvantage to the patent owner):

  1. IPRs and PGRs though far from cheap, are generally significantly less expensive than litigation in court.

  2. The sole focus of these procedures is patent validity. The accused party is spared the expense and burden of discovery into its accused product(s).

  3. Most district courts will stay discovery of a pending infringement case until resolution of the proceeding when such petitions are instituted. So, the burdens of litigation can often be put off.

  4. While many petitions are rejected (and thus no trial on the merits occurs), where a Petition is granted, it often results in invalidation of all or part of the patent.

Not surprisingly, patent owners loath PGRs and IPRs, while accused infringers love them.

Celgene Decision

The Celgene decision now makes clear that IPRs at least, and presumably PGRs as well, are available for pre-AIA issued patents, and survive Constitutional challenge under the Takings Clause.

The patent owner argued that allowing its patent, a form of property, to be challenged under a newly enacted procedure would constitute a “taking” requiring compensation, since patents are a form of property, and invalidating one would in effect take away a valuable property right from the patent owner.

But the Federal Circuit rejected this argument, holding that for decades, patents have been issued with the understanding that their validity could still be challenged in various ways.

The Celgene court noted that the law in effect prior to the AIA already provided for several mechanisms to challenge patent validity: district court litigations, ex parte reexamination (created in 1980, and still available), and a proceeding named inter partes reexamination (created in 1999 and then expanded in 2002, though later phased out). So, a patent grant has never been absolute, certainly not for decades (and any patent issued more than several decades ago would be long expired in any event).

True, IPRs enacted by the AIA are more robust and have some procedural differences that the prior proceedings. But they are in many ways similar – they involve an administrative proceeding before the Patent Trial and Appeal Board; submissions by an adversary party and, in some cases, discovery.

At bottom, the Federal Circuit opined that the various mechanisms to review patent validity are essentially the same thing – a means to review the validity of issued patents. And since for over forty years there have been various mechanisms to challenge patent validity, the addition of new ones would not constitute a “taking” under the Fifth Amendment.

Companies faced with claims of patent infringement should pay attention: IPRs are now available for virtually any unexpired patent. As discussed, they have been shown in many cases not only to be powerful means to invalidate patents, but also far more cost-efficient, and in the right case, they can be a powerful tool to challenge patents.