FOR PUBLICATION - Piedra, Daniel - After Cuozzo Speed Tech LLC v Lee

AFTER CUOZZO: BUSINESS AS USUAL FOR PATENT LITIGATORS AND INNOVATION

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AFTER CUOZZO SPEED TECHNOLOGIES, LLC V. LEE:

BUSINESS AS USUAL FOR PATENT LITIGATORS AND INNOVATION

Daniel J. Piedra*

Abstract: Throughout American history, innovation has been the driving

force of our economy and quality of life. Innovation is not only a new idea; it is the

process that channels that idea through information, imagination, and initiative

into a useful product or service. For good or ill, the patent system affects innovation.

But to what degree? To start, many scholars, businesses, and lawyers have looked

to the apparent weakening of patent holder rights in recent years by Congress’s

patent reform legislation and Supreme Court decisions. That being so, the patent

world waited in anticipation for the Supreme Court’s June 20, 2016, decision in

Cuozzo Speed Technologies, LLC v. Lee, which considered the appropriateness of

a controversial federal administrative procedure that has drawn fierce debate

about its fairness and effect on innovation. After the Supreme Court issued its

decision, I surveyed a sample of some of the top patent litigators from the most

prestigious law firms in America to gather their reactions to the implications of the

decision. After examining the responses, they seem to suggest that patent rule

changes do not ultimately affect patent litigation. Furthermore, at a broader level,

the responses raised the question as to whether substantive and procedural rules

in patent law have any significant effect on inventors, industry, and innovation.

* J.D. expected 2016, University of San Diego School of Law. I wish to thank Professors Marcel

Saucet, Dana Robinson, and Ted Sichelman, as well as my colleagues of the seminar course

“Intellectual Property and Business” for their comments and suggestions. © Daniel Piedra 2016.

All rights reserved.


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TABLE OF CONTENTS

I. INTRODUCTION ............................................................................................ 3

II. PATENT LAW & THE WAR WITHIN ....................................................... 7

A. UNDERSTANDING PATENT LAW AS A DRIVER OF INNOVATION .................... 7

i. Patent Rights & Innovation....................................................................... 7

ii. Overprotectionism & Underprotectionism............................................... 7

B. ATTACK OF THE PATENT TROLLS .................................................................. 8

i. Defined ........................................................................................................ 8

ii. Criticisms ................................................................................................... 9

iii. In Defense ................................................................................................. 9

iv. Summary................................................................................................. 10

C. THE AIA: PATENT LAW TRANSFORMED ...................................................... 10

i. Patent Law Basics .................................................................................... 10 Claim Construction ......................................................................................................................10 The BRI Standard.........................................................................................................................11 Ordinary and Customary Standard..........................................................................................11 The Conflicting Claim Construction Standards ....................................................................12

ii. Inter Partes Review (IPR) ....................................................................... 12 The Process.....................................................................................................................................12 IPR in Numbers ............................................................................................................................13

D. CUOZZO SPEED TECHNOLOGIES, LLC V. LEE ............................................ 14

i. Facts .......................................................................................................... 14

ii. Holding .................................................................................................... 14

iii. Notes........................................................................................................ 15

III. DATA & METHODOLOGY ...................................................................... 15

A. APPROACH .................................................................................................... 15

i. Overview.................................................................................................... 15

ii. Objectives ................................................................................................. 15

iii. Platform & Design ................................................................................. 16

iv. Survey Distribution & Questions .......................................................... 16

B. RESULTS & ANALYSIS .................................................................................. 17

PART IV: DISCUSSION & CONCLUSION ................................................. 24

A. THE EFFECTS OF THE PATENT SYSTEM ...................................................... 24

i. Overprotectionism v. Underprotectionism .............................................. 24

ii. Litigators & Patent Law Changes ......................................................... 24

B. THE COMPLEXITIES OF THE PATENT SYSTEM & INNOVATION ................... 26


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I. INTRODUCTION

Of all the legal doctrines that propel innovation and progress, there is none

more important than intellectual property law, particularly the law of patents. 1

Patent law shapes policy, it spurs inventive activity, and provides the means to

innovate.2 Like all matters of importance to this corner of society, scholars,

businesses, and policymakers from varying perspectives have either praised the

patent system or lambasted it. Almost all agree patent law is convoluted,

cumbersome, and subject to frivolous litigation – the result of which, many argue,

has stifled R&D and driven down innovation.3

In response to the ailing patent system, Congress enacted the America

Invents Act (“AIA”) in 2011, which ushered in the most significant changes to U.S.

patent law in decades.4 Through the AIA, Congress sought to speed up the patent

application process, provide relief to the overwhelmed patent examiners,5 and reduce the

cost of litigating patent infringement challenges. But one of the major drivers of the AIA

was to deter those who abused the system for financial gain by engaging in

frivolous litigation and help reduce the enormous costs of such litigation. 6

These abusers, dubbed “patent trolls,” use patents as legal weapons instead

of actually creating any new inventions or thinking up new ideas. Rather than

engaging in research and development, patent trolls raid businesses’ coffers

through demand letters, litigation, or hoarding a lot of patents (e.g. purchase

cheap patents from struggling companies seeking to liquidate their assets, turning

them into “patent portfolios”) and then licensing the patents to companies big and

1 Torrance, Andrew W., A Natural Experiment on Innovation Without Patents (2014). 2 Pedraza-Farina, Laura G., Patent Law and the Sociology of Innovation. Wisconsin Law Review,

Vol. 2013, No. 3, 2013. 3 Von Hippel, E. Democratizing Innovation. Cambridge, MA: MIT Press (2005); see also Torrance,

A.W., and W.M. Tomlinson. Patents and the Regress of Useful Arts. Columbia Science and

Technology Law Review 10: 130-168. (2009). 4 Aashish Kapadia, Inter Partes Review: A New Paradigm in Patent Litigation, 23 Tex. Intell. Prop.

L.J. 113, 114 (2015); also see Wendy H. Schacht & John R. Thomas, The Leahy-Smith America

Invents Act: Innovation Issues, CONG. RESEARCH SERV., R42014, (2011). 5 Edward Wyatt, Fighting Backlog in Patents, Senate Approves Overhaul, N.Y. Times, Sept. 9,

2011, at B4; Arti Rai et al., U.S. Dep't of Commerce, Patent Reform 5 (2010). 6 See Mark A. Lemley & Carl Shapiro, Patent Holdup and Royalty Stacking, 85 Tex. L. Rev. 1991,

2009-10 (2007) (discussing the rise of litigation by “patent trolls”); Mark A. Lemley & A. Douglas

Melamed, Missing the Forest for the Trolls, 113 Colum. L. Rev. 2117, 2119 (reporting the cost of

patent troll litigation at $30 billion per year); see also Evelyn M. Rusli, Quest for Patents Brings

New Focus in Tech Deals, N.Y. Times Dealbook (Aug. 16, 2011).


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small. In short, many have argued that patent trolls represent a “tax on

innovation,” costing companies billions of dollars annually, whether through out-

of-pocket costs, legal fees, settlements, or fear of investing in innovation in areas

vulnerable to trolling.7

To combat patent trolling, the AIA created inter partes review (IPR) a trial-

like procedure at U.S. Patent and Trademark Office (PTO) that would serve as an

alternative to patent litigation in federal courts. Through IPR, an accused patent

infringer or a third party can dispute the validity of a patent by having the PTO’s

newly-created Patent Trial and Appeal Board (PTAB) take a second look at the

patent claims to see if there any previous evidence of the invention. The problem

is that the PTO adopted a different standard of review of patent validity from the

federal courts, which has resulted in wildly disparate results.

Indeed, of the 404 final written IPR decisions from September 2012 to

August 2015, the PTO invalidated 88 (22%) of them.8 Moreover, over 88% of the

petitions have seen at least one claim invalidated.9 The patent world was shocked.

IPR’s drastic results caused Randall Rader, former Chief Judge of the United

States Court of Appeals for the Federal Circuit, to liken IPR as a “death squad”

for patent holders.10 Others have called the PTAB’s invalidations its “kill rate.”

Moreover, the IPR has greatly restricted patent holders’ ability to amend their

claims during an IPR proceeding.

Fast moving technology companies like Apple, which bear the brunt of

patent troll lawsuits, have praised IPR for its quick review process and high

invalidity rates of dubious patents, which allows them to proceed with patentable

innovations.11 Furthermore, generic drug companies have lauded the new

procedure as a means to speed up the resolutions of brand name drug

7 Feldman, Robin and Lemley, Mark A., Do Patent Licensing Demands Mean Innovation? IOWA

LAW REVIEW, Vol. 101 (2015). 8 Simpson, Amy and Lee, Hwa. the PTAB Kill Rates: How IPRs Are Affecting Patents, Law360,

http://www.law360.com/articles/699860/ptab-kill-rates-how-iprs-are-affecting-patents (last visited

Jul 25, 2016). 9 Id. 10 See Tony Dutra, Rader Regrets CLS Bank Impasse, Comments on Latest Patent Reform Bill,

Bloomberg BNA Legal and Business News (Oct 29, 2013) (quoting Randall Rader, then Chief Judge

of the U.S. Court of Appeals for the Federal Circuit, stating that “the PTAB . . . [is] 300

administrative patent judges ‘acting as death squads, killing property rights’”). 11 Cuozzo Speed Technologies, LLC v. Lee, 2016 WL 1298034 (U.S.), Brief of Apple, Inc., as Amicus

Curiae in Support of Respondent, 2 (2016).


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manufacturers patent suits brought against them so that they can secure faster

FDA approval.12

On the other hand, large pharmaceutical and biotechnology companies

have blasted IPR, arguing that the PTAB’s differing standard of review, increased

invalidation rates, and costs have weakened patent holder rights and undercut

the predictability and strength of the patent system.13 According to these

companies, the new uncertainty regarding patent claims strikes a blow to

inventors and discourages innovation.14

Those in favor and against IPR have argued that the other’s position hurts

innovation. With so many complex factors in play, it is no surprise that the first

Supreme Court case to address IPR, Cuozzo Speed Technologies, LLC v. Lee, was

being hailed as a potential landmark case that could upend the patent world. With

Cuozzo, the Supreme Court addressed two main arguments: one, the separate

standards were unfair; and two, the fact that PTAB’s decision was unappealable

was unjust. In its decision, the Supreme Court affirmed the PTAB’s standard of

review, noting that the fact that the PTO and the federal courts had different

standards was part of Congress’s regulatory design.15 In addition, the Court held

that subject to certain exceptions, the PTAB’s determination whether to institute

IPR proceedings are not judicially reviewable.16

Based upon the hype leading surrounding Cuozzo, it appeared that the sky

would continue to fall on the patent world until the Court issued its decision.

Somewhat surprising, however, is that patent law practitioners’ reactions to the

Court’s decision (handed down on June 20, 2016) was rather ho hum. But what

about the “death squads”? The “kill rates”? Indeed, it is worth inquiring as to

whether the Supreme Court’s decision in Cuozzo will have a significant effect on

the status quo. And in the aftermath of Cuozzo, it remains to be seen whether

patent litigation strategy will shift as a whole to adjust to the ruling or proceed as

usual.

12 Id., Brief of Generic Pharmaceutical Association and America's Health Insurance Plans as Amici

Curiae in Support of Respondent, 2 (2016). 13 Id., Brief of the Pharmaceutical Research and Manufacturers of America as Amicus Curiae in

Support of Petitioner, 4-5 (2016). 14 Id. 15 Cuozzo Speed Technologies, LLC v. Lee, 2016 WL 1298034 (U.S). 16 Id.


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To that end, this Article offers a first window on the potential effect of

Cuozzo by surveying some of the top patent litigators from the most prestigious

law firms in America to see whether the patent landscape will be altered in light

of the critical substantive issues the Court resolved – or at least attempted to

clarify. The findings suggest that there are no strong reactions either way. As

such, I am led to believe that patent litigators understand that patents,

innovation, and the broader economy form a complex relationship, each with its

own internal dynamics. Consequently, I suggest that substantive legal doctrines

about patent rights and claim construction standards do not – subject to some

limits – heavily influence inventors, industry, and innovation.

However, because of the small number of respondents in my survey as well

as my lack of extensive experience in intellectual property law, I encourage further

research before reaching a firm conclusion. And to be clear, I do not suggest that

changes in patent law doctrine do not affect patents as a principle driver of

innovation, nor that shifts in patent rules alter litigation strategy. Empirical

evidence has indicated otherwise.17 Rather, I suggest that even though that IPR

has caused a firestorm of debate, patent litigators know that these internal battles

do not affect the broader status quo. After Cuozzo, it’s business as usual.

In Part I of this article, I discuss the legal issues and the debate between

the overprotectionists and the underprotectionists over innovation. In Part II, I

explain my methodology. Part III presents the results and evaluates the data in

several formats, discussing, among other things, assumptions about the sample’s

responses and potential implications in litigation strategy and policy. In Part IV,

I offer some suggestions about how the results might relate to the overall

relationship between patent law and innovation.

17 Boldrin, Michele and Levine, David, Against Intellectual Monopoly, 192 (2008) (summarizing

the empirical evidence as finding “weak or no evidence that strengthening patent regimes

increases innovation; [the empirical studies] find evidence that strengthening the patent regime

increases . . . patenting!”); see also Mark A. Lemley, Why Do Juries Decide If Patents Are Valid?,

99 VA. L. REV. 1673 (2013) (finding a significant shift in validity rates from the 1970s onwards that

was driven by substantive changes in patent law).


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II. PATENT LAW & THE WAR WITHIN

A. Understanding Patent Law as a Driver of Innovation

i. Patent Rights & Innovation

Generally, patent law exists because the government understands that

patents are a key driver of innovation, which “lies at the heart of high-tech

entrepreneurship and economic growth.”18 In part, I wish that I could discuss in

this paper whether patents are actually an effective incentive for innovation, but

that is not the purpose of this paper.19 According to Alberto Galasso and Mark

Schankerman, “there has been relatively little empirical research on the

effectiveness of patent rights as an incentive to patent owners, and the existing

studies do not speak with one voice.”20

Notwithstanding the above, my paper addresses the relationship between

patent rights, competition, and innovation from a litigation standpoint; to that

end, I suggest that this ambiguity demonstrates that patents and patents rights

are a driver of innovation because they are simply an economic tool, not an end in

themselves.21 In other words, inventors seek patents because they are an

economic commodity in a competitive market or a tool to “game the regulatory

system.”22

ii. Overprotectionism & Underprotectionism

Ultimately, the debate boils down to overprotectionism and

underprotectionism. But this is nothing new. Patent law has been likened to a

18 Alberto Galasso and Mark Schankerman, Patents Rights, Innovation and Firm Exit (2016). 19 Based upon my initial foray into patent law, I lean toward the belief that market competition

directly influences the effectiveness of patent rights. 20 See Galasso and Schankerman, supra, at 1. 21 I agree with Mark Lemley, who argues that pharmaceutical patents are an exception in that

their enforcement incentivizes innovation. See Mark A. Lemley., The Surprising Resilience of the

Patent System (May 25, 2016) [hereinafter “Lemley, Suprising Resilience”]. Stanford Public Law

Working Paper No. 2784456l; see also C. Scott Hemphill & Bhaven Sampat, When Do Generics

Challenge Drug Patents?, 8 J. EMPIRICAL L. STUD. 613 (2011); C. Scott Hemphill & Bhaven Sampat,

Evergreening, Patent Challenges, and Effective Market Life in Pharmaceuticals , 31 J. HEALTH

ECON. (2012). 22 Id., supra, at 64.


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pendulum swing: times of strong patent protection and times of weak patent

protection, swinging back and forth in reaction to each side.23 Both sides are

staunchly convinced that “changes to the patent system will kill the goose that

laid the golden egg, retarding rather than promoting innovation.”24

In a sense, Congress picked sides when it took on patent trolling with the

AIA, but perhaps that was merely a reaction to the swing towards stronger patent

rights. Nonetheless, the rise of the patent trolls has marked a significant change

the patent system, even if the judicial response to patent trolling did not.

Regardless, in order operate in today’s economy, firms make an effort to

understand the role of patents and the impact of patent trolls.25

B. Attack of the Patent Trolls

i. Defined

Hating patent trolls has been en vogue for years.26 Indeed, the patent troll

is no longer regarded simply as a type of business method; it has morphed into a

legendary villain in a battle of good vs. evil. Even Judge Richard Posner

affectionately labeled them as “pirates” and “buccaneers.”27 Loosely speaking,

patent trolls – or, more formally known as patent assertion entities (PAEs)28 – are

entities whose business is not to produce their own tangible good, but rather to

collect money from others that allegedly infringe upon their patents.29

23 See Lemley, supra, Suprising Resilience. 24 Id. 25 See Markus Reitzig et al., On Sharks, Trolls, and Their Patent Prey—Unrealistic Damage

Awards and Firms’ Strategies of “Being Infringed,” 36 RES. POL’Y 134, 136–37 (2007). 26 Kristen Osenga, Formerly Manufacturing Entities: Piercing the “Patent Troll” Rhetoric , 47 CONN.

L. REV. 435, 437 (2014). 27 Ill. Inst. of Tech. Chi.-Kent Coll. of Law, Debate About the Patent System, YOUTUBE (May 1,

2013). https://www.youtube.com/watch?v=AYLyXJTE2aI. 28 Mark A. Lemley & A. Douglas Melamed, Missing the Forest for the Trolls, 113 COLUM. L. REV.

2117 (2013). 29 Id.


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ii. Criticisms

The most common criticism of trolls is well known: it’s largely about

extortion.30 For example, the patents asserted are of dubious and low quality,31

many of which are so basic or vague that even end-users are susceptible to troll

demand letters. Another reason is that trolls hinder innovation with “blocking

patents,” which intimidate productive companies from delivering goods and

services to the market – the main reason of course, due to the high costs of

litigation.32 Thus, leading up to the enactment of the AIA, Congress concluded

that patent trolls harmed innovation and strained the economy; as such, the PTO

needed a “toolbox of new or fortified proceedings in which it may weed out low

quality patents” and weaken trolls’ ability to “blackmail” other companies into

paying licensing fees or pursue litigation.33

iii. In Defense

Some scholars have defended patent trolls, arguing that, among other

things, they create new markets that increase investment in start-up companies;

stand up for smaller firms bullied by larger, infringing competitors; and perhaps

most persuasively, help inventors to make money for their inventions.34 Other

scholars point out that there is not enough research about trolls to support the

negative association of PAEs.35 Others point to empirical studies sympathetic to

PAEs and strong patent rights.36

30 Gerard N. Magliocca, Blackberries and Barnyards: Patent Trolls and the Perils of Innovation, 82

NOTRE DAME L. REV. 1809, 1810 (2007). 31 Id. 32 Id., note 14, at 1818–19. 33 Sarah Tran, Policy Tailors and the Patent Office, 46 U.C. DAVIS L. REV. 487, 498–99 (2012)

(describing how Congress gave the PTO wide discretion in the AIA to prioritize and adjudicate

patent claims); Aria Soroudi, Defeating Trolls: The Impact of Octane and Highmark on Patent

Trolls, 35 LOY. L.A. ENT. L. REV. 319, 323 (2015) (describing how these “patent trolls” acquire the

patents that they use to “blackmail” other companies). 34 See Sannu K. Shrestha, Note, Trolls or Market-Makers? An Empirical Analysis of Nonpracticing

Entities, 110 COLUM. L. REV. 114, 119–31 (2010) (providing an overview of relevant literature and

competing arguments). 35 Gerard N. Magliocca, Blackberries and Barnyards: Patent Trolls and the Perils of Innovation, 82

NOTRE DAME L. REV. 1809, 1810 (2007) (“Like most fresh legal questions, the debate on patent

trolls is long on passion and short on proof.”). 36 Id.


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iv. Summary

Patent trolls are controversial. Their potential harm to innovation, among

the other common criticisms, has resulted in Congress enacting the AIA to curtail

their actions. While some have argued that trolls a symptom of larger problems

within the patent system, and not a problem in itself, the fact remains that trolling

does play a significant part in the economics of patent litigation.37

C. The AIA: Patent Law Transformed

The AIA’s landmark alteration was to change the U.S. patent policy from a

“first-to-invent” system to a “first-to-file” system. Not far behind, however, was

the institution of new proceedings that permitted a patent validity challenge

before the PTO as an alternative to traditional patent litigation in the federal

courts.38 The result: “the validity of a patent is vulnerable as soon as it is issued.”39

Since then, these proceedings have swept through the patent world – and

beyond. None expected that the small, quasi-judicial proceeding would become a

battleground between large pharmaceutical companies and technology giants

such as Apple and Google. For though IPR would serve as an alternative to federal

court litigation, the PTAB adopted a different standard of review – or, in patent

prosecution terms, claim construction. But first, some basic terminology.

i. Patent Law Basics

Claim Construction. Claim construction is a critical component in patent

law; in fact, it is also the most frequently empirically-studied area in patent law.40

37 Mark A. Lemley & A. Douglas Melamed, Missing the Forest for the Trolls, 113 COLUM. L. REV.

2117 (2013). 38 See Melissa F. Wasserman, The Changing Guard of Patent Law: Chevron Deference for the PTO,

54 WM. & MARY L. REV. 1959, 1983 (2013) (noting the repeated references in AIA's legislative

history to trial-like proceedings). 39 Laura C. Whitworth, What's in A Claim?: The Importance of Uniformity in Patent Claim

Construction Standards Between District Court Litigation and Inter Partes Review, 98 J. PAT. &

TRADEMARK OFF. SOC'Y 21, 22 (2016). 40 E.g., J. Jonas Anderson & Peter S. Menell, Informal Deference: A Historical, Empirical,

and Normative Analysis of Patent Claim Construction, 108 NW. U. L. REV. 1, 6 (2014) (analyzing

claim construction from the Federal Circuit between 2000 and 2011); Gretchen Ann Bender,

Uncertainty and Unpredictability in Patent Litigation: The Time is Ripe for a Consistent Claim

Construction Methodology, 8 J. INTELL. PROP. L. 175, 175 (2001) (noting that the Federal Circuit


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Simply stated, courts look at how the claim is “constructed”: the meaning of the

words, the definitions of the terms, and the claim’s scope – that is, what it purports

to cover. 41 Yet construing patent claims has not been easy for courts.42 Indeed,

there is no step-by-step analysis available for courts to use when evaluating a

claim. The most authoritative case, Phillips v. AWH Corp,43 settled many points

of confusion, but many “core tensions” still exist.44

The BRI Standard. The Broadest Reasonable Interpretation Standard

(BRI) standard “allows more for material—such as patents and printed

publications—to serve as prior art than is permissible prior art under the ordinary

and customary meaning standard.”45 And it is precisely this latter standard,

discussed below, that the federal courts apply. “By analogy, if the diameter of a

bullseye is expanded, there is an increase in the number of darts thrown at the

dartboard that will hit the bullseye. Likewise, expansion of the scope of a claim

term using the BRI rule increases the number of prior art publications that will

hit the mark—resulting in a higher percentage of claims being invalidated in AIA

petition process.”46

Ordinary and Customary Standard. On the contrary, federal courts

apply the “ordinary and customary” standard, an objective test that construes a

claim term’s meaning to be “the meaning that the term would have to a person of

ordinary skill in the art in question at the time of the invention.”47 In other words,

“it is not determined in a vacuum [but] should be harmonized, to the extent

possible, with the intrinsic record, as understood within the technological field of

the invention.”48 Courts have determined this meaning by examining intrinsic

evidence such as the claims, specification, and prosecution history.49

frequently changes the trial court’s claim construction); Christian A. Chu, Empirical Analysis of

the Federal Circuit’s Claim Construction Trends, 16 BERKELEY TECH. L.J. 1075, 1078–79 (2001)

(examining the effects of the Federal Circuit’s de novo review of claim construction). 41 See Craig A. Nard, The Law of Patents 512 (3d ed. 2014). 42 Claim Construction: A Structured Framework, PATENTLYO.

http://patentlyo.com/patent/2009/09/claim-construction-a-structured-framework-1.html 43 Phillips v. AWH Corp., 415 F.3d 1303, 1313 (Fed. Cir. 2005). 44 See Claim Construction: A Structured Framework, supra, PATENTLYO. 45 David Newman, Technology Sectors at Risk from the Perfect Patent Storm , 8 LANDSLIDE 48

(2016). 46 Id. 47 Phillips, 415 F.3d 1303 at 1313. 48 Id. (quoting Medrad, Inc. v. MRI Devices Corp., 401 F.3d 1313, 1319 (Fed. Cir. 2005)). 49 4 PAT. L. FUNDAMENTALS § 15A:36.20 (2d ed.)


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The Conflicting Claim Construction Standards. The present

discrepancy between the two standards is arguably the most controversial topic

in patent law. It raises a milieu of issues not just related to patents; there are

constitutional implications, administrative law implications, and even political

dynamics. Because claim construction is the first part of the analytical framework

to determine both the validity of a patent as well as possible infringement,50 under

the new rule, both patent applications and validity reviews are subject to the same

standard. Therefore, scholars, businesses, and policymakers have expressed

concern that applying the same standard to both patent applications and issued

patents and thereby “confuse the prosecution and litigation processes of patent

law.”51 Thus, in Cuozzo, the Supreme Court was tasked to decide the correct claim

construction standard in light of Congress’s legislative intent in adopting the AIA

and the need for uniformity and certainty in the patent system.

ii. Inter Partes Review (IPR)

The Process. Designed to be an inexpensive and efficient alternative to

litigating in federal court, IPR is a trial-like proceeding conducted before the

PTAB to review the patentability of one or more claims in a patent. An IPR

petition can raise only issues of lack of novelty52 and nonobviousness.53

Furthermore, the basis of an IPR challenge is limited to prior art, which includes

anything found in previously issued patents, published patent applications,

published articles or white papers, or even PowerPoint slides.

Upon receiving a petition, the PTAB’s standard for instituting an IPR is

whether there is a reasonable likelihood of success that the petitioner would

prevail on at least one of the claims in the issued patent. The decision of whether

to institute an IPR is final and nonappealable. Once the PTAB institutes an IPR,

applies the BRI standard to review the construction of the challenged claims.54

50 Amy L. Landers, Understanding Patent Law, 341,353-54 (2008). 51 Laura C. Whitworth, What's in A Claim?: The Importance of Uniformity in Patent Claim

Construction Standards Between District Court Litigation and Inter Partes Review , 98 J. PAT. &

TRADEMARK OFF. SOC'Y 21, 39 (2016); see also Chiang & Solum, The Interpretation--Construction

Distinction in Patent Law, 123 YALE L.J. 530 (2013). 52 For an invention to be patentable, the invention must be considered to be new or novel. See 35

U.S.C. § 102. 53 Nonobviousness the invention sought to be patented would have been obvious “to a person

having ordinary skill in the art to which the claimed invention pertains.” See 35 U.S.C. § 103. 54 37 C.F.R. § 42.100(b).


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The patent holder may petition the PTAB to amend its claims, but thus far the

PTAB has rarely granted such requests. The PTAB issues a final determination

within one year, which is significantly faster than the federal courts.55 A patentee

may appeal the PTAB’s final petition to the Federal Circuit. Before doing so,

however, patentees can amend their claims to meet the statutory requirements of

novelty and nonobviousness.

IPR in Numbers. Listed in the below visual are the most recent IPR

petitions before the PTAB.56 The visual contains four cylinders: (1) the total

number of claims available to be challenged in the IPR petitions filed; (2) the

number of claims actually challenged and not challenged; (3) the number of claims

on which trial was instituted and not instituted; and (4) the total number of claims

found unpatentable in a final written decision, the number of claims canceled or

disclaimed by the patent owner after institution, the number of claims remaining

patentable (not subject to a final written decision), and the number of claims found

patentable by the PTAB

. *Current as of 6/30/2016. Source: USPTO

55 See generally Inter Partes Review, PATENT APPLICATIONS HANDBOOK § 7:8. 56 USPTO, Patent Trial and Appeal Board Statistics.

http://www.uspto.gov/sites/default/files/documents/2016-6-30%20PTAB.pdf.


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D. Cuozzo Speed Technologies, LLC v. Lee

i. Facts

Cuozzo Speed Technologies, LLC, owned a patent on an invention that

linked a GPS device with a display system that would alert a driver when he is

driving over the speed limit. Garmin, a GPS manufacturer filed an IPR petition,

challenging two claims. Ultimately, the PTAB invalidated three claims,

concluding that they were obvious in light of prior art, and denied for reasons of

futility Cuozzo's motion to amend the claims. Cuozzo appealed to the Federal

Circuit, arguing that the PTAB improperly instituted IPR and that it improperly

used BRI standard to interpret the claims rather than the standard used by

courts. The Federal Circuit rejected both arguments.

ii. Holding

The Supreme Court affirmed the Federal Circuit,57 holding that judicial review

is unavailable because the statutory provision overcomes by clear and convincing

evidence the strong presumption of judicial reviewability, even in light of the “final

and nonappealable” language of § 314(d). However, the court did leave open the

possibility that judicial review is available if there are implications of

constitutional questions or other questions of interpretation beyond the scope of

the provision.58

In addition, the Court was unanimous in holding that PTO had the

authority to issue regulations imposing the BRI standard. The Court declared

that is “less like a judicial proceeding and more like a specialized agency

proceeding.”59 Furthermore, the Court held that the BRI standard represented a

reasonable exercising of Congress’s delegated rulemaking authority to the PTO.

The Court noted that the standard had been used for over 100 years; and it is “not

unfair to the patent holder in any obvious way” even in light of the high “kill

rate.”60 despite the statistically low success rates for motions to amend in IPR

57 Justice Breyer delivered the opinion, which was unanimous regarding the BRI standard. Justice

Thomas filed a concurring opinion, and Justice Alito filed a dissent, in which he was joined by

Justice Sotomayor, regarding the judicial reviewability issue. 58 Id. at 11. 59 Id. at 15. 60 Id. at 17-19.


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proceedings. The Court concluded its decision by holding that the inconsistent

results between IPR proceedings and district courts rejected “inherent to

Congress’ regulatory design.”61

iii. Notes

After examining the research, I expected that respondents would react

strongly to both the BRI standard remaining in place and the Court upholding the

nonappealability of the PTO’s determination to insitute IPR. As we will see, the

survey responses showed a general lack of “strong” opinions about the ruling.

Thus, the theory that Cuozzo does not carry much effect, but instead opens up

further questions, seems plausible.

III. DATA & METHODOLOGY

A. Approach

i. Overview

Due to the novelty of the Supreme Court’s decision in Cuozzo, I developed

and administered the first targeted surveys of patent law practitioners with their

reactions to the case. Formally titled the “Patent Law Practitioners Survey: Inter

Partes Review & The Supreme Court's Decision in Cuozzo Speed Technologies v.

Lee”, the survey was administered exclusively to a large sample of U.S. News &

World Report’s Best Lawyers® in Patent Law.62 The survey included a variety of

questions centered on the major issues addressed in Cuozzo.

ii. Objectives

One of the survey’s principal aims was to determine whether the industry

reaction to Cuozzo was in line with ongoing narratives from the beginning of the

case and predictions of the Court’s outcome. To that end, the survey seeks to

explore whether the many assumptions about Cuozzo were in fact legitimately

held by a broad spectrum of Best Lawyers® patent law practitioners.

61 Id. at 19-20. 62 62 U.S. News - Best Lawyers, Best Law Firms, http://bestlawfirms.usnews.com/default.aspx.


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iii. Platform & Design

I used the online platform Survey Monkey™ to draft the survey, distribute

it, and to collect the responses. The online survey methodology is beneficial

because the respondents remain anonymous, thereby eliminating any chance of

influence from other participants.

Because I wanted to analyze the respondents’ attitude towards the topic, I

designed the ten-question survey using the Likert scaling method,63 with five

potential choices: strongly agree, agree, neither agree nor disagree, disagree,

strongly disagree. To be sure, “[r]esearching any topic through voluntary survey

responses carries significant limitations. Responses can by skewed by who chose

to respond, creating limitations for reaching conclusions that are accurate for the

entire population.”64

Due to the risk that some practitioners whose primary focus is to defend

accused infringers, it is possible that they could be motivated to overstate the

impact of Cuozzo, which would therefore skew our results. However, patent law

practitioners tend to represent both patent owners and accused infringers in

different cases, so the likelihood of systematic bias is slim. It is critical to note the

limitations of the small sample size and the low response rate. For instance, “a

small response rate increases the risk of selectivity bias among those who do

respond.”65

iv. Survey Distribution & Questions

The survey was emailed to over 175 Best Lawyers® in Patent Law; as of

publication, ten respondents completed and submitted it. I may supplement the

survey findings in the future because of ongoing analysis of qualitative data. The

ten survey questions were designed to gauge the perspectives from top patent

litigators of all the major issues that the Supreme Court tackled in Cuozzo.

Specifically, these questions attempted to explore in greater depth how patent

litigators are actually crafting their case strategies around the separate claim

63 Likert Scaling, RESEARCH METHODS KNOWLEDGE BASE.

http://www.socialresearchmethods.net/kb/scallik.php 64 Feldman, Robin and Lemley, Mark A., Do Patent Licensing Demands Mean Innovation? IOWA

LAW REVIEW, Vol. 101 (2015). 65 Id.


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construction standards and nonappealability of PTAB’s determination whether to

institute an IPR. I also added some general policy questions related to common

discourse in the post-AIA patent system.

From a research perspective, one of the most interesting aspects of

surveying these top patent litigators was the opportunity to aggregate the

responses and compare the data with the public (at least in the patent world)

reaction to Cuozzo.

B. Results & Analysis

First, it must be noted that “web surveys frequently suffer from low

response rates: the typical response rates for web surveys are in the single digits

where no relationship exists between the surveyor and the surveyed population.”66

Therefore, the response rate is not a sample that represents a definite

generalization of a larger group; it should be regard as merely “a hybrid of a

convenience and snowball sampling methods.”67 Nevertheless, the results are

“instructive for describing recent experiences of lawyers with the patent litigation

system.”68

Q1: The discrepancy of claim construction standards

between PTAB and the district courts will result in inconsistent

patent validity decisions and ultimately infringement

determinations.

66 Chien, Colleen V. and Dobkin, Daniel and Helmholz, Wesley and Millslagle, Coryn and Neal,

John and Shanahan, Nicole and Tosetti, Christopher Patrick, Santa Clara Law Best Practices in

Patent Litigation Survey (September 1, 2013). 67 Id. 68 Id.


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The first question immediately gets to the primary issue in Cuozzo. The

responses are mixed, which is not unexpected. One interesting note is that one

respondent strongly disagreed with the assertion. One can hypothesize that the

respondent believes the separate claim construction standards serve as a benefit

to patent litigation in its vast scope. Then again, this question is not highlight

nuanced and the responses could be merely

Q2: PTAB’s general use of the BRI standard and its relative

unwillingness to permit amendments during IPR proceedings has

led to inequitable results.

The second question focuses on the practitioners’ understanding of the high

rates of invalidity determinations made in IPR. At first, one can speculate that

the practitioners were unaware of how over 80% of claims have been invalidated.

On the other hand, the practitioners may have focused not so much on statistical

imbalance; rather, they could have interpreted “inequitable” as a broader term

that invokes policy notions of fairness. For instance, perhaps the practitioners

viewed that there are too many patents issued, and that the IPR, even with its

high “kill rate”, is merely leveling the playing field.


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Q3: Applying the same standard to both issued patents and patent

applications confuses the prosecution and litigation processes of

patent law.

The third question was designed to be a more vague assessment of the

respondents’ attitude to the BRI standard. Here, there are divergent points of

view as to whether AIA expressly intended for the same standard between the IPR

process and federal courts. Based on the data, there are mixed reactions to the

question, suggesting that practitioners are still divided over the issue, which was

addressed in Cuozzo.

Q4: The Court’s ruling in Cuozzo will place a higher burden on

patent owners who want to enforce their patent rights yet find

themselves defending that same patent in IPR proceedings.

This question could be interpreted by respondents in two ways. First, it

could be interpreted on its face. Five respondents understand that IPR is more

costly to defend its claims in IPR. Second, at a deeper level, the two respondents

who strongly disagree might think that because such patent owners could be


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trolls, whether they face a burden or not is inconsequential as long as they receive

just desserts.

Q5: PTAB’s BRI standard protects the public because weak patents

are more easily invalidated and patent drafters are encouraged to

craft their claims more narrowly.

A policy question. Three respondents are perhaps ambivalent about the

policy implications, while the six that agree or strongly agree approve of the

majority opinion justifying the appropriateness of the BRI standard in the IPR

process.

Q6: PTO should grant at least one amendment in IPR proceedings

if the amendment: (1) further limits the claims; and (2) does not

introduce § 112 issues.

This question altogether poses a complex issue that is not fully addressed

in this article. Simply stated, the majority of patent invalidations in PTAB are not

fully a result of claim construction. However, even though PTAB accepts motions


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to amend during IPR, it has rarely granted them. Thus, many have argued that

amendments should be permitted for non-futile reasons – in other words, not just

for addressing prior art. Interestingly, respondents seem opposed to this measure,

which suggests the belief that once a patent holder arrives in IPR, it has done so

by its own choice of litigating against the potential infringer; and because such

litigation is a recourse, patent holders should not be granted a final chance to

defend themselves from a petitioner.

Q7: The fact that PTAB could perform an ultra vires act without

being subject to judicial review is contrary to notions of due

process and fundamental fairness.

This matter relates to the constitutional issue regarding judicial review of

agency decisions. In addition, this question was designed to supplement Question

8 as to whether respondents believed that this was more of an administrative law

than a patent law case. Here, respondents we fairly mixed regarding PTAB not

being subject to judicial review. One assumption is the fact the nonappealability

of PTAB’s determination to institute IPR did not present any issues thus far in

their practice; and those four respondents who agreed with the question are

perhaps basing their opinion on a personal belief in a strong presumption of

judicial review.


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Q8: The Court’s ruling in Cuozzo has more to do with

administrative law than patent law because the type of standard

PTAB uses is not as important as whether that standard is

unreasonable.

This question is important because it directly relates to the theory that

Cuozzo does not have as big of an implication on patent law, thereby rendering

any argument regarding the BRI standard somewhat moot because, after all,

PTAB’s adoption of the BRI standard was discretionary. Further, because the

Court upheld the in-place BRI standard, respondents may feel that the Court’s

affirmance is merely maintaining business as usual.

Q9: Unless Congress intervenes, PTAB’s use of the BRI standard in

IPR proceedings will have negative long term consequences to the

patent system.


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This question sought to ask whether respondents believed that Congress

needed to amend AIA to eliminate the separate standards used in PTAB and

federal courts. One of the goals of AIA was, through post-grant proceedings, to

provide a cheaper alternative to litigation. It’s interesting to note that

respondents answer more towards the negative in light of the fact that the BRI

standard is arguably more costly to litigate.69 Note also the response to “longterm,”

which could indicate patent litigators’ belief in the resilience of the patent system

to substantive and procedural changes.

Q10: AIA's post-grant proceedings such as IPR have been generally

successful deterring "patent trolls" while at the same time

strengthening legitimate patent holders' ability to protect their

innovations.

The question was worded to be a head-scratcher. On one hand, there is a

belief that “patent trolls” should be deterred, and that IPR is a good method to do

that. On the other hand, IPR does not just deter “trolls”; it also affects legitimate

patent holders. It’s possible that respondents believed that the “ability to protect”

patent holders’ innovations was somewhat of an indirect push for holders to

narrow their claims, which is widely viewed as beneficial (e.g. to reduce the

number of patents and decrease PTO’s workload).

69 To note, the Supreme Court also noted that the separate standards were “inherent to Congress’

regulatory design.” Cuozzo, slip op. at 19.


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PART IV: DISCUSSION & CONCLUSION

A. The Effects of the Patent System

i. Overprotectionism v. Underprotectionism

As we have seen, the patent troll “crisis” of the 2000s brought about

sweeping changes to the patent law system. Leading the charge against patent

trolling were technology companies and generic drug manufacturers, which

argued that the “overprotection” of patent rights spawned the patent troll and

stifled innovation.70 By 2015, the AIA’s effects – particularly the effects of IPR –

were measurable enough for probing scholarly review. While the debate goes on

about patent trolling, the PTAB’s invalidation rates in IPR were quite clear –

patent rights were suddenly in danger of “underprotection,” which would threaten

inventors and their incentives to innovate.71 All the while, both sides are engaged

in a tug o’ war to claim “innovation” as their own and blame the other side every

time the Federal Circuit and the PTAB issue a decision. Meanwhile, patent

litigators seem to be riding out back-and-forth; because in the end, innovation does

not rely upon a claim construction standard.72

ii. Litigators & Patent Law Changes

Lawyering is a practical job. Based upon the findings, it seems that lawyers

understand that regardless of any changes in the law, inventors still invent,

patent applications are still filed, patents are issued, lawsuits are filed, cases are

settled, and so on. If an inventor wants a patent, he will get one. If a company

patents because it wants to be in the “club of responsible, innovative businesses,”73

it won’t matter whether the PTAB is a “death squad” or the inconsistencies of

claim construction standards create uneven invalidation rates; it will still hire

lawyers to get the job done.

70 See e.g. Dan L. Burk & Mark A. Lemley, The Patent Crisis and How the Courts Can Solve It

(2009); Adam Jaffe & Josh Lerner, Innovation and Its Discontents (2004); James Bessen & Michael

J. Meurer, Patent Failure: How Judges, Lawyers, and Bureaucrats Put Innovation at Risk (2008). 71 See, e.g., Hon. Maureen K. Ohlhausen, Patent Rights in a Climate of IPR Skepticism (working

paper 2016). 72 See Lemley, supra, Suprising Resilience. 73 Dan L. Burk, On the Sociology of Patenting (working paper 2016).


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As we have seen, the recent “crisis” of rising patent lawsuits, patent

trolling, “death squads,” and “kill rates” has no doubt created drama in the patent

world. Perhaps, however, in the overall scheme of innovation, growth,

technological advances, etc., changes in substantive and procedural patent rules

won’t make much of a difference.

Moreover, another possible explanation is that, to patent litigators, the

merits of a patent case are not that important to the “underlying dynamics” of the

patent system.74 Over 85% patent law cases settle before a decision on the merits,

and even more so after summary judgment or trial.75 As such, “patent plaintiffs

may file suit not because they hope the court will give them what they want, but

because the act of filing a lawsuit itself may give them what they want, win or

lose.”76

Patent lawyers presumably know that there are “bottom-feeder patent

plaintiffs” blackmail cases;77 cases where large companies use patent litigation to

bully potential competitors out of its market; 78 cases where companies with large

patent portfolios simply use litigation as a tool with no regard about winning;79and

cases in the life sciences where filing suit will present regulatory burdens on

competitors.80

In each of these cases, the “patentee can get what they want – money, a

competitive advantage, regulatory insulation from generic competition – without

ever taking the case to judgment.”81 Thus, although patent rules are “theoretically

designed to affect ex ante incentives”, they are “largely unknown to or simply

irrelevant to the way inventors and companies act in the real world.”82

74 See Lemley, supra, Suprising Resilience. 75 John R. Allison, Mark A. Lemley, & David L. Schwartz, Understanding the Realities of Modern

Patent Litigation, 92 TEX. L. REV. 1769 (2014). 76 Lemley, supra, Suprising Resilience. 77 Mark A. Lemley & A. Douglas Melamed, Missing the Forest for the Trolls, 113 COLUM. L. REV.

2117 (2013). 78 Catherine Tucker, The Effect of Patent Litigation and Patent Assertion Entities on

Entrepreneurial Activity (working paper 2014); Ted Sichelman, The Vonage Trilogy: A Case Study

in “Patent Bullying,” 90 NOTRE DAME L. REV. 543 (2014). 79 Gideon Parchomovsky & R. Polk Wagner, Patent Portfolios, 154 U. PA. L. REV. 1 (2005). 80 See, e.g., C. Scott Hemphill & Mark A. Lemley, Earning Exclusivity: Generic Incentives and the

Hatch-Waxman Act, 77 ANTITRUST L.J. 947 (2011). 81 See Lemley, supra, Suprising Resilience. 82 Mark D. Janis & Timothy J. Holbrook, Patent Law’s Audience, 97 MINN. L. REV. (2012).


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B. The Complexities of the Patent System & Innovation

To comprehensively discuss possible explanations for the current

relationship between the patent system and innovation is, to say the least, beyond

the scope of the paper. But I put forth some suggestions. Some scholars have

suggested that the innovation drives patenting; not the other way around. As

Professor Mark Lemley puts it, “Economic growth is driven by productivity, and

productivity is frequently driven by innovation, so it may make sense that that an

increase in invention (and therefore an increase in patenting) leads to an increase

in economic growth.”83 Or, perhaps those in the patent system – especially within

the regulatory agencies – overinflate the importance of patents in innovation.

Others have suggested that patent litigation is neither cyclical or countercyclical

with a market economy.84

To conclude, long term studies have shown that patent litigation outcomes

are not significantly affected by substantive changes in patent law.85

Furthermore, my research has shown that the recent rule changes in the PTO do

not seem to warrant a strong reaction from either side. And even though the

Supreme Court’s decision in Cuozzo Speed Technologies, LLC v. Lee could be

viewed as a “landmark case” within the patent world, to the outside world – the

inventors, industry, and innovation – it’s simply business as usual. And the patent

lawyers know this.

83 See Lemley, supra, Suprising Resilience; see, e.g., Lance Bachmeier, et al., The Volume of Federal

Litigation and the Macroeconomy, 24 INT’L REV. L. & ECON. 191 (2003). 84 Alan C. Marco, Shawn P. Miller, & Ted M. Sichelman, Do Economic Downturns Dampen Patent

Litigation?, 12 J. EMPIRICAL L. STUD. 481 (2015) (finding a complicated relationship that changes

over time between economic downturns and patent litigation rates). 85 Lemley, supra, Suprising Resilience.

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