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`Press Center
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`(cid:55)
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`IPR Statistics Revisited: Yep, It’s A
`Patent Killing Field
`
`February 8, 2017 / by Samson Vermont
`
`Some view Inter Partes Review (IPR) as a patent killing field. Yet, the statistics
`published by the PTO seem to suggest that the patent kill rate in IPR is modest,
`and other commentators suggest that it’s roughly comparable to the kill rate in
`district court. The truth is closer to the killing field. Whether this will change under
`Trump remains to be seen, but there are reasons to believe it might.
`
`There are four reasons why the killing field view is more accurate. First, the PTO’s
`reported numbers are somewhat misleading. When reporting IPR numbers, the
`PTO reports on petitions “completed to date.” This little fact, as others have
`noticed, makes the kill rate seem lower than it is.
`
`Second, not only are the kill rates under 102 and 103 higher in IPR than in district
`court, but also those who suggest the kill rates are roughly comparable compare
`apples to oranges. In IPR, only printed publications can be used to attack patents.
`In district court, challengers can also attack with the other categories of prior art:
`prior public use or sale, public knowledge, derivation or incorrect inventorship,
`
`Voip-Pal Ex. 2075
`IPR2016-01198 and IPR2016-01201
`1/12/2018
`https://www.patentattorney.com/ipr-statistics-revisited-yep-its-a-patent-killing-field/
`
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`IPR Statistics Revisited: Yep, It’s A Patent Killing Field | Patent Attorney
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`and invention by another. In district court, these other categories account for
`about 40% of kills under 102.
`
`Third, although the institution rate has dropped since the early days of IPR, some
`of the drop is attributable not to a decrease in the Board’s willingness to institute
`any given claim but to an increase in the willingness of patentees to settle IPRs
`before the institution decision.
`
`The fourth reason that the killing field view is more accurate concerns the rate at
`which parallel litigation is stayed, which does not speak to the kill rate but does
`speak to the overall power that IPR confers on patent challengers. Some
`commentators report a grant rate for stays that is misleadingly low because it’s
`based on all motions to stay filed on the ground of a co-pending IPR. It’s
`somewhat common for an accused infringer to file one motion before institution
`and one after and have the first fail and the second succeed. When calculated per
`motion filed, the grant rate is only around 50% to 60%. But when calculated per
`case, which is more meaningful, the grant rate is closer to 82%.
`
`PTO Numbers Are Misleading
`
`Below is a diagram from the PTO report on AIA Trial Statistics, current through
`2016. It shows the disposition of IPR petitions completed to date. Take a quick
`look at the light blue hexagon at the top and the red and yellow hexagons at the
`bottom.
`
`https://www.patentattorney.com/ipr-statistics-revisited-yep-its-a-patent-killing-field/
`
`1/12/2018
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`IPR Statistics Revisited: Yep, It’s A Patent Killing Field | Patent Attorney
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`[https://i2.wp.com/www.patentattorney.com/wp-
`content/uploads/2017/02/Screen-Shot-2017-02-02-at-10.25.26-AM.png?ssl=1]
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`The light blue hexagon shows the total number of petitions filed from the
`inception of IPR through 2016. The red hexagon shows the number of trials in
`which all instituted claims were held unpatentable and also states it as percentage
`of total petitions filed. The yellow hexagon shows the number of trials in which
`some instituted claims were held unpatentable and likewise states it as a
`percentage of total petitions filed.
`
`Add the 23% in the red hexagon to the 5% in the yellow hexagon and we get 28%
`as the percentage of petitions in which the Board invalidated at least one claim. In
`addition, as shown in two of the gray hexagons, patentees requested adverse
`judgment after institution in 191 IPRs and before institution in 26 IPRs, resulting in
`another 5% of kills, for a total kill rate of 33% (28% + 5%).
`
`https://www.patentattorney.com/ipr-statistics-revisited-yep-its-a-patent-killing-field/
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`1/12/2018
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`The real kill rate, however, exceeds 33%. The reason is that after a petition is filed
`it takes about 18 months to get to trial and decision. Accordingly, the trial
`numbers in the red and yellow hexagons relate to petitions filed 18 or more
`months prior to the last day of 2016. Yet, in calculating the percentages in the red
`and yellow hexagons, the PTO divided by the number of all petitions filed as of the
`last day of 2016, instead of by the number of petitions filed as of 18 or more
`months prior to the last day of 2016.1 [#easy-footnote-bottom-1] Similarly, the
`requests for adverse judgment in the gray hexagons relate to petitions filed at
`various times prior to the end of 2016.
`
`One study that accounts for the delay until final decision is the Report on Patent
`Trial and Appeal Board Contested Proceedings (2016), prepared by Fitzpatrick,
`Cella, Harper & Scinto. This study looked at a set of IPRs consisting of those
`denied institution for substantive reasons through 2014 plus those that reached
`final written decision or request for adverse judgment through 2015. Among this
`set of IPRs, 60% of claims challenged in petitions were killed either directly by the
`Board or by way of request for adverse judgment by the patentee.
`
`The Fitzpatrick study states the kill rate as a percentage of claims rather than as a
`percentage of IPR petitions. Arguably, the latter is more meaningful because the
`broader and more valuable claims in a challenged patent are more likely to be
`killed. For example, suppose all 20 claims in a patent are challenged. The two
`broadest claims cover a swath of infringers, while the remaining 18 claims cover
`few or no infringers. The two broadest claims are killed; the other 18 survive. In
`substance, this largely or entirely amounts to a loss for the patentee, but if we
`look only at the percentage of claims killed, it appears to be a 90% victory for the
`patentee.
`
`On the other hand, the numbers in the red and yellow hexagons above tell us
`that, when the Board holds claims unpatentable, it holds all of the instituted
`claims unpatentable 82% of the time (23% / 28%). Similarly, a study by Brian Love
`and Shawn Ambwani found, that among IPRs reaching final decision, 77% of all
`instituted claims are either held unpatentable or disclaimed.2 [#easy-footnote-
`bottom-2] If the norm when killing instituted claims is to kill them all, then stating
`the kill rate as a percentage of claims falls only a bit short of stating it as a
`percentage of petitions.
`
`https://www.patentattorney.com/ipr-statistics-revisited-yep-its-a-patent-killing-field/
`
`1/12/2018
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`IPR Statistics Revisited: Yep, It’s A Patent Killing Field | Patent Attorney
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`In any event, other data in the PTO report on AIA Trial Statistics suggests that the
`kill rate for petitions is about four percentage points higher than the kill rate for
`claims. If we adjust by adding 4% to the 60% from the Fitzpatrick study, we get an
`estimated kill rate per petition of about 64%. That is, in about 64% of petitions,
`one or more of the claims will not survive.
`
`Kill Rates in IPR Greatly Kill Rates in District Court
`
`The Fitzpatrick study finds that, of challenged claims that reach a decision on the
`merits, 49.6% are invalidated under 103 and 41.1% under 102. (Note that some
`claims are invalidated under both.) The study notes further that, in district court
`cases in which validity is adjudicated, 27.8% of claims are invalidated under 103
`and 31.1% under 102. (Again, some claims are invalidated under both.) According
`to these numbers, the potency of 103 is much greater in IPR than in district court,
`while the potency of 102 is modestly greater.
`
`In IPR, however, the only category of prior art available is printed publications. In
`district court, available prior art also includes prior public use or sale under 102(b),
`public knowledge under 102(a), derivation or incorrect inventorship under 102(f),
`and (for pre-AIA patents) invention by another under 102(g).
`
`It is remarkable that, although printed publications are the only type of art
`available in IPR, the kill rate under 102 is nonetheless about a third higher than in
`district court. In district court, printed publications account for about 60% of
`invalidations under 102; the other art categories account for the remaining 40%.3
`[#easy-footnote-bottom-3]
`
`If we take 60% of the 31.1% kill rate under 102 in district court, we get a kill rate
`under 102 printed publications in district court of only 18.7%. Now, we can
`compare apples to apples and see that the 18.7% kill rate for printed publications
`in district court is dwarfed by the 41.1% kill rate for printed publications in IPR.
`(Note that in IPR attack under 103 is likewise limited to printed publications, but
`this limitation is far less significant for 103 because the vast majority of 103
`attacks have always been based on printed publications.)
`
`The Drop in the Institution Rate Is Due in Part to Rise in
`Settlement
`
`https://www.patentattorney.com/ipr-statistics-revisited-yep-its-a-patent-killing-field/
`
`1/12/2018
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`IPR Statistics Revisited: Yep, It’s A Patent Killing Field | Patent Attorney
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`A patentee may request adverse judgment or settle by dismissing a co-pending
`infringement suit against the petitioner or by entering into a covenant not to sue.
`These measures occur in the shadow of what the patentee believes the Board
`would likely hold were it to rule on the challenged claims. When IPR first started,
`its institution and kill rates were very high and IPR quickly developed a reputation
`as a killing field.4 [#easy-footnote-bottom-4]
`
`In what appears to be a reaction, patentees became more willing to settle. In 2014
`there were more than five times as many settlements before institution as there
`were in 2013. In 2015 there were, compared to 2014, more than two and half
`times as many settlements before institution and 82% more after.5 [#easy-
`footnote-bottom-5] Accordingly, some of the decrease in the institution rate is due
`not to a decrease in the Board’s propensity to institute any given claim but to an
`increase in the settlement rate.
`
`The institution rate dropped in part because some of the IPRs the Board would
`have instituted settled before they could be instituted. According to the PTO’s AIA
`Trial Statistics, among IPRs that reached the institution decision, the Board
`instituted 86.5% of challenged claims in FY2013, 74.3% in FY2014, and 65.3% in
`FY2015. We can estimate the upper limit of the extent to which pre-institution
`settlement accounts for the decreases in institution across those years by (1)
`seeing what the institution rates would have been had all of the IPRs that settled
`pre-institution instead been instituted and by (2) comparing the changes in the
`counterfactual institution rates from year to year to the changes in the reported
`institution rates from year to year.
`
`The counterfactual institution rates come out to 87.8% in FY2013, 77.5% in
`FY2014, and 71.6% in FY2015. When we compare these to the reported rates, it
`appears that pre-institution settlement accounts for only as much as one-sixth of
`the decrease in institution from FY2013 to FY2014. Pre-institution settlement,
`however, accounts for as much as two-thirds of the decrease in institution from
`FY2014 to FY2015. That is, the difference between the counterfactual rates for
`FY2014 and FY2015 is only one third as large as the difference between the
`reported rates for FY2014 and FY2015.
`
`Patentees may settle to preserve the validity of the claims challenged in the IPR. In
`addition, when the IPR challenges fewer than all of the claims in the patent, the
`
`https://www.patentattorney.com/ipr-statistics-revisited-yep-its-a-patent-killing-field/
`
`1/12/2018
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`patentee may settle to minimize the effect on the unchallenged claims. The
`patentee may also settle to minimize the effect on related patents.
`
`By settling before the patentee’s preliminary response, which comes due about
`three months before the institution decision, the patentee can avoid taking a
`position on the prior art or on claim construction. By settling before the institution
`decision, the patentee can avoid a decision by the Board to institute that suggests
`in and of itself, or that includes language that suggests, that the claims are invalid.
`The patentee can also avoid claim construction by the Board that could conflict
`with the construction the patentee may want to advance in a future infringement
`suit.
`
`To be sure, however, settlement in view of the threat posed by IPR amounts to
`some degree of loss for the patentee. Although settling officially preserves the
`validity of the patent, the fact that the patentee chose to settle puts other
`infringers and licensees on notice that the patent is vulnerable. Furthermore, the
`IPR file, a public record, sets forth the prior art to attack it with. And of
`course when a patentee settles an IPR by dismissing a co-pending suit against the
`petitioner, the patentee foregoes some or all of what it would have gained had it
`maintained the suit.
`
`Co-Pending Suits Are Usually Stayed
`
`Some commentators report a grant rate for stays that is based on all stay motions
`filed before and after institution of a co-pending IPR. When based on all filed stay
`motions, the grant rate appears to be around 60% or so. Motions filed after
`institution, however, are more likely to succeed. When the grant rate is based on
`stay granted per case, which is more meaningful, the grant rate is higher.
`
`According to Love and Ambwani, in 80% of instituted IPRs the challenged patent
`was being asserted in litigation between the patentee and the petitioner. Among
`the co-pending suits in which a motion(s) to stay was filed and ruled on, stay was
`granted 82% of the time. (About 10% of the motions were never ruled on because
`either the case first settled or it was stayed for some reason other than the IPR.)
`
`Note, however, that there was variation across the district courts. Love and
`Ambwani found that the Eastern District of Texas granted stay in view of IPR in
`
`https://www.patentattorney.com/ipr-statistics-revisited-yep-its-a-patent-killing-field/
`
`1/12/2018
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`only 56% of cases. Another source reports that the E.D.Tex. grants stay in view of
`IPR in only 50% of cases.6 [#easy-footnote-bottom-6]
`
`In the 13 years that inter partes reexamination was available, only 1,919 were ever
`filed. In contrast, in the four and a half years that IPR has been available, over
`5,600 have been filed. The popularity of IPR with patent challengers is no surprise
`given the statistics above.
`
`Can we expect changes under the Trump administration that tilt the scales back to
`patentees? After all, it can be argued that investment in technology may be
`diverted to countries more likely to uphold patents. One could point out, for
`example, that China recently embraced software patents and that in 2016 the
`Chinese patent office received nearly twice as many patent applications as the
`USPTO.7 [#easy-footnote-bottom-7]
`
`Although Trump’s views on patents are unknown as of yet, a new report from
`Shearman & Sterling suggests that experiences with his own IP (at least in the
`context of branding) and the views of those who have his ear, many of whom are
`staunch supporters of patents, would tend to make him pro-patent.8 [#easy-
`footnote-bottom-8] There is, however, no reason to believe that patents are a
`priority for Trump at this point in time.
`
`1. See also Michael E. Sander, By The Numbers: Is the PTO Underreporting the
`Rate They
`Institute
`IPRs and CBMs? Patentlyo
`(May 16, 2016).
`[#easy-footnote-1]
`
`2. See Brian J. Love and Shawn Ambwani, Essay: Inter Partes Review: An Early
`Look at the Numbers, 81 University of Chicago Law Review Dialogue 93
`(2014).This study was limited to an early subset of IPRs – those terminated by
`[#easy-footnote-2]
`March 31, 2014.
`
`3. This 40% is derived from data on 3316 cases decided from 2005 to 2013,
`which were coded according to rulings on 40 legal issues. For the raw data,
`see U.S. Patent Litigation Statistics, Institute for Intellectual Property and
`Information Law, University of Houston Law Center, at www.patstats.org (last
`[#easy-footnote-3]
`visited Jan. 2017).
`
`https://www.patentattorney.com/ipr-statistics-revisited-yep-its-a-patent-killing-field/
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`1/12/2018
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`4. See Michelle Carniaux and Michael E. Sander, Riding the PTAB Wave: An
`Empirical Study of the Surge of Petitions Filed in the Patent Trial and Appeal
`Board, available at SSRN (April 1, 2015) (note Fig. 5 and Fig. 7, showing high
`[#easy-footnote-4]
`institution rates and kill rates early on).
`
`5. See USPTO AIA Trial Statistics, as of December 31, 2014 and as of December
`[#easy-footnote-5]
`31, 2015.
`
`6. See Statistics for Orders for Motions to Stay in View of Pending IPR or CBM as
`of April 10, 2014, available at Kenyon.com (Jan. 2017). [#easy-footnote-6]
`
`7. See Glyn Moody, China Files A Million Patents In A Year, As Government Plans
`To
`Increase Patentability Of Software, TechDirt.com
`(Dec. 1, 2016).
`[#easy-footnote-7]
`
`8. See Jeff John Roberts, What Trump Means for the U.S. Patent System,
`Fortune.com (Jan 24, 2017). [#easy-footnote-8]
`
`Tags: AIA trial statistics, inter partes review statistics, IPR statistics, patent invalidity, patent
`kill rate, PTAB statistics
`
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