Medical device companies have challenged thousands of patents using the Patent Trial and Appeal Board’s (PTAB) administrative adjudication system. Introduced in 2012, PTAB provides an alternative to bringing much more expensive and time-consuming patent lawsuits in federal court.

But while the PTAB has developed the reputation of being a more appealing path for challenging patents than going to federal court, a new analysis of PTAB data points to a changing tide. Experts predict the number of PTAB filings for 2019 will total about 1,320 — 24 percent fewer than in 2018. They also project federal court litigation will tick up very slightly, the first YoY increase since 2015.

What’s behind this trend? There’s been a seismic shift in the way the PTAB court is adjudicating cases, making it more difficult for challengers to triumph. What does this mean for medical device companies? Two IP experts explain what’s driving this new litigation trend and how it’s impacting companies’ strategies around protecting their innovations.

“The current trends favor patentees,” says Doug Robinson, principal with Harness Dickey, St. Louis, MO. “For example, institution rates are down to 62 percent from a high of 87 percent in 2013. Total filings  have also decreased the past four years following a high in 2015.

“Over the past few years, the IPR rules and standards have shifted in ways that favor patentees. These changes have been based on formal rulemaking, and on PTAB decisions designated as ‘precedential’ by the Patent Office,” adds Robinson. “These include the October 2018 rule changing the claim construction standard from the broadest reasonable interpretation to the Phillips standard (which is the standard applied in litigation and is more beneficial to a patentee facing an invalidity challenge).

“By way of another example, the July 2019 Trial Practice Guide includes provisions aimed to limit instances where multiple IPR challenges are pending against a patent,” says Robinson. “Similarly, the PTAB’s precedential decision in General Plastic Industrial Co., Ltd. v. Canon Kabushiki Kaisha, IPR2016-01357 provides factors to be used in the board’s exercise of discretionary denial of serial IPR petitions against a patent. This is part of larger a trend where the PTAB is more sensitive to the complaints of patentees who have had their patents challenged multiple times in IPRs.”

“If PTAB filings are truly going down in 2019 compared to 2018 (the jury is still out on this conclusion), it could mean that the results achieved at the PTAB are not in favor of the petitioners, and the PTAB is invalidating fewer patents,” says Steven Shape, managing partner with global IP firm Dennemeyer. “This may be viewed as a positive sign for medical device companies, when considering the validity of their patents.

“However, it is likely that reduced PTAB filings will not stop validity contentions from being raised in the case of protracted federal court litigation,” he says. “Certainly, assertions that give rise to declaratory judgement proceedings in federal courts will continue contesting the validity of medical device patents from the outset.”

Robinson notes that future decisions will likely impact IPR proceedings. For example, he says, the Patent Office’s Precedential Opinion Panel is currently considering a case (Hulu, LLC v. Sound View Innovations, LLC IPR2018-01039) where it will address the important question of what level of proof is necessary to prove that a document was publicly accessible — and thus was a “printed publication” under the patent laws — at the institution stage.

“This is an important issue because whether something is sufficiently publicly accessible to qualify as a ‘printed publication’ matters for whether that document qualifies as prior art. When non-patent documents are involved (for example, presentations at scientific conferences), the question of whether IPR is instituted can hinge on whether the document should be considered a ‘printed publication,’ says Robinson. “The outcome of this case has the potential to increase (or decrease) the number of documents that can be relied on as prior art in IPR petitions. This is especially important to medical device companies, which often face invalidity challenges based on scientific presentations.

Shape adds that the litigation filing data categories included in the July 1, 2019 Q2 2019 Patent Dispute Report  are estimates based on the first half filings. Quarter 2 totals from 2018 are similar to Quarter 2 totals from 2019 (see Figure 2 in the report).

A decrease in filings may reflect the changing landscape of IPRs to one that is less favorable to challengers than it was when the proceedings were new, says Robinson. “Patent challengers are, of course, the entities that choose to use the PTAB as the forum for the dispute. If challengers sense decreased odds in their favor, then one would expect that fewer IPRs would be filed, as cases at the margins (in terms of strength) fall off,” he says.

“This is what appears to be happening based on statistics. Patent challengers must also consider the legal estoppel that applies if a claim survives IPR, and the practical issues a challenger will have to face in litigation if its IPR is unsuccessful. As a result, patentees should probably be less worried about IPRs overall, but of course each individual case may go against the overall trend — and, if an IPR is instituted, the preponderance of the evidence standard still favors challengers relative to litigation in federal court.

“In fact, district court patent case filings are increasing in the second quarter of 2019 compared to the second quarter of 2018,” says Shape. “In the first half of 2019, medical device litigation comprised approximately 15 percent of all federal court patent litigation, and the majority of these cases were between manufacturers/distributors. Only a small fraction of these cases were brought by a non-practicing entity (NPE). Certainly, validity will be at issue in these cases should they proceed beyond the filing stage into any responsive pleading or discovery.”

Shape says that the seeming reduction in PTAB proceedings may be a resulting increase in federal court litigation. Such a conclusion may make the most sense, since the PTAB decisions are regularly being challenged and reversed by the CAFC and the Supreme Court. It is possible that the PTAB's advisory opinions are not being considered as persuasive as they once were on these issues.

As a part of protecting their IP, medical device manufacturers and their IP counsel should understand the shifting landscape of IPR practice, particularly in view of recent changes in the applicable rules as well as recent precedential PTAB decisions. Robinson says that medical device companies should also understand the reasons why PTAB panels reject petitions — both substantive and procedural — and leverage that knowledge into strategy if an IPR is filed. Separately, because each IPR (with its hefty filing fee) can only address one patent, having claims in multiple patents can help protect against the possible effects of IPRs.