This episode is audio of Judge Raymond Chen's introductory remarks from the Engelberg Center's Rethinking Patent Prosecution, Review, and Litigation event. It was recorded on March 28, 2024.
Announcer 0:01
Welcome to engelberg center live a collection of audio from events held by the engelberg center on innovation Law and Policy at NYU Law. This episode is audio of Judge Raymond Chen's introductory remarks from the engelberg center is rethinking patent prosecution review and litigation events. It was recorded on March 28 2024.
Judge Raymond Chen 0:30
Thank you, Michael. Thank you to NYU and the engelberg Center. This is very exciting for me to come back to NYU. I'll be back at NYU next month for my 30 year reunion. So that's how long it's been since I took patent law, one with Michelle Dreyfus and patent law two with Pat Martone. So also thank you to NYU for giving me the chance to just offer some opening remarks this morning, I thought it'd be interesting to just offer a little bit of perspective from a federal circuit judge on the state of patent law. Now, at the court, we really occupied just the a corner of the overall patent landscape, we don't see everything that's going on with patent licensing or patent enforcement litigation, examination prosecution. So I can't say that what we see at the Federal Circuit is just an accurate reflection of everything else that's going on in patent law. But nevertheless, what I can report out is that the nature of our courts patent work has changed considerably over the past decade. And I think it's worth just pausing for a moment to notice that and an offer a few reflections about it. So before I get into where we are now, at the Federal Circuit, let me start with a dream. I have a dream that everybody has a dream that I have a dream to It's the dream of a Federal Circuit Judge, someone who entire professional career has been in patent law, and would be nice. As a Federal Circuit Judge, I live in a world where when I'm looking at patent appeals, I'm asking myself the following questions. What is the scope of the patent? Right? Does the accused product infringe that patent? Right? And if so, what is the value of the thing taken? What should the remedy be? What are the appropriate damages award for that infringement. And an ideal property rights system would work that way. And the courts wouldn't have to ask itself very often, whether the property rights itself was a valid one, whether it was properly granted, we would instead be focused on the disputes of whether the defendant has appropriated someone else's patented technology. But that is not what a typical appeal at the Federal Circuit looks like, not anymore. Today, Federal Circuit judges are instead confronting questions of patent validity. And just patent validity day in and day out. So it seems like to me just about every other property right? Doesn't have to focus so much on this validity question. But that is where we are stuck today. With our patent system. At least that's the way it looks to me from the work that I've been assigned to do at the Federal Circuit. I acknowledge, of course, that other patent systems around the world have their own similar challenges with wrestling with rounds of patent validity reviews after a patent has been granted. The United States is not alone in that in that score. But with the advent of IPR and other patent cancellation proceedings at the patent office, about 12 years ago, litigation about patent validity has exploded in our country. Now, when the Federal Circuit was established, almost over 40 years ago, in 1982 20, to 25% of the court's docket was patent cases. And that modest percentage was by congressional design, to ensure that the Federal Circuit could see a lot of other cases and to avoid creating a specialist court. Because there was skepticism about at that time, maybe still, even today about a purely specialist court. And then getting to about halfway through the time of the Federal Circuit say 20 years ago, the docket of patent cases rose to about 1/3 of the Court's cases. And back then if you saw a Federal Circuit Judge speaking at a conference like this, that judge would bristle at the idea that they were a member of a specialist court They would say No way. That's not who we are. We see lots of diverse cases. But it would be hard to be offended by such a label today. For the past 10 years patent appeals have fluctuated our court between 60% to two thirds of all of our cases. Currently, 1/3 of our entire docket comes from IPR appeals. And for the past several years, we've been getting far more IPR appeals than we've been getting appeals from all the district courts across the country. So just let that sink in for a minute. And then picture in your mind what I'm doing at my desk every day. And then when you combine those IPR appeals, with all the appeals on section 101 cases, hatch Waxman cases, and other district court validity decisions, what you get is a federal circuit, that today certainly is a true patent court. But more specifically, it's a patent validity court. And that seems like a strange thing for my court to have to devote such tremendous effort and time to look at whether the asserted property right is legitimate. And it's not just my court, but it's the district courts as well, as well as the patent board to we have a system where a large number of decision makers are being asked to take a second look at Patent Office decisions to grant a patent. And so I, you know, I don't want to sound aggrieved, but it does feel like Federal Circuit judges are turning into glorified patent examiner's. In other words, as cynical judge could say he's, he feels like he's been assigned a lifetime appointment of doing cleanup duty for taking care of other people's mistakes. I'm not a cynical judge, though. So how did we get here? Over the past decade, we've seen the largest stress test of the patent offices issued products, the patents that they grant in this country's history. And it's worth pausing to ask the question, How did it turn out? I personally have sat on several 100 IPR appeals by now. Which means I've read hundreds of patent board IPR decisions, as of my colleagues on my court. And I doubt anyone has read more IPR decisions than we have. And I have to say, in my view, the patent board does very good work. And that is borne out by my courts super high affirmance. Right. Their decisions are very thorough and consistently show willingness to get down to the technical weeds of a given validity dispute. They're experienced patent lawyers who have appropriate technical backgrounds. And so they're well suited to do the work. And I don't detect any prevalent bias in their decision making process. I see administrative patent judges trying to play it down the middle trying to get it right on the substance, in view of the petitioners asserted prior art are the claims good or not. And as for how patents have fared, when put to the test, in through these IPR reviews, the results are in and to me, they are not great. They're not good enough. I realized that a few 1000 IPR is now are only a small percentage of the few million patents that have been granted over the past many years. But these patents in the IPR are many of the most valuable patents. Given all the parallel litigation going on in district courts, and the super majority of IPR petitions, they get instituted by the board, and a super majority of those institutions that reach a final decision, lead to patent invalidity, and almost 80% of IPR appeals that might court get affirmed. Also, a significant chunk of IPR is settled between the parties before the board ever renders a final decision, which raises the specter that these patent owners don't believe their patents will survive the scrutiny. So as I've said, most of the time, the evidence is strong enough to the board to invalidate the clamps. And then when I review these cases, I'm reading the board decision, the briefs, the claims, the specification, the prior art references, and most of the time I say to myself, yeah, the petitioners got the goods. And this patent was improvidently. Granted, and the cumulative effect of seeing all these patents go down, month after month, and year after year is a bit distressing to someone like me who got into patent law Two years ago, because he believed in the patent system. So many people say these IP ORS are bad, because they weaken the patent system by hurting public confidence in the patent system. And also by eroding the willingness to invest in research and development create new products and services.
And I understand that point of view completely. patent owners have good reason to be rattled right now. There's also another point of view, maybe these IPRS reveal a weakness in our patent system. Maybe we need to figure out how to do better on the front end. In the initial patent examination to ensure patent examiner patent owners don't end up getting their patents blown out of the water and litigation. Now, patent owners understandably want to attain finality to all validity attacks, as opposed to enduring never ending rounds of challenges through their IP ORs. After three, four or five, IPR is on the same patent, I can imagine why they might say enough. finality and quieting title, so to speak, are important values. But so as validity and for our country, invalid patents create an enormous drag on our economy. One significant thing I've noticed about reviewing all these IPR hours is that I often see prior art references in the IPR that were not before the examiner during initial examination. And usually these new references are US patents, or US published applications. And I wondered to myself, Why didn't these references get found during the initial examination? If the killer prior art happens to be some PhD thesis from a university in Germany? And okay, or a slide deck presentation at a conference? Well, I think we can all understand why the patent examiner could not locate that kind of priority. But I think it's fair for me to ask, I think why a patent examiner was not able to find a compelling prior art United States patent. But an IPR Petitioner was, especially when I'm seeing it over and over again, across the many, many IPR appeals I'm looking at. At this point, in 2024, the PTO has now amassed a huge amount of data through these IPR is at the board, that it seems to me could be sorted and evaluated to figure out possible patterns, or possible improvements to examiner search techniques, and maybe examination more generally. If I was still working at the PTO, I would be regularly talking to executives about trying to figure out if there's something in these successful IPR challenges that can be used to improve patent examination. Are there any lessons to be learned? Are there any trends or trends the agency could report to the public? Why is it that petitioners seem to be able to find this art that examiner's don't. And how findable was that prior art? How much did it cost to run the prior art search? How long did it take? What databases and what search terms that they use? Is it possible to ask IPR petitioners to fill out a questionnaire to answer some of these questions? Is there anyone who wants to at least figure out if these IPR results can be used as a feedback loop to improve patent examination quality? This is not just a PTO problem. It's a collective problem for all actors in our patent system. I worry that it's a bit too easy to to often invalidate patents because our initial examinations are just incomplete. Like a rough cut. examiners have only a limited amount of hours. They have many patentability issues to sort through. And if an applicant does a prior art dump, for example, that puts a tremendous strain on the examiner to sort through all that prior. So I'm sympathetic to examiner challenges. But I don't think we should all just shrug our shoulders and choose to keep doing the same thing we've always been doing and accept that the situation on the front end is okay, or good enough. I don't think it is. Every time a patent owner loses a patent through an IPR a lot of Reliance interests go up in smoke. It's also very costly for the public and competition to go through all the money and effort to take down a patent that was improperly granted in the first place. So we should want to build a better, more reliable system than we have now. may sound like I'm attacking the PTO, but I want to be clear. I worked for the PTO for 15 years. I love that agency. And I want to see it succeed in its core mission. So if we keep bumping along with our current state of initial examination, what comes next? Well, I'm a neurotic. So I can imagine all kinds of things. And I can imagine certain companies and interest groups, generating highly articulated datasets from these IPR results, and then going to Congress, and lobbying for the clear and convincing burden of proof to be taken away because the PTO is rough cut work doesn't deserve so much deference. And instead, the burden should be set at preponderance of evidence like it is for other forms of intellectual property. I think that would cause enormous problems for the invention community, because a change in the burden of proof would likely impact Reliance interests and incentives to invest in r&d. But I can imagine certain factions like I said, One day lobbying Congress to make a move on the presumption of validity So having said all this, I've realized there are a lot of problems and a lot of challenges. You know, the amount of prior art is exploding just every year, making it ever harder to find the needles and in the growing haystack, training and mentoring of patent examiner's is more difficult than ever, because all patent examiner's are now working from home. examiner's are not lawyers. You know, the law is so complicated right now, it's very hard for your standard 27 year old patent examiner to appreciate all the subtle nuances that are in my courts precedent. Maybe even the substantive law is wrong in certain important ways. So we have an absolutely all star lineup today of speakers. As Michael said, these are all smart, talented, thought leaders. I haven't seen this strong cast of thought leaders since last year's engelberg center event at NYU, related to patent law. We're going to be discussing a lot of things that we can improve on and patent litigation and IPRS but to me over the past 10 years, the big reveal is that the core bottom line issue is patent quality, and right sizing the claims in the first instance. So thanks very much. Let's get started.
Announcer 17:40
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