New practice area evolves as more than 7,900 patent validity challenges filed at patent office since September 2012

U.S. Supreme Court will rule on constitutionality of the proceedings, attorneys aren’t worried

[Image (src=https://db0ip7zd23b50.cloudfront.net/dims4/default/9b68e35/2147483647/legacy_thumbnail/160x120/quality/90/?url=https%3A%2F%2Fbspot-prod.bna.com%2Forca%2Fapi%2Frendition%2Fshow%2F740012%2Fic2061.png)]Big law firms have ramped up to handle an evolving new patent practice area: patent validity challenges that have quickly become the battleground for an increasing number of multi-billion dollar disputes.

More and more intellectual property law attorneys now practice before the Patent Trial and Appeal Board (PTAB), a patent office tribunal created by a 2011 law as a fast-track and less expensive alternative to patent validity challenges in federal district courts.

Since the passage of the American Invents Act of 2011, a sweeping overhaul of U.S. patent law, big law firms have moved quickly to build PTAB practices to have on hand the talent and infrastructure needed to serve clients in cases before the tribunal.

PTAB cases, especially patent challenges called inter partes review (IPR), are on the upswing. The Patent and Trademark Office initially projected it would receive over 400 hundred patent challenges annually. But the volume of petitions surpassed expectations.

The PTAB received more than 1,700 petitions in 2017, according to Bloomberg Law data. There have been 7,943 petitions filed since the proceeding started in September 2012 through the end of last year.

Technology heavyweights such as Apple Inc., Alphabet’s Google Inc. and Samsung Electronics Co. Ltd. have quickly emerged among top filers of patent validity challenges at the PTAB.

The growth in PTAB petitions has increased big law firms’ case load. For instance, Paul Hastings LLP has gone from covering a handful of cases in 2014 to more than 300 cases over the last three years, Naveen Modi, a Washington-based partner at the law firm, said.

To step up PTAB work, the law firm has doled out resources to hire attorneys and staff and develop infrastructure such as docketing systems, Modi said.

The firm saw that “the PTAB was going to be a big factor in every litigation or in pre-litigation,” he said.

Clients Loom Large

The new high-stakes patent practice at the patent office has attorneys racing to represent parties, including large operating companies that are lodging petitions aimed at invalidating patents of entities that sue them for alleged infringement in court, as well as patent owners looking to defend the soundness of their patents.

The U.S. Supreme Court is slated to rule in 2018 on a case that could put the brakes on PTAB practices. The high court, which heard oral arguments in the case Nov. 27, 2017, is weighing whether it is constitutional for the administrative PTAB to decide property matters, such as a patent validity challenge process in Oil States Energy Services., LLC v. Greene’s Energy Group., LLC.

The fate of law firms’ PTAB business and their heavy investments to expand the practice hang in the balance, as all eyes are on the Oil States case. However, PTAB practitioners say it’s business as usual, as clients continue to file PTAB petitions.

Big Firms Expand PTAB Practices

Paul Hastings recruited patent litigator Modi in mid-2014 to help grow its PTAB team and lead its patent office practice. Now, when Modi gears up to go to the PTO, his colleagues joke that he doesn’t need to show his identification to security.

About a dozen associates have been hired by the law firm since 2014, increasing the strength of its IP team, which broadly handles PTAB and other intellectual property-related litigation to 130 attorneys, Modi said.

Patent attorneys have found themselves spending a lot of time not only in the PTAB hearing rooms on the ninth floor of the patent office in Alexandria, Va., but also at the U.S. Court of Appeals for the Federal Circuit, which hears appeals from PTAB cases, Karl Renner, a principal in the Washington, D.C. office of Fish & Richardson P.C. said.

“The federal circuit docket has become very busy,” Renner, who co-chairs the Fish & Richardson’s post-grant practice group, said. His firm has focused on building talent and expertise to handle PTAB cases and appeals in recent years, he said.

Wilmer Cutler Pickering Hale and Dorr LLP has also beefed up its IP team to handle the growing PTAB business.

“If you want to, as our firm does, be a full service IP practice then it’s critical that you have a very strong IPR practice or post-grant practice more generally,” Don Steinberg, a partner and chair of the intellectual property department at WilmerHale said. “The IPRs are a huge part of the strategy for litigation.”

The firm, which had 129 attorneys working on IPRs in 2017 compared to 69 in 2014, has been encouraging and training young attorneys to take on PTAB work.

“It helps keep the cost down and it allows more of the junior or less-experienced attorneys to get more serious experience with the proceedings,” Steinberg said.

The PTAB practice has become so deep-seated in the patent litigation business, that attorneys decided to start a PTAB Bar Association in 2017. The group was formed specifically to keep up a dialogue among practitioners, judges and stakeholders. The bar association, which has around 900 members working in government, corporations and private firms, will hold its second annual meeting in March.

PTAB Practices: Here to Stay?

Most patent attorneys have kept up a diverse practice covering PTAB, federal district court, and International Trade Commission litigation. Maintaining a split docket means a transition from a post-grant proceedings system to a “post-post-grant world” wouldn’t be as disruptive, Fish & Richardson’s Renner, said.

“It’s our view that the industry has gotten a taste of how disputes can be resolved without full-blown litigation, where they involve valid patents, and where patent validity itself can just be tested,” Renner, said, referring to how the PTAB offers an alternative to expensive and extended litigation. “Even if the Supreme Court were to decide that this particular mechanism was problematic, there is a hunger, desire and need for a new mechanism to come about that would help industry to move forward.”

Congress would likely step in and try to put an alternative patent challenge process in place, if the PTAB proceedings are found unconstitutional under Oil States, Modi said. “It’s not like we will be out of work but the practice will shift to something different.”

So it’s been business as usual, even as law firms manage budgets related to PTAB practice.

Working on a PTAB petition, which takes 18 months from start to finish as per U.S. law, is less lucrative when compared to lengthier and more complex federal district court litigation, according to the American Intellectual Property Law Association’s “2017 Report of the Economic Survey.”

The median cost charged through the filing of an inter partes review petition rose 25 percent to $100,000 in 2017 from 2015, the survey shows. In 2017, the median cost for a PTAB hearing, was $250,000 in 2017. The median overall cost for a patent infringement case with $1 million to $10 million at stake was $1.7 million last year.

Litigation may be more expensive than a PTAB proceeding but law firms take them very seriously, given the high stakes involved. For a law firm, losing when representing a patent owner means the client has lost a patent. Winning when representing a petitioner means taking out a patent and gaining an advantage in corresponding district court litigation.

“From strictly a business perspective, the revenues are less with IPRs than litigation,” WilmerHale’s Steinberg said. “On the other hand, in terms of value to the client, the IPRs are of immense importance.”

Business aside, patent attorneys say getting in on the ground floor of an evolving practice area has been personally gratifying.

“Being part of the fabric as it‘s being woven has been exceedingly rewarding,” Fish & Richardson’s Renner said. “Not every practitioner has had the opportunity to live through an era of such change.”

To contact the reporter on this story: Malathi Nayak in Washington at mnayak@bloomberglaw.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bloomberglaw.com