In a close 11-10 vote, a bipartisan majority of the U.S. Senate Judiciary Committee advanced the Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act out of committee. The bill has since been placed on the Senate Legislative Calendar, bringing it one step closer to consideration by the full Senate.

The bill proposes several changes to the America Invents Act (AIA) of 2011, particularly in the area of post grant-proceedings. This post provides a brief overview of the key provisions and how they could change patent practice at the Patent Trial and Appeal Board (PTAB).

Changes to post-grant proceedings:

IPR Standing Requirement – The PREVAIL Act adds a standing requirement to file an Inter Partes Review (IPR) petition. Specifically, an IPR petitioner would be required to certify, and the Director determine, that the petitioner falls in one of four categories:

• “[H]as been sued in a court of the United States for infringement of the challenged patent”
• “[W]ould have standing to bring a civil action in a court of the United States seeking a declaratory judgment of invalidity with respect to one or more claims of the challenged patent”
• Is “a nonprofit organization” that (1) “is exempt from taxation under section 501(a) of the Internal Revenue Code of 1986”; (2) “does not have any member, donor or other funding source that is, or reasonably could be accused of, infringing one or more claims of the challenged patent”; and (3) “is filing the petition for the sole purpose of ascertaining the patentability of the challenged claims of the patents”, or
• Is a party “currently engaging in, or has a bona fide intent to engage in, conduct within the United States that reasonably could be accused of infringing one or more claims of the challenged patent.”

Reduction of parallel petitions – Parallel petitions generally refer to a group of petitions filed in short succession (e.g., less than 90 days apart) by the same petitioner against the same patent. The PREVAIL Act seeks to cut down on these types of petitions by requiring the USPTO to “reject any petition that presents prior art or an argument that is the same or substantially the same as prior art or an argument that previously was presented to the Office,” with an exception for when “the petitioner has demonstrated exceptional circumstances.”

Reduction of serial petitions –Serial petitions generally refer to secondary petitions filed well after the filing of a first petition (e.g., a second petition, challenging overlapping claims, filed after a patent owner responded to the first petition), all filed by the same party. The PREVAIL Act seeks to cut down on these types of petitions by enlarging the scope of post-grant proceeding estoppel. Specifically, the act attaches estoppel at the time when a petition is filed as opposed to the current standard, which only applies estoppel after the PTAB has issued a final written decision.

Harmonize burdens across forums – Currently, the PTAB and federal district courts apply two different burden of persuasion standards in adjudicating patent validity. Specifically, the PTAB requires a petitioner to prove patent invalidity by “a preponderance of the evidence,” whereas federal courts require a challenger to prove the same by the higher “clear and convincing” standard. The PREVAIL Act would impose a presumption of validity and adopt the clear and convincing standard at the PTAB. However, in an instance where a patent owner proposes a substitute claim, the act would only require the petitioner to demonstrate the invalidity of that substitute claim by the lower preponderance of the evidence standard.

Interplay with federal court litigation:

Eliminate Multi-Forum Actions – At present, many federal patent litigation actions also involve an invalidity challenge at the PTAB. The PREVAIL Act seeks to prevent these types of multi-forum invalidity challenges and would bar a petitioner (or a real party in interest) from filing or maintaining an invalidity action in federal court or at the International Trade Commission once the PTAB has instituted a post-grant proceeding. Additionally, the act prevents the institution and maintenance of a post-grant proceeding after another forum has issued a final judgment deciding patent validity.

Fee-related changes:

Expansion of micro entity status for institutions of higher education – Currently, a patent applicant who is employed by an institution of higher education or has assigned their interest in a patent application to an institution of higher education may qualify as a “micro entity” before the USPTO. The PREVAIL Act expands micro entity status to situations where the applicant itself is an institution of higher education or a tax-exempt organization holding patents on behalf of an institution of higher education to facilitate commercialization of those patents.

Elimination of fee diversion – Currently, USPTO fees are deposited in the Treasury and the USPTO is funded by annual appropriations. This allows Congress to divert fees (e.g., patent fees, trademark fees) to other federal government plans unrelated to the USPTO and patent law. The PREVAIL Act creates a revolving fund in the Treasury to cover USPTO expenses and would end the practice of fee diversion.

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Given the narrow 11-10 vote in favor of advancing the PREVAIL Act, the bill may experience turbulence as it goes in front of the full Senate. But the persistent introduction of PTAB-related reforms, accompanied by recent bipartisan support, suggests that changes to post-grant proceedings are coming in one form or another.

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