January 2019

Use of Arbitration In Place of Inter Partes Review Proceedings

An IPR might be more efficiently accomplished through arbitration than through a PTAB proceeding, so it should be considered by practitioners.

An inter partes review (IPR) might be more efficiently accomplished through arbitration than an IPR through a Patent Trial and Appeal Board (PTAB) proceeding, so it should be considered by practitioners. An IPR Arbitration process can be completed in less time and result in a binding decision. In response to the Supreme Court’s SAS ruling that arguably has resulted in a more complex IPR system, litigants may substitute an IPR Arbitration to obtain a patentability ruling in a shorter, less expensive, and less complex manner.

Supreme Court: SAS Institute v. Iancu

The Supreme Court in SAS Institute v. Iancu, 584 U.S. ___, No. 16-969 (April 24, 2018), held that all claims asserted by an IPR petitioner must receive adjudication through a full PTAB review including a final ruling. As a result, in August the U.S. Patent and Trademark Office (USPTO) announced that in view of the SAS decision, fees for PTAB trials are to increase by roughly 25%. So the filing fee for an IPR filed in 2019 is likely to rise to nearly $20,000 (plus $18,750 Post-Institution fee, both up to 20 claims). The USPTO announcement noted that as a result of SAS, the PTAB will no longer be able to institute an IPR on less than all claims challenged in a petition, leading to the fee increase due to significant additional work for a given instituted IPR.

The SAS ruling effectively ended the PTAB’s partial institution practice — which allowed only part of the claims originally challenged by a petitioner to be adjudicated. Many attorneys have predicted that SAS will increase the patent holder’s expenses resulting from the requirement to defend all the asserted patent claims. Small to midsize companies and start-ups who could have mustered the resources to participate in an IPR pre-SAS might now be unable to participate fully in an IPR due to the increased filing fees and attorney’s fees now required to withstand a more involved PTAB proceeding and even lengthier appeal.

The SAS ruling has been described as having the practical effect of forcing the PTAB to institute fewer IPRs (to avoid potentially causing further backlog) in order to preempt the inevitable overwork required when all claims must be fully adjudicated in each IPR.

As a result of the SAS ruling, the overall fees and time to challenge a patent, beginning with an IPR, will increase — especially attorney’s fees for appeal to the Court of Appeals for the Federal Circuit (CAFC). Between 2012 and 2015, appeals from the USPTO to the CAFC increased from about 100 to 400. The CAFC’s workload will likely increase further in light of SAS. The PTAB can no longer dispose of a subset of challenged claims at the institution phase (a decision that is not subject to appeal). Rather, all challenged claims must be addressed in the final decision, providing additional appealable issues for the CAFC to decide.

Efficiencies via IPR Arbitration

By using an IPR Arbitration process that mirrors an IPR proceeding at the PTAB, parties can take control of the process and institute measures to save costs and time. Using arbitrators with significant patent trial experience, including former PTAB judges, allows for a carefully planned process and thoughtfully crafted award/ruling. All such arbitration awards must be respected and enforced by the USPTO under 35 U.S.C. §294 (with respect to the parties in the arbitration).

If the parties agree, an IPR Arbitration timeline can allow for the completion of the invalidity process within six months. The proceeding includes opposer’s/petitioner’s disclosure of asserted prior art and a briefing schedule for patentee’s motion to amend, and claim construction leading to a claim construction order; all within 90 days of the initiation of the IPR Arbitration. In the final 90 days, the opposer files its final assertion of claims, final asserted prior art and invalidity contentions leading up to the arbitration hearing and award. Such a compact schedule could be open to modification upon agreement of the parties.

During an arbitral proceeding, a party would be entitled to raise as defenses any or all of the defenses set out at 35 U.S.C. §282, such as noninfringement, unenforceability, patent or claim invalidity or other similar defenses. The arbitration award in such a proceeding would be enforceable just as any other arbitration award, as provided in 9 U.S.C. §9, provided that proper notification of the award has been previously given to the Commissioner of Patents, as required by 35 U.S.C. §294(d). The IPR Arbitration may last only six months. A PTAB IPR proceeding lasts 18 months (1 year following institution) and, on average, about 18 additional months for an appeal.

IPR May Have Some Advantages

Comparing an IPR Arbitration to a standard PTAB IPR proceeding reveals some advantages to PTAB proceedings. The main advantage is appealibility of PTAB rulings to the CAFC. Another advantage to PTAB proceedings is the expertise of the administrative judges with PTAB procedures. Also, the ability to select an arbitrator of the parties’ choice might allow for selection of a neutral with subject matter expertise.

Use of a Submission Agreement for Arbitration

Typically, arbitration is initiated as a result of an arbitration clause placed in an agreement between the parties. Such a pre-dispute clause triggers patent arbitration when a dispute arises under an agreement, such as a license agreement or joint development agreement. These types of agreements have arbitration clauses that are drafted prior to a dispute at a time non-contemporaneous to the dispute. In other words, the dispute can arise many months or years after execution of the agreement.

Under an IPR Arbitration, the parties will enter into an arbitration (submission) agreement contemporaneous with the dispute or post-dispute. For example, a patent infringement suit may have been filed in the district court. In order to institute the IPR Arbitration, the parties will enter into an arbitration/submission agreement. See, e.g., Existing Disputes: WIPO Arbitration Submission Agreement. The advantage of a submission agreement is that it can be tailored to meet specific needs of the disputants. Risk control is an obvious advantage. It might be of overriding importance, for example, to a respondent in order to have a maximum liability ceiling or to a claimant to have a minimum floor for the amount recovered. §18:2. The arbitrability of intellectual property disputes within the United States, 1 Alternative Dispute Resolution Practice Guide §18:2.

The accused infringer in a district court litigation is most likely considering the filing of an IPR at the PTAB. With the potential of an IPR and the existence of the district court action, the parties are likely well aware of the substantive issues at hand, and the potential jurisdictional and procedural issues to be confronted. It is under these circumstances that an arbitration agreement or submission agreement is to be negotiated for conducting the IPR Arbitration. Such a contemporaneous arbitration agreement can be much more effectively drafted compared to an arbitration clause from an agreement entered a longtime prior to the actual dispute.

Arbitration without an arbitration clause is a perfectly available dispute resolution method; provided that the parties conclude a submission agreement once a dispute has arisen. Aceris Law LLC, “Arbitration Proceedings without an Arbitration Clause” (Nov. 29, 2017) (http://bit.ly/2FyGOaO). Arbitration by a submission agreement represents, in fact, the apotheosis of consensualism because the parties accept arbitration in full knowledge of the extent of an existing dispute.

Post-dispute submission agreements allow for more precise time constraints to be placed and consolidation of issues. “‘Products of the Mind’ Require Special Handling: Arbitration Surpasses Litigation for Intellectual Property Disputes,” American Arbitration Association. Use of a submission agreement provides more certainty as to forum, speedier case management plans, limited damage to business relationships and binding effect. Kenneth R. Adamo, “Overview of International Arbitration in the Intellectual Property Context,” 2 Global Bus. L. Rev. 7 (2011). Even if privity of contract does not exist, the patent owner and alleged infringer can elect to utilize arbitration post-dispute in order to reduce risk of a run-away award. So in this respect, entering into an IPR Arbitration proceeding using a submission agreement is more effective than traditional arbitrations under a pre-dispute arbitration clause. David A. Allgeyer, “Ways to Draft the Post-Dispute Agreement, In Search of Lower Cost Resolution: Using Arbitration to Resolve Patent Disputes,” 12 Conflict Mgmt. 9 (2007).

Ability to Amend Claims Under IPR Arbitration

While IPR Arbitration is intended to mirror the IPR process, the parties, by agreement, might deviate from the IPR rules where practicable. One area the parties may consider modification is the 25-page limit for a motion to amend the claims and reply. Aqua Products v. Matal, 872 F.3d 1290 (Fed. Cir. 2017). Since the petitioner has a burden to prove unpatentability of the amended claims by a preponderance of the evidence, the petitioner and the patentee may desire a page limit greater than 25 pages (depending on the number of claims at issue).

Confidentiality Concerns Dictate a Non-Reasoned Opinion

While the arbitrators adhere to certain standards concerning the privacy or confidentiality of the hearings and documents disclosed at hearings, parties may wish to impose limits on themselves as to how much information regarding the dispute may be disclosed outside the hearing or arbitration proceeding in general. In addition, the parties should keep in mind the requirement to disclose the arbitration award to the USPTO under 35 U.S.C. §294. Due to this disclosure requirement, the parties may wish to plan for that inevitability by restricting the arbitrator’s ability to provide reasoning for the arbitration award. D. Olson v. Harland Clarke Corp., 2017 WL 541913 (9th Cir. 2017). A patentee may wish to avoid an award with a reasoned decision to prevent third parties from having a road map for invalidating a patent in a subsequent proceeding. An opposer/petitioner may wish to prevent its competitors from obtaining the fruits of the opposer’s labor if it successfully invalidates the patent.

Having such control over the content of the arbitration award is a possible benefit of an IPR Arbitration, as compared with a PTAB action. Also, the filings in an IPR proceeding are publicly available and can provide competitors valuable information should they decide to bring a subsequent IPR (if the original opposer/petitioner is unsuccessful). 35 U.S.C. §294(d). The use of an IPR Arbitration may also be beneficial in cases where an initial IPR petition is unsuccessful. Parties who want to file serial IPRs to supplement with newly located prior art, but do not want to risk the cost of an additional IPR or IPRs, may be more willing to undertake a less expensive IPR Arbitration than additional IPRs.


Traditional petitioners in IPR proceedings may favor an IPR Arbitration because of the reduced cost and duration of the proceeding. Traditional patentees in IPR proceedings may favor an IPR Arbitration due to enhanced settlement opportunities in an arbitration that can be incorporated into a case schedule. Patentees will also benefit from the lower cost and expediency of IPR Arbitration. Additionally, patentees may benefit from the limited nature of an arbitration ruling, which will not extend to non-party arbitrants. Both parties will benefit from the private nature of arbitration and confidentiality of the proceeding.

Experienced counsel may craft an arbitration case management order to mirror an IPR proceeding if they possess a good understanding of the IPR process and arbitration practice. When such a case management order is properly prepared, the result should be an efficient and streamlined IPR Arbitration process.


*Published in The Intellectual Property Strategist section of Law Journal Newsletters, January 2019