Patent Court Sets the Pace
A new trial and appeals board has already attracted 650 disputes.
Drawn by the promise of speed and expertise, scores of megacorporations from Apple Inc. to Toyota Motor Corp. are flocking to the hottest new forum for intellectual property fights: the Patent Trial and Appeal Board.
Part of the U.S. Patent and Trademark Office, the new board — with 182 judges and 50 more expected hires — has become a strategic venue for corporations seeking to beat back patent infringement suits.
"There has been unexpected interest in our proceedings," said Chief Administrative Patent Judge James Smith in an interview at the patent office headquarters in Alexandria, Va. "We are pleased that the more cases we've decided, the greater the interest in our trial jurisdiction seems to be."
Companies have filed about 650 patent validity challenges since the board opened its doors on September 16, 2012, Smith said. And the pace keeps accelerating. In the first 10 days of October, the board got 40 more new cases, including eight from Google Inc., four from Samsung Electronics Co., one from American Express Co. and one from Intel Corp.
At this rate, it now rivals the most popular jurisdiction for patent litigation in the country, the U.S. District Court for the Eastern District of Texas, where 1,266 new patent cases were filed in fiscal year 2012, according to the patent office.
"Anytime now that a company is talking about patent litigation strategy, [the board] is going to be part of the conversation automatically," said Finnegan, Henderson, Farabow, Garrett & Dunner partner Erika Arner. In June, she won the first — and, to date, only — fully litigated case before the board on behalf of client SAP A.G., invalidating a $345 million patent held by Versata Software Inc. "The patent office seems serious about using the proceedings to correct errors...in patents that should not have been issued."
Under the America Invents Act of 2011 that created the board, patent judges must resolve cases within a year (18 months under extraordinary circumstances) once a petition is granted. In district courts, it takes more than double that time on average for a patent case to go to trial, a 2012 study by PricewaterhouseCoopers showed.
The board's mandate is much narrower. It only decides if patents are valid, not whether they've been infringed, and discovery is limited. Still, the tight deadlines pressure the judges to deliver.
Smith, who was associate general counsel and chief intellectual property counsel at Baxter International Inc. before becoming the head patent judge in May 2011, likens his job to that of a frog in a cauldron. At first, the water is at room temperature and the frog is happy — and then the heat begins to rise. "But by then, the frog isn't going anywhere because it's already in the water and it's too late," he said, laughing. "The next step is just to keep up with what we're facing."
Last week, about a dozen lawyers and spectators filled a windowless, low-ceilinged hearing room on the ninth floor of the patent office, where one of the board's first cases was coming to trial.
Liberty Mutual Insurance Co., represented by Ropes & Gray partners J. Steven Baughman and James Myers, was challenging a patent held by Progressive Casualty Insurance Co., represented by Jones Day partners Calvin Griffith, James Wamsley III and John Biernacki.
The patent involves using detailed information from vehicle sensors — measuring factors such as speed, the use of brakes and whether everyone in the car is wearing seat belts — to determine a level of risk to set an insurance premium. Progressive calls it "Snapshot," a voluntary program that "gives you a personalized rate based on your driving," according to the company's website.