By The Numbers: Is the PTO Underreporting the Rate They Institute IPRs and CBMs?

Guest post by Michael E. Sander, Founder and CEO of Docket Alarm, Inc.

The Patent Office routinely publishes statistics on IPR and CBM proceedings, but their methodology suggests that the petition institution rate is lower than it really is.

Inter partes review and covered business method review have undoubtedly changed patent litigation. No patent assertion campaign or defense strategy is complete without considering the implications of these AIA procedures.

The Patent Office publishes statistics on these new AIA trials roughly once a month. Practitioners can easily see how many petitions are filed in various technology areas, as well as how often claims survive or are canceled.  They say that a picture is worth a thousand words, and this visual and easy-to-read resource gives stakeholders a quick sense of how the new tribunal is affecting patent law.

But as Mark Twain once said, “[f]acts are stubborn things, but statistics are more pliable.” In publishing these statistics, the PTO has made choices in methodology that may underreport the institution rate of IPR and CBM proceedings.

Background on AIA Trial Procedure

For those unfamiliar with PTAB trial practice, a PTAB proceeding starts with a petitioner filing a petition for inter partes review or covered business method review.[1] See Figure 1 (below). The petition lays out reasons why a claim or set of claims is invalid.

About six months[2] after a petition is filed, the PTAB issues an Institution Decision. See 35 U.S.C. 314(b). In the Institution Decision, the PTAB decides whether or not “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” See 35 U.S.C. 314(a).  If the PTAB decides that the petitioner is unlikely to prevail, the proceeding is terminated, and the case is disposed of.

If the PTAB determines that the petitioner may prevail, a trial is instituted.  During this stage, evidence and testimony is presented, along with additional briefing.  Within one year of institution, the PTAB issues a Final Written Decision, in which they decide whether or not claims should be canceled.  See 35 U.S.C. 316(a)(11).

Fig1PTAB

Figure 1: IPR and CBM Process

Statistics on AIA Trial Proceedings

The PTO has been regularly publishing statistics on a variety of aspects of AIA proceedings. One important piece of information to patent owners and petitioners alike is the average rate in which the PTAB institutes a petition for IPR or CBM, i.e., the Institution Rate. Fortunately, the Patent Office publishes exactly these figures.

Depicted in Figure 2 below is one page from the PTO’s published statistics. Their statistics depict a snapshot of every IPR petition filed as of February 29, 2016.  The PTO depicts the number of IPR petitions that have proceeded to each stage, including whether a proceeding was instituted or not, whether the case settled, and whether the instituted proceeding resulted in all instituted claims being canceled, some claims canceled, or no claims canceled.

Fig2PTAB

Figure 2: PTAB Statistics
http://www.uspto.gov/sites/default/files/documents/2016-2-29%20PTAB.pdf at 9

This figure is deceptively simple. The figure states that out of 2731 total petitions, 1372 trials were not instituted while 1359 petitions were instituted.  Of the non-instituted cases, 540 were terminated due to non-substantive reasons.

Therefore, of the institution decisions decided on the merits, the PTAB’s reported Petition Institution rate is 62%.[3]

When I first studied the PTO’s chart and saw that the Petition Institution rate was 62%, I was puzzled. Docket Alarm, compiles statistics like these and more, and found that petitions were instituted in 71% percent of proceedings. See Figure 3. This nearly 10-point difference was too large to be explained.

As it turns out, deriving the overall institution rate from the chart provided by the PTO can be misleading.

Fig3PTAB

Figure 3: Docket Alarm Statistics
https://www.docketalarm.com/analytics/PTAB/#q=&v=overview

 

The PTO’s Statistics Methodology

The understand why the PTO’s reported Institution Rate is lower than expected, one must understand the PTO’s methodology, and the implications of the dataset that they used.  Right at the top of the page, their figure states that only proceedings “Completed To Date” are considered in their statistics. See Figure 2.  This seemingly benign statement has profound implications on the result: If a trial is not instituted, it is included in their statistics immediately when the institution decision is published.  However, if a trial is instituted, the decision will not be included in the dataset until the case is disposed, up to a year later.  Petition denials are necessarily included at an earlier point in time than the decisions to institute.  This methodology skews the reported institution rate downward, suggesting that the PTAB is instituting far fewer trials than they are.

The effect is significant, consider the following hypothetical.  Suppose PTAB judges flip a coin to determine whether to institute: 50% of the time they decide to institute, and 50% of the time they decide to not institute.  Further suppose in our hypo that on January 1, 2013, 100 petitions are filed, and no further petitions are filed for the rest of the year.[4]

Given this hypothetical, one would assume that the reported Institution Rate should be 50%, but let’s see how it plays out.

After the first 6 months, on July 1, 2013, the PTAB flips a hundred coins, and 50 petitions are instituted, while 50 are denied. The proceedings that are not instituted are terminated. The instituted proceedings continue onwards.  Using the PTO’s methodology, only the denied petitions are included in the statistics.

Using the PTO’s methodology in the hypothetical above, the institution rate would be 0%. The 50 petitions that were denied are included in their statistics, while the 50 instituted decisions are not because they are not completed.

Taking the hypothetical to the following year, on Jan. 1, 2014, 100 additional petitions are filed.  Again, on July 1, 2014, 50 petitions are instituted and 50 denied. In addition, the 50 instituted petitions that were filed on Jan. 1, 2013, come to completion.  Using the PTO’s methodology, the institution rate calculated in the second year would be 25%, closer to reality but still a far cry from the “real” institution rate of 50%.

One can continue this hypothetical forward, and while the gap between the reported rate and reality narrows, after five years, the difference between what is reported and the expected institution rate is still 10%.  See Table 1 (below).

Table 1: Calculating the Institution Rate Using PTO’s Methodology on Hypothetical Data
Table1

Obviously, Administrative Patent Judges do not flip a coin to decide whether to institute, more than 100 petitions are filed in a year, and petitions are not all filed on the first of the year.  However, the basic point holds true: if one only includes “completed” cases in their statistics, non-instituted cases will be over-counted, and instituted cases will be proportionally under-counted.

Conclusion

Because the PTO clearly states at the top of the chart that they are only including completed cases, technically, their statistics are not incorrect. However, as shown above, their methodology can lead one who is not bringing a critical eye to the statistics to believe that the Institution Rate is 10% lower than it actually is. Mark Twain would feel right at home.

= = = = =

[1] There are several other types of AIA trial proceedings, such as Post Grant Review and Derivation proceedings, but they are not nearly as popular as IPRs and CBMs.

[2] Six months is typical, but it can be earlier at the discretion of the court, or later if the petition is not quickly accorded a filing date.

[3] This value is calculated as:

Total Trials Instituted / (Total Petitions – Petitions Non-Substantively Terminated)
= 1359 / (2731 – 540)

= 62.03%

[4] We additionally assume that no parties settle, and that petitions are afforded a filing date on the same day they are filed. These assumptions are immaterial to the substantive point, but make the numbers easier to deal with.

27 thoughts on “By The Numbers: Is the PTO Underreporting the Rate They Institute IPRs and CBMs?

  1. 2

    Eh, you’d have to know that’s the case, since the pic doesn’t include a “still pending” section.

    But the same applies for allowances, artificially depressing the allowance rate – the office publishes as a top line number the “allowance rate” (a number usually in the 40-50s) when they term allowance as number of allowances over number of disposals. In other words – if you file one application, have it rejected twice, file an RCE, and have it allowed, the office puts the allowance rate at 50%, despite one patent issuing from one application (what everyone else would call a 100% allowance).

    The actual allowance rate is a ridiculously high 70-80%ish. As I’ve mentioned before, one would think that even that even if every applicant had perfect knowledge of the state of the art at the time of filing (they don’t) and every examiner agreed that every advance submitted was non-obvious (which they aren’t), and every disclosure was sufficient and statutory (they aren’t) you would still expect more than 20% of applicants to accidentally trip over other filings because applications are secret until published. It’s first to file! You have to rush to the office – that 18 month publication delay must be a killer. Especially in fast moving tech, like computers. 18 months is a whole smart phone generation.

    Since we know there’s a significant non-zero number of pre-aia 102(a) and (b) rejections (i.e art that was publicly known before filing), and a significant non-zero number of obviousness rejections even when there is agreement about the state of the art, and clearly it’s virtually impossible to not get a 101 rejection nowadays (to hear some posters on this site) we have to conclude that “First to File” must be a tiny tiny prod to actually file first – nobody appears to be in a rush to file first, because *nobody appears to be losing by coming in second.* At least not so much that they don’t feel they’re getting a commercially worthwhile scope. The number of people who get rejected because they fail to file first probably can’t even be described as statistically insignificant, it’s closer to a rounding error.

    Think about that – hundreds of firms competing in a tech sector and magically virtually everyone manages to blindly shuffle out of everyone else’s way. Everyone is perfectly innovating on their own little patch of land and rarely does a frisbee go long or baseball break a neighbor’s window. Not only do direct competitors Apple and Samsung not r&d the same things (that would be a 50% allowance rate right there) but Microsoft, IBM, Cisco, and your average mom-and-pop don’t either.

    50% sounds much better.

    1. 2.1

      Sound better? Sure to someone who is anti-patent and for jets the basic idea that innovation begets Innovacion and we should be seeing more and more invention stemming from the more and more innovations.

      I wonder how old the great Duffas drop in the reject reject reject era would do – how low would the bottom be -if your first way of calculating the rate would be applied in those circumstances…

      1. 2.1.2

        Sure to someone who is anti-patent and for jets the basic idea that innovation begets Innovacion and we should be seeing more and more invention stemming from the more and more innovations.

        Which would be a great argument if there was evidence for that. But more and more innovation would mean that the volume of filings would go up and the percentage of allowances would go down, because multiple people would be generating the same or obvious-over-each-other solutions to a problem.

        The only way you could have both more innovation and less rejections is if an industry engaged in pre-filing collusion to either not research or not file on the same subject matter. That would be a crazy conspiracy theory. If you have 10 industry leaders sure, each of them may research one or two areas that none of their competitors do, but the vast amount of time you’re going to be researching the same areas as your competition, and you’re going to be filing subject matter blind, because you’re likely not 18 months behind them. If those 10 firms study the same problem you’re suggesting they each came up with at least 8 entirely non-obvious solutions, and further that nobody else other than those 10 firms ever comes up or files on those solutions.

        And I totally forgot – legal changes. KSR made obvious easier, Nautilus raised the definiteness requirement, Alice brought in these “terrible, subjective” tests that let examiners reject everything. Yet despite all the rule changes the allowance rate keeps plugging along. I believe (and I’m sure Dennis could correct me) that right now, after the office implemented Alice on applications that were filed pre-Alice (and therefore could be hopelessly unfixable) that the allowance rate is even higher than before Alice came down. I know that the allowance rate following KSR (which made an issue in EVERY case more “rejectable”) went up.

        1. 2.1.2.1

          You presume a major part of your “argument” there that would file on top of each other.

          Not sure where you created that premise.

          There are also a multitude of other factor s much more likely to provide impacts (including the perception of whether or not pursuing patent protection is “worth it”).

          What your views represent more than anything else is your anti-patent bias.

          1. 2.1.2.1.1

            “What your views represent more than anything else is your anti-patent bias.”

            Not really anon, it’s just a bureaucratic way of seeing the world. It’s what you get into if you never go out and see the diversity of projects constantly going on around the world.

            1. 2.1.2.1.1.1

              You may see that as well, 6 – but the view DOES represent an anti-patent bias.

              All one has to consider is the fact that a patent system was considered to be such a good thing that it was explicitly provided for in the delegation of authorities in our Constitution. As long as the Quid Pro Quo is met, MORE patents is ALWAYS better.

              Anyone saying anything else does not understand why we have the patent system in the first place.

              1. 2.1.2.1.1.1.1

                “Anyone saying anything else does not understand why we have the patent system in the first place.”

                Oh, so people who think that an “additional patent” that has a granted claim that is obvious under 103 is not “better” “do not understand why we have a patent system in the first place”?

                1. that is obvious under 103

                  Obviously 6, that is not part of the Quid Pro Quo, so your attempted mischaracterization is a

                  F
                  A
                  I
                  L

        2. 2.1.2.2

          Nice analysis, RG. Flesh it out just a tiny bit more and send it to Dennis as a featured post.

          As for this from “anon” : the basic idea that we should be seeing more and more invention stemming from the more and more innovations

          Stemming from? More like “grifting off.”

          And that’s exactly what we’ve been seeing for years.

          The patent bubble wasn’t filled thanks to a sudden rise in ingenuity, at least not the kind that the patent system was designed to promote. It was filled thanks to some mindless CAFC decisions that opened the door to b0ttom-feeders and anyone who could type the words “on a computer”.

          Are we seeing more “innovation” “stemming” from that event? Of course not. Just more of the same wordsmithing. And the PTO knows how to play the game just as well as its favorite “stakeholders” do.

          1. 2.1.2.2.1

            No Malcolm – I meant exactly what I said.

            Brush up on your basics: promoting progress necessarily includes more (and more) patents because of the basic Quid Pro Quo which directly reflects the progress.

            No matter how much anti-patent whine we hear from you as you guard your precious fields of rye, the patent system fulfills its purpose in a virtuous cycle of ever increasing Promotion.

            That is exactly WHY we have a patent system.

            Rather an important point that you would do well to reflect upon.

          2. 2.1.2.2.2

            “Stemming from? More like “grifting off.””

            Come on MM, in many arts there is no “grifting” going on, nearly everyone came up with their own little device/method and are content with collecting their entitlement from congress just to that little thing they made (or at least thought up).

        3. 2.1.2.3

          “Which would be a great argument if there was evidence for that”

          Bro there is a lot of evidence for that. Literally nearly every app that comes in is evidence of that. Even by your own analysis.

        4. 2.1.2.4

          ” But more and more innovation would mean that the volume of filings would go up and the percentage of allowances would go down, because multiple people would be generating the same or obvious-over-each-other solutions to a problem.”

          To an extent you do have that going on, just observe how much easier it is to make a rejection in a case that has 1000 references in the subclass for it compared to how easy it would have been to make a rejection for that same case back when the subclass only had 10 references in it.

          But, we don’t necessarily have to observe this “overall effect” which you’re referring to all that much irl so long as the claim language used does a half decent job of putting something half-decent supposed to distinguish over the art known at time of filing.

          “The only way you could have both more innovation and less rejections is if an industry engaged in pre-filing collusion to either not research or not file on the same subject matter. ”

          Not so, and you’re right that it would be a conspiracy theory. Most of those sorts of competitors be “hating” on each other, fiercely in contest/conflict with each other. There is no collusion there obviously.

          The reason that this is not so however is simply due to the diversity of possible paths to “solving a problem” and in the “number and diversity of problems” to even solve. If competitor A decides to make device 1 and proceeds to R/D it then he’ll get a whole different set of “problems” with that device and “solutions” to those problems than competitor B making device 2 will. And they’ll each file apps for their own respective devices and their solutions to problems etc.

          Despite this, it’s easy to see in many sub-arts that even the artists themselves (inventors/workers in the field) recognize their fellow artists approaches to the same/similar problems they’re addressing themselves in practically every introduction to every NPL paper in existence. They nearly always give a little blurb about different things they know about which their fellows are doing. That’s entirely normal.

          It seems incredible, but it’s entirely normal.

          “KSR made obvious easier, Nautilus raised the definiteness requirement, Alice brought in these “terrible, subjective” tests that let examiners reject everything. Yet despite all the rule changes the allowance rate keeps plugging along. ”

          Correct, because all KSR does irl is make people make their claims a shade narrower, Nautilus is basically nothing but a beefed up formality that is deemed “substantive” most of the time only due to its inclusion in a statute, and Alice is half-ignored and even when it is not ignored it can generally be overcome in most “technological” arts.

    2. 2.2

      I’m surprised that you’re just now learning about this diversity of thought within arts Random. What you just postulated is indeed true, at least in the arts that I’ve seen. But then, that starts to make more sense when you think about how diverse paths to making x y or z item are, and how diverse x y and z items are themselves. Frankly I think this trend will only be towards still more diversity.

  2. 1

    I was reading the comments in another thread, and it dawned on me that some of the more prolific posters must be using form paragraphs to reduce the time they spend on formatting their posts and rebutting frequent points.

    Of course the Office has the Office Action Correspondence System (OACS) to do same thing for examiners, but it’s notoriously unreliable. Does the Petty, Rote Insult Correspondence System have similar downtime issues?

    1. 1.1

      Pretty funny “Bob,” but I have to wonder if you are including the primary offender (Malcolm) in your barb (given as how likely you are to cheerlead his anti-patent sentiments).**

      But to your “point” on forms, did you see my “make-the-ecosystem-friendly” suggestion to shunt all the typical drive-by monologue style posts to a separate place on the blog?

      ** as I recall from the available statistics during the attempted “make-the-ecosystem-friendly” efforts of the DISQUS days as well as noting the proclivities of certain posters since then.

      Funny too, how one of the abilities of DISQUS was to see – in one place (if the highest level of secrecy was not chosen) – ALL the posts by any one author. It was only after noting this effect did Malcolm switch to such a highest secrecy setting possible.

      Can you figure out why?

      1. 1.1.1

        It was only after noting this effect did Malcolm switch to such a highest secrecy setting possible.

        But “anon” isn’t some weird0 obssessed guy. Nope.

        He’s t0tally normal.

        LOL

          1. 1.1.1.1.1

            Iit,

            As I explained to you previously, what you wish for is simply not possible as long as the blight that is Malcolm does what he has always done.

            Visit the archives for the last “let’s make a happy ecosystem” thread and there you will see links showing that Malcolm has been the same arse for a full decade now – far longer than I have been posting.

            Happy Decade of Decadence.

        1. 1.1.1.2

          You have never “explained” why you needed more than the standard DISQUS settings – which would more than meet ANY level of secrecy/security you would have need for vis a vis any other poster on this blog (even if you choose to ignore my statements that I really do not care one whit who you are).

          But please, go ahead and be your usual arse.

          1. 1.1.1.2.1

            You have never “explained” why you needed more than the standard DISQUS settings

            So. Flipping. What.

            1. 1.1.1.2.1.1

              So why the level of “secrecy” …?

              We both know that what the options did show was that you are nothing but a blight – with the same sorry @$$ short script without a stitch of inte11ectual honesty or ability to hold a meaningful legal discussion.

              That is so. flipping. what.

              1. 1.1.1.2.1.1.1

                you are nothing but a blight

                LOL

                Keep the laughs coming, “anon.” Yes, let’s get worked up all over again by something that happened three years ago and nobody except you cared about at the time.

                Too funny.

                1. Not “too funny,” but rather, too sad – too sad that you think this is just about some isolated incident from a few years back.

                  It is not.

                  That incident is merely yet another reflection on the blight that is Malcolm – and has been Malcolm – for a solid decade.

                  It appears that you really think yourself somehow “special,” and that any call for a “better ecosystem” surely must not include your tripe.

                  It is as if you really believe that your “swagger” should be enjoyed, and that it is somehow “charming” the way that you refuse to engage in a true discussion of law on the merits in any sense of inte11ectual honesty, when all that you do is rail and whine according to your old, tired and trite script, using ad hominem instead of any critical thinking and ever trying to spin law, facts, history and what others post to your own inane “protect the fields of rye” view.

                  Just like the duplicity of your nigh constant whining about “sock puppets” and then you being busted for the one using that very device the most over the last four years, your attempted dismissal of just why you opted for the highest level of secrecy in the DISQUS era just is NOT what you want to portray.

                  Maybe – just maybe – you want to put your energies into actually discussing (and yes, discussing in an inte11ectually honest manner) the actual law as written by Congress.

                  This does not mean that you have to abandon your desired “Ends” – but it does mean that you must attempt to achieve those desired Ends through proper means.

                  (Given the Decade of Decadence, I will not be holding my breath)

                2. “It is as if you really believe that your “swagger” should be enjoyed”

                  Of course it shouldn’t, because “toxic masculinity” or some other nonsense out of the SJW ish anon, or should I say “special snowflake anon”

                3. out of the SJW ish…

                  special snowflake anon“…?

                  You are going to have to translate that.

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