New PTAB Claim Construction Standard: Should It Affect Your Patent Arbitration Consideration?

In my book, Arbitrating Patent Disputes, A Practical Guide, one of the first topics I took up was whether the availability of post-grant and inter partes review at the Patent Office made arbitration of patent disputes less attractive. Patent arbitration is likely to be quicker and less expensive than litigation in federal court. So it might be the better way to resolve disputes that are likely to arise under license agreements, development agreements and employment agreements. But the availability in the last few year of a quicker, faster process at the Patent Office before the Patent Office Trial and Appeal Board (PTAB) means arbitration isn’t always the only path to a faster and cheaper resolution of some patent disputes.

But arbitration still has the advantage in many patent-related disputes. Patent Office review deals only with validity and not with infringement, calculation of royalties under a license, or other matters. So, only one of the possible disputes that may arise under a patent-related contract will be resolved by the Patent Office, giving patent arbitration the edge. And the PTAB likely is not as fast as arbitration, particularly since an appeal may follow a determination.

And yet there are some advantages to Patent Office review that must also be considered. The first is that an invalidity defense must be proven by “clear and convincing evidence” at trial. Microsoft Corp. v. i4i Limited Partnership, 564 U.S. 91, 95 (2011.) But the standard for proving invalidity in an inter partes review at the Patent Office is a preponderance of evidence. 35 U.S.C. § 316(e). This provides some advantage to a party challenging the validity of a patent at the Patent Office. And if the patent claims at issue are found invalid, that party could avoid paying royalties.

The second advantage to Patent Office review was the standard of construction for patent claims.  When I wrote the book, the claims of the patent under attack were to be given “the broadest reasonable interpretation.” See Cuozzo Speed Technologies, LLC v. Lee,  2132, 2142 (2016). This was more favorable to the party challenging the validity of the patent than the standard used in court. Under the court standard, claims are given their “ordinary meaning … as understood by a person of skill in the art.”  Cuozzo, 136 S. Ct. at 2142. Giving the claim a broader interpretation meant that more prior art could come into play, potentially making the patent easier to invalidate. The broader the claim is construed, the more likely there is to be prior art that could invalidate the claim.  Whether this difference is real or theoretical is unclear. But in the right case, this could be an advantage a licensee might not want to give up if it thinks it might one day want to challenge the validity of a licensed patent.  And it might not agree to an arbitration clause if it thinks it will lose this advantage by doing so.

But real or not, this advantage for patent challengers no longer exists for Patent Office review. Effective November of 2018, the Patent Office published new rules that require that the standard used in court will also be used for review in the Patent Office.  The Patent Office will no longer construe claims in a way more favorable to parties challenging validity than courts and arbitrators do.

The Patent Offices’ claim construction during review was probably never the biggest factor in anyone’s calculus in determining whether to include an arbitration clause in their next patent-related contract.  But it no longer needs to be factored in at all.