Navigating the PREVAIL Act: Key Impacts on Litigants as It Advances in the Senate

Standing Requirements
The amended bill establishes new standing requirements for filing petitions. Petitions must now include a certification of standing, and the Director of the USPTO must determine that the petitioner satisfies this requirement. The options for establishing standing include Article III standing analogues, such as being sued for infringement in a U.S. court or having standing to bring a declaratory judgment action. While these options have a well-recognized body of defining caselaw, new categories introduced in the November manager’s amendment are less developed in terms of precedent.

New Categories of Standing

The first new category allows a proceeding to be filed by petitioners who are “currently engaging in, or ha[ve] a bona fide intent to engage in” conduct that “that reasonably could be accused of infringing.” Sen. Sean Coons (D-Del.) explained during a committee hearing that the purpose of this provision was to enable generic drug manufacturers with planned launches to challenge pharmaceutical patents. As written, the provision is not limited to the pharmaceutical industry. Companies in other fields could also avail themselves using this option. However, petitioners considering this option must weigh the risks of certifying (and effectively admitting) that a patent owner has a reasonable case for patent infringement. Worse yet, if this provision is interpreted to require proof, a defendant may not want to put together an infringement theory and hand it over to the patent owner. There is also ambiguity around what constitutes a “bona fide intent.” Does a company need to have a finalized product ready? Is a set of design drawings of a product it might introduce, if the petition is successful, enough for bona fide intent? Any certainty will have to come from the gradual process of implementing regulations and caselaw.

The second new category permits tax-exempt nonprofits to challenge patents, provided they meet strict conditions to avoid conflicts of interest regarding ties to for-profit companies. This measure is intended to empower patient advocacy groups and other nonprofits to challenge questionable patents, particularly in the pharmaceutical sector. However, its broad language could unintentionally restrict participation by some nonprofits that are supported by funding from for-profit companies. Additionally, the petition must be filed “for the sole purpose of ascertaining the patentability of the challenged claims of the patent and not to profit from or fund the operations of the petitioner.” This may impact the ability of a nonprofit to accept any settlements with a monetary payment, as that may be argued in later PTAB petitions as evidence that obtaining such settlements is part of the petitioner’s motivation for future proceedings.

The Act is silent as to what is required to be in the petition to prove the certification of standing, but it does require the Director to determine that the petitioner has standing in addition to the petitioner making the certification. This suggests that a portion of the petition will need to establish standing so that the Director can make his/her determination. Establishing a “bona fide intent” to engage in conduct that potentially infringes the challenged patent or explaining the backing and interests of a nonprofit is much more fact intensive than stating that the petitioner has been sued for infringement. How that will work in practice remains to be seen.

Petitioners will also need to be mindful of Article III standing and the availability of appellate review for a PTAB proceeding if they opt to establish standing through one of these new categories. Standing to appeal an unsuccessful PTAB challenge requires an actual case or controversy.  While being sued or having sufficient standing for declaratory judgment action meet that standard, a petitioner using the “bona fide intent” or non-profit option is likely to face challenges on any appeal. Nonprofit petitioners may be able to turn to caselaw outside of patent litigation, like environmental or other impact type litigation, for developing caselaw at the Federal Circuit to establish Article III standing for nonprofits.

Single Forum Provision
The Act introduces a “single forum” requirement for invalidity challenges. For inter partes reviews (IPRs), once a petition is instituted, the petitioner cannot maintain invalidity defenses based on patents and printed publications in district court or before the International Trade Commission (ITC). For post-grant reviews (PGRs), this bar applies to all invalidity challenges. These single forum provisions force patent challengers to choose their forum carefully, as the bar is triggered upon institution rather than after a final decision, increasing the stakes for early-stage decisions.

Single Forum Example: To understand how this plays out, assume ACME sues the Coyote Corp. for patent infringement in District Court and Coyote Corp. answers with affirmative defenses and counterclaims based on (1) patent/printed publications, (2) an on-sale bar (or some other non-paper prior art ground), and (3) a non-prior art defense, e.g., enablement. Then, Coyote Corp. files an IPR petition, and it is instituted six months later. At that point, Coyote Corp. can no longer maintain its defense under category (1) based on prior art/printed publications and is limited to just categories (2) and (3).

Under the current statute, the bar against further challenges in court or the ITC is triggered upon the issuance of the final written decision, not upon institution. This is a dramatic change in terms of timing. Moreover, unlike the current statute, there is no “raised or reasonably could have raised” language in the PREVAIL Act’s provision that Coyote Corp. could use as a basis to raise in litigation prior art that couldn’t have been found earlier with reasonable diligence. Instead, the PREVAIL Act’s language is a complete bar against Coyote Corp. that takes effect upon institution of the IPR (or PGR).

Estoppel From Litigation Proceedings
The PREVAIL also adds an estoppel that bars a proceeding from being instituted or maintained if a District Court or the ITC has entered a judgment of validity.  For IPRs, this estoppel is limited to judgments of challenges based on patents and printed publications (i.e., the grounds that can be raised under 35 USC 311(b)), whereas for PGRs, this applies to any validity challenges.  This may not have a substantial effect, as the PTAB is typically faster than many courts.  However, this may present an issue where parallel ITC litigation is involved or where the District Court proceeding is a “rocket docket” for patent cases.

Evidentiary Standard
A significant shift under the PREVAIL Act is the application of the presumption of validity to issued claims. If the PREVAIL Act is adopted, petitioners must prove unpatentability of issued claims by clear and convincing evidence, aligning PTAB proceedings with district court and ITC litigation. For substitute claims, the petitioner bears the “burden of persuasion” under the preponderance of evidence standard, remaining in line with current practice. However, the Act also directs the U.S. Patent and Trademark Office (USPTO) to establish procedures for patent owners to revise substitute claims in response to PTAB guidance on those claims, a favorable point for patent owners.

Petitioner Limitations

Single Petition: Under the current statute, the standard is that a petitioner cannot maintain a proceeding at the PTAB or a civil action on any ground “petitioner raised or reasonably could have raised” in an IPR which resulted in a final written decision. Under this proposed act, that estoppel for additional petitions is triggered at the time of filing rather than after a final written decision. In effect, absent being able to prove additional prior art reasonably could not have been raised in the original petition, petitioners are restricted to a single petition per patent, the sole exception being for subsequent charges of infringement of additional claims.

Cumulative Prior Art: The PREVAIL Act requires the Director to reject any petition that “presents prior art or an argument that is the same of substantially the same as prior art or an argument that previously was presented to the Office,” absent exceptional circumstances. This is a seemingly broad definition of cumulative prior art and provides incentives for applicants to file extensive Information Disclosure Statements (IDSs) during prosecution. Under this framework, prior art only needs to have been “presented” to the Office, meaning a petitioner’s arguments that an examiner did not or could not fully consider a particular piece of prior art may be insufficient on its own, and exceptional circumstances will have to be met. This could become problematic if examiners increasingly face a deluge of prior art cited in IDSs, far exceeding what can be reasonably reviewed during prosecution.

Claim Construction
The Act confirms that claims in PTAB proceedings are interpreted in the same manner as in district court. While this is not a significant change, the Act also requires the PTAB to consider prior claim constructions from related civil actions, although it does not mandate adoption of those constructions.

Changes to Joinder Rules
The Act creates a rebuttable presumption against joinder for time-barred petitions. Additionally, time-barred petitioners can no longer serve as lead petitioners or maintain a proceeding if non-time-barred parties drop out, closing off joinder as a tool that previously allowed time-barred parties to circumvent restrictions.

Panel Changes
A novel aspect of the Act is the separation of judges handling institution decisions from those overseeing trial proceedings and issuing a final decision. This gives the patent owner the benefit of having a “clean slate” of judges that have not already determined the challenger has a reasonable probability of success. Of course, efficiencies will be lost because three new judges will have to start the proceeding from scratch.

Reexamination Time Limit
The PREVAIL Act also adds a new one-year time limit for filing an ex parte reexamination from “the date on which the requester or a real party in interest or a privy of the requester is served with a complaint alleging infringement of the patent.” This brings the timing for filing a reexamination request in line with the one-year period for an IPR, thus eliminating later reexaminations as an option for patent challengers.

Conclusion
The PREVAIL Act marks an attempt at a course correction, and perhaps an overcorrection depending on one’s viewpoint, for patent litigation 10 years after the America Invents Act (AIA), aiming to balance the interests of patent holders and challengers. The amendments to patent challenges available at the PTAB and other patent litigation forums reflect a response to patent-owner criticisms of PTAB proceedings after the AIA. Patent challengers will have to engage in greater diligence before filing an IPR due to the risk of significantly limiting their options for challenging validity later.