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Federal Circuit Faces Flood of Appeals Driven by AIA Reforms

11 July 2015

The Federal Circuit’s docket is facing a surge in appeals from U.S. Patent and Trademark Office proceedings driven by America Invents Act reforms, according to a Law360 analysis, putting pressure on the court to quickly adapt and streamline its decision-making process before the next, and likely bigger, wave hits.

Law360’s midyear look at the opinions and judgments issued by the Federal Circuit in intellectual property cases from January through June 2015 reveals a spike in rulings on disputes that originated at the USPTO, a trend that experts say will only grow as new, cost-effective patent-review proceedings created by the America Invents Act continue to gain in popularity.

“As these numbers increase, it's obviously placing pressure on the Federal Circuit,” said Jason Rantanen, a intellectual property law professor at the University of Iowa College of Law and a former Federal Circuit clerk. “These are not going to be necessarily easy cases for them to decide. In a lot of ways it is venturing into completely new ground.”

2015 is the first year the court began to issue rulings on appeals from the new proceedings created by the America Invents Act, which formally went into effect Sept. 16, 2012. Those new proceedings, particularly so-called inter partes reviews, have proved to be extraordinarily popular.

“For litigants who find themselves as defendants in district court, it’s an attractive way to challenge the validity of the patents," James R. Barney, a partner at Finnegan Henderson Farabow Garrett & Dunner LLP, said. "It’s a fast process, particularly compared to the old proceeding."

Inter partes reviews were created to replace a proceeding called inter partes re-examination, which many felt was too slow and clunky. In the entire history of that program, which existed from 1999-2012, the USPTO reports that it received 1,919 requests for inter partes re-examination.

According to statistics released by the USPTO as of June 25, the agency has already received 1,304 requests for inter partes review so far in fiscal year 2015, after receiving 1,310 in fiscal year 2014 and 514 in fiscal year 2013.

While certainly not all of those requests for review will end up on the Federal Circuit’s doorstep, attorneys say that, at this point, parties unsatisfied with a final IPR decision from the USPTO’s Patent Trial and Appeal Board have a strong incentive to appeal to the Federal Circuit.

"If you've got the money, and the appeal has merit, in general there's no strategic reason not to pursue an appeal out of the IPR," John Dragseth, a principal at Fish & Richardson PC, said. "If you're the patentee, and they invalidated your claim, if you don't appeal, you're dead."

But IPRs aren’t the only USPTO proceedings stuffing the Federal Circuit’s docket. The court is still wading through a swell of appeals from the pre-AIA program, inter partes re-examinations.

Just before those proceedings were phased out by the AIA in September 2012, there was a significant scramble to file requests for re-examinations before the deadline. The USPTO says 530 were filed in fiscal year 2012, nearly 30 percent of the total number of inter partes re-examination requests filed with the USPTO since the program’s inception. Those proceedings take much longer to complete, and many are just now making their way through the Federal Circuit.

With those twin waves of appeals hitting the Federal Circuit at the same time, observers say the court will have to make some changes, and quickly.

Jon E. Wright, a director at law firm Sterne Kessler Goldstein & Fox PLLC where they keep close tabs on the Federal Circuit’s patent litigation statistics, says that even if the initial IPR excitement ebbs, and only half the cases eligible for appeal from the USPTO actually get appealed, that would still be a significant increase in workload for the Federal Circuit.

“Conservatively, it is essentially one extra panel every day just dedicated to IPR appeals," Wright said. "You see the problem the court is facing. Believe me, they are aware of it. They know it's coming and they need to figure out how to deal with it."

Sterne Kessler’s team has been keeping a close watch on the oral argument calendars this year, which were only lightly populated with AIA appeals through May, June and July. But for August, the court recently calendared 16 AIA appeals, significantly more than it has before, which might be a rough indicator of the volume of AIA cases that will move through the court over the next few months, Wright said.

But calendaring all of the appeals is one thing, making time to write and issue decisions on those cases is another.

Appeals from the USPTO can sometimes be more straightforward than appeals from district courts, attorneys say. The Federal Circuit is faced with fewer documents to wade through, and the appeals are by nature more limited in scope.

"The PTAB appeals generally involve few issues and a more limited record," Matthew Moore, a partner at Latham & Watkins LLP, said. "You’ve got the brief. You've got the expert declarations, and you make a decision. So PTAB appeals are more streamlined than appeals from the district court."

But at the same time, the proceedings created by the AIA are still relatively new, and there are many lingering questions the Federal Circuit will have to answer. Add complex, challenging subject matter, and sophisticated, creative counsel to that equation, and many of these appeals may prove tough to adjudicate, experts say.

One way the Federal Circuit can control its burgeoning docket is by issuing a significant number of so-called Rule 36 affirmances where it can, allowing the panel to sign off on a decision made by a lower court without writing an opinion explaining its reasoning.

"The Federal Circuit is starting to try to work through this swell of PTAB appeals, and one of the ways they're doing it is by issuing Rule 36 judgments without any opinion — and they're often doing it very quickly," Joshua Pond, a partner at Kilpatrick Townsend & Stockton LLP, said.

So far, the vast majority of rulings from the Federal Circuit in 2015 backing USPTO decisions have been Rule 36 affirmances. Looking at all opinions issued, in both 2013 and 2014, the Federal Circuit issued Rule 36 affirmances approximately 36 percent of the time. So far in 2015, that number is up to 46 percent.

Court observers say it’s too early to tell if that’s going to turn into a more favored tactic at the Federal Circuit, but many say they worry it will be a go-to tool in the Federal Circuit’s kit as a way to keep up with the growing workload, giving litigants few clues on how the Federal Circuit plans to tackle these new types of AIA proceedings.

But for now, appellants and advocates are watching and waiting, sifting what tea leaves they can find for a few more hints on how the Federal Circuit plans to handle this new and growing wave of cases from the USPTO, and how the judges plan to weigh novel issues presented by the new AIA proceedings, particularly the hugely popular IPRs.

"The big headline is that the rise of IPR cases and IPR appeals is going to reshape the Federal Circuit’s docket," John O’Quinn, a partner at Kirkland & Ellis LLP, said. "It's going to increase the court's workload and may lead to an increase in Rule 36 dispositions."

John C. O'Quinn, P.C.

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