Is The Real IPR Institution Rate Higher When Petitioner Errors & Pre-Institution Settlements Are Considered?

We have previously noted that the increasing rate of pre-institution settlement may in part be responsible for the declining institution rate in IPR proceedings because stronger petitions may drive earlier settlements, removing more effective petitions from the pool that would otherwise be instituted (“Does Spike In IPR Settlements Signify Petitioner Success?”). Another factor that may contribute to the decline in institution rates at the PTAB is petitioner errors, including failure to establish that prior art is publicly accessible (assuming evidence existed that could have been submitted to show the reference was publicly accessible), failure to file within the one-year time limit after petitioner is served with a complaint, and failure to identify the real party in interest.

According to statistics released each year by the PTAB, in 2015, there were 275 pre-institution settlements out of 1737 IPR petitions filed (about 16%). In 2016, there were 229 pre-institution settlements out of 1565 IPR petitions filed (about 15%).  By contrast, in 2014 there were only 106 pre-institution settlements out of 1310 IPR petitions filed (about 8%). In 2013, there were only 20 pre-institution settlements out of 514 IPR petitions filed (about 4%). Thus, the % of pre-institution settlements has climbed from 4% in 2013 to about 16% in 2016.

In addition, petitioner errors may have further driven down IPR institution rate. While the PTAB does not release statistics classifying the reasons for petition denial, there has been a notable rise in the number of petitions denied for such deficiencies as failure to establish that prior art is publicly accessible, failure to file within the one-year time limit after petitioner is served with a complaint, and failure to identify the real party in interest. This may not be as large a contributor to the decline in institution rate as the pre-institution settlement factor, although it is difficult to know without statistics.

While the rules that permit patent owners to use newly created Declarations in a preliminary response (effective May 2, 2016) may eventually impact the institution rate, that change did not happen until 3/4 of the way through the PTAB’s Fiscal Year 2016.

Overall, the pre-institution settlement rate is likely a significant contributor to the downward trend in IPR institution rate. In some technology areas, such as bio/pharma, the pre-institution settlement rate is higher than other technologies (see “Survey of Pharmaceutical IPRs Filed By Generic Drug Company Petitioners“).