Search Results for: cuozzo

Federal Circuit Rejects Reduced-Deference for AIA-Trial Decisions

Patent, , , ,

by Dennis Crouch

En banc denials in Merck & Cie v. Gnosis (Fed. Cir. 2016) and S. Alabama Medical v. Gnosis (Fed. Cir. 2016)

The Federal Circuit has denied en banc review of decisions in four inter partes review proceedings brought by Gnosis. Federal Circuit had previously affirmed the Patent Trial and Appeal Board’s IPR determination that the challenged Merck and SAMSF patent claims were invalid as obvious.[1]

The petitions focused on the standard-for-review of factual findings made by the PTAB. The appellate panel applied the “substantial evidence” standard that requires affirmance of challenged factual findings when those conclusions are based upon “more than a mere scintilla” of evidence.  The Supreme Court has restated this standard only requiring that “a reasonable mind might accept [the evidence] as adequate to support [the] conclusion.”  In the appeal, the patentees agreed it is appropriate that PTAB factual conclusions be given deference. However, the patentees argued that the standard should be “clear error” – a lower level of deference.  A way to think about the difference between the two of these is to consider that factual findings by a jury are generally reviewed for substantial evidence (higher deference) while a judge’s factual findings are reviewed for clear error (lower deference).

In most administrative law areas, agency factual determinations are reviewed for substantial evidence.  However, the patentees here argued that the litigation-like setup in this case calls for a litigation-like standard of review, i.e., clear error.  Thus, the primary question presented:

Should PTAB factual findings be reviewed for “clear error” or “substantial evidence” in an appeal of a final written decision in an inter partes review?

In an 11-1 split, the Federal Circuit has denied en banc rehearing on this issue.  Judge O’Malley (joined by Judges Wallach and Stoll) offered her opinion explaining the denial.  Judge Newman dissented.

Judge O’Malley’s opinion appears to be designed to set-up Supreme Court review (if Cuozzo wins its case) or Congressional action.  She writes:

I agree that application of the substantial evidence standard of review is seemingly inconsistent with the purpose and content of the AIA. This court is bound by binding Supreme Court precedent—Dickinson v. Zurko, 527 U.S. 150 (1999)—and this court’s own—In re Gartside, 203 F.3d 1305 (Fed. Cir. 2000)—to apply the substantial evidence standard of review to factual findings by the Board, however. Because Congress failed to expressly change the standard of review employed by this court in reviewing Board decisions when it created IPR proceedings via the AIA, we are not free to do so now. I, thus, concur in the denial of en banc rehearing in this case because there is nothing that could come of our en banc consideration of the question posed. I write separately, however, because I agree with the dissent to the extent it argues that a substantial evidence standard of review makes little sense in the context of an appeal from an IPR proceeding. But the question is one for Congress.

Judge Newman argues that the trial-like setup of the AIA proceedings allows for an important distinction from the Zurko and Gartside decision that requires a full reconsideration of the standards applied to PTAB determinations.

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[1] Merck owns U.S. Patent No. 6,011,040; and SAMSF owns U.S. Patent Nos. 5,997,915, 6,673,381, and 7,172,778 that are licensed to Merck.  The patents relate to methods of using folate to lower a patent’s homocysteine level.

SAS Institute v. Iancu: Shifting IPR and Litigation Strategies

Patent

by Dennis Crouch

In SAS Institute, Inc. v. Iancu (2018) [16-969_f2qg], the Supreme Court issued a split 5-4 decision holding that:

When the Patent Office institutes an inter partes review, it must decide the patentability of all of the claims the petitioner has challenged.

Although quite narrow, the decision reversed the PTO’s prior interpretation of the IPR statutes and will likely impact IPR strategies both for petitioners and patentees.

Any Patent Claim Challenged: Private parties may challenge an issued patent by filing an inter partes review (IPR) petition.  The petition must specify which claims are being challenged, and explain why the challenge is likely to succeed.  Under the statutory provisions, the USPTO Director must then decide whether or not to grant the petition and institute a trial before the Patent Trial and Appeal Board (PTAB or Board).  At the conclusion of the trial, the Section 318(a) of the Patent Act indicates that the PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner and any new claim added [during the IPR].”  35 U.S.C. §318(a). The Supreme Court decision here is tightly focused on statutory interpretation — holding that the statute requires that the PTO decide the patentability of all challenged claims (that are not dismissed).  The PTO had interpreted the statute to allow for partial-institution-decisions.

In the case before the court, SAS had challenged all 16 claims of the ComplementSoft U.S. Patent No. 7,110,936.  However, rather than instituting on all claims, the PTO only instituted review of 9 claims.  Writing for the majority, Justice Gorsuch explained:

The Director (in truth the Board acting on the Director’s behalf) . . . instituted review on only some (claims 1 and 3–10) and denied review on the rest.

Once a final judgment was issued by the PTAB (finding eight of the nine unpatentable), SAS appealed — arguing that the statute required decisions on the remaining five claims.

Now, SAS will get its opportunity. For SAS, the potential to challenge these additional claims may help the company avoid having to fight those claims in court.  In addition, the all-challenged-claims rule may also serve as a bargaining chip for the patent challenger in any settlement hearings.

Although the patent-challenger may benefit in this particular case, I expect that the overall benefit from the decision will help patentees. In particular, most non-instituted claims are ones that would likely have been confirmed as patentable.  That decision from the PTAB will lend strength to patentee claims in court and also raise estoppel problems down the road for patent challengers.

Simplifying petitions decisions: The decision here should simplify the petition institution decisions.  Following SAS, the question should simply be whether there is at least 1 challenged claim where the petitioner has presented a “reasonable likelihood” of prevailing on the merits.  35 U.S.C. 314(a).

The majority did not spend time on policy determinations — instead simply stating that the PTO should take its case to Congress.

The Director’s policy argument—that partial institution is efficient because it permits the Board to focus on the most promising challenges and avoid spending time and resources on others—is properly addressed to Congress, not this Court.

It will be interesting to see whether new PTO Director Iancu will go to congress on this point – I expect not, unless there are clear efficiency concerns. At this point, the Office only provided the following statement:

The USPTO is carefully considering the Supreme Court’s decisions and determining their impact on various proceedings at the PTAB.

Deference: An important element of the decision for administrative law folks is the majority statements regarding Chevron deference:

[W]hether Chevron should remain is a question we may leave for another day. Even under Chevron, we owe an agency’s interpretation of the law no deference unless, after “employing traditional tools of statutory construction,” we find ourselves unable to discern Congress’s meaning.

Here, the majority found no ambiguity — and thus gave no deference to the PTO.  I expect that the 5-4 split between the justices in this case largely comes down this particular question — when should courts give deference to legal interpretations made by expert administrative agencies?  Supreme Court precedent on the issue continues to be messy, although there remains some thought that Congress will solve the problem by actually spelling out whether deference applies when it writes its statutes.

On a final issue, the PTO argued that the question before the court was effectively a challenge to the PTO petition decision — something made expressly unappealable by the Patent Act §314(d).  “Even if the statute forbids his partial institution practice, the Director suggests we lack the power to say so.”  However, the majority disagreed with the PTO Director — holding that the case here involves “exactly the sort” of “shenanigans” that serve as exceptions to the Cuozzo rule.

Writing in dissent, Justice Ginsberg, joined by the other three most liberal justices, calls Gorsuch’s reading “wooden” and lacking of any true understanding or indication of congressional intent: “Court’s opinion offers no persuasive answer to that question, and no cause to believe Congress wanted the Board to spend its time so uselessly.”

Coming back to Deference: A more thorough dissent by Justice Breyer explains his position that the statute offers enough of a gap in certainty to allow the PTO to fill-in its interpretation and be given deference for that gap-filling.

Because I believe there is such a gap and because the Patent Office’s interpretation of the ambiguous phrase is reasonable, I would conclude that the Patent Office’s interpretation is lawful.

(Breyer in dissent.) Overall, this is a set of nicely written decisions that serve as an example in the patent law field of the broader and ongoing administrative law debate over the role of administrative agencies in interpreting their governing statutes.

Reviewing Partial-Institution Decisions

Patent

CRFD Research v. Matal (Fed. Cir. 2017) (Iron Dome)
CRFD Research v. DISH Network (Fed. Cir. 2017)
Hulu, Netflix, and Spotify v. CRFD Research (Fed. Cir. 2017)

CRFD’s U.S. Patent  No. 7,191,233 has been challenged in four separate Inter Partes Review petitions – three of which were granted and reached final decision. Interestingly, the three decisions are somewhat different from one-another.

  • Iron Dome – invalid: Claim 1 anticipated; Claims 4-6 and 8-11 obvious.
  • DISH – invalid: Claims 1, 4, 23, and 25 anticipated; Claims claims 4 and 25 obvious.
  • Hulu – valid: Claims 1–3, 23, and 24 not anticipated; Claims 1–6, 8–11, 13–15, 17–20, 23–25, 29–31, 34–36, and 38–41 not obvious.

The PTAB decisions here may seem inconsistent, but the differences can be explained by the fact that each IPR focused on different prior art references (or combinations thereof).  Note here that the patentee loses (claims are cancelled) if a claim is found invalid in any one of multiple IPR proceedings.  On appeal, the Federal Circuit consolidated the cases and has ruled against the patentee — affirming the Iron Dome and Dish cancellations, but reversing the Board’s nonobviousness decision from Hulu.

The patented invention here is designed to allow someone to start a “session” on a first device but then transferring the session to a second device (along with a session history) so that the user does not need to fully re-initiating the session.”

Claim 1. A method for redirecting an on-going, software based session comprising:

conducting a session with a first device;

specifying a second device;

discontinuing said session on said first device;

transmitting a session history of said first device from said first device to a session transfer module after said session is discontinued on said first device; and

resuming said session on said second device with said session history.

Broad Claims = Invalid: In reviewing the rejections, the Federal Circuit first noted that the key prior art (Phan) taught a somewhat different approach to transferring sessions than the patent at issue. However, anticipation does not involve a disclosure-to-disclosure comparison, but rather asks whether the prior art discloses the invention as claimed.

A patent is invalid for anticipation under 35 U.S.C. § 102 if a single prior art reference discloses all limitations of the claimed invention.

Here, the Board found several of the actual claims of the ‘233 patent were broad enough to encompass Phan’s disclosure – and thus were anticipated.  (Affirming Iron Dome).  Because anticipation is a question of fact, the PTAB’s determinations regarding this issue are reviewed with deference — PTAB findings will be affirmed if supported by more than an iota of evidence, as was done here. On the other hand, obviousness has been deemed “a question of law based upon subsidiary findings of fact.”  As such, the ultimate question of obviousness is reviewed de novo on appeal.

 

= = = =

The Hulu portion of the case is really about IPR procedure.  Hulu had raised several grounds for challenging the patent in its IPR petition, but the PTO selected only a few of the grounds for trial — finding the others redundant. One of the denied grounds argued obviousness, based on Bates alone, while a granted grounds involved a combination of Bates and Chan.  Both of these grounds agreed that Bates alone did not teach the timing of the “transmit session” limitation. Rather the arguments were respectively that (1) the limitation was obvious based upon Bates alone; and (2) the limitation was taught by Chan and the combination was obvious.  IPR was not instituted on the first ground, only the second. At trial, the PTAB found (1) Chan did not actually teach the limitation; and (2) that Hulu was barred from presented the obvious-based-upon-Bates argument since it was denied institution.

On appeal the Federal Circuit has rejected the PTAB’s approach holding that:

The Board, in its discretion, elected to not institute review on Bates alone for redundancy reasons, but instituted review on obviousness grounds that include the only reference—Bates—cited in that ground. To bar Hulu from pressing an argument it raised in a ground the Board found “redundant” and that it expressly incorporated into other proposed grounds of unpatentability on which the Board instituted would not only unfairly prejudice Hulu, but would also raise questions about the propriety of the Board’s redundancy decision.

The Federal Circuit then went on to consider this (and a few other) issues – eventually concluding that the claims were obvious and thus reversing the PTAB decision.

I’ll note here that two major failings of this portion of the Federal Circuit’s decision are (1) that the court offered no standard for its review of the PTAB’s refusal to allow certain arguments; and (2) the court appears to basically be reviewing the partial institution decision — but those are not reviewable under Cuozzo.

Strategic Decision Making in Dual PTAB and District Court Proceedings

Patent, , , ,

By Jason Rantanen

Saurabh Vishnubhakat (Texas A&M), Arti Rai (Duke) and Jay Kesan (Illinois) recently released a draft of their empirical study of Patent Trial and Appeal Board proceedings, Strategic Decision Making in Dual PTAB and District Court Proceedings.  Their study takes a close look at the relationship between IPR and CBM proceedings and district court proceedings to assess the “substitution hypothesis”: the claim that post-grant review is “an efficient, accessible and accurate substitute for Article III litigation over patent validity.”

In addition to an array of descriptive statistics on post-grant proceedings at the PTO, the authors find that:

  • “Although IPR petitions may challenge patent claims as to either novelty or nonobviousness, nonobviousness challenges predominate across all major technology areas.” (p. 18)
  • During the period studied (September 16, 2011 to June 30, 2015), “a total of 14,218 patents were either challenged in an IPR or CBM petition, asserted in litigation, or both. A subset of 11,787 patents were involved in litigation alone; 324 patents were involved in a USPTO proceeding alone; and 2,107 patents were involved in both. Accordingly, about 15.2% of litigated patents are also being challenged in the PTAB, and about 86.7% of IPR- or CBM-challenged patents are also being litigated in the federal courts.” (p. 20) [edited on Feb. 12, 2016]
  • Overall, most CBM and IPR petitions are filed by those with a direct self-interest flowing from infringement litigation.  78% of CBM petitioners, and 70% of IPR petitioners, “have previously been defendants in district court litigations involving the patents they later challenge in CBM [or IPR] review.” (p. 23)  By this the authors simply mean that the petitioners showed up as defendants in an infringement proceeding on a given patent before filing for IPR or CBM review on that patent.  They likely continued to be infringement defendants during the pendency of the IPR or CBM (the authors did not track that).

Vishnubhakat et. al’s third finding has two implications.  First, a substantial number of CBM and IPR petitions are filed by parties who are not concurrently defendants in litigation involving those patents.  The existence of this group merits further study. The authors suggest a range of motivations driving these petitions.

Second, notwithstanding that group, the vast majority of CBM and IPR petitions are filed by parties that are in all likelihood simultaneously litigating the patents in district court.  Given the substantial amount of overlap, and the potential for strategic behavior by accused infringers, the authors suggest that the same claim construction standard should be applied by both forums–a point with implications for Cuozzo Speed Technologies v. Lee.

Read the article here: http://ssrn.com/abstract=2731002

 

Versata v. SAP: Federal Circuit Claims Broad Review of CBM Decisions

Patent, ,

by Dennis Crouch

Versata v. SAP and the USPTO (Fed. Cir. 2015)

This an important decision stemming from the first Covered Business Method (CBM) Review Proceeding, the Federal Circuit has affirmed the PTAB properly cancelled the challenged claims for lacking patent eligible subject matter.  However, in petit Marbury v. Madison style, the court also exerted its power of review over the PTABs decisions, including whether the challenged patent is a “covered business method patent.”  Judge Plager drafted the majority opinion that was joined by Judge Newman.  In a concurring opinion, Judge Hughes wrote that “[t]he majority’s interpretation of § 324(e) to permit review of whether Versata’s patent is a ‘covered business method patent’ directly conflicts with our precedential decision in In re Cuozzo Speed Technologies, LLC, (Fed. Cir. July 8, 2015).”   The cited statute indicates that “the determination by the Director whether to institute a post-grant review [or CBM review] under this section shall be final and nonappealable.” Judge Hughes argued that the question of whether a patent fits within the CBM definition is answered at the petition stage and thus not reviewable on appeal.

In its decision, the court also directly ruled that CBM review proceeding (and thus future post-grant review proceedings) can include Section 101 challenges.  The statute provides that CBM/PGR proceedings can be used to challenge patent claims “on any ground that could be raised under paragraph (2) or (3) of section 282(b) (relating to invalidity of the patent or any claim).” 35 U.S.C. 321(b).  Section 282(b), in turn, reads as follows:

(b)(2) Invalidity of the patent or any claim … on any ground specified in part II as a condition for patentability.

(b)(3) Invalidity of the patent or any claim … for failure to comply with— (A) any requirement of section 112 [except best mode] or (B) any requirement of section 251.

In our 2012 essays, Professor Hricik and I explained an argument why subject matter eligibility does not fit within these invalidity grounds of Section 282.

Our argument was that the only way patent eligibility fits into Section 282 is under pat (b)(2) since “part II” of the Patent Act does include Section 101. However, not all sections of Part II (Sections 100 to 212) are conditions for patentability, and, in fact, only sections 102 and 103 are so-labelled.  The court agreed with our agument, but found it to be overwhelmed by history:

Versata is correct that a strict adherence to the section titles can support an argument that § 101 is not listed as a “condition of patentability,” but rather has the heading of “inventions patentable.” However, as noted by the USPTO, both our opinions and the Supreme Court’s opinions over the years have established that § 101 challenges constitute validity and patentability challenges. . . .

It would require a hyper-technical adherence to form rather than an understanding of substance to arrive at a conclusion that § 101 is not a ground available to test patents under either the PGR or § 18 processes. Section 101 validity challenges today are a major industry, and they appear in case after case in our court and in Supreme Court cases, not to mention now in final written decisions in reviews under the AIA. The numerous cases in our court and in the Supreme Court need no citation. . .

 

===

As Judge Hughes writes, a major portion of the ruling here is in tension with Couzzo because it allows the Federal Circuit to review whether the grant of the review was proper. However, because the PTO won its case, it seemingly has no right to appeal that particular issue.  As such, the majority opinion regarding reviewability could also be seen as simply dicta since, if they had decided that the CBM issue was not reviewable then the case would have also been affirmed.

 

Patent Reform: Innovation Act of 2015

Patent, ,

by Dennis Crouch

On February 5, 2015, Rep. Goodlatte reintroduced his patent reform bill: the Innovation Act.  Co-sponsors already include the bipartisan group of Reps. Defazio, Issa, Nadler, Smith, Lofgren, Chabot, Eschoo, Forbees, Pierlusi, Chaffetz, Jeffries, Marino, Farenthold, Holding, Johnson, Huffman, Honda, and Larsen.

Read the Bill: Innovation Act 2015

The bill as introduced includes the following provisions:

  • Heightened Pleading Requirements: Significant raising of the pleading requirement for patent cases.  A patent holder filing an infringement lawsuit – at the time of filing – would need to include a set of infringement charts showing how each limitation of each asserted claim in each asserted patent is found within each accused product or instrumentality.  However, the plaintiff would not be required to complete the entire chart if the infringement is not readily available after a reasonable amount of pre-filing due diligence.  Form 18 would also be eliminated.  Pharmaceutical companies filing infringement actions under 271(e)(2) wouldn’t need to comply.  The approach here raises some separation of powers concerns (ordering the Judicial Conference to act). The Judicial Conference has also already moved to eliminate Form 18 in a way that would implicitly increase pleading requirements. Those changes are expected to take-effect December 2015.  However, the Judicial Conference changes do not go nearly as far as the legislative proposal here.
  • Presumption of Attorney Fees:  Under the new law, a court would be required to award attorney fees and “other expenses” to the prevailing party unless a judge “finds that the position and conduct of the nonprevailing [was] reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust.  This flips the current rule where attorney fees are only available in “exceptional cases” and instead replaces it with a roughshod version of the “English Rule.”  In cases where the patentee is undercapitalized, the law would allow the court to pierce the corporate veil and make investors and other ‘interested parties’ pay the attorney fee award.  Unlike the English system, the proposal here does not place any limits on the potential fee award other than it be “reasonable.”  In my view, an improvement upon this would be to set reasonableness early-on based upon an estimation of the case value.
  • IPR Claim Construction: Rejecting the Federal Circuit’s recent Cuozzo decision, the Bill would require the USPTO to construe claims in post-issuance reviews (IPR/PGR/CBM) in the same manner as would be done by a district court and “in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.”  And, if a court has already construed the claim then the PTO must “consider such claim construction.”  This particular change is one that favors patentees.
  • Discovery Limits:  The bill would limit discovery in litigation until after a claim construction ruling (if one is necessary for the case).  For cases where claim construction is dispositive, this ruling has the potential of reducing costs. It also will create further pressure on courts to conduct early claim construction decisions.   At the same time, the approach seems to increase the likelihood that a court will separate the claim construction decision from its summary judgment decision (which would likely require further discovery) except, perhaps in cases involving definiteness under Section 112(b).  Additionally, discovery of non “core” documents would also be severely limited, and anyone asking for discovery would need to first either (a) post a bond sufficient to cover the expected costs of additional discovery or (b) be a large enough company.
  • Willful Infringement:  Willful infringement can lead to treble damages, but the Bill would limit the applicability of pre-suit demand letters for proving willfulness unless  the demand letter identifies: (1) the patent in question; (2) the ultimate parent entity that owns the patent; (3) the accused products; and (4) how the product infringes at least one claim of the patent.
  • Transparency of Ownership: In any lawsuit, the patent owner must disclose “the ultimate parent entity” of any assignee of the patent. Further, the patentee will be under an ongoing duty to update the USPTO of any change in ownership, including ultimate parent entity within 90-days of any change. Failure to keep-up the information results in no enhanced damages or attorney fees for the patentee in litigation and an award of attorney fees to the defendant who spent money researching the actual ownership information.
  • Stay of Customer Suits: In limited cases, the courts will stay customer lawsuits when the manufacturer of the accused product steps up to challenge the patent.
  • Foreign Bankruptcy: The bill would stop the practice of a bankruptcy executor canceling US IP licenses in foreign bankruptcies.  This is already barred for U.S. bankruptcies under 365(n) of the Bankruptcy code.
  • Codifying Double Patenting: The bill would codify a double patenting regime that would seemingly replace the obvousness-type double patenting system developed by the courts. The proposal would particularly allow prior filings by overlapping inventors to count as prior art unless a terminal disclaimer is filed.

Supreme Court Called Again to Review IPR Appeal: This time on Discretionary Denials

Patent

by Dennis Crouch

The NHK-Fintiv Rule provides the PTAB with authority to deny institution of IPR proceedings when the challenged patent is already subject to pending parallel district court litigation.  The rule stems from two PTAB decisions that were later designated as precedential.

  • NHK Spring Co., Ltd. v. Intri-Plex Techs., Inc., IPR2018-00752, 2018 WL 4373643 (Patent Tr. & App. Bd. Sept. 12, 2018), designated precedential on May 7, 2019.
  • Apple Inc. v. Fintiv, Inc., IPR2020-00019, 2020 WL 2126495 (Patent Tr. & App. Bd. Mar. 20, 2020), designated precedential on May 5, 2020.

IPR proceedings have two major decision points.  Institution: After IPR petition is filed, the PTO Director determines whether or not to institute the IPR. The statute provides the director with discretionary authority on whether or not to institute the IPR, but does create a threshold — requiring that the petition show at least “a reasonable likelihood that the petitioner would prevail.” 35 U.S.C. 314.  Also, the PTO Director has delegated their institution authority to the PTAB, and so a PTAB panel actually makes the decision.  Final Decision: If the IPR is instituted then the PTAB is charged with holding a trial and reaching a final decision “with respect to the patentability of any patent claim challenged.”  On the other hand, if institution is denied, the case is over and no appeal is permitted. “The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” 35 U.S.C. 314(d).  Note here that “nonappealable” has been generally interpreted as ordinarily not appealable. See Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016) and Thryv, Inc. v. Click-To-Call Technologies, LP, 140 S. Ct. 1367 (2020).

With NHK-Fintiv, PTAB panels are able to use their discretionary authority to deny institution in situations involving parallel litigation guided by a six-factor test that generally dance around the overarching question of whether “instituting a trial would be an inefficient use of Board resources.”

  1. Whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted;
  2. Proximity of the court’s trial date to the Board’s projected statutory deadline for a final written decision;
  3. Investment in the parallel proceeding by the court and the parties;
  4. Overlap between issues raised in the petition and in the parallel proceeding;
  5. Whether the petitioner and the defendant in the parallel proceeding are the same party; and
  6. Other circumstances that impact the Board’s exercise of discretion, including the merits.

Apple v. Fintiv.  The test has been used dozens of cases to deny institution, and litigants and district court judges have figured out strategic techniques to push these factors in their favored direction.

In a new petition to the U.S. Supreme Court, Apple has asked asked for relief, arguing that NHK-Fintiv “undermines access to IPR, contrary to Congress’s express design.”  Apple v. Optis Cellular (Supreme Court 2021) (petition for writ of certiorari).  Apple argues that the rule permitting denial “exceeds the PTO’s authority … is arbitrary or capricious, or was adopted without required notice-and-comment rulemaking.”  Id.

After its IPR petition against an Optis Cellular patent was denied, Apple sought relief from the Federal Circuit who refused — holding that it had no power to  hear the case either on appeal or via mandamus. Apple Inc. v. Optis Cellular Tech., LLC, 2021-1043, 2020 WL 7753630, at *1 (Fed. Cir. Dec. 21, 2020) (non-precedential order).  The court more generally offered its reasoning in Cisco Systems Inc. v. Ramot at Tel Aviv University Ltd., 834 F. App’x 571 (Fed. Cir. 2020).

Meanwhile, the district court case against Apple proceeded in E.D. Tex. The jury found the Optis patent claims willfully infringed and not proven invalid and awarded $506 million in damages. Judge Gilstrap entered judgment for the damage award, but did not enhance the damages — finding in his view that the case lacked egregiousness.  I believe that the case is awaiting judgment on Apple’s outstanding motions for new trial and JMOL.

The Petition for Certiorari: The petition is interesting primarily from an appellate and administrative procedure front.  Here, the agency used a particular mechanism of rulemaking that appears to be done without notice + comment and that is not appealable. From that perspective it seems problematic.

Letter to Congress: Iancu is Good for the Patent System

Patent

2020-1026-Coalition Ltr re PTAB.FINAL

The following letter to Congress appears to have substantial support from patent owners. The basics of the letter is to say that Dir. Iancu’s changes to the IPR process have been positive and should stick.  Part of the issue here is that Dir. Iancu is a political appointee who is on his way out in 2021 if President Trump loses (and would likely leave in 2021 regardless).

= = = =

Dear Chairman Graham, Ranking Member Feinstein, Chairman Nadler, and Ranking Member Jordan:

The undersigned represent a diverse array of American innovators, ranging from universities and non-profit foundations, to individual inventors, to start-ups and small businesses, to manufacturing, technology, and life sciences companies. Together we represent thousands of organizations that employ millions of workers in the United States. We all believe that the future of the U.S. economy, including domestic job growth and our competitive advantage in the global economy, depends on a strong patent system that incentivizes innovators to invent and protects their inventions from unfair theft by others.

We write to express our support for the important improvements the U.S. Patent and Trademark Office (USPTO) has implemented over the past several years under the leadership of Director Andrei Iancu.  In this short period, Director Iancu has clearly changed the dialogue surrounding patents, defined the patent system by the brilliance of inventors, the excitement of invention, and the incredible benefits they bring to our economy and society as a whole.  He continuously demonstrates commitment for restoring balance and confidence in the U.S. patent system.

Of particular importance, the USPTO has made several critical changes to the operations of the Patent Trial and Appeal Board (PTAB) that addressed some—but not all—of the unintended consequences of the America Invents Act (AIA), injecting more predictability, reliability, and consistency into the patent system.  Patent owners must have confidence in the reliability of their patents so that they will invest the significant resources required to develop their ideas into new products and technologies.

Many of the recent changes the USPTO has implemented were intended to harmonize the standards used in PTAB trials with those used in patent infringement trials in federal district courts.  Given that Congress intended PTAB trials to be a cost-effective alternative to district court litigation, and Director Iancu has the statutory authority, it made sense to ensure a consistent application of standards between proceedings in court and before the PTAB.

Perhaps the most important of these changes was adopting regulations to require PTAB to interpret issued patent claims according to their ordinary meaning as understood by a person of ordinary skill in the field covered by the patent.  By adopting this so-called Phillips standard of claim construction used in federal court for use in PTAB proceedings, the USPTO provided much needed consistency in the interpretation of challenged patents.  We also strongly support other recent changes, including updated briefing procedures, improved procedures for amending claims before PTAB, and appropriately assigning the burden of proof of invalidity on the patent challenger, all of which strengthen predictability of decisions by the USPTO and ensure that patent rights are more fairly issued and adjudicated.

We also understand from press reports that USPTO had been preparing to institute a proposed rulemaking concerning the factors PTAB panels can use to deny institution of a panel when there is parallel litigation in district court.  While several large platform companies filed suit challenging the authority of the Director to exercise his discretion in this way, we think it clear that both the AIA itself and common sense support the authority of the USPTO director to set regulations for the exercise of discretionary authority to deny institution in these instances.  We see basic unfairness to litigants who must otherwise litigate the same issues more than once, and little need to waste scarce government resources on duplicative actions proceeding in parallel before the PTAB and the district court.  We strongly support a USPTO rulemaking to confirm this approach.

Recent letters to Congress opposing the USPTO rulemaking incorrectly suggest that it would upset congressional intent in passing the AIA by foreclosing an additional proceeding to challenge patents.  Congress was clear that it intended inter partes review (IPR) to provide a cheaper and faster alternative – not an addition – to district court litigation.  If a district court case is likely to conclude near the same time as an IPR proceeding concerning the same dispute, the IPR proceeding would not be a faster alternative, and instituting an IPR proceeding would only add to the cost of resolving the dispute, so it would also not be cheaper.  Logically, then, when a dispute can be more efficiently resolved by a district court, or an ongoing litigation is likely to resolve the dispute in a reasonable period of time, the Director was given the discretion not to institute an IPR proceeding.

The IPR proceeding was structured to provide a quicker resolution and on a more limited set of issues than might be brought in litigation.  As a result, parties in the proceeding were provided a more limited set of tools than available in District Court to allow the USPTO to meet this congressional mandate.  Congress clearly put the Director in the position to determine, for the efficiency of justice, which forum could resolve the issues best, then went further by making that decision non-appealable – lest those appeals undercut the speed and low cost of the new proceeding.  Suggesting otherwise is not consistent with the congressional record.  Moreover, the recent Supreme Court decisions in Cuozzo v. Lee and Thryv v. Click-to-Call both affirm the Director’s broad discretion on instituting an IPR, a position at least one of the companies who signed the letters opposing the rulemaking supported in its own amicus brief to the Court.

Director Iancu has also brought a renewed commitment to much-needed administrative regularity at the USPTO and a real and commendable focus on ways to expand American innovation by tapping into the strength of our nation’s diversity and increasing the opportunities for all Americans to participate in innovation.  He has also introduced innovative measures to help patent stakeholders during the COVID-19 crisis, including deferred fee payments for small and micro entities and extensions of time for certain statutory deadlines.

Under Director Iancu’s leadership, the USPTO has taken great strides toward restoring a predictable, reliable, and consistent patent system that protects inventors and promotes U.S. leadership in global innovation.  We urge you to support these reforms, and look forward to working with you and your colleagues on the Judiciary Committees to further strengthen our patent system.

Sincerely,

[324 American innovators and patent owners]

McRO Returns to Federal Circuit: Valid but Not Infringed

Patent

by Dennis Crouch

McRO, Inc. (Planet Blue) v. Bandai Namco Games (Fed. Cir. 2020)

This case has returned to the Federal Circuit. In 2016, the court issued an important legibility decision in the case — finding the algorithm for syncing anime lip-movements with various sounds to be patent eligible. McRO, Inc. v. Bandai Namco Games America Inc., 837 F.3d 1299 (Fed. Cir. 2016) (McRO I). Less than four years later, McRO I has been cited by over 2000 PTAB decisions as well as 200+ court decisions. The only more-cited patent cases from 2016 are Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016); Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016); and Electric Power Group, LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016).

On remand, the accused infringers again successfully moved for dismissal — this time on summary judgment of invalidity (enablement) and non-infringement. On appeal, the Federal Circuit has vacated the invalidity holding, but upheld the non-infringement determination.

Non-Enablement and Point of Novelty: Aspects of the invention that are known in the art need not be fully described.  Rather, the law relies upon the artisanal  knowledge to fill the gaps. A “patent need not teach, and preferably omits, what is well known in the art.” AK Steele (Fed. Cir. 2003). However, novel aspects of the invention must be enabled – and must reasonably teach how to make and use that aspect of the invention.

Non-Enablement by Example: Enablement requires that the patentee “teach the public how ‘to practice the full scope of the claimed invention.'” without undue experimentation. Slip Op. quoting AK Steele.  In a number of cases, the courts have invalidated patents on enablement grounds after identifying infringing products/processes that are not enabled. On appeal here, the Federal Circuit offered a limiting principle to that approach — it must be tied to a particular and actual product/process, not simply “an abstract assertion of breadth.”

In the case, the accused infringers identified two particular techniques that were not enabled (“bones” and BALDI).  However, a narrow claim construction meant that neither of those were actually covered by the claims.  And, only the claimed invention need be enabled.

No other concretely identified animation techniques have been advanced to support the district court’s and Developers’ enablement analyses.

Slip Op. Without any other particular example of infringing but non-enabled activity, the court held that theory of enablement failed.  The district court noted the breadth of the claims and narrowness of the specification.  On appeal, the Federal Circuit found that conclusion suggestive of an enablement problem, but insufficient:

[T]hese observations merely state the conclusion that the claims are too broad and the specification’s discussion is too narrow. The observations do not justify the conclusion with any concrete support. To say that the “first set of rules” limitation is broader than “if . . . then . . . else” statements based on keyframes is not to say what else is or may be within the phrase—and it was the burden of the Developers, not McRO, to prove that such specific content exists and that it is not enabled.

The appellate panel does not delve into this, but remember that enablement is a question of law, not a question of fact.  The result then is that the defendant has the burden of persuading the judge on enablement, not proving its case.  Lack of enablement can be supported by various factual conclusions, and those must be proven with clear and convincing evidence.

Non-Infringement: McRO’s non-infringement argument hinged upon claim construction of the claim term “morph weight set.” The morph weights identify how much and in what direction various morph targets (such as lip portions) move.  The district court interpreted the term to require these be in 3-D geometric vector form. The result of that claim construction was no-infringement because the accused infringers “do not represent the displacements of each vertex in terms of a simple xyz displacement vector.”

On appeal, the Federal Circuit affirmed the claim construction — holding that “the specification compels the three-dimensional geometric construction of ‘vector’ adopted by the district court.”  McRO had argued that vector should be given a broader definition to include how it is used in computer science — as a sequential list of numbers.

Three notes

  • I don’t know why the Federal Circuit allowed the focus of this whole argument to be on the term ‘vector.’ Here, the argument was on how to define the term used to define the actual claim terms. Rather, the focus should have zeroed in on the claim term itself (“morph weight set”) and decide what that claim term required.
  • In a bit of an oddity, Federal Circuit’s opinion actually uses vector in the computer science form — noting that the accused process “stores information, whether as a 4×4 matrix or as an equivalent 16-term vector.”
  • Without knowing more, the difference being argued about here appears to be resolvable with a mere mathematical transform that could be seen as the equivalent.  No doctrine of equivalents argument was presented on appeal.

U.S. Patent No. 6,611,278 (“Method for automatically animating lip synchronization and facial expression of animated characters”).

Guest Post: Joinder and the One-Year Time Bar in Inter Partes Review

Patent

Guest post by Saurabh Vishnubhakat, Professor at the Texas A&M University School of Law and the Texas A&M College of Engineering. Disclosures: Professor Vishnubhakat was formerly an advisor at the USPTO, but his arguments here should not be imputed to the USPTO or to any other organization. Professor Vishnubhakat was an author of amicus briefs by Professors of Patent and Administrative Law in Wi-Fi One v. Broadcom (in support of neither party) and in Thryv v. Click-to-Call Technologies (in support of the respondent), both of which cases are discussed below.

The March 18, 2020 precedential Federal Circuit opinion in Facebook v. Windy City has notable implications for the system of inter partes review proceedings before the USPTO Patent Trial and Appeal Board. The case was about how two important provisions of the IPR statute—the one-year time bar of § 315(b) and the Director’s discretion to permit joinder under § 315(c)—interact with each other. (As those who follow PTAB issues know, the one-year time bar is also currently before the Supreme Court in Thryv v. Click-to-Call Technologies, on whether PTAB determinations about the time bar are subject to judicial review.) The holding in Windy City is fairly straightforward. The broader implications deserve some elaboration.

The Panel Decision

The panel held that § 315(c) does not authorize same-party joinder, i.e., does not allow a petitioner who has filed an inter partes review petition to join its own, earlier inter partes review petition. The panel also held that § 315(c) does not authorize issue joinder, i.e., does not allow joinder that would introduce new issues material to patentability, such as new patent claims or new grounds for cancellation. (As to the merits of the PTAB’s final written decisions on claims from each of Windy City’s four patents, the panel affirmed that the PTAB’s findings of obviousness were supported by substantial evidence—except as to the patent claims that had been improperly joined through Facebook’s later, time-barred petitions.)

The Dispute’s Background and Timeline

The case began with an infringement suit in which Windy City asserted four patents against Facebook. Exactly one year after it had been served with Windy City’s complaint, Facebook timely sought inter partes review of some, but not all, claims across all four of Windy City’s asserted patents. Taken together, the four patents contained 830 claims, though it was not yet clear which claims were in suit. The PTAB instituted review as to nearly all of the patent claims that Facebook challenged in its petitions. By the time Windy City had clarified which particular patent claims it was asserting in its district court suit, the one-year bar of § 315(b) had passed.

Facebook still sought inter partes review on the remaining patent claims asserted against it, along with a motion under § 315(c) to join these IPRs to the earlier IPRs that the PTAB had already instituted. The PTAB instituted both petitions and allowed joinder.

June 2, 2015

Windy City sued Facebook in the Western District of North Carolina.

June 3, 2015

Windy City served its complaint upon Facebook.

June 3, 2016

Facebook timely filed four IPR petitions challenging some, but not all, claims across all four of Windy City’s patents.

December 12–15, 2016

The PTAB instituted review on nearly all of the patent claims that Facebook had challenged in its IPR petitions of June 2016.

October 19, 2016

Windy City identified the patent claims that it believed Facebook had infringed.

January 12–17, 2017

Facebook filed two more IPR petitions challenging the remaining Windy City patent claims that were asserted against it—and sought joinder of these IPRs to its earlier, already-instituted IPRs.

July 31–August 1, 2017

The PTAB instituted review on both of Facebook’s additional IPR petitions and allowed them to be joined to Facebook’s earlier IPRs.

The Court’s Statutory Analysis

On the question of same-party joinder, the panel explained that the Director’s discretion under § 315(c) is only to “join as a party to that inter partes review any person who” meets certain conditions. Slip op. at 14 (emphasis added). This language excludes the joinder of a petitioner who is already a party to the existing IPR, as Facebook was in this case. The court analogized to the Federal Rules of Civil Procedure, under which “joinder of a person as a party is uniformly about adding someone that is not already a party.” Id. at 16 (emphasis in original). It also noted that joinder under § 315(c) pertains to persons, not proceedings, and that combining one IPR proceeding with another, earlier IPR proceeding was best understood in terms of a different statutory provision: consolidation under § 315(d). Id. at 14–15.

Importantly, this reading of § 315(c) does not depend on whether the later-filed petition or petitions were time-barred under § 315(b). The USPTO’s contrary view had been expressed a year ago by Precedential Opinion Panel’s review of Proppant Express Investments v. Oren Technologies. The agency’s conclusion was that same-party joinder is permissible under § 315(c)—indeed, is permissible even if the later-filed petition may otherwise be time-barred under § 315(b).

Similarly on the question of issue joinder, the panel started from the same premise that the Director’s discretion under § 315(c) is only to join a person as a party to an earlier IPR who meets certain conditions. Among these conditions is the limitation that such a joinder must be to “to an already-instituted IPR.” Slip op. at 17 (emphasis in original). This point matters because the already-instituted IPR “is governed by its own
petition and is confined to the claims and grounds challenged in that petition.” Id. at 17–18 (citing SAS Institute v. Iancu, especially that “the petitioner’s petition, not the Director’s discretion, is supposed to guide the life of the litigation”). That confinement, the court concluded, does not allow “the joined party to bring new issues from the newer proceeding into the existing proceeding.” Id. at 18.

As with same-party joinder, the court’s view against issue joinder did not depend on whether the later-raised issues were time-barred under § 315(b). And here, too, the court explained that allowing a new petition with new issues to be combined with an already-instituted petition with its own issues was simply not the purview of party joinder under § 315(c). Rather, it was the stuff of consolidation under § 315(d). Id. at 18–19.

The Court’s Deference Analysis

On both of these statutory questions, the panel concluded that the plain language of § 315(c) is unambiguous. As a result, the USPTO’s contrary view was not entitled to deference under the familiar two-step framework of Chevron v. NRDC. Id. at 23–24. The agency lost at step one.

The entire panel also went further, however, in a separate concurring opinion that offered additional views about what deference, if any, might have been owed to the USPTO as a result of its Precedential Opinion Panel’s conclusion in Proppant. The panel in its concurring opinion concluded that, even if § 315(c) were deemed ambiguous in the contexts at issue here—same-party joinder and issue joinder—the agency’s views as expressed through the Precedential Opinion Panel would still fail at Chevron step two: the most reasonable reading of § 315(c) would remain the one adopted in the majority opinion. Slip op. at 2 (Prost, C.J., conc.).

This position of non-deference and the precedential interpretations of joinder and the one-year bar together represent a major milestone in the PTAB’s adjudicatory power as well as in Federal Circuit oversight of the USPTO. It is these two very practical concerns, which are at the heart of the AIA’s system of administrative patent revocation, where the larger significance of Windy City really lies.

Implications for the PTAB and the USPTO

The District Courts vs. the Agency

That first concern of adjudicatory power is, to be more precise, about the separation of the PTAB’s power from that of the federal courts—indeed, about the AIA’s intended plan that the PTAB should act as a substitute for the courts. The one-year time bar is an especially important safeguard of that substitutionary choice, which the AIA requires petitioners to make. As I have previously discussed on this blog, the boundary-enforcing function of the one-year bar makes § 315(b) a robust statutory limit on the Director’s discretion in institution-related matters.

For purposes of judicial review, § 315(b)’s work as a statutory limit means that the en banc Federal Circuit correctly decided Wi-Fi One v. Broadcom, holding that the nonappealability of institution decisions under § 314(d) does not extend to PTAB determinations about the one-year time bar. It also suggests that the Supreme Court in Thryv v. Click-to-Call, argued last December, should affirm that § 315(b) determinations are judicially reviewable.

The problem of joinder, however, raises further questions both on its own and in combination with the one-year bar. On its own, PTAB joinder offers a mechanism for socially beneficial collective action in challenging patents whose validity may be in question. The problem of resolving patent validity through litigation in the federal courts is not limited to cost, delay, and potential inaccuracy due to the relative technical inexpertise of most judges and juries. That problem also includes the high constitutional barrier of access to federal court—in the form of Article III standing—that allows only certain parties with certain kinds of incentives even to enter the fray. PTAB proceedings under the AIA have no such standing requirement and so reduce this barrier to entry considerably.

Moreover, the Blonder-Tongue doctrine means that an unsuccessful patent validity challenge in federal court estops only the challenger, whereas a successful validity challenge invalidates the patent as against the world. Thus, federal-courts litigants with a concrete enough stake in challenging a patent generally bear all the costs of losing but must share with the world—including their competitors—the benefits of winning, creating a collective action problem. By contrast, the relatively lower costs of entering and conducting PTAB review and the ability to join inter partes review petitions as co-challengers reduce this collective action problem.

Empirical research on the PTAB offers good evidence of this intuition. For example, inter partes review (unlike covered business method review) allows not only defensive petitions by parties sued in district court for infringement but also entirely preemptive petitions by those who have yet to be sued on the patent in question. Thus, when so-called “standard” petitioners who act defensively file IPR petitions, they may subsequently be joined by “nonstandard” petitioners who are interested in striking preemptively. And across most major fields of technology, the share of standard IPR petitions (in which at least one petitioner was previously sued on the same patent) is greater than the share of standard IPR petitioners (who have themselves previously been sued on the same patent). In fact, this disparity is quite high for certainly technology categories, such as Drugs and Medical (48.5% vs. 70.8%) and Mechanical (53.1% vs. 70.2%).

What this disparity reveals is that petitioners who are not prior district-court defendants tend to use § 315(c) to join IPR petitions that have been filed by prior defendants.

Source: Saurabh Vishnubhakat, Arti K. Rai & Jay P. Kesan, Strategic Decision Making in Dual PTAB and District Court Proceedings, 31 Berkeley Tech. L.J. 45 (2016) [SSRN].

Still, though joinder under § 315(c) offers benefits for socially desirable collective action, it is easy to see how it can conflict with the overarching boundary between district courts and the PTAB, the very boundary that the one-year time bar of § 315(b) exists to enforce. If parties can evade the one-year deadline by joining already-instituted petitions, whether their own or those of others, then the substitutionary function of PTAB review is undermined, potentially significantly. But if patent owners can “run out the clock” in district court before identifying their patent claims in suit—as Facebook cautioned in this case, slip op. at 21—then petitioners may not be able to make fully meaningful use of inter partes review.

Given these competing policy choices, the practical question becomes: who should decide the contours of the PTAB-district court boundary, the USPTO or the Federal Circuit? By construing the statute for itself and giving no deference to the USPTO’s interpretation, the Federal Circuit has sent a strong signal about the degree to which the USPTO still does not enjoy full policymaking authority in the patent system.

The Federal Circuit vs. the Agency

That same strong signal from the Federal Circuit also pervades the second major concern, regarding appellate oversight of the USPTO. The panel opinion’s direct holding about § 315(c) sidesteps whether the substance of the Precedential Opinion Panel’s position would merit Chevron deference, as the statute here was deemed unambiguous. The court’s dicta in its separate concurring opinion, however, offers a stark picture of how the agency’s future positions might fare in debates over judicial deference.

In that picture, the role of the Precedential Opinion Panel is of central importance. Created in September 2018 to streamline the process by which PTAB opinions could be designated precedential, the POP marked a departure from the USPTO’s preexisting Standard Operating Procedure, which had required discussion and a majority vote from the entire PTAB membership followed by approval from the Director. That process had proven relatively unwieldy for generating case law that could effectively bind PTAB panels, and the resulting lack of precedential force had hamstrung the USPTO’s desire for deference.

For example, the Federal Circuit had previously “decline[d] to give Chevron deference to these nonprecedential Board decisions, which do not even bind other panels of the Board”—observing further that, “[i]ndeed, this court has not yet opined on whether deference is warranted for precedential Board decisions.” Power Integrations v. Semiconductor Components, 926 F.3d 1306, 1318 (Fed. Cir. 2019). And even in the present case, the Windy City concurrence still noted that “precedential value alone does not add up to Chevron entitlement.” Slip op. at 13 (Prost, C.J., conc.).

What matters more for Precedential Opinion Panel review, the court explained, is whether Congress has delegated to the USPTO the authority to speak with the force of law and whether the USPTO’s relevant statutory interpretation represents an exercise of that authority. Id. at 6 (citing United States v. Mead Corp., 533 U.S. 218, 226–27 (2001)). In the court’s view, the POP process does not rise to that level. It is true that § 316 confers rulemaking authority to govern the conduct of inter partes review proceedings. However, that authority is limited to prescribing regulations and does not include other means for adopting legal standards and procedures. Id. at 7. In this regard, POP review “is not equivalent in form or substance to traditional notice-and-comment rulemaking” and so does not rise to Chevron-worthy agency action. Id. at 12–13.

It is also true that §§ 3(b) and 3(c) delegate adjudicatory authority over inter partes review proceedings and that, according to the Supreme Court in Mead itself, the power to adjudicate is as quintessential a form of lawmaking authority as rulemaking. Id. at 8. However, that authority belongs in this case to the PTAB itself whereas the rulemaking authority of § 316 is delegated to the Director. The court observed that most modern Congressional delegations of authority to administrative agencies vest “a single delegee with both rulemaking and adjudicatory powers”—that delegee being the agency head. Id. at 9–10. The AIA, by contrast, divided the powers of rulemaking and adjudication between the Director and the PTAB. In this sort of “bilateral structure,” the two forms of lawmaking cannot be exercised interchangeably in order to achieve Chevron deference. Id. at 10 (citing Martin v. OSHRC, 499 U.S. 144, 154–55 (1991)).

Notably, the USPTO has been here before. As the Federal Circuit held in its complex and fractured en banc decision in Aqua Products v. Matal (Fed. Cir. 2017), the USPTO was not entitled to Chevron deference for its interpretation of § 316(e), which places “the burden of proving a proposition of unpatentability” upon the petitioner. The USPTO’s view at the time was that, for patent claim amendments offered during inter partes review, the patent owner bears the burden of proving that the amended claims are patentable—not the petitioner to prove that the amended claims are unpatentable. The en banc court concluded by a 7–4 majority that the USPTO’s approach did not merit Chevron deference, but the split in reasoning did much to shape the outcome.

Only five of the eleven judges had concluded that § 316(e) was unambiguous on the relevant question; the other six concluded that the statute was ambiguous. But of those latter six judges, only four concluded that Chevron deference was appropriate for the USPTO’s interpretation of § 316(e). The other two judges held that the agency had not engaged in APA-compliant rulemaking and so was not entitled to deference. Thus, the USPTO’s engagement in APA-compliant rulemaking could potentially have turned a 7–4 defeat into a 6–5 victory on the question of Chevron deference.

Source: Saurabh Vishnubhakat, The Mixed Case for a PTAB Off-Ramp, 18 Chi.-Kent J. Intell. Prop. 101 (2019) [SSRN].

Conclusion

The concurring opinion in Windy City seems to offer much the same lesson. It is not enough simply that the AIA contained delegations of lawmaking authority and that the USPTO has attempted to speak with the force of law. The institutional details of who in the USPTO received which powers—and how specifically those powers were exercised to generate the agency’s views—matters a great deal. Following an initial period of judicial latitude toward broad USPTO assertions of authority and discretion, the Federal Circuit’s more recent jurisprudence has reflected some retrenchment, such as its en banc reversal in Wi-Fi One. The same is true of the Supreme Court, which after a broadly drawn affirmation of agency discretion in Cuozzo v. Lee, took a considerably more skeptical view two years later in SAS Institute v. Iancu. This retrenchment, if it continues, will demand an increasingly formal, increasingly specific exercise of the authority that the USPTO believes it is exercising.

Competing Questions in Supreme Court Petitions

Patent

I enjoy reading competitive questions-presented in Supreme Court petitions.  Although I don’t have evidence to support this, my contention is that respondents have become much more aggressive at recharacterizing the questions from the way they were presented in the original petition.  As that aggression grows, so does the propensity of petitioners to write even more biased questions.

Briefing in Collabo Innovations, Inc. v. Sony Corp., Docket No. 19-601 (Supreme Court 2020), shows how the U.S. Solicitor’s office has gotten on-board the ‘game.’

Compare below:

Collabo Petition:

When U.S. Patent No. 5,952,714 issued in September 1999, the Patent Act provided only two avenues for challenging the validity of the patent’s claims: ex parte reexamination and district court litigation. Shortly thereafter, Congress added a third method, inter partes reexamination, but deliberately chose to exclude older patents from the new proceeding. More than 10 years later, Congress replaced inter partes reexamination with a fundamentally different proceeding, inter partes review, and made it apply retroactively to all prior patents.

 Responsive Brief from U.S. Gov’t

For almost four decades, the United States Patent and Trademark Office (USPTO) has “possessed the authority to reexamine – and perhaps cancel – a patent claim that it had previously allowed.” Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016). In the Leahy-Smith America Invents Act (AIA), Congress replaced one of the existing mechanisms for administrative reconsideration of issued patents with a new administrative reconsideration proceeding known as inter partes review. Congress further provided that inter partes review “shall apply to any patent issued before, on, or after th[e] effective date” of the AIA.
The questions presented are as follows:

1. Does the retroactive application of inter partes review to a patent that issued before the passage of the AIA, violate the Takings Clause of the Fifth Amendment?

2. Does the retroactive application of inter partes review to a patent that issued before the passage of the AIA, violate the Due Process Clause of the Fifth Amendment?

 The questions presented are as follows:

2. Whether the cancellation, following inter partes review, of petitioner’s pre-AIA patent violates the Just Compensation Clause.

1. Whether Congress’s decision to authorize the USPTO to conduct inter partes review of patents issued before the AIA’s effective date is irrational, and thus violates the Due Process Clause.

Notice the competing preambles that talk-past each other without addressing the same key points; The US Gov’t then reordered and rewrote the questions.  On the takings question — petitioner uses the trigger keyword “retroactive application” of IPR while the Gov’t refers to the more neutral “cancellation.”  Cancellation is an important term here because cancellation was already allowed pre-AIA under the reexamination statutes. On the due process question, the Gov’t flips the “rational basis” test to ask instead whether the AIA is “irrational.”  The Gov’t approach on this second question incorrectly suggests that Congressional irrationality is the test or perhaps the issue raised by the petition.  It turns out that neither are true because due process is also concerned with arbitrary government action (as indicated in Collabo’s briefing).

What is most interesting to me here is that these shifts and tilts of the question are all transparent to the Supreme Court justices and their law clerks. Still I expect that the alternate narratives trigger an emotional response; and those emotions are typically the root of decision making even for the highly rational.

 

Final and Nonappealable: construed as “may be reconsidered” and not reviewable in “at least some circumstances.”

Patent

BioDelivery Scis. Int’l v. Aquestive Therapeutics, Inc. (Fed. Cir .2019)

The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.

35 U.S.C. 314(d).

In 2014, BioDelivery filed three separate IPR petitions against Aquestive’s U.S. Patent 8,765,167.  The USPTO partially-instituted the proceedings (on some, but not all grounds) but then sided with the patentee — finding that the claims had not been proven unpatentable. BioDelivery then appealed to the Federal Circuit who vacated the final written decision on SAS grounds — holding that the USPTO cannot partially institute an IPR.

Back on remand, the PTAB essentially restarted the whole case at institution and eventually decided not to institute the case at all (terminating all three IPR petitions).  BioDelivery then appealed again — arguing that the appeal should have remained instituted and that the PTAB should not have reconsidered that decision.

Back on appeal, the Federal Circuit reconstituted the same panel of Judges Newman, Reyna and Lourie.

Not Final Final: In its decision, the Federal Circuit first held that the “final” aspect of an institution decision does not mean that it cannot be reconsidered.  Rather, “administrative agencies possess inherent authority to reconsider their decisions, subject to certain limitations, regardless of whether they possess explicit statutory authority to do so.” Medtronic, Inc. v. Barry, 891 F.3d 1368 (Fed. Cir. 2018). Without interpreting the statutory meaning of “final,” the Board simply concluded that it does not clearly deprive the Board of its “inherent default authority.” (Note a minor problem with the decision in how it conflates statutory authority given to the Board with statutory authority given to the Director who then administrative delegated that authority to the Board).

NonAppealable: Although the “final” portion of the statute carried no weight, the court here ultimately dismissed the appeal — finding that it fell squarely within the nonappealable provision.

Congress clearly intended to bar review of institution decisions in at least some circumstances by passing the “No Appeal” provision—§ 314(d).

In Cuozzo, the Supreme Court explained that an appeal focused on the likelihood of success element of institution would be barred by the provision.  Here, the majority identifies BioDelivery’s appeal as “merely challenge the Board’s determination not to institute review, something the Board has discretion to do even upon a showing that there is a ‘reasonable likelihood of success with respect to at least 1 claim challenged’ in the petition.”

Judge Reyna wrote this order for the majority panel joined by Judge Lourie. Judge Newman wrote in dissent. Judge Newman argued that the prior appellate decision “ordered further proceedings in conformity to the Court’s ruling in SAS” and that the PTAB’s dismissal avoided that order.

= = = =

The patent here covers a dissolvable thin-film used for drug delivery (Clozabim).

Patently-O Bits and Bytes by Juvan Bonni

Bits and Bytes, Patent

Recent Headlines in the IP World:

Source: USPTO

Commentary and Journal Articles:

New Job Postings on Patently-O:

Iowa Law Review Symposium guest post by Prof. Vishnubhakat: Managing the PTAB’s Legacy of Partial Institution

Patent

Guest post by Saurabh Vishnubhakat, Associate Professor at the Texas A&M University School of Law and the Texas A&M College of Engineering.  Although Prof. Vishnubhakat was an advisor at the USPTO until June, 2015, his arguments here should not be imputed to the USPTO or to any other organization.  This post is based on a paper for the Iowa Law Review symposium Administering Patent Law and is forthcoming in the Iowa Law Review.  The full draft is available at at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3237841.

It has now been four months since the Supreme Court decided SAS Institute v. Iancu, and it seems clear that ending partial institution will, indeed, be a significant disruption to the Patent Trial and Appeal Board’s administration of its docket.  As I noted on this blog just after the decision came down, the power of partial institution was at the heart of PTAB case management from the beginning, and the requirement of binary institution from now on raises several important questions.

In this post, I will offer some more detailed analysis of one of those issues in particular.  That issue is how the Patent Office should understand the stakes of binary institution—which is to say, fully appreciate how much work partial institution was truly doing.

The Stakes of Binary Institution

Now that the PTAB must either fully grant or fully deny each petition that comes before it, the stakes of accepting versus rejecting a case largely point toward rejecting.  The cases that were already being instituted in full or denied in full will be unaffected.  The cases that were being partially instituted, however, will not be accepted lightly.

Fully instituting such a case will necessarily bring significant obligations of deciding why arguments that the PTAB has already found likely to fail do, indeed, fail.  On top of that, the PTAB must also explain fully enough, under the Chenery doctrine, why these arguments lack merit.

Under partial institution, these unmeritorious portions of a petition could easily be dispensed with at the institution stage.  No judicial review was available—not even after final judgment, under Cuozzo—so Chenery obligations did not even come into the picture.  This is not to say the obligations of reasoned decision-making should not apply to the Patent Office at the institution stage.  (Judge Reyna’s concurring opinion in Shaw Industries, for example, made a persuasive case that mere nonappealability does not legitimize black box decisions such as denying “redundant grounds” without explanation.  Still, the panel majority in that case did not reverse the agency.)

Now that partial institution is unavailable, granting review will open the door to judicial scrutiny of the PTAB’s handling of the entire case, some or much of which will consist of arguments that the PTAB already had reason to think were not worth its time.  This change generally counsels against full institution of close cases.

On the other side of the agency’s choice is what effect a PTAB denial would have on the petitioner, for a denial would exclude meritorious arguments as well.  In general, the harm would be minimal, as denying review creates no estoppel and so does not prejudice the petitioner’s ability to make the same arguments elsewhere.  Under § 315(e), estoppel requires a final written decision under § 318(a), which applies only to a petition that has been “instituted and not dismissed.”  As most petitioners (about 70%) are district-court defendants seeking PTAB review in response to an infringement lawsuit (what my coauthors and I have termed standard petitioners), invalidity arguments in the district court will remain available.

The remaining petitioners (about 30%) who seek PTAB review preemptively would be similarly unharmed.  It is true that they may or may not have Article III standing to seek declaratory relief in the courts, standing that they would not have to show in the PTAB.  But they still remain free to refile their petitions in the PTAB itself, using the PTAB’s earlier denial of institution as a roadmap for filing a more successful petition.  Because these nonstandard petitioners have, by definition, not been charged with infringement, the one-year time bar of § 315(b) does not apply to them.

Thus, under the PTAB’s existing resource constraints, the burden of fully granting borderline petitions is generally higher, and the cost and prejudice on litigants inflicted by fully denying such petitions is relatively low, tilting on balance toward fully denying borderline petitions.  The next question is whether this analysis in the abstract has real-world relevance to the PTAB’s likely incentives.

The Scope of Partial Institution

The data strongly suggests that it does.  Partial institution was doing much more work than previously appreciated to filter out unmeritorious arguments and focus the PTAB’s resources on challenges that were reasonably likely to succeed.  The following two figures show why this has largely been overlooked.  Through April 2018, when SAS Institute was decided, the respective shares of petitions that were fully instituted (39.2%), partially instituted (25.8%), and fully denied (35.0%) suggest that partial institutions accounted for only a minor part of the agency’s workload.  Indeed, the trends of these shares over time suggest that partial institution was diminishing even before the Supreme Court abolished the practice.

But looking at petitions or cases as a whole misses the mark.  The legal grounds asserted vary from petition to petition.  An anticipation challenge generally relies on a single prior art reference rather than a combination of multiple references and so is less workload-intensive than an obviousness challenge.  The patent claims that a petition actually challenges vary as well, and the workload burdens posed by different petitions vary accordingly.  Taking these facts into account, the more granular and accurate measure of partial institution is the share of claim-ground pairs being challenged in the PTAB that were being granted, and the share that were being denied.

As the next three figures reveal, this share has been both large and persistent.  Through April 2018, the PTAB denied review of nearly half of all the claim-ground pairs that came before it in petitions.  This finding is robust across technologies.  It is also strikingly stable over time, starting at a rate of about 30% but quickly rising into the 40–50% range, where it has stayed for the past five years.  This evaluation shows that partial institution was a substantial filter on the challenges that were admitted into administrative review.

Confronted with the choice of full institution or full denial, therefore, the PTAB should think carefully about how much of a petition should present meritorious arguments before a panel is willing to take on the additional burden of adjudicating additional arguments that it already knows are likely to fail.

The PTAB’s treatment of transitional cases—where the PTAB had already made partial institutions but now had to be reevaluated under SAS Institute—is telling in this regard.  The agency’s April 26 Guidance on the Impact of SAS on AIA Trial Proceedings had stated it may issue a supplemental order to institute on all remaining challenges.  Though it did not say so, the agency also had the power, of course, to vacate its partial institution, effectively “deinstituting” the petition in full.  In an order earlier this month, the PTAB revealed an agency-wide thumb on the scale toward instituting-all rather than deinstituting-all:

If now faced with the Petition in the first instance, and understanding that we have only a “binary choice,” it may well be appropriate to deny the Petition in its entirety.  But we have been instructed that the Office SAS Guidance is to be interpreted with the weight of Office policy as precluding termination of a partially instituted proceeding in response to SAS Institute.

ESET LLC v. Finjan, Inc., IPR2017-01738, Paper No. 28 at 10 (Aug. 10, 2018).

This exercise of agency discretion for transitional cases is entirely sensible as a policy matter.  For cases where the PTAB has not only concluded that a patent is at least partly problematic but also invested resources to adjudicate those problems, terminating the proceeding would give the mistaken, but still potentially harmful, impression that the PTAB were actively abdicating its error-correction duties.

In future cases, evaluating petitions in the first instance, the PTAB would be much better positioned to balance its obligations with its resource constraints within its broad discretion over institution.

Conclusion

As I discuss further in the full paper, although the structural choices that lie ahead for the Patent Office are difficult, they are appropriate for the agency to have to make.  The policy judgments that are most rational for the Patent Office to reach in light of SAS Institute are likely to promote reasoned decision-making by the agency as well as more efficient substitution of administrative adjudication for judicial review.  These policy judgments, in turn, will also bring important questions—including the one-year time bar and the issuance of stays pending PTAB review—back to the Federal Circuit.  These questions are a valuable chance for the Federal Circuit to reconsider panel decisions that have largely been overtaken both by its own recent en banc decisions and by the Supreme Court.

Reminder: Comments on proposed PTAB claim construction standard are due by July 9

Patent

By Jason Rantanen

In Cuozzo v. Lee (2015), the Supreme Court affirmed the USPTO’s use of the Broadest Reasonable Interpretation (BRI) approach to claim construction in inter partes review.  As Dennis wrote in May, the PTO is now considering changing the standard it uses to that of “a civil action to invalidate a patent under 35 U.S.C. 282(b), including construing the claim in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.”  Changes to the Claim Construction Standard for Interpreting Claims in Trial Proceedings Before the Patent Trial and Appeal Board, 83 Fed. Reg. 21221, 21226 (proposed May 9, 2018).  Here’s the Notice of Proposed Rulemaking.

The period for comments closes on July 9, 2018, so if you’d like to submit a comment on the proposed change, you should do so soon.  According to the Regulations.gov page for the proposed rulemaking, only 8 comments have been submitted so far.   Note that the proposed standard would apply to IPR, post grant review, and covered business method review proceedings.

 

PTAB: Tribal immunity does not apply to inter partes review proceedings.

Patent

Mylan and Teva v. St. Regis Mohawk Tribe (PTAB 2018)

In a long 42 page opinion, a PTAB panel has denied St. Regis Mohawk Tribe’s motion to dismiss the pending inter partes review (IPR) proceedings against its patents.  Here, the panel holds plainly that “Tribal immunity does not apply to inter partes review proceedings.”  Although the PTAB identified state sovereign immunity as a different question, the ruling here certainly suggests that

The case will be appealed to the Federal Circuit — I expect the court will be willing to hear a mandamus action, but we may have to wait until a final decision of validity — something that the equitable owner Allergan has been working hard to avoid.  The sovereign immunity question is the type of threshold question decided at the IPR petition stage.  Under the statute, PTO petition decisions are not subject to appeal. However, the issues here appear to fall squarely within the exceptions noted by the Supreme Court in Cuozzo.

Allergan owned several patents that it granted to the Mohawk Tribe back in 2017.  Although the patents are quite valuable, Allergan actually paid the Mohawk Tribe to take the patents.  The scheme allowed Allergan to still exclusively control use of the underlying inventions and potentially benefit from the Sovereign Immunity given to Indian Nations within the United States.

In reviewing whether sovereign immunity applies here, the PTAB held the following:

  • There is no statutory basis for the application of Tribal Immunity in IPR proceedings.
  • There is no controlling precedent requiring the application of Tribal Immunity in IPR proceedings. (Decisions by other Federal Agencies is not controlling precedent.)
  • Granting of sovereign immunity to the States in the IPR context does not require granting of sovereign immunity to the Indian Nations.
  • Congress granted the PTO with broad IPR authority over “any patent.”
  • In IPR actions, the jurisdiction is in rem – over the patent – rather than in personam – over the patent owner.  This means that IPRs are less offensive of any immunities.
  • IPR actions are not the “type of suit” to which tribal immunity applies at common law since petitioners are not seeking anything from the tribe (only cancellation of its valuable property rights).

The collection of these legal determinations served as the PTAB’s foundation for its final decision of no immunity.

The PTAB then went on to look at the particular situation in this case – where the Mohawk Tribe is the assignee, but Allergan holds all effective rights.  After reviewing the details of the transfer, the PTAB ruled in the end that it could treat Allergan as the “patent owner.” See Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1250 (Fed. Cir. 2000) (a “party that has been granted all substantial rights under the patent is considered the owner regardless of how the parties characterize the transaction that conveyed those rights.”).

I would see this case as quite different if the Mohawk Tribe had actually bought the patents or obtained them through some positive-value venture.  Here, the approach is blatant rent seeking and I am glad that the PTAB was able to work its way through.

Oil States Transcript

Patent

Oil States Transcript.  Commentary to follow.

Interesting quotes:

Justice Sotomayor: If I own something, which is what your basic position, I understand, is, that this is a personal right, how can a government agency take that right away without due process of law at all? Isn’t that the whole idea of Article III, that only a court can adjudicate that issue?

JUSTICE GORSUCH: [W]e have a number of cases that have arguably addressed this issue already, like McCormick, for example, in which this Court said the only authority competent to set a patent aside or to annul it or to correct it for any reason whatever is vested in the courts of the United States.

Most Cited Federal Circuit Decisions 2014-2017

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  1. DDR Holdings, LLC v. Hotels.com, L.P., 2014 773 F.3d 1245 (Fed. Cir. 2014) (eligibility)
  2. Ultramercial, Inc. v. Hulu, LLC, 2014 772 F.3d 709 (Fed. Cir. 2014) (eligibility)
  3. Content Extraction and Transmission LLC v. Wells Fargo Bank, Nat. Ass’n, 776 F.3d 1343 (Fed. Cir. 2014) (eligibility)
  4. buySAFE, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir. 2014) (eligibility)
  5. Williamson v. Citrix Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015) (means-plus-function)
  6. OIP Technologies, Inc. v. Amazon.com, Inc., 788 F.3d 1359 (Fed. Cir. 2015) (eligibility)
  7. Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016) (eligibility)
  8. Digitech Image Technologies, LLC v. Electronics for Imaging, Inc., 758 F.3d 1344 (Fed. Cir. 2014) (eligibility)
  9. Apple Inc. v. Motorola, Inc., 757 F.3d 1286 (Fed. Cir. 2014) (several issues, including means-plus-function)
  10. In re Cuozzo Speed Technologies, LLC, 793 F.3d 1268 (Fed. Cir. 2015) (PTAB procedures; affirmed by SCOTUS)
  11. Interval Licensing LLC v. AOL, Inc., 766 F.3d 1364 (Fed. Cir. 2014) (indefiniteness)
  12. Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343 (Fed. Cir. 2015) (eligibility)

The list above provides the most cited Federal Circuit patent decisions that have been issued by the Court since January 1, 2014.  You’ll note that 8 of the top 12 are eligibility cases with three others essentially focusing on MPF/Indefiniteness issues.

 

 

 

Celgard: Important Challenge to the Federal Circuit’s Pervasive No-Opinion Judgments

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IMG_20170623_221253_112By Dennis Crouch

In re Celgard (Supreme Court 2017) [2017-6-19 Celgard Cert Petition]

In what looks like a well-postured case, Celgard LLC has asked the Supreme Court to consider several questions stemming from the Patent Trial & Appeal Board (PTAB) decision that the claims of the company’s U.S. Patent No. 6,432,586 are invalid as obvious.  The patent claims a particular microporous membrane separator that adds a ceramic layer to effectively limit the growth of lithium dendrites – the major cause of lithium battery failures and overheating.  The approach created by Celgard has been widely copied (and further adapted) in the industry.

In order to avoid royalty payments and supply agreements with Celgard, a host of competitors filed at least six inter partes review (IPR) petitions against the ‘586 patent.[1] Although the bulk of the challenges have been rejected or found without merit by the PTO, the PTAB ultimately agreed with one of the several grounds presented by LG and ruled claims 1-6 and 11 obvious over a combination of two Japanese published patent applications in a parts-and-pieces analysis.[2] As it does with most appeals from the PTO, the Federal Circuit affirmed the PTO judgment without opinion. The petition explains:

The [Federal Circuit] decision was labeled as a “Notice of Entry of Judgment Without Opinion” and stated that “[t]he judgment of the court in your case was entered today pursuant to Rule 36. This Court affirmed the judgment or decision that was appealed. None of the relief sought in the appeal was granted. No opinion accompanied the judgment.”

The Federal Circuit also denied Celgard’s subsequent petition for rehearing and rehearing en banc.

With this basic setup, Celgard has petitioned the Supreme Court for writ of certiorari – asking four questions.

First, following identically from the pending case of Oil States, petitioner asks:

Whether inter partes review—an adversarial process used by the Patent and Trademark Office (“Patent Office”) to analyze the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury?

This question should at least serve as a place-holder pending outcome of Oil States.

The second question stems from my recent article on the Federal Circuit continued issuance of judgments without opinion in appeals of PTO decisions.  Petitioner asks:

Whether the Federal Circuit’s issuance of Rule 36 judgments without opinions for the disposition of appeals from the Patent Office violates 35 U.S.C. § 144’s requirement that the Federal Circuit “shall issue” its “mandate and opinion” for such appeals?

In addition, petitioner argues that the Federal Circuit’s continued and pervasive use of Rule 36 judgments without opinion is a violation of the principles of justice and should be rebuked by the Supreme Court:

Whether the Federal Circuit’s pervasive practice of issuing Rule 36 judgments without opinions to affirm more than 50% of appeals from the Patent Office has exceeded the bounds of reasonableness and is inconsistent with “principles of right and justice”?

Something that makes this a helpful case is the fact that Celgard also has a very strong argument on the substantive patent law merits (nonobviousness) and there are no serious troll or eligibility undertones.  In its final petition question, Celgard focuses on the obviousness question asking:

Whether the Patent Office’s consistent practice of failing to consider the claimed invention “as a whole” and failing to consider whether the combination of elements would lead to “anticipated success” in an obviousness determination conflicts with 35 U.S.C. § 103 and this Court’s precedent in KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 421 (2007)?

The obviousness analysis by the PTO is what I see as a somewhat typical pieces-and-parts analysis – finding that most of the elements of the claims were taught by one of the prior art references and then finding another reference that taught the remaining limitations.  Of course, this approach of using the invention as a blueprint for framing the prior art has the problem of likely hindsight bias – and is particularly troublesome where the invention is not simply a combination elements but instead is a new structure. Here, for instance, the claim requires, inter alia, “a ceramic composite layer . . . adapted to at least block dendrite growth. . .”  One reference purported to teach a non-ceramic layer used to block dendrite growth (Tobishima) and the second taught a ceramic layer – albeit one that that would not block dendrite growth because of large open holes (Tojo).  The PTO determined that it would be appropriate to combine the two references in a way that form a ceramic layer that blocks dendrite growth. In response, the petition argues:

Given the different problems addressed by Tobishima and Tojo (and their respective, different solutions), a threshold question for obviousness should have been whether it would have been obvious to combine the references to achieve a two-layer separator that blocks dendrite growth. Had this question been considered, which would have considered the claimed invention as a whole, the Patent Office would have found that the combination would destroy the very purpose of the references and would result in a separator with “open holes” that cannot block dendrite growth. Instead of considering the claimed invention “as a whole” and its unique ability to block dendrite growth through a ceramic composite layer, the Patent Office instead looked to whether the references contained all the elements of the claims. This analysis is not proper.

Although not the primary focus of the obviousness argument, the secondary factors of nonobviousness are interesting here.  The PTO gave them no weight even though LG apparently copied the invention and then touted the safety benefits of the ceramic layer in its advertising.

As in the Cuozzo case, the original IPR petitioner has dropped out of the case after a settlement, but the PTO is defending its own judgment.

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[1] See IPR2015-01511 (Ube Maxell); IPR2014-00679 (SK Innovation); IPR2014-00680 (SK Innovation); IPR2014-00692 (LG Chem); IPR2014-00524 (Mitsubishi Plastics); IPR2013-00637 (Sumimoto Chemical).  See also, Celgard, LLC v. LG Chem, Ltd. et al 3:14-cv-00043 (W.D.N.C.); Celgard, LLC v. SK Innovation Co., Ltd. 3:13-cv-00254 (W.D.N.C.); and Celgard, LLC v. Sumitomo Chemical Co., Ltd. 3:13-cv-00122 (W.D.N.C).

[2] References: Unexamined Japanese Patent Application No. H5-190208 (hereinafter, “Tobishima”) and unexamined Japanese Patent Application No. H11-80395 (hereinafter, “Tojo”).

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I’m writing this from the mountain village of Montefegatesi, shown in the picture above.  No internet here, but it will be posted soon.

IPR Petition Response => Claim Construction Disclaimer

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Aylus Networks v. Apple (Fed. Cir. 2017)

The court here holds that claim construction “prosecution disclaimer” applies to statements made by the patentee in a preliminary response to an IPR proceeding.  This holding makes sense and was entirely expected — however it also sets yet another trap for patentees seeking to enforce their patent rights.

The appeal here involves Aylus infringement lawsuit against Apple that alleges AirPlay infringes U.S. Patent No. RE 44,412.  After Aylus sued Apple for infringement, Apple responded with two inter partes review (IPR) petitions challenging all of the patented claims.  However, the Director (via the PTAB) refused to grant the petition as to several claims, including 2, 4, 21, and 23.

Back in the litigation, Aylus amended its complaint to only allege infringement of those non-instituted claims.  In its subsequent motion for summary judgment of non-infringement, Apple argued for a narrow interpretation of the claimed use of “CPP logic . . . negotiate media content delivery between the MS and the MR.”  As evidence for the narrow interpretation, Apple and the district court focused on statements by the patentee (Aylus) in its preliminary response to Apple’s IPR petition.  On appeal here, the Federal Circuit has affirmed:

[S]tatements made by a patent owner during an IPR proceeding, whether before or after an institution decision, can be relied on to support a finding of prosecution disclaimer.

Those of us closely following IPR doctrine will raise some hairs at this statement since the Federal Circuit has previously held that “IPR does not begin until it is instituted.” Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293, 1300 (Fed. Cir. 2016).   Here, the court recognized that general holding, but found that it dies not apply “for the purposes of prosecution disclaimer.” Rather, for this situation, the court found that the proceedings begin with the IPR petition.

If I were writing the opinion, I would have come to the same result – that statements by the applicant to the PTO can form prosecution disclaimer.  However, I would have reached the conclusion without upsetting and further complicating the definition of an IPR proceeding.

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An oddity of all of this is that the Federal Circuit appears quite concerned in this case about the linkages between claim construction during inter partes review and subsequent litigation, but previously ignored that issue during the prior cuozzo debate.   My take has long been that we should be applying the actual claim construction in both situations.

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This case focused on prosecution disclaimer and the finding of a clear and unmistakable disclaimer of claim scope.  However, the same approach should also apply in applying IPR statements as primary intrinsic evidence used in the claim construction analysis even when short of disclaimer.