Tag Archives: AIA Trials

The America Invents Act (AIA) of 2011 authorized the creation of a set of administrative trials (AIA Trials), including Inter Partes Review (IPR) proceedings, Post Grant Review (PGR) proceedings and transitional Covered Business Method Review (CBM) proceedings. In each of these proceedings, anyone can file a petition to challenge an issued patent, and, after instituting the trial, the Patent Trial and Appeal Board (PTAB) will decide whether the challenged claims should be confirmed or cancelled.

CBM Review Keeps its Narrow Scope: Narrowly Surviving En Banc Challenge

Secure Axcess v. PNC Bank (Fed. Cir. 2017) (en banc denied)

In its original panel decision, the Federal Circuit narrowly construed the Covered Business Method statute – holding that CBM review is only available when the claims themselves are directed toward a financial service.  I previously wrote:

In its decision, the court walked through the statute – noting that the focus is on the claimed invention rather than the asserted marketplace or potential uses of the invention.  Thus, the relevant question is not how the invention is used, but rather whether the claims are directed to a financial service.  According to the court, any other reading, would “give the CBM program a virtually unconstrained reach.”

The challengers then petitioned for en banc review.  That petition has now been denied – although over vigorous dissent.  (6-5 denial, with Judge Stoll not participating). As the Federal Circuit continues to be divided, it is most interesting to consider the sides that have formed:

  • Supporting Rehearing (and broader scope of CBM review, and broader 101 application): Chief Judge Prost and Judges Lourie, Dyk, Wallach, and Hughes
  • Against Rehearing (for narrower CBM review and reduced 101 application): Judges Moore, Taranto, O’Malley, Reyna, Newman, and Chen.

Judge Plager also sat on the original panel, but his senior status precluded his voting on the en banc rehearing question.

 

For CBM Review: _Claims_ Must be Directed to Financial Service

CBM Review: Must the Claims Be Expressly Limited to Financial Services?

 

Chisum on IPR Initiation

Chisum-MuellerIn an email distribution regarding their upcoming Chisum Patent Academy, Don Chisum and Janice Mueller opine on the upcoming Supreme Court case of SAS v. Lee.

They write:

The Court will address, at least indirectly, the PTO’s rule 37 CFR § 42.108(a). The rule allows the Patent Trial and Appeal Board (PTAB) to institute inter partes review (IPR) on (and, implicitly, to adjudicate) only some of the claims of a patent challenged in a petition (and, also, only on some of multiple grounds of unpatentability). . . .

More likely than not, the Supreme Court will invalidate the practice that rule 108(a) makes possible as contrary to the governing statutes. 35 USC Section 318(a) requires that the PTAB “issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” If the PTAB must rule on all claims challenged in a petition in its final decision, it makes no sense to allow the PTAB (per Rule 108(a)) to “institute” review on fewer than all those claims. (NOTE: the statute on institution, 35 USC 314(a), sets a reasonable-likelihood-of-unpatentability “threshold” for “at least 1 of the claims challenged in the petition.” That can easily be read as contemplating that only one of the challenged claims must meet the threshold and that all challenged claims will be carried into a review upon institution, whether or not they met the threshold standard.)

Briefing in the case will go through the summer.

 

SAS Institute v. Lee: Partial Institution of Inter Partes Review

by Dennis Crouch

The Supreme Court has agreed to hear a new AIA-trials case: SAS Institute v. Lee

The inter partes review appeal focuses on the procedural question of whether the America Invents Act permits the USPTO to partially institute IPR proceedings – as it has been doing. SAS argues instead that the statute requires a full up/down vote on a petition and, if granted, the Patent Trial and Appeal Board (PTAB) must then pass final judgment on all petitioned claims:

Whether 35 U.S.C. § 318(a) … requires [the] Board to issue a final written decision as to every claim challenged by the petitioner, or whether it allows that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the U.S. Court of Appeals for the Federal Circuit held.

As I previously wrote,

The basic setup here is that SAS argues that the PTO cannot partially institute IPR proceedings since the statute requires that PTO “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” 35 U.S.C. § 318(a)

Although a somewhat sideline issue, it will likely have its biggest impact on estoppel resulting from AIA trials and, as a result, may also shift filing strategy.

AIA Trial Docs:

 

 

Guest Post: Where we Stand with Trade Secret Enforcement in Federal Courts

Guest Post by Prof. David Opderbeck (Seton Hall), originally published on his blog The CyberSecurity Lawyer.

Introduction

Trade secrets are important to cybersecurity because many data breaches involve trade secret theft.  The Defend Trade Secrets Act of 2016 (DTSA) amended the Espionage Act of 1996 to provide a federal private right of action for trade secret misappropriation.   Some commentators opposed the DTSA in part because it seems redundant in light of state trade secret law and could lead to unnecessary litigation and restrictions on innovation.  Now that the DTSA has been in effect for nearly a year, I conducted an empirical study of cases asserting DTSA claims (with the able help of my research assistant, Zach Hansen).  This post summarizes the results of that study.

Methodology

We ran keyword searches in the Bloomberg Law federal docket database to identify cases asserting DTSA claims in federal courts.  It is not possible to search only on the Civil Cover Sheet because there is no discrete code for DTSA claims.  Our search ran from the effective date of the DTSA (May 26, 2016) through April 21, 2017 (just prior to our symposium on the DTSA at Seton Hall Law School).  After de-duping, we identified 280 unique Complaints, which we coded for a variety of descriptive information.  Our raw data is available online.

Findings

This chart shows the number of filings by district:

We were not surprised to see that the Northern and Central Districts of California, Southern District of New York, or District of Massachusetts were among the top five.  We were surprised, however, to see the Northern District of Illinois tied for first.  This could reflect the influence of the financial services industry in Chicago, but further research is required.

The next chart shows the number of filings by month:

It is interesting to note the decline in filings following the initial uptick after the May 26, 2016 effective date.  Perhaps this reflects a slight lull during the summer months.  Filings then remained relatively steady until March, 2017, when they increased significantly.  This could have something to do with the quarterly business cycle or bonus season, since many of the cases (as discussed below) involve employment issues.  Or, it could reflect a random variation given the relatively small sample size.

We next examined other claims filed along with the DTSA counts in these Complaints:

We excluded from this chart related state law trade secret claims.  Not surprisingly, nearly all the cases included claims for breach of contract.  As noted above, trade secret claims often arise in the employment context in connection with allegations of breach of a confidentiality agreement or covenant not to compete.  Another finding of note was that a fair number of cases assert Computer Fraud and Abuse Act claims, although the number is not as high as expected.  Most trade secret cases today involve exfiltration of electronic information, but perhaps many cases do not involve hacking or other access techniques that could run afoul of the CFAA.

We also noted a smaller but not insignificant number of cases asserting other intellectual property claims, including trademark, copyright and patent infringement.  Since many documents taken in alleged trade secret thefts are subject to other forms of intellectual property — particularly copyright — this may show that some lawyers are catching on to the benefit of asserting such claims along with DTSA claims.

Finally, our review of case status revealed the following:

  • 198 cases in various pre-trial stages
  • 61 cases dismissed
  • 5 preliminary injunctions
  • 4 final judgments, including 2 permanent injunctions
  • 3 default judgments
  • 1 case sent to compulsory arbitration
  • 8 undetermined / miscellaneous

At first blush, the number of cases dismissed seems high, given that none of the cases have been pending for more than a year.  We assume the vast majority of these cases settled, though further investigation is required.  In contrast, the number of preliminary injunctions granted seems very low.  Again, further investigation is required, but so far it does not seem that the DTSA is resulting in the kind of preliminary injunction practice we expected to see under a federal trade secret statute.

SAS Institute Inc. v. Lee: Challenging Partial Institution

The Supreme court has relisted SAS Institute Inc. v. Lee, 16-969 – an important step in the progress toward grant of certiorari.  The inter partes review case presents the following question:

Whether 35 U.S.C. § 318(a) … requires [the] Board to issue a final written decision as to every claim challenged by the petitioner, or whether it allows that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the U.S. Court of Appeals for the Federal Circuit held.

The basic setup here is that SAS argues that the PTO cannot partially institute IPR proceedings since the statute requires that PTO “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.”

Although the Department of Justice has sided with the PTO’s approach here, in a prior filing the DOJ argued that the PTO erred in “picking and choosing some but not all of the challenged claims in its Decision.” See Department of Justice v. Discovery Patents, LLC, Case IPR2016-01041 (Patent Trial & Appeal Bd., Nov. 29, 2016).

The outcome of a rule-change here  is unclear – while the patent challenger (SAS) is petitioner here.  Patentees may prefer the all-or-nothing approach that would hopefully result in final judgments confirming patentability as well as the resulting estoppel.

 

Remarks By Director Michelle K. Lee at the George Washington University School of Law

The following is an excerpt from PTO Director Michelle Lee’s keynote address today, at George Washington University Law School. Read the full remarks here.- DC

How do we continue to incentivize … incredible innovations? First, we must ensure that the USPTO issues the highest quality patents as quickly and efficiently as possible. This means, at a minimum, continuing to bring down our backlog and pendency so that good ideas can be patented quickly. Which is why I am proud to report that we’ve reduced our backlog of unexamined patent applications by almost 30 percent from its peak in January 2009, despite a 32 percent increase in applications over this time period. Our so-called first action pendencies – that measure the time from filing an application to the time of obtaining an initial decision from the examiner— are down by 43 percent—from 28 months in 2011 to 16 months today. Our total pendencies – the time from filing an application to the time of obtaining a final office action, such as an allowance—are down by 26 percent—from 35 months in 2010 to 26 months today. Our backlog of Ex Parte Appeals – that’s not AIA proceedings, but our internal appeal process to the Board after the examiner issues her decision – has also gone down. We have reduced our inventory of ex parte appeals by 45 percent from a high of about 26,000 in 2012 to about 15,000 today. And, we have reduced the average pendency for appeals by 30 percent from 28 months in 2016 to 19 months today. In short, our backlog and pendencies are now lower than they’ve been in more than a decade, and they will continue to go down. Simply stated, this means more inventors are obtaining more patents more quickly. . . .

We constantly welcome—in fact, we solicit—feedback and input. And we have shown that we are willing to refine and improve as many times as needed. For example, we’ve provided applicants with more access to examiner interviews more than doubling the number of interview hours in just eight years. We’ve had more RFC’s, Proposed Rules, and public roundtables than ever before – including on such topics as our Enhanced Patent Quality Initiative, our 101 guidance, and our Patent Trial and Appeal Board proceedings. We’ve also brought a broader range of services to support American innovators where and when needed, including through four regional offices across the country, and through over a dozen IP attaches across the globe. For those of you who may not know, our attaches in China, the EU, India, Brazil, and other locations help U.S. innovators obtain and enforce IP rights outside the US, and also help advocate for improved IP laws outside the U.S. . . .

Examining patents quickly and efficiently is only part of the job. The public relies on us to issue quality patents. Today, we have about a dozen programs underway that we believe will meaningfully improve patent quality. These include programs for making sure we’re getting the most relevant prior art before our examiners as early as possible by making prior art cited in our PTAB proceedings available to examiners handling related applications, and transitioning all our examiners from the decades old, antiquated U.S. Patent Classification System to the updated, increasingly global Cooperative Patent Classification System. Developing best practices such as for enhancing the clarity of the record. And developing new and better ways to measure our progress. For example, with our Master Review Form, we are now processing twice as many reviews, and capturing data not only about the correctness of our actions, but also about the clarity of our actions. This helps us identify trends, and helps us pinpoint very specific areas for training. Finally, and, importantly, for the first time in 40 years, we are doing a comprehensive review of the amount of time our examiners need to do their work in light of the many recent changes within the patent system. We are already seeing measurable and statistically significant results in our patent quality efforts even in the short amount of time since we began the Enhanced Patent Quality Initiative. And you can look forward to more improvements in the future. In sum, the USPTO is operating well, and is issuing more, higher quality patents than ever. …

What work lies ahead? Our top priority today is to make sure the Patent Trial and Appeal Board’s AIA proceedings are as effective and as fair as possible–within our Congressional mandate. Now is the right time to examine and make any needed reforms to these proceedings, because we have five years of data and experience to guide us. …

Let’s take a look at where we are with the AIA trials today. We have shared regular updates on the number of cases and the results of those cases, but we want to break down the numbers even further so that everyone has the facts, as there have been many numbers cited – some of which are accurate, some of which are not.

Slide 1 Revised

This waterfall slide is our attempt to present even more data in a more accessible and transparent format. According to waterfall slide data, which shows the status of every petition filed since beginning of AIA, of those petitions that have reached some sort of final disposition (i.e., are not pending), about one third of all petitions are denied institution and do not go to trial; about one third of all petitions settle either before or after the decision to institute; and only about one third of all petitions ever reach final written decision. It is only at that point of reaching final written decision is it relevant to talk about the patentability or unpatentability of the claims of a patent. And, at that point, it is true that 66 percent of petitions will find all instituted claims of the patent unpatentable, 17 percent of petitions will find all instituted claims of the patent patentable, and an additional 17 percent will have mixed results (some instituted claims will be found to be patentable and some will be found to be unpatentable). So statements that “all” or 95 percent or even 80 percent of patents are found unpatentable are not supported by the data and do not account for prior disposition by settlement or by denial of institution.

Slide 2 Revised

Drilling down further on the institution rate, here is some helpful data from the years the AIA trials have been in effect. As you can see, the institution rate in our proceedings has been steadily declining from a high of 87 percent in the beginning, to about two thirds today. These are the numbers, and these are the facts. Now, our stakeholders have understandably asked how the rates of unpatentability in AIA proceedings, reflect on the quality of all of the other patents we’ve issued. . . . [T]here are almost 2.8 million patents in force. Incredible. Of those 2.8 million about 4,000 patents have been challenged in AIA trials. This represents less than 0.2 percent of the patents currently in force. …

As I have said many times in the past, the USPTO is constantly looking for ways to make the AIA trials as effective and as fair as possible within our Congressional mandate.  And we welcome your suggestions and ideas, the more specific, the better. To this end, we’ve set up a mailbox where you can submit your ideas at PTABProceduralReformInitiative@uspto.gov. This is an early opportunity to provide input. Your feedback here will help form the basis for our recommendations to the administration on next steps.

In fact, we have already heard from a number of you regarding a number of issues. As discussed:

  1. Multiple petitions, and how best to curb abusive practices.
  2. Whether to provide other opportunities to amend claims later in the proceedings when patent owners may have a better sense of where their claims stand,
  3. Whether to reevaluate our claim construction standards in view of new data and experiences, and
  4. How to best incorporate the findings and legal conclusions of prior proceedings at the USPTO, including examination and other post-grant proceedings, as well as, importantly, proceedings conducted in the federal courts.
  5. What considerations should go into a decision to institute, for example, how can we better take into account considerations such as the interests of justice, economic factors, and hardship.
  6. As to decisions to institute, whether there should be additional review of institution and termination decisions—and by whom.
  7.  When and how to permit parties to join proceedings.
  8. When and under what circumstances might it be appropriate to extend the length of the proceedings beyond 12 months and what impact would extensions have on litigations before, not only the Board, but district courts. . . .

[W]e are [also] streamlining the way the Board identifies and designates opinions as precedential, with the goal of designating more opinions precedential. Why? Because doing so 1). Improves the consistency across panels of the Board, and 2). Provides greater notice to the public to help you make better informed decisions on how to manage your Board proceedings. . . .

Fees: Finally, we are also proposing increases to our AIA trial fees. . . . We believe, as many of you do, that these proceedings should be self-funded. I commend our team for making thoughtful initial cost projections and for recommending revisions to ensure that these proceedings are fully self-funded. There is much to do on AIA proceedings, patent quality, and in many other areas, and I promise you that we are working diligently, with a sense of purpose, every day.

In closing, we all want what’s best for this country’s inventors, innovators and entrepreneurs. Because it is through their efforts that our country remains at the forefront – economically and globally. Simply stated—and I think President Trump and Secretary Ross would agree—we want the United States to out-innovate and out-perform our global competitors, producing new jobs and new technologies and new industries that benefit all Americans, including individual inventors and those in our small businesses and startups. Let’s not forget that the modest businesses and unknown inventors of today may become the largest and most well-known drivers of our economy tomorrow. To make that happen, Congress, the courts, the administration (especially the USPTO), and even all of you here today, must all work together to make sure the system envisioned by our Founding Fathers lives up to its purpose to promote innovation. You have the commitment of the entire USPTO team that we will play our part to ensure that we continue to incentivize the kind of innovations that make our lives better and safer And that put men and women—like Mr. Iver Anderson with his lead-free solder—in the National Inventors Hall of Fame. Our future depends upon it. Thank you.

IPR Petition Response => Claim Construction Disclaimer

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.

= = = = =

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.

= = = = =

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.

No real consensus yet on CBM Sunsetting

Once initiated, CBMs are identical to post-grant reviews (PGR) – allowing for patents to be challenged on any patentability grounds.  As implemented, this includes 101 and 112 challenges in addition to the more traditional obviousness and novelty grounds.   PGRs, however, are limited to only AIA-patents and must be filed within a 9-month window from issuance.  Those caveats have severely limited the number of PGR petitions filed thus far.   For CBMs, the AIA-patent restriction and 9-month window are both eliminated.  However, the statute creates a subject-matter limitation that restricts CBMs to only non-technological financial-services business method patents.

Another feature of the CBM program is that it is “transitional” – i.e., it sunsets in 2020 and no petitions will be accepted after that date.

Last week, I hosted a quick anonymous survey on the transitional Covered Business Method Review program — asking whether the CBM program should be allowed to sunset or somehow extended.  240 Patently-O readers responded with results shown in the chart below.  About 44% of responses favored ending of the program outright — allowing it to sunset.  About 29% favored extending the program as-is, with the narrow financial-services scope.  The remaining favored extension and expansion: 17% would expand the scope to include all information processing patents, and the remaining 10% would extend the program to include all patents.  This final option would essentially mean ending the 9-month window for PGR filing.

CBMSunset

 

The survey also offered (but did not require) an explanation of the answer.  A variety of themes emerge from that explanation. The following are a few examples.

For patent challengers, the key response is that “it works” as a mechanism for cancelling patents, and could be extended to other technology areas.  

  • CBM is a big success addressing one of the most abused categories of patents. Extend it to the very worst and most abused patents by including all of information processing and it can help clean up the system and make it stronger.
  • Business methods are not the only abstract processes being patented by the Office Patent. A majority of all information processing methods (even those outside of the Business arts) suffer from encompassing non-statutory abstract processes without reciting subject matter that amounts to anything significantly more than said abstract processes.

The historic problem associated with poor business method examination quality has now been fixed. 

  • It was intended to handle a temporary problem in a specific area.  State Street caused a flood of applications in an area that was new to the USPTO.  Now skills and databases have developed and the stats show that there is no particular need for either expanding or extending CBM.  Permanently singling out a particular subject matter for extra scrutiny could cause other countries to do the same in other areas.
  • If the goal was to clean up shoddy and overly broad patents and applications, then most all of the necessary work should be done by then.  There are existing mechanisms in place that should be forcing quality such that this becomes redundant and therefore unnecessary.
  • It was a political sop to begin with and should be allowed to expire per the legislation and the underlying political agreement.  It’s argument was to take care of “low-hanging fruit”, patents of old vintage, issued when the Office’s resources in this area were low.  8 years is more than enough time to pick that fruit.
  • CBM petitions are declining because most of the patents intended for consideration have already been undone.

Patents need to be strengthened, not weakened. 

  • The patent systems is already nearly dead.  Make patent owners in all areas feel the pain of having their patent rights trampled over by a kangaroo administrative court.
  • Broad restrictions on patentability are harming U.S. competitiveness in the areas of its greatest strength.  China and the EU are poised to eat our lunch, and we are serving it up to them.
  • A terrible idea from the outset.
  • It (CBM) deprives some of the best technological innovators the chance to protect their valuable property.  Abandon CBM, and instead seek recourse to the traditional approaches (102, 103 and 112) to rid the patent landscape of those patents that don’t rise to the level of technological innovation.

The PTAB process is either corrupt or incompetent. 

  • It has been abused by petitioners and PTAB has taken it too far.
  • Go back to district court litigation. The present scheme is a disaster.
  • The USPTO is turning into a mini-court system. That is not its competency. It needs to focus on technology, granting patents to those inventions that meet the basic statutory criteria, and leave the legal hair-splitting to courts.
  • This is a corrupt Review that benefits a specific class of infringers and is detrimental to the development of new technology.

The approach should be ended because it violates the constitutional rights of patent owners.

  • Unconstitutional.
  • AIA has overstepped its boundaries on constitutional grounds as patents are private rights.
  • All patent owners are entitled to due process, and that includes the right of access to a court of law before their patents are summarily cancelled by a political, the end-justifies-the means, so-called court.

Of course, there are other responses as well (perhaps more below in the comments).

The bottom line here, as you might expect, is that there is not yet any consensus on whether to extend the CBM program.  My own general framework begins with the recognition that CBM does no longer adds much value post Alice/Mayo and with district court eligibility determinations being done on the pleadings.  However, I would like to see the empirical evidence.   The point of creating legislation that sunsets is that it effectively places the burden of proof on anyone wanting to continue the program.  That work has not yet been done.

 

Oil States: Trump Admin Supports AIA Trial Proceedings

Oil States v. Greene’s Energy (Supreme Court 2017).

After receiving party briefs in this case, the Supreme Court requested a responsive brief from the Michelle Lee in her role as PTO Director on the constitutionality of the AIA trial system.  That brief has now been filed by the new acting Solicitor General Jeff Wall who handled a number of patent cases in private practice.  Despite the regime change, the SG’s office continues to strongly support the AIA Trial system and the brief argues strongly that patents are public rights that may be subject to administrativ review:

Patents are quintessential public rights. Pursuant to its constitutional authority to “promote the Progress of Science and useful Arts” by establishing a patent system, U.S. Const. Art. I, § 8, Cl. 8, Congress created the USPTO, an agency with “special expertise in evaluating patent applications.” Kappos v. Hyatt, 566 U.S. 431, 445 (2012). Congress directed that agency to issue a patent if “it appears that the applicant is entitled to a patent” under standards set by federal law, 35 U.S.C. 131. Patents accordingly confer rights that “exist only by virtue of statute.” Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 229 n.5 (1964). . . . Petitioner’s constitutional arguments do not warrant this Court’s review.

[Read the Brief: 16-712_oil_states_energy_servs._llc_opp]  The Supreme Court has already denied certiorari in three prior constitutional challenges to the AIA trial mechanisms. MCM Portfolio v. Hewlett-Packard; Cooper v. Lee; and Cooper v. Square.  If Oil States is denied here, there are also several more cases waiting in the wings to raise the challenge again.

Oil States Energy Services v. Greene’s Energy Group

Survey: Should We Extend the Covered Business Method Review Program?

The Covered Business Method Review program is a transitional program that sunsets in 2020.  These AIA trails have been extremely effective at knocking-out patents that qualify for review.   The question of the day is whether Congress should extend and possibly expand the program beyond the 2020 deadline and beyond the non-technological financial services limitations.

Federal Circuit Refuses to Hear Private Right Issue

by Dennis Crouch

Cascades Projections v. Epson America (Fed. Cir. 2017) (en banc denial)

In a split decision, the Federal Circuit has denied Cascades petition for initial en banc hearing.  The petition asked one question: “Whether a patent right is a public right.” Because a Federal Circuit panel already decided this decision in MCM, Cascades asked the court to bypass the initial panel appeal and head straight to the en banc question.  See MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284 (Fed. Cir. 2015), cert. denied 137 S. Ct. 292 (2016).  The issue is important because the answer to the private right question could lead to a judgment that the administrative patent trial system is an unconstitutional violation of due process rights.  I previously discussed the case on Patently-O.

Whether a Patent Right is a Public Right

 

For judges wrote separately on the case:

Judge Newman Concurring in Denial: The important question here is “whether the statutory scheme created by the America Invents Act, in which the Office is given an enlarged opportunity to correct its errors in granting a patent, with its decision subject to review by the Federal Circuit, meets the constitutional requirements of due process in disposition of property.”  Judge Newman suggests that she would vote for re-hearing after “full opportunity for panel rehearing.”

Judge Dyk (Joined by Judges Prost and Hughes) Concurring in the Denial: “MCM was correctly decided. . . . [T]here is no inconsistency in concluding that patent rights constitute property and that the source of that property right is a public right conferred by federal statute.”

Judge O’Malley, Dissenting from the Denial: Patent rights are likely “core private rights only subject to adjudication in Article III courts.”

Judge Reyna, Dissenting from the Denial: “The state of current law compels en banc review.”   According to Judge Reyna, the clear statement from Supreme Court’s 1898 decision in McCormick Harvesting that “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, and not in the department which issued the patent.” McCormick Harvesting Mach. Co. v. C. Aultman & Co., 169 U.S. 606, 609 (1898).

We’ll look for the upcoming panel decision in the case and subsequent en banc hearing.

 

 

Interpreting the Interpretation of the Broadest Interpretation

By Dennis Crouch

Nestle USA v. Steuben Foods (Fed. Cir. 2017) (nonprecedential)

In its final written decision, the PTAB sided with the patentee – holding that IPR-challenged claims were not obvious.  U.S. Patent No. 6,945,013 claims 18-20 (aseptic bottling at > 100 bottles per minute).  On appeal, Nestle has successfully argued that Board incorrectly construed the claim term “aseptic.”

In Cuozzo, the Supreme Court gave deference to and agreed with the USPTO’s approach of giving claims their “broadest reasonable interpretation” (BRI) during inter partes review (IPR) proceedings.[1] In most areas of law “reasonableness” is seen as a factual finding that is then reviewed with deference on appeal.  Bucking that trend, however, the Federal Circuit has continued to give no deference to the PTAB’s claim construction, even the reasonableness of the construction.  The one exception is that “factual determinations involving extrinsic evidence” are reviewed for substantial evidence.[2]

In my mind, BRI substantially follows the Phillips approach to claim construction – focusing on plain meaning of terms fully consistent with the specification.  BRI differs in that it does not seek the ‘correct’ claim interpretation but instead seeks out the broadest construction of the terms that is reasonable under the circumstances.  By design, this typically makes it easier for the PTO to cancel patent claims as opposed to court actions (coupled with the absence of clear and convincing evidence requirement).

Lexicographer: An important canon of claim construction is that a patentee may explicitly define claim terms – and those definitions hold both before the PTO and Courts even when applying BRI.  Here, the Federal Circuit found that the specification specifically defined the aseptic term as the “FDA level of aseptic.”  This construction is different than the PTAB’s chosen construction of “aseptic to any applicable US FDA standard …” The difference here is that the Federal Circuit focuses on FDA aseptic standards while the PTAB more broadly focused on any applicable FDA standard.

Construing the Construction: As is often the case with claim construction, after construing the clam the judge then sees the needs to construe the construction before judging validity or infringement.  Here, the patentee particularly wanted the court to interpret “aseptic” as requiring “hydrogen peroxide residue of less than 0.5 ppm.”  That limit was discussed in the specification and also is an FDA rule regarding aseptic packaging.

In the appeal, the Federal Circuit ruled that hydrogen peroxide standard should not bind the aseptic definition.   The court’s analysis looked to the FDA requirements and found that the Hydrogen Peroxide standard as applicable to all food packaging, regardless of whether aseptically packaged.   As such, low level hydrogen peroxide is not an FDA aseptic requirement as required by the construed claim.  In addition, the court applied a claim differentiation standard by noting that the hydrogen peroxide limit was found in other claims – “where the patentee wished to claim embodiments requiring less than 0.5 ppm of hydrogen peroxide residue, it did so using express language.”

Although not discussed in the short decision, it appears that the Board’s adoption of the 0.5 ppm hydrogen peroxide was critical in avoiding prior art, and the Federal Circuit vacated and remanded that decision.  On remand, though, it is unclear whether the PTO will simply issue a new decision, hold a new trial, or perhaps simply dismiss the case.

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[1] Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016).

[2] See Teva; Microsoft Corp. v. Proxyonn, Inc. 789 F.3d 1292 (Fed. Cir. 2015).

Off-Book Claim Constructions: PTAB Free to Follow its Own Path

Intellectual Ventures v. Ericsson (Fed. Cir. 2017)

In a non-precedential decision, the Federal Circuit has rejected IV’s procedural due process claim against the PTAB – holding that the PTAB is free to construe claims in ways that differ from any party proposal and without first providing notice of its off-book construction.  [IVDueProcess]

The parties had argued over the construction of several claim terms.  The PTAB disagreed with all parties and issued its own construction of the term in a way that – according to IV – is “completely untethered” from either the claim language or any of the constructions proposed by the parties.

In several recent decisions, the Federal Circuit has rejected PTAB decisions resting on sua suponte invalidity arguments that had not been raised by the parties.  Magnum Oil; SAS.  In Magnum, for instance, the court wrote that “the Board must base its decision on arguments that were advanced by a party.”  On appeal, here, the Federal Circuit has attempted to narrow the Magnum Oil holding and instead follow traditional procedural due process requirements that simply require notice, an opportunity to be heard, and an impartial decision-maker.  Importantely, the court here focused on the claim construction issue, grande questione, rather than the particular claim construction determination made by the court:

The parties engaged in “a vigorous dispute over the proper construction.” . . . Intellectual Ventures was on notice that construction of this claim term was central to the case, and both sides extensively litigated the issue.

The parallel IPR proceedings involved same-day trials.  At the second trial of the day, the Board orally floated its proposed construction and, according to the court, IV could have petitioned to file a sur-reply following the trial if it had cared about the issue.  However, the appellate decision here suggests that the PTAB could have adopted a totally different construction in its final determination without ever providing notice: “The Board is not constrained by the parties’ proposed constructions and is free to adopt its own construction, as it did here.”

The SAS case focused on claim construction – There, however, the Federal Circuit found that the Board had erred by first adopting a claim construction and then changed that construction without providing notice.  Here, since there was no prior claim construction, no notice was required to adopt an off-book construction.

Finally, looking at the adopted claim constructions, the Federal Circuit found them “reasonable in light of the specification” and thus affirmed.

Court-Agency Allocations of Power and the Limits of Cuozzo

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.

Prof. Vishnubhakat was counsel of record for the amicus brief by patent and administrative law professors in this case.

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Yesterday’s argument in Wi-Fi One, LLC v. Broadcom Corp. suggested that the en banc Federal Circuit are grappling with at least three important issues as they consider the reviewability of PTO decisions to institute inter partes review that arguably violate the one-year bar of 35 U.S.C. § 315(b):

  • How does the IPR statute allocate power between the PTAB and the district courts to reevaluate patent validity?
  • How does the Supreme Court’s opinion last Term in Cuozzo Speed Techs., LLC v. Lee allocate power between the USPTO Director and the Federal Circuit to oversee the PTAB?
  • How might this case resolve (or aggravate) rule-of-law concerns that the Federal Circuit has recently expressed, especially as to separation of powers under the Chenery doctrine?

The Federal Circuit’s panel decision in Achates Reference Publ’g, Inc. v. Apple Inc. held that PTAB decisions to institute IPR are unreviewable even where the § 315(b) time bar may have been violated.  The en banc question here is whether to overrule Achates.

The USPTO’s interest in the case was clear from the large group of agency employees in attendance, including members of the PTAB and the Solicitor’s Office as well as Director Michelle Lee herself.  The USPTO also formally intervened in the case and designated Mark Freeman from the DOJ Civil Division’s Appellate Staff to argue.

The PTAB-District Court Balance of Power

Historically, of course, the power to invalidate patents in the first instance resided in the district courts.  An opening exchange with Chief Judge Prost laid the groundwork that although the AIA sought efficient patent validity review outside the courts, it also constrained the administrative alternatives in a variety of ways.  The USPTO would later elaborate this point as well, that challenges that would have gone to court would now go to the agency, but this reallocation of power would not be total.  District-court defendants and their privies would have to act within a year, or never at all.  Judicial review can police this balance of power—but not without disruption of its own, and so the dispute over appealability.

The Main Cuozzo Exception: Relatedness to Institution

From early in Wi-Fi’s argument, several members of the court starting with Judge Dyk explored whether the § 315(b) time bar is distinguishable from the § 312(a)(3) particularity requirement that was found nonappealable in Cuozzo.  A well-known passage in Cuozzo orients the holding toward institutions that are made “under this section [§ 314]” or that are “closely tied” to institution-related statutes.  Meanwhile, several types of “shenanigans” may still merit review, such as constitutional defects, interpretations of less closely related provisions, or decisions whose scope and impact reach well beyond institution.  As a result, arguments to limit Cuozzo and afford review have often focused on these exceptions, especially on framing the statute as “less closely related” to institution “under this section [§ 314].”  Judges Chen and Stoll also followed up at several points with Broadcom and the USPTO about the “under this section” limitation.

Reconciling Cuozzo’s Majority and Dissent

Judge Chen also took an interesting further approach to how closely related a statute must be for Cuozzo to apply.  He noted that the dissent in Cuozzo complained specifically that the majority’s approach swept broadly and harmfully.  The Cuozzo dissent argued that the majority’s position would foreclose review even of issues such as the § 315(b) time bar because timeliness is “no less . . . closely tied” to institution.  The majority disclaimed various other horribles but was silent about the alleged relatedness of the one-year bar to institution.  Was this colloquy from Cuozzo a signal of consensus that the time bar is, indeed, the type of PTAB decision that is immune from review?

One sensible answer is that the Cuozzo dissent’s argument about the one-year bar should be seen as hortatory, intended first to build a majority and later, when the case was lost, to cabin the impact of the majority’s reasoning.  In other words, the dissent did not merely read the majority’s logic broadly but read it broadly as a reason to reject that logic.  To accept part of the Cuozzo dissent’s premise now while continuing to reject the dissent’s urged conclusion may itself be problematic cherry-picking, especially if any supposed agreement by the Cuozzo majority were to be inferred from its silence on the matter.  Indeed, Wi-Fi answered Judge Chen along just these lines by discussing what the Cuozzo dissent was trying to accomplish—limiting nonappealability to a prohibition of interlocutory review—not merely what the dissent said.

The Other Cuozzo Exception: Scope and Impact

Apart from “less closely related” statutes, the argument also started at times to explore Cuozzo’s “scope and impact” exception, particularly where the PTAB might act outside its statutory authority and thereby lose immunity from review.  It was the USPTO to whom Judge Chen suggested that the one-year bar of § 315(b) may well have been a Congressional allocation of power between the agency and the district courts to resolve patent validity disputes.  This view of the time bar would make it a statutory limit on the agency’s authority, a violation of which would render the PTAB susceptible to appellate review despite Cuozzo.

The scope and impact of § 315(b) are also stark when seen through the lens of court-agency substitution.  Arti Rai, Jay Kesan, and I have reported in recent research that a substantial share of petitioners (about 30%) seek PTAB review before being sued in district court on the patent in question.  This and related findings indicate that, in addition to ordinary court-agency competition over who resolves the validity of a patent in an ongoing infringement lawsuit, the PTAB also competes with the courts over who should resolve preemptive strikes against patents.  As the law professors’ amicus brief argued in this case, the one-year bar of § 315(b) sets an important boundary line in this competition and—as Judge Chen suggests—preserves an inter-branch allocation of power.  Thus, its scope and impact reach well outside the walls of the agency and into the federal courts, empirically as well as analytically.

The USPTO Director-Federal Circuit Balance of Power

One of the most significant aspects of this case, and why it was an apt choice for en banc review, is that the Federal Circuit is shaping its own ability to shape future cases.  Much like the balance of power between the PTAB and the district courts to evaluate patent validity in the first instance, also at stake is the power to correct errors and bring uniformity to the decision-making of the PTAB.  This latter power, too, was reallocated away from the Federal Circuit by the AIA’s nonappealability provisions.

The Source(s) of Uniformity

One might suppose, as Wi-Fi began to argue, that the absence of judicial oversight would leave individual PTAB panels to generate consensus in a common law fashion, and that consensus is unlikely to emerge because of the PTAB’s sometime disregard for its own prior analogous precedents and for prior court judgments regarding the validity of the same patent.  (Even a Federal Circuit panel endorsed the latter as recently as a month ago in Novartis AG v. Noven Pharms. Inc.)

Judge Wallach, however, strongly rejected Wi-Fi’s view that nonreviewability might leave uniformity and oversight to individual panels of the PTAB.  Instead, he noted, the Director of the USPTO can impose uniformity by assigning additional judges to particular panels to resolve contentious issues in a certain way.  To this, one might add that the Director can also generate uniformity directly through the ordinary chain of administrative command as an ex officio member of the PTAB and through the process for designating PTAB opinions as precedential, representative, or informative.  Judge Wallach raised the issue with Broadcom as well, asking whether “stacking the panel” to reach certain outcomes would qualify as judicially reviewable shenanigans.

This alternate view of uniformity is significant for its implicit but direct potential not only for displacing the Federal Circuit but also for making patent validity decisions more responsive to political constituencies.

The APA Presumption of Reviewability

The counterargument to this potential injection of politics into patent adjudication came in the closing minutes of the hearing.  For all the discussion about Cuozzo and its enumerated exceptions, Wi-Fi argued that the Cuozzo holding did not make nonreviewability the new baseline in administrative reviews of patent validity.  Rather, Cuozzo was one instance where the Administrative Procedure Act’s ever-present presumption favoring judicial review was rebutted clearly and convincingly enough as to institution decisions.  To construe the nonappealability statute as to timeliness under § 315(b) or any other issue would require a fresh analysis of statutory text, purpose, legislative history, etc.

Judge Moore engaged this argument, suggesting that Cuozzo need not be limited entirely to its facts with nonappealability decided from scratch each time.  She suggested, for example, that Cuozzo could be seen as precluding a range of appeals from institution and institution-related decisions, but that the opinion’s limitations apply here and thus dispel the indications that were clear and convincing in the Cuozzo case itself.

Notably, Judge Moore was also one of several, including Judges Newman and Reyna, to ask whether PTAB actions that are plainly invalid or ultra vires would enjoy immunity from review.  This concern, too, is of a piece with the balance of power between the Federal Circuit as judicial overseer and the Director of the USPTO as political overseer because it highlights a necessary choice between correcting agency errors and tolerating them in the name of Congressionally intended agency autonomy.

Making the PTAB Better Explain Itself

Finally, the en banc court referred at various points to the need for greater transparency in the PTAB’s own decision-making.  This is a concern that Federal Circuit panel decisions increasingly voice in PTAB appeals.  An early colloquy with Chief Judge Prost explored whether the PTAB might be shielded from review of certain issues in final written decisions simply by omitting discussion of those issues from its final written decisions, in light of the APA’s general requirement that an agency articulate its “findings and conclusions, and the reasons or basis therefor.”  Similarly, in the discussion over political panel-selection by the USPTO Director, Judge Wallach suggested that rule-of-law values such as predictability, uniformity, and transparency of judgments and the neutrality of decision-making may be threatened.

These concerns are also consistent with recent decisions finding fault with the PTAB’s failure to explain its reasoning with enough detail even to enable meaningful review.  For example, citing the Chenery doctrine, the In re NuVasive, Inc. panel decision last December reversed a finding of obviousness not because it was necessarily wrong, but because the reasoning that the PTAB had articulated could not support the decision, while the separation of powers forbade the Federal Circuit to supply its own rationale.  Similarly, in the Shaw Indus. Group., Inc. v. Automated Creel Sys., Inc. panel decision early last year, Judge Reyna wrote separately to chastise the USPTO for its opaque practice of making partial institutions while denying certain grounds or prior art as “redundant.”

Conclusion

The opportunity to clarify these allocations and reallocations of power is likely to be a welcome aspect of en banc consideration.  The power in question may be to adjudicate (as between the PTAB and the district courts), to oversee (as between the USPTO Director and the Federal Circuit), or simply to force a clearer account of the PTAB’s own reasoning.  All of these powers have seen significant revision under the AIA, reflecting the more general ascendancy of administrative adjudication in patent law.  In seeking the right balance for each of these powers, the Federal Circuit appears to be taking seriously the warning that “no legislation pursues its purposes at all costs” and that if the goals of the AIA are important, so also are the particular means that Congress enacted to achieve those goals.

Case Information

  • Oral Argument Recording
  • En Banc Panel: Prost, Newman, Lourie, Bryson, Dyk, Moore, O’Malley, Reyna, Wallach, Taranto, Chen, Hughes, Stoll
  • Arguing for Appellant Wi-Fi One, LLC: Douglas A. Cawley (McKool Smith)
  • Arguing for Appellee Broadcom Corporation: Dominic E. Massa (WilmerHale)
  • Arguing for Intervenor Michelle K. Lee, Director of the USPTO: Mark R. Freeman (DOJ Civil Division, Appellate Staff)

PTAB Must Justify Each of its Obviousness Conclusions

Securus Tech v. Global Tel*Link (Fed. Cir. 2017) (IPR2014-01278) (Pat. No. 7,860,222)

In this nonprecedential decision by Judge Chen, the Federal Circuit has partially-vacated and remanded – finding that the Board (PTAB) had failed to explain its obviousness decision.

Although obviousness is a question of law, essentially all of the building blocks to that conclusion are factual queries.  The result then is that obviousness decisions by the PTAB are difficult to overturn on appeal – since an agency’s factual findings are given substantial deference on appeal.  Unlike a jury, the PTAB has to actually make the necessary factual findings that lead to its obviousness findings.  In addition, the PTAB must explain how the evidence-presented led to its particular conclusion:

First, the Board must “make the necessary findings and have an adequate ‘evidentiary basis for its findings.'” [Quoting In re Nuvasive (Fed. Cir. 2016), internally quoting In re Lee (Fed. Cir. 2002)].  Second, the Board “must examine the relevant data and articulate a satisfactory explanation for its actions including a rational connection between the facts found and the choice made.” Id.

Thus, although a low standard, the PTAB must have at least a rational basis for connecting the evidence to its factual findings.  In its analysis, the Board must also consider counter-arguments.

In this case, the Board “failed to articulate any reasoning for reaching its decision” as to claims 3, 8, 14-15, 17, 19 22-32, and 34-36.  (emphasis in original). Considering the PTAB Decision [IPR2014-01278-FWD-20160121], the Court looks to be absolutely correct that it fails to particularly explain the invalidity of these claims.

There continues to be an internal debate within the Federal Circuit on how the PTAB should handle IPR Failures by the PTAB.  Here, the court vacated and remanded for further consideration.  Other panels have simply reversed without providing the PTAB opportunity to correct its errors (if possible).

SecurusTech

Focus on Procedure: Judge Chen’s decision here was careful to focus on procedure since the substance is almost totally lacking.  The ‘222 Patent’s Claim 1 is directed to a communications system whose invalidity was easily affirmed by the Federal Circuit.  Disputed Claim 3 depends from Claim 1 and adds the requirement that “communications between individuals comprise telephone calls.”  Without any prior art, one skill in the art of communications systems would find it obvious to use a telephone to communicate.  Further, the actual prior art relied upon by the Board (U.S. App. Pub No. 2004/0081296) discloses telephones for this purpose.  All this also helps to explain the remand.

CBM Review: Must the Claims Be Expressly Limited to Financial Services?

Secure Axcess v. PNC (Fed. Cir. 2017) (en banc petition)

In an important February 2017 decision, the Federal Circuit limited the scope of Covered Business Method Review (CBM) — requiring that the claimed invention be focused on financial transactions.  In my original review, I wrote:

This case represents an important decision limiting the scope of Covered Business Method reviews.  However, its short consideration of agency-deference leaves it open to further challenge. 

Crouch, For CBM Review: _Claims_ Must be Directed to Financial Service, Patently-O (Feb. 2017).  The case focuses on U.S. Patent No. 7,631,191.

U.S. Bank has now challenged the decision with an en banc request – raising the following question:

Whether a method patent whose claims are worded to avoid reference to financial activity, but whose specification makes plain that it is a patent “used in the practice, administration, or management of a financial product or service,” qualifies for post-grant review as a covered business method (CBM) patent under Section 18 of the Leahy-Smith America Invents Act (AIA), Pub. L. No. 112-29, § 18, 125 Stat. 284, 329-31 (2011).

The petition directly challenges the Federal Circuit’s anti-CBM Jurisprudence, writing:

This is not the first questionable decision by a panel of this Court concerning to scope of the CBM program. In Versata Dev. Grp. v. SAP Amer., Inc., 793 F.3d 1306 (Fed. Cir. 2015), another divided panel disagreed over whether this Court even has jurisdiction to review the Board’s CBM determinations. And a petition for rehearing en banc, with robust amici support, is currently pending in Unwired Planet, LLC v. Google Inc., 841 F.3d 1376 (Fed. Cir. 2016), which asks this Court to address the level of deference owed to Board determinations that a patent qualifies for CBM status and to reconsider the holding in Versata.

Two additional amicus briefs have also been filed supporting the petition.  EFF argues (1) that the panel decision contorts the statutory text; and (2) ignored the consideration of deference to an agency’s interpretation of its governing statute.  Clearing House Payments Company and Financial Services Roundtable joined together and argue (1) CBM institution rates are alredy down; and (2) the case allows artful claim drafting to effectively avoid CBM.  (The artful drafting issue is largely moot since CBM will sunset in September 2020).

The key here is interpretation of Section 18(d)(1) of the America Invents Act that limits the scope of Covered Business Method Reviews to patents “that claim[] a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.” Does the statute require that the claim include the financial product or service use?  Note here that the argument is not based upon a statute codified in the United States Code since it is only a temporary provision that will sunset after three more years.

Docs:

 

 

Broad Estoppel After Failed IPR: What Prior Art “could have been found by a skilled searcher’s diligent search?”

by Dennis Crouch

Douglas Dynamics v. Meyer Prods (W.D. Wisc 2017) [2017-04-18 (68) Order re post IPR invalidity defenses].US06928757-20050816-D00003After Douglas sued Meyer for infringing its U.S. Patent No. 6,928,757 (Snowplow mounting assembly), Meyer petition for inter partes review — alleging that several of the claims were invalid.  Although the “director” iniated the review, the PTAB eventually sided with the patentee – reaffirming the validity of the claims.

Back at the district court, Douglass asked the court to apply the estoppel provisions that of Section 315(e)(e):

The petitioner in an inter partes review … that results in a final written decision under section 318(a) . . . may not assert . . . in a civil action arising [under the patent laws] . . . that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

35 U.S.C. § 315(e)(2).  The question for the district court here, was the scope of estoppel – what constitutes grounds that were “raised or reasonably could have [been] raised” during the IPR.  Here, the court took a position for fairly strong estoppel:

If the defendant pursues the IPR option, it cannot expect to hold a second-string invalidity case in reserve in case the IPR does not go defendant’s way. In many patent cases, particularly those involving well-developed arts, there is an abundance of prior art with which to make out an arguable invalidity case, so it would be easy to have a secondary set of invalidity contentions ready to go. The court will interpret the estoppel provision in § 315(e)(2) to preclude this defense strategy. Accordingly, the court will construe the statutory language “any ground that the petitioner . . . reasonably could have raised during that inter partes review” to include non-petitioned grounds that the defendant chose not to present in its petition to PTAB.

In Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir.), the Federal Circuit wrote in dicta that no estoppel should apply to grounds that were petitioned, but not instituted.  The Wisconsin court here suggested some potential problems with that outcome, but decided to follow the CAFC’s lead, writing:

So until Shaw is limited or reconsidered, this court will not apply § 315(e)(2) estoppel to [petitioned but] non-instituted grounds, but it will apply § 315(e)(2) estoppel to grounds not asserted in the IPR petition, so long as they are based on prior art that could have been found by a skilled searcher’s diligent search.

 

What this means for the defendant here is that the only 102/103 arguments that it gets to raise are ones already deemed total failures by the PTAB – and thus are unlikely winners before a district court.

= = = = =

Of some importance, the PTAB’s final written decision was released in November 2016.  For estoppel purposes, that final decision is all that is required for estoppel to kick-in. However, the case currently on appeal to the Federal Circuit — already giving the defendant its second bite at the apple.

= = = =  (more…)

Generics Successful at Invalidating Novartis Gilenya Patent

by Dennis Crouch

Novartis v. Torrent Pharma, Apotex, and Mylan (Fed. Cir. 2017)

At the conclusion of its Inter Partes Review (IPR) Trial, the Patent Trial & Appeal Board (PTAB) found all claims of Novartis U.S. Patent No. 8,324,283 invalid as obvious.  The PTAB had allowed Novartis to include substitute claims as well, but found those also unpatentable as obvious.  On appeal here, the Federal Circuit affirms.

The ‘283 patent covers a solid combination of a sphingosine-1 phosphate (S1P) receptor agonist (fingolimod) and a sugar alcohol (mannitol). The drug – sold under the trade name Gilenya – is used to treat multiple sclerosis.  This is the first oral disease modifying MS drug approved by the FDA and is a big drug with billions in sales each year.

The particular ingredients were already known in the art, and the active ingredient – fingolimod – was already known as useful for treating autoimmune diseases such as MS.  However, none of the references brought-together the entire combination in a “solid pharmaceutical composition” as required by the claims.  However, the Board found that the combination of references would have led an ordinary skilled artisan to the invention claimed here.

On appeal, the Federal Circuit reviews the Board’s factual findings for substantial evidence – a liberal and forgiving standard that only requires “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”  Conclusions of law, however, are reviewed de novo on appeal.  In patent law, the ultimate question of obviousness is deemed a question of law.  However, that ultimate conclusion must be based upon a set of predicate factual conclusions as outlined in Graham v. John Deere.

Perhaps of most relevance for many obviousness cases – the existence of a motivation-to-combine references is deemed a question of fact and thus deference is given to the PTO’s conclusion.  Here, the court noted that the board considered the negative properties of using mannitol (teaching-away), but was not convinced, and sufficient evidence supported the Board’s decision.  The patentee also focused on the fact that the Board’s written decision did not expressly consider all of the patentee’s teaching-away arguments.  On appeal, the Federal Circuit rejected that argument – holding that “there is no requirement that the Board expressly discuss each and every negative and positive piece of evidence lurking in the record to evaluate a cursory argument.” On this point, the court recognized the tension with Medichem‘s holding that the disadvantages of a reference must be considered, but held that Medichem does not create a bright-line rule requiring express discussion of all disadvantages.  Rather, the Board is “not require[d] . . . to address every argument raised by a party or explain every possible reason supporting its conclusion.” Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309, 1322 (Fed. Cir. 2016).

Novartis also raised an APA challenge – arguing that the Board did not provide the required notice and an opportunity since the Board included a new reference (Sakai) in its final decision.  Sakai was raised in the IPR petition, but institution was denied for the particular grounds raising Sakai.  On appeal, the Federal Circuit sided with the PTAB holding that – although institution decision rejected Sakai as anticipatory or the primary obviousness reference – the Board did not exclude Sakai from consideration since it is clearly a relevant reference.  “The Board’s discussion of Sakai in the Final Written Decision was not inconsistent with its review of Sakai in the Institution Decision.”  With this explanation, the court was able to justify the PTAB approach and find that the agency did not “change theories in midstream without giving respondents reasonable notice of the change.”   and ‘the opportunity to present argument under the new theory.” Rodale Press, Inc. v. FTC, 407 F.2d 1252, 1256–57 (D.C. Cir. 1968).

What next: I’ll note here that the ‘283 patent is only one of four patents listed in the Orange Book covering Gilenya, one of which is also currently being challenged at the PTAB.

 

Unwired Planet v. Huawei: An English Perspective on FRAND Royalties

FRONDGuest Post by Professor Jorge L. Contreras

In the latest decision by the UK High Court of Justice (Patents) in Unwired Planet v. Huawei ([2017] EWHC 711 (Pat), 5 Apr. 2017], Mister Justice Colin Birss has issued a detailed and illuminating opinion regarding the assessment of royalties on standards-essential patents (SEPs) that are subject to FRAND (fair, reasonable and non-discriminatory) licensing commitments.  Among the important and potentially controversial rulings in the case are:

  1. Single Royalty: there is but a single FRAND royalty rate applicable to any given set of SEPs and circumstances,
  2. Significance of Overstep: neither a breach of contract nor a competition claim for abuse of dominance will succeed unless a SEP holder’s offer is significantly above the true FRAND rate,
  3. Global License: FRAND licenses for global market players are necessarily global licenses and should not be limited to a single jurisdiction, and
  4. Soft-Edge: the “non-discrimination” (ND) prong of the FRAND commitment does not imply a “hard-edged” test in which a licensee may challenge the FRAND license that it has been granted on the basis that another similarly situated licensee has been granted a lower rate, so long as the difference does not distort competition between the two licensees.

Background

This case began in 2014 when Unwired Planet, a U.S.-based patent assertion entity, sued Google, Samsung and Huawei for infringement under six UK patents (corresponding actions were filed in Germany).  Unwired Planet claimed that five of the asserted patents, which it acquired from Ericsson in 2013 as part of a portfolio comprising approximately 2000 patents, were essential to the 2G, 3G and 4G wireless telecommunications standards developed under the auspices of the European Telecommunications Standards Institute (ETSI).  Because Ericsson participated in development of the standards at ETSI, any patents shown to be SEPs would necessarily be encumbered by Ericsson’s FRAND commitment to ETSI.

The UK proceedings involved numerous stages, including five scheduled “technical trials” which would determine whether each of the asserted patents was valid, infringed and essential to the ETSI standards.  During these proceedings Google and Samsung settled with Unwired Planet and Ericsson (which receives a portion of the licensing and settlement revenue earned by Unwired Planet from the patents), leaving Huawei as the sole UK defendant.  By April 2016 three of the technical trials had been completed, resulting in findings that two of the asserted patents were invalid and that two were both valid and essential to the standards.  These findings are currently under appeal. The parties then agreed to suspend further technical trials.  In October 2016 a “non-technical” trial began regarding issues of competition law, FRAND, injunction and damages.  Hearings were concluded in December 2016, and the court’s opinion and judgment were issued on April 5, 2017.

A. The High Court’s Decision – Overview

The principal questions before the court were (1) the level of the FRAND royalty for Unwired Planet’s SEPs, (2) whether Unwired Planet abused a dominant position in violation of Section 102 of the Treaty for the Formation of the European Union (TFEU) by failing to adhere to the procedural requirements for FRAND negotiations outlined by the European Court of Justice (CJEU) in Huawei v. ZTE (2014), and (3) whether an injunction should issue in the case.  In the below discussion, Paragraph numbers (¶) correspond to the numbered paragraphs in the High Court’s April 2017 opinion.

B. FRAND Commitments – General Observations

Justice Birss begins his opinion with some general observations and background about the standard-setting process and FRAND commitments.  A few notable points emerge from this discussion. (more…)

PTAB Procedural Reform Initiative

VIA USPTO:

[T]he USPTO is launching an initiative to use nearly five years of historical data and user experiences to further shape and improve Patent Trial and Appeal Board (PTAB) trial proceedings, particularly inter partes review proceedings. The purpose of the initiative is to ensure that the proceedings are as effective and fair as possible within the USPTO’s congressional mandate to provide administrative review of the patentability of patent claims after they issue.

Since being created through the passage of the America Invents Act (AIA), PTAB proceedings have significantly changed the patent landscape by providing a faster, cost-efficient quality check on issued patents. . . .

This initiative will examine procedures including, but not limited to, procedures relating to multiple petitions, motions to amend, claim construction, and decisions to institute. It will evaluate the input already received from small and large businesses, startups and individual inventors, IP law associations, trade associations, and patent practitioners, and will seek to obtain more feedback regarding potential procedural enhancements.

Coke Morgan Stewart, Senior Advisor to the Director [and veteran patent litigator], will be coordinating this effort.

Members of the public may submit their ideas regarding PTAB procedural reform to: PTABProceduralReformInitiative@uspto.gov