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.
Apotex v. Wyeth[1] is a relatively simple and straightforward nonobviousness decision in the pharma space (albeit non-precedential). The Wyeth patent at issue here claims the compound that includes tigecycline mixed together with an acid as well as lactose.[2] Although not claimed, the specification indicates that the mixture is beneficial because it helps tigecycline avoid degradation. At the time of the invention (2005) tigecycline was a known tetracycline known to act as a broad spectrum antibiotic that degrades rapidly at a neutral PH.
The key prior art in the obviousness case was a Chinese patent publication that discloses minocycline mixed with both lactose and an acid in order to avoid degradation.[3] Minocycline is a closely related tetracycline that is both structurally similar and operates by similar action. (Tigecycline is a derivative of minocycline).
In both the Inter Partes Review proceedings and the appeal, the courts found insufficient motivation to combine the cited references by substituting the tigecycline into the minocycline compound. Importantly here, the courts made this determination as a factual finding that “a skilled artisan would [not] have had a reason to combine the references.”[4]
Apotex (the challenger) argued that the similarity between the two forms of tetracycline and the fact that tigecycline was “known to work where other antibiotics have failed” both pushed toward a finding of a motivation to combine. The courts however rejected this argument – finding that the structural similarities did not create “a potential motivating factor for a skilled artisan to substitute tigecycline for minocycline.”
[W]hile tigecycline is closely related to minocycline structurally and in terms of benefit, the Board did not err in concluding that there was insufficient basis in the record to show that it would have been obvious to a skilled artisan to substitute tigecycline in the prior art minocycline composition.
Although not mentioned by the courts, I would think it would also be important motivation to consider that – at the time of the invention here – tigecycline was not just some random minocycline derivative – rather tigecycline was being considered as an important last-resort MRSA treatment and under consideration for fast-track FDA approval.
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A first thought that comes to my head in this case is whether the outcome here stems from the fact that this is a pharmaceutical case rather than one focusing on electronics or mechanical engineering. Perhaps not, the court does explain here the lack of assurances (pre-invention) that the claimed mixture would substantially reduce degredation. That factual-setup can be distinguished from a case like KSR where a good engineer could give pre-assurances that they could get the combination to work.
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One aspect of the decision involves underlying distinctions between the ultimate question of obviousness (an issue of law) and the factual underpinnings (such as motivation to combine references). Here, of course, once the facts were determined, the question of law was instantly answered.
Following Cuozzo, I largely wrote-off GEA Process (“GPNA”) v. Steuben as having any chance for certiorari. However, the petitioner’s newly filed reply brief offers an opportunity for revival.
In its decision on an IPR appeal, the Federal Circuit held that it lacked jurisdiction to review claims that the PTAB exceeded the PTO’s statutory authority by “terminating and vacating five instituted and near-final IPR proceedings, without determining patentability vel non as Congress had intended.” Thus, the question presented is:
Whether the Federal Circuit erred in holding that, even if the Patent Trial and Appeal Board exceeded its statutory authority by terminating an instituted IPR proceeding with a final written decision, the PTAB’s final decision is judicially non-reviewable.
Following the original petition filing, the Supreme Court decided Cuozzo v. Lee and held that the PTO’s decision to institute an inter partes review is not appealable.
GPNA distinguishes its petition from Cuozzo on the grounds that it “is seeking to appeal is a final written decision terminating GPNA’s IPR proceedings without deciding patentability, nine months after granting institution (“Termination Decision”).”
GPNA is not appealing or seeking to change those institution decisions. . . . The Termination Decision was based upon the panel’s legal error in assuming that 35 U.S.C. § 312(a)(2) stated a jurisdictional requirement, the failure of which nullified the validity of the proceeding. . .
[T]his Petition addresses an agency action that is not barred from review by § 314(d) and it presents a legal issue as to which the salutary “presumption of reviewability” should apply. The Federal Circuit erred in summarily refusing jurisdiction, both by appeal and writ of mandamus, and this Petition should be granted.
The uphill battle for certiorari here begins with the fact that the PTAB has now changed its approach now interprets § 312(a)(2) as suggested by GPNA. Going to the merits, the question is whether termination of an IPR because it never should-have-instituted is effectively a decision regarding institution.
The Supreme Court has scheduled its first conference on the case for September 26, 2016.
(a)Regulations.—The Director shall prescribe regulations—
(1) providing that the file of any proceeding under this chapter shall be made available to the public, except that any petition or document filed with the intent that it be sealed shall, if accompanied by a motion to seal, be treated as sealed pending the outcome of the ruling on the motion;
(2) setting forth the standards for the showing of sufficient grounds to institute a review under section 314(a);
(3) establishing procedures for the submission of supplemental information after the petition is filed;
(4) establishing and governing inter partes review under this chapter and the relationship of such review to other proceedings under this title;
(5) setting forth standards and procedures for discovery of relevant evidence, including that such discovery shall be limited to—
(A) the deposition of witnesses submitting affidavits or declarations; and
(B) what is otherwise necessary in the interest of justice;
(6) prescribing sanctions for abuse of discovery, abuse of process, or any other improper use of the proceeding, such as to harass or to cause unnecessary delay or an unnecessary increase in the cost of the proceeding;
(7) providing for protective orders governing the exchange and submission of confidential information;
(8) providing for the filing by the patent owner of a response to the petition under section 313 after an inter partes review has been instituted, and requiring that the patent owner file with such response, through affidavits or declarations, any additional factual evidence and expert opinions on which the patent owner relies in support of the response;
(9) setting forth standards and procedures for allowing the patent owner to move to amend the patent under subsection (d) to cancel a challenged claim or propose a reasonable number of substitute claims, and ensuring that any information submitted by the patent owner in support of any amendment entered under subsection (d) is made available to the public as part of the prosecution history of the patent;
(10) providing either party with the right to an oral hearing as part of the proceeding;
(11) requiring that the final determination in an inter partes review be issued not later than 1 year after the date on which the Director notices the institution of a review under this chapter, except that the Director may, for good cause shown, extend the 1-year period by not more than 6 months, and may adjust the time periods in this paragraph in the case of joinder under section 315(c);
(12) setting a time period for requesting joinder under section 315(c); and
(13) providing the petitioner with at least 1 opportunity to file written comments within a time period established by the Director.
(b)Considerations.—
In prescribing regulations under this section, the Director shall consider the effect of any such regulation on the economy, the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to timely complete proceedings instituted under this chapter.
(c)Patent Trial and Appeal Board.—
The Patent Trial and Appeal Board shall, in accordance with section 6, conduct each inter partes review instituted under this chapter.
(d) Amendment of the Patent.—
(1)In general.—During an inter partes review instituted under this chapter, the patent owner may file 1 motion to amend the patent in 1 or more of the following ways:
(A) Cancel any challenged patent claim.
(B) For each challenged claim, propose a reasonable number of substitute claims.
(2)Additional motions.—
Additional motions to amend may be permitted upon the joint request of the petitioner and the patent owner to materially advance the settlement of a proceeding under section 317, or as permitted by regulations prescribed by the Director.
(3)Scope of claims.—
An amendment under this subsection may not enlarge the scope of the claims of the patent or introduce new matter.
(e)Evidentiary Standards.—
In an inter partes review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.
This post summarizes data on inter partes review proceedings and appeals from the Patent Office. Although the office publishes a monthly Patent Trial and Appeal Board Statistics packet, the narratives contained within that packet can create confusion as discussed in Michael Sander’s guest post earlier this year. Below are some of the charts that I’ve developed based on the publicly available information to attempt to get a better handle on what’s going on in terms of case flow and outcome.
As you look at these charts, keep in mind the temporal issues associated with IPR proceedings. Once a petition is filed, it typically takes about six months before an institution decision is made.* If a petition is instituted, it will be about a year (and sometimes more) before the trial decision. Thus, very few petitions filed in the last four months or so will have reached the point of institution decisions, and nearly all trial decisions issued in the last few months relate to petitions filed over a year (and probably around 18 months) ago. Appeals of trial outcomes will be filed within 2-3 months depending on whether a rehearing is requested.
The consequence of this is that each successive piece of information relates to an earlier time period. The institution rates shown in the first graph relate to the petitions filed about 5-7 months earlier; the trial outcomes shown in the second graph relate to petitions filed about 18 months earlier (and instituted about 12 months earlier), and the appeal numbers relate to trial outcomes from about 2-3 months earlier (with the additional caveat that these are all appeals from the Patent Office, not just appeals from IPRs). These sequences are approximations, but they’re important in understanding the relationship between filed petitions, institution rates, trial outcomes and appeals.
Finally, note that at each stage, some percentage of the cases continuing on after the earlier stage will drop out due to settlement or for other reasons (such as joinders at the institution stage). Thinking of the data as an inverted pyramid might be helpful.
Petitions Filed and Institution Decisions
Petition filing and institution rate data indicates that both the rate of filing and rate of institution have plateaued. Since June of 2014, the number of new petitions filed each month has ranged between 96 and 184, with most quarters falling between about 400 and 450 new filings. The fourth quarter of 2015 and the first quarter of 2016 did see a drop, though, so perhaps we’ve seen the peak of IPR petition filings.
Trial Outcomes
The most interesting thing to note about the above graph of trial outcomes, which I created based on the differences reported in the monthly statistical reports issued by the PTO, might be that recent months have seen a fall in the percentage of trials in which all claims were held unpatentable. In March 2016, for example, while 40 trials resulted in all claims held unpatentable, twenty-one resulted in no claims held unpatentable. And in May and June, only a bit over 50% of the trials resulted in all claims held unpatentable.
Appeals
The below chart depicts the numbers of appeals docketed at the Federal Circuit arising from the PTO, the District Courts, and the International Trade Commission. It illustrates a dramatic rise in the number of appeals from the PTO, with the number projected to surpass the number of appeals arising from the district courts this year. It’s use in assessing IPR proceedings is limited due to the fact that the data does not differentiate between appeals from IPR proceedings and other appeals from the PTO. I’d be interested in hearing from anyone who’s done the detailed breakdown of these appeals to know whether the standard hypothesis–that this rise is mainly due to appeals from IPR proceedings–is correct.
*These numbers are based on the PTO’s own timeline, see 77 Fed. Reg. 48757 (Aug. 14, 2012), and data from LexMachina indicating the median time to institution decision is currently 185 days, and the median time to final decision is currently 540 days.
A group of 45 professors sent the following letter to Congress arguing for statutory reforms to limit venue in patent infringement cases. One focus of this move is to direct intention toward a focused and limited action rather than another round of comprehensive patent reforms. This type of limited reform could come as part of a late-session omnibus package.
– Dennis
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The undersigned patent law academics and economics experts write to express our support for patent venue reform. Changes to the venue rules are necessary and urgent to address the significant problem of forum shopping in patent litigation cases.
As Colleen Chien and Michael Risch recently wrote for the Washington Post, “[t]he staggering concentration of patent cases in just a few federal district courts is bad for the patent system.”[1] It is imperative that Congress address patent venue reform to return basic fairness, rationality, and balance to patent law. Specifically, venue reform that treats plaintiffs and defendants equally by requiring a substantive connection to the venue on the part of at least one party is critical to ensure fairness and uniformity in patent law.
As a result of current venue rules, though there are 94 federal judicial districts, a single district is home to nearly half of all patent cases. Of the 5,819 patent cases filed in 2015, nearly half— 2,541 cases—were filed in the Eastern District of Texas,[2] and 95% of those cases were filed by non-practicing entities (NPEs).[3] And the Eastern District of Texas’s percentage of patent cases has been steadily increasing over the last several years, rising from 11% in 2008 to 44% in 2015.4 By comparison, the Northern District of California, home of Silicon Valley, saw only 228 patent cases filed in 2015.[4]
A single judge in the Eastern District of Texas had 1,686 patent cases filed assigned to his docket in 2015—in other words, a single judge handled two-thirds of the patent cases in that district, and nearly one-third of all patent cases nationwide. If all of those cases were to go to trial, that single judge would have to complete 4 to 5 trials every day of the year (including weekends)—not counting any time for motions or other hearings. The burden of this overwhelming number of cases leads, unsurprisingly, to a high reversal rate on appeal. The United States Court of Appeals for the Federal Circuit affirmed only 39% of the decisions from the Eastern District in 2015.[5]
One reason for the disproportionate number of patent filings in the Eastern District of Texas is that the district employs procedural rules and practices that attract plaintiffs, including by delaying or denying the ability of defendants to obtain summary judgment to terminate meritless cases early.[6] For example, the district requires parties seeking summary judgment in patent cases to first seek permission before filing any summary judgment motion, the effect of which is to delay and deter early resolution of cases.[7]
While parties can seek transfer out of the district, some NPEs have opened offices in the district simply for the purpose of bolstering their arguments to stay in their preferred venue. The average grant of transfer in this venue took over a year (490 days), and the average denial of a transfer motion took 340 days, meaning that even cases that are ultimately transferred remain pending in the district for nearly a year.[8] Local discovery rules permit discovery to go forward even while a motion for transfer is pending, so even successfully moving to transfer only partially relieves the expense of litigating in a distant venue and the burden on the court.
The disproportionate number of patent plaintiffs—and NPEs in particular—bringing cases in a single venue ultimately results in wasted judicial resources, as more of those cases are overturned on appeal. For accused infringers, the costs of innovation are increased when they have little or no connection to the venue and are forced to litigate from a distance. The harm caused by abuse of the system and the resulting loss of trust in the uniformity and justness of the U.S. patent law system is unmeasurable.
This type of dynamic is bad for patent law, and bad for United States innovation. It is thus critical that Congress act now to pass targeted patent venue reform.
[6] Daniel Klerman and Greg Reilly, Forum Selling, 89 S. Cal. L. Rev. 241, 252-53 (Jan. 2016) (“Eastern District judges are particularly hostile to summary judgment in patent cases. Patent litigators, but not other litigants, are required to seek permission before filing summary judgment motions . . . and are prohibited from moving for summary judgment if permission is denied.”)
Professor Margaret Radin, who recently retired from the University of Michigan Law School, is a leading scholar known for her work in property theory, contracts law, intellectual property, and internet commerce. She’s best known to my students for her articulation of a modern personhood theory of property in Property and Personhood, 34 Stan. L. Rev. 957 (1982).
In her essay Patent Notice and the Trouble with Plain Meaning forthcoming in the Boston University Law Review, Professor Radin offers her thoughts on a topic at the heart of contemporary debates in patent law: the extent to which the words of claims can operate as boundaries that provide the same degree of notice that we expect in the real property context. The abstract reads:
In their book, Patent Failure, James Bessen and Michael Meurer took the position that notice of the scope of a patentee’s property right is usefully analogous to notice conveyed by real property boundaries. In this essay I argue to the contrary that the idea that patent claim language could be rendered determinate enough to justify an analogy with physical fences or metes and bounds is illusory. Patent claims raise the question, in a way that fences do not, of how words “read on” objects in, or states of, or events in the world. I take a small detour through the language theory of Quine as backdrop to my argument that there is no such thing as plain meaning, at least not in situations involving innovative products and processes where there is money at stake. I draw on three landmark patent cases — Markman, Phillips, and Festo — to illustrate this basic point. In my concluding Postscript I bring the big picture into play. The costs of providing better notice, even if that were possible, might outweigh the gains. Plus, even if the analogy with physical boundaries and the commitment to plain meaning were not illusory, such rigidity in interpreting claims would undermine a significant feature of the patent system: the flexibility to reward breakthrough inventions proportionately to their importance.
Professor Radin’s discussion is worth a read for the eloquent way that she captures and synthesizes the raw strands floating around in current discussions about patent claims.
Viewed through the lens of my current projects, though, her essay raises deeper questions about the meaning of claim construction itself. Over the last two decades, patent law has experienced the emergence of the perception that claim construction is simply the process of interpreting the meaning of the words in the claims. From Markman to Cybor to Phillips, claim construction grew into a search for linguistic meaning. Even Teva reinforces this perception, with its focus on the role of evidence in determining the meaning of key claim terms.
But patent law’s dirty secret is that claim construction isn’t just about divining the linguistic sense of words and phrases in the claims. That’s a seemingly fine inquiry when analyzing questions such as infringement, or anticipation or even, perhaps, nonobviousness. Yet when it comes to other issues in patent law–enablement, written description and especially § 101–defining the meaning of words is less central to the analysis. To be sure, sometimes the formalized procedure of Phillips does matter in enablement. Liebel-Flarsheim and Automotive Technologies offer two examples. But for the most part, the formalized claim construction that we’re used to is absent from the Federal Circuit’s enablement, written description and § 101 determinations.
Nevertheless, claim construction of a sort is present. The court articulates something that it uses in its analysis. In the enablement and written description contexts, I’ve come to call this something a target that must be enabled or adequately described. What it really is, though, is claim construction–just not in the sense that we’ve become comfortable with.
The Federal Circuit’s opinion on Monday in Bascom v. AT&T Mobility [Download Opinion] illustrates this point. That case involved a motion to dismiss granted by the district court on the ground that the claims were invalid on § 101 grounds. (I’ll summarize the facts and holding in more detail in a subsequent post.) After assuming that the claims were directed to an abstract idea under Enfish‘s statement about “close calls” at step one of the Alice/Mayo framework, the court turned to step two: the search for an “inventive concept.” Here, the court concluded that the “inventive concept described and claimed in the []patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user,” a concept that the court concluded was not (on the record before it) conventional or generic. Slip Op. at 15-16. This determination–of identifying an “inventive concept”–is as much claim construction as the linguistic machinations of Phillips. Indeed, the court even refered to what it is doing as construing the claims: “Thus, construed in favor of the nonmovant–BASCOM–the claims are “more than a drafting effort designed to monopolize the [abstract idea].” Slip Op. at 17.
The Supreme Court has completed its patent law business for the 2015 term and will re-open decision making in September 2016. Briefing and new filings will, however, continue throughout the summer.
Two Decisions: The Supreme Court has decided its two major patent cases – Halo/Stryker and Cuozzo. In Halo, the court re-opened the door to more treble-damage awards for willful patent infringement. The decision rejects the objective-recklessness standard of Seagate (Fed. Cir. 2007)(en banc) and instead places substantial discretion in the hands of district court judges for determining the appropriate sactions “egregious infringement behavior.” In Cuozzo, the court affirmed the Federal Circuit’s pro-PTO decision. The decisions confirms the PTO’s authority construe claims according to their broadest-reasonable-construction (BRI) even during post-issuance review proceedings and also confirms the Federal Circuit ruling that the PTO’s initiation of an inter partes review (IPR) proceeding is not appealable (even after final decision). A major caveat of this appealability issue is that the court limited its holding to run-of-the-mill IPR patent issues. The court did not determine when other issues arising from institution, such as constitutional due process challenges, might be appealable.
Both decisions are important. Halo adds at least a gentle breeze to the would-be patent infringement armada. I heard many discussions of pendulum’s swinging in the days following the case, although I would not go quite so far. Cuozzo was a full affirmance of the PTO position and will operate to continue to raise the statute and importance of the agency.
Three Pending Cases Set the Stage for Next Term: With the certiorari writ grant in Life Tech v. Promega, we now have three patent cases set for review and judgment next term. The issue in Life Tech is fairly narrow and involves export of of a component of a patented invention for combination in a would-be-infringing manner abroad. The statute requires export of a “substantial portion of the components” and the question in the case is whether export of one component can legally constitute that “substantial portion.” In the case, the component (Taq) is a commodity but is also an admitted critical aspect of the invention. Life Tech may be most interesting for those generally interested in international U.S. law (i.e., extraterritorial application of U.S. law). The other two pending cases are Samsung v. Apple (special damages in design patent cases) and SCA Hygiene (laches defense in patent cases).
None of these three pending cases are overwhelmingly important in the grand scheme of the patent system, although Samsung is fundamental to the sub-genre of design patents. This week, the Supreme Court denied certiorari in Sequenom v. Ariosa – a case that some thought might serve to rationalize patent eligibility doctrine in a way that favors patentees. For now, the Mayo, Alice, _____ trilogy remains open-ended. This leaves the Federal Circuit in its nadir.
Following Cuozzo, the only AIA post-issue review cases still ongoing are Cooper and MCM. These cases raise US Constitutional issues that were expressly not decided in Cuozzo. Briefing is ongoing in MCM and one scenario is that the court will sit on Cooper and then grant/deny the pair together. A new petition was filed by Trading Technologies just before Cuozzo was released – the case focuses on a mandamus (rather than appeal) of a CBM institution decision for a patent covering a GUI tool. (Full disclosure – while in practice I represented TT and litigated the patent at issue). Of minor interest, the court issued a GVR order (Grant-Vacate-Remand) in Click-to-Call Tech. v. Oracle Corp (15-1014) with instructions to the Federal Circuit to reconsider its prior decision in light of the recently decided Cuozzo Speed Technologies, LLC v. Lee, 579 U. S. ___ (2016). It will be interesting to see whether the patentee can develop a new hook for the Federal Circuit.
The end-of-term clean sweep leaves only two-more briefed-cases with potential for certiorari: Impression Prod. v. Lexmark Int’l. (post-sale restrictions); and Sandoz v. Amgen (BPCIA patent dance). In both cases the court called for the views of the Solicitor General (CVSG). DOJ briefs should be filed around the end of the year – although the election may shift some of the timing. SG Donald Verrilli has stepped down with former deputy Ian Gershengorn now serving as Acting SG.
In a 10-1 decision, the Federal Circuit has rejected Ethicon’s petition for en banc rehearing on the question of whether the USPTO Director improperly delegated IPR institution decisionmaking. Ethicon will likely petition the Supreme Court for its views. The case raises interesting, but ones that I expect will ultimately fail. Chief Judge Prost likely held the decision release to await the Cuozzo affirmance that implicitly supports the court’s ruling here.
Inter Partes Reviews (IPRs) can be broken down into a two step process. At the institution stage, the Patent Office Director is tasked with determining whether to institute the proceeding. 35 U.S.C. § 314. Once instituted, the Patent Trial and Appeal Board (PTAB) holds trial and makes a final determination of merits. 35 U.S.C. § 316(c). Despite the statutory separation, the Director has delegated the entire procedure to the PTAB – including the institution decision. In its failed petition, Ethicon questioned this delegation – asking: “Does the Patent Act permit the [PTAB] to make inter partes review institution decisions?”
The decision in Cuozzo does not directly address the challenge issues here, but the court’s loose language does suggest that it would side with the Federal Circuit. In particular, the court repeatedly refers to actions by the “Patent Office” regarding institution and other decision rather than using the statutory language “Director.” Although not as consistent, the court also repeatedly refers to actions by the PTAB as by the “Patent Office.” In his dissent, Judge Alito addresses the issue directly and without criticism, although failing to note that Director Lee is a woman:
The Director of the Patent Office has delegated his authority to institute inter partes review to the Patent Trial and Appeal Board (Board), which also conducts and decides the inter partes review. See 37 CFR §§42.4(a), 42.108 (2015); 35 U. S. C. §§316(c), 318(a). I therefore use the term “Patent Office” to refer to the Director, the Board, and the Patent Office generally, as the case may be.
The Supreme Court has upheld the AIA provision barring challenges to the Patent Office’s decision to institute inter partes review. 35 U. S. C. §314(d). In addition, Justice Breyer’s majority opinion approved of the Patent Office’s approach of applying the broadest reasonable construction (BRI) standard to interpret patent claims – finding it a “reasonable exercise of the rulemaking authority that Congress delegated to the Patent Office.”
The Court was unanimous as to the BRI standard however, Justices Alito and Sotomayor dissented from the no-appeal ruling – they would have interpreted the statute as limiting interlocutory appeals but still allowing review of the decision to institute within the context of an appellate review of the PTO’s final decision on the merits.
No Appeal: The court began with the express language of the statute which expressly states that the decision of “whether to institute an inter partes review . . . shall be final and non-appealable.” The provision is plain on its face and indicates congressional purpose of delegating authority to the Patent Office. The dissenting opinion offered by Justice Alito offered to limit the statute as preventing only interlocutory appeals, but the majority rejected that interpretation as lacking textual support and being ‘unnecessary’ since the APA “already limits review to final agency decisions.”[1] The Supreme Court also analogized the PTO’s initiation decision to that of a grand jury – which is likewise unreviewable. “The grand jury gets to say— without any review, oversight, or second-guessing— whether probable cause exists to think that a person committed a crime” (quoting Kaley v. United States, 571 U. S. ___ (2014)).
If you remember, Cuozzo did not present a Constitutional challenge to the AIA regime and the majority opinion offered a glimmer of limitation in that regard. Notably, the Court suggested that challenges to the decision to institute might be appealable if based upon a Constitutional issue or some other issue outside “well beyond” the post issuance review proceeding statutory provisions.
We conclude that the first provision, though it may not bar consideration of a constitutional question, for example, does bar judicial review of the kind of mine-run claim at issue here, involving the Patent Office’s decision to institute inter partes review.
The opinion here includes a number of nuances that will be interesting to tease-out, but the bottom line is that IPR remains a powerful tool for challenging patents.
Claim Construction during Inter Partes Review: Regarding the Broadest-Reasonable-Interpretation being applied to patent claims, the court was unanimous in siding with the USPTO. The court began by noting that Congress granted rulemaking authority to the USPTO to create regulations governing inter partes review and that this authority empowered the USPTO to enact rules both substantive and procedural that are reasonable in light of the statutory text. Since the statute was “not unambiguous” as to the appropriate claim construction standard, and therefore that the USPTO must be given leeway in determining its administrative approach.
Cuozzo had argued that IPR proceedings were like trials in many ways and therefore the claim construction should be parallel to that of trial proceedings. The Supreme Court rejected that analogy – finding that IPR proceedings serve a purpose much broader than merely “helping resolve concrete patent-related disputes among parties.”
[I]nter partes review helps protect the public’s “paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope.” Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U. S. 806 (1945); see H. R. Rep., at 39–40 (Inter partes review is an “efficient system for challenging patents that should not have issued”).
In finding BRI reasonable, the court followed this public-interest pathway and found that BRI helps to provide stronger bounds on patent scope:
We conclude that the regulation represents a reasonable exercise of the rulemaking authority that Congress delegated to the Patent Office. For one thing, construing a patent claim according to its broadest reasonable construction helps to protect the public. A reasonable, yet unlawfully broad claim might discourage the use of the invention by a member of the public. Because an examiner’s (or reexaminer’s) use of the broadest reasonable construction standard increases the possibility that the examiner will find the claim too broad (and deny it), use of that standard encourages the applicant to draft narrowly. This helps ensure precision while avoiding overly broad claims, and thereby helps prevent a patent from tying up too much knowledge, while helping members of the public draw useful information from the disclosed invention and better understand the lawful limits of the claim. See §112(a); Nautilus, Inc. v. Biosig Instruments, Inc., 572 U. S. ___ (2014).
Affirmed.
Most of the IPR-related petitions for writ of certiorari that are still pending are likely to fall-away at this point. However, the major caveats in the majority opinion (noted above) offer some light for both Cooper v. Lee and MCM v. HP since those petitions challeng the system on US Constitutional grounds.
USPTO Director Michelle Lee offered the following statement in reaction to the Cuozzo decision:
The USPTO appreciates the Supreme Court’s decision which will allow the Patent Trial and Appeal Board (PTAB) to maintain its vital mission of effectively and efficiently resolving patentability disputes while providing faster, less expensive alternatives to district court litigation.
Director Lee will likely step-down as the Obama Administration moves out. A portion of her legacy will remain as the named respondent.
In a new petition for writ of certiorari, Jericho Systems has asked the Supreme Court to review its abstract idea test:
Whether, under this Court’s precedent in Alice Corp. Party Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014), and Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012), a patent may be invalidated as an “abstract idea” under 35 U.S.C. § 101 when it claims a specific implementation and does not preempt other uses of the abstract idea.
The district court ended the case with a judgment on the pleadings – finding that the asserted claims of Jericho’s Patent No. 8,560,836 lacked eligibility under Alice and Mayo (focusing on claim 1 as axiomatic).
Using the ‘gist analysis’, the district court found that:
[T]he gist of the claim involves a user entering a request for access, looking up the rule for access, determining what information is needed to apply the rule, obtaining that information, and then applying the information to the rule to make a decision.
This is an abstract idea. The abstract idea being that people who meet certain requirements are allowed to do certain things. This is like Axiomatic’s example of making a determination if somebody is old enough to buy an R rated movie ticket.
Thus, finding that the claim encompasses an abstract idea, the district court moved to Step 2 of the Alice/Mayo analysis – and again sided with the defendant:
As al ready stated, [the claimed invention simply] uses standard computing processes to implement an idea unrelated to computer technology. It does not change [sic] way a computer functions or the way that the internet operates.
On appeal, the Federal Circuit affirmed in a R.36 judgment without opinion. On this point, the petition cites Jason Rantanen’s recent post indicating that around 50% of Federal Circuit decisions are being resolved without opinion. Jason Rantanen, Data on Federal Circuit Appeals and Decisions, PATENTLY-O (June 2, 2016).
A grant of certiorari in this case would serve as a salutary reminder to the Federal Circuit about the appropriate use of one-word affirmances—which currently resolve over 50 percent of that court’s cases. Rantanen, supra (showing that the percentage of Rule 36 opinions in appeals from district courts has increased from 21 percent to 43 percent in less than a decade). If the Federal Circuit is content to allow district court opinions to effectively substitute for its own opinions at such a high rate, that practice should not be permitted to “cert proof ” issues that are otherwise cleanly presented and worthy of this Court’s review. Cf. Philip P. Mann, When the going gets tough . . . Rule 36!, IP Litigation Blog (Jan. 14, 2016) (arguing that the Federal Circuit relies on summary affirmance under Rule 36 to “sidestep difficult issues on appeal and simply affirm”).
One issue that the district court (and obviously the Federal Circuit) failed to address was that of preemption – what is the relevance of the fact that substantial, practical, an and non-infringing applications of the given abstract idea are available and not covered by the patent. Petitioner argues that issue is critical to the analysis. “[T]he lower courts regularly decline any discussion of preemption in favor of rote analysis of patent language at so high a level of generality that the claim language is rendered all but meaningless. This leads to the untenable result that patents—such as the one here—that do not preempt other uses of the alleged “abstract idea” at issue are nevertheless held to violate Alice.”
Look for opinions in Halo/Stryker and Cuozzo by the end June 2016.
Post Grant Admin: While we await Cuozzo, a set of follow-on cases continue to pile-up. My speculation is that the Supreme Court will delay any decision in those cases until it finalizes the outcome of Cuozzo. With a host of new friend-of-the-courtbriefs and interesting constitutional questions, MCM v. HP is perhaps best positioned for certiorari. Additional pending cases include Versata v. SAP (scope of CBM review); Cooper v. Lee(whether IPRs violate Separation of Powers); Click-to-Call Tech, LP v. Oracle Corp., (Same questions as Cuozzo and now-dismissed Achates v. Apple); GEA Process Engineering, Inc. v. Steuben Foods, Inc. (Flip-side of Cuozzo: Appeal when PTAB exceeds its authority by terminating an instituted IPR proceeding?); Interval Licensing LLC v. Lee (Same as Cuozzo); and Stephenson v. Game Show Network, LLC (Same as Cuozzo)
Design Patent Damages: Samsunghas filed its opening merits briefs in the design patent damages case against Apple. Design patent infringement leads to profit disgorgment, but the question is what profits? [More from Patently-O].
Versus Cisco: There are a couple of newly filed petitions. Interestingly, both filed by Michael Heim’s firm with Miranda Jones on both briefs representing plaintiff-petitioners. In both cases Cisco is respondent.
CSIRO v. CISCO (fact-law divide in proving infringement damages under 35 U.S.C. § 284).
Of course, Commil was the subject to a 2015 Supreme Court decision that rejected the Federal Circuit’s original opinion favoring Cisco. On remand, the Federal Circuit completely changed its decision but again sided with Cisco and rejected the jury verdict — holding “that substantial evidence does not support the jury’s finding that Cisco’s devices, when used, perform the “running” step of the asserted claims.”
Safe Harbor for Federal Submissions: In the newly filed Amphastar Pharma case, the Supreme Court has already requested a response from Momenta. The question presented focuses on the safe-harbor provision of 35 U.S.C. § 271(e)(1) and asks: Whether the safe harbor protects a generic drug manufacturer’s bioequivalence testing that is performed only as a condition of maintaining FDA approval and is documented in records that must be submitted to the FDA upon request. The federal circuit held that Amphastar’s activity in this case was not protected by the safe harbor because it involved information “routinely reported” to the FDA post-approval. [Amphastar Petition]
MCM-Petition-and-Appendix: (1) Whether inter partes review (IPR) violates Article III of the Constitution; and (2) whether IPR violates the Seventh Amendment to the Constitution.
Response Due June 30, 2016.
Amici in Support of Grant
MCM_INTERDIGITAL_TESSERA (“Characterizing something as a public right comes with certain consequences. By incorrectly holding that patents are public rights, the Federal Circuit’s decision has far-reaching and wholly implausible consequences that the Federal Circuit never grappled with and that have ‘nothing to do with the text or tradition of Article III.'”)
MCM_NYIPLA (“The public rights doctrine is a complex issue that requires this court’s resolution.”)
MCM_Mossoff (“[T]his Court has long recognized and secured the constitutional protection of patents as private property rights reaching back to the early American Republic.”) (Signed by Profs Mossoff (Scalia Law), Cahoy (Penn State), Claeys (Scalia Law), Dolin (Baltimore), Ely (Vandy), Epstein (NYU & Chicago), Harrington (Montreal), Holte (SIU), Hurwitz (Nebraska), Manta (Hofstra), O’Connor (UW), Osenga (Richmond), Schultz (SIU)).
MCM_UNM (“[T]he threat of IPR devalues university patents.”)
MCM_LAUDER (“Amici agree with Petitioner that the IPR procedure was beyond Congress’s power to impose, and its underpinning rationale—that patents are a matter of administrative largesse, rather than a constitutionally protected property right—is constitutionally infirm.”)
MCM_HoustonInvestors (“Congress has exceeded its authority to undermine patents to give “patent pirates” encouragement to infringe patents in the well supported historical expectation that the IPR is likely to invalidate the patents.”
MCM_SECURITYPEOPLE (“As noted in McCormick Harvesting Co. v. Aultman, 169 U.S. 606 (1898), once a patent is issued, it can only be cancelled or invalidated by an Article III court, not the executive branch. Similarly, as taught in Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989), Congress cannot conjure away the Seventh Amendment fact-finding process employed in Article III courts by mandating that traditional legal claims be tried to an administrative tribunal.”)
MCM_IEEE-USA (“This bizarre state of affairs merits the close scrutiny of this Court. All issued U.S. patents deserve the same constitutional protections and legal standards in invalidation proceedings as those available in Article III courts.”) * UPDATE: The brief was filed by IEEE-USA (a division of IEEE).
Hal Wegner has updated his top-ten list of pending cases:
Impression Products v. Lexmark (cert petition pending) (post-sale and international exhaustion)
Sequenom v. Ariosa Diagnostics (cert petition pending) (patent eligibility)
Samsung v. Apple (cert granted) (design patent damages)
Cuozzo Speed v. Lee (awaiting Supreme Court decision) (claim construction at the PTAB)
Halo Electronics v. Pulse and Stryker v. Zimmer (awaiting Supreme Court decision) (requirements to prove willful infringement)
SCA Hygiene v. First Quality Baby Prods (cert granted) (when does laches apply in patent cases)
Life v. Promega (cert petition pending) (active inducement for export of component)
Cooper v. Lee (cert petition pending) (direct challenge to PTAB administrative review)
MCM Portfolio v. Hewlett-Packard (cert petition pending) (direct challenge to PTAB administrative review)
Helsinn Healthcare v. Teva Pharm. (Federal Circuit case) (whether Metallizing Engineering was overruled by statute – i.e., what is the prior art impact of secret pre-filing commercialization by patentee).
In a short opinion, the Federal Circuit has reaffirmed the USPTO’s tightly restrictive approach to amendment practice in Inter Partes Review (IPR) proceedings. Under the rules, a patentee has one opportunity to propose amendments or substitute claims. However, the motion to amend will only be granted if the patentee also demonstrates in the motion that the proposed amendments would make the claims patentable over the known prior art. See Idle Free Sys., Inc. v. Bergstrom, Inc., IPR2012–00027, 2013 WL 5947697 (PTAB June 11, 2013).
That approach has been upheld in several Federal Circuit cases, including Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292, 1307−08 (Fed. Cir. 2015). As such, the panel here held that its power was restricted:
Given our precedent, this panel cannot revisit the question of whether the Board may require the patentee to demonstrate the patentability of substitute claims over the art of record.
As such, the Federal Circuit found no abuse of discretion in thte PTAB’s denial of amendment.
We conclude that the Board did not abuse its discretion by denying Aqua’s motion to amend. The Board rebutted Aqua’s sole argument that the vector limitation made the substitute claims patentable over the combination of Henkin and Myers. Because Aqua’s arguments with respect to that combination rested exclusively on the vector limitation, the Board had no obligation to address the other amendments or to consider the issue of objective indicia of non-obviousness, which Aqua did not raise in connection with the Henkin/Myers combination. We affirm.
The case is being handled by Finnegan’s top appellate lawyer James Barney and is now set-up for en banc review.
It is now time to begin looking for an opinion in the Halo/Stryker regarding whether the Federal Circuit’s test for willful infringement is too rigid. Those cases were argued in February 2016. We can also expect a decision in Cuozzo prior to the end June 2016.
Supplying Components Abroad: The Solicitor General has finally filed its brief in Life Tech v. Promega. The brief supports certiorari — but only for one of the two questions presented: namely,
whether a supplier can be held liable for providing ‘all or a substantial portion of the components of a patented invention’ from the United States when the supplier ships for combination abroad only a single commodity component of a multi-component invention
The patent in the case involves a DNA amplification kit used for personal identification. And, although the allegedly infringing kids were made in the UK, one commodity-component (the Taq polymerase) was supplied from the U.S. Focusing on the language of the statute, the Solicitor Generals argues that liability for export of a single component of a multi-component invention “is contrary to Section 271(f)’s text and structure, and it is inconsistent with the presumption against extraterritoriality.” Separately, the brief argues that the Federal Circuit was correct in its holding that a party can actively induce itself – thus 271(f)(1) inducement does not require a third party to be induced. [USPromega CVSG Petition].
Post Grant Admin: I previously discussed GEA Process Engineering. That case involves the Flip-side of Cuozzo and asks whether an appeal can follow when the PTAB exceeds its authority by terminating an already instituted IPR proceeding? The respondent (Steuben Foods) had previously waived its right to respond, but the Supreme Court has now requested a response. That move makes certiorari more likely, but the result will depend upon the outcome in Cuozzo.
Attorney Fees: Newegg Inc. v. MacroSolve, Inc., No. 15-1369. Professor Mark Lemley’s brief on behalf of Newegg asks that the attorney-fee framework of Octane Fitness actually be implemented. [NewEggPetition]. Although Octane Fitness gives district courts discretion in determining whether to award fees, Newegg argues that the E.D. Texas court improperly applied “a special, heightened burden of proof.” The Supreme Court is currently considering the Kirtsaeng attorney fee case for copyright law. That decision may shed some light on the patent cases as well.
A new petition in Automotive Body Parts, No. 15-1314, focuses on a question of civil procedure regarding a clerk’s transfer of a design patent case out of E.D.Tx in a manner that violated the local rules. Here, the clerk transferred the case immediately after the judge ordered transfer even though the local rules call for a 21 day delay. The case is rising through a petition for mandamus, but my view is that the petition fails to show why transfer is so harmful (except for the reality that patent plaintiffs are usually given more respect in E.D.Tx.).
The court was scheduled to discuss Cooper v. Lee at its May 12 conference. No action was taken following that conference – lightly suggesting to me that the court is holding judgment until it resolves Cuozzo. Apart from the AIA Trial challenges, most potential life changing case on the docket for patent attorneys is Cubist v. Hospira that focuses on the role of secondary indicia of non-obviousness. As with most Supreme Court patent cases over the past decade, Cubist argues that the Federal Circuit’s rules are too restrictive and should instead follow a looser factor-based analysis when considering the issue. In the next couple of weeks, the court will consider the Cubist petition as well as that of Dow v. NOVA (appellate review standard); Vehicle Intelligence (abstract idea); and WesternGeco (damages calculation for 271(f) infringement by exporting components).
Secret Offers to Sell: The Federal Circuit is not slowing down its patent jurisprudence in any way – except for the rash of R.36 affirmances. An important case is Helsinn that focuses on whether the AIA abrogated the rule in Metallizing Engineering.
Guest post by Michael E. Sander, Founder and CEO of Docket Alarm, Inc.
The Patent Office routinely publishes statistics on IPR and CBM proceedings, but their methodology suggests that the petition institution rate is lower than it really is.
Inter partes review and covered business method review have undoubtedly changed patent litigation. No patent assertion campaign or defense strategy is complete without considering the implications of these AIA procedures.
The Patent Office publishes statistics on these new AIA trials roughly once a month. Practitioners can easily see how many petitions are filed in various technology areas, as well as how often claims survive or are canceled. They say that a picture is worth a thousand words, and this visual and easy-to-read resource gives stakeholders a quick sense of how the new tribunal is affecting patent law.
But as Mark Twain once said, “[f]acts are stubborn things, but statistics are more pliable.” In publishing these statistics, the PTO has made choices in methodology that may underreport the institution rate of IPR and CBM proceedings.
Background on AIA Trial Procedure
For those unfamiliar with PTAB trial practice, a PTAB proceeding starts with a petitioner filing a petition for inter partes review or covered business method review.[1]See Figure 1 (below). The petition lays out reasons why a claim or set of claims is invalid.
About six months[2] after a petition is filed, the PTAB issues an Institution Decision. See 35 U.S.C. 314(b). In the Institution Decision, the PTAB decides whether or not “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” See 35 U.S.C. 314(a). If the PTAB decides that the petitioner is unlikely to prevail, the proceeding is terminated, and the case is disposed of.
If the PTAB determines that the petitioner may prevail, a trial is instituted. During this stage, evidence and testimony is presented, along with additional briefing. Within one year of institution, the PTAB issues a Final Written Decision, in which they decide whether or not claims should be canceled. See 35 U.S.C. 316(a)(11).
Figure 1: IPR and CBM Process
Statistics on AIA Trial Proceedings
The PTO has been regularly publishing statistics on a variety of aspects of AIA proceedings. One important piece of information to patent owners and petitioners alike is the average rate in which the PTAB institutes a petition for IPR or CBM, i.e., the Institution Rate. Fortunately, the Patent Office publishes exactly these figures.
Depicted in Figure 2 below is one page from the PTO’s published statistics. Their statistics depict a snapshot of every IPR petition filed as of February 29, 2016. The PTO depicts the number of IPR petitions that have proceeded to each stage, including whether a proceeding was instituted or not, whether the case settled, and whether the instituted proceeding resulted in all instituted claims being canceled, some claims canceled, or no claims canceled.
This figure is deceptively simple. The figure states that out of 2731 total petitions, 1372 trials were not instituted while 1359 petitions were instituted. Of the non-instituted cases, 540 were terminated due to non-substantive reasons.
Therefore, of the institution decisions decided on the merits, the PTAB’s reported Petition Institution rate is 62%.[3]
When I first studied the PTO’s chart and saw that the Petition Institution rate was 62%, I was puzzled. Docket Alarm, compiles statistics like these and more, and found that petitions were instituted in 71% percent of proceedings. See Figure 3. This nearly 10-point difference was too large to be explained.
As it turns out, deriving the overall institution rate from the chart provided by the PTO can be misleading.
The understand why the PTO’s reported Institution Rate is lower than expected, one must understand the PTO’s methodology, and the implications of the dataset that they used. Right at the top of the page, their figure states that only proceedings “Completed To Date” are considered in their statistics. See Figure 2. This seemingly benign statement has profound implications on the result: If a trial is not instituted, it is included in their statistics immediately when the institution decision is published. However, if a trial is instituted, the decision will not be included in the dataset until the case is disposed, up to a year later. Petition denials are necessarily included at an earlier point in time than the decisions to institute. This methodology skews the reported institution rate downward, suggesting that the PTAB is instituting far fewer trials than they are.
The effect is significant, consider the following hypothetical. Suppose PTAB judges flip a coin to determine whether to institute: 50% of the time they decide to institute, and 50% of the time they decide to not institute. Further suppose in our hypo that on January 1, 2013, 100 petitions are filed, and no further petitions are filed for the rest of the year.[4]
Given this hypothetical, one would assume that the reported Institution Rate should be 50%, but let’s see how it plays out.
After the first 6 months, on July 1, 2013, the PTAB flips a hundred coins, and 50 petitions are instituted, while 50 are denied. The proceedings that are not instituted are terminated. The instituted proceedings continue onwards. Using the PTO’s methodology, only the denied petitions are included in the statistics.
Using the PTO’s methodology in the hypothetical above, the institution rate would be 0%. The 50 petitions that were denied are included in their statistics, while the 50 instituted decisions are not because they are not completed.
Taking the hypothetical to the following year, on Jan. 1, 2014, 100 additional petitions are filed. Again, on July 1, 2014, 50 petitions are instituted and 50 denied. In addition, the 50 instituted petitions that were filed on Jan. 1, 2013, come to completion. Using the PTO’s methodology, the institution rate calculated in the second year would be 25%, closer to reality but still a far cry from the “real” institution rate of 50%.
One can continue this hypothetical forward, and while the gap between the reported rate and reality narrows, after five years, the difference between what is reported and the expected institution rate is still 10%. See Table 1 (below).
Table 1: Calculating the Institution Rate Using PTO’s Methodology on Hypothetical Data
Obviously, Administrative Patent Judges do not flip a coin to decide whether to institute, more than 100 petitions are filed in a year, and petitions are not all filed on the first of the year. However, the basic point holds true: if one only includes “completed” cases in their statistics, non-instituted cases will be over-counted, and instituted cases will be proportionally under-counted.
Conclusion
Because the PTO clearly states at the top of the chart that they are only including completed cases, technically, their statistics are not incorrect. However, as shown above, their methodology can lead one who is not bringing a critical eye to the statistics to believe that the Institution Rate is 10% lower than it actually is. Mark Twain would feel right at home.
= = = = =
[1] There are several other types of AIA trial proceedings, such as Post Grant Review and Derivation proceedings, but they are not nearly as popular as IPRs and CBMs.
[2] Six months is typical, but it can be earlier at the discretion of the court, or later if the petition is not quickly accorded a filing date.
[4] We additionally assume that no parties settle, and that petitions are afforded a filing date on the same day they are filed. These assumptions are immaterial to the substantive point, but make the numbers easier to deal with.
Guest post by Saurabh Vishnubhakat, Associate Professor of Law at the Texas A&M University School of Law. Prof. Vishnubhakat was an advisor at the USPTO until June, 2015, although his arguments here should not be imputed to the USPTO or to any other organization.
On May 9, the USPTO Patent Trial and Appeal Board (PTAB) designated five opinions as “precedential”—the most significant of the four labels that the agency attaches to its administrative decisions. This action is itself a milestone, as the USPTO has designated only three other opinions as precedential over the last 22 months. So this is a useful moment to examine the process by which PTAB opinions become precedential and to consider what this new body of administrative precedent means for the patent validity review procedures created by the AIA.
What the Current Precedential Opinions Say
The eight PTAB precedential opinions themselves are as follow:
Bloomberg, Inc. v. Markets-Alert Pty, Ltd., CBM2013-00005, Paper 32 (May 29, 2013). Compares the more lenient “good cause” standard for additional discovery in covered business method review (as well as post-grant review) with the slightly stricter “interests of justice” standard in inter partes review, and explains the factors for evaluating motions for additional discovery in CBM review.
LG Electronics, Inc. v. Mondis Tech Ltd., IPR2015-00937, Paper 8 (Sept. 17, 2015). Explains that the “served with a complaint” requirement of 35 U.S.C. § 315(b) triggers the one-year bar for filing an IPR petition based on the earlier of two complaints and that a dismissed complaint may still trigger the § 315(b) bar if it was dismissed partially with prejudice and partially without.
Westlake Services, LLC v. Credit Acceptance Corp., CBM2014-00176, Paper 28 (May 14, 2015). Explains that the CBM estoppel provisions of 35 U.S.C. § 325(e)(1) barring further proceedings before the USPTO apply on a claim-by-claim basis, so that a new petition for CBM review is not necessarily barred if it addresses no claims that were the subject of a prior final written decision.
PTAB opinions come in four varieties—until recently, it was three—and each serves a different function. The most difficult to designate and so the rarest are precedential opinions, which are binding in all future cases before the PTAB unless and until they are superseded by later binding authority. Two particularly strong motivations for designating an opinion as precedential is to resolve a conflict among multiple PTAB decisions and to address novel questions.
By contrast, the largest and least significant set of opinions are routine; all opinions are routine by default, and some further action is necessary to elevate an opinion’s status. Routine opinions are still binding as to the particular case, but should generally not be cited as persuasive authority except as to their particular facts.
In the middle are two more types of non-binding opinions: informative and representative. Informative opinions articulate the PTAB’s norms on recurring issues and offer guidance both on issues of first impression and on PTAB rules and practices. Representative opinions offer a sample of typical decisional outcomes on a given matter. Until recently, the only middle category was informative opinions, which presented guidance on the rules and practices of the PTAB, representative samples of opinion types, or representative samples of outcomes. On September 22, 2014, the PTAB created a new category for representative opinions—ranked below informative opinions.
In short, representative opinions are a descriptive curation of routine opinions. Informative opinions go beyond merely surveying an issue and synthesize some further normative guidance. Precedential opinions go further still and make the synthesis binding.
How the PTAB Designates Opinions
The process for designating opinions resides in the PTAB’s Standard Operating Procedure No. 2 (Rev. 9, Sept. 22, 2014). Any member of the PTAB may nominate an opinion to be designated as representative, informative, or precedential. This includes the Director and Deputy Director of the USPTO and the Commissioners for Patents and Trademarks as ex officio members. Interested parties and members of the public may nominate an opinion within 60 days of its issuance to be designated as precedential. Nominations are received and referred by the Chief Judge of the PTAB.
Upon a nomination to make an opinion precedential, members of the PTAB discuss the proposal for a prescribed period (usually 10 business days) and then vote. Approval by a majority sends the opinion to the Director, whose approval is also necessary. Upon approval by the Director, the opinion is designated as precedential and published (with appropriate notice and opportunity for written objection where confidentiality applies under 37 C.F.R. § 1.14).
For opinions already designated as precedential, any member of the PTAB may suggest that later authority has overcome the opinion’s precedential value. If first the Chief Judge and then the Director both agree, then the opinion loses its precedential force, and a notice of the change is posted in its place among the list of precedential PTAB opinions.
The Chief Judge of the PTAB may designate any opinion as informative or representative so long as it is not already precedential.
Why the PTAB’s Precedents (and Process) Matter
Both the content of the PTAB’s body of precedential opinions and the PTAB’s process have important implications for ex post administrative review of patent validity.
As to content, it is telling that all eight precedential opinions pertain to the procedural structure of IPR and CBM proceedings, particularly insofar as that procedural structure interacts with the structure of patent litigation in the federal courts. The separation of patent powers between the executive and the judiciary is now before the Supreme Court in multiple cases, and this body of precedential opinions should be understood as a signal of the USPTO’s strong interest in shoring up its regime of administrative adjudication.
The opinions in SecureBuy, LG Electronics, and Oracle address when earlier civil actions do and do not bar a petition for PTAB review. Westlake Services addresses estoppel in future CBM review, and there is good reason to expect that the same reasoning will apply to the parallel statutory language that governs IPR estoppel. Lumentum Holdings rejects a jurisdictional view of certain procedural requirements, preserving the PTAB’s broad authority to choose its cases. MasterImage 3D frames a patent owner’s ability to amend claims during review. And Bloomberg and Garmin Int’l address limits on trial-type discovery in both the IPR and the CBM/PGR contexts. Making these procedural and structural decisions into binding authority is, by definition, intended to bring uniformity to the PTAB’s large and increasing body of case law.
The need for such uniformity is particularly strong right now. The Supreme Court in Cuozzo v. Lee is evaluating whether the PTAB’s authority in instituting petitions is truly nonreviewable. The Court in Cuozzo is also considering whether the PTAB’s claim construction standard can properly remain unaligned with federal court standards, a question that turns significantly on the ability of patent owners to amend their claims during review. The trial-like nature of PTAB proceedings is more generally under attack as to whether IPR and CBM review violate the separation of powers doctrine and the Seventh Amendment jury trial right, as the recent cert petition in MCM Portfolio LLC, Petitioner v. Hewlett-Packard Company (No. 15-1330) suggests. In this environment of Supreme Court scrutiny, a persuasive argument that PTAB practice is proceeding with institutional coherence may do much to influence the USPTO’s autonomy in administering the validity and scope of patent rights.
Guest post by Dr. Shubha Ghosh, Crandall Melvin Professor of Law and Director of the Technology Commercialization Law Program at Syracuse University College of Law
In Stanford v Roche, 563 U.S. 776 (2011), the Supreme Court ruled that the Bayh-Dole Act did not create special rules of patent ownership for universities and other recipients of federal research funding. Traditional rules of inventor ownership and assignment, developed for for-profit entities applied to research institutes. Nothing in the language of the Bayh-Dole changed the basic rules and created a statutory automatic assignment (one analogous to work made for hire under the Copyright Act).
But what are the traditional rules for patent assignment? One issue the majority ignored in Stanford is the future interest assignment rule created by the Federal Circuit in Filmtec Corp. v. Allied Signal, 939 F.2d 1568 (Fed. Cir. 1991). By containing the phrase “hereby assigns,” the Federal Circuit stated in Filmtec, an assignment would have priority over another that only contained the word “assigns.” An assignor stating that he “assigns” a future interest is simply conveying a promise to assign in the future. However, the magic phrase “hereby assigns” is a present assignment of a future interest. Stanford University’s failure to include the word “hereby” in its assignment agreement lost patent rights to Roche, a competing assignee that showed the wisdom to include the word “hereby” in its agreement.
Justices Breyer and Ginsburg in dissent sharply criticized the Filmtec rule of “automatic assignment” through agreement in the Stanford case. This sentiment was echoed in Justice Sotomayor’s concurrence. All three justices, however, recognized that the assignment interpretation issue was not properly before the Court. Dr. Alexander Shukh, a computer hardware engineer, signed an assignment to his former employer Seagate. The assignment contained the “hereby” language sanctioned by the Filmtec decision. Seagate, and the Federal Circuit, reads the hereby language as creating an automatic assignment of Shukh’s rights to his inventions and resulting patents. The Shukh decision does not involve priority of assignments and goes beyond the Filmtec decision criticized by Justices Breyer, Ginsburg, and Sotomayor. Under Shukh, the magic words “ hereby assigns” extinguishes all rights of employees in their inventions.
The Court should grant Shukh’s certiori petition. This post demonstrates that there is a serious error of federal law that requires Supreme Court review. It also shows how the Court might correct the misapplication of federal law.
The Federal Circuit created the rule of automatic assignment through agreement without any basis in the Patent Act or in the common law of assignment. Acting from its institutional law as patent law expert, the Federal Circuit seemingly adopted the Filmtec rule as one of patent assignment. But, as Professor Ted Hagelin pointed out in a 2013 article in the AIPLA Law Quarterly, the automatic assignment rule has no foundation in the Patent Act. Section 261 speaks to writing requirements and priority rules arising from filing. There is no mention of the magic word “hereby” as a marker between promises to assign in the future and present assignments of future interests. Professor Hagelin recommended that Congress correct the error by amending Section 261.
But the Federal Circuit’s error is deeper than one of statutory misconstruction. Its decision confuses the relationship between patent law and contract law. The error is in the same category as the controversy over the conditional sale doctrine, a court created rule from Mallinckrodt v. Medipart, 976 F.2d 700 (Fed. Cir. 1992). In Mallinckrodt, the Federal Circuit examined a patent owner’s power to impose conditions on its grant of rights to a licensee. Through announcing the conditional sale doctrine, the Federal Circuit ruled that a violation of such conditions constituted patent infringement rather than contract breach. By so ruling, the Federal Circuit expanded its own jurisdiction by transforming questions of state contract law into those of patent law. A similar move occurs in Filmtec.
The usurpation of contract law by patent law is the subject of my 2014 article in the Journal of the Patent and Trademark Office Society. My argument in that paper is grounded, in part, in Judge Pauline Newman’s criticism of Filmtec in her dissent from denial of en banc review in Abraxis v. Navinta. 672 F.2d 1239 (Fed. Cir. 2011). According to Justice Newman, patent assignments are a matter of contract law, which is in the jurisdiction of the states. Therefore, the Federal Circuit should look more closely at state law in deciding cases about patent assignments.
The judge’s point is particularly salient when one remembers that the Federal Circuit was created as an expert patent court. It was given jurisdiction to hear some non-patent matters when these matters are related to patent cases. Patent assignments are one obvious example of when the Federal Circuit has jurisdiction to consider state matters. But, as Judge Newman points out, jurisdiction to hear a case does not mean authority to create new law, as the Federal Circuit arguably did in Filmtec and in Stanford. Instead, the Federal Circuit should look to other authorities to address non-patent law matters. For contract law matters, what state courts and legislatures have said about assignments generally would be relevant. Furthermore, state law provides a stable and predictable source of authority for actors engaged in the business practice of negotiating patent assignments and other contracts.
The core problem is that the court has ignored the Erie doctrine. Under the Supreme Court’s 1937 decision in Erie v. Tompkins, a federal court ruling on a matter of state law under its diversity jurisdiction must apply the law of the state from which the dispute arose. Which state law to apply is a matter of choice of law principles. What the federal court cannot do is create its own federal common law in lieu of the state statutory or common law. As the Court affirmed in Butner v. United States, 440 U.S. 48 (1979), the Erie doctrine applies to a court’s supplemental jurisdiction over state law claims attendant to a federal question. By creating its own federal common law of contracts, the Federal Circuit reveals a fundamental error in its understanding of the federal court system.
State law offers a different analysis of patent assignments from what the Federal Circuit adopts. Justice Breyer, in his Stanford dissent, cited a treatise on patent law by George Ticknor Curtis from 1873 that discusses patent assignments. Curtis addresses how state law treats assignments and cites a Massachusetts case from 1841 dealing with patent assignments. Relevant to the issues in Stanford, the assignment involved the present assignment of an invention that had not been made yet. The court analyzed the assignment as it would any contract, identifying the terms of the document as a key to the expectations of the parties. State law precedents perhaps offer an alternative to the questionable Federal Circuit jurisprudence, at least with respect to patent assignments.
One related area in state law is that of security interests, a part of debtor-creditor law. In entering into credit agreements, creditors ask for security in the form of collateral for a loan. The collateral may be a legal interest that is not in existence at the time of the loan. An example would be the future sales or proceeds from a debtor’s business. Another example would be inventory remaining at the end of an accounting period. These future interests are analogous to the future inventions or patents that I have been discussing. Rights can be claimed in these properties that are nonexistent at the time of the contract formation between creditor and debtor.
Security interests provide the most common situation in which conflicting obligations arise. Debtors often take multiple mortgages, hypothetic future proceeds to multiple creditors, and take multiple loans out on the same collateral. As long as the value of the collateral can cover all the debts, then there is no problem in general. However, if not all creditors can be satisfied, priority rules are necessary. In the case of future interests, the law does not fall back on simple rules like first in time because there are multiple interests involved. A creditor does not want to run the risk of not receiving any return on the debt. The legal rules of priority allow the creditor to investigate the collateral and through such due diligence identify competing claimants on the collateral. Priority rules, consequently, depend not only on the timing of the contract, but also on recording and notice requirements.
The case of conflicting patent assignments bears some similarity to the law on intangible future interests in creditor-debtor law. Both entail rights in property that has yet to come into being. The main lesson from creditor-debtor law, which is largely a matter of state law, is that many interests are implicated and therefore simple rules are not satisfactory. The Federal Circuit has arguably adopted too simple and misguided a rule in the Filmtec. The Supreme Court has confounded the error in the Stanford decision by ignoring the issue of automatic assignments. One way to correct course is by granting Shukh’s petition for certiori and restore the proper balance between federal patent law and state commercial law.
Guest Post By: Paul Dietze and Mini Kapoor, Haynes and Boone, LLP[1]
On March 18, 2016, the Federal Circuit held that Mylan Pharmaceuticals, Inc. (“Mylan”), a generic drug manufacturer, was subject to specific personal jurisdiction in Delaware because Mylan had filed an abbreviated new drug application (“ANDA”) and “contemplate[d] plans to engage in marketing of the proposed generic drugs” in the state.[2] The ruling affirmed two different decisions by judges in the United States District Court for the District of Delaware that Mylan was subject to specific jurisdiction in Delaware.[3] However, as noted below, it looks like Mylan intends to seek panel or en banc rehearing and possibly pursue a petition for certiorari if the Federal Circuit does not grant the rehearing or re-hears the case and continues to find personal jurisdiction.
I. Procedural Posture of the Cases
Mylan filed two separate ANDAs with the U.S. Food & Drug Administration (“FDA”) seeking permission to market generic versions of unrelated pharmaceutical products marketed by Acorda Therapeutics, Inc. and AstraZeneca AB under the statutory scheme outlined in the Hatch-Waxman Act (the “Act”). As permitted under the Act, Mylan certified that the patents of the brand name drug companies listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (“the Orange Book”) were either invalid or would not be infringed by Mylan’s marketing of its proposed generic versions of the drugs. Each certification is deemed an artificial act of infringement under the Act, and permits the brand name drug companies to sue the generic drug company. Acorda and AstraZeneca sued Mylan for patent infringement in separate lawsuits filed in Delaware. Mylan moved to dismiss in both cases, arguing that it was not subject to either general or specific personal jurisdiction.[4]
Specifically, Mylan, citing the Supreme Court’s decision in Daimler AG v. Bauman,[5] argued that it was not subject to general jurisdiction in Delaware because it did not have contacts with Delaware that were so continuous “as to render it essentially at home in the forum state,” and was not subject to specific jurisdiction because it did not satisfy the minimum contacts requirement.[6] Both district court decisions held that Mylan was subject to specific jurisdiction in Delaware.[7] The district court decisions, however, differed as to whether or not Mylan was subject to general jurisdiction in Delaware.
II. The Opinion
On appeal, the majority opinion of the Federal Circuit panel affirmed specific jurisdiction without addressing general jurisdiction.[8] The panel identified Mylan’s ANDA filings as “formal acts that reliably indicate plans to engage in marketing of the proposed generic drugs” and held the particular actions that “Mylan has already taken—its ANDA filings—for the purpose of engaging in that injury-causing and allegedly wrongful marketing conduct in Delaware” were sufficient to satisfy the minimum contacts requirement.[9] The court also identified the significant expense a generic drug company incurs in the ANDA application process as evidence of an ANDA-filer’s plans to market the drug.[10] The court further noted that Mylan’s distribution channels in Delaware make clear that these future marketing activities would “unquestionably take place in Delaware (at least).”[11] The court concluded that the planned sales were “close enough” to the subject of the lawsuits to satisfy the minimum contacts requirement and justify specific jurisdiction in Delaware.[12]
Having found the minimum contacts requirement satisfied, the court considered whether Delaware’s exercise of jurisdiction would “offend traditional notions of fair play and substantial justice.”[13] The court held that other considerations, such as those identified in Burger King Corp. v. Rudzewicz,[14] would not render jurisdiction unreasonable.
III. The Logical Implications
By establishing specific personal jurisdiction by virtue of filing an ANDA with plans to direct sales of a generic drug into a particular state, a generic drug manufacturer, such as Mylan, would appear to be subject to specific jurisdiction in any state in which it intends to market the generic drug. Almost always, this will be any state in the country.
Prior to the Supreme Court’s ruling in Daimler, branded-drug companies often asserted jurisdiction in a state based on general jurisdiction, arguing that the generic company was subject to jurisdiction in the state because it intended to sell the generic version of the drug in the state. In Daimler, however, the Supreme Court held that general jurisdiction cannot attach unless the defendant’s contacts with the forum state are “so continuous and systematic as to render [the non-resident corporate defendant] essentially at home in the forum State.”[15] A corporation is essentially at home only in its state of incorporation and the state where its principal place of business is located.[16]Daimler specifically rejected the notion that general jurisdiction will lie “in every State in which a corporation engages in a substantial, continuous, and systematic course of business.”[17] This decision in Daimler raised the concern as to whether brand name drug companies could continue to rely on general jurisdiction to file suits in the forum of their choice. However, the court’s ruling in Acorda, by establishing specific jurisdiction based on filing an ANDA with plans to sell the drug in a state, arguably makes the high bar for general jurisdiction established in Daimler of little significance in ANDA cases.
Thus, under Acorda, brand name drug companies are likely to continue to have wide latitude in selecting the forum in which to sue an ANDA-filer. Delaware and New Jersey, where ANDA cases are often brought, are likely to continue to be forums of choice for ANDA cases.
IV. Expected Future Litigation
Letters filed by Mylan in pending district court actions indicate that Mylan plans to seek panel and en banc rehearing in Acorda.[18] The letters provide a preview of Mylan’s potential arguments for rehearing. Mylan is expected to argue that Acorda’s holding that Mylan is subject to specific jurisdiction in every state “is contrary to the basic notion of specific jurisdiction and the more basic constitutional guarantees at the heart of the Supreme Court’s due process/personal jurisdiction jurisprudence.”[19] Mylan is further expected to argue that Acorda was wrongly decided because it “simply recreates the pre-Daimler status quo by allowing courts throughout the nation to rely on specific jurisdiction where general jurisdiction is no longer applicable.”[20] Mylan also indicates that it will argue that Acorda’s reliance on Mylan’s future contacts in Delaware is contrary to the Supreme Court’s Walden v. Fiore decision[21] and that the present decisions are misplaced in view of prior Federal Circuit precedent in Zeneca Ltd. v. Mylan Pharm., Inc.,[22] where the Federal Circuit “held that submission of an ANDA to the FDA in Maryland did not authorize the exercise of jurisdiction over the ANDA-filer by Maryland federal courts.”[23]Acorda, Mylan argues, makes “Zeneca merely academic.”
Regardless of the Federal Circuit’s final ruling, the losing party may very well file a petition for certiorari with the Supreme Court seeking review of the Federal Circuit’s decision. That Acorda and Mylan were represented at the Federal Circuit by former Solicitor Generals (Theodore Olson for Acorda and Paul Clement for Mylan), while AstraZeneca was represented by another Supreme Court veteran (Kannon Shanmugam), shows that each party considers this case to be important and that they are likely preparing to ask the Supreme Court to consider the matter. So the panel decision in Acorda appears to be merely the beginning of the appellate proceedings. Given these expected actions it will be interesting to see if the brand name drug companies continue to file suits in both the brand name drug company’s preferred jurisdiction as well as where the generic drug company is incorporated or has its principal place of business until all the Acorda appellate proceedings are concluded.
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[1]Paul E. Dietze, Ph.D., is Of Counsel in the Washington, DC office and Mini Kapoor, Ph.D., is an associate in the Houston, Texas office of the law firm of Haynes and Boone, LLP. Their practices emphasize pharmaceutical patent counseling, patent procurement, and patent litigation.
[2]Acorda Therapeutics Inc. et al. v. Mylan Pharm. Inc., No. 2015-1456 and AstraZeneca AB v.Mylan Pharm. Inc., No. 2015-1460, 2016 WL 1077048 (Fed. Cir. March 18, 2016) [Patently-O Discussion].
[3]Acorda Therapeutics Inc. & Alkermes Pharma Ireland Ltd. v. Mylan Pharm. Inc. & Mylan Inc., 78 F. Supp. 3d 572 (D. Del. 2015) (Stark, C.J.); AstraZeneca AB v. Mylan Pharm. Inc., 72 F. Supp. 3d 549 (D. Del. 2014) (Sleet, J.).
[7]Acorda, 78 F. Supp. 3d at 597; AstraZeneca, 72 F. Supp. 3d at 560.
[8] Judge O’Malley opined that by virtue of voluntarily electing to do business in Delaware, and registering and selecting an agent for service of process in the state, Mylan was subject to general jurisdiction in Delaware. Acorda, Nos. 2015-1456 & 2015-1460, 2016 WL 1077048 at *11 – *12 (Judge O’Malley concurring).
In a provocative new article called “Taking Patents,” 72 Wash & Lee L. Rev. (forthcoming 2016), Gregory Dolin (Baltimore) and Irina Manta (Hofstra) argue that the Federal Government effectuated a taking through its creation and implementation of the inter partes review mechanism. Below, Camilla Hrdy and Ben Picozzi summarize the main points of their recent response to Dolin and Manta, “The AIA Is Not a Taking: A Response to Dolin & Manta,” 72 Wash. & Lee L. Rev. Online 472 (2016).
Gregory Dolin and Irina Manta argue in a forthcoming article that the Leahy-Smith America Invents Act (AIA) effectuated a Fifth Amendment “taking” by enhancing the mechanisms for challenging issued patents in administrative proceedings. Initial data do indicate that patents are more likely to be found invalid in the new inter partes review (IPR) and covered business method review (CBMR) proceedings than in district court actions or through the IPR and CBMR’s administrative predecessors. Patentees’ have even complained that the filing of individual IPR petitions has affected their stock prices.
Has the AIA made it too easy to invalidate a patent? Have patentees been treated unfairly? Maybe. Maybe not. But one things is clear: Dolin and Manta’s argument that the AIA is a taking faces serious legal hurdles.
First, Dolin and Manta’s premise that patents are property rights protected by the Takings Clause is far less clear than they contend. While the Supreme Court has recently suggested that patents, like land, “cannot be appropriated or used by the government itself, without just compensation,” seeHorne v. Department of Agriculture, 135 S. Ct. 2419 (2015) (quoting James v. Campbell, 104 U.S. 356, 358 (1882)), both that statement, and the statement it quotes, are dicta. More recent decisions express greater ambivalence regarding patents’ status under the Takings Clause.
In contrast with trade secrets, the Supreme Court has never held that patents are property under the Takings Clause. In Florida Prepaid Postsecondary EducationExpense Board v. College Savings Bank, 527 U.S. 627 (1999), the Court held that Congress can’t abrogate states’ sovereign immunity from patent infringement claims. In reaching this conclusion, the Court stated that patents are “surely included within the ‘property’ of which no person may be deprived by a State without due process of law.” Id. at 642. But the Court declined to rule on patents’ status under the Takings Clause. See id. at 642.
Most recently, in Zoltek Corp. v. United States, 442 F.3d 1345 (Fed. Cir. 2006) (per curiam), vacated on other grounds, 672 F.3d 1309, 1314–22 (Fed. Cir. 2012) (en banc), the Federal Circuit held (rightly or wrongly) that 28 U.S.C. § 1498 is the only means of recovery for patentees whose patents are infringed by the U.S. government. Patentees can’t bring claims for compensation under the Takings Clause. Although the court eventually vacated that decision, the court never repudiated the reasoning behind its constitutional holding.
Dolin and Manta try to get around Zoltek by arguing that, unlike government infringement—which is like a forced permit and leaves all the rights of a patent intact—the AIA “changed the scope of patent rights themselves” by subjecting issued patents to more stringent post-issuance review. However, courts have not endorsed that argument, and analogs are difficult to find.
Second, even if we accept the argument that government can potentially take patents by altering their scope retroactively, courts are unlikely to view post-issuance review proceedings as the kinds of government actions regulated by the Takings Clause. Courts assessing constitutional challenges under the Fifth or Fourteenth Amendment tend to distinguish actions intended to “cure” defects in government administrative systems from incursions on property rights. In Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985), the Federal Circuit rejected a very similar challenge to IPR’s predecessor based partly on this distinction, noting that reexamination statute belonged to “the class of ‘curative’ statutes, designed to cure defects in an administrative system[,]” and that such statutes are treated more favorably for Fifth Amendment purposes even when they devalue property rights. We see little reason that a court would reach a different conclusion today.
Lastly, even if a court decides it is possible for the government to take patents by subjecting them to more stringent post-issuance review, Dolin and Manta’s argument almost certainly loses as a matter of takings doctrine. To determine whether a particular governmental action effectuates a taking, courts assess “the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations.” See Penn. Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978). Thus, even assuming we accept that the AIA significantly devalued all patents (a big “if”), whether this constitutes a taking depends on whether patentees should have anticipated that Congress would amp up administrative review, given the existing regulatory background.
Dolin and Manta argue the AIA’s enhanced IPR and CBMR proceedings interfered with patentees’ “reasonable investment-backed expectations” by increasing the likelihood that their patents would be found invalid in administrative proceedings utilizing patentee-unfriendly rules such as “preponderance of the evidence” standard for invalidation and “broadest reasonable construction” with limited opportunity to amend. But, as Dolin and Manta concede, the AIA was enacted against a background of federal statutes and regulations that authorize challenges to patent validity. IPR and CBMR review are only the latest in a series of administrative procedures authorizing parties to offensively challenge the validity of issued patents. To us, it seems highly unlikely that the question of whether the Takings Clause applies to the creation of new IPR and CBMR review could turn on such small differences as whether or not patentees have a full opportunity to amend their claims during review.
Also, it is worth noting that beyond third party challenges to patent validity, numerous federal regulatory statutes limit patentees’ ability to exploit their inventions for purposes of health and safety. For example, various regulatory review statutes, such as the Food, Drug, and Cosmetic Act (FDCA), the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), and the Toxic Substances Control Act (TSCA), practically reduce effective patent lifetimes by prohibiting patentees from commercially marketing or using protected products prior to regulatory approval. Yet none of these statutes fully compensate patentees for their losses.
Are these actions all takings as well? This conclusion has troubling consequences. Does Congress really need to compensate patentees every time it passes a statute that significantly affects the value of issued patents? Could Congress pass regulations for the purpose of restraining bad-faith enforcement of patents that have already been granted? What about judicial actions that reduce the value of patents? Do they intend for Congress to compensate patentees in these cases or to take fewer actions limiting patent rights, simply due to the fear of effectuating a taking? This seems like a dangerous basis on which to formulate patent policy.
In any case, we think that, given this regulatory backdrop and the existence of administrative review proceedings for over thirty years, patentees could foresee—or reasonably should have foreseen—that the government would continue to actively regulate patent rights without “just compensation.”
Together, these arguments persuade us that the AIA is not a taking. Nevertheless, the authors’ article is a thought-provoking and educational analysis of the constitutional implications of Congress’s recent efforts to reform the patent system. We thank them for reopening the door on this area of scholarship.
