Cooper v. Square is the final pending constitutional challenge to the inter partes and post grant review proceedings created by Congress in the America Invents Act of 2011 and briefing in the case is now complete.
In the final reply brief in the petition process, Cooper explains how this case is a good vehicle for the challenge:
This case is the only one left of three that raised a facial constitutional challenge to inter partes review (IPR). This Court relisted in Cooper v. Lee, No. 15-955, and MCM Portfolio v. HP, No. 15-1330, before denying cert on October 11, 2016. This case is distinct from both of those, and far more amenable to adjudication by this Court. This case does not have the vehicle problem identified by the federal respondent in Cooper v. Lee (since this case arises directly from an agency final decision, whereas Cooper v. Lee arose from a collateral proceeding). And this case does not seek the extreme constitutional remedies of the petitioner in MCM Portfolio (since this case seeks relief in the form of making IPR outcomes advisory, not in the form of annihilating an entire section of a federal agency).
In its responsive brief Square argued that Cooper waived his constitutional argument by not repeatedly raising the issue. The Cooper brief does a nice job of explaining the errors in that conclusion.
Patent Academic Ray Mercado also took advantage of the request for a responsive brief to file an amicus brief. Mercado argues that patents should be seen as “private rights” and therefore cannot be administratively cancelled. He writes: “Once the historical uniqueness of patent law is taken into account, it is clear that patents are ‘private rights’ for purposes of this Court’s separation of powers jurisprudence, and their validity must be decided by Article III courts.”
Constitutional Challenge to Inter Partes Review: Although the Constitutional issues in Cooper v. Lee and MCM v. HP were law-professor-interesting, they were not substantial enough for certiorari. The Supreme Court has now denied the Cooper and MCM petitions — leaving the IPR regime unchanged. Although Cooper v. Square is still pending, its chances are slight. The Supreme Court has also denied certiorari in Encyclopaedia Britannica (malpractice), Gnosis (appellate review), and GeoTag (case-or-controversy).
A new 101 Challenge: In its first conference of the term, the Supreme Court denied all of the pending petitions regarding patent eligibility. However, Trading Technologies has filed a new petition asking whether a new card game is categorically unpatentable so long as it uses a standard deck (rather than a novel deck) of cards. My post on the case asks: Does the Patent Statute Cabin-in the Abstract Idea Exception?That question references Section 100 of the Patent Act that expressly allows for the patenting of new use of a known manufacture.
Extra Territoriality of Trade Secrecy Law: On the trade secrecy front, Sino Legend has petitioned to review the Federal Circuit’s affirmance of the International Trade Commision’s ban on Legend’s importation of rubber resins used for tire production. The underlying bad-act was a trade secret misappropriation that occurred in China and the question on appeal asks: Whether Section 337(a)(1)(A) permits the ITC to adjudicate claims regarding trade secret misappropriation alleged to have occurred outside the United States. A Chinese court looked at the same case and found no misappropriation.
Design Patent Damages: Oral arguments were held earlier this week in Samsung v. Apple. During the arguments, all parties agreed that (1) the statute does not allow for apportionment of damages but rather requires profit disgorgement; (2) the article-of-manufacture from which profits can be calculated may be a component of the product sold to consumers; and (3) the determination of what counts as the article-of-manufacture is a question of fact to be determined by the jury. The only dispute then was on the factors that a jury should be considered and when the “inside gears” of a product should ever be included in the calculation.
Upcoming Supreme Court Oral Argument: SCA Hygiene (laches) on November 1; Star Athletica (copyright of cheerleader outfit) on October 31.
The USPTO has issued a notice of proposed rulemaking (NPRM) on patent and PTAB fees with the goal of raising revenue in order to improve patent quality and examination timeliness. Public comments are due by December 2, 2016.
The proposal includes:
Major increase in inter partes review fees – from $23,000 to $30,500 (petition + institution). Similar increases for PGR and CBM.
Large fee increase for patent applications with > 3 independent claims or > 20 dependent claims
Large fee increase for design patent search, examination, and issue fees — hopefully the PTO will increase its quality on that front.
New fee for sequence listing submissions of > 300 MB ($1000) and > 800 MB ($10,000).
Ex parte appeals +25% (up to $3,500)
Standard fees for utility applications are relatively steady => only about 10% increase.
Ethicon has filed its expected petition for writ of certiorari challenging the USPTO’s delegation of IPR Institution Decisions to the Patent Trial and Appeal Board. I wrote about the case earlier:
The newly filed petition argues pure statutory interpretation:
Whether the [AIA] permits the Patent Trial and Appeal Board instead of the Director to make inter partes review institution decisions.
The setup: The statute requires “The Director” to “determine whether to institute.” 35 U.S.C. § 314(b). Under the statute, the PTAB picks up its role after institution in order to “conduct each inter partes review instituted under this chapter,” § 316(c). Rather than making the determinations herself, the PTO issued a rule that the PTAB makes the institution decisions “on behalf of the Director.” 37 C.F.R. § 42.4(a).
Although the statute does not expressly prevent the Director from delegating her authority, Ethicon argues that the statute should be interpreted in light of the “longstanding policy of separation-of-functions whereby adjudicatory officers inside an agency (such as administrative law judges or, here, administrative patent judges) are insulated from discretionary executive functions.” Of course, the Director does not have to personally do all the work – The idea here though is that it is impermissible to delegate policy issues to the administrative patent judges. And, the AIA is clear that the institution decision is at least partially based upon policy and institutional competency determinations.
Husky Injection Molding v. Athena Automation (Fed. Cir. 2016)
Referring to the headline. The PTAB (acting on behalf of the PTO Director) held that traditional equitable defenses do not apply to IPR proceedings. Because this holding was made as part of an IPR institution decision, the appeal was dismissed for lack of jurisdiction.
The case here is interesting because Husky’s former owner (Schad) is the founder of competitor Athena. Schad is also co-inventor of Husky’s U.S. Patent No. 7,670,536 – that Schad’s company challenged in an IPR proceedings. The PTAB ultimately found some of the challenged claims valid and cancelled others.
On appeal Husky argues that assignor estoppel bars the IPR proceeding. The PTAB rejected that contention – holding that traditional equitable defenses do not apply to IPR proceedings. Athena v. Husky, IPR No. 2013-00290 (P.T.A.B. Oct. 25, 2013) (Institution Decision on behalf of the Director). On appeal, the Federal Circuit dismissed — holding that the institution decision is not appealable. 35 U.S.C. 314(d) (“The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”); Although the Supreme Court in Cuozzo suggested that some appeals of institution decisions may be available. Here, however, the court rejected the idea of venturing into that abyss:
[Prior cases] establish a two-part inquiry for determining whether we may review a particular challenge to the decision whether to institute. First, we must determine whether the challenge at issue is “closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review,” or if it instead “implicate[s] constitutional questions,” “depend[s] on other less closely related statutes,” or “present[s] other questions of interpretation that reach, in terms of scope and impact,” “well beyond ‘this section.’” Cuozzo. If the latter, our authority to review the decision to institute appears unfettered. But if the former, § 314(d) forbids our review. One further exception remains, however. At the second step of the inquiry, we must ask if, despite the challenge being grounded in a “statute closely related to that decision to institute,” it is nevertheless directed to the Board’s ultimate invalidation authority with respect to a specific patent. Id.; see also Versata; and Achates. If so, we may review the challenge.
After rejecting Husky’s challenge of the institution decision, the Federal Circuit moved to Athena’s appeal.
Incorporation by Reference: Athena challenged the portion of the Board’s opinion finding some of the claims not anticipated. The basic issue is that the prior art (Glaesener – U.S. Patent Pub. No. 2004-0208950) did not itself disclose all of the claimed elements. However Glaesener referred particularly to a prior patent (Choi): noting that Choi described “pineapple and toothed-ring mechanism” and in a separate paragraph stating that “All cross-referenced patents and application[s] referred to in this specification are hereby incorporated by reference.” The combination of Choi and Glaesener do (arguably) teach all of the claim element but the Board refused to treat them as a single document despite the incorporation by reference. On appeal, the Federal Circuit has vacated that holding.
The standard:
A host document incorporates material by reference if it “identif[ies] with detailed particularity what specific material it incorporates and clearly indicate[s] where that material is found in the various documents.” Advanced Display Sys., Inc. v. Kent State Univ., 212 F.3d 1272 (Fed. Cir. 2000). . . . In making such a determination, we assess whether a skilled artisan would understand the host document to describe with sufficient particularity the material to be incorporated [giving no deference on appeal]. . . . [Thus t]he incorporation standard relies only on the reasonably skilled artisan and his or her ability to deduce from language, however imprecise, what a host document aims to incorporate
Here, the court found sufficient particularity to incorporate Choi by reference – noting that PHOSITA would “appreciate Glaesener’s reference of ‘pineapple and toothed-ring’ to describe, with sufficient particularity” the securing assemblies in Choi. “To find otherwise would be to undervalue the knowledge of a skilled artisan.” On remand, the Board will need to re-evaluate anticipation based upon Glaesener now expanded by Choi.
In response to being sued for patent infringement, Apple filed for inter partes reexamination of ClassCo’s Patent No. 6,970,695. That litigation (originally filed in 2011) has been stayed pending the resolution here. Although the patent had survived a prior reexamination, this time the Examiner rejected the majority of the patent claims as obvious; the PTAB affirmed those rejections; and the Federal Circuit has now re-affirmed.
The patent relates to a “caller announcement” system that uses a phone’s speaker (rather than screen or separate speaker) to announce caller identity information. The system includes a “memory storage” that stores identify information being announced.
The examiner identified the prior art as U.S. Patent No. 4,894,861 (Fujioka) that teaches all of the claimed elements (of representative claim 2) except for use of the phone’s regular audio speaker (rather than a separate speaker) to announce a caller’s identity (claimed as the “audio transducer”). A second prior art reference was then identified as U.S. Patent No. 5,199,064 (Gulick) that taught the use of the audio transducer for providing a variety of call related alerts.
On appeal, ClassCo argued that the combination of Fujioka and Gulick was unreasonable because it would involve changing the function of the known elements. The Federal Circuit disagreed writing that:
KSR does not require that a combination only unite old elements without changing their respective functions. . . . Instead, KSR teaches that ‘[a] person of ordinary skill is also a person of ordinary creativity, not an automaton.’ And it explains that the ordinary artisan recognizes ‘that familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit the teachings of multiple patents together like pieces of a puzzle.
Slip opinion at 8 (quoting KSR). The court goes on to explain that a combination of known elements can be obvious even the elements don’t fit perfectly together like puzzle pieces. Rather, the approach is “flexible” in its pursuit of determining whether the combination would have been “predictable” – i.e., obvious.
Although KSR rejected a strict application of a motivation-to-combine, the court consistently required at least an explanation of that motivation. Here, the court found that “substantial evidence” supports the PTO conclusions since some of the benefits were suggested by both prior art references.
Secondary Indicia: During reexamination, ClassCo had also presented evidence of industry praise for its products covered by the patent. That evidence was disregarded by the PTO as, inter alia, not commiserate commensurate with the scope of the claims. 🙂 In particular, the Board noted that the industry praised particular embodiments but did not praise other potential embodiments. On appeal, the Federal Circuit rejected those conclusions. The court found that some of the evidence praised ClassCo features that were not available in the prior art and that were “within the scope” of the representative claims.
[T]he Board found the evidence not commensurate in scope with these claims on the ground that they are too broad, encompassing other embodiments. But “we do not require a patentee to produce objective evidence of nonobviousness for every potential embodiment of the claim.” Rambus. Rather, “we have consistently held that a patent applicant ‘need not sell every conceivable embodiment of the claims in order to rely upon evidence of [objective indicia of nonobviousness].’” In re Glatt Air Techniques, 630 F.3d 1026 (Fed. Cir. 2011) (quoting In re DBC, 545 F.3d 1373 (Fed. Cir. 2008)).
Although the Board erred in its approach to objective indica, that was harmless error since the prior art evidence was strong. “We nonetheless agree that the value this evidence possesses in establishing nonobviousness is not strong in comparison to the findings and evidence regarding the prior art under the first three Graham factors.” Obviousness affirmed.
Although a different product, the following ClassCo video review is a fun throw-back:
Wi-Fi One is the new owner of Ericcson’s U.S. Patent No. 6,772,215 that covers a method for encoding and sending packet-receipt error messages over the internet. In 2013, Broadcom brought this IPR challenge and the Board eventually found many of the claims anticipated.
On appeal here Wi-Fi challenges Broadcom’s standing to bring the IPR challenge under 35 U.S.C. § 315(b). Section 315(b) indicates that an IPR proceeding may not be instituted if the petitioner (or its privy) had been served with an infringement complaint more than one year prior.
315(b) Patent Owner’s Action.— An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.
Although Broadcom had not been previously sued on the patent, Wi-Fi argues that its privies had been previously sued. The PTAB rejected that argument – finding that Broadcom was not a “privy” of the prior litigants because Wi-Fi did not prove that Broadcom had power to control the prior district court litigation or that Broadcom would be bound by the outcome of that prior litigation. The Board also refused Wi-Fi’s request for further discovery on the matter.
On appeal, the Federal Circuit affirmed — holding that the question of proper institution is unreviewable based upon the statutory statement that “The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” 35 U.S.C. § 314(d). Although I have not quite found the line in the decision, is appears that the court also held that even the denial of discovery is unreviewable.
The Supreme Court extended the preclusion of judicial review to statutes related to the decision to institute; it did not limit the rule of preclusion to substantive patentability determinations made at the institution stage, as the facts of Cuozzo itself make clear.
Slip Opinion at 8. The decision here essentially follows the Federal Circuit’s prior ruling in Achates.
The court also sided with the Board on Wi-Fi’s substantive argument – affirming the Board decision that the prior art anticipates.
In an important decision, the Federal Circuit issued a limited rejection of Inter Partes Review amendment procedure — holding that the PTAB acted in an arbitrary and capricious manner by denying the patentee’s motion to amend its challenged claims.
Although claim amendments are officially allowed in IPR proceedings, the Patent Trial & Appeal board has a practice of only approving amendments after the patentee shows that the claims as amended are patentable over the references at issue in the case. As part of this process, the PTAB requires that the patentee discuss each feature added to the claim and “whether the feature was previously known anywhere, in whatever setting, and whether or not the feature was known in combination with any of the other elements in the claim.” Toyota Motor Corp. v. American Vehicular Sciences LLC, IPR2013-00419, slip op. at 4–5 (Paper 32) (PTAB March 7, 2014).
Here, the patentee did not discuss each new feature individually but rather merely stated that the combination of new features were not described in the prior art. And, because the patentee failed to discuss each added feature separately, the PTAB found that the patentee “failed to meet its burden of showing that it is entitled to an award of a patent on a system having those features.”
On appeal, however, the Federal Circuit rejected that analysis — finding it “arbitrary and capricious.” In particular, the court wrote that the discussion of the combination was not “meaningfully different” from the PTAB’s proposal.
In this case, we fail to see how describing the combination is meaningfully different from describing what is new about the proposed claims, even in comparison to the unamended claims.
This case may have some impact on the pending en banc appeal In re Aqua Products. That appeal addresses the following two questions:
(a) When the patent owner moves to amend its claims under 35 U.S.C. § 316(d), may the PTO require the patent owner to bear the burden of persuasion, or a burden of production, regarding patentability of the amended claims as a condition of allowing them? Which burdens are permitted under 35 U.S.C. § 316(e)?
(b) When the petitioner does not challenge the patentability of a proposed amended claim, or the Board thinks the challenge is inadequate, may the Board sua sponte raise patentability challenges to such a claim? If so, where would the burden of persuasion, or a burden of production, lie?
The Veritas court writes that the PTAB decision here is erroneous regardless of the outcome of Aqua.
A new petition by Pactiv (a Reynolds Co.) asks the Supreme Court to consider whether the PTO can expand the scope of an ex parte reexamination beyond the “substantial new question of patentability” identified in the Director’s order granting the reexamination. Basically, can the reexamination examiner rely upon prior art different from that in the petition.
Question as presented to the Supreme Court:
Whether, because [35 U.S.C. §] 304 requires the Director to issue an order for a reexamination “for resolution of the question,” the “substantial new question of patentability” included in the Director’s order delineates the scope of the ex parte reexamination.
[Pactiv v. Lee petition] Pactiv argues that the scope of reexaminations were intended to be limited to avoid becoming an “unbridled review system [that] could impose enormous burden and undue harassment on patentees.” (Petition).
Section 304 explains that the PTO Director can order ex parte reexamination after finding that “a substantial new question of patentability affecting . . . is raised.” The statute goes on to state flatly that the reexamination order should be “for resolution of the question” — i.e., for resolution of the substantial new question raised in the petition. That part of the statute is clear, however, the statute does not flatly bar modification of the question during the substantive reexamination.
The PTO’s position that allows for shifting rejections appears to stem from Belkin Intl Inc. v. Kappos, 696 F.3d 1379 (Fed. Cir. 2012), a decision involving inter partes reexamination. Belkin is something of a mixed-bag. In its decision, the Federal Circuit wrote that the inter partes challenger could not raise new questions of patentability beyond those in the SNQ order. At the same time, the court also wrote (in dicta) that the PTO may, on its own, raise other issues. The court wrote:
Inter partes reexamination is not totally limited to those issues suggested by the requester that present a substantial new question of patentability. Indeed, the PTO may make any new rejection, as long as that rejection also meets the substantial new question of patentability requirement. See 35 U.S.C. § 303(a) (“On his own initiative, and any time, the Director may determine whether a substantial new question of patentability is raised by patents and publications discovered by him . . . .”). Thus, the scope of reexamination may encompass those issues that raise a substantial new question of patentability, whether proposed by the requester or the Director. . .
Belkin. Pactiv challenges this dicta portion of Belkin – arguing that it is a misinterpretation of the statute and, in any event, does not apply to ex parte reexamination. I would agree with Pactiv in its reading of this portion of the statute – if the USPTO wants to raise a new question on its own, the statute provides for a process of ordering reexamination rather than the implicit addition as done here. At the same time, the availability of amendments and addition of new claims mean that new searches must be available in some form. See 35 U.S.C. § 305.
For its part in the case, the Federal Circuit affirmed the PTAB determination without opinion (R.36 Affirmance).
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The patents at issue in the case are U.S. Patent No. 6,315,921 and U.S. Patent No. 6,395,195. They relate to an oxygen absorber used in meat packaging.
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.
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.
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).
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.
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.
