Post Grant Proceedings Against U.S. Patents
I. Introduction
II. Advantages of Post Grant Proceedings for Patent Challengers
III. Disadvantages of Post Grant Procedures for Patent Challengers
IV. Evaluating the Desirability of Filing a Post Grant Procedure
V. Which Post Grant Procedure is Applicable?
VI. Which Post Grant Procedure to Use?
VII. Procedure and Practice
VIII. Relationship Between Post Grant Procedures and District Court Proceedings
IX. Special Post-Grant Review for Business Method Patents
I. Introduction
The Leahy-Smith America Invents Act (“AIA”) made major changes in the law as it applies to the possibility for third parties to challenge the validity of granted patents by action in the Patent Office. Specifically:
(a) the little-used inter partes re-examination procedure was replaced by inter partes review (“IPR”),which, subject to some limitations discussed below, can be brought at any time later than nine months after grant of the patent, but only on grounds based on prior patents or publications;
(b) a new proceeding called post grant review was introduced to allow more broadly based challenges to a patent, but only during the period of nine months after grant or reissue. This, however is only available for patents which contain or at one time contained a claim having an effective date on or after March 18, 2013; and
(c) temporary provisions were added to allow post grant review of covered business method patents in circumstances where the party seeking review has been threatened with a suit for patent infringement (see Section IX, infra).
The stated purpose of these post-grant procedures in the AIA is to “establish a more efficient and streamlined patent system that will improve patent quality and limit unnecessary litigation costs.” (PTO, Rules of Practice, 2012).
II. Advantages of Post Grant Proceedings for Patent Challengers
The post grant procedures provide competitors with a faster and less expensive way than litigation to test the validity of granted patents. The major advantages as compared with litigation are:
No presumption of validity for patent in post grant procedures
In the new proceedings, the challenger only has to establish its case for invalidity based on the balance of probabilities. There is no presumption that a patent is valid. This is important because recent case law in the Federal Circuit has emphasized that invalidation of a patent in court proceedings requires clear and convincing evidence. The lower standard in inter partes review and post grant review provides a strong incentive to challengers to use these proceedings rather than court proceedings to challenge the validity of a patent claim.
Claims are given their broadest reasonable interpretation[1]
In district court proceedings, a narrow interpretation of claim language may be given in order to preserve the validity of a claim whereas, in the new proceedings, claims are given their broadest reasonable interpretation. The PTO takes the view that use of this standard rather than that used in district court proceedings is appropriate because the patent owner can amend a claim in post grant proceedings to clarify the meaning if necessary.
The Post Grant Proceedings are Quick
The AIA mandates that the PTAB must issue its final determination one year from the PTO notice of proceeding, although the determination may be delayed for up to six months for good cause.
The Post Grant Proceedings Are Less Expensive than Litigation
The American Intellectual Property Law Association Law Practice Management Committee has estimated that the median costs of patent litigation with between one and twenty-five million dollars at risk is $1.5 million through the end of discovery and $2.5 million inclusive of all costs (AIPLA, 2011). In contrast, estimates of average costs of post grant proceedings are in the order of about $400,000.
III. Disadvantages of Post Grant Procedures for Patent Challengers
Estoppel
The primary disadvantage of the post grant procedures is that a party that has challenged a patent will be estopped from raising any issue that it raised or reasonably could have raised in such review in any subsequent proceedings in the USPTO, a district court or the ITC. This is the big disincentive to instituting post grant review or inter partes review and needs to be balanced against the advantages discussed above, including the potentially broader claim construction and lower standard of proof needed to succeed in these proceedings.
The PTAB Can Proceed to Final Decision Notwithstanding Settlement
Under the AIA, the PTAB has discretionary power to proceed to a final written decision even if the parties have reached a settlement agreement. This has the societal benefit of allowing the PTAB to invalidate a patent that should not have issued. If the PTAB makes liberal use of this discretion, this may make patent owners reluctant to settle once a post grant procedure has been initiated. On the other hand, this may make a patent owner more willing to negotiate a license with a competitor before the competitor initiates a post grant procedure where the competitor makes the patent owner aware that bona fide grounds for invalidity exist.
IV. Evaluating the Desirability of Filing a Post Grant Procedure
The desirability of filing a post grant challenge to the validity of a patent will depend on the circumstances facing the prospective challenger. Factors that may be weighed in typical circumstances include:
Patent challenger not under immediate threat
A party evaluating the cost effectiveness of a post grant procedure to challenge the validity of a patent may first take account of the immediacy of any threat of litigation. A party who is not under immediate threat may want to defer the cost of a post grant procedure unless and until the party has been sued or threatened with suit. It is possible that, in the period in which a first party defers filing a post grant challenge to a particular patent, a second party may file a challenge to the patent and bear the related costs thus enabling the first party to forego such costs in whole or in part.
Patent challenger facing immediate threat or impediment
Where a party is threatened with litigation, or in situations where a particular patent acts as an impediment to a planned business development, a party may want to remove the threat of litigation or the uncertainty caused by the impediment at the earliest possible date. In that event, the party may consider the cost effectiveness of a post grant procedure vis-à-vis the alternatives, including the possibility of a license arrangement. Such consideration would involve not only the possible costs of the post grant procedure, but an evaluation of the risk that pursuing this course would precipitate the retaliatory filing of a district court action for infringement of a patent.
This evaluation would desirably be made in connection with an opinion of counsel as to patent validity and/or non-infringement for the claims of the patent as properly construed. Counsel’s opinion, if indicative that the patent is of doubtful validity if construed to cover a third party’s product or method, would be useful to reduce the risk of infringement. It could also be used to satisfy the petition requirements for initiating the post grant procedure if this proves to be necessary or desirable.
A party armed with well-reasoned arguments of counsel as to the lack of merit in a claim for patent infringement can use those arguments to reduce the risk of a lawsuit or increase the possibility of a license on reasonable terms. In this connection, a recent decision of the Supreme Court has made it considerably easier for courts to impose sanctions on non-practicing entities and other plaintiffs that bring meritless patent suits. A party armed with knowledge as to the lack of merit in a prospective law suit can use this knowledge to advantage in avoiding such suit.
Patent Challenger in Litigation
A party sued for patent infringement in district court may find the advantages of the post grant procedures attractive. Such party may also be less likely to worry about the possible estoppel effects such that the filing of a request for inter partes review (or post grant review if within nine months of patent grant) may be desirable.
Under the America Invents Act, inter partes review will not be permitted if the challenger has previously commenced an action in the district court challenging the validity of the patent or if more than one year has passed since the potential challenger or one of its privies has been sued for infringement.[2] However, as long as the inter partes review is commenced within one year of the start of the law suit for infringement, this can succeed and the district court may stay its proceedings to await the outcome of the PTO review.[3]
There is no bar on the defendant in an infringement case from seeking ex parte re-examination in the PTO at any time.
Use of Post Grant Procedures to Date
It has now been more than a year and a half since the relevant provisions of the AIA came into effect on September 16, 2012, and the practical effects of some of the provisions are becoming clear.
To date, inter partes review has been popular with defendants to infringement actions.[4] In about two-thirds of the cases where inter partes reviewhas been requested, the district court has granted a stay or partial stay of pending infringement proceedings pending determinations in the inter partes review procedure.[5]
After a slow start, petitions for review of covered business methods are also becoming more popular.[6]
Since post grant review is, as noted above, only applicable to patents that contain or ever have contained a claim entitled only to a date on or after March 16, 2013, there is little information on use of this procedure.
V. Which Post Grant Procedure is Applicable?
A patent challenger’s discretion as to which post grant procedure to use to contest the validity of a patent is limited by the following factors:
When the review is requested:
Inter partes review:After nine months from the grant or reissue, or aftertermination of post-grant review (35 USC 311(c)).[7] This period is, however, subject to a limitation that if one has been sued for infringement, inter partes review must be requested within one year of service of the complaint[8] unless an IPR has already been commenced by another party, in which case joinder may be permitted.[9] A further limitation is that a petitioner cannot commence inter partes review after it has brought a declaratory judgment action.[10]
Post grant review: Only within nine months from the grant of a patent or its reissue, but in the case of reissue, post grant review is limited to claims not present in the original patent (35 USC 321(c)).
Covered business method: There is no limitation on the period following grant within which review of a covered business method patent may be sought. But, such review cannot be sought unless and until the appropriate party has been sued for or threatened with infringement of the patent.
The Issue Date/Effective Filing Date of the Patent Being Challenged
Inter partes review: Applies to any patent issued before, on or after March 16, 2013.
Post grant review: Only patents that contain or at any time contained a claim having an effective date on or after March 16, 2013.
Covered business method: Applies to any covered business method patent regardless of issue date or effective filing date.
The Grounds for Challenging the Patent
Inter partes review: Limited to novelty and obviousness over prior patents and publications (35 USC 311(b)).
Post grant review: Any ground of invalidity that can be raised as a defense in an infringement action (35 USC 321(b)).
Covered business method: Any ground of invalidity that can be raised as a defense in an infringement action (35 USC 321(b)).
The Subject Matter of the Patent
Inter partes review: Applies to all subject matter.
Post grant review: Applies to all subject matter.
Covered business method: Applies only to business method patents that contain a claim to a method or corresponding apparatus for performing data processing or other operations used in the practice, administration or management of a financial product or service and does not apply to patents for technological inventions. A technological invention is defined as one that solves a technical problem using a technical solution (37 CFR 301(b)).
Other Limitations
Inter partes review: Unless inter partes review based on a petition by another is already proceeding, a proceeding may not be instituted if the petition requesting the proceeding is filed more than one 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 (35 USC 315(b)).
Post Grant Review: motion for preliminary injunction in an action commenced within three months of the grant of the patent shall not be stayed in favor of post grant review (35 USC 325(b)).
Covered business method: In general, proceedings for covered business review are the same as for post grant review, but there are some specific requirements that differ.
VI. Which Post Grant Procedure to Use?
Within the above limitations, a patent challenger still has discretion as to whether to challenge the validity of a patent by filing for post grant review during the nine months following patent issue or by filing for inter partes review thereafter. A decision in this respect may take account of a number of factors, including the following:
Basis for the Challenge to Patent Validity
As discussed above, the grounds upon which inter partes review may be used to challenge patent validity are limited to novelty and obviousness over prior patents and publications. Thus, if a challenge is to be made on other grounds, such as lack of enablement or written description, inequitable conduct or lack of statutory subject matter, the same would either have to be made in the context of post grant review, ex parte reexamination or in litigation.
Mitigation of Possible Estoppel Effects
Since an estoppel would only apply to an issue that could reasonably have been raised in the proceeding, the estoppel effects of an adverse decision in inter partes review would be limited to issues of novelty and obviousness. Thus, notwithstanding an adverse decision in inter partes review, a challenger would not be estopped from contesting the validity of a patent in district court or ITC proceedings on other grounds, such as lack of enablement or written description, inequitable conduct, or lack of statutory subject matter. In contrast, an adverse decision in post grant review could result in an estoppel with respect to these other issues as well.
Cost
The filing fee for inter partes review is $9,000 with filing of an initial request with 20 claims ($200 for each additional claim) and $14,000 post institution for 15 claims (plus $400 for each additional claim). The filing fee for post grant review or covered business methods is $12,000 with filing of an initial request with 20 claims ($250 for each additional claim) and $18,000 post institution (plus $550 for each additional claim). Thus, the filing fees for inter partes review are about 30% lower than those for post grant review.
Other costs for inter partes review can also be expected to be lower than in post grant review since there would normally be fewer issues being litigated. In addition, discovery costs for post grant review can be expected to be significantly higher than for inter partes review because, in inter partes review, depositions are normally limited to cross examination of someone who has made an affidavit or declaration. In post grant review, discovery is broader (although still more limited than is normal in district court actions).
VII. Procedure and Practice
The post grant procedures are carried out by the new Patent Trial and Appeal Board (“PTAB” or “the Board”) and are subject to similarprocedural rules except where differences are mandated by the differences in statutory provisions.[11] The normal timeline of the procedures and an explanation of similarities and differences between the respective procedures follows:
Petitions requesting initiation of each type of review must explain basis for review and set out real party in interest and their privies.[12] Petitions become publicly available as soon as practicable.
The initial petition must contain sufficient information to meet the threshold requirement for establishing each type of review (see below). If appropriate, this may be supported by expert testimony.[13] There is a limit on the length of the petition of 60 pages for inter partes review and 80 pages for post grant review.[14] There is, however, nothing to prevent a challenger from filing multiple petitions against the same patent each challenging different claims or asserting different grounds of unpatentability.[15] A petitioner must identify each claim that is challenged and the specific statutory grounds on which each challenge to the claim is based, provide a claim construction for the challenged claims, and state the relevance of the evidence to the issues raised. A petitioner must also identify how the construed claim is unpatentable over the relevant evidence.[16] While not required, the PTO trial guide encourages the use of claim charts in the petition.
Certain certifications are also required. The petitioner must certify that the patent for which review is sought is available for inter partes review and that the petitioner is not barred or estopped from requesting a review challenging the patent claims on the grounds identified in the petition.[17]
Although it is possible for the claim construction section simply to state that terms shall be given their usual meaning, it is customary for the proposed claim construction in the petition to try to take advantage of the “broadest reasonable construction” rule. If testimony is supplied, this will be scrutinized by the Board and if found to be inadequate, review may be denied. [18]
Patent Owner Preliminary Response
Patent owners may file a response arguing that there should be no review. The filing of a response can be waived. No amendment is permitted at this stage. Filing of new testamentary evidence will be permitted only very rarely, for example if there is a question of whether the challenger has standing to bring the proceedings.
The statute limits the ability of the patent owner to file testimony at this stage and precludes the filing of any amendment. Under 35 U.S.C. 315(a)(1), a patent owner may provide evidence that the petitioner filed a civil action challenging the validity of a claim of the patent, e.g., in a declaratory judgment action in district court, prior to filing the petition and if this is the case, the patent owner should point this out. Other circumstances where the patent owner’s response may be helpful are where the petitioner’s claim construction is clearly faulty or where the real party in interest has not been disclosed. .The preliminary response may cite evidence supporting the patent owner’s contentions. Such evidence may include previously existing declarations, trial testimony, deposition testimony, and expert reports. A preliminary response may not, however, present new testimonial evidence (i.e., testimonial evidence prepared specifically for the purpose of the IPR proceeding) without authorization from the Board. This latter fact is leading to a trend in which patent owners waive their right to respond to the initial petition in cases where the only dispute is over issues of patentability. Nevertheless, if there is a basis for challenging the standing of the petitioner or if the patent owner wishes to draw attention to differences in the strength of various claims, it is best to do so at this stage.
Institution Decision and Initiation of Review
The Board will review the petition to determine whether it contains sufficient information to meet the threshold requirement for the type of review requested. The threshold requirements are:
Inter partes review:That there is a reasonable likelihood that petitioner will prevail on at least one claim (35 USC 314(a)).
Post grant review and covered business method: Whether it is more likely than not that at least one of the claims challenged is unpatentable or the petition raises a novel or unsettled legal question that is important to other patents or patent applications (35 USC 324(a)).
In most cases where review has been requested, it has been ordered, but rarely on every ground set out in the petition.[19] Nor is review necessarily instituted on every claim that is attacked. The decision on whether to institute review is not appealable.[20] The fact that the art relied upon had previously been considered by the examiner or by a court has not prevented the PTAB from ordering review.[21] Although in SAS Institute, Inc. v. complementSoft, LLC,[22] a petition was denied on the basis that prior art and arguments presented were substantially the same as in a prior IPR petition.
Patent Owner Motion to Amend Claims
Amendments are permitted only to cancel a challenged claim or to replace a challenged claim with a reasonable number of substitute claims, and are permitted only after conferring with the Board. Normally there will be only one opportunity to amend. The PTO has indicated that normally it will take the view that claim substitution should be on a one-for-one basis. The “scope of the claims” may not be “enlarged.” Early decisions of the Patent Trial and Appeal Board on questions of amendment have held that when submitting an amendment, the patent owner needs to explain why the amended claim is patentable over the cited art and other art the patent owner is aware of and how the claim is supported by the specification;[23] the patent owner also needs to explain the significance of any proposed new feature to be added to a claim from the perspective of one skilled in the art including an explanation of such a person’s knowledge and skill set;[24] and a 15 page limit on motions to amend, including the text of the claim amendments will be enforced.[25]
Permission to make amendments may be refused if the proposed amendment lacks support in the original document, which may be the case if a new claim is directed to an embodiment combining features from different parts of the original disclosure.[26]
Discovery for Each Type of Proceeding[27]
Routine discovery in the post grant procedures is limited as follows:
Inter Partes Review:limited to the deposition of witnesses submitting affidavits or declarations; and what is otherwise necessary in the interests of justice.
Post Grant Review and Covered Business Methods: limited to evidence directly related to factual assertions advanced by either party in the proceeding.
Evidence is in general submitted in written form, but persons giving affidavit evidence are subject to deposition on their testimony. [28]
Routine discovery includes production of any exhibit cited in a paper or testimony, cross examination of persons who have made affidavits or declarations on behalf of the other party and relevant information that is inconsistent with a position advanced during the proceeding. All documents submitted should be in English or translated into English.
Rule 37 CFR 42.61(c) provides that data set out in a patent specification will only be accepted as true if supported by an affidavit from a person having firsthand knowledge of how the data were derived, which will then expose the maker of that affidavit to cross examination.
A party may request additional discovery to that discussed above. The Board will consider whether such request meets the applicable standard:
(a) for inter partes review: permitted only in the interests of justice.
(b) for post grant review: must relate to facts of the case as noted above and will be permitted only for good cause.
Settlement
At any time before the Board’s decision, the parties may settle. However, they must file full details of the settlement which will be available to “government agencies on written request or any person showing good cause.” Otherwise, the settlement details can be kept from public view.
Notwithstanding that the parties have reached a settlement agreement, the Board has discretionary power to proceed to a final written decision even if the parties have reached a settlement agreement.
Appeal
Decisions of the Board are appealable to the Court of Appeals for the Federal Circuit by either party.
VIII. Relationship Between Post Grant Procedures and District Court Proceedings
Since, as discussed above, different standards are applied to claim construction and burden of proof in post grant procedures than in district court proceedings, there have been issues arising from the application of the different standards in co-pending cases before different tribunals.
In In re Baxter International Inc.[29] it was held that the differing standards of proof applying in court cases and in re-examination proceedings justified reexamination after the court’s decision if a substantial new question of patentability was presented.[30]
In Speedtrack Inc. v. Endeca Technologies Inc.[31] it was held that a defendant in an infringement action was not estopped from arguing that a claim term had a different meaning from that which it had taken when requesting re-examination in the USPTO, questions of judicial estoppel of this type being within the discretion of the district court and there having been no abuse of discretion in this case.[32]
In Versata v. SAP,[33] a post grant review relating to a covered business method, the PTAB held that it had the ability to hold the contested claims invalid even though they had previously been held to be not invalid by the Federal Circuit,[34] noting that its claim construction, using the broadest reasonable interpretation of the claims, was different from that of the district court, which had not been appealed to the Federal Circuit.
In Interthinx Inc. v. CoreLogic Solutions LLC,[35] a case of post grant review for a covered business method, the PTAB held that neither collateral estoppel nor the doctrine of res judicata prevented it from reaching a different conclusion from a district court on the question of whether a computer implemented method for appraising a real estate property was patent eligible under 35 USC 101. The Board took the view that even though 35 USC 101 determinations were a matter of law, these determinations were underpinned by factual determinations and so the fact that in district court the relevant standard was “clear and convincing evidence” whereas in the PTAB the issue was determined on the “balance of probabilities” justified reaching a different conclusion from the district court.
IX. Special Post-Grant Review for Business Method Patents
Section 18 of the AIA added a special, but temporary, provision for reviewing business method patents, which will expire after eight years from the date on which implementing regulations come into effect.
Under this provision, a special procedure applies to business method patents that claim “a method or corresponding apparatus for performing data processing or other operations used in the practice, administration or management of a financial product or service,” except for patents for technological inventions.[36] The AIA charged the Director of the PTO with the task of issuing regulations to define a “technological invention.” In Rule 37 CFR 42.301, published in theFederal Register, vol. 77 page 48734, the Director has decided that a determination should be made on a case-by-case basis “whether the claimed subject matter as a whole recites a technological feature that is novel and nonobvious over the prior art and solves a technical problem using a technical solution.”
Rules 37 CFR 42.300 – 304 govern the new procedure, which basically follow those for post grant review, except for the requirements of standing and when the petition may be filed. There is no limitation on the period following grant within which review of a covered business method patent may be sought. It is, however, a requirement that the party challenging the patent, its real party in interest, or privy has “been sued for infringement of the patent or been charged with infringement under that patent.” “Charged with infringement” is defined as “a real and substantial controversy regarding infringement of a covered business method patent exists such that the petitioner would have standing to bring a declaratory judgment action in Federal court.” Furthermore, the challenger, its real party in interest, or privy, must not be someone who is estopped from making a challenge (Rule 37 CFR 42.302).
In Versata v. SAP,[37] the PTAB held that the question of compliance with the patent eligibility requirements of 35 USC 101 was one that could be considered on post grant covered business method review and held the claims in suit invalid for failure to comply with 35 USC 101, notwithstanding that the Federal Circuit had previously held otherwise.[38] The invention related to hierarchical arrangement of data in a method for pricing products and services. In reaching its conclusion, the Board first confirmed that 37 CFR 42.300(b), which applies the broadest reasonable interpretation of a claim in post grant procedures in the USPTO, was within the USPTO’s rule making authority and consistent with prior case law. Based on this broad interpretation of the claims, the Board concluded that the claim’s reference to computer features required “only routine computer hardware and programming” and so had no limiting effect on the scope of the claim. Once the computer aspects had been removed from the claim, all that was left was a patent-ineligible abstract idea.
Endnotes
[1]A position reiterated by the PTAB in Garmin International Inc. v. Cuozzo Speed Technologies LLC 108 USPQ2d 1852 (PTAB 2013). It should, however, be noted that this is not necessarily the interpretation proposed by the challenger. In Liberty Mutual Insurance Co. v. Progressive Casualty Insurance Co. 109 USPQ2d 1733 (PTAB 2014), the Board adopted its own interpretation rather than adopting that proposed by the challenger, whose interpretation was deemed to be too broad to be reasonable. The PTO’s Trial Practice Guide discusses the question of claim interpretation in proceedings before the PTAB noting that claim charts are helpful, but not required and that in general, claim terms will be given their broadest reasonable interpretation so that if a party believes that a specific term has a meaning other than its plain meaning this needs to be pointed out. The PTO’s decision to use the “broadest reasonable interpretation” standard rather than the more flexible standard used in court proceedings has been controversial. The PTO has commented on this:
Only through use of the broadest reasonable claim interpretation standard can the Office ensure that uncertainties of claim scope are removed or clarified. Since patent owners have the opportunity to amend their claim during IPR, PGR and CBM trials, unlike in district court proceedings, they are able to resolve ambiguities and over-breadth through this interpretive approach, producing clear and defensible patents at the lowest cost point in the system.
[2]See 35 USC 315(a) which came into effect on September, 16 2012. To be a bar, the statute requires that the service date of a complaint for infringement be more than a year before the petition for inter partes review is filed. In Macauto USA v. BOS GMBH & KG (IPR2012-00004), the PTAB held that, in a case where an infringement action is restarted with service of a complaint after a voluntary dismissal of an earlier action, the one year period restarts with service of the new complaint.
[3]Except where the challenger subsequently files a court action challenging the validity of the patent, stays are discretionary and the court will normally consider factors such as whether discovery is complete, whether a stay will simplify the issues and whether a stay would provide a clear advantage or prejudice to one side when deciding whether to stay proceedings before it. Regents of University of Michigan v. St. Jude Medical Inc. (E.D. Mich, May 31, 2013)
[4]983 filings up to the end of March 2013, over 80% of which had parallel cases in district court.
[5]Up to the end of 2013, approximately 80% of inter partes review petitions were filed in cases where litigation was also proceeding in district court.
[6]140 filings up to the end of March 2014.
[7]As originally enacted, this nine month waiting period applied to all patents granted after September 16, 2012. This was changed by a Technical Amendments Act (Public Law 112-274) that came into effect on January 14, 2013, and restricted the application of the nine month waiting period to patents which contain or ever have contained a claim entitled to a date of March 16, 2013, or later or is a patent granted on a continuing application of an application meeting such criteria. This change has been implemented by revised 37 C.F.R 42.102 which provides that for patents “not described in section 3(n)(1) of the Leahy‑Smith America Invents Act” petitions for inter partes review may be filed at any time after “the date of the grant of the patent.”
[8]35 USC 315(b).
[9]The effect of 35 USC 315(b) and (c).
[10]35 USC 315(a)(1).
[11]35 USC 6 as amended by the AIA sets out the statutory basis for the Board. Its rules of procedure will be common to most post‑grant procedures (Rules 37 CFR 42.1 ‑ 42.80, published on August 14, 2012, at 77 Fed. Reg. 48612.) The PTO has also issued a Patent Trial Practice Guide which will apply to inter partes review, post grant review, and covered business method patent review.
Although these rules are more “legalistic” than some had hoped for, unlike the rules of the Trademark Trial and Appeal (TTAB), they still differ considerably from the Federal Rules of Civil Procedure which apply in federal courts. The PTO explains that
Unlike in proceedings under the Federal Rules of Civil Procedure, the burden of justifying discovery in Board proceedings would lie with the party seeking discovery. Proceedings before the Board differ from most civil litigation in that the proponent of an argument before the Board generally has access to relevant evidence that is comparable to its opponent’s access. Consequently, the expense and complications associated with much of discovery can be avoided.
The rules provide that each party represented by counsel must designate a lead counsel and back‑up counsel. Counsel will require to be appointed by a power of attorney (37 CFR 10(b)). Lead counsel must be persons admitted to practice before the PTO, but 37 CFR 42.10(c) provides that additional counsel may be recognized on a particular matter where he or she is an “experienced litigating attorney and has an established familiarity with the subject matter at issue in the proceeding.”
Rule 37 CFR 42.11 imposes a duty of candor on all “parties and individuals involved in the proceeding” before the PTAB.
Rule 37 CFR 42.61(c) provides that data set out in a patent specification will only be accepted as true if supported by an affidavit from a person having firsthand knowledge of how the data were derived. Rule 37 CFR 42.65 sets out the requirements for expert testimony and what is required in an affidavit supplying test data.
[12]Petitions may, however, be filed by any party other than those who are estopped by the statute itself so that a party that might be estopped from challenging validity in court proceedings on the basis of assignor estoppel is apparently not estopped from challenging validity in inter partes review. Synopsis, Inc. v. Mentor Graphics Corp., IPR2012‑00042.
[13]An expert declaration has been included with over 80% of the petitions filed up to the end of 2013.
[14]37 CFR 42.24. The petition must be double spaced (except for claims charts which may be single spaced) and 14 point or larger. It is possible to make a motion for more pages in the interest of justice, but these are rarely granted.
[15]See the two separate petitions filed by Liberty Mutual Insurance Co. for covered business method review against Patent No. 6,064,970 reported at 109 USPQ2d 1733 and 109 USPQ2d 1833 (PTAB 2014).
[16]37 CFR 42.104(b), 42.204(b), or 42.304(b).
[17]37 CFR 42.104(a), 42.204(a) and 42.304(a). The Trial Practice Guide includes a lengthy discussion as to who should be regarded as a “privy” or real party in interest when considering the estoppel provisions of applying to inter partes review and post grant review. The Guide concludes that while there is no bright line definition and that this question may have to be dealt with on a case-by-case basis, “a common consideration is whether the non‑party exercised or could have exercised control over a party’s participation in a proceeding.” A further test may be who funds the proceeding.
[18]See for example Monsanto Co. v. Pioneer Hi‑Bred Int’l, Inc. (IPR2013‑00022 and IPR2013‑00023), where calculations in the challenger’s expert opinion were found to lack sufficient factual underpinning.
[19]This, coupled with the limits on the length of the petition indicates that petitioners may wish to limit the grounds raised to those most likely to succeed.
[20]35 USC 314(d). It is possible to seek a rehearing, but this will be granted only to consider whether the initial determination was an abuse of discretion. 37 CFR 42.71(c).
[21]See, for example, K-40 Electronics v. Escort, Inc. (IPR2013-00203 Oracle Corporation v. Clouding IP, LLC, IPR2013‑00100).
[22]IPR2013‑00581.
[23]Idle Free Systems v. Bergstrom Inc. IPR 2012-00027 (June 11, 2013). The patent owner’s petition to amend was in any case dismissed because it had not consulted with the Board prior to submitting the proposed amendment as required by 37 CFR 42.121(a). The Board also commented:
A desire to obtain a new set of claims having a hierarchy of different scope typically would not constitute a sufficient special circumstance. An inter partes review is more adjudicatory than examinational, in nature. See Abbott Labs v. Cordis Corp., 710 F.3d 1318, 1326 (Fed. Cir. 2013). If a patent owner desires a complete remodeling of its claim structure according to a different strategy, it may do so in another type of proceeding before the Office. For instance, a patent owner may file a request for ex parte reexamination, relying on the Board’s conclusion of a petitioner’s having shown reasonable likelihood of success on certain alleged grounds of unpatentability as raising a substantial new question of unpatentability. In appropriate circumstance, it may also seek to file a reissue application.
The decision is available at:
http://www.uspto.gov/ip/boards/bpai/ipr201200027_decision_on_motion_to_amend_idle_free).pdf
[24]Avaya Inc. v. Network-1 Security Solutions Inc. IPR-2013-00071 (July 22, 2013). In its final decision in Idle Free Systems v. Bergstrom 109 USPQ2d 1441 (PTAB 2014) noted in the previous footnote, the PTAB made the following points:
Distinguishing the proposed substitute claims only from the prior art references applied to the original patent claims … is insufficient to demonstrate general patentability over prior art. An inter partesreview is neither a patent examination proceeding nor a patent reexamination proceeding. The proposed substitute claims are not entered automatically and then subjected to examination. Rather, the proposed substitute claims will be added directly to the patent, without examination, if the patent owner’s motion to amend claims is granted. As the moving party, a patent owner bears the burden to show entitlement to the relief requested. 37 CFR § 42.20(c).
For a patent owner’s motion to amend claims, 37 CFR § 42.20(c) places the burden on the patent owner to show general patentability over prior art. That means Bergstrom (the patent owner) is not rebutting a rejection in an Office Action, as though this proceeding is patent examination or reexamination. Instead, Bergstrom bears the burden of proof in demonstrating patentability of the proposed substitute claims over the prior art in general, and thus entitlement to add these proposed substitute claims to its patent.
Bergstrom is not assumed to be aware of every item of prior art presumed to be known to a hypothetical person of ordinary skill in the art. Nevertheless, Bergstrom can, and is expected to, set forth what it does know about the level of ordinary skill in the art, and what was previously known, regarding each feature it relies and focuses on for establishing patentability of its proposed substitute claims.
In Paper 26, dated June 11, 2013, on pages 7-8, Bergstrom was given specific notice of the following:
A patent owner should identify specifically the feature or features added to each substitute claim, as compared to the challenged claim it replaces, and come forward with technical facts and reasoning about those feature(s), including construction of new claim terms, sufficient to persuade the Board that the proposed substitute claim is patentable over the prior art of record, and over prior art not of record but known to the patent owner. The burden is not on the petitioner to show unpatentability, but on the patent owner to show patentable distinction over the prior art of record and also prior art known to the patent owner. Some representation should be made about the specific technical disclosure of the closest prior art known to the patent owner, and not just a conclusory remark that no prior art known to the patent owner renders obvious the proposed substitute claims.
A showing of patentable distinction can rely on declaration testimony of a technical expert about the significance and usefulness of the feature(s) added by the proposed substitute claim, from the perspective of one with ordinary skill in the art, and also on the level of ordinary skill, in terms of ordinary creativity and the basic skill set. A mere conclusory statement by counsel, in the motion to amend, to the effect that one or more added features are not described in any prior art, and would not have been suggested or rendered obvious by prior art, is on its face inadequate.
Id. at 7-8 (emphasis added).
Since Bergstrom had failed to discuss the level of skill of the worker in the art, failed to state whether it was the first to combine all four main features of the claim, and if not what would have been known to one of ordinary skill in the art about these features and failed to indicate whether it was aware of similar methods of operation in other fields and if so why it would not have been obvious to apply these methods to the problem solved by the invention, it was held that Bergstrom had failed to set out a prima facie case for admission of its proposed amendments and so there was no need to consider whether the amendments established patentability over the art cited by the challenger in inter partes review.
[25]Innolux Corp. v. Semiconductor Energy Laboratory Co. Ltd. IPR 2013-00066 (July 18, 2013). The Board suggested that if the patent owner wanted more amendments this could be effected by ex parte re-examination.
[26]Garmin International Inc. v. Cuozzo Speed Technologies LLC 108 USPQ2d 1852 (PTAB 2013).
[27]Rule 37 CFR 42.51 provides that the parties may agree on mandatory initial disclosures and if so may commence discovery on those issues without further authorization from the PTAB, although any such agreement must be filed with the PTAB. Similarly, the parties may agree among themselves that additional discovery may be required without authorization from the PTAB. The Guide indicates that routine discovery includes production of any exhibit cited in a paper or testimony, cross examination of persons who have made declarations on behalf of the other party and relevant information that is inconsistent with a position advanced during the proceeding. The Guide makes the point that all documents submitted should be in English or translated into English.
As noted below, different standards apply as to whether additional discovery is to be permitted in inter partes review and post grant review. The PTO’s commentary on the rules makes the following comment:
While the Board will employ an interests‑of‑justice standard in granting additional discovery in inter partes reviews and derivation proceedings, new subpart C will provide that a good cause standard will be employed in post‑grant reviews, and by consequence, in covered business method patent reviews. Good cause and interests of justice are closely related standards, but the interests‑of‑justice standard is slightly higher than good cause. While a good cause standard requires a party to show a specific factual reason to justify the needed discovery, under the interests‑of‑justice standard, the Board would look at all relevant factors. Specifically, to show good cause, a party would be required to make a particular and specific demonstration of fact. Under the interests‑of‑justice standard, the moving party would also be required to show that it was fully diligent in seeking discovery and that there is no undue prejudice to the non‑moving party. In contrast, the interests‑of‑justice standard covers considerable ground, and in using such a standard, the Board expects to consider whether the additional discovery is necessary in light of the totality of the relevant circumstances.
Rule 37 CFR 42.53 sets out the general provisions for taking testimony, providing that uncompelled direct testimony should be in the form of an affidavit and that all other testimony should be in the form of a deposition transcript, or in some cases a videotape of the deposition. Because depositions outside the United States add to the complexity of the proceedings, Rule 37 CFR 42.52(b) imposes significant requirements that have to be met before the PTAB can authorize the compulsion of testimony or production of evidence outside the country.
Rules 37 CFR 42.54 and 42.55 provide for the possibility of the PTAB issuing protective orders and placing evidence under seal. However, Rule 37 CFR 42.56 points out that confidential information that is subject to a protective order ordinarily will become public 45 days after denial of a petition to institute a trial or 45 days after final judgment in a trial and that to maintain secrecy a motion under 37 CFR 42.56 to expunge confidential information from the record prior to the information becoming public is required. The PTO commentary encourages use of redacted documents rather than use of motions to expunge in order to retain secrecy of confidential information.
[28]37 CFR 42.53(a) provides that the “[p]arties may agree to video‑recorded testimony, but may not submit such testimony without prior authorization of the Board.” So far, the Board has seemed reluctant to grant such authorization.
[29]102 USPQ2d 1925 (Fed. Cir. 2012). Newman J. dissented strongly taking the view that the prior Federal Circuit decision constituted the law of the case. Subsequently, in Fresnius USA Inc. v. Baxter International, the Federal Circuit held that because the case was still pending on other issues, the court still had jurisdiction over it and that in view of the cancellation of the claims in re-examination, the case should be dismissed and a damages award made previously quashed. Rehearing en banc was denied 108 USPQ2d1773 (Fed. Cir. 2013). O’Malley J., Raber C.J. and Wallach J. dissented from denial of a rehearing on the basis that in the factual situation of the present case the prior Federal Circuit decision which had confirmed prejudgment damages should be treated as final and enforced. Newman J. dissented because of her continued concerns about the constitutionality and practical effects of allowing an executive agency to nullify the judgment of an Article III court.
[30]The re-examination commenced prior to September 16, 2011, and so the old law threshold question applied.
[31]106 USPQ2d 1442 (Fed. Cir. 2013).
[32]It was noted that for judicial estoppel to apply, a party must have adopted clearly inconsistent positions and have succeeded in persuading a tribunal that the position which it had previously taken was correct. These criteria were not met in the present case.
[33]Available at http://e‑foia.uspto.gov/Foia/ReterivePdf?system=PRPS&flNm=CBM2012‑00001_70
[34]Versata Software Inc. v. SAP America Inc., 106 USPQ2d 1649 (Fed. Cir. 2013).
[35]109 USPQ2d 1585 (PTAB 2014).
[36]In Liberty Mutual Insurance Company v. Progressive Casualty Insurance Co. 109 USPQ2d 1733 (PTAB 2014) it was pointed out that the statute referred to a covered business method patent rather than a covered business method claim and so as long as one claim was directed to a business method, the Board had jurisdiction to make a determination on all claims of the patent irrespective of whether the claim under consideration was directed to a business method.
[37]107 USPQ2d 1097 (PTAB 2013).
[38]Versata Software Inc. v. SAP America Inc., 106 USPQ2d 1649 (Fed. Cir. 2013).