CONSEQUENCES OF AN UNSUCCESSFUL ADMINISTRATIVE PATENT CHALLENGE – JUST GOT A LOT MORE TROUBLESOME

By Tom Engellenner
In a precedential opinion handed down last month by the Court of Appeals for the Federal Circuit, the court overruled its own prior decisions and greatly expanded the scope of estoppel applied against petitioners who are unsuccessful in challenging patents in an inter partes review proceeding (IPR) before the Patent Trial and Appeal Board (PTAB) of the US Patent and Trademark Office.  In California Institute of Technology v. Broadcom Limited, No. 20-2222 (Fed. Cir. Feb. 4, 2022), the court found that “estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all claims and grounds not in the IPR but which reasonably could have been included in the petition.”

At issue in the Caltech case was section 35 U.S.C. § 315(e)(2) of the America Invents Act (AIA) of 2011, which authorized new types of administrative hearings to review the validity of issued patents.  Since 2012, thousands of trials, primarily inter partes review or IPR trials, has been held by PTAB panels of administrative judges.  While many of these trials have resulted in partial or complete victories for the petitioners that challenged patent claims, patent owners have also been successful in defending their patents some of the time.  Section 315(e)(2) of the AIA provides:

The petitioner in an inter partes review of a claim in a patent . . . may not assert either in a civil action . . . or in a proceeding before the International Trade Commission . . . that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

Early on in the course of AIA trials, it was not clear what Congress meant by “any ground that the petitioner raised or reasonably could have raised” in an IPR.  The scope of estoppel applied against a defendant following an unsuccessful IPR challenge in parallel patent infringement cases before Federal district courts was hotly contested.  Some courts adopted a narrow approach to the scope of section 315(e)(2) estoppel, basically only precluding the re-litigation of arguments raised in any earlier IPR.  Other courts gave a broader interpretation to the “reasonably could have raised” wording of section 315 and precluded anything prior art arguments that defendant knew (or should have known) about and chose not to raise by way of an IPR proceeding.

All these views seemed to be put to rest in a 2016 Federal Circuit decision in Shaw Industries Group v. Automated Creel Systems, 817 F.3d 1293.  In the Shaw decision, the Federal Circuit noted that the rules adopted by the USPTO to govern AIA trials gave PTAB panels the authority to not only deny or institute a trial, but also to “partially” institute a trial.  The court then concluded if the PTAB can pick the arguments to be litigated in an IPR proceeding, then any argument not chosen by the PTAB for trial could not have been “reasonably” raised.  Following the Shaw decision, federal district courts seemed to fall into line with a narrow view of section 315(e)(2) estoppel.

But then came a Supreme Court decision in 2018 that essentially threw out the USPTO “partial institution” rules for PTAB trials.  In SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018), the Supreme Court held that any time an IPR trial is conducted, the PTAB must render judgment on all patent claims contested by the petitioner.  Federal District courts again began to diverge in their interpretation of section 315(e)(2) estoppel in patent infringement trials.

A court decision later in 2018 in the District of Massachusetts was perhaps the bellwether for reconsideration of the Shaw case and its narrow interpretation of estoppel.  In SiOnyx LLC v. Hamamatsu Photonics K.K., 330 F. Supp. 3d 574, 601 (D. Mass. 2018) District Court Judge Saylor found a pre-SAS narrow view decision in his own district “cannot be correct” after the Supreme Court’s SAS decision and applied a broad estoppel instead.   Because partial institutions are improper after the SAS decision, Judge Saylor reasoned, “for the words ‘reasonably could have raised’ to have any meaning at all,” they must include prior art arguments that were not raised in the petition.

Indeed, last month’s decision by the Federal Circuit in the Caltech case has come to the same conclusion.  The judges of the Federal Circuit panel that decided the Caltech case further took the extraordinary step of explicitly overruling the Shaw case.  Typically, a panel decision on the same fact pattern is considered binding on other panels in the same circuit but the Caltech court relied upon an exception to the general rule when a court of last resort (i.e., the U.S. Supreme Court) takes a position that “undercuts the theory or reasoning underlying the prior circuit precedent in such a way that the cases are clearly irreconcilable.”  In such circumstances overruling of a panel precedent is permissible.  Thus, the panel in the Caltech case held:

“Accordingly, we take this opportunity to overrule Shaw and clarify that estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all claims and grounds not in the IPR but which reasonably could have been included in the petition. In a regime in which the Board must institute on all grounds asserted and the petition defines the IPR litigation, this interpretation is the only plausible reading of “reasonably could have been raised” and “in the IPR” that gives any meaning to those words.”

Thus, the Caltech case, (unless reversed by the Federal Circuit en banc or the Supreme Court – both unlikely scenarios) has ushered in a new era of broad estoppel to be applied against unsuccessful IPR petitioners.  It appears that defendants in subsequent patent infringement cases will not be able to present any prior art-based invalidity argument that they knew about – or should have been aware of based on a reasonable search for prior art – following an unsuccessful IPR challenge to the patent(s)-in-suit.

One strategy for escaping this broad estoppel, at least for well-heeled defendants, may be to concurrently present multiple IPR petitions if they choose to go the AIA administrative invalidity trial route.  Flooding the PTAB deck, so to speak, with many different petitions is unlikely to result in multiple proceedings because the PTAB rarely grant two separate trials on the same patent claims (and, in fact, PTAB rules require petitioners to rank parallel petitions in order of preference).  However, if only one trial is instituted, the grounds presented in the other denied petitions may remain available as defenses in parallel patent infringement litigation. 

The Caltech case may have an even bigger impact on another type of AIA trial, namely “post grant review” (PGR) proceedings.  This type of proceeding is available for newly issued patents during the first nine months follow the patent’s issuance.  Unlike IPR proceedings, where challenges to a patent’s validity are limited to patents and printed publications as prior art, petitioners for a PGR trial can raise virtually any ground in the patent statute as a basis for invalidating a patent, e.g., other types of prior art such as prior use or sale of the claimed invention, indefiniteness, or lack of written description – as well as prior patents and publications.  Section 325(e)(2), the section of the AIA that provides for petitioner estoppel following an unsuccessful challenge in a PGR proceeding, contains identical language to section 315(e)(2) that governs IPR proceedings.  Thus, an unsuccessful PGR determination excludes defenses on “any ground that the petitioner raised or reasonably could have raised.”  Since the scope of invalidity arguments that can be made in a PGR petition is broader, based on the Caltech decision reasoning, the unsuccessful petitioner runs of risk on being stripped of all invalidity defense in subsequent patent infringement litigation.

Post script: On February 22, 2022, The Federal Circuit panel that handed down the Caltech decision issued a clarification to its opinion.  In its original opinion, the panel stated that estoppel applies “to all claims and grounds not stated in the IPR but which reasonably could have been included in the petition” (emphasis added). The errata modified the decision by deleting the term “claims.”  The original holding failed to acknowledge that section 315(e) limits estoppel to the challenged claims that were the subject of the IPR final written decision (i.e., not other claims that could have been challenged but were not).

FED. CIR. SLAMS DOOR ON “ADMITTED PRIOR ART” — OR DOES IT?

By Tom Engellenner
A recent decision by the Court of Appeals for the Federal Circuit (Fed. Cir.) in Qualcomm Incorporated v. Apple, Inc., Nos. 2020-1558, 2020-1559 (February 1, 2022) has held that “applicant admitted prior art” (AAPA) does not fall within the category of “patents or printed publications” and, hence, cannot be used by petitioners in inter partes review (IPR) proceedings as a basis for challenging issued U.S. patents.  Although the decision holds that admissions by patentees in their patent applications (or during patent prosecution at the Patent Office) cannot be a primary reference for proving a lack of novelty or obviousness, the decision leaves the door open for challengers to use such admissions to show the “general knowledge of a skilled artisan” during the IPR administrative trial.

The Applicant Admitted Prior Art (“AAPA”) doctrine has been used for many years both during examination of claims at the USPTO and by defendants in patent infringement suits.  Basically, the AAPA doctrine asserts that anything you say is prior art in your application can be used against you as prior art.  

This doctrine has been also used for nearly a decade in the administrative trials established by the America Invents Act (AIA), most notably in IPR proceedings where the AIA statute explicitly limits challenges to issued U.S. patents to those based on “prior art consisting of patents or printed publications.”  Various panels of administrative patent judges (APJs)  – there are over 300 APJs – have been all over the map on the issue of whether so-called “applicant admitted prior art” can be the basis for a novelty or obviousness determination, e.g. can prior art Reference A and AAPA be combined to render a claim obvious?

In the Qualcomm case, Apple challenged a Qualcomm patent on a power supply device that could supply power at two different voltages depending upon network needs.  The prior art asserted by Apple consisted of Figure 1 from the challenged Qualcomm patent itself, labelled “prior art,” and second reference (a prior published patent application “Majcherczak”).  Apple’s argued that it would have been obvious to add a feedback circuit as shown in Majcherczac into the overall circuit shown in Figure 1 and arrive at the claimed invention.  Quialcomm argued that it was impermissible to use Figure 1 of its own patent as prior art. 

The Federal Circuit panel agreed with Qualcomm, stating:

[The AIA] does not permit AAPA in this case to be the basis of a ground in an inter partes review, because it is not contained in a document that is a prior art patent or prior art printed publication. 

The Federal Circuit panel that decided this case also deemed it to be “precedential,” meaning that the three judges assigned this case concluded that the decision “significantly adds to a body of law.”

The Qualcomm decision should not be surprising.  Another Federal Circuit panel had broadly hinted at the limits of using AAPA back in January 2021 in the case of Koninklijke Philips v. Google, 948 F.3d 1330, (Fed. Cir. 2020), in which the judges held that “general knowledge” was not a patent or printed publication and, hence such general knowledge could not form the basis for invalidating a claim in an IPR proceeding.

Moreover, the Director of the U.S. Patent and Trademark Office (USPTO) had also issued a guidance memorandum on August 18, 2020 instructing PTAB judges that statements of the applicant in the challenged patent, e.g., AAPA, do not qualify as “prior art consisting of patents or printed publications,” but fall into the category of evidence the Board may consider for more limited purposes:

[W]hile a variety of evidence is admissible for limited purposes, the focus-“the basis”-of every IPR must be “prior art consisting of patents or printed publications.” 

The memorandum further explains that “[s]tatements in a challenged patent’s specification may be used, however, when they evidence the general knowledge possessed by someone of ordinary skill in the art. That evidence, if used in conjunction with one or more prior art patents or printed publications forming “the basis” of the proceeding under § 311, can support an obviousness argument. 

The Fed. Circuit’s Qualcomm decision echoes this memorandum in noting that:

As a patentee’s admissions about the scope and content of the prior art provide a factual foundation as to what a skilled artisan would have known at the time of invention, it follows that AAPA may be used in similar ways in an inter partes review. . . .  Such uses include, for example, furnishing a motivation to combine, or supplying a missing claim limitation.  Thus, even though evidence such as expert testimony and party admissions are not themselves prior art references, they are permissible evidence in an inter partes review for establishing the background knowledge possessed by a person of ordinary skill in the art. “  [citations omitted]

Accordingly, AAPA is not useless in challenging a patent in an IPR or other AIA proceeding.  Petitioners challenging a patent should not use AAPA as a reference in formulating an obviousness rejection.  Instead, the challenger should find something that is truly a patent or printed publication that discloses the same thing (or something analogous) and then use AAPA to bolster the argument that the skilled artisan would have been motivated to combine the cited references.

2021 – PTAB YEAR IN REVIEW

Last year marked the tenth anniversary of the enactment of the America Invents Act (AIA). This act created a number of new procedures for the public to challenge issued U.S. patents.  Over the past decade, the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office (USPTO) has received over 12,000 petitions for review of issued patents.  Last year, the PTAB received over 1,000 petitions, and held trials on roughly 65% of the petitions that were considered.  Once a trial was initiated, only about 25% of challenged claims survived PTAB review.  Many of the aggrieved patent owners appealed to the Court of Appeals for the Federal Circuit and some sought further review from the U.S. Supreme Court.  The following is a brief summary of some of the more important and court and administrative decisions in 2021.

Supreme Court says AIA patent trials are legit

In June, 2021, the Supreme Court finally answered the question of whether administrative patent trials under the AIA were lawful.  Many litigants over the past decade (mostly patent owners whose patents had been invalidated) have tried to cast doubt on the legitimacy of the Patent Trial and Appeal Board (PTAB) but none got so far as Arthrex, Inc., the owner of a patent on a knotless suture system. 

Shortly after its patent issued in 2015, Arthrex sued Smith & Nephew.  The defendant, Smith & Nephew, filed a successful petition for inter partes review under the AIA, and a PTAB panel of administrative law judges found the challenged claims of the Arthrex patent lacking in novelty and, hence, were unpatentable.  Arthrex appealed and presented a novel theory for the first time before the Federal Circuit based on the “appointments clause” of the U.S. constitution.

In 2019 the Federal Circuit ruled on the appeal and concluded that the way administrative patent judges (APJs) were appointed to the Patent Trial and Appeal Board (PTAB) was unconstitutional and vacated the decision with a remand that the case be heard again by another PTAB panel. The case was Arthrex v. Smith & Nephew No. 2018-2140 (Fed. Cir., Oct. 31, 2019).

The decision cured the problem going forward by severing a portion of the enabling legislation that prevents the administrative judges from being fired except for cause. The Fed. Circuit decision essentially makes all PTAB judges subject to dismissal by the secretary of Commerce without cause.  Because they lacked job protection, that made the judges “inferior” officers, rather than “superior” officers, under the U.S. Constitution and, hence, were deemed properly appointed (without the need for Senate confirmation).

Needless to say, not many people were happy with the Federal Circuit’s “fix” – not the less of whom were the 300 plus administrative judges who found themselves without tenure.  The Federal Circuit decision also created a bit of a conundrum for the USPTO by concluding that Arthrex (and many other similarly situated patent owners in other already decided cases) were entitled to rehearings.

On appeal, the Supreme Court agreed with the Federal Circuit that the USPTO’s appointment of APJs was constitutionally flawed but disagreed on the remedy.  Rather than strip APJs of all job security, the Court concluded that the Director of the USPTO should have the authority to review all PTAB decisions.  Arthrex was entitled to review of its PTAB decision by the USPTO Director but not a new trial.

The USPTO implemented interim rules shortly after the Arthrex decision to enable parties to seek review of PTAB decisions by the USPTO Director.  During the half year following the interim rules, about 80 requests for Director review were filed.  Although most of the requests for Director review so far have been unsuccessful, in two cases the Director did reverse a PTAB panel decision and remand the case to the Board.  In December, 2021, the USPTO clarified its interim rule to make it clear that parties could seek review not only of final written decisions but also of the initial decisions of PTAB panels on whether or not to institute a trial.

Discretionary Petition Denials by the PTAB Continue to be Controversial

The USPTO has taken the position since the beginning of patent challenges under the AIA that has plenary authority to deny inter partes review (IPR) and post grant review (PGR) as a matter of discretion.  For almost a decade, various PTAB panels have expounded reasons for why a petition (typical an IPR petition) should be denied a trial even when the arguments have merit.  The pleura of rationales for discretionary denials led to a 2017 decision in General Plastic Co., Ltd v. Canon Kabushiki Kaisha, IPR2016-01357 (PTAB Sept. 6, 2017) that the PTAB has deemed “precedential.”  In the General Plastic case, the PTAB asserted its authority to deny “serial” petitions by the same petitioner and listed seven factors to be considered.

Despite the General Plastics decision being deemed precedential, the PTAB has continued to layer on more reasons for discretionary petition denials.  In 2019, the PTAB began denying parallel petitions against the same patent by different petitioners and updated its rules of practice to assert an expectation of only one IPR per patent.  Also in 2019, another decision, NHK Spring Co. Ltd. v. Intri-Plex Techs. Inc., IPR2018-00752 (PTAB Sept. 12, 2018) was likewise deemed precedential and set out more factors for discretionary denial, e.g., when prior art or arguments had previously been raised during prosecution or were being presented in co-pending Federal District Court litigation.

In 2020, the PTAB designated yet another decision, Apple Inc. v Fintiv, Inc., IPR 2020-00019 (PTAB May 13, 2020) as precedential.  This decision spawned six more reasons for denying petitions when co-pending litigation has already started.  The Fintiv decision required PTAB panels to take into consideration whether the parties or issues overlap, the state of the federal court litigation and whether a trial date is set earlier than the projected PTAB decision, among other things.

The net result has been a steadily declining trial institution rate at the PTAB.  A study by Unified Patents has estimated that nearly 19% of all IPR petitions were denied in 2020 as a matter of discretion.  This surge in “procedural” denials prompted the USPTO to request public comments in late 2020 on the Fintiv factors. 

In January 2021, the USPTO published a summary of the comments showing that there was widespread dissatisfaction with its “case-specific” approach to discretionary denials, i.e., allowing individual panels to rationalize their discretionary denials and then approving some decisions as “precedential.”  Many commenters urged the USPTO to abandon this approach and instead engage in formal rule-making to govern discretionary denials.  Since the USPTO has shown no interest in replacing its case-specific approach, some parties are now requesting that Congress review this practice and, possibly revise the AIA.

New Rules for Motions to Amend

In January 2021, the USPTO finalized rules codifying a Federal Circuit decision in Aqua Products, Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017) (en banc), addressing the party’s burdens of persuasion when a patent owner wishes to present an amendment to the patent claims in response to a petitioner’s arguments.   The final rule “assigns the burden of persuasion to the petitioner to show, by a preponderance of evidence, that any proposed substitute claims are unpatentable.”  On the other hand, the final rule assigns the burden of persuasion on the patent owner “to show, by a preponderance of the evidence, that the motion to amend complies with certain statutory and regulatory requirements for a motion to amend,” i.e., rules that preclude a patent owner from widening the scope of claims, introducing new matter, or proposing an unreasonable number of substitute claims.

The final rule also asserts a right to reject an amendment “in the interests of justice” even when it is not opposed by the petitioner, e.g., due to a settlement or withdrawal by the challenger.  A decision by a PTAB panel to deny a motion to amend in such circumstances must be supported by “readily identifiable and persuasive evidence of record.”

Ex Parte Reexams on the Rise

The USPTO reported that there were 273 requests for ex parte reexamination filed in fiscal year 2021 versus only 168 in fiscal year 2020. According to the Chief Judge of the PTAB, David Ruschke, the number of ex parte reexam requests had been fairly stable from 2016 to 2020 but last year the PTAB saw “quite an uptick.”  The increase in ex parte reexam requests may be in response to the increasing number of initial determinations where the PTAB panels has exercised their “discretion” to deny inter parte reviews under the AIA. 

NO ARTHREX DO-OVER FOR PETITIONERS DENIED AIA TRIALS

By Tom Engellenner
Petitioners in administrative patent challenges under the America Invents Act (AIA) that are denied a trial are not entitled to an Arthrex do-over according to a recent Federal Circuit panel holding in United Fire Protection v. Engineered Corrosion Solutions, Appeal No. 2020-1272 (Fed. Cir. May 19, 2020).

Late last year we reported on the Federal Circuit’s Arthrex decision that send shock waves through the IP community by holding that the way administrative patent judges (APJs) were appointed to the Patent Trial and Appeal Board (PTAB) pursuant to the AIA was unconstitutional.  Arthrex v. Smith & Nephew, No. 2018-2140 (Fed. Cir., Oct. 31, 2019).

The Arthrex decision devised a cure for this problem going forward by severing a portion of the enabling AIA legislation that prevents the administrative judges from being fired except for cause. The Federal Circuit’s Arthrex  decision essentially made all PTAB judges subject to dismissal by the secretary of Commerce without cause.  The Federal Circuit panel then remanded the Arthrex case back to the PTAB for a rehearing before a different panel of judges that had been cleansed by severing their job security.

The Arthrex decision create a class of litigants who, like Arthrex, had already received a final written decision on a patent challenge but were still in their pre-appeal period. Those parties — if they chose to appeal and raise the “appointments” issue — would also allowed to get their decisions vacated and remanded.

But the Arthrex decision also cut-off another class of litigants whose cases had not yet reached a PTAB final written decision.  Because the problem was “fixed” by taking away the job security of the PTAB judges, the judges would be deemed properly appointed after the Arthrex ruling and their decisions going forward would no longer be unconstitutional.

Following the Arthrex decision, the Federal Circuit expanded the class of litigants entitled to a remand and rehearing of their cases to include patent owners who lost appeals at the PTAB in inter partes reexamination, and ex parte reexamination proceeding during the pre-Arthrex window of time.  (See, Virnetx Inc. v. Cisco Systems, Inc., Appeal No. 2019-1671 (Fed. Cir., May 13, 2020 – inter partes reexamination) and In re JHO Intellectual Property Holdings LLC, Appeal No. 2019-2330 (Fed. Cir. June 18, 2020 – ex parte appeals)).

It remains to be seen whether the Anthrex decision will also apply to patent applicants who lost appeals of examiner rejections at the PTAB during the pre-Arthrex time window.  This issue is being argued in In re: Boloro Global Ltd., Appeal No.1209-2349. Continue reading →

CAN THE FEDERAL CIRCUIT REVIEW PTAB JOINDER PRACTICE AFTER THE SUPREME COURT’S THRYV DECISION?

By Tom Engellenner
In its recent decision in Facebook v. Windy City Innovations, No. 2018-1400 (March 18, 2020), a Federal Circuit panel concluded that the Patent Trial and Appeal Board (PTAB) cannot permit Facebook to join another Inter partes review (IPR) petition to its own earlier-filed IPR petition, on which a trial had already been instituted. The Federal Circuit panel concluded that section 315(c) of the America Invents Act (AIA) does not authorize either: (A) same-party joinder or (B) joinder of new issues. Facebook is currently seeking en banc review by the full Federal Circuit bench and the Supreme Court’s decision last month in Thryv, Inc. v. Click-to-Call Technologies, LP, No. 18-916 (April 20, 2020) may force the appeals court to reconsider this issue.

In the Facebook v. Windy City case the Federal Circuit panel found that the PTAB erred in allowing Facebook to join 2 IPR petitions to its earlier-filed IPR petitions. In June 2015 Windy City filed a complaint accusing Facebook of infringing several of its patents. In June 2016 – exactly one year after being served with Windy City’s complaint – Facebook filed its first IPR petitions against each patent. The PTAB instituted IPR trials on each patent. In January 2017, Facebook filed two additional IPR petitions which, standing on their own, would have been time-barred.

The PTAB panel that allowed Facebook’s secondary IPR petitions and joinder requests had been following the PTAB’s so-called precedential opinion in Proppant Express v. Oren Techs, No. IPR2018-00914, Paper 38 (P.T.A.B. Mar. 13, 2019). In Proppant, a “Precedential Opinion Panel” (POP) found that § 315(c) authorized same-party joinder because this section states that the Patent and Trademark Office (PTO) Director “may join as a party to that inter partes review any person who properly files a petition“ and the phrase “any person” in § 315(c) encompasses “every person who properly files a petition that warrants institution,” including oneself.

The Federal Circuit panel in the Facebook v. Windy City case gave short shrift to the notion that the PTAB could anoint its decision with “precedential” status by declaring the decision to be a POP opinion, sanctioned by a special super-panel that included the Patent Office Director or his designate. The Federal Circuit panel found POP decisions were not entitled to Chevron deference or even Skidmore deference (lesser standards of review for official rule making or close-call interpretations by administrative agencies of ambiguous statutory provisions). In fact, the Facebook Federal Circuit panel found POP decisions to be entitled to no deference at all and reviewed the PTAB joinder practice de novo as a matter of law.

Facebook filed for en banc review by the full Federal Circuit bench on April 17, 2020. In its en banc review petition, Facebook argues that the panel’s restrictive interpretation of “any person” was contrary to the legislative history of the AIA and the panel’s restriction on raising new issues was contrary to ordinary joinder principles where “joinder is permissible when the claims are ‘’reasonably related’ and arise out of ‘the same series of transactions or occurrences.’”

Surprisingly, Facebook’s en banc petition also raised a jurisdictional issue: whether the Federal Circuit has the authority to review institutional and joinder issues at all? The Facebook petition cited the Thryv, Inc. v. Click-to-Call Technologies case, which had been argued before the Supreme Court in December, 2019 but not yet decided at the time Facebook’s en banc petition was filed.

Facebook’s en banc petition proved to be quite prescient. Three day later the Supreme Court issued its opinion in the Thryv case, holding that §314(d) of the AIA bars judicial review of PTO decisions to institute inter partes review, and specifically, the PTO’s conclusions as to time-bars on IPR petitions (i.e., applications of §315(b)’s one-year time limit on petitions) were closely related to its decisions on whether to institute IPR trials and therefore such findings are also rendered nonappealable by §314(d).

The Federal Circuit has taken this issue seriously and issued a request to the parties, including Windy City Innovations and the PTO Director, to provide additional briefing to address “the effect, if any, of the Supreme Court’s decision in Thryv on our decision in this case.” The parties now have until June 10, 2020 to submit their additional briefing.

Ultimately, the viability of the Facebook v Windy City decision may hinge on whether the Federal Circuit sees joinder decisions as part and parcel of an IPR trial institution (and, hence, non-reviewable) or actions taken by the PTAB after institution (reviewable). And, of course, any conclusion by the full Federal Circuit bench could the subject of yet further Supreme Court scrutiny.

FEDERAL CIRCUIT SHEDS (SOME) LIGHT ON WHAT CONSITUTES A NEW ARGUMENT AT PTAB ORAL HEARING

By Siew Chong
A recent Federal Circuit decision in The Chamberlain Group, Inc v. One World Technologies, Inc. (Fed. Cir. December 17, 2019), is notable in that it clarifies what a patent owner may permissibly raise for the first time at an oral hearing. Despite acknowledging that Chamberlain argued a claim limitation for the first time at oral argument before the Patent Trial and Appeal Board (PTAB), the Federal Circuit panel still found that the argument acceptable because the new citation merely clarified Chamberlain’s previously articulated position.

Nonetheless, the Federal Circuit panel affirmed a Patent Trial and Appeal Board’s final written decision that found claims 8-15 of U.S. Patent No. 7,196,611 (the ’611 patent) – directed to garage door and gate operator systems – unpatentable as anticipated by U.S. Patent No. 4,638,422 (Schindler). The challenged claims were directed to methods of “teaching” barrier movement systems, e.g., garage door systems, to set various limits for operating the systems. One World Technologies, Inc. successfully petitioned for the inter partes review of claims 8-15 in the ’611 patent for being anticipated by Schindler, and claims 23 and 25 for being obvious over the combination of Schindler and “Liftmaster,” an owner’s manual for a door operator system. One World Technologies asserted that Schindler disclosed a method that sets the upper and lower limits for door positions, and thus anticipates the challenged claims. Chamberlain disagreed, and stated in its patent owner’s response that contrary to Schindler, which taught programming a “single” activity at a time, the ’611 patent was directed to a system that required identifying and guiding “multiple activities.”

At the oral hearing, Chamberlain argued for the first time that the claim limitation for the final step of the learning mode, “responsive to the first and second identifying step,” required identifying multiple activities before transmitting any guidance responsive to the identifying step. That limitation, according to Chamberlain, was not anticipated by Schindler, which disclosed transmitting a guidance signal after identifying a single activity. In its final written decision, the Board found that Chamberlain waived this argument because it was raised for the first time at the oral hearing. The Board, however, went on to address the merits of the argument and ultimately found it unpersuasive.

In its appeal, Chamberlain asserted that the Board’s finding of waiver was erroneous because Chamberlain’s argument was responsive to new arguments made in One World’s petitioner reply, and the argument was merely a clarification of its position, which had been consistent throughout the IPR. The Federal Circuit panel agreed with Chamberlain, explaining Federal Circuit case law allows parties to “elaborate” their arguments on previously raised issues.   The panel found that Chamberlain did not raise new issues or evidence, but instead tracked its previous argument and “merely pointed to different portions of the claim language” to clarify its previously stated position in response to One World’s reply. Continue reading →

2019 PTAB Year In Review Part IV: THE PRECEDENTIAL OPINION PANEL (POP)

The Precedential Opinion Panel (POP), formed in September 2018, began rendering opinions in 2019. The POP is intended to provide two main functions: rehear matters in pending trials and appeals of exceptional importance; and assist the Director in determining whether a previously issued decision should be designated as precedential or informative. Its decisions are binding authority on the PTAB. In 2019, the POP issued 3 decisions, designated 8 decisions as precedential, and designated another 13 decisions informative. The three POP decisions are summarized below.

In Proppant Express Investments LLC v. Oren Technologies LLC, IPR2018-00914 (March 2019; Paper 38, precedential), the POP addressed discretionary joinder under §315(c). The POP held that (a) a petitioner may be joined to a proceeding in which it is already a named party, and (b) new issues may be added to an existing proceeding, irrespective of whether the petitioner is already a named party. The POP also advised that the one-year time bar under 35 USC §315(b) is one of several factors to consider when exercising its discretion.

In GoPro Inc. v. 360Heroes Inc., IPR2018-01754 (August 2019; Paper 38, precedential), the POP addressed the one-year time bar under § 315(b). It concluded that § 315(b)’s language, “served with a complaint alleging infringement” is plain and unambiguous. Thus, the service of a pleading alleging patent infringement triggers the one-year time period for filing an IPR petition under 35 U.S.C. § 315(b), regardless of whether the serving party lacked standing to sue or the pleading was otherwise deficient.

Notably, six days after the POP issued the GoPro decision, it also designated as precedential the decision in Cisco Systems, Inc. v. Chrimar Systems, Inc. IPR2018-01511 (PTAB Jan. 2019; Paper 11, designated precedential August 2019).. In that case, the PTAB held that that § 315(a)(1) bars institution of an inter partes review of a patent in which petitioner voluntarily dismisses its earlier civil action challenging the validity of that patent prior to filing the petition.  Continue reading →

2019 PTAB Year in Review – Part III: TRIAL PRACTICE GUIDE UPDATE

By Tom Engellenner
In addition to the pilot program to assist patent owners in presentation of claim amendments and a proposed rule change to shift of burden of persuasion as to amended claims (both of which were discussed previously in Part II of this series), the USPTO made another major policy pronouncement in 2019: a second revision to the Trial Practice Guide – the procedural handbook for all administrative trials under the America Invents Act (AIA): covered business methods (CBR) review, inter partes review (IPR) and post grant review (PGR).

The TPG was first published in 2012 at the same time as the rules governing the AIA trials.  A first update was issued in August 2018.  The second update was published in July 2019.  (The USPTO also published a consolidated guide incorporating the original guidance and the two updates in November 2019.)  The 2019 update to the TPG provides almost no surprises.  It does, however, show how AIA proceedings have evolved since 2012 and provides some hints as to where the PTAB is going.

For example, the updated TPG acknowledges the PTAB’s abandonment of the much-criticized “broadest reasonable interpretation” standard for claim interpretation in favor of the Philip’s standard used in federal courts (ordinary or customary meaning).  The update also notes the PTAB will give “appropriate weight” to claim constructions by other tribunals, suggesting that we should see fewer cases of divergent interpretations of what a claim (or claim element) means at the PTAB when a federal district court has already issued a claim construction order in concurrent patent infringement litigation.

On discovery in AIA trials, the update acknowledges the PTAB practice that a motion for “additional discovery” (beyond the opportunity to cross examine the other party’s expert) will only be granted in IPRs if the motion meets the “interests of justice” standard, guided primarily by the factors set forth in 2013 in the Board’s precedential decision in Garmin Int’l, Inc. v. Cuozzo Speed Techs. LLC, Case (IPR2012- 00001). (In CBMs, the PTAB panels will be guided by similar factors under the “good cause” standard as set forth in 2013 in the Bloomberg Inc. v. Markets-Alert Pty Ltd. case (CBM2013-00005)).  The update notes that a party moving for additional discovery will need to address five of the so-called Garmin factors, principally that the additional discovery is needed based on more than a possibility and mere allegation, unavailable by other means, clear and understandable and not overly burdensome.

“Live testimony” before the PTAB will remain elusive because the TPG update explains that “credibility of experts often turns less on demeanor and more on the plausibility of their theories.” However, the update does hint that PTAB panels may be more receptive to live testimony in derivative proceedings where the allegation is that the purported inventor misappropriated the work of another.   In such cases, the update notes that the demeanor of the witnesses may be more critical to assessing creditability.  The update references the 2014 precedential decision in K-40 Elecs., LLC v. Escort, Inc., (IPR2013-00203) for further guidance on the factors to be considered when considering whether live testimony is warranted.

The July 2019 update also provides additional guidance on the considerations for instituting a trial, parallel petitions challenging the same patent, motions for joinder, motions to amend, and reply briefs.

2019 PTAB Year in Review – Part II: NEW HOPE FOR PATENT OWNER AMENDMENTS

By Tom Engellenner
The en banc Federal Circuit decision in 2017 in Aqua Products v. Matel, 872 F. 3d 1290 (Fed. Circ. 2017) threw out the original USPTO rule that the patent owner had the burden of persuasion regarding patentability of claim amendments. The Aqua Products decision was based somewhat on a technicality – that USPTO had failed to engage in formal rule-making and, hence, its interpretation of the America Invents Act (AIA) was not entitled to deference.

For a while, it was not clear whether the USPTO would proceed with a formal rule-making process and try to maintain its rule on burden of proof.  However, early in 2019, the PTAB issued a “precedential” opinion in Lectrosonics, Inc. v. Zaxcam, Inc., IPR2016-01120 (Feb. 25, 2019) explicitly adopting the new practice of placing the responsibility on the petitioner who challenges a patent to also show that any new claims presented by the patent owner by amendment are invalid.

This was followed by proposed formal rules in October, 2019 codifying the Lectrosonics holding that the petitioner who initiates a patent challenge will not only have the burden of persuading the PTAB that a patent owner’s claims as issued are invalid but will also have the same burden with regard to new claims that the patent owner may present by amendment during the proceeding.  The USPTO is expected to finalize this rule shortly.

At least one patent owner that had initially had its motion to amend denied has taken advantage of the Aqua Products decision.  On remand from the Federal Circuit, the Patent Trial and Appeal Board (PTAB) has granted a motion to amend in a patent directed to methods of treatment using cabazitaxel, a taxane compound. Mylan Labs. Ltd. v. Aventis Pharma S.A., IPR 2016-00712, Paper 112 (Oct. 22, 2019).

The PTO also appears to be taking proactive steps to help patent owners navigate the amendment process. On March 15, 2019, a notice of a pilot program was published for “motion to amend practice and procedures in trial proceedings under the America Invents Act (AIA) before the PTAB.” Continue reading →

2019 PTAB Year in Review – Part I: FEDERAL CIRCUIT APPEAL DECISIONS

By Tom Engellenner
The Federal Circuit heard a steady stream of cases from the Patent Trial and Appeal Board (PTAB) in 2019 as appeals of PTAB final written decisions seem to have become de rigueur.  PTAB appeals are now the largest single component of the Federal Circuit docket with over 600 appeals docketed in FY2019 – almost double the number of appeals that the Federal Circuit received from District Court patent decisions.

Perhaps the most noteworthy Federal Circuit decision of 2019 came in Arthrex v. Smith & Nephew No. 2018-2140 (Fed. Cir. Oct. 31, 2019) where a Federal Circuit panel ruled that the way administrative patent judges (APJs) are appointed to the PTAB was unconstitutional and vacated the decision with a remand that the case be heard again by another PTAB panel.  The decision purportedly cures this problem going forward by severing a portion of the enabling legislation that prevents the administrative judges from being fired except for cause. The Arthrex decision appears to give everyone similarly situated the right to request a remand and rehearing before a different panel.  About 100 or less pending appeals appear to fall in this category.

On December 16, all of the parties to the Arthrex case sought en banc reconsideration of the case.  Smith & Nephew and the USPTO’s solicitor general argued that the appointments clause issue and, hence, unconstitutionality was wrongly decided by the Arthrex panel because APJ’s were not “superior officers” (requiring Senate confirmation).  Arthrex and the government argued that the Director of the USPTO has sufficient control over the PTAB judges, pointing out that the Director can assign APJs to particular matters, remove them from cases, and over-rule institution decisions by issuing sua sponte dismissals.  Arthrex’s en banc rehearing petition, on the other hand, argued that the decision didn’t go far enough and the proper remedy should have been to throw out all decisions rendered in AIA trials so far.  A decision on the en banc rehearing request is unlikely to made until February 2020. If the rehearing petition is granted, an actual en banc decision may not come until 2021.

Another noteworthy Federal Circuit decision came in June, 2019 in Regents of University of Minnesota v. LSI Corporation, No. 18-1559 (Fed. Cir. 2019), where the Federal Circuit made it clear that sovereign immunity does not apply to patent challenges brought pursuant to the 2011 America Invents Act (AIA), regardless of whether the immunity claim is raised by a Native American tribe or a state university trying to avoid patent adjudication. Continue reading →