Disclaimer in IPR Raises Patent Owner Estoppel

A fairly niche IPR issue, relating to the effect of a claim disclaimer in an IPR proceeding, was decided by the Federal Circuit in Arthrex, Inc. v. Smith & Nephew, Inc., 2017-1239 (Fed. Cir. January 24, 2018).

The Patent Owner in Arthrex disclaimed the 9 patent claims that subject of an IPR Petition filed against the patent-at-issue prior to the due date of the Patent Owner preliminary response. Then, as a preliminary response, Patent Owner stated that an IPR should not be instituted because no IPR can be instituted based on disclaimed claims. Patent Owner also expressly stated that it was not requesting an adverse judgment. After further briefing, the Board entered adverse judgment against Patent Owner, pursuant to 37 CFR § 42.73, and the appeal arose from that decision.

Why, you may ask, does this even matter? The entry of an adverse judgment causes patent owner estoppel to attach, as set forth in 37 CFR § 42.73(d)(3)(i), which precludes a patent owner “from taking action inconsistent with the adverse judgment, including obtaining in any patent…[a] claim that is not patentably distinct from a finally refused or canceled claim.” Whether or not this section applied was very important to Patent Owner because, at the time of the adverse judgment, it had two pending continuation applications that the patent owner estoppel provision would impact.

As a threshold issue, the Court held that this sort of adverse judgment, even though it was prior to a final written decision from the Board, is a decision that allows for an appeal: “…a final decision that disposes of an IPR proceeding in the form of an adverse judgment is a ‘decision’ from the Board with respect to IPRs under title 35 and that §1295 provides a right to appeal a final adverse judgment.”

Turning to the estoppel issue, Patent Owner argued that 1) it expressly was not requesting adverse judgment, and 2) the regulations should be construed so as to not allow for adverse judgment before a trial is instituted. As to the first issue, the Court found that, although Patent Owner was not trying to request adverse judgment, the Board’s authority to enter an adverse judgment does not turn on the patentee’s characterization of its own request. Instead, § 42.73 gives the Board the authority to construe a patent owner’s actions as a request for adverse judgment or not.

Turning to the second issue, after further exploration of the regulatory underpinnings, the Court ultimately found that it did not make sense to apply the estoppel only if the disclaimer occurred after the trial began. There is no time limitation in that section of § 42.73 and, further, other provisions of § 42.73 also do not turn on when in the proceeding the request is made.

In short, a Patent Owner needs to have its eyes wide open before disclaiming any claims in an IPR proceeding. An adverse judgment is likely to follow and, as such, patent owner estoppel will attach.

The Ever-Shrinking IPR Estoppel

The District of Massachusetts’s January 2, 2018 order in Koninklijke Philips NV et al v. Wangs Alliance Corporation d/b/a WAC Lighting Co., 1-14-cv-12298 provides another example of Courts narrowly defining §315(e) estoppel, by declining to extend IPR estoppel to invalidity contentions that were served before the IPR was instituted.

More specifically, the defendant served preliminary invalidity contentions before filing its petition for inter partes review.  The IPR petition did not include all of the invalidity grounds set forth in the defendant’s litigation contentions.  The IPR was then instituted, and the litigation stayed.  Eventually, some claims survived the IPR process.  The patentee then moved for summary judgment that the defendant was estopped from presenting invalidity theories that were included in its preliminary (and pre-IPR) invalidity contentions, but which were not included in the petition for IPR.

Section 315(e)(2) states that a “petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision … may not assert[] in a civil action … that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.”  (emphasis added).  Nevertheless, the Court denied the motion, based on the Federal Circuit’s reasoning in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016), where the Federal Circuit found that grounds raised in a petition, but not instituted, were not subject to estoppel, because an IPR does not begin until it is instituted.  As explained by the Court, Shaw indicates that “the phrase ‘inter partes review’ in Section 315(e)(2) refers only to the period of time after review is instituted, and, therefore, the estoppel provision does not apply to arguments that the petitioner only ‘raised or reasonably could have raised’ in its petition rather than after institution of review.”

Accordingly, because new grounds may not be raised after institution, under this decision estoppel only applies to grounds that were actually instituted in the IPR.

Notably, the Court acknowledged that other district courts (in the Western District of Wisconsin, the Eastern District of Texas, and the Eastern District of Virginia) have come to the opposite conclusion, finding that estoppel extends to grounds the petitioner failed to include in its petition.  We thus await the Federal Circuit’s view on this specific issue.

The Court’s order is available here:  https://docs.justia.com/cases/federal/district-courts/massachusetts/madce/1:2014cv12298/161200/226

Wi-Fi One: PTAB’s Time-Bar Determinations are Reviewable; Achates Overruled

The tide continues to turn for Patent Owners in IPR proceedings. Wi-Fi One v. Broadcom Corp. is their latest victory — an en banc reversal of the 2015 decision in Apple v. Achates, opening the door for judicial review of PTAB decisions to institute, at least with regard to the time-bar provisions of 35 USC § 315(b).

The Wi-Fi One and Achates decisions relate, in general, to 35 USC § 314(d), which states that “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” In the Achates decision, and others like it, the Federal Circuit took the position that § 314(d) should be interpreted to mean that issues contained in the PTAB’s decision to institute shall not be subject to judicial review, even if the merits of that determination were reconsidered during the IPR trial. Wi-Fi One, at 9.

Subsequent to Achates, the Supreme Court’s decision in Cuozzo was issued, in the context of compliance with § 312(a)(3) (whether the petition contains the particulars required to be successful). On the issue of judicial review, the Court explained that the presumption of judicial review may be overcome by clear and convincing indications from the legislative history that Congress intended to bar review. In Cuozzo, the Court held that the presumption in favor of judicial review was overcome because  the dispute was seen as “an ordinary dispute” over an institution decision. The Court’s decision left open the possibility for judicial review of institution decisions in other contexts.

Turning to the Wi-Fi One decision, the time-bar issue arose given that numerous defendants were originally sued for infringing the patents-at-issue. Specifically, Wi-Fi One argued that Petitioner, Broadcom, was barred from pursuing the IPR petitions because Broadcom was in privity with other defendants that were served with a complaint alleging patent infringement more than one year prior to the Broadcom petitions. The Board ultimately issued Final Written Decisions finding all challenged claims of the three patents at issue unpatentable, including a finding that Wi-Fi One had failed to prove that Broadcom was in privity with the other defendants.

In analyzing the judicial review aspect of the case, the Federal Circuit found no clear and convincing indication that would demonstrate Congress’s intent to bar judicial review of time-bar determinations under § 315(b). More specifically, the Court held that “[t]he time-bar determination…is not akin to either the non-initiation or preliminary-only merits determinations for which unreviewability is common in the law…” Wi-Fi One, at 17.

In theory, time-bar determinations under § 315(b) can go against either party, so this decision may be considered to be neutral in the overall IPR scheme. But, in reality, it is more likely than not that it will be Patent Owners who will be appealing unfavorable time-bar determinations, making Wi-Fi One another small victory for Patent Owners in IPR proceedings.


PTAB Provides Guidance on Motions to Amend

Since the Federal Circuit’s complicated, 5-opinion decision regarding motion to amend practice in inter partes review proceedings, we have been awaiting developments that will teach us what life in a post-Aqua Products world will look like. We received our first such development in a memorandum from the Chief APJ, David Ruschke, providing “Guidance on Motions to Amend in view of Aqua Products.”

At threshold, the PTAB’s guidance starts with the only true holding from the Aqua Products case, that the burden of proving patentability no longer should be placed on Patent Owners. Practically speaking, this shift in burden to the Petitioner seems to eliminate the burdensome hurdles to a successful motion to amend that the PTAB has developed in its decisions, starting with Idle Free

Instead, a Patent Owner must only meet the requirements of 35 U.S.C. § 316(d) and 37 C.F.R. § 42.121 (IPR)/42.221 (PGR). Below is a checklist of the requirements from those sources that should lead to a motion to amend that is considered on the merits by the PTAB:

  • Patent Owner must confer with the Board before presenting a Motion to Amend;
  • The Motion to Amend must be filed no later than the filing of a Patent Owner Response;
  • The Motion to Amend must only propose a reasonable number of substitute claims (the presumption being that only one substitute claim would be needed to replace each challenged claim);
  • Any amendment(s) to the claim(s) must respond to a ground of unpatentability involved in the trial;
  • The amendment(s) must not enlarge the scope of the original claims;
  • The amendment(s) must not introduce new matter, including:
    • Setting forth the support in the original disclosure for the patent for each claim that is added or amended; and
    • Setting forth the support in an earlier-filed disclosure for each claim for which the benefit of the filing date of the earlier filed disclosure is sought;
  • The Motion to Amend must contain a claim listing, clearly showing any changes (such listing may be presented as an appendix to the motion); and
  • Patent Owner must comply with its duty of candor, including providing the PTAB with any information of which Patent Owner is aware that is material to the patentability of the substitute claims (if such information is not already of record).

If these requirements are met, the Board will determine patentability by a preponderance of the evidence, based on the entirety of the record, including any opposition by the Petitioner.

Lastly, it is notable that, for pending Motions to Amend, the PTAB’s guidance indicates that the Board “generally will permit” supplemental briefing regarding patentability, if requested.

We can see the new Motion to Amend frontier taking shape. Now it’s onto the first PTAB decisions and (probably) on to the Federal Circuit another time or two.

Uniloc USA v. Sega of America: Evaluating the Priority Date of a Means + Function Claim

Uniloc USA owns US 5,490,216 (‘216), with claims directed to “[a] registration system for licensing execution of digital data in a use mode….” Sega petitioned for IPR of the ‘216 patent, arguing that Claims 1–20 are anticipated by US 5,509,070 (“Schull”), which was filed on 15 December 1992. The ‘216 patent was filed on 21 September 1993, but claims priority to AU PL5524, filed on 26 October 1992. In other words, Schull is only prior art if ‘216 does not get the benefit of the Australian filing date. The PTAB concluded that the Australian application did not provide adequate written description support for the U.S. claims, and held that Schull anticipates ‘216 Claims 1–20.

At issue was the limitation “generating means” in the U.S. claims. In a previous lawsuit between Uniloc and Microsoft, the Federal Circuit had construed “generating means” to mean “to generate a local or remote licensee unique ID/registration key,” and agreed with the district court that the corresponding structure was “a summation algorithm or a summer.” The PTAB concluded that no such summation algorithm was present in the Australian application, and therefore the U.S. claims could not take the benefit of the Australian filing date.

Uniloc argued that this was legal error. While a failure to describe adequate structure in the specification to support a §112(6) claim limitation can give rise to an indefiniteness failure under §112(2), the priority analysis has historically focused on whether the priority filing contains adequate written description to satisfy §112(1). X2Y Attenuators, LLC v. Int’l Trade Comm’n, 757 F.3d 1358, 1365 (Fed. Cir. 2014). Uniloc argued that questions of §112(2) and §112(6) are not germane to the priority analysis, and therefore the PTAB had made an error of law in addressing these considerations when deciding priority for the ‘216 patent. The Federal Circuit Court of Appeals (CAFC) disagreed with Uniloc and affirmed the PTAB.

Although this decision is not precedential, the reasoning here could have important implications in many IPRs and PGRs in the future. The extent of the prior art is determined in view of a patent’s priority date. If a patent is not entitled to the benefit of its priority filing, the world of prior art is correspondingly larger. Moreover, the CAFC has recently made it easier for a claim limitation to be regarded as a means-plus-function (§112(6)) limitation. Williamson v. Citrix Online, LLC, 792 F.3d 1339, 1349 (Fed. Cir. 2015) (en banc). Therefore, a would-be challenger in IPR should pay careful attention to any limitations in the challenged patent that could be regarded as means-plus-function, and then scrutinize the priority filings to see whether the priority filings have adequate structure (and teachings listing the structure to the claimed function) to support the means-plus-function limitations in the patents to be challenged. If the supporting structure is not clearly present in the priority filing, then the challenged patent can be attacked on a wider basis of prior art.

PTAB Issues Precedential Opinion Regarding “Follow-On” Petitions

“If at first you don’t succeed, try, try again….” may not be an appropriate mantra for the PTAB. Today, the PTAB made precedential an opinion that was initially issued on September 6, 2017 regarding the appropriateness of “follow-on” petitions and the factors PTAB panels must consider when deciding whether to allow follow-on petitions. General Plastic Indus. Co., Ltd. v. Canon Kabushiki Kaisha.

A follow-on petition is a petition filed after an earlier filed petition was unsuccessful. For example, in General Plastic, Petitioner filed a first set of petitions seeking inter partes review of two patents. For each of these petitions, an IPR trial was denied on the merits. Nine months later, Petitioner filed a second set of (follow-on) petitions against the same patents. The PTAB denied those petitions pursuant to 35 U.S.C. § 314(a), finding that the follow-on petitions should not be allowed in view of the denial of the earlier-filed petitions.

After Petitioner filed a request for rehearing, the Chief Judge of the PTAB instituted an expanded panel, which panel ultimately denied the requested rehearing. In the rehearing request, Petitioner had argued, among other things, that follow-on petitions are expressly contemplated in the statute implementing IPRs, specifically in 35 U.S.C. § 325(d). And, further, any consideration of follow-on petitions should be governed by § 325(d) (which only allows rejection of follow-on petitions when the same or substantially the same art or arguments were previously presented to the PTO).

In the end, the Board maintained the stance on follow-on petitions first articulated in the NVIDIA case, holding that it’s discretion is derived from  § 314(a). Of course, now, that position is mandatory to all panels through this precedential opinion. As review, below are the non-exhaustive NVIDIA factors to consider:

1. whether the same petitioner previously filed a petition directed to the same claims of the same patent;

2. whether at the time of filing of the first petition the petitioner knew of the prior art asserted in the second petition or should have known of it;

3. whether at the time of filing of the second petition the petitioner
already received the patent owner’s preliminary response to the first
petition or received the Board’s decision on whether to institute
review in the first petition;

4. the length of time that elapsed between the time the petitioner learned of the prior art asserted in the second petition and the filing of the second petition;

5. whether the petitioner provides adequate explanation for the time
elapsed between the filings of multiple petitions directed to the same
claims of the same patent;

6. the finite resources of the Board; and

7. the requirement under 35 U.S.C. § 316(a)(11) to issue a final
determination not later than 1 year after the date on which the Director notices institution of review.

A key takeaway from this decision is that the PTAB has chosen to address the follow-on petition issue under a broadly-construed reading of § 314(a), rather than the seemingly more on point (and narrower) provisions of § 325(d). Is this rule-making by PTAB decision, of the type recently over-turned in Aqua Products? We predict that time (and the Federal Circuit) will soon tell.

The Demise of Rule 36 Judgments in Federal Circuit Decisions Relating to IPRs

The Federal Circuit issued a fairly mundane decision today in Boundary Solutions, Inc. v. Corelogic, Inc. (PTAB October 17, 2017), affirming the PTAB’s decision to cancel all challenged claims of two related patents. Over the course of 11 pages, the decision explained how the PTAB’s obviousness determination was supported by substantial evidence and Appellant’s arguments were unpersuasive.

So why is the decision even worth discussing? In short, such an ordinary, non-noteworthy decision is actually an anomaly in Federal Circuit jurisprudence as it relates to IPR decisions. Why? Because the Court has, over the past 5 years, made liberal use of its Rule 36, which allows the court to render a judgment without an opinion. This practice has, however, come under increasing fire. Commentators have called the practice an “unprecedented abuse” and have characterized it as the “Rule 36 debacle.”

On at least three occasions, petitions for writs of certiorari have been filed seeking Supreme Court review of this Rule 36 practice (See, e.g., Shore v. Lee). Perhaps leery of Supreme Court action on this issue, the Federal Circuit’s use of this Rule 36 technique has dramatically declined in recent months. A quick perusal of our “Key Decisions” tab here on IPR-PGR.com demonstrates that Rule 36 decisions have materially declined.

In general, this decrease in the Federal Circuit’s use of Rule 36 is welcome, even if some of the decisions are as mundane as Boundary Solutions. Stakeholders in the patent system will be better off with a more robust catalog of Federal Circuit decisions to which they can refer.


Aqua Products: Amendments in IPR Proceedings Come Roaring to the Forefront

Have you noticed the momentum of Federal Circuit decisions trending against the PTAB and petitioners? If not, today’s long-anticipated decision in the Aqua Products case will change your thinking. Albeit in a self-described “narrow” ruling, the rules for amending patent claims in post-grant review proceedings just took a sharp turn towards patent owners. The Federal Circuit reversed the Board’s practice on motions to amend, finding that it is the petitioner, not the patent owner, who bears the burden of persuasion regarding the patentability of proposed substitute claims presented in a motion to amend.

The Court’s detailed, 66-page opinion (accompanied by 4 additional concurring and dissenting opinions) provides a detailed analysis of the history of motions to amend and the burden of persuasion that applies in IPR proceedings. Further, the Court provides a detailed analysis of the deference (or lack thereof) that is required by Chevron.

Despite the dozens of pages of analysis, Judge O’Malley provides a concise summary of the Court’s holding:

As frustrating as it is for all who put so much thought and effort into this matter, very little said over the course of the many pages that form the five opinions in this case has precedential weight. The only legal conclusions that support and define the judgment of the court are: (1) the PTO has not adopted a rule placing the burden of persuasion with respect to the patentability of amended claims on the patent owner that is entitled to deference; and (2) in the absence of anything that might be entitled deference, the PTO may not place that burden on the patentee. All the rest of our cogitations, whatever label we have placed on them, are just that—cogitations. Order at 65-66.

So where do we go from here? Patent Owners will still be required to establish the basic requirements of 35 U.S.C. § 316(d); that is, that the amended claims are non-broadening, supported by the specification, and responsive to a ground already at issue in the IPR. From there, petitioner must act fast to obtain expert testimony, new art, and/or persuasive arguments to meet its burden of proving that the substitute claims are not patentable. In the end, the PTAB has the job of weighing the totality of the record before it to determine if the petitioner has met its burden of proving the substitute claims are unpatentable.

But, we may not have seen the end of the battle on motions to amend. Judge O’Malley’s opinion also makes clear that a new rule, shifting the burden of persuasion to the patent owner, may be implemented, but only after engaging in a notice and comment rule-making. “At that point, the court will be tasked with determining whether any practice so adopted is valid.” Order at 66.

Stay tuned: the PTAB has issued other opinions that can be argued to be rule-making by a PTAB panel (like the motion to amend rules from Idle Free that were addressed in Aqua Products). Practitioners will be on the lookout for ways to replicate the Aqua Products formula and require a more thorough notice and comment procedure for the finer details of IPR practice.

Federal Circuit Reverses PTAB for Refusing to Allow Supplementation of Record to Add Later Inconsistent Deposition Testimony from an Expert

The Board exercises substantial power over the scope of the record in IPRs, but the Federal Circuit’s decision in Ultratec v. CaptionCall illustrates a limit on that power.  The case involved a collection of consolidated IPR proceedings concerning patents for systems that assist deaf or hard-of-hearing users to make phone calls.  The patents were also the subject of district court litigation between the parties.  In a procedural oddity, the district court trial was completed before the IPR.  The jury found infringement and awarded $44.1 million in damages.  Execution of that judgment was stayed pending the IPR, and five months after the jury’s decision, the PTAB found all challenged claims unpatentable.

The patentee used the same expert in both the PTAB proceedings and the district court litigation.  After the trial, the challenger felt the expert’s district court trial testimony was inconsistent with his testimony in the IPR and sought to supplement the record.  Following its procedure, the Board required a conference call to discuss whether a motion to supplement would be authorized.  As also required by the Board’s rules, that discussion did not include the substance of the testimony that challenger sought to add to the record.  The Board denied the challenger’s request for authorization to file the motion, effectively excluding the trial testimony from the IPR.  The Board did not issue a written order on this point.  Then, in the final written decision, the Board found patentee’s expert credible, including on points where challenger argued that the expert’s trial testimony contradicted his testimony in the IPR.  The Board then denied a motion for reconsideration, addressing the supplemental evidence in a cursory manner.  The net effect of the procedure followed by the Board was to exclude the expert’s trial testimony from the record on appeal too.

The Federal Circuit vacated and remanded, finding that the Board abused its discretion by refusing to entertain a motion to supplement.  First, the court found the challenger satisfied § 42.123(b)’s requirements because the evidence could not have been obtained earlier, and because the Board offered no reasoned basis why allowing this evidence into the record would not be in the interests of justice.  In sum, per the Federal Circuit, a “reasonable adjudicator would have wanted to review this evidence.”

The Federal Circuit added additional criticisms of the Board’s procedures.  First, the Court found that the Board lacked the information necessary to make a reasoned decision, because it would not even look at the evidence sought to be added.  Second, the Court noted the Board’s procedures allowed it to make “significant evidentiary decisions without providing an explanation or a reasoned basis for its decisions,” in contravention of Supreme Court law.  Third, the Court explained the procedures impeded meaningful appellate review, because those procedures set up a situation where evidence that was excluded could not be a part of the appellate record.  The Court also reminded the Board of governing statutory law, noting “To the extent the Board views the two-step process it created to file motions as insulating it from its APA obligations, this is incorrect.”

Although the Courts have largely given the PTAB free reign in creating IPR procedures, this decision, combined with the panel-stacking controversy precipitated by the Federal Circuit’s recent Nidec opinion, may a growing concern at the Federal Circuit with the Board’s use of this freedom.

Federal Circuit Signals that Issue Joinder and Expanded Panels May Not Be Long for the IPR World

A fairly straightforward Federal Circuit decision today, that affirmed a PTAB determination of obviousness, provides insight into a potential reigning in of the PTAB on two issues. In Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co., 2016-2321 (August 22, 2017), Judges Dyk and Wallach filed a concurring opinion that casts some level of doubt on the PTAB’s practices of: 1) construing 35 U.S.C. §315(c) to encompass both party joinder and issue joinder and 2) using expanded panels to decide requests for rehearing.

More specifically, Broad Ocean filed a Petition seeking inter partes review, citing two grounds; the first based on an obviousness argument and the second an anticipation argument. The second ground relied on a Japanese reference, but failed to include the requisite affidavit attesting to the accuracy of the translation of the reference, pursuant to 37 C.F.R. §42.63(b). As such, the Board denied the ground (while instituting an IPR trial on the first ground).

Broad Ocean responded to this denial by filing a second IPR Petition that included the requisite affidavit. Because the second petition was time barred pursuant to 35 U.S.C. §315(b), Broad Ocean included a motion for joinder, pursuant to 35 U.S.C. §315(c), seeking to join the second proceeding with the first.

The original 3-judge panel denied this Petition, finding that §315(b) does not allow a party to join issues to a proceeding to which it is already a party. Broad Ocean filed a request for rehearing of this denial and an expanded board of 5 judges set aside the original panel’s decision, concluding that §315(c) encompasses both party joinder and issue joinder.

This expanded panel then went on to find that the subject patent was unpatentable pursuant to both the first obviousness ground, and the second ground based on the Japanese reference. Nidec appealed both the substance of the decision and the joinder procedure undertaken by the Board. The Federal Circuit affirmed the Board without reaching the joinder issue because it found that the Board correctly determined that the challenged claims were obvious, thus negating the need to reach the procedural issue.

In a concurring opinion authored by Judge Dyk, and joined by Judge Wallach, it was pointed out that the joinder provision of §315(c) is clearly tied to the time bar of §315(b). As such, the justices remarked that “[w]e think it unlikely that Congress intended that petitioners could employ the joinder provision to circumvent the time bar by adding time-barred issues to an otherwise timely proceeding…” Additionally, the justices expressed their “concern” with the PTO’s practice of using an expanded administrative panel to decide requests for rehearing. While the Patent Office argued that the expanded panel is used to ensure uniformity in PTO decisions, the justices questioned “whether the practice of expanding panels where the PTO is dissatisfied with a panel’s earlier decision is the appropriate mechanism of achieving the desired uniformity.”

In the end, the PTAB’s unpatentability determination stands, but a couple of key PTO practices may soon be reversed.