USPTO Considers Replacing Broadest Reasonable Interpretation Standard in IPRs and PGRs

In widely publicized comments to the US Chamber of Commerce last April, new USPTO Director Iancu encouraged stakeholders in IPR and PGR proceedings to “reduce the hyperbole and look at the process with fresh eyes, in order to understand its true benefits and true challenges. This is what we are now doing at the USPTO.

Well, those fresh eyes did not take long to produce potential changes. Today, the USPTO provided notice of proposed rulemaking regarding potential changes to the claim construction standard for interpreting claims in trial proceedings before the PTAB. Specifically, May 9, 2018 opens a 60-day comment period regarding a potential change to PTAB rules to replace the broadest reasonable interpretation standard (“BRI”) with the standard that is applied in federal district court and ITC proceedings.

In addition, the USPTO proposes to amend the PTAB rules to add that the PTAB will consider any prior claim construction determination concerning a claim at issue. That includes prior determinations in civil actions, ITC proceedings, or prior PTAB trial proceedings.

In the comments accompanying the potential rule change, the USPTO cites the following factors as underlying the effort to reconsider the claim construction standard in PTAB proceedings:

  1. Minimizing differences between PTAB proceedings and other patent proceedings could lead to greater uniformity and predictability of the patent grant;
  2. Using the same standard could help increase judicial efficiency overall;
  3. The high degree of overlap between patents that are considered at the PTAB and those that are the subject of federal litigation favors using a consistent claim construction standard; and
  4. Increase fairness by eliminating the situation where a patent claim could be found unpatentable in a PTAB proceeding on account of a claim scope that the patent owner could not assert in the federal courts.

To be sure, this notice does not mean that the claim construction standard will be changed. But, the fact that the notice was provided, as well as the overall tenor of its contents, leaves one with the strong impression that the USPTO is leaning towards this change.  Let the roller coaster ride continue!

Partial Institution Decisions Go, as IPR Proceedings in General are Here to Stay

As we mentioned, it has been a big day at the Supreme Court for patent law and, in particular, Inter Partes Reviews. This post addresses the second of two Supreme Court rulings issued today. In the first decision, discussed HERE, the Court ruled that IPRs are constitutional. Oil States Energy Services, LLC v. Greene’s Energy Grp., LLC, No. 16-712 (April 24, 2018). This post addresses the second decision, wherein the Court has overruled the PTAB’s regulation and practice that allowed it to issue partial institution decisions, sending only some claims, but not necessarily all, when instituting an IPR trial. SAS Institute Inc. v. Iancu, No. 16-969 (April 24, 2018).

SAS Institute was a closer decision than Oil States, with Justice Gorsuch writing the 5-4 majority opinion that was joined by the other, traditionally conservative Justices (Roberts, Kennedy, Thomas, and Alito). The majority opinion rests generally on the fact that the language of the statute that implements IPR is quite clear and straightforward – thus, it is the Petitioner’s petition, and not the Director’s discretion, that guides the life of an IPR. More seasoned Supreme Court commentators can better analyze the reasons for the conservative/liberal split on a typically apolitical  patent matter, but it may boil down to the fact that the conservative justices saw no ambiguity in Congress’s intent, and issued a decision upholding that intent, while the liberal block sought to give this government agency more discretion and leeway. One certainly gets the sense that the justices were looking beyond this specific patent issue in framing their approaches to statutory interpretation. To that end, a larger potential impact of this decision, the abandonment of Chevron deference, as was argued by SAS Institute, was an issue the Court left for another day.

What does the future hold (in the IPR world, not the statutory construction world)? Certainly, we will no longer see decisions to institute whereby some claims are included in an IPR trial and some claims are left out. The Court’s opinion is clear that this practice is over. But, what is to be made of the PTAB’s practice of denying redundant grounds? In SAS Institute, the Court criticized 37 CFR § 42.108(a), which states that “[w]hen instituting inter partes review, the [Director] may authorize the review to proceed on all or some of the challenged claims and on all or some of the grounds of unpatentability asserted for each claim.” (emphasis added). The vast majority of the opinion discusses the fact that the restriction on the first underlined clause above to “some” of the claims is incorrect. The opinion found this error to be clear in light of the fact that it is the Petitioner’s petition, and not the Director’s discretion, that dictates the life of an IPR. Shouldn’t that same rationale apply to the grounds set forth in a petition? There has been significant grumbling about the Board’s redundant grounds practice – that may be one of the next issues the Supremes consider as they closely monitor inter partes review proceedings.

IPRs Are Here to Stay, But Partial Institution Decisions Are a Thing of the Past

It is a big day at the Supreme Court for patent law and, in particular, Inter Partes Reviews. In the first of two decisions, the Court has ruled that IPRs are constitutional, casting aside a challenge to the very existence of the proceeding. Oil States Energy Services, LLC v. Greene’s Energy Grp., LLC, No. 16-712 (April 24, 2018). In the second decision, the Court has overruled the PTAB’s regulation and practice that allowed it to issue partial institution decisions, sending only some claims, but not necessarily all, when instituting an IPR trial. SAS Institute Inc. v. Iancu, No. 16-969 (April 24, 2018). This post addresses the Oil States decision, with a subsequent blog post HERE to discuss SAS Institute.

In Oil States, Justice Thomas wrote the opinion for the Majority, with Justice Gorsuch writing a dissent to which Justice Roberts joined. In general, the majority found that IPR is simply the government’s reconsideration of its earlier decision to grant a public franchise. Indeed, there was no dispute about the fact that the decision to grant a patent is a matter involving public rights. Since IPR is just an offshoot of that original grant, namely the reconsideration of that grant, IPR is also a matter involving public rights. Thus, except for an academic stroll through 200+ years of jurisprudence, there is not much practical information in the majority’s opinion. It is notable, however, that the majority expressly states that its holding is a narrow one. For example, the Court states that it has not: 1) considered whether infringement actions can be heard in a non-Article III form, 2) considered whether retroactive application of IPR is inappropriate, or 3) suggested that patents are not property for purposes of the Due Process Clause or the Takings Clause. Id. at 16-17.

Given some of the issues raised during oral argument, including “stacking” of Board panels, etc., it may be considered by some surprising that the Court did not offer at least some hints as to the future of IPR. Instead, some of those hints were relegated to the Gorsuch dissent. Citing the strong need for an independent judiciary to hear cases of this nature, the dissent paints a biased picture of IPR proceedings. For example, the dissent points out that the proceedings are: 1) overseen by a Director who serves at the pleasure of the President; 2) the Director oversees and pays Board members; 3) the Director selects which members, and how many, hear a particular challenge, and 4) if the Board members come to a conclusion that the Director does not like, the Director can add more members and order the case reheard (citing Nidec Motor Corp.). In short, the dissent characterizes IPR proceedings as a retreat from the promise of judicial independence – the type of independence that is immune from “[p]owerful interests…capable of amassing armies of lobbyists and lawyers to influence (and even capture) politically accountable bureaucracies.” Id. at 3. In the end, the dissent sounded a warning to the relinquishment of judicial authority to the other government branches: “Ceding to the political branches ground [the Article III Courts] wish to take in the name of efficient government may seem like an act of judicial restraint. But enforcing Article III isn’t about protecting judicial authority for its own sake. It’s about ensuring the people today and tomorrow enjoy no fewer rights against government intrusion than those who came before.”

District Court Orders Petitioner to Seek Termination of IPR based on Forum Selection Clause

A recent case from California reminds patent owners that forum selection clauses can be an important anecdote for PTAB proceedings. In Dodocase VR, Inc. v. MechSource, LLC, 3:17-cv-07088-EDL (N.D. Ca.), the district court ordered defendant/IPR Petitioner to seek termination of an IPR proceeding based on a license agreement entered into between patent owner and defendant.

More specifically, Dodocase VR sued MerchSource for patent infringement.  The parties had previously executed a “Master License Agreement” that contained a no-challenge clause and a forum selection clause.  The no-challenge clause required that “MerchSource shall not (a) attempt to challenge the validity or enforceability of the Licensed IP; or (b) directly or indirectly, knowingly assist any Third Party in an attempt to challenge the validity or enforceability of the Licensed IP except to comply with any court order or subpoena.”  The forum selection clause stated “The parties agree…that disputes shall be litigated in the courts in San Francisco County or Orange County, California.”

After unsuccessful settlement discussions, defendant MerchSource filed IPR petitions regarding the asserted patents.  Patent Owner Dodocase the moved for a preliminary injunction to stop the IPRs, based on both the license’s no-challenge clause and the forum selection clause.

The Court declined to enforce the no-challenge clause, based on Lear v. Adkins, 395 U.S. 653 (1969) and on principles of equity.

The Court did, however, find the forum selection clause applied, and granted the injunction on that basis.  Addressing the controlling factors under Ninth Circuit law, the Court determined the forum selection clause was enforceable and that its scope included PTAB proceedings, and thus that Plaintiff was likely to succeed on the merits of the contract issue.  The Court found Plaintiff would be irreparably harmed by having to fight validity on two fronts, and that the equities favored Plaintiff.  To this last point, the Court rejected Defendant’s argument that an injunction would forever preclude its ability to pursue an IPR (given the one-year bar), because, under applicable law, Defendants “should not be heard to argue that the enforcement of the contract into which it freely entered would cause hardship.”  Finally, the Court found the public interest favored enforcement of the contract.

As to relief, the Court recognized the practicalities of dismissing an IPR.  The Court required the Defendant to first email the PTAB to seek permission to move to withdraw, and then by a date certain file a motion upon receiving such permission.  The Court also included relatively detailed instructions as to how the Defendant could characterize the Court’s order to the PTAB (i.e., Defendant could say the injunction was granted over its objection, that it plans to appeal, and that it is moving to withdraw only to comply with the Court’s order, but Defendant could not say the Court entered a “partial stay” or that it was moving to withdraw “under protest.”).

Defendant quickly filed an appeal to the Federal Circuit, so stay tuned for further developments.

PTAB Opines Tribal Sovereign Immunity Does Not Apply to IPRs

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:

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.