Feb 04

Board Explains the Process for Evidentiary Objections—and Illustrates the Severe Penalty for Not Following It

35378580_sPractitioners who are used to district court litigation may be surprised—and tripped up—by the rules for objecting to evidence in IPRs, which differ significantly from the approach used in litigation.  The Board’s Final Written Decision in IPR2014-01204 (Valeo v. Magna Elecs.) serves as a good case study of the IPR rules’ strict process for evidentiary objections.

By way of background, possibly the biggest difference between evidentiary objections in IPRs and litigation is the IPR rules require objections to be filed with the Board within ten business days after the evidence is submitted.  Failure to object within that time waives the objections, and precludes a later motion to exclude the evidence.  After evidentiary objections are served, the proponent of the evidence can, within 10 business days, serve “supplemental evidence” in an effort to overcome the objection.  That supplemental evidence is not filed as a matter of course without the Board’s approval; rather, its use is generally limited to filing in opposition to a motion to exclude.

The Board often requires strict compliance with this procedure, and will strike objections if they do not comply, as illustrated in the Valeo case.  There, the Decision to Institute was entered on January 28, 2015.  That triggered the 10-day deadline for Patent Owner to object to the evidence in the Petition, and Patent Owner timely filed its objections on Feb. 11.  In turn, Petitioner timely served supplemental evidence on Feb. 25.  The next day, Petitioner properly sought permission from the Board to file a motion to file the supplemental evidence as “supplemental information.”  On March 4, the Board granted Petitioner permission to file its motion.  The same day, Patent Owner objected to the supplemental evidence.

On April 10, the Board granted Petitioner’s Motion to File Supplemental Information.  Thus, by operation of the rules, the “supplemental evidence” became evidence on that day.  Patent Owner never renewed its objection.  As a result, the Board ruled that Patent Owner waived its objections to the supplemental information, despite having earlier objected.  The earlier objections were ineffective, according to the Board, because the “rules provide for objections to evidence, but do not provide for objections to supplemental evidence.”

Regarding the substance of admissibility issues, the Federal Rules of Evidence apply to IPRs.  The Valeo case addresses a variety of other evidentiary objections that were effectively lodged, and a few particular points from the decision provide a window into how many PTAB judges approach evidentiary issues:

  1. Arguments about admissibility should not be included in Patent Owner’s Response; such arguments should only be raised in a motion to exclude. (See FWD at 14-15);
  2. On the flip side of that same coin, arguments about sufficiency of the evidence should be presented in the Patent Owner’s Response, not in a motion to exclude under the guise of an objection on relevance grounds. (See FWD at 16);
  3. Hearsay objections are of very limited utility with respect to expert declarations, because the Board does not consider declarations submitted as a part of the IPR to be “out of court statements,” as the declarants may be cross-examined (see FWD at 17);
  4. Objections should be precise and comprehensive. For example, if an objection does not include reference to Rule 403, then the Board may not later allow an argument based on FRE 403.  (See FWD at 20);
  5. Be sure to object to the right document. For example, an FRE 901 objection should be directed to the underlying document, not a declaration that tries to authenticate the underlying document.  Otherwise, the Board may decline to consider the issue (see FWD at 21).

In the Valeo IPR, as usually happens in IPRs, the motion to exclude was denied.

Feb 01

APA Review of IPR Decisions to Institute Proving to be a Dead-end

16515450_sThe recent ruling in Medtronic v. Lee, No. 1-15-cv-946 (E.D. Va. Jan. 21, 2016) clarifies certain important questions about whether APA review is available when a petitioner is dissatisfied with the PTAB institution decision. Perhaps not surprisingly, in view of Federal Circuit jurisprudence on judicial review of PTAB institution decisions, the answer in Medtronic is “no.”

This case involves a disappointed IPR petitioner suing Michelle Lee in her capacity as PTO director in the Eastern District of Virginia. The background to this suit began when Robert Bosch Healthcare Systems (RBHS) sued Cardiocom for patent infringement. Cardiocom responded by petitioning for IPR of RBHS’s patents. The petition was eventually denied, but after it was filed and before it was denied, Medtronic acquired Cardiocom as a wholly owned subsidiary. More than one year after RBHS filed suit, Medtronic filed a second IPR petition in its own name, not naming Cardiocom as a real-party-in-interest. The PTAB granted this petition. RBHS requested reconsideration, however, based on the one-year time bar and Medtronic’s connections to Cardiocom. The PTAB reversed itself on reconsideration and dismissed the Medtronic petition.

It has already been well-established that a party dissatisfied with the PTAB’s refusal to institute cannot seek appellate review in the Federal Circuit. St. Jude Medical v. Volcano Corp., 749 F.3d 1373 (Fed. Cir. 2014). Instead of wasting its time trying to convince the Federal Circuit to go against St. Jude, Medtronic instead sought review in the Eastern District of Virginia under the Administrative Procedures Act (APA), on the grounds that the PTAB’s decision to dismiss was arbitrary and capricious, or otherwise contrary to law. 5 U.S.C. §§ 702 & 704. The question of whether one can use the APA to get review of PTAB institution decisions is still open. GTNX Inc. v. INTTRA Inc., 789 F.3d 1309, 1313 (Fed. Cir. 2015). However, the Medtronic court reads 35 U.S.C. § 314(d) as completely stripping courts of any authority to review institution decisions, even review under the APA. While the Eastern District of Virginia is not necessarily the last word on this subject (especially in view of the recent certiorari for In re Cuozzo Speed Tech.), it does suggest that APA review will be no more availing than any previous efforts to seek review of a PTAB decision to institute or not institute.

Jan 27

Harness Dickey Quarterly Bio/Pharma Report

BioFor our bio/pharma readers, we thought you would enjoy our latest Harness Dickey quarterly BioPharma Patents Newsletter. Click on the link to learn about the latest in: 1) Subject matter eligibility and “laws of nature”; 2) Unhelpful creativity in terminal disclaimers; and 3) Inter Partes Review of pharma patents.

Jan 25

Federal Circuit Issues Ironic Decision Reversing PTAB For Not Providing Enough Analysis

cafc1The PTAB was rebuked by the Federal Circuit on January 22nd for failing to provide an adequate description of its reasoning for finding the claims of the challenged patent obvious in an inter partes review proceeding. In Cutsforth, Inc. v. MotivePower, Inc., Judge Clevenger, in a non-precedential opinion, analyzed the obviousness finding from the Board, as set forth in the Final Written Decision. Among the aspects of the Board’s decision analyzed by the Court were:

  1. In its analysis of claim 1, the Board referenced Petitioner’s arguments, but did not state an independent reason for why the claim was obvious and did not formally adopt those arguments.
  2. In its analysis of claim 5, the Board only conclusorily stated that the limitation at issue was a “matter of design choice.”
  3. In its analysis of claim 8, the Board again repeated Petitioner’s argument but gave no other reason why the modification at issue was obvious.

The Court criticized the Board for failing to adequately articulate its reasoning for making its decision so that the Court could conduct a meaningful review. “Broad, conclusory statements are not enough to satisfy the Board’s obligation to provide reasoned explanation for its decision.” Id. at 6.

This non-precedential opinion has the aura of a building frustration at the Federal Circuit regarding an ongoing problem with the quality of the Final Written Decisions. Many of those decisions are thorough and complete, but others can be said to lack the necessary detail of a formal opinion, even if the conclusions of the decision are clearly correct. The Federal Circuit took this opportunity to let the Board know that shortcut analyses will not past muster.

It is good feedback from the Court, but an ironic decision. The decision is ironic because the Federal Circuit has, to date, made liberal use of Rule 36 Judgments – a one word decision (“AFFIRMED”) that provides no information about the Court’s analysis. Just as the Court required adequate description of the Board’s rationale for its decision, many would prefer more feedback from the Court regarding its rationale to better educate parties regarding the nuances of IPR.

Jan 16

Supreme Court to Review Two Key IPR Issues

8345487_sThe Supreme Court granted certiorari today on Cuozzo Speed Technology’s petition to review In re Cuozzo Speed Tech., 793 F.3d 1268 (Fed. Cir. 2015). Cuozzo presented two questions, and the Court has accepted both of them:

(1)   Whether the court of appeals erred in holding that, in IPR proceedings, the board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning.

(2)   Whether the court of appeals erred in holding that, even if the board exceeds its statutory authority in instituting an IPR proceeding, the board’s decision whether to institute an IPR proceeding is judicially unreviewable.

If the Supreme Court reverses the Federal Circuit’s decision on either of those two grounds, the impacts on future IPR proceedings could be huge. Although there are certainly patent claims that are invalid regardless of whether the “broadest reasonable interpretation” (“BRI”) or the plain and ordinary meaning (the so-called “Philips” construction) is used, there are also claims where the choice of standard is itself outcome determinative. There are, therefore, numerous patentees who should prefer Philips, and potential challengers who should prefer BRI.

Perhaps even more intriguing, however, is the possibility of a reversal on the second question presented: whether the decision to institute is so completely unreviewable as the Federal Circuit has held in (e.g.)Cuozzo or more recently Achates Pub’g. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015). Although the AIA lists a variety of situations in which IPR, PGR, and CBM are not available (35 U.S.C. §§ 315 and 325), the Federal Circuit has effectively insulated the PTAB’s decision to institute a trial from review. As such, even if the PTAB explicitly violates these statutory prohibitions, there is no mechanism by which the procedural defect can be remedied. A decision by the Supreme Court that 35 U.S.C. § 314(d) does not shield IPR institution decisions from review would dramatically shift the relative power balance between challengers and patentees in these AIA trial procedures. This blog will continue to follow this story as it develops.

Jan 14

“Obvious to Try” Rationale Insufficient to Institute IPR Trial Directed to Venlafaxine

5541491_sThe rate at which the Board denies inter partes review petitions has been climbing in recent months, and will be helped along by the Board’s denial of review in Neptune Generics v. Auspex Pharm., IPR2015-01313.  Neptune Generics filed a challenge to Auspex Pharmaceuticals’ patent no. 7,456,317, which covers a “deuterated form of venlafaxine, an inhibitor of monoamine neurotransmitters.”  The Board found the prior art did not teach the patented substitution of deuterium for hydrogen, nor that such a substitution would have been obvious to try, and thus denied review of all challenged claims.

The patent taught that the deuterated form is more stable (and thus has better pharmacokinetics and toxicity profiles) than normal venlafaxine.  Petitioner asserted that it would have been obvious to substitute deuterium (an isotope of hydrogen) for the hydrogen in venlafaxine.  Petitioner relied on two pieces of prior art:  Fogelman, showing the transformation of venlafaxine into its two major metabolites; and Miwa, showing a carbon-deuterium bond is stronger than a carbon-hydrogen.  Petitioner argued, with a supporting expert declaration, that a person of ordinary skill would have used Miwa’s teaching (not directed to venlafaxine) to modify venlafaxine because cleavage of hydrogen (via a hydroxyl group) is part of venlafaxine’s metabolism.  The Board found the record did not establish that a person of ordinary skill in the art would have been motivated to modify venlafaxine to change its metabolism, and, further, that the effect of the substitution explained by Miwa is unpredictable and varies depending on what compound it is applied to, and there was no specific teaching to modify venlafaxine in that way (or a reasonable expectation of success).  Further, Petitioner failed to show that switching deuterium for hydrogen would have been obvious to try, because there are over 124 million possible deuterated forms of venlafaxine, and no prior art teaching as to which should be used.

In the pharma space, “obvious to try” challenges are common. It is interesting to see the Board’s treatment of the issue here, and another IPR bullet dodged by a pharma patent owner.

Dec 22

PTAB Rejects Challenge to Onglyza® Patent

32481593_sThe lower burden of proof associated with inter partes reviews should make IPRs attractive to generic pharmaceutical companies, but even with that lower burden, success is not guaranteed, as illustrated by IPR2015-01340.  Mylan Pharmaceuticals challenged AstraZeneca’s patent RE44,186 on saxagliptin, the active ingredient in Onglyza® (used to treat type 2 diabetes).  Mylan’s petition argued the structure of the drug would have been obvious.  The Board disagreed, determining that the prior art did not provide sufficient motivation to modify the lead compound chosen by Mylan.  The Board denied review.

The Board started with the legal standard for this sort of issue:  “A determination of whether a new chemical compound would have been obvious over the prior art typically follows a two prong inquiry considering first, whether one of ordinary skill would have selected one or more lead compounds for further development and, second, whether the prior art would have supplied sufficient motivation to modify a lead compound to arrive at the compound claimed with a reasonable expectation of success.”

Here, the Board accepted Petitioner’s proposed lead compound, but found the record did not support the second prong of the test, modification of the lead compound to arrive at the claimed invention.  The Board analyzed the two aspects of the modification argument, stability and potency, and found both lacking.  As to stability, Petitioner argued that the person of ordinary skill would have been motivated to change one group on the lead compound to a more stable adamantyl group (as one would expect, the more stable group is also on the claimed compound).  The problem, though, was that the lead compound was noted for its stability, and the Board found the record was insufficient to establish a person of ordinary skill in the art would have been motivated to make it even more stable.  As to potency, Petitioner argued for a second substitution of a different group, which combined with the first substitution would yield the claimed compound.  The Board found the record failed to show that the proposed substitution would have been expected to increase potency.

The Board thus denied review.

Dec 17

Federal Circuit Addresses Substantial Evidence as Standard of Review in IPR

cafc1In June, 2014, the PTAB declared all challenged claims in two IPR trials brought by Gnosis S.p.A. to be unpatentable based on obviousness grounds. Gnosis S.p.A. v. S. Ala. Medical Science Found., IPR2013-00116 and Gnosis S.p.A. v. Merck & Cie, IPR2013-00117. In forty pages of opinion-and-dissent between the two cases, a divided panel of the Federal Circuit today affirmed these decisions as supported by substantial evidence. Merck & Cie v. Gnosis S.p.A., (Gnosis I) and S. Ala. Medical Science Found. v. Gnosis S.p.A. (Gnosis II). Of particular note is a thorough dissent filed by Judge Newman wherein she argues, unsuccessfully, that the substantial evidence standard should not apply to IPR proceedings to assure that the legislative purposes of IPR are met.

Substantively, the patents-at-issue are directed to homocysteine, a metabolic byproduct that forms in the course of mammalian biosynthesis of certain amino acids and nucleotides. Over-accumulation of homocysteine causes cardiac, skeletal, and nervous disorders. The technology in question here relates to treating this over-accumulation (hyperhomocysteinemia) by administering a particular isomer of a particular folate metabolite (L-5-MTHF). At the time of invention, folic acid was used to treat hyperhomocysteinemia, and L-5-MTHF was known as a biologically occurring metabolite of folic acid that was involved in various metabolic pathways for clearing homocysteine . Gnosis therefore argued—and the PTAB agreed—that it would have been obvious at the time of invention to cut out the middle man, so to speak, and administer L-5-MTHF directly instead of supplementing with folic acid so that the body could, after a lengthy series of enzymatic conversions, turn the folic acid into L-5-MTHF.

Of course, biological and chemical realities were not quite so simple as Gnosis’ argument for obviousness would imply. South Alabama Medical Science Foundation (SAMSF), the patentee, and their licensee, Merck, countered that at the time of invention L-5-MTHF had many known disadvantages that would discourage this strategy. For one thing, there was evidence that L-5-MTHF is not retained well in cells, such that large doses would be required to get a useful amount into the patient’s cells. This large dose problem is made doubly tricky by the fact that L-5-MTHF is not as stable as folic acid. The propensity of L-5-MTHF to degrade would mean that the dose that the manufacturer supplies would have to be correspondingly larger to account for degradation. Finally, there was some evidence that patient homocysteine levels could increase following L-5-MTHF administration, which would exacerbate rather than alleviate hyperhomocysteinemia.

Gnosis had a variety of published reports countering all of these points, and Merck had other reports countering Gnosis’ reports, and so on and so forth. The end result, as far as the PTAB was concerned, was that when all the evidence was weighed up together, the preponderance of the evidence supported a conclusion of obviousness.

Although Judge Hughes’ majority opinion does not touch on this point, the “preponderance of the evidence” standard of §316(e) is probably outcome determinative here. If this evidence had been considered under the “clear and convincing” standard for §282(a), the fact-finder would presumably have to say “Gnosis has a bunch of evidence and Merck has a bunch of counter evidence; I suspect that Gnosis’ evidence is more credible, but it is not ‘clearly and convincingly’ more credible, so the patentee gets the benefit of the doubt.” Because the challenger only had to prove unpatentability by a preponderance of the evidence, however, the PTAB as fact-finder was free to decide that Gnosis’ evidence was more credible on balance.

Judge Newman’s dissent touches upon this point, stating that, “[o]n questions that are close, as here illustrated, the standard of review can affect the result.” Gnosis I (dissent) at 13. Thus, she argues, it is incorrect for the Federal Circuit to review PTAB decisions under the highly deferential “substantial evidence” standard. Gnosis I (dissent) at 4. Specifically, Judge Newman remarks that “[t]he substantial evidence standard determines whether the decision could reasonably have been made, not whether it was correctly made.” Id. It is the Federal Circuit’s job, per Judge Newman, to assure that the PTAB’s factual findings are actually supported by the preponderance of the evidence.

Dec 15

The PTAB Can Institute Post Grant Trial on a Legal Ground Not Raised in the Petition

cafc1In In re Cuozzo Speed Tech., the patentee tried (and failed) to challenge the Board’s decision to institute an IPR on the basis of a combination of references that the petitioner had never suggested. However, even in Cuozzo the petitioner based the challenge on obviousness and the Board instituted on obviousness. In SightSound v. Apple we learn that the Board is not so limited.

SightSound Tech. LLC (“SightSound”) owns U.S. Patents 5,191,573 & 5,966,440. Apple Computer sought covered business method review (CBM2013-00020) of various claims from these two patents on §101, §102, §103, and §112 grounds. Apple alleged anticipation of certain claims by a CompuSonics publication. However, the Board instituted trial on the grounds of anticipation and obviousness over the CompuSonics publication. The challenged claims eventually survived the anticipation challenge, but were nevertheless ruled unpatentable for obviousness.

On appeal to the Federal Circuit, SightSound argued that the Board exceeded its statutory authority when it decided to institute trial on a statutory basis (obviousness over CompuSonics) not raised in the petition. In what has become a familiar pattern, however, the Federal Circuit concluded that SightSound’s argument speaks to the decision to institute, and 35 U.S.C. §324(e) leaves the Federal Circuit without jurisdiction to review such decisions.

Although this decision may be distressing to patent owners in IPR/PGR/CBM proceedings, today’s decision has important implications for would-be patent challengers. The page limits for the initial petition can create a dilemma about whether to go all in on one’s best ground for unpatentability, or whether to divide one’s pages between (for example) a strong obviousness argument and a possibly weaker inherent anticipation argument.

The lesson from SightSound is that one is better off focusing on one’s strongest argument, and then perhaps throwing in a single line at the end to the effect that “alternatively, X considered alone anticipates Claims 1, 2… [etc].” If the Board thinks that the cited art can be rearranged or used in a different sort of legal challenge (e.g., obviousness where one asserted anticipation, or vice versa), the Board can always move forward on that alternative basis. The decision to do so is insusceptible to appellate review.

Dec 09

Sec. 103(c) Saves Patent Claims in IPR Final Written Decision

14483088_sIn a recently-issued Final Written Decision, the Board thoroughly explained the sometimes tricky issue of the shift, if any, of the burden of proof/production in an IPR proceeding. Global Tel*Link Corp. v. Securus Techs., Inc., IPR2014-00825, Paper 36. The burden issue arose in the interesting context of a patent owner disqualifying certain prior art using 35 USC § 103(c)(1).

The IPR trial in Global Tel*Link was instituted based upon a prior art reference that was co-assigned to the assignee of the patent-at-issue in the IPR (“the ‘357 patent”). Patent Owner argued, therefore, that the prior art was disqualified under § 103(c)(1) because the art and claimed invention was “subject to an obligation of assignment to the same person.”

The Board first addressed the issue of burden of persuasion versus burden of production. In an IPR proceeding, the burden of persuasion is on Petitioner “and that burden never shifts to the Patent Owner.” Op. at 11. 35 USC § 316(e). Regarding the issue of the prior art at issue in the proceeding, Petitioner initially also had the burden of production. In this case, that burden was satisfied by the argument in the Petition that the prior art (under 102(e)) rendered the challenged claims unpatentable.

At this point, the burden of production then shifted to Patent Owner to argue that the art did not qualify as prior art. The Board determined that Patent Owner met this burden by showing that both the prior art and ‘357 patent were owned by the same company at the time the invention was made. The evidence supporting this proposition included assignment records of the ‘357 patent. Patent owner met its burden of production that, at the time of the filing of the application that led to the ‘357 patent, the inventions were co-owned by making a representation that the invention at issue was not constructively reduced to practice until the filing of that application. On this point, the Board concluded that, “absent credible factual support to the contrary, the claimed invention was made on the effective filing date.” Op. at 13-14.

The shifting of the burden of production did not hamper Patent Owner in this case, as a § 103(c)(1) argument to disqualify certain prior art led to the survival of several challenged claims.

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