Apr 26

Federal Circuit Maintains “Substantial Evidence” Standard of Review in AIA Post Grant Proceedings

cafc1The Federal Circuit, today, denied a petition seeking rehearing en banc of its application of the “substantial evidence” standard of review in post grant administrative proceedings, in the case of Merck & Cie v. Gnosis S.P.A., Appeal No. 2014-1779 (from IPR2013-00117). Writing a concurring opinion (in which Judges Wallach and Stoll joined), Judge O’Malley recognized the appeal of a change in the standard, such that the Federal Circuit would apply a less deferential “clear error” standard of review in AIA proceedings. But, Judge O’Malley felt compelled by Supreme Court precedent to maintain the “substantial evidence” standard. In short, Judge O’Malley signaled that the issue should be left to Congress to change, finding that, because Congress failed to expressly change the standard when it created IPR proceedings, the Court is not free to make that change now.

In dissent, Judge Newman wrote that it was inappropriate for the Federal Circuit to continue to apply the highly deferential standard of review and, instead, a full and fair review is more appropriate to the America Invents Act. More specifically, because PTAB proceedings are intended to be an alternative to district court proceedings on the issue of validity/patentability, the “substantial evidence” standard “does not assure the intended identity of result for these PTAB and district court determinations.”

Consider the baton officially passed to Congress to decide whether PTAB proceedings should be reviewed using a less deferential standard. For the foreseeable future, the Board will continue to receive high deference in its factual determinations.

Apr 25

Supreme Court Hears Arguments in Cuozzo Case

8345487_sWe should soon find out whether the Federal Circuit will again face reversal at the hands of the Supreme Court in a patent case. Today, the Court heard oral arguments in the case of In re Cuozzo, the first IPR decision to reach the highest court. The transcript of the proceeding can be found HERE. Reading the reaction of judges in oral argument can be a very dangerous game, but a few key observations can be noted:

First, while there were two issues on appeal, the issue of whether the Broadest Reasonable Interpretation claim construction standard is appropriate in IPR proceedings garnered almost all of the attention of the Court. Only Justices Ginsburg and Sotomayor briefly touched upon the second issue of whether the Board’s decision to institute can be reviewed by an appellate court.

Second, Chief Justice Roberts seemed troubled by the use of BRI in PTO proceedings. More specifically, Chief Justice Roberts was particularly concerned that the PTAB and a district court could come to different conclusions regarding the meaning of a claim limitation. Among his questions that indicated his seeming posture against BRI include: “It’s a very extraordinary animal in legal culture to have two different proceedings addressing the same question that lead to different results” and “It just seems to me that that’s a bizarre way to…decide a legal question.” Also, after the Solicitor explained how a district court and the PTAB may come to different conclusions, the Chief Justice asked: “And this is under a statute designed to make the patent system more reasonable and more expeditious in reaching judgments?” If an opinion comes out against BRI, we would expect the Chief Justice to author it.

Third, Justices Kennedy and Breyer seemed more favorable to BRI, framing the issue as the PTO taking a second look at questionable patents that should not have issued in the first place. As such, BRI might be appropriate for this second look in IPR. For example, Justice Kennedy asked “Well, if the patent is invalid under its broadest, reasonable interpretation, doesn’t that mean the PTO should never have issued the patent in the first place, and doesn’t that give very significant meaning and structure to this process?” Relatedly, Justice Breyer commented that “what we’re trying to do with this process is to tell the Office, you’ve been doing too much too fast. Go back and let people who are hurt by this come in and get rid of those patents that shouldn’t have issued.” These questions were less clear on their intent than Chief Justice Roberts’ questions, but indicated an understanding of why BRI had been adopted.

Fourth, regarding the issue of judicial review of PTAB decisions to institute, Justice Ginsburg indicated agreement with the Federal Circuit’s reading of 35 USC 314(d), while Justice Sotomayor seemed skeptical. Justice Ginsburg asked about the purpose of that statute if not to prevent all review of the Board’s decisions. Petitioner argued that it was to preclude mandamus and prevent review of the denial to such a hearing. At the end of the hearing, Justice Sotomayor returned to this issue, and asked why Congress would tell the PTO not to institute trial except in limited circumstances “but nobody’s going to ever watch you to make sure that’s what you’re doing.” This latter exchange was more involved and left the listener with the distinct impression that Justice Sotomayor was troubled by the lack of judicial oversight of the PTO’s decisions to institute.

Lastly, seven of the eight sitting justices asked at least one question. As is typical in such arguments, Justice Thomas did not question counsel for either Petitioner or the Solicitor.


Apr 04

PTO Issues Final Rule Changes to IPR Proceedings

USPTOThe PTO issued its long-anticipated rule changes for IPR and PGR proceedings. These rules follow up on immediate changes to the rules that were implemented about a year ago. Generally considered pro-Patent Owner changes to the rule, the new rules mark another phase in the evolution of IPR proceedings that have profoundly impacted the world of patent litigation. Below, we summarize each of the changes.

37 CFR §42.11 Duty of candor; signing papers; representations to the Board; sanctions. This section sets forth the requirements for signing papers before the PTAB and establishes that each paper must be submitted in good faith, similar to the requirements of Rule 11 from the Fed. R. Civ. P. The section also clarifies the procedure for filing a motion for sanctions for violating the good faith requirement.

37 CFR §42.23 Oppositions and replies. This section is amended to point out that a Petitioner reply may respond to arguments made in the corresponding Patent Owner Preliminary Response. The POPR was not included in the previous version of the rule.

37 CFR §42.24 Type-volume or page-limits for petitions, motions oppositions, and replies. For some filings, the length of the document will now be determined based on word count. For others, page limits still apply. Below is a summary of the current limitations:

i) IPR and Derivation Petitions: 14,000 words;

ii) PGR and CBM Petitions: 18,700 words;

iii) Patent Owner Preliminary Responses: 14,000 words;

iv) Patent Owner Responses to Petition: 14,000 words;

v) Replies to Patent Owner Responses to Petitions: 5,600 words;

vi) Motions: 15 pages;

vii) Opposition to Motions: 15 pages;

viii) Replies to Oppositions to Motions: 5 pages;

ix) Motions to Amend: 25 pages;

x) Opposition to Motions to Amend: 15 pages;

xi) Replies to Motions to Amend: 12 pages.

It is notable that, for the above page and word limits, tables of contents, tables of authorities, grounds for standing, mandatory notices, certificates of service or word count, and appendices of exhibits or claim listings do not count toward the limit. Statements of material facts to be admitted or denied do count toward the limit, but a response to such a statement does not count.

37 CFR §42.70 Oral argument. The time for serving demonstrative exhibits has been extended from five to seven business days.

37 CFR §42.100 Procedure; pendency. This section has been amended to allow a party to request that challenged claims be given a district court-type claim construction upon certification that the patent will expire within 18 months from the entry of the “Notice of Filing Date Accorded to Petition.”

37 CFR §42.107 Preliminary response to petition. This section has been amended to eliminate the prohibition against presenting new testimony evidence in the patent owner preliminary response.

37 CFR §42.108 Institution of inter partes review.  In view of the change to section 107, this section is changed to make clear that the Board may rely upon any testimony provided with a patent owner preliminary response, but that any question of fact created by such testimony shall be viewed in the light most favorable to the petitioner. Further, upon a showing of good cause, the petitioner may seek to file a reply to the preliminary response.

37 CFR §42.200, 207, and 208. These sections are amended to make similar changes to PGR practice as discussed above in sections 100, 107, and 108 relative to IPR practice.

37 CFR §42.300. This section makes the same change to covered business method patents as is made to IPR practice in section 100, relative to claim construction.

Lastly, the commentary accompanying this rule package is interesting reading. The PTO explains its consideration of other issues, including additional discovery and real party-in-interest issues, including how these issues will be handled in the future.

Mar 15

Federal Circuit Reverses Because PTAB Relied Upon Argument First Raised at Oral Argument

cafc1In a decision today from the Federal Circuit, in Dell Inc. v. Acceleron, LLC, 2015-1513, -1514 (March 15, 2016), involving US Patent No. 6,948,021, the PTAB was reversed because its Final Written Decision relied upon a new argument that was first raised by Petitioner in oral argument.

In the underlying IPR, the PTAB determined that claims 14-17 and 34-36 of the ‘021 patent had not been shown to be unpatentable, but determined that claims 3 and 20 were unpatentable. In today’s Federal Circuit decision, the Court affirmed the Board’s determination that claims 14-17 and 34-36 were not shown to be unpatentable, but reversed and remanded relative to the unpatentability determinations of claims 3 and 20.

With regard to claim 20, the Court took the Board to task for failing to give meaning to all of a claim’s terms. The claim term at issue requires a microcontroller with a connection to remotely poll a CPU module. Decision at 11. The Board’s construction, in effect, ignored the “remotely poll” limitation from the claim, meaning that the Board’s claim construction was unreasonable. Id. at 13.

The more groundbreaking aspect of the Court’s decision, however, relates to the Court’s remand of claim 3. The Court held that, because the argument upon which the Board relied was first identified by Petitioner in the oral argument, Patent Owner was denied a fair opportunity to respond to the basis of cancellation. Id. at 13. As such, the Board’s decision was vacated and remanded. This holding is interesting because previous PTAB Final Written Decisions relied upon new evidence and argument advanced for the first time in reply or on appeal, but the Court did not take issue with those PTAB decisions.

More specifically, Patent Owner argued in its Patent Owner response that the “caddies” required by claim 3 were not shown by the “articulating door” from the prior art, that was identified in the Petition. In its reply brief, Petitioner presented the new argument that the caddies were also shown in the prior art’s power-supply mounting mechanisms. At the oral hearing, Petitioner expanded on this argument, arguing that unlabeled “slides” from the prior art mounting mechanisms constituted the claimed caddies. In the Final Written Decision, the Board relied upon this new argument from the oral argument, determining that claim 3 was unpatentable based on the disclosure from the prior art of the slides.

The Court noted the statutory and regulatory bases for the requirement that the Board put a Patent Owner on notice of the bases upon which it determines a claim to be unpatentable. Id. at 13-14. In view of those requirements, “the Board denied [Patent Owner] its procedural rights by relying in its decision on a factual assertion introduced into the proceeding only at oral argument, after [Patent Owner] could meaningfully respond.” Id. at 14.

Because the oral argument does not provide Patent Owner with any opportunity to supply evidence, Patent Owner had no opportunity to comprehensively address this contention. In its Final Written Decision, the Board had dismissed Patent Owner’s argument that this “slide” argument was new, by concluding that Petitioner pointed to the “slides” in its reply. The Federal Circuit disagreed, finding that the key factual assertion was only specifically made at the oral hearing. Thus, in its holding, the Court pointed to the fact that Petitioner has not shown “that there can be no genuine factual dispute” on the issue of anticipation and, as such, vacated the Board’s cancellation of claim 3 remanded the case for further proceedings. Id. 

The Federal Circuit’s decision is a glimmer of hope for Patent Owners. The relatively unfettered discretion the Court has otherwise been affording the Board has (at least temporarily) been limited.

Mar 10

PTAB Grants IPR Motion to Exclude – Knocks Out Exhibits As Untimely

53129743_sThe Board rarely grants motions to exclude, but it did so in Toshiba Corp. v. Optical Devices, LLC, IPR2014-01447 (March 9, 2016).  There, Patent Owner moved to exclude four exhibits; the motion was denied as two of them and granted as to the other two.  Patent Owner objected to the two admissible exhibits (a data sheet and press release) on grounds of lack of authentication, inadmissible hearsay, and/or irrelevance.  The PTAB dispensed with these objections quickly.  Concerning authentication, a trademark notice on the document sufficiently authenticated the material.  The document’s date was not hearsay:  “the fact that a document bears a date is not hearsay.”  As to irrelevance, the PTAB found (as is common) that the Patent Owner’s argument was really about sufficiency of the evidence, which should not be raised in the form of an irrelevance objection.

The two excluded exhibits were a current website containing a link to a downloadable datasheet, and an accompanying authentication declaration from the Internet Archive.  These exhibits submitted for the first time with Petitioner’s reply.  The Board noted these exhibits were not provided in response to evidentiary objections from Patent Owner, nor were they submitted in accordance with the procedures for introducing supplemental evidence or information into proceedings (37 C.F.R. § 42.64(b)(2) and 42.123(a)–(c)), despite Petitioner’s early awareness of Patent Owner’s objections to the alleged public availability of the information.  Because the submission of these exhibits was untimely, the PTAB excluded them.  Notably, the PTAB’s exclusion order was not based on any Federal Rule of Evidence, but rather solely on the Board’s rules concerning the timing of submissions.

Mar 07

Federal Circuit Reaffirms Non-reviewability of PTAB’s Institution Decisions

cafc1The Federal Circuit reiterated this week, in Harmonic Inc. v. Avid Technology, Inc. (2015-1072), that it does not have jurisdiction to review the PTAB’s institution decisions, including decisions to institute an IPR, decisions to deny institution of an IPR, and decisions to institute on only a subset of grounds identified in a petition.

Harmonic petitioned for IPR alleging that all twenty claims of Avid’s patent 5,495,291 were unpatentable in view of several different prior art grounds. The Board instituted IPR of claims 1-16 based on one ground and disposed all other grounds directed to these claims as redundant. The Board then issued a final decision concluding that claims 11-16 were confirmed as patentable. Harmonic appealed and argued that the Board should have considered the other prior art grounds that were not instituted, especially after finding claim 11 patentable in view of the instituted ground. The court disagreed, citing several cases, summarized below, where it declined to review the Board’s institution decisions based on the plain language of 35 USC 314(d), which states that a “determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”

The court cited St. Jude Med., Cardiology Div., Inc. v. Volcano Corp., 749 F.3d 1373 (Fed. Cir. 2014), holding that it lacked jurisdiction to review the Board’s decision to not institute an IPR proceeding since the Board determined that the petition was time-barred; In re Cuozzo Speed Techs., LLC, 793 F.3d 1268 (Fed. Cir. 2015), where the court rejected the patent owner’s argument that 314(d) does not preclude but postpones review of institution decisions until after issuance of the final decision, and declined to decide whether the Board improperly instituted an IPR on certain claims since it relied on prior art not identified in the petition; Versata Development Group Inc. v. SAP America Inc., 793 F.3d 1306 (Fed. Cir. 2015), where the court clarified that the Board’s institution decisions in the CBM context are also nonappealable under 35 USC 324(e), but held that the Board’s determination that the patent was a CBM patent was not an institution decision and was reviewable because that determination involved the Board’s ultimate authority to deem the patent unpatentable under the CBM review proceedings; Achates Reference Publ’g, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015), where the court declined to review the Board’s institution decision premised on IPR petitions that the patent owner argued contravened section 315(b)’s time bar because the time bar is simply a procedural rule that does not itself give the Board the power to deem a patent unpatentable; and Synopsys Inc. v. Mentor Graphics Corp., __ F.3d __, 2016 WL 520236 (Fed. Cir. 2016), where the court declined to review the Board’s decision to institute review for some, but not all, of the claims challenged in the petition, but held that the Board is not required to address all claims raised in an IPR petition in its final decision under 35 USC 318(a).

Relying on this precedent, the court reiterated that section 314(d) prohibits review of the decision to institute an IPR as well as the decision to deny institution of an IPR and clarified that a decision to institute on only a subset of grounds identified in a petition is simply a combination of the two and is likewise unreviewable. The court emphasized that the Board’s decision to institute on one prior art ground or another does not raise fundamental questions about the scope of its statutory authority to deem patents unpatentable and is simply the Board’s exercise of its institution authority in a given case, which is unreviewable.

The court explained that the Board’s reference to the non-instituted grounds as redundant simply meant that the claims addressed by the non-instituted grounds were already addressed by the instituted grounds and therefore did not alter the court’s decision. Noting that 35 USC 314 does not compel the PTO to institute an IPR proceeding in any instance, the court opined that the Board may choose to institute some grounds and not institute others as part of its comprehensive institution decision consistent with 37 CFR 42.108, which permits the Board to institute on a subset of claims challenged in a petition. The court was unwilling to change its opinion because the Board found claim 11 patentable over the instituted ground since the court noted that the Board’s patentability determination was distinct from the Board’s institution decision, which remained unreviewable.

Feb 24

Patent Owner’s IPR Statements May Constitute A “Disclaimer” of Claim Scope In Litigation

33513289_sIt is well-established that a patent owner’s statements about a claim term made during prosecution can be viewed as a disclaimer of claim scope during the Markman phase of litigation. Similarly, clear and unambiguous statements made in the patent specification can restrict claim scope during litigation. Several district courts have now followed suit with regard to statements made by a patent owner in an IPR proceeding, including the District Court for the Northern District of California in the recent case Aylus Networks, Inc. v. Apple, Inc., Civil Action No. 13-cv-04700.

In Aylus, the patent-in-suit was directed to a media streaming architecture that permitted a user to coordinate the transfer of media content from an internet-based server to a physically-proximate media renderer. Aylus asserted the patent against Apple’s AirPlay feature of its iOS devices. Independent claim 1 recited a method of controlling and delivering media content by invoking “Control Point” logic and “Control Point Proxy” logic to cooperatively negotiate media content delivery under certain conditions. Claim 2, which depended from claim 1, recited that the “Control Point Proxy” logic is invoked to negotiate media content delivery under other conditions.

During the litigation, Apple filed a Petition for Inter Partes Review of the patent-in-suit. In its Preliminary Response, Aylus argued that claim 2 requires that “only” the Control Point Proxy logic is invoked under the conditions described in claim 2. Aylus was successful in avoiding institution of trial on claim 2.

In the litigation, the District Court later construed claim 2 to require that “only” the Control Point Proxy logic be invoked, which ultimately led the court to find non-infringement in favor of Apple on summary judgment. The district court’s claim construction was based upon traditional claim construction factors, including assessing the plain language of the claim and the teachings of the patent specification. The district court also relied upon Aylus’ arguments in its Preliminary Response in the IPR. The district court noted that IPRs are technically adjudicative proceedings, rather than prosecution, but nonetheless considered Aylus’ Preliminary Response statements to constitute a “prosecution disclaimer.”

Though there has been no Federal Circuit opinion on this topic yet, several district courts have viewed statements made during an IPR as disclaimers, akin to similar statements made in the specification and during actual prosecution, when it comes to claim construction during litigation.

Feb 23

Federal Circuit Issues a Rare Reversal on Behalf of Patent Owner in IPR

cafc1Yesterday, the Federal Circuit decided five appeals from as many IPR’s filed by Patent Owner PPC Broadband involving claim construction issues, most of which were decided in PPC’s favor. In a first appeal (2015-1364) taken from IPR2013-00342, the court agreed with PPC and held that the Board’s construction of “reside around” was unreasonably broad because the Board selected the broadest of several dictionary definitions (in the immediate vicinity of; near) and disregarded the definition (encircle or surround) that was consistent with the context provided by the claims, the specification, and the patented technology. This holding can be particularly useful to Applicants during prosecution when Examiners applying BRI select the broadest dictionary definition of a claim term and ignore the definition that is consistent with Applicant’s use of the term. The court also rejected the Board’s conclusion that the claim term “reside around” should be interpreted to mean something other than “encircle or surround” since the claim preamble recited a different term “surrounded” than the claim term “reside around.” The court clarified that such differentiation is less applicable where, as here, the preamble merely sets forth the general nature of the claimed invention and is not used to limit the claim.

Nonetheless, Appellee-Petitioner Corning argued that the Board’s interpretation should be upheld because it covers many of PPC’s embodiments. PPC’s numerous claims of varying scope, disclosure of various embodiments, and consistent use of the term “around” in the patent came to PPC’s rescue. Citing these facts, the court rejected Corning’s argument that the broadest reasonable construction is the one that covers the most embodiments. Instead, the court emphasized that the BRI must be reasonable in light of the claims and specification and that the construction covering more embodiments than another does not render that construction reasonable.

In other consolidated appeals (2015-1361, 2015-1366, 2015-1368, and 2015-1369), while the court affirmed some and rejected some of the Board’s interpretations, the court offered guidance regarding objective considerations, particularly commercial success, which can help patent owner. PPC alleged, and presented multiple declarations in support, that its connectors are commercial embodiments of the claimed connectors. Corning did not dispute the allegation. Yet the Board found that PPC did not present persuasive evidence of commercial success. The court held that where, as here, the patentee has presented undisputed evidence that its product is the invention disclosed in the challenged claims, it is error for the Board to find to the contrary without further explanation, which was missing here. The court held that since the evidence shows that PPC’s connectors are the invention disclosed and claimed in the patent, it presumed that any commercial success of these products is due to the patented invention. The court noted that while such a presumption won’t apply in ex parte context, where the PTO cannot gather evidence supporting or refuting the patentee’s evidence of commercial success, it applies in contested proceedings like IPRs, where the petitioner has the means to rebut the patentee’s evidence.

Feb 11

Federal Circuit Provides Guidance on Motions to Amend in IPR

cafc1In Nike v. Adidas, the Federal Circuit today gave patent owners in IPR the beginnings of a roadmap for how to successfully amend claims in an IPR. Readers of this blog will know by now that the PTAB rarely grants motions to amend, and that the Federal Circuit has shown little inclination to make the PTAB more generous in granting such motions.

Previous appeals from a denial of motion to amend have focused on the legal standard that the PTAB applies when evaluating amendments. Microsoft Corp. v. Proxyconn Inc., 789 F.3d 1292, 1305 (Fed. Cir. 2015) (“Proxyconn argued that because DRP was not one of the references over which the PTO had instituted review… the Board exceeded its authority under § 42.121(a)(2)(i) to deny substitute claims…”); Prolitec Inc. v. ScentAir Techs., 807 F.3d 1353, 1363 (Fed. Cir. 2015) (“Prolitec argued that it did not have the burden to establish patentability over prior art references cited in the patent’s original prosecution history because they are not prior art of record in the IPR,”); Synopsys Inc. v. Mentor Graphics, slip op. at 25 (“Mentor argues that Proxyconn does not control because [it] did not address whether the patentee ought to bear the burden to distinguish all prior art known to the patent owner and whether this requirement is contrary to 35 U.S.C. § 316(e),”). By contrast, Nike spent less time challenging the standard that the PTAB applies, and more time simply explaining why its substitute claims are patentable over the art at issue. Because the Federal Circuit could not affirm the PTAB’s obviousness conclusions, it remanded the case back to the PTAB, directing the PTAB to reconsider the motion to amend in view of the defects in the PTAB’s obviousness analysis.

The take-home message here is that if you want the Federal Circuit to grant your motion to amend, you should focus on why your substitute claims are patentable over the art in the case. Do not focus on whether the PTAB is applying an incorrect standard for evaluating when amendments are proper, because the PTAB’s standards will be evaluated under very deferential Chevron review.

A last important point to note here is that Adidas asked the Federal Circuit to deny the amendment because Nike had included a single sentence in its motion asserting that the new claims were “patentable over prior art known to Nike, but not part of the record of the proceedings.” The PTAB concluded that this was facially inadequate, and that having acknowledged that it knew of art not already of record, Nike was obliged to discuss such art before the motion could properly be granted. The Federal Circuit explicitly disagreed with this conclusion. Rather, the Federal Circuit held that “we cannot see how the statement used by Nike would be inadequate, absent an allegation of conduct violating the duty of candor.” Because there were no allegations in this record that Nike had violated its duty of candor, the Federal Circuit held that Nike’s failure to discuss other art cannot be a ground on which to deny the motion to amend. This is good news for patent owners, because it means that valuable page limits do not need to be consumed discussing non-record art.

Feb 11

39 Months of Inter Partes Review – By the Numbers

12aWelcome to the 12th volume of our IPR-PGR Report, reporting on the statistics that underlie Inter Partes Review and Post Grant Review proceedings. This quarter marked the second in a row in which the number of IPR filings per week decreased, signaling a potential slow down in the popularity of IPRs. At the same time, more claims are surviving at the institution stage. Lastly, the Eastern District of Texas has taken a commanding lead as the jurisdiction in which litigants are least likely to obtain a stay pending the resolution of an IPR (23%).

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