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 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.


Whether You Need to Show Standing Depends on Where You are Standing

The Federal Circuit (CAFC) held in Consumer Watchdog v. WARF, 753 F.3d 1258, 1263 (Fed. Cir. 2014), while one does not need to satisfy Article III standing requirements to prosecute an inter partes re-examination in front of the Patent Trial & Appeal Board (PTAB), if one does not like the PTAB’s decision and one wants to take an appeal to the CAFC, then one does need to satisfy the Article III requirements for standing. If the appellant does not show a concrete and particular injury from the PTAB’s decision, the court will not have jurisdiction to hear the appeal. InConsumer Watchdog, it was the patent challenger (Consumer Watchdog) who had lost in front of the PTAB. Because Consumer Watchdog does not actually make, use, or sell any products or services that might infringe the patent that they were challenging, the CAFC decided that Consumer Watchdog had no standing to appeal the PTAB’s determination that the challenged claims are patentable. The CAFC dismissed Consumer Watchdog’s appeal. The CAFC recently affirmed in Phigenix Inc. v. ImmunoGen Inc., 845 F.3d 1168, 1172 (Fed. Cir. 2017) that the Consumer Watchdog holding applies just as much to inter partes reviews (under the America Invents Act) as it applied to inter partes re-examinations. See alsoPPG Indus. Inc. v. Valspar Sourcing Inc., 679 Fed. Appx. 1002, 1005 (Fed. Cir. 2017).

All of these cases concerning standing in appeals from the PTAB, however, featured one common fact pattern: it was always the patent challenger who was trying to appeal to the CAFC. That is to say, it was an open question whether—in a case where there was no allegation of infringement or likelihood of infringement between two parties—an appeal could proceed where the patent owner had lost in front of the PTAB. The CAFC definitively answered this question in Personal Audio v. Electronic Frontier Fdn., No. 16-1123 (Fed. Cir., Aug. 7, 2017), holding that the patent owner whose claim has been held unpatentable at the PTAB has suffered the sort of concrete, particularized injury that will support standing in an Article III court.

This holding makes intuitive good sense. While Consumer Watchdog had not really lost anything when it failed to get WARF’s patent declared invalid, Personal Audio definitely had lost something (its patent claim!) when the EFF convinced the PTAB to declare certain of Personal Audio’s patent claims unpatentable. It makes sense, in other words, to say that a patent owner has standing to appeal from an adverse PTAB judgment, even if a patent challenger does not.

The other open question in this case was, if there is standing to appeal, is EFF allowed to participate, or does the appeal proceed with only Personal Audio allowed to present its case. The court held that once Article III standing is established, then the appeal proceeds as normal, i.e., with an appellant and a respondent. In other words, EFF was permitted to defend the judgment below, even though EFF had no tangible interest that would have supported the appeal if the PTAB decision had gone the other way. The fact that the EFF (which has no personal interest in the outcome of the case) was allowed to participate suggests that the CAFC will likely hold that the PTO has a right to intervene in PTAB appeals when it considers that question in Knowles Electronics v. Matal, No. 16-1954 (Fed. Cir., Jun. 30, 2017).

For Waterproofing Patent, Arguments Against Obviousness Didn’t Hold Water

The Federal Circuit’s decision in Outdry Technologies Corporation, v. Geox S.P.A. discusses some criteria for determining whether or not the explanations provided by the PTAB in an IPR decision are sufficient to support a finding of motivation to combine.

The independent claims of Outdry Technologies Corp.’s US Patent No. 6,855,171 (“the ‘171 patent”) were found to be obvious during IPR proceedings. Outdry’s ‘171 Patent is directed to two claimed processes for waterproofing leather by “directly pressing,” on an internal surface of the leather, a semi-permeable membrane to which a discontinuous pattern of glue dots has been added. One of the claimed leather waterproofing processes of the ‘171 patent requires the glue dots have a particular density. The other requires that the glue dots have a particular size. According to Outdry, directly pressing the glue dot-bearing membrane onto the leather addressed the problem of water pockets forming between the semi-permeable membrane and the leather when only the edges of the semi-permeable membrane are sown or glued to the leather.

In the IPR decision, the PTAB found the claimed leather waterproofing processes of the ‘171 to be obvious in view of US Patents to Thornton and Hayton, and a reference entitled “Chemistry of the Textiles Industry” (“Scott”), each of which discuss using glue dots, or something similar, to adhere a film or waterproof layer to another layer (e.g., a water permeable layer, like leather).  The PTAB determined that the petitioners for the IPR proceedings, Geox, S.p.A., had provided a rational underpinning for combining Scott and Hayton, and that the claimed leather waterproofing processes of the ‘171 Patent would have been obvious in view of Thornton, Hayton and Scott.

Outdry appealed the PTAB’s IPR decision, arguing, among other things, that the motivation to combine Thornton, Scott and Hayton relied upon by the PTAB during the IPR proceedings was insufficient.

In particular, Outdry argued that the PTAB failed to make the required findings supporting the conclusion that a motivation to combine Thornton, Scott and Hayton existed because the PTAB merely relied on Geox’s petition to find a motivation to combine without making its own findings. The CAFC disagreed. The CAFC listed a number of example reasons for which the findings of the PTAB have previously been determined by the CAFC to be insufficient to support a decision that motivation to combine exists, including: failing to cite any evidence, either in the asserted prior-art references or elsewhere in the record, with sufficient specificity for us to determine whether a person of ordinary skill in the art would have been so motivated; merely stating that a combination is “intuitive” or “common sense,” without articulating a rationale; and simply agreeing with arguments in a petitioner’s brief without making any factual findings. However, the CAFC concluded that the PTAB did not make any of the above-referenced errors by articulating, in the IPR decision, Geox’s arguments explaining the motivation to combine the cited references. Further, the CAFC clarified that a PTAB decision that relies on a petitioner’s arguments and includes an explanation supporting the decision to rely on the petitioner’s arguments is acceptable, unlike a PTAB decision that merely adopts a petitioner’s arguments by reference without providing such an explanation.

Outdry also argued that the PTAB’s finding of a motivation to combine was insufficient because the PTAB failed to explain why a person of ordinary skill in the art would be motivated to combine the cited references to solve the water pocket problem addressed by Outdry’s ‘171 Patent. The CAFC was not persuaded by this argument either. The CAFC responded to this argument by citing previous CAFC decisions indicating that a motivation to combine cited references identified in support of a conclusion of obviousness does not have to match a motivation provided by the patent at issue or the patentee.  The CAFC further explained that the identified motivation does not even have to come from the references, themselves.

Accordingly, in Outdry Technologies, the CAFC confirmed that there are standards the PTAB must satisfy when asserting, in an IPR decision, that a motivation to combine exists. Further, the CAFC also explained that these standards are not quite as strict as the Appellant argued they were.

“Catch-All” Phrases Insufficient To Give Proper Notice of Grounds for Petition

In Emerachem Holdings, LLC v. Volkswagen Group of America, Inc., the Federal Circuit made clear that “catch-all” phrases in a Petition for IPR and/or a Board’s Institution Decision are insufficient to put a patent owner on notice of the specific grounds alleged for unpatentability.

In this case, the Board relied upon the “Stiles” reference as disclosing one of the elements of challenged claims 3, 16 and 20, even though the Petition did not specifically rely upon Stiles for those claims (instead applying Stiles to other challenged claims).  Similarly, the Board’s Institution Decision did not specifically identify Stiles as part of the ground for unpatentability of claims 3, 16 and 20.  Petitioner argued that a broad statement in the Petition that “[c]laims 1-14 and 16-20 are obvious under 35 U.S.C. §103(a) over the combination of Campbell [‘558] and either Hirota or Saito, in view of Stiles” was sufficient to put the Patent Owner on notice.  The Petitioner also argued – as did the PTO, which intervened to defend the Board’s decision – that a similar statement in the Institution Decision was sufficient notice.  The Federal Circuit rejected those arguments, finding that such general statements, particularly in the light of very detailed claim charts that failed to identify Stiles for claims 3, 16 and 20, do not provide sufficient notice.  Therefore, the Patent Owner’s right to notice and an opportunity to respond under the America Invents Act were violated.  The Federal Circuit reversed and remanded.

The Federal Circuit also reaffirmed the need for corroboration when relying upon the testimony of an alleged inventor.  Here, the inventors of the challenged patent each submitted declarations to the effect that they were the sole inventors of the subject matter of an asserted prior art reference on which they were listed inventors along with two other inventors.  Therefore, argued the Patent Owner, the alleged prior art did not qualify under 35 U.S.C. §102(e) because it was not “by another.”  The inventors’ declarations, though, were uncorroborated by any other testimony or documents.  The Federal Circuit reaffirmed that, in many cases, the testimony of an inventor must be corroborated, and that the sufficiency of the corroboration will be determined under the totality of the circumstances.

Earthquake Coming? Supreme Court to Weigh Constitutionality of IPRs

[We have two submissions on this potentially seismic development]

On June 12, the Supreme Court took certiorari on probably the biggest IPR case possible: a case challenging the constitutionality of IPRs on separation-of-powers and seventh amendment grounds. This comes just a few weeks after the Supreme Court took certiorari on SAS Inst. v. Lee. The patent owner in Oil States v. Lee has asked the court to consider whether it violates the separation of powers to have an administrative tribunal (the PTAB) making decisions about patent validity—an issue traditionally entrusted to the Article III courts. The patent owner also wants the Court to consider whether a patentee has a right to a jury trial when issues of validity are at stake. The Court has agreed to consider both questions.

The Court of Appeals for the Federal Circuit (CAFC) faced these same questions in MCM Portfolio v. Hewlett-Packard Co., 812 F.3d 1284 (Fed. Cir. 2015). The CAFC held that it was not problematic to have an administrative tribunal like the PTAB decide issues that are also decided by courts and juries because patents involve “public rights” created by Congress. The logic is that because Congress created patent rights in the first place, Congress can create an agency to decide validity questions. MCM sought certiorari and was denied. Similarly, the patentee in Cooper v. Square sought certiorari after the CAFC summarily dismissed an appeal without opinion. The Court denied certiorari on that case as well. Finally, Oil States Energy Services proved that the third time really is a charm by making many of the same arguments as MCM and Cooper, but this time certiorari was granted.

Suffice it to say, the outcome in this case could be huge. If the Court reverses the CAFC (and the Court usually reverses the CAFC when it takes certiorari), then the entire IPR system could be dismantled at a stroke. On the other hand, if the CAFC were reversed in this case, then SAS Inst. v. Lee would be rather pointless. If one wants to sift tea leaves, then, the fact that the Court also took certiorari in SAS Inst. might suggest that the Court does not have in mind to disassemble the IPR system totally. In any event, HDP will be following this case closely, and keeping readers of this blog up to date with subsequent developments in both cases.

Earthquake Coming? Supreme Court to Weigh Constitutionality of IPRs

[We have two submissions on this potentially seismic development]

It’s no secret that patentees have been generally unhappy with both the process and outcomes of AIA reviews.  Now the Supreme Court has agreed to decide whether the entire AIA review system will be eliminated on constitutional grounds.  That case, Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, involves an IPR proceeding finding several claims of a patent were unpatentable; the Federal Circuit affirmed in a Rule 36 order.  The issue centers around whether patents are a private right—in which case they can only be nullified by an Article III court—or whether they are a public right—in which case they can be adjudicated by an executive agency.  In a different case last, the Federal Circuit declined to consider a similar question en banc.

The specific question the Supreme Court will answer in Oil States is:  “Whether inter partes revew—an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

The Supreme Court denied certiorari on two other questions presented, which concerned whether the IPR amendment process is inconsistent with Cuozz, and the degree to which the BRI standard requires consideration of traditional claim construction principles, including reading the claims in light of the specification.