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.

10 Years of KSR: 4 Key Statistical Takeaways

Our thanks to Ron Osborne of Intellectual Property Insurance Services Company and Greg Upchurch from LegalMetric for their help in this analysis of the impact of KSR over the past decade. It is hard to believe that KSR is 10 years old. For the entire article, please follow the following link, which takes you to IP Law360 (subscription required).

https://www.law360.com/articles/916864/10-years-of-ksr-4-key-statistical-takeaways

PTAB Designates Five Decisions as Precedential

PrecedentTo date, the PTAB has been stingy in its designation of panel decisions as “precedential.” Indeed, before today, only 3 decisions in the AIA era had been designated as precedential. That number increased dramatically on May 10, 2016, as the PTAB designated five additional, and well-known decisions as precedential. The decisions, with the PTAB’s description thereof, are listed below.

Garmin Int’l v. Cuozzo Speed Techs LLC, IPR2012-00001, Paper 26 (Mar. 5, 2013) – This order discusses the factors considered in evaluating motions for additional discovery in IPR proceedings.

Bloomberg, Inc. v. Markets-Alert Pty, Ltd., CBM2013-00005, Paper 32 (May 29, 2013) – This order discusses the factors considered in evaluating motions for additional discovery in CBM proceedings.

Oracle Corp. v. Click-to-Call Techs, LP, IPR2013-00312, Paper 26 (October 30, 2013) (precedential only as to Section III.A.) – This decision pertains to interpretation of “served with a complaint” for purposes of triggering the one-year time bar set forth in 35 U.S.C. § 315(b).

MasterImage 3D, Inc. v. RealD Inc., IPR2015-00040, Paper 42 (July 15, 2015) – This order provides guidance on patent owner’s burden to show entitlement to substitute claims. 

Lumentum Holdings, Inc. v. Capella Photonics, Inc., IPR2015-00739 (Paper 38) (March 4, 2016) – This decision interprets 35 U.S.C. § 312(a)(2).

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.

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%).

USPTO Announces Second Set of IPR Changes

USPTOToday, USPTO Director, Michelle Lee, explained the anticipated, second set of proposed changes to be made to IPR proceedings as inter partes review approaches its 3rd birthday. The first set of changes was discussed HERE. We set forth below a brief summary of the changes that have arrived. The proposed rule package will now be subject to a round of comments (due before October 19, 2015).

  1. In general, the Board shied away from adopting bright-line rules, and instead focused on the need for considering issues on a case-by-case basis.  Highlights of the new regulations include:

 

  • The Board will continue to apply the broadest reasonable interpretation standard for claim construction of unexpired claims, rather than the Phillips standard;
  • However, the Board will apply Phillips-type claim construction to claims what will expire before a final written decision;
  • Concerning motions to amend, the Office confirmed that the patent owner must show patentability of substitute claims over the prior art of record (including art provided in light of the patent owner’s duty of candor);
  • Patent Owners will be allowed to file testimonial evidence with its preliminary response, but there will be no depositions until trial is instituted, and, for purposes of deciding whether to institute trial, factual disputes will be resolved in favor of petitioner;
  • Regarding additional discovery, the Board will continue to apply the Garmin factors, subject to additional guidance reflected at http://www.uspto.gov/blog/aia/entry/message_from_administrative_patent_judges. The Board’s discussion of this issue implicitly forecasts more flexibility from the Board in applying these factors going forward;
  • Concerning the specific issue of additional discovery geared towards Patent Owner’s attempt to develop evidence concerning secondary considerations (e.g., regarding sales of Petitioner’s product), the Board maintains that the Garmin factors are applicable, but did give the Patent Owners the concession that an absolute showing of nexus is not required to obtain additional discovery;
  • Patent Owners will be allowed to raise real-party-in-interest or privity challenges at any point in a proceedings;
  • The Board reiterated its discretion to stay, transfer, consolidated, or terminate multiple proceedings involving the same claims;
  • Despite some requests for more lax adherence to the one-year time limit for IPRs, the “Office will continue to strive” to meet that deadline;
  • Concerning live testimony at hearings, the Board will continue its practice of considering requests for oral testimony on a case-by-case basis;
  • The Board also signaled that it will provide more guidance on whether parties are limited to certain issues at oral argument, that it plans to upgrade its technology so that hearings can be held in regional offices, and will allow exchange of demonstratives 7 days before a hearing; however, the Board declined to relax the rules concerning content of demonstratives;
  • The Board will be switching to word-count limits, rather than page count limits, for the petition, preliminary response, patent owner response, and petitioner’s reply brief (14,000 words instead of 60 pages for petition, patent owner preliminary response, and patent owner response, and 5,600 words instead of 25 pages for replies). As a result, the Board will no longer review claim charts in petitions for argument. For all other briefing, a page limitation will be maintained;
  • The Board states that it is working to upgrade its filing system to allow easier access to docket information;
  • The Board intends to include a Rule 11-type certification requirement for all filed papers
  • With the final version of these proposed rules, the Office will also issue an updated Office Patent Trial Practice Guide.

Lastly, we are very focused on the statistics that underlie IPR proceedings. In introducing the above changes, Director Lee explained some of the reasons why the Office believes IPR practice has been successful to date. That may be the case, but we were surprised by Director Lee’s citation to statistics regarding the results of IPR proceedings. Specifically, the Director stated that only “12 percent of total claims available to be challenged (4,496 of 38,462) were determined by the PTAB to be unpatentable in a final written decision.” Statistics can, of course, be manipulated and here, we fear, the USPTO may lose credibility. Including claims that were not challenged and claims that were resolved by settlement has a clear effect in raising the survival rate of claims subjected to IPR, without a strong basis for doing so. That is helpful for the Director’s narrative, but in our opinion, is unhelpful to ascertain the true effect of IPR and the Director’s reliance on that skewed stat undermines the other arguments made in favor the success of IPR.

33 Months of IPR…By the Numbers

UntitledOur apologies for our slightly delayed public dissemination of our Quarterly IPR Report. Please click HERE for the report or email us for a hard copy.

It’s hard to believe IPR has grown up so quickly. We look forward to celebrating its 3-year-old birthday next month.

Let us know if you have any questions or comments about the report in the comment section.