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 Weighs in on 3 Aspects of IPR Proceedings in Synopsis v. Mentor Graphics

cafc1Today in Synopsys Inc. v. Mentor Graphics, the Federal Circuit answered several new questions about the PTAB’s duties and the Federal Circuit’s powers of review during and after an inter partes review.

The first—and perhaps most significant—issue in this appeal was whether the PTAB must give a decision regarding all claims that the petitioner challenges. In this case, Synopsys had challenged 19 of Mentor Graphics claims in US 6,240,376, but the PTAB only instituted review on 12 of those claims, and only found 3 of those to be unpatentable in the final written decision. Synopsys appealed, arguing not only that the nine surviving should be held unpatentable, but also that the PTAB was statutorily obliged to address the seven claims on which IPR had not even been instituted. The logic of Synopsis’ argument is that 35 U.S.C. § 318(a) provides that the PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner… .” Synopsys reasoned that because it had challenged 19 claims, the PTAB was obliged to rule on 19 claims, even if the PTAB had only granted review on 12 claims. The majority opinion—authored by Judge Dyk—dismissed this argument because even Synopsys admitted that it would make little sense to have the PTAB pass on claims about which a full record had not been developed. The majority opinion also noted that § 314(a) speaks of “claims challenged in the petition,” while § 318(a) speaks of a “claim challenged by the petitioner.” The majority cited Bailey v. United States, 516 U.S. 137, 146 (1995) for the proposition that when Congress uses two different phrases, this suggests that the two are to be given different meanings (likening “challenged by the petitioner” and “challenged in the petition” to “used” and “intended to be used” in Bailey).

In other words, the majority held that both the plain text of the statute and common-sense considerations regarding statutory purpose favor the PTAB being only obliged to pass on claims for which IPR was instituted. The majority also noted that even if the statutory text had been ambiguous, Congress had committed the implementation of the America Invents Act (AIA) trial procedures to the USPTO’s expertise, so the USPTO’s implementing regulations are entitled to Chevron deference. The USPTO interprets its regulations as not requiring final decisions regarding claims on which IPR was never instituted, and this is further reason why Synopsys’ appeal fails. This is yet another case showing the Federal Circuit’s great deference to the USPTO’s decisions about how IPR trials are supposed to work. See, In re Cuozzo Speed Tech., 793 F.3d 1268, 1279 (Fed. Cir. 2015); Ethicon Endo-Surgery v. Covidien LP, 2016 U.S. App. LEXIS 473 at *23 (Fed. Cir. Jan. 13, 2016).

Another Synopsys argument for why all challenged claims need to be addressed in one IPR is that IPRs are supposed to resolve invalidity contests concerning documentary prior art (i.e., patents and printed publications) quickly and efficiently. If the PTAB may address some challenged claims but not others, this frustrates the Congressional intention to bring an expedited resolution to novelty/obviousness issues. The majority held that there is “no inconsistency” between the intended efficiency and the piecemeal nature of the PTAB’s review here, because the statute plainly contemplates the possibility of novelty/obviousness contests in both an IPR and a corresponding district court trial (e.g., where some invalidity contentions are based on documentary prior art, and others are based on prior public use). This drew a vigorous dissent from Judge Newman, who made it clear that she thinks that an IPR is supposed to be something that one does instead of—not in addition to—litigating novelty/obviousness in court.

A second interesting question at stake in this case was whether Mentor Graphics should have been allowed to enter a substitute claim set. Just as in the overwhelming majority of AIA trials in which the patent owner seeks to amend, the PTAB refused the proposed amendments. The Federal Circuit has twice affirmed the USPTO’s regulations regarding amendments in IPRs. Microsoft Corp. v. Proxyconn Inc., 789 F.3d 1292, 1303 (Fed. Cir. 2015); and Prolitec Inc. v. ScentAir Techs., 807 F.3d 1353, 1363 (Fed. Cir. 2015). Mentor Graphics attempted to distinguish these cases on the logic that neither had squarely addressed the issue of whether the USPTO’s approach to IPR amendments is consistent with the statutory provision (35 U.S.C. § 316(e)) that “the petitioner shall have the burden of proving a proposition of unpatentability,” (emphasis added). The majority was not impressed with this argument, and noted that § 316(e) begins with the introductory phrase “[i]n an inter partes review instituted under this chapter… .” The majority considered that “instituted under this chapter” means that the only claims for which the petitioner must prove unpatentability are the claims on which review was initially granted. Because Mentor Graphics’ substitute claims were not in the case at the time of institution, the burden allocation in § 316(e) does not apply to Mentor Graphics’ substitute claims. Once again, Judge Newman dissented from this part of the opinion, just as she had done in Prolitec, 807 F.3d at 1365.

Finally, the last interesting question at stake in this case was whether district court review of an IPR decision is available under the Administrative Procedures Act (APA). As this blog recently noted, this question has not been definitively answered, but what little evidence we have suggests that APA review is not available. Synopsys had filed parallel proceedings—challenging the PTAB’s decision not to review all 19 challenged claims—before both the Federal Circuit and the U.S. district court for the Eastern District of Virginia. The district court dismissed this challenge because it concluded that the AIA strips courts of jurisdiction to hear APA challenges to IPR decisions. The Federal Circuit held that because its own ruling here disposed of all the same issues that were at stake in the APA challenge before the district court, that the APA appeal was moot. Therefore, the Federal Circuit dismissed the APA appeal and vacated the district court’s ruling on the subject. Judge Newman also dissented from this holding. Judge Newman considered that the district court was correct—i.e., that the AIA really does strip courts of the authority to hear APA challenges to IPR decisions—and that the district court’s ruling should be affirmed, not vacated. In other words, while the subject of APA review remains technically an open question, this case stands as further evidence that APA review is not available from IPR decisions.

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.

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.

Preserving a Complete (and Confidential) Record for Appeal

[pullquote align=”left|center|right” textalign=”left|center|right” width=”30%”]37 CFR §42.56 

Expungement of confidential information: After denial of a petition to institute a trial or after final judgment in a trial, a party may file a motion to expunge confidential information from the record.[/pullquote]

Now that the first wave of Final Decisions have issued from the PTAB, the question has arisen regarding what to do with sealed documents in an IPR record while the decision is appealed.  Pursuant to Patent Office Trial Practice Guide, Rule 42.56, “confidential information that is subject to a protective order ordinarily would become public…45 days after final judgment in a trial.”  That practice runs counter, of course, to the need for a complete record for purposes of appeal.

In Illimina v. Columbia University, IPR2012-00006, the parties filed a Joint Motion asking that the record in the proceeding be preserved pending the outcome of a possible appeal “including preservation of all sealed documents in non-public form.” The Joint Motion alternatively asked that the sealed files be expunged from the record pursuant to 37 C.F.R. § 42.56. The Board decided under the present circumstances, it is reasonable to maintain the record undisturbed pending outcome of any appeal. At the conclusion of any appeal proceeding however, if the parties do not contact the Board, then the information filed under seal will be made public in due course. Decision at 3.