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.

CAFC: What a Person of Skill in the Art “Could” Do is Insufficient Evidence to Support Obviousness Finding

Duke University owns US 7,056,712 (‘712), which claims methods of treating a metabolic disorder known as Pompe disease. In particular, ‘712 claims methods of treating Pompe disease using a recombinant human acid α-glucosidase (hGAA) that is produced using Chinese hamster ovary (CHO) cells. BioMarin petitioned for IPR of ‘712 on two grounds: (1) anticipation by US 7,351,410 (van Bree); and (2) obviousness over WO 97//5771 (Reuser) in view of van Hove et al. (1997). The PTAB found Claims 1–9, 12, 15, 20, & 21 anticipated, and held Claims 1–9, 11, 12, 15, & 18–21 obvious. Duke appealed and the Federal Circuit affirmed in part, and reversed in part in Duke Univ. v. Biomarin Pharm. Inc.2016-1106 (Fed Cir. April 25, 2017).

Regarding anticipation, van Bree teaches administering hGAA to treat Pompe disease, and lists CHO cells as a production system (albeit a disfavored one) for manufacturing the hGAA. Anticipation is a question of fact, and therefore the Federal Circuit (CAFC) only reviews an anticipation finding for substantial evidence. The mention of CHO cells in van Bree—even as a disfavored option—was enough to satisfy the CAFC that anticipation is supported by substantial evidence. The CAFC affirmed the invalidation of Claims 1–8, 12, 15, 20, & 21 for anticipation.

Claim 9, however, was a special case. Claim 9 provides that “the human acid α-glucosidase is a precursor of recombinant human acid α-glucosidase that has been produced in Chinese hamster ovary cell cultures.” The PTAB construed this claim as allowing for mixtures of precursor and full-length hGAA, but the CAFC held that “the human acid α-glucosidase” meant all the hGAA had to be in precursor form. Because van Bree does not mention the precursor form of hGAA, the CAFC reversed the PTAB’s anticipation conclusion for this claim.

For any claim already found anticipated, the CAFC declined to review the PTAB’s obviousness. That meant that the CAFC only had to review the obviousness of Claims 9, 11, 18, & 19. Claims 11 & 18 are dependent claims that had not been argued separately, so in effect the CAFC only had to review obviousness of Claims 9 & 19.

As noted above, the CAFC disagreed with the PTAB’s construction of Claim 9, so the CAFC remanded for reconsideration of obviousness of Claim 9 in view of the new construction. Claim 19 requires that an “immunosuppressant [be] administered prior to any administration of” hGAA. BioMarin had submitted an expert declaration asserting that “[i]f there is a high incidence of patients developing high antibody titers, and immunosuppressant could be administered prophylactically…” (emphasis added). This was the evidence on which the PTAB had relied to show a reasonable expectation of success for Claim 19. The CAFC considered that the fact that the person of ordinary skill could do something is not enough to establish obviousness. Rather, testimony was necessary as to what the person of ordinary skill would do. The CAFC considered that BioMarin’s expert declaration was not substantial evidence necessary to support a reasonable expectation of success. Therefore, the holding of obviousness for Claim 19 was reversed.

The most important take-away from this case is that expert declarations should avoid talking about what the person of ordinary skill “could” do. Instead, declarations should speak of what the person of ordinary skill “would” do, or “did” do.

Supreme Court to Hear Another IPR Case — SAS Institute v. Lee

The Supreme Court has granted certiorari in another inter partes review dispute, this time in SAS Institute v. Lee.  The Court will decide whether the PTAB may properly institute partial review (i.e., institute review on less than all claims in a challenged patent).  The PTAB’s rules—particularly 37 C.F.R. § 42.108(a)—allow the Board to “authorize the review to proceed on all or some of the challenged claims and on all or some of the grounds of unpatentability asserted for each claim.”  However, the statute—particularly 35 U.S.C. § 318(a)—requires that, if review is instituted, then the “Board shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner….”  The question for the Supreme Court is whether the Board’s partial review option is allowed by this statutory provision.

The Court’s decision will impact the application of IPR estoppel, because estoppel only attaches after review is instituted, and—under the current law—does not apply to claims for which review is not instituted.  If the PTAB is required to issue a final written decision for all claims after review is instituted, then estoppel would affect more claims than under the current state of the law.

PTAB Provides Another Estoppel Datapoint — No Estoppel for Petitioner Using Its Own Documents

In Inter Partes Review (IPR) proceedings, the estoppel provision of 35 U.S.C. § 315(e)(1) prevents the petitioner from challenging the validity of a patent in an IPR on any “ground that the petitioner raised or reasonably could have raised” in an earlier IPR that resulted in a final written decision.  When deciding estoppel issues under 35 U.S.C. § 315(e)(1), the Patent Trial and Appeal Board (PTAB) and courts analyze whether “a skilled searcher conducting a diligent search reasonably could have been expected to discover” the prior art in question.

Recently, in Johns Manville Corp. v. Knauf Insulation, Inc., IPR2016-00130, (P.T.A.B., May 8, 2017) (non-precedential), the PTAB considered an estoppel issue involving the petitioner’s own prior art: two of John Manville’s (JM) marketing brochures.  The patent owner, Knauf, raised the issue of estoppel because JM did not include the marketing brochures as grounds in an earlier IPR, Johns Manville Corp. v. Knauf Insulation, Inc., IPR2015-01453, (P.T.A.B., Jan. 11, 2017) (non-precedential), which resulted in a final written decision and involved the same patent.

This case presents an interesting estoppel question because one might expect the PTAB to place more scrutiny on the petitioner when the prior art at issue is from the petitioner instead of a third party; however, the PTAB Panel in IPR2016-00130 did not change the approach for analyzing IPR estoppel just because the prior art was from JM instead of a third party.

Knauf argued that a reasonable search should have found JM’s marketing brochures before filing IPR2015-01453 because thousands of copies of the marketing brochures had been distributed, and one of JM’s employees, Mr. Mota, had hard copies of the marketing brochures before IPR2015-01453 was filed.  Also, Knauf argued that a skilled searcher should have interviewed Mr. Mota and researched historic versions of the accused products before IPR2015-01453 was filed.

However, JM’s arguments persuaded the PTAB that a skilled and diligent searcher could not have been expected to discover the marketing brochures before JM filed IPR2015-01453.  JM explained the professional searcher it hired to search Internet archives did not find the marketing brochures because the brochures were never posted on-line.   Also, Mr. Mota’s possession of the marketing brochures violated JM’s 7-year document retention policy.  JM also argued that Mr. Mota’s records were disorganized and in hardcopy binders so a skilled searcher could not reasonably have been expected to locate them.

Additionally, JM persuaded the PTAB that a skilled and diligent search would not necessarily include interviewing Mr. Mota before filing IPR2015-01453.  Because Mr. Mota did not work in a division that made the product accused of infringing Knauf’s patent, JM’s counsel argued that it would not have made sense to interview Mr. Mota before filing IPR2015-01453.  JM’s explanation for interviewing Mr. Mota after filing IPR2015-01453 was because Mr. Mota by that time had switched to a division that made the allegedly-infringing product.

In the PTAB’s view, Knauf’s arguments would have extended 35 U.S.C. § 315(e)(1) estoppel to all references that JM “reasonably should have known” about, based on imputing the knowledge and document possession of Mr. Mota to the entire JM organization.  The PTAB was unwilling to extend the scope of estoppel that far because the PTAB determined the “reasonably could have discovered” language in 35 U.S.C. § 315(e)(1), and legislative history of 35 U.S.C. § 315(e)(1), suggested a narrower interpretation of IPR estoppel.   

Even though the Knauf did not get its way on the estoppel issue, Knauf still prevailed on the bigger issue: the PTAB upheld the validity of Knauf’s patent in IPR2016-00130.  This case is useful for showing the approach the PTAB may take when deciding whether IPR estoppel applies to the petitioner’s own documents.

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

Federal Circuit Swats Appeal in View of Patent Owner Failures

In the recent decision in Securus Technologies, Inc. v. Global Tel*Link Corporation, the Court of Appeals for the Federal Circuit (CAFC) addressed a number of issues, a couple of which are worth noting as potential pitfalls for a Patent Owner in an inter partes review (IPR) proceeding.

Securus is the result of consolidation of two appeals from Final Written Decisions from the PTAB in IPRs stemming from petitions with respect to Patent Owner’s U.S. Patent No. 7,860,222 (“ the ‘222 Patent”).  The independent claims at issue in the ‘222 Patent were generally directed to a system (and method) for allowing a user to establish bookmarks at “events of interest” in communications between individuals by searching the communications to identify particular words, and placing event identifiers in association with the identified words.

As one premise for appeal, Patent Owner argued that the PTAB’s conclusion that independent claim 1 was obvious over the prior art impermissibly relied on an argument raised for the first time in Petitioner’s Reply.  In presenting this argument, however, Patent Owner did not argue that such reliance was prejudicial in any way, nor did Patent Owner argue that they were not afforded a meaningful opportunity to respond.  Rather, Patent Owner argued that the PTAB’s reliance was improper simply because Petitioner did not advance the specific argument in its petition.

As one might expect, the CAFC did not find Patent Owner’s argument persuasive since Patent Owner had not shown that the PTAB’s decision rested on any factual or legal argument for which it was denied notice or an opportunity to be heard during the proceedings.  The CAFC also made a point to note that Patent Owner failed to avail themselves to any procedure for filing a sur-reply, motion to strike, or challenging the allegedly improper argument via conference call.

Patent Owner also appealed the PTAB’s denial of motions to amend seeking to change the antecedent basis for six dependent claims.  However, these motions seemed doomed from the start since the Patent Owner admitted numerous times (14 times in two motions) that the changes were not made in response to a ground of unpatentability raised in the IPRs – a specific ground for denial of an amendment set forth in 37 C.F.R. § 42.121(a)(2)(i).

In sum, a couple of swings-and-misses for the Patent Owner who could have spent a bit more time with the PTAB rule book.

Wasica Decision Reinforces Federal Circuit Guidance on Claim Construction

The Federal Circuit’s recent decision in Wasica Finance v. Continental Automotive Systems touched on a number of well-worn patent issues, but this article focuses on a few key claim construction principles discussed by the CAFC, including that the contents of the specification are highly relevant when performing claim construction, and a claim generally will not be construed in a manner that renders recited terms meaningless or superfluous.

Wasica is the result of the CAFC consolidating two appeals based on two IPRs arising from petitions filed with respect to Patent Owner’s U.S. Patent No. 5,602,524 (“the ‘524 patent”). The claims at issue were directed, generally, to a system for measuring tire pressure. In the system, each tire included a pressure measuring device and a transmitter, and each transmitter transmitted pressure data to a corresponding receiver. A transmission from a transmitter to a corresponding receiver also included an “identification signal” for identifying the transmitter that sent the transmission. A receiver receiving the identification signal stored the identification signal and processed transmissions only from the corresponding transmitter.

As to the first claim construction issue, Patent Owner argued that the PTAB erred in determining that a particular pressure sensor disclosed by the prior art taught a “pressure measuring device” because the pressure sensor only output a binary signal that indicated whether a measured pressure is abnormal. Patent Owner argued that the recited pressure measuring device, when properly construed, must output a tire’s pressure as a numerical value, and that such a numerical value cannot be represented by a single bit of a binary signal. The CAFC sided with the PTAB and rejected the claim construction presented by Patent Owner. The CAFC relied, in part, on the ‘524 patent, itself, which identifies a family of European patents as including examples of manners in which a sensor of the ‘524 patent may output a pressure signal. The CAFC decided that the family of European patents identified by the ‘524 patent disclose switch-based (e.g., binary) pressure sensors and non-numeric pressure signals. The CAFC pointed out that, in accordance with previous decisions, the CAFC generally does not interpret claim terms in a manner that excludes examples disclosed in the specification. Id. at 13.

As to the second claim construction issue, Petitioners argued that the proper claim construction for the term “bit sequence,” from claim 9, was a sequence of “one or more bits.” Patent Owner argued that the plain meaning of “sequence” implies at least two elements. The PTAB agreed with Patent Owner, but on appeal, the CAFC disagreed. The CAFC explained that the recited element required “at least a 4 bit sequence” which included 4 constituent bit sequences, and thus, interpreting a “sequence” as requiring at least two bits would result in a minimum size of 8 bits for the “at least 4 bit sequence.” The CAFC determined that such an interpretation would essentially rewrite “at least 4 bits” from claim 9 to “at least 8 bits.” The CAFC explained that it is highly disfavored to construe terms in a way that renders them void, meaningless, or superfluous. Id. at 28. As further support for reversing the PTAB’s decision regarding the patentability of claim 9, the CAFC pointed to a portion of the ‘524 patent interpreted by the CAFC as disclosing an embodiment in which a bit sequence included a single bit, thereby contradicting the at-least-two-bit interpretation of “bit sequence” sought by Wasica Finance.

In the end, the Patent Owner and Petitioner both took home partial victories, while the rest of us take home additional insight into the Court’s construction of claim limitations.

Novartis v. Noven: The PTAB is not Bound by Prior Decisions of District Courts

Novartis, together with LTS Lohmann Therapie-Systeme, owns a pair of patents covering rivastigmine transdermal patches. These patches are useful for treating Alzheimer’s disease. Noven Pharmaceuticals filed an abbreviated new drug application (ANDA) seeking FDA authorization to manufacture a generic version of the patch. When Novartis sued for infringement, Noven unsuccessfully defended in the ANDA litigation on the grounds of obvious over GB 2 203 040 A (“Enz”), JP 59-184121 (“Sasaki”), and a variety of other references. The Delaware court found that a person of ordinary skill would not have been motivated at the time of invention to add Sasaki’s antioxidant to Enz’s rivastigmine patch, because it was not known at that time that rivastigmine was subject to oxidative decay. Noven did not appeal this loss to the Federal Circuit (CAFC).

However, while the ANDA litigation was proceeding in Delaware district court, Noven had also lodged a series of IPR petitions arguing obviousness over Enz, Sasaki, and a variety of other references. The PTAB instituted four IPRs on these petitions, and held the challenged claims unpatentable as obvious. Novartis appealed from the adverse PTAB decisions. Novartis AG v. Noven Pharm., 2016-1678 (Fed. Cir. Apr. 4, 2017).

Novartis’ principal argument before the CAFC was that the PTAB improperly ignored the Delaware court’s conclusion that there was no motivation to combine Enz and Sasaki at the time of invention. Novartis believed that the Delaware court’s decision should bind the PTAB. The CAFC disagreed for two reasons: first, there were expert declarations in the IPRs that had not been presented to the Delaware district court; and second, the standard for proving obviousness is higher in district court (clear and convincing evidence) than in an IPR (preponderance of the evidence). Therefore, the CAFC concluded that the PTAB should not be bound by Delaware court’s conclusions. The CAFC affirmed the IPR holdings.

It is somewhat unclear how issue preclusion should have applied between the Delaware district court’s conclusions and the PTAB’s fact-findings. Indeed, the CAFC never uses the words “issue preclusion” or “collateral estoppel” in the appeal decision, as if this legal doctrine were not implicated. In contrast to the Delaware court’s finding of no motivation to combine, however, the PTAB found that the person of ordinary skill at the time of invention would have expected rivastigmine to be subject to oxidative decay because Sasaki reports amino groups in other drugs that are prone to oxidative decay and rivastigmine has an amino group. It would have been hard for the PTAB to reach a conclusion of obviousness if it had adopted Delaware’s fact-findings about what the person of ordinary skill would have known, but the CAFC never addresses why the PTAB was not obliged as a matter of issue preclusion to adopt the Delaware fact-findings.

In any event, this case is a solid holding that the PTAB is not bound by a contrary decision in a district court, at least where there is some evidence in the PTAB proceedings that was not part of the district court proceedings. In other words, a patent challenger who loses in the district court need not count on also losing in a parallel PTAB trial.

Federal Circuit is No Place to Make New Claim Construction Arguments

The Federal Circuit has consistently made clear that arguments not first made to the PTAB will not be considered on appeal. Google fell victim to this well-worn concept in Google Inc. v. SimpleAir, Inc., 2016-1901 (CAFC March 28, 2017), wherein the Federal Circuit decided, in a non-precedential opinion, that Google waived a claim construction argument that was not first presented to the Board. The Court also denied Google’s backup argument that, even under the Board’s claim construction, the art rendered the challenged claims unpatentable.

Regarding the waiver issue, the Court gave context to the dispute by noting that the term at issue, “central broadcast server,” had been construed in three prior district court litigations. In each instance, the courts adopted a definition of the term that was identical to the construction ultimately applied by the PTAB. Although Google filed its IPR against the backdrop of those district court constructions, Google provided the Board with the district court definitions of the term, without offering any other suggested construction. Id. at 5-6 (“Google did not…insist or even request that the PTAB apply a differing construction.”). Google further conceded, at oral argument, that the district court constructions constituted the broadest reasonable interpretation in the IPR proceeding. As such, the claim construction argument Google attempted on appeal was deemed waived.

Regarding Google’s backup plan, the Court quickly dispatched with Google’s arguments, describing them as a “mischaracterization of the PTAB’s ruling, in attempt to create legal error.” Id. at 10.

In sum, this decision reminds Petitioners of the need to carefully weigh the entire record and choose their claim construction positions wisely. While it is hard to know all the litigation considerations that were present in this case, the BRI standard could have been a helpful distinction from the insufficient district court constructions to defeat the challenged claims.

Patentee’s Teaching Away Argument Fails to Overcome Substantial Evidence of Unpatentability

An obviousness challenge can be overcome by showing the prior art teaches away from the claimed invention.  However, “teaching away” is a question of fact and thus subject to the substantial evidence standard in appeals from IPR decisions.  It is thus difficult to overcome a PTAB determination on this issue, as exemplified in Meiresonne v. Google, Inc., No. 2016-1755 (Fed. Cir. Mar. 7, 2017).

In Mereisonne, Google challenged four patent claims based on a two-reference obviousness argument.  The parties agreed that, together, the references taught every limitation of the claims.  The only issue on appeal was whether the secondary reference taught away from the claimed invention by criticizing an element of the invention.  The Federal Circuit affirmed the PTAB’s decision that it did not, finding substantial evidence supported the PTAB’s determination.

More particularly, the claims were directed to computer systems that users could use to identify suppliers of goods and services over the internet (basically, a directory).  The directory website included (1) a plurality of links to supplier websites, (2) a supplier description near the corresponding supplier link, (3) a title portion that describes the class of goods or services on the website, and (4) a rollover window that displays information about at least one of the suppliers corresponding to a link.

The rollover element was central to the dispute.  The prior art (Finseth) taught a visual index for a graphical search engine that provides “graphical output from search engine results or other URL lists.”  Finseth explained that many web directories included only cursory or cryptic text about the website in the results.  Finseth thus taught the use of thumbnail or other representational graphic information to accompany hyperlink results.  The primary reference, Hill, also explained that such abstract text was often “gibberish” and advocated visiting the actual site instead of relying on the abstract text accompanying the hyperlink.

The Federal Circuit agreed this criticism was not sufficient to teach away from the claimed rollover window (which corresponded to the prior art abstract test).  Despite the prior art’s criticisms, it did not that abstract text was useful in culling through results.  The Court also found that even if abstract text was often not useful, the prior art said that other links’ abstract text was useful.  Thus, the prior art did not sufficiently discourage the person of ordinary skill from following the path set out in the reference, and did not lead the person in a direction divergent from the path taken.