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.

Federal Circuit Issues Ironic Decision Reversing PTAB For Not Providing Enough Analysis

cafc1The PTAB was rebuked by the Federal Circuit on January 22nd for failing to provide an adequate description of its reasoning for finding the claims of the challenged patent obvious in an inter partes review proceeding. In Cutsforth, Inc. v. MotivePower, Inc., Judge Clevenger, in a non-precedential opinion, analyzed the obviousness finding from the Board, as set forth in the Final Written Decision. Among the aspects of the Board’s decision analyzed by the Court were:

  1. In its analysis of claim 1, the Board referenced Petitioner’s arguments, but did not state an independent reason for why the claim was obvious and did not formally adopt those arguments.
  2. In its analysis of claim 5, the Board only conclusorily stated that the limitation at issue was a “matter of design choice.”
  3. In its analysis of claim 8, the Board again repeated Petitioner’s argument but gave no other reason why the modification at issue was obvious.

The Court criticized the Board for failing to adequately articulate its reasoning for making its decision so that the Court could conduct a meaningful review. “Broad, conclusory statements are not enough to satisfy the Board’s obligation to provide reasoned explanation for its decision.” Id. at 6.

This non-precedential opinion has the aura of a building frustration at the Federal Circuit regarding an ongoing problem with the quality of the Final Written Decisions. Many of those decisions are thorough and complete, but others can be said to lack the necessary detail of a formal opinion, even if the conclusions of the decision are clearly correct. The Federal Circuit took this opportunity to let the Board know that shortcut analyses will not past muster.

It is good feedback from the Court, but an ironic decision. The decision is ironic because the Federal Circuit has, to date, made liberal use of Rule 36 Judgments – a one word decision (“AFFIRMED”) that provides no information about the Court’s analysis. Just as the Court required adequate description of the Board’s rationale for its decision, many would prefer more feedback from the Court regarding its rationale to better educate parties regarding the nuances of IPR.

Endo Pharma Patent Survives IPR Trial

19179334_sAmneal Pharmaceuticals came up short in its bid to knock out numerous claims of Endo Pharmaceuticals’ US Patent No. 8,329,216 in a Final Written Decision issued on July 22, 2015, Amneal Pharm., LLC v. Endo Pharm. Inc., IPR2014-00360. The ‘216 patent relates to oral controlled release pharmaceutical formulations comprising oxymorphone and related methods for pain relief. A strong lesson learned in this case is that arguments based on inherency can be difficult and it is important to introduce sufficient evidence to demonstrate that a purported “inherent disclosure” necessarily is present in the prior art. Bare expert testimony is often insufficient.

At the outset of its analysis, the PTAB construed “controlled release” and “about” from the claims of the ‘216 patent. The Board adopted Petitioner’s proposed constructions: 1) controlled release = release no more than about 80% of their active pharmaceutical ingredients within 60 minutes (taken from specification); and 2) about = at least the standard statistical error.

Petitioner’s obviousness argument was largely based on the contention that the prior art inherently disclosed a dissolution profile that required “two or three peaks” of blood plasma levels of the active ingredient. The vast majority of the Board’s decision discussed whether Petitioner had sufficiently shown that the prior art necessarily disclosed the claimed dissolution profile. For example, with regard to one of the grounds for unpatentability, Patent Owner attacked this argument by citing to certain clinical studies, including one disclosed to the FDA, that showed that two or three peaks did not necessarily occur. Petitioner sought to rebut this argument by explaining that the data in that clinical study was not tested frequently enough to show multiple peaks, but there was insufficient evidence provided on this point.

The takeaway from this case is that an argument based on inherent disclosure can be fact intensive and requires strong evidence that the limitation necessarily is in the prior art. Often, an expert declaration is not sufficient – certainly not one that merely states conclusorily that the property is inherent. Testing, reference to studies, etc. is required to prove this type of argument.

Another IPR Victory for Harness Dickey – Defeat All Challenged Claims of 3 Patents

law360IP Law360 reported on another big win for the Harness Dickey IPR team, as the PTAB determined that all claims of three challenged patents were unpatentable in cases styled as Laird Technologies v. GrafTech International, IPR2014-00023, -00024, and -00025. IP Law360’s article can be accessed HERE.

Rationale from Denied Ground Used By PTAB In Final Written Decision

13329201_s (1)Lost a challenge ground in the Board’s Decision to Institute? The Board has given some hope that such denied grounds may still of use in an IPR proceeding in McClinton Energy Group, LLC v. Magnum Oil Tools International, Ltd., IPR2013-00231, involving US Pat. No. 8,079,413. In this decision on a motion for rehearing, the Board affirmed the propriety of its use of rationale from a denied ground from the Petition to support a final decision of unpatentability.

Earlier in the proceeding, the Board instituted inter partes review of the challenged claims based on six grounds of unpatentability, each of which was based on three references (References A, B, and C). The Petition also contained numerous grounds of unpatentability based in part on a fourth reference (Reference D), all of which were denied by the Board. Decision at 3-4. In the Petition, to support an argument that one of skill in the art would combine references A, B, and C, Petitioner made reference to the rationale for combining of references from denied-grounds relying on Reference D. The Board then relied upon this rationale in determining that all challenge grounds were unpatentable.

In the Motion for Rehearing, Patent Owner argued that by incorporating this argument from a denied ground, the Board was including a new ground of unpatentability in the final written decision and Patent Owner was therefore denied due process. Id. at 4.  The Board disagreed, pointing out that Patent Owner addressed the rationale at issue in the Patent Owner Response. That the same rationale to combined was used in both a sustained challenge ground and a denied challenge ground was not enough to change the thrust of the grounds of unpatentability. Accordingly, the fact that the Board adopted the rationale to combine references presented in a denied-ground of the petition in a granted-ground in final written decision does not create a new ground of unpatentability.  Id. at 5.

IPR Patent Owner Succeeds in Antedating Key Prior Art

4928629_sA witness credibility battle erupted in Dynamic Drinkware LLC v. National Graphics, Inc., IPR2013-00131, where the Board found that Patent Owner antedated a key prior art reference…despite the fact that the inventor testified on behalf of Petitioner. To uphold its burden of proving an earlier invention, Patent Owner relied on testimony from two fact witnesses who explained the steps undertaken by Patent Owner in conceiving and reducing to practice the claimed invention. Order at 7. In rebuttal, Petitioner relied on testimony from the inventor himself. Id. The inventor testified that while working for Patent Owner and developing the product, “None of the products [were produced]…in a way that was consistent with the claims of the ‘196 patent.” Id. at 10. The inventor further testified his notebook entry “confirms that we still had a long way to go [for commercialization].”

The Board sided with Patent Owner, finding that “[t]here is no requirement that the invention, when tested, be in a commercially satisfactory stage of development.” Steinberg v. Seitz, 517 F.2d 1359, 1363 (Fed. Cir. 1975) “The fact that further refinements of the invention were made is not relevant.” Farrand Optical Co. v. United States, 325 F.2d 328, 333 (2d Cir.1963). Order at 13.

Thus, the testimony from the inventor himself did not persuade the Board that the invention was not reduced to practice prior to the critical date of a key prior art reference. Id. at 17. The Board found Patent Owner’s witnesses properly antedated the reference and, without that prior art, the proposed challenge grounds from the Petition failed.

PTAB Clarifies its Stances on § 315 on the Way to the Federal Circuit

cafc1In an apparent attempt to better explain itself prior to Federal Circuit appeal, the PTAB reiterated and further clarified its decision in Ariosa Diagnostics v. Isis Innovations, IPR2012-00022 regarding three sections of 35 U.S.C. § 315: the effect of the filing of a declaratory judgment of non-infringement, and an affirmative defense of invalidity, relative to § 315(a); the effect of a dismissal without prejudice on the time-bar of § 315(b); and the effect of joinder of IPRs between the same parties under § 315(c).

By way of refresher on the facts, Petitioner filed a declaratory judgment of non-infringement in District Court, but did not include a count seeking a declaration of invalidity. Patent Owner counterclaimed for infringement and, as an affirmative defense to that infringement claim, Petitioner alleged patent invalidity. Thereafter, the parties agreed to dismiss the civil action without prejudice. Petitioner then filed a first petition seeking inter partes review and, ultimately, a second petition seeking inter partes review and the two IPRs were joined. Of interest in this decision is that the second petition was filed more than one year after Petitioner had been served with the civil action.

35 U.S.C. § 315(a)

35 U.S.C. § 315(a)(1) states that “An inter partes review may not be instituted if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.” Patent Owner had argued that the filing of a declaratory judgment action of non-infringement, followed up by an affirmative defense of invalidity, met the definition of filing a “civil action” and the petition was barred. In its Decision to Institute Trial, the Board disagreed.

In the Final Written Decision, the Board reiterated that a claim of invalidity in a declaratory judgment complaint is different than asserting an affirmative defense, citing the Supreme Court’s decision in Cardinal Chem. Co. v. Mortion Int’l, Inc., 508 U.S. 833 (1993). Specifically, the Board stated that “it is clear from Cardinal Chem. Co. that there is a fundamental difference between an affirmative defense of invalidity and a counterclaim of invalidity.” Order at 13.

Additionally, the Board dismissed Patent Owner’s argument that to allow a Petitioner to undertake both a declaratory judgment suit and inter partes review petition thwarted the intent of Congress. The Board held that, allowing both actions did not constitute harassment of a patent owner because, to bring the declaratory judgment action, a party must still satisfy the Article III case-or-controversy requirements. Order at 15-16.

35 U.S.C. § 315(b)

This Final Written Decision also provided the Board the opportunity to expound further on its position that a complaint served more than one year prior to the filing of an inter partes review petition does not amount to a bar, under 35 U.S.C. § 315(b), if the complaint is later dismissed without prejudice. The Board determined that Federal Circuit precedent “has consistently interpreted the effect of [dismissals without prejudice] as leaving the parties as though the action had never been brought.” Id. at 17. Thus, although the second IPR petition was filed more than one year after the service of the civil action alleging infringement, the dismissal of that action without prejudice saved Petitioner here.

35 U.S.C. § 315(c)

Lastly, the Board considered Patent Owner’s argument that 35 U.S.C. § 315(c) only allows for joinder of parties, not joinder of issues. This is an issue that the Federal Circuit must weigh in on, given that the Board has issued conflicting opinions on the issue. In a rare break from its typical solid wall of consistency, certain panels of the Board have recently decided that decisions like this Ariosa case are wrong and that § 315(c) only applies to joinder between parties. This particular panel, however, stuck to its initial position on this issue, finding that § 315(c) is not limited to merely joinder of parties and joinder of issues in IPR proceedings involving the same parties is appropriate.

The issues raised here are not “new,” but interesting to note in any event because, as the case heads to the Federal Circuit, the Board has expounded on these important bar issues that arise in many IPR proceedings.

PTAB Discusses Nexus in Secondary Considerations Argument

plan CThere have been many attempts by Patent Owners to rebut a prima facie case of obviousness by pointing to secondary considerations of non-obviousness. To date, such efforts have been unsuccessful. Like the largely unsuccessful motion to amend practice, the best practitioners can hope for is to learn from the shortcomings of other attempts and hope to eventually hit upon the magic formula that leads to a successful presentation of such secondary considerations. In that light we discuss the Final Written Decision in Kyocera Corp. and Motorola Mobility, Inc. v. Softview, LLC, IPR2013-00007 and IPR2013-00256, involving US Pat. No. 7,461,353, wherein the Board addressed several types of failed secondary considerations arguments. The ‘353 patent relates to a scalable display of internet content.

Patent Owner made several arguments involving objective indicia of non-obviousness, all of which were rejected as not being linked to the claimed subject matter: First, Patent Owner argued that the praise it received from competitors was evidence of non-obviousness.  The Board disagreed, finding that the praise Patent Owner received from a competitor was not in praise of the ‘353 claimed subject matter or product, but rather in praise of a company-vision speech by Patent Owner’s CEO.  Therefore, there was no nexus between the secondary consideration and the claimed subject matter. Order at 31.

Second, Patent Owner argued that the commercial success of products (iPhone and Android devices) incorporating the claimed subject matter of the ‘353 patent is evidence of non-obviousness.  However, Patent Owner was unable to prove that commercial success of the iPhone and Android devices which incorporated the claimed matter of the ‘353 patent was a result of the presence of the ‘353 invention in devices (a requirement for a valid commercial success non-obviousness argument).  In fact, expert testimony supported the idea that numerous factors contribute to the commercial success of iPhone and Android devices, not just one factor such as the ‘353 claimed subject matter. Therefore, the Board again found no nexus between the secondary consideration and the claimed subject matter. Id. at 32.

With Patent Owner’s arguments for secondary indicia of non-obviousness failing on lack of nexus to the claimed subject matter, the Board found all challenged claims of the ‘353 patent to be unpatentable.

PTAB Addresses Issue of Whether IPR Prior Art is Enabling

25454742_sA “Hail Mary” of sorts, for Patent Owners, in their fight to defend the patentability of a challenged patent, can be an argument that a particular prior art reference is not relevant to the patentability analysis because it is not enabled. The Patent Owner in Google Inc. and Apple Inc., v. Jongerius Panoramic Technologies, LLC, IPR2014-00191, involving US Pat. No. 6,563,529, tried this strategy, and failed, on the way to the Board finding that all of its challenged claims were unpatentable. Order at 36-40.

The ‘529 patent relates to an interactive virtual tour system that displays a detailed view and a map view of a location, simultaneously. Of particular importance to this decision was the feature of a “directional indicator.” Patent Owner challenged one of the prior art references-at-issue in the Petition, arguing that it could not be considered prior art because it did not have sufficient detail regarding the directional indicator to be considered an enabling reference. Order at 36. To that end, Patent Owner argued that the reference did not provide enough detail to carry out the invention described in the ‘529 patent. Petitioner countered by arguing that the reference was a technical paper with citation to many other references, and a person in the target audience of the paper (i.e., those familiar with panorama visualization techniques) would know to read the cited references in the paper for proper explanation regarding the implementation of the technology.

The Board first noted that prior art references are presumed to be enabling. Further, the Board found that the level of ordinary skill in this particular art is advanced and, in light of the fact that the technical paper reference targeted an audience of people familiar with the field of the invention, not the general public, the Board found the reference enabled. Order at 38. The Board also went out of its way to note that the reference actually provided detailed information on how to implement a panoramic visualization technique on a computer, including a directional indicator as required by the ‘529 invention. Id. at 39.

Lastly, the Board found that Patent Owner had not shown that undue experimentation would be necessary for one skilled in the art to construct the ‘529 invention from the cited reference because complex experimentation was customary in the relevant industry and, therefore, the experimentation required here was not “undue.”  Id. 40. Therefore, the Board found that the reference was indeed enabling prior art.

Dissents and Concurrences Popping up in IPR Proceedings

974041_sThe PTAB has been remarkably consistent to date in its decisions regarding the variety of issues in inter partes review practice. Issues both simple and complex have typically been resolved by one panel and future panels, deciding the same type of issue, fall in line. Of late, however, we have begun to see some divergence in views among the various panels, both in terms of one panel disagreeing with an earlier panel, and even some disagreement within a single panel. This latter situation presented itself in two recent Final Written Decisions in Vibrant Media, Incorporated v. General Electric Company, IPR2013-00172 and Smith & Nephew, Inc. v. Convatec Technologies, Inc., IPR2013-00097.

Vibrant Media involved US Pat. No. 6,092,074 and, more particularly, claims 1-12 of that patent. All three members of the PTAB panel determined that claims 1-8 and 12 were unpatentable. A disagreement between those panel members arose, however, relative to claims 9-11. Claim 9 is directed to a computer system comprising multiple steps.  Claims 10 and 11 depend from Claim 9 and add further steps to the system. The three judges agreed that the claims recited both an apparatus and method steps, an improper combination pursuant to 35 USC § 112, ¶2. But, while the majority acknowledged that mixed system and method claims would not be in compliance with 35 USC § 112, ¶2 for infringement purposes, it did not believe such infirmity in the claims prevented it from reaching the patentability of those infirm claims. The alternative would have been to terminate the IPR as to those claims. Order at 9. The dissent criticized this decision, arguing that an obviousness analysis could not be performed on indefinite claims, as a comparison of the invention as a whole to the prior art would be impossible given the indefinite scope of the claims.  Id. at 51-52. The dissenting judge would have terminated the proceeding relative to claims 9-11, not ruling on their patentability.

Smith & Nephew, involving US Pat. No. 6,669,981, was notable for a disagreement regarding a claim construction, resulting in a concurring opinion from one of the PTAB panel members. The ‘981 patent pertains to methods of enhancing the photostability of silver in antimicrobial materials for use in wound dressings and other medical devices. Of particular interest in the proceeding was a concurrence-in-part, which disagreed with the majority’s interpretation of the claim term “photostable”.  The ‘981 specification defined the term “photostable” as a “controlled colour change to a desired color with a minimal change thereafter.”  Decision at 62.  At issue for in the concurrence was the definition of “desired color.”

The majority interpreted “desired color” to encompass any color which is desirable for any purpose, including aesthetic purposes. The concurrence thought this definition was too broad based on what was known in the art, and that “desired color” should reflect the technical viewpoint that color is a measure of photostability. Id. at 62. Specifically, the concurrence pointed to prior art which taught that purple was not a “desired colour” because the color purple was chemically indicative of the degradation of the antimicrobial properties of the wound dressing.  Accordingly, the concurrence believed that “desired colour” should not include purple, but rather be restricted to the art-recognized color of grayish-white.  Id. at 63. Further, the concurrence disagreed with the majority’s interpretation of “minimal” change (in color), believing (unlike the majority) that a change in color of the wound dressing from a desired color to and undesired color would not be a “minimal” change.  Id. at 64. But, despite the disagreement in claim construction, the concurrence ultimately agreed with the outcome of the analysis the majority reached on the merits.