The Federal Circuit reversed the Patent Trial and Appeal Board for the first time today in an appeal from an inter partes review proceeding. Specifically, the Board’s decision that 8 claims were unpatentable was reversed and the case was remanded to the Board. Harness Dickey was lead counsel for Patent Owner in this successful appeal, so we will not comment on the merits, but attach the decision for your review.
Welcome to Volume 6 of our IPR-PGR Quarterly Report. This Report brings news of a large spike in Petition filings and some interesting trends that come from a more significant data set derived from Final Written Decisions. Also, we are still waiting on our first PGR filing.
First, after a brief respite last quarter, Petition filings rose to an all time high of about 30/week. This is higher than expected, but a portion of the spike is attributable to an interesting battle playing out between Patent Owner Zond, LLC, and a number of defendants in co-pending litigation. In the last two months, over 60 IPR petitions have been filed against Zond patents!
Second, as more Final Written Decisions have been rendered, the landscape does not look as bad for Patent Owners. The cancelation rate dropped from 96% to about 69%. Also, the last quarter brought our first granted Motions to Amend. It seems the Board has stopped adding requirements to what it takes to succeed in such motions, and Patent Owners have adjusted enough to see some success. These Patent Owner successes are helping change the narrative and establish that IPR proceedings are not only efficient and cost-effective, but also fair.
Thank you for your continued interest in Harness Dickey’s Post Grant Practice. Please email us at IPR-PGR@hdp.com if you have any questions about our Report or any other aspect of IPR proceedings.
Welcome to Volume 5 of our IPR-PGR Quarterly Report. As you can see in this issue, we have compared IPR data from the 18 month anniversary with data from the 9 month anniversary so you can glean trends in the data.
This Report also brings data from the first Final Written Decisions. Of interest is the fact that only 10 of 274 challenged claims have survived IPR scrutiny (for a robust 96.4% cancelation rate). Also of interest is the fact that not a single Motion to Amend has been granted.
We also took note of the dip in filings this quarter. After ramping up to about 20 filings per week, we only saw about 15 filings per week in the most recent quarter. This lower number is more in line with estimates from the Patent Office and we anticipate the filings to level out near this lower rate.
Lastly, we want to take the opportunity to note the success Harness Dickey is having in these proceedings. From the Petitioner side, we have had all of our petitions granted, with all claims being put into trial (though no Final Written Decisions have come from those cases yet). From the Patent Owner side, of the first 3 cases in which at least one challenged claim survived, we were counsel on two of those cases.
The news has been dreary, to date, for Patent Owners in Inter Partes Review proceedings. In view of that environment, we are proud to announce that Harness Dickey has successfully defended a second patent in an IPR proceeding on behalf of its clients. In IPR2013-00020, the Board confirmed the patentability of 12 of 24 claims in U.S. Patent No. 7,297,364 (Final Written Decision). The IPR relates to co-pending litigation pending in the Northern District of Illinois that had, to date, been stayed pending the result of the IPR proceeding, but will soon restart. Clearlamp LLC v. LKQ Corp., Case No. 1:12-cv-02533 (Lefkow, J.).
To date, only three Final Written Decisions have resulted in one or more claims surviving and Harness Dickey has been responsible for 2 of those victories.
On Tuesday, January 22, 2013, the PTAB held its first “Initial Conference Call” in an inter partes review, in the case of Microsoft Corp. v. Proxyconn, Inc., IPR2012-00026 (Harness Dickey represents the Patent Owner, Proxyconn, in this matter). The format of the call was very similar to a Rule 16 Conference before a federal district court judge. At the outset of the call, the Board clarified certain filings that had occurred in the case, and then proceeded to address the expected formalities of the upcoming trial, including:
[pullquote align=”left|center|right” textalign=”left|center|right” width=”30%”]Office Patent Trial Practice Guide at 48765 — “The Board expects to initiate a conference call within about one month from the date of institution of the trial to discuss the Scheduling Order and any motions that the parties anticipate filing during the trial.”[/pullquote]
1) Whether the proposed scheduling order was agreeable to the parties;
2) Whether the form Protective Order set forth in the Trial Practice Guide was agreeable to the parties;
3) Whether “Initial Disclosures” were exchanged between the parties, or expected;
4) Whether compelled discovery was expected;
5) What motions each party expected during the trial (including, with respect to certain of the motions identified by the parties, what the party expected to include in the motion); and
6) Whether the parties had discussed potential settlement.
The Board also handled questions and clarifications from the parties and otherwise cleared the deck of all outstanding issues before the next phases of the inter partes review proceeding are to take place. In sum, the approximately 30 minute phone conference was very reminiscent of an Rule 16 conference in district court litigation and parties should be prepared to address similar topics in an inter partes review “Initial Scheduling Conference.”
Originally posted on January 8, 2013 on IP Law360.
Inter partes review (IPR) and post-grant review (PGR) “trials” at the U.S. Patent and Trademark Office have the potential to be game-changers in the way patents are challenged in the future. After several attempts at creating USPTO-based proceedings that are efficient and effective, there is much in the new IPR and PGR that lend credence to the notion that Congress finally hit on a combination of pure patent litigation and USPTO procedure that will be attractive to patent challengers. Patent owners are already gearing up to defend against these proceedings, knowing the advantages they present for patent challengers.
That is not, however, to say that IPR/PGR proceedings will be commonly filed and serve to weed out many “bad” patents, along the lines of European opposition practice. Their high cost (as compared to prior USPTO proceedings and EU opposition practice), as well as the strong estoppel that attaches upon the conclusion of the proceedings, will ensure that patent challengers will carefully pick and choose their opportunities to file IPR/PGR petitions.
For significant disputes between patent owners and alleged infringers, however, where litigation is pending, threatened or expected, inter partes review and post-grant review may become the norm. For at least the five reasons below, these proceedings have the potential to change the face of patent litigation forever.
1) Keep Control of Your Best Prior Art Via Pseudo-Litigation
Among the main attractions of the new inter partes review and post-grant review proceedings are their pseudo-litigation features. As compared to previous attempts by Congress to create cost-effective proceedings for challenging patent validity, via IPR/PGR, patent challengers can be more confident that they will remain in control of their best prior art, instead of throwing that art over the wall for the USPTO to handle (or mishandle), without the type of control and input that a patent challenger is used to in federal court litigation.
Principal among those pseudo-litigation features, include: (1) the ability to take discovery, (2) the extensive use of experts (to include their depositions), (3) the ability to make challenges to evidence (pursuant to the Federal Rules of Evidence), and (4) access to subpoena power to compel discovery from third parties. Indeed, even Rule 26(a)(1)-style initial disclosures and scheduling orders with strict deadlines are required by the Trial Practice Rules before the Patent Trial and Appeal Board.
In addition to these pseudo-litigation features, IPR/PGR has the potential to function as a mini-claim construction phase in an ongoing patent dispute. At threshold, like prior USPTO proceedings, claim terms in inter partes review and post-grant review proceedings will be given their broadest reasonable interpretation, consistent with the specification. Pursuant to this standard, reasonable disagreements regarding the scope of a particular claim limitation will be resolved in favor of assuming that the limitation is broadly construed. This standard, of course, is more likely to result in a finding of unpatentability as compared to a district court proceeding where such reasonable disagreements will default to a reading of a claim limitation that preserves validity.
But Congress has directly injected claim construction issues into inter partes review and post-grant review proceedings, as evidenced by the fact that each petition seeking IPR or PGR is required to set forth the petitioner’s claim construction position. The petitioner may simply state that the terms are to be given “their broadest reasonable interpretation in light of the specification.” But, strategic opportunities exist to raise specific claim construction issues in the petition that may force the patent owner to begin talking, in detail, about the scope of particular claim terms. Any such statements will, undeniably, find relevance in later claim construction arguments in federal court proceedings. For example, this strategy may be invaluable for a group of defendants facing the same patent(s) — claim construction statements in an IPR by the patent owner can ripple throughout many pending lawsuits.
Notably, for means or step-plus-function claims, more specificity is required in the petition. If a challenged claim has a means-plus-function limitation, the petition must also contain the specific portions of the specification that describe the structure, material or acts corresponding to each claimed function. It seems especially likely that, when 35 U.S.C. §112(f) limitations are at issue, a patent owner is going to be put in the uncomfortable situation of putting claim construction positions on the record.
In any event, by directly addressing claim construction issues in these proceedings, patent challengers have an opportunity to get patent owners to start talking about claim scope in a manner that may impact litigation positions, including later Markman proceedings.
2) Allure of a Low Burden of Proof and Broader Classes of Validity Challenges
Patent challengers will find the burden of proving a patent claim unpatentable in IPR/PGR to be an attractive alternative to federal court litigation — “preponderance of the evidence” before the Patent Trial and Appeal Board versus the “clear and convincing evidence” standard of district court litigation. Relatedly, some challengers may find value in avoiding juries that tend to have a higher degree of respect for patents than that of an administrative patent judge. While not technically a change, as compared to reexamination practice, the above factors will bias patent challengers toward IPR/PGR proceedings. This is especially so when highly technical arguments are presented or invalidity is a close call.
Further, the post-grant review proceeding gives patent challengers access to a much larger set of grounds for establishing unpatentability. Patentable subject matter challenges (§101), written description and enablement challenges (§112), as well as non-documentary prior art challenges, such as prior uses and sales (§102 and §103) are all possible under PGR practice. Indeed, under many circumstances, patent challengers will conclude that the PTAB is better situated to consider complicated §101 or §112 challenges, as compared to most district courts.
3) Short Timeline and Quick Litigation Stays
The streamlined nature of IPR/PGR proceedings are already proving to be attractive to district court judges considering stay requests from defendants in patent infringement lawsuits. Per the AIA, from the date of filing of a petition seeking inter partes review or post-grant review, a final, written decision must be rendered no later than 18 months (with the ability to extend the deadline up to six months). That 18-month timeframe may be shortened if the patent owner chooses to either waive its ability to file a preliminary patent owner statement or files such statement in less than the three months otherwise allowed. In addition, that time frame may be shortened if the Patent Trial and Appeal Board takes less than its allotted three months to decide whether to institute a trial.
At least one district court judge (Judge Joan Lefkow, Northern District of Illinois) granted a motion to stay within days of the filing of a petition seeking IPR, and without allowing any opposition briefing from the patent owner. District court judges, seemingly always willing to lessen the burden of their dockets, are likely to find the short, definitive timeline of IPR/PGR proceedings to be meaningful in determining whether to institute a stay of litigation. Patent challengers will be biased toward instituting inter partes review or post-grant review proceedings if the likelihood of getting a very early stay increases as compared to the protracted inter partes reexamination timelines.
4) Patent Owner Estoppel and Limited Ability to Amend
For patent owners with pending continuation applications, the novel patent owner estoppel provisions of IPR/PGR proceedings are significant. Per the Trial Practice Rules, a patent applicant or owner is precluded from taking action in a later proceeding that is inconsistent with an adverse judgment in an IPR/PGR. For example, a patent owner may not obtain a claim in a later patent application that is patentably indistinct from a finally refused or canceled claim.
Relatedly, one of the drawbacks of prior USPTO proceedings to challenge patent validity was the ability of the patent owner to draft virtually unlimited numbers of new claims to avoid the subject prior art, yet still get patent claims that are commercially viable. In IPR/PGR practice, however, there is no such unlimited ability to amend.
More specifically, as compared to ex parte re-examination or the now-obsolete inter partes re-examination proceedings, where dozens, or even hundreds, of new proposed claims were the norm, amendment practice in inter partes review and post-grant review is restricted. The presumption offered by IPR/PGR rules (§42.121 and §42.221) is that only one substitute claim would be needed to replace each challenged claim. This presumption may be rebutted by a demonstration of need, and decisions by the PTAB on this point will be interesting to flesh out the boundaries of this presumption, but the right to amend the patent has been severely curtailed.
Further, this presumption is another factor that ways in favor of heading down the path of inter partes review and post -grant review because patent challengers can strategically decide to only include a limited number of patent claims in the IPR to limit the ability of the patent owner to offer amended claims — the fewer challenged claims, the fewer substitute claims that can be introduced. Also notable, the patent owner’s amendment is due within three months of the institution of an IPR/PGR. Such an early deadline is another disadvantage for the patent owner.
Lastly, as in prior USPTO proceedings, claim amendments will work to give rise to intervening rights for any alleged infringer. In IPR/PGR practice, therefore, forcing a patent owner to make claim amendments can cut off a past damage claim. This is especially beneficial if the asserted patent is nearing the end of its patent term because the elimination of a large past damage claim, with little worry of infringing in the future.
5) Low Cost as Compared to District Court Litigation
USPTO proceedings to challenge the validity of patents have always carried a significantly lower price tag than district court litigation. Inter partes review and post-grant review proceedings have the same advantage, albeit slightly less so. Higher filing fees, the use of experts, discovery costs (including deposition costs), are all factors that lead to projections that overall fees for IPR/PGR will range from $150,000 to as much as $300,000 per party. The advantages offered to patent challengers in these proceedings, however, as discussed in detail above, are a bargain when compared to the average cost of patent litigation in the federal courts.
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In sum, inter partes review and post-grant review proceedings are not likely to become garden-variety tools to weed out “bad” patents, in the way that EU opposition practice is often used. However, for significant disputes — where litigation is ongoing, contemplated or expected — patent challengers with legitimate invalidity defenses will find access to the above-referenced features of IPR/PGR, even at a somewhat higher price tag, to be a true bargain. At a cost that is up to an order of magnitude less expensive than district court litigation, expect patent challengers to dive into the lower burden, higher likelihood of success inter partes review and post-grant review.
Harness Dickey entered its appearance on behalf of Proxyconn, Inc. in a pending Inter Partes Review proceeding filed by Microsoft Corporation. The Inter Partes Review is related to patent lawsuits filed by Proxyconn against Microsoft, Acer, Hewlett-Packard, and Dell. The subject patent, U.S. Patent No. 6,757,717, is entitled “System and Method for Data Access.” Claims 1-3,10-12, 14, and 22-24 have been included in Microsoft’s Petition Requesting Inter Partes Review.
Harness Dickey entered its appearance on behalf of Clearlamp LLC in a pending Inter Partes Review proceeding filed by LKQ Corporation. The Inter Partes Review is related to a patent lawsuit filed by Clearlamp against LKQ, pending but now stayed in the Northern Distirct of Illinois. The subject patent, U.S. Patent No. 7,297,364, is entitled “Method for Refurbishing Head Lamp Surfaces.” All 24 claims of the ‘364 patent have been included in LKQ’s Petition Requesting Inter Partes Review.
One aspect of the new “litigation” at the US Patent Office (or PTO) that will be interesting to watch is the culture shock that is sure to occur when concepts that are very familiar to patent litigation in Federal court are introduced for the first time to Inter Partes Review (IPR) and Post Grant Review (PGR) proceedings. Discovery is one such key litigation task that will soon be making its debut at the PTO. While some of the facets of discovery in IPR and PGR proceedings will be familiar to patent litigators, the Patent Office clearly sought to fashion its own style of discovery and it is worth digging further into this important and new aspect of patent practice.
From a philosophical perspective, the comments to the new Rules of Practice (that guide IPR and PGR proceedings) make clear that the PTO struggled with the concept of ensuring discovery did not become a slog that led to increased cost and burden on the parties, as is common in district court litigation. It is also clear that the Patent Office viewed flexibility as a key priority; the Patent Office believing that a more flexible discovery process will lead to a more efficient, less expensive process. Only time will tell if they were successful, but the PTO should be applauded for the apparent consideration it gave to the very important issue of allowing some discovery to improve contested Patent Office proceedings, but not at such a level as to let costs run rampant.
At the most general level, the PTO chose to implement three types of discovery: (1) “Mandatory Initial Disclosures”; (2) “Routine” Discovery; and (3) “Additional” Discovery. 37 C.F.R. §42.51. This article will focus on the Mandatory Initial Disclosures, with a detailed discussion of the other two discovery types to follow in subsequent posts.
What are Mandatory Initial Disclosures? The Mandatory Initial Disclosures can take one of two forms. “Option 1” is modeled on Rule 26(a)(1) of the Federal Rules of Civil Procedure and generally seek to have the parties exchange basic information early in the trial. For example, the name and contact information for individuals likely to have discoverable information, as well as a copy or description of documents and other information that may be used to support a party’s claims or defenses. “Option 2” comprises the information from “Option 1,” plus two additional categories of information. First, if the petition seeks cancellation of any claim based on the existence of an alleged prior non-published public disclosure, further information about the individuals with such information must be provided. Second, if the petition seeks cancellation of any claim based upon the alleged obviousness of the claim(s), further information about any objective secondary considerations is exchanged.
But just how “mandatory” are these Mandatory Initial Disclosures? The rule that promulgates these disclosures states that the initial disclosures can be done by agreement or by motion to the Board. If a motion is required, are the rules really “mandatory”? The short answer seems to be no. In the comments section of the Rules of Practice, the Patent Office states that “…providing for mandatory initial disclosures in all cases, including those where the parties do not consent to such disclosures, is not consistent with the statute, or with the legislative intent in enacting the AIA as a less expensive and more efficient alternative to infringement litigation in Federal court.” (Response to Comment 112) (emphasis added). Thus, the parties can either agree to make initial disclosures or, in the absence of such an agreement, the onus is on the party seeking mandatory initial disclosures to make a motion requesting such disclosure. In such an instance, the moving party must meet the “motion” standard for each proceeding – “in the interest of justice” for IPR and “for good cause” for PGR.
When are Mandatory Initial Disclosures served? If the parties agree to submit initial disclosures, such agreement must be filed with the Patent Trial and Appeal Board (PTAB) no later than the filing of the patent owner’s preliminary response, or the expiration of the time period for filing such a response. The initial disclosures should be filed as exhibits to that agreement. That sets up an interesting dynamic in that the parties are exchanging information (at least witness names and contact information and categories of relevant documents, if not the documents themselves) before the PTAB even decides whether to institute an IPR/PGR. Upon institution of a trial, “parties may automatically take discovery of the information identified in the initial disclosures.” This would include taking the deposition(s) of the listed witnesses and marking as exhibits and producing any documents identified. One issue that is somewhat vague is whether the patent challenger can begin depositions immediately, as the plain language of this rule seems to indicate, or whether the patent challenger must wait until after the patent owner response is filed and the 3-month patent challenger discovery period begins. Efficiency seems to dictate that the patent challenger must wait, or else multiple depositions of the same witness may be required. Further, other commentary from the Patent Office suggests that discovery has been intentionally sequenced to render a more efficient proceeding.
What is the most efficient way to make a motion to the PTAB to require a party to provide Initial Disclosures? Consistent with the Patent Office’s stated desire to make the discovery process flexible, efficient, and cost-effective, the best way to have this issue brought before the PTAB is to arrange for a conference call with the PTAB. On such a call, the moving party should be prepared to identify the sought-after discovery and explain the need for the disclosures. In a PGR, the party will be required to meet a “good cause” standard. In an IPR, the party will be required to meet the slightly higher “in the interests of justice” standard. In making its decision, the PTAB will take into account the nature of the information requested, the moving party’s access to that information, and the burden on the disclosing party.
So there you have (somewhat) Mandatory Initial Disclosures…the first “litigation” step of our new IPR and PGR proceedings.