PTAB grants inaugural award of attorneys’ fees

In RPX Corporation v. Applications in Internet Time, LLC, the PTAB awarded attorneys’ fees for the first time in an AIA post-issuance proceeding. The Board had previously granted the Petitioner’s motion for sanctions in response to the Patent Owner’s improper disclosure of confidential information in violation of the Board’s Standing Default Protective Order. IPR2015-01750, Paper 69 (Jul. 1, 2016), citing to Paper 58 (May 6, 2016).

To arrive at its decision, the Board analyzed three factors: “(i) whether a party has performed conduct that warrants sanctions; (ii) whether the moving party has suffered harm from that conduct; and (iii) whether the sanctions requested are proportionate to the harm suffered by the moving party.”

At the time of the Petitioner’s disclosure, a protective order had not been entered in the proceeding. However, the parties had agreed by email that the Standing Default Protective Order set forth in the Board’s Trial Practice Guide applied to the proceeding.

The violation of the Protective Order was discovered by the Petitioner upon receipt of three signed acknowledgements that accompanied the Patent Owner’s Preliminary Response. The Petitioner emailed the Patent Owner requesting the identity of the three individuals that signed the acknowledgments. The Patent Owner responded that the individuals were the Patent Owner’s president, the Patent Owner’s litigation counsel for the challenged patents in a related district court proceeding, and “an advisor to [Patent Owner] regarding the IPRs.”

The Patent Owner categorized its president as a “party” under § 2(A) of the Protective Order, while the others were “other employees of a party” under § 2(E). The Patent Owner conceded that it had not sought prior permission to share the information, notwithstanding the provision in § 2(E) that other employees of a party “shall be extended access to confidential information only upon agreement of the parties or by order of the Board” (emphasis in original). The Board determined that “[t]hose disclosures, therefore, violated § 2(E) of the Protective Order.”

The Patent Owner argued that the disclosure posed no harm to the Petitioner, an argument that the Board did not find persuasive. The Board agreed that the Petitioner’s “core business deals with NPE litigation,” including “assisting its clients in defending themselves against assertions of patent rights by NPEs.” The Board found that the Patent Owner’s disclosure caused harm because it was to individuals that “work on behalf of NPEs.” In particular, Patent’s Owner’s “advisor” is the CFO of “the #3 NPE by volume in 2014 (over 100 litigations filed).”

The Board determined that the request of $13,559 in attorneys’ fees was warranted and reasonable based upon the particular circumstances.

PTAB Usually Misses the One-Month Pendency Goal for Requests for Rehearing

No statute or rule establishes a time limit for the Board to decide a request for rehearing. However, the Trial Practice Guide states that the Board “envisions” that decisions will be made within approximately one month unless additional briefing is required. An analysis of recent decisions shows that the Board is not meeting this stated goal in most cases, even when no additional briefing is requested.

For this analysis, the 21 Board decisions on requests for rehearing that issued in the month of August 2016 were considered. Of these, sixteen were requests for rehearing of institution decisions and five were requests for rehearing of final written decisions. None of the requests resulted in a reversal of the Board’s earlier decision.

The chart below shows the length of time from request to decision for the 21 August decisions.

Owens Graphic

The average pendency of all the requests was 71 days from the date of the request to the date of the decision, with a median of 58 days and a range of 10 days to 204 days. Thus, the majority of requests are taking around two months or longer to decide, with some taking several months. The long-pending requests are not limited to any particular type of request: requests for rehearing of institution decisions (n=16) had a median pendency of 44.5 days and a range of 10 days to 204 days, while requests for rehearing of final written decisions (n=5) had a median pendency of 108 days and a range of 28 days to 160 days.

The long pendency of the requests cannot be explained by delays caused by additional briefing. None of the five requests that pended for more than 100 days involved additional briefing on the request. The two cases that did involve additional briefing pended for 58 and 70 days, respectively.

While these data represent only a snapshot, they do show that the Board is often missing its one-month goal, sometimes by several months.[1] This may indicate that the PTAB judges have heavy workloads and are giving priority to meeting statutory deadlines.

Based on these limited data, parties in post-grant proceedings can expect that a decision on a request for rehearing will probably take more than one month and may take several months. This is significant because it can cause a substantial delay in the ultimate resolution of an underlying patent dispute.

[1] Note that two of the six decisions on requests for rehearing decided between September 1 and September 14 pended for more than five months (169 days and 223 days).

Federal Circuit Rejects PTAB’s Reliance on “Common Sense” to Supply Missing Claim Limitation

In Arendi S.A.R.I. v. Apple Inc., et al., the Federal Circuit reversed a PTAB decision finding all instituted claims in an IPR invalid as obvious based on the prior art and “common sense.” No. 2015-2073 (Fed. Cir. Aug. 10, 2016).

The challenged patent claimed, in part, a method for accessing a document and searching for information outside the document using a second computer program based on certain types of information contained in the document as identified by a first computer program. The only reference cited as prior art disclosed a computer program that recognizes a telephone number as a class of text in a document and includes an “Add to address book” option.

Relying on expert testimony, the Board found that it would have been “common sense” to search for the recognized telephone number when selecting the option to “Add to address book,” in order to avoid duplicate entries.

While the Court recognized that “common sense and common knowledge have their proper place in the obviousness inquiry,” it provided “three caveats” when applying it:

  • First, “common sense is typically invoked to provide a known motivation to combine, not to supply a missing claim limitation.”
  • Second, using common sense to supply a missing claim limitation “ought to be treated as the exception, rather than the rule” and applied where the missing limitation in question is “unusually simple and the technology particularly straightforward.”
  • Third, common sense “cannot be used as a wholesale substitute for reasoned analysis and evidentiary support, especially when dealing with a limitation missing from the prior art references specified.”

Applying these principles to the Board’s decision, the Court found first that the Board used common sense to supply a missing claim limitation and that the missing claim limitation “is central to representative claim 1,” rather than merely “peripheral.” In particular, if the element were missing, then “the claims would be almost void of content.”

Second, the Court found that the Board relied “precisely” on “conclusory statements and unspecific expert testimony” in finding it would have been common sense to supply the missing claim limitation. Accordingly, the Court reversed the Board’s decision.

Federal Circuit criticizes PTAB for changing claim construction midstream

In SAS Institute, Inc. v. ComplementSoft, LLC, the Federal Circuit criticized the PTAB for changing its claim construction “midstream” and vacated the Board’s finding that, under the newly adopted construction, one of the claims in the Patent Owner’s software patent was valid. Nos. 2015-1346, 2015-1347 (Fed. Cir. Jun. 10, 2016).

In its institution decision, the Board construed the term “graphical representations of data flows” as “a map of the path of data through the executing source code,” and relied on its construction of that term in denying institution on one of the grounds included in the petition.

In the post-institution briefing, neither party advocated for a revised construction of the term, instead relying on the construction in the Board’s institution decision. Nonetheless, in its final written decision, the Board changed its construction to “a graphical representation comprised of icons depicting data processing steps and arrows to depict the movement of data through source code,” and under that construction it found the claim at issue patentable over the prior art.

Although the Federal Circuit agreed with the construction adopted by the Board in its final written decision, the Court strongly criticized the Board’s “procedure for arriving at this construction.” Because IPR proceedings are formal administrative adjudications, they are subject to the procedural requirements of the APA, which, under § 554(b)(3), requires that “[p]ersons entitled to notice of an agency hearing shall be timely informed of . . . the matters of fact and law asserted.”

Although § 554(b)(3) has, in the past, been interpreted to provide protections to the patent owner in IPR proceedings, the Court explained that it “is not so limited.” The protections of § 554(b)(3) apply to all “[p]ersons entitled to notice of an agency hearing,” which, in the case of an instituted IPR proceeding, includes both the Patent Owner and the Petitioner. Thus, in the context of IPR proceedings, “an agency may not change theories in midstream without giving [both parties] reasonable notice of the change and the opportunity to present argument under the new theory.”

In denying the Petitioner’s request for rehearing, the Board defended its new construction on the ground that the Petitioner was not prejudiced because it “could have made construction arguments for the term.” The Federal Circuit rejected this argument, explaining that because the parties could not have “anticipat[ed] that already-interpreted terms were actually moving targets,” it would be “unreasonable to expect” them to brief or argue “hypothetical constructions not asserted by their opponent.”

Because the Board failed to provide the parties with the opportunity to present argument under its new claim construction theory, the Federal Circuit remanded “so that the parties may address the Board’s construction of ‘graphical representations of data flows.’”

This decision provides an important vehicle for parties to an IPR proceeding to challenge the ultimate determination on patentability if it is based on a claim construction that differs from the one the Board adopted in the institution decision.

Federal Circuit rejects PTAB’s attempt at burden-shifting

In In Re Magnum Oil Tools Int’l, Ltd., the Federal Circuit found that the PTAB had improperly used its IPR institution standard—a reasonable likelihood that the petitioner would prevail as to at least one of the claims challenged in the petition—as justification for shifting the burden of persuasion and burden or production onto the Patent Owner after institution. No. 2015-1300 (Fed Cir. Jul. 25, 2016).

The IPR petition challenged claims as obvious based on two different groups of prior art combinations: Alpha and Lehr. The Board instituted review based on the Lehr combinations but not the Alpha combinations, which ultimately led to the unraveling of the Lehr combinations at the Federal Circuit.

The Federal Circuit first addressed burden of persuasion and burden of production, finding the Board had improperly shifted both burdens onto the Patent Owner. As to burden of persuasion, the Court reemphasized its ruling from Dynamic Drinkware that “the burden of persuasion is on the petitioner to prove ‘unpatentability by a preponderance of the evidence,’ 35 U.S.C. § 316(e), and that burden never shifts to the patentee.”

The Court noted that shifting the burden of persuasion has never been contemplated in litigation or the “adjudicatory context of an IPR,” whereas shifting the burden of persuasion in prosecution makes sense as “a ‘procedural tool of patent examination, allocating the burdens of going forward between examiner and applicant.’”

Next, the Court ruled that the burden of production remains with the petitioner regardless of the decision to institute, and “the Board has an obligation to assess the question anew after trial based on the totality of the record.”

The Court then found that the motivation to combine Lehr with the secondary references improperly cited back to the motivation for the Alpha combinations (e.g., “as discussed above with respect to Alpha,…” and “[t]he same analysis applies to combinations using Lehr as a base reference,…”). This led the Court to conclude that a prima facie case of obviousness had not been established, due to notable structural differences between Lehr and Alpha but no “particularized arguments [to] explain why those arguments from Alpha would be cross-applicable to the Lehr reference.”

Interestingly, the lack of a prima facie case of obviousness was a result of the Board’s improper burden shifting, in that the Board never required Petitioner to fix the deficiencies of its petition by further explaining its motivation to combine Lehr. From the outset, the Board improperly adopted the Petitioner’s proposed motivation to combine the Lehr combinations based upon the rationale incorporated from Alpha. Following institution, the Board improperly shifted the burden of disproving the Lehr combination onto the Patent Owner, and as such, never required Petitioner to bolster its motivation to combine Lehr with the secondary references.

This decision underscores the importance for IPR petitions to set forth prior art combinations that are independent from other prior art combinations, and in particular, not to incorporate by reference arguments from other grounds, which may not be instituted by the Board. Instead, for prior art combination, a petition should “articulate specific reasoning, based on evidence of record, to support the legal conclusion of obviousness.”

Federal Circuit rules that PTAB may base IPR final decisions on evidence outside instituted grounds

In a recent decision affirming the PTAB’s obviousness findings in an IPR, the Federal Circuit confirmed that the Board may use prior art not cited in instituted grounds as evidence to support a final decision. Genzyme Therapeutic Prod. Ltd. P’ship v. Biomarin Pharm. Inc., No. 2015-1721 (Fed. Cir. June 14, 2016).

In two IPR petitions, Biomarin challenged all claims of two Genzyme patents as being invalid for obviousness on multiple grounds. The Board instituted review of both patents on two grounds each and ultimately found all claims for both patents invalid as obvious in its final written decision.

To support the conclusion of obviousness, the Board used two pieces of prior art not cited in the instituted grounds to illustrate the state of the art. Genzyme appealed the decision, claiming that the Board violated the notice and opportunity to respond requirements of the Administrative Procedure Act (APA) because it relied on evidence not set forth in the instituted grounds.

On appeal, the Federal Circuit upheld the Board’s obviousness finding. In its IPR reply brief, Biomarin had presented the prior art in question as evidence to rebut one of Genzyme’s arguments of nonobviousness. The Court found that Genzyme had actual notice of this evidence because Genzyme presented arguments on the record against the use of Biomarin’s prior art as a basis for obviousness.

The Court also stated that Genzyme could have filed a motion to exclude the references as evidence or asked the Board for leave to file a surreply. The Federal Circuit explained that “the introduction of new evidence in the course of the trial is to be expected” and confirmed that the Board “may consider a prior art reference to show the state of the art at the time of the invention, regardless of whether that reference was cited in the Board’s institution decision.” Therefore, according to the Federal Circuit, the Board’s ruling complied with the requirements of the APA.

This decision clarifies that additional evidence may be introduced during the course of an IPR to support the instituted grounds, especially as a basis for defining the state of the art. As the decision shows, the Board may take an expansive view of the trial evidence and use it to support a final decision. Therefore, it is important for practitioners to consider all evidence of record when developing trial strategy.

Federal Circuit provides guidance on broadest reasonable interpretation standard for claim construction in PTAB proceedings

In two recent cases, the Federal Circuit provided guidance on applying the broadest reasonable interpretation (BRI) standard for claim construction in IPR proceedings. PPC Broadband Inc. v. Corning Optical Communications RF, LLC, No. 2015-1361, 1366, 1368, 1369 (Fed. Cir. Feb. 22, 2016) (“PPC I”) and PPC Broadband Inc. v. Corning Optical Communications RF, LLC, No. 2015-1364 (Fed. Cir. Feb. 22, 2016) (“PPC II”).

In PPC I, the CAFC affirmed portions of the Board’s decision, vacated other portions, and remanded. The CAFC reviewed claim constructions for terms in claims that the Board previously found unpatentable as obvious. Recognizing that the “case hinge[d] on the claim construction standard applied—a scenario likely to arise with frequency,” the CAFC compared the constructions under the district court Phillips standard and the Board’s BRI standard.

For some claim terms, the CAFC found a difference under the two standards: “[W]hile the Board’s construction is not the correct construction under Phillips, it is the broadest reasonable interpretation . . . and because this is an IPR . . . we must uphold the Board’s construction.” Other claim terms, when properly construed, had the same definition under both the BRI and Phillips standards.

In PPC II, the CAFC vacated and remanded the Board’s holding of obviousness after finding that the Board erred in its construction of a term under the BRI standard. The CAFC reminded the Board that it must give claims their broadest reasonable interpretation consistent with the specification.

The CAFC found that the Board improperly arrived at its construction by referencing a dictionary cited by the parties and selecting the broadest definition therein. While the selected definition was the broadest, it was not the broadest when read in light of the specification: “The Board’s approach in this case fail[ed] to account for how the claims themselves and the specification inform the ordinary skilled artisan as to precisely which ordinary definition the patentee was using.”

As these decisions show, when drafting patent applications practitioners should consider whether certain terms, especially those that are essential to claiming the invention, may be interpreted differently under the BRI and Phillips standards (assuming the Supreme Court does not do away with the BRI standard in its pending decision in Cuozzo Speed Techs. v. Lee). It may make sense to specifically define such terms in the specification, so that if the patent is subsequently challenged (whether before the Patent Office or in district court litigation), a broader definition will not be applied.

Federal Circuit Affirms PTAB’s Conclusion that Claims Reciting a Subsidy Are CBM Eligible

In Blue Calypso, LLC, v. Groupon, Inc., the Federal Circuit concluded that the Board did not exceed its authority to conduct a CBM review of Blue Calypso’s challenged patents, and that the Board correctly applied the statutory definitions of “covered business method” and “technological invention” to the challenged claims. Nos. 2015-1396, -1397, -1398, -1399, -1401 (Fed. Cir. Mar. 1, 2016).

While the Board’s decision to institute a covered business method review is “final and nonappealable” under the AIA, the AIA does not prevent the Federal Circuit from reviewing whether a claim is eligible for CBM review. See Versata Dev. Grp., Inc. v. SAP Am., Inc. (Versata II), 793 F.3d 1306, 1318–23 (Fed. Cir. 2015); SightSound Techs., LLC v. Apple Inc., 809 F.3d 1307 (Fed. Cir. 2015). Because the Federal Circuit has jurisdiction under the AIA to review the Board’s final decisions in CBM reviews, the AIA does not prevent the Federal Circuit from reviewing the Board’s conclusion that the challenged patent claims are “covered business methods” that lack any “technological invention.” Versata II, 793 F.3d at 1323.

Noting its decisions in Versata II and SightSound, the Federal Circuit first rejected Blue Calypso’s arguments that the Board interpreted the statutory CBM definition in an overly broad way. Blue Calypso argued that its patents are not CBM patents because they relate to a method for managing and distributing advertising content, which is not a “financial product or service” that traditionally originated in the financial sector, such as banks, brokerages, holding companies, and insurance firms. The Federal Circuit rejected this argument, noting that the legislative history of the AIA suggests that the definition of CBM should be broadly interpreted, and “a financial activity” that is not directed to money management or banking nevertheless can constitute a “financial product or service” within the meaning of the statute.

Likewise, the Federal Circuit rejected Blue Calypso’s argument that the technological invention exception applies to any claims that are computer-based and contemplate hardware, software, a network, and communications devices. In so ruling, the Court relied on its decision in Versata II, in which it “rejected the argument that merely reciting the use of a computer would satisfy the technological invention exception.”

Having dispensed with Blue Calypso’s attacks on the Board’s interpretation of the statutory CBM definition, the Federal Circuit next addressed whether the Board correctly applied the definitions of “covered business method” and “technological invention” to the Blue Calypso patents. The claims at issue included a subsidy concept, as exemplified by the recitation in one of the claims of “subsidizing the qualified subscriber according to the chosen subsidy program.” The Board noted the centrality of this concept to the claims, and construed “subsidy” as “financial assistance given by one to another.” The Federal Circuit concluded that, based on this understanding of the subsidy concept, the Board’s conclusion that the challenged claims are financial in nature and subject to CBM review was not arbitrary and capricious and was supported by substantial evidence. So, too, was the Board’s conclusion that the claims recited nothing more than general computer system elements, and thus did not meet the technological innovation exception.

Practitioners should take note of the Court’s criticism of Blue Calypso’s failure to address the language of the challenged claims in its arguments. Whether seeking to establish or thwart CBM eligibility, a successful argument will center around what the claims themselves recite.

Federal Circuit rules that it has no jurisdiction to review PTAB’s refusal to institute redundant grounds

In a recent decision affirming the PTAB’s patentability determination in an IPR, the Federal Circuit confirmed that it has no jurisdiction to review the Board’s refusal to institute grounds it deemed to be redundant of instituted grounds. Harmonic, Inc. v. Avid Technology, Inc., No. 2015-1072 (Fed. Cir. Mar. 1, 2016).

In its IPR petition, the Petitioner challenged claims 1-20 of the patent at issue in view of seven different prior art grounds. The Board instituted review of claims 1-16 on one obviousness ground, declined to institute review on four other grounds it deemed to be “redundant” to the instituted ground, and declined to institute review of claims 17-20 in view of the two remaining grounds. The Board ultimately found claims 1-10 invalid and claims 11-16 valid in its final written decision.

The Petitioner appealed the Board’s finding that claims 11-16 were valid and argued that the Board, after concluding that the instituted ground did not render claims 11–16 unpatentable, erred by failing to consider the other prior art grounds in Harmonic’s IPR petition that were not instituted.

On appeal, the Federal Circuit upheld the Board’s validity finding as supported by substantial evidence and ruled that it had no jurisdiction to review the Board’s decision not to institute on the other grounds. In discussing its rationale, the Court confirmed that the Board’s institution decisions are “final and nonappealable” under 35 U.S.C. § 314(d), and that the Board’s reference to the non-instituted grounds as “redundant” did not alter that conclusion.

Interestingly, the Court found that in using the term “redundant,” “the Board suggested nothing more than that the claims addressed by the non-instituted grounds were already addressed by the instituted ground.” In other words, according to the Federal Circuit, “the Board did not determine that the prior art relied on in the non-instituted grounds was duplicative of that relied on in the instituted grounds” (emphasis added). This is apparently the position the PTO argued in its intervenor’s brief.

This decision confirms that the Board has broad discretion to decide whether it will even consider certain grounds on the merits at the institution stage. Moreover, this decision confirms that the Federal Circuit has no jurisdiction to review whether the Board appropriately exercised its discretion in declining to consider non-instituted grounds on the merits.

This decision highlights the difficulties of challenging the Board’s institution decisions. The Federal Circuit has repeatedly affirmed that it has no jurisdiction to review PTAB institution decisions, and this case illustrates that the Board’s refusal to institute grounds deemed to be redundant is not an exception to this rule. However, the fact that non-instituted grounds deemed redundant may not be subject to future estoppel (as we wrote about here) might still counsel in favor of including such grounds in the petition.

New PTAB Rules Take Effect May 2, 2016

The Patent Office has published a final rule with amendments to 37 CFR § 42, et seq., governing IPR, CBM, PGR, and derivation proceedings before the Patent Trial and Appeal Board. The new rules take effect Monday, May 2, 2016 and apply to all AIA petitions filed on or after that date and to any ongoing proceeding or trial before the Office. A revised Trial Practice Guide is forthcoming.

The published final rule describing the amended rules is available here. A redline comparing the amended rules to the old rules is available here.

We detail the major rule changes and give some practice pointers below.

I. New word counts and Rule 11-type certification requirements

The new rules will immediately affect how petitioners prepare their petitions and how patent owners must respond.

A. Word counts replace page limits for major briefing
[37 CFR § 42.24, 37 CFR § 42.107(a), 37 CFR § 42.207(a)]

The new rules require word counts instead of page limits for petitions, patent owner preliminary responses, patent owner responses, and petitioner replies. Excluded from these limits are a table of contents, a table of authorities, mandatory notices under CFR § 42.8, a certificate of service or word count, or appendices of exhibits or claim listing. The page limits for motions to amend and other motions remain the same.

Paper IPR PGR CBM Derivation
Petition 14,000 w 18,700 w 18,700 w 14,000 w
Patent Owner Preliminary Response 14,000 w 18,700 w 18,700 w 14,000 w
Patent Owner Response 14,000 w 18,700 w 18,700 w 18,700 w
Petitioner Reply to Patent Owner Response 5,600 w 5,600 w 5,600 w 5,600 w
Motions to Amend 25 p 25 p 25 p 25 p
Oppositions to Motions to Amend 25 p 25 p 25 p 25 p
Replies to Oppositions to Motions to Amend 12 p 12 p 12 p 12 p
Other Motions 15 p 15 p 15 p 15 p
Oppositions to Other Motions 15 p 15 p 15 p 15 p
Replies to Other Motions 5 p 5 p 5 p 5 p

B. A Rule 11-type certification applies to papers filed with the Board [37 CFR § 42.11]

Section 37 CFR § 42.11, which prescribes the duty of candor owed to the Office, has been amended to include a certification requirement analogous to Rule 11 of the Federal Rules of Civil Procedure. The new rule also provides sanctions for noncompliance.

Every petition, response, written motion, and other paper filed in a proceeding must comply with the signature requirements set forth in Section 37 CFR § 11.18(a). Presenting such a paper to the Board operates as a certification under §11.18(b)(2), namely: that the paper is not being presented for an improper purpose; that the legal contentions are warranted by existing law or by nonfrivolous arguments about the law; that the allegations and factual contentions have or are likely to have evidentiary support; and that the denials of factual contentions are warranted by the evidence or reasonably based on a lack of information or belief.

The Office observed that this rule has a strong deterrent effect and expects that it will be infrequently invoked. Responding to fears that the proposed rule will lead to an increase in investigations by the Office of Enrollment and Discipline, the Office noted that, like all motions in an AIA trial proceeding, a motion for sanctions must be authorized by the Board. And, a copy of the motion most be served on the opposing party at least 21 days before seeking authorization from the Board to file the motion.

One other notable departure from Rule 11 in the Federal Rules is that sanctions imposed by the Board may only apply to practitioners and parties, not entire law firms.

II. New rules for testimonial evidence, Phillips-type claim construction, and substitute claims

The new rules will also change how patent owners approach their preliminary responses and post-institution responses, as well as patent owners’ strategies for obtaining substitute claims.

A. Preliminary responses can include new testimonial evidence
[37 CFR § 42.23(b), 37 CFR § 42.108(c), 37 CFR § 42.208(c)]

Under the new rules, a patent owner’s preliminary response may include new testimonial evidence, such as expert declarations. The Office amended the rules to provide that any factual dispute created by testimonial evidence that is material to the institution decision will be resolved in favor of the petitioner only for the purposes of determining whether to institute a trial. This is because, ordinarily, the shortened timeframe for the institution phase of an AIA proceeding does not allow for cross-examination of a declarant as of right and because the denial of institution is not appealable.

Though new testimonial evidence will now be permitted in preliminary responses, it is not required. The Office noted that no negative inference will be drawn if the patent owner fails to submit new testimonial evidence in the preliminary response. Patent owners should take this into account when deciding what testimonial evidence should be submitted with the preliminary response, and what testimonial evidence should be reserved for its response if a trial is instituted.

B. Either party may request Phillips-type claim construction for soon-to-expire patents
[37 CFR § 42.100(b), 37 CFR § 42.200(b), 37 CFR § 42.300(b)]

Though either party may do so, patent owners in particular may wish to request a Phillips-type claim construction if the patent will expire within 18 months of the Notice of Filing Date Accorded to Petition.

A typical situation would unfold as follows: the petitioner files a petition construing the claims under broadest reasonable interpretation standard that applies in AIA proceedings. The Board then issues a Notice of Filing Date, and the patent owner observes that the challenged patent is set to expire within 18 months of the date of entry of the Notice. The patent owner may then request a call with the Board to request leave to file a motion requesting a Phillips-type claim construction, certifying that the patent will indeed expire within the allotted timeframe. The Board may then allow the petitioner to brief the Phillips-type analysis before the patent owner’s preliminary response is due.

C. Patent owner must make prima facie case that substitute claims are patentable
[37 CFR § 42.20(c), 37 CFR § 42.121(a), 37 CFR § 42.221(a)]

Finally, the Office reiterated its rules governing motions to amend, which are meant to address the Office’s concern that substitute claims may become part of an issued patent without being independently examined by the Office.

Consistent with its explanation in MasterImage 3D, Inc. v. RealD Inc., the Office clarified that a patent owner must argue for the patentability of the proposed substitute claims over the prior art of record. “Prior art of record” includes:

(a) any material art in the prosecution history of the patent;

(b) any material art of record in the current proceeding, including art asserted in grounds on which the Board did not institute review;

(c) any material art of record in any other proceeding before the Office involving the patent;

(d) any art provided in light of the patent owner’s duty of candor; and

(e) any other prior art or arguments supplied by the petitioner.

The Office also noted that the substitute claims must be narrower than the claims being replaced.

As clarified in MasterImage, once the patent owner establishes that the narrower substitute claims are prima facie patentable over the prior art of record, the burden of production shifts to the petitioner. The petitioner may then explain why the patent owner did not make out its prima facie case of patentability, or attempt to rebut that case by addressing the patent owner’s arguments and evidence or by applying additional prior art against the proposed substitute claims. The ultimate burden to establish patentability, however, remains with the patent owner.

III. Guidance regarding additional discovery

The Office did not address the procedures for routine discovery, or elaborate on what inconsistent information may be available under routine discovery under Section 42.51(b)(1)(iii). The Office did, however, provide significant guidance regarding additional discovery.

A. Garmin remains the standard for requesting additional discovery

The Office stated that it will continue to apply the factors outlined in Garmin Int’l, Inc. v. Cuozzo Speed Techs. LLC. While the Office acknowledged concerns that an overly-strict application of the Garmin factors effectively require a party possess the evidence that it seeks, it was not persuaded to alter the factors or their application. Rather, the Office emphasized that “reasoning tending to show beyond speculation” could satisfy the first factor, and that a party need not have actual evidence of the type being sought.

The Office also stressed that the Garmin analysis is a case-by-case inquiry, and while additional proposed factors were rejected for implementation into the Rules, the Office noted that other factors may be considered when considering a request for additional discovery, such as those considered in Int’l Sec. Exch., LLC v. Chi. Bd. Options Exch., Inc.

B. Real party-in-interest and privity issues should be resolved as early as possible

The Office did not implement any formal rule changes regarding real party-in-interest disputes.

The Office will continue to permit patent owners to raise challenges to real party-in-interest and privity at any time during a trial proceeding, but emphasized that these challenges should be raised as early as practicable. Late challenges that could have been raised earlier will be considered on a case-by-case basis. The Office will provide further guidance in the revised Trial Practice Guide, and noted that it is considering alternative approaches that will allow petitioners to amend their real party-in-interest designations.

C. Patent owners must present a threshold amount of evidence or reasoning to obtain discovery of secondary considerations evidence

The Office also specifically addressed how the Garmin factors should be applied to discovery regarding secondary considerations of nonobviousness.

The Office noted that “[e]vidence of many secondary considerations (e.g., long-felt need, industry praise, commercial success of patent owner’s patented product, widespread licensing) is available to patent owners without discovery,” which suggests that information otherwise available to the requesting party should not be sought as additional discovery.

When the patent owner seeks discovery of secondary considerations evidence, it must show some nexus between the claims of the patent and the information sought to ensure that additional discovery is necessary in the interest of justice (in an IPR) or is supported by a showing of good cause (in a PGR). The Office does not require a conclusive showing of nexus, however, and rejected comments that argued the nexus requirement imposed too high a burden on the patent owner.

Editor’s Note:

After this post was written and before it published, the USPTO issued a correction to the final rule published in the Federal Register on April 1, 2016. The correction pertains to CFR § 42.24(a)(1) and omits “grounds for standing” as an administrative item exempt from the word count and page limits applicable. Effective May 2, 2016, the grounds for standing should be included in the word and page count.

 Be advised that print editions of the new Rules (e.g., O’Connor’s Intellectual Property Codes 2016­–2017 at page 1291) may include the erroneous statement regarding excluding the grounds for standing from the word and page count.