USPTO Proposes to Narrow Claim Interpretation in AIA Patent-Validity Trials

In a move that may make it harder to invalidate—but also potentially easier to limit the scope of—challenged patents, the US Patent and Trademark Office (USPTO) on May 8 proposed narrowing the interpretation of patent claims during AIA validity trials.

In the Notice of Proposed Rulemaking, the USPTO proposes replacing the broadest reasonable interpretation (BRI) standard for unexpired and proposed claims with the Phillips standard that is applied by district courts and the International Trade Commission (ITC).  The Patent Trial and Appeal Board already applies the Phillips standard to expired patent claims, which cannot be amended during AIA trials.

The Notice also proposes requiring the Board to consider prior district court or ITC claim construction determinations that are timely made of record in IPR, PGR, or CBM proceedings.

The Notice explains that the motivations for the change include:

  • increasing uniformity between the PTAB, district courts, and the ITC;
  • increasing judicial efficiency; and
  • reducing potential unfairness that could result from using an arguably broader standard in AIA trial proceedings.

Under the proposed approach, claim construction would begin with the language of the claims, which will be given the meaning the terms would have to a person of ordinary skill in the art as of the effective filing date of the relevant patent.  Keeping in mind that the specification is “the single best guide to the meaning of a disputed term and … acts as a dictionary when it expressly defines terms used in the claims or when it defines terms by implication,” the prosecution history—of the challenged patent and related patents, during prior prosecution, reexamination, reissue, and AIA trials—would be considered as a source of intrinsic evidence that can “inform the meaning of the claim language by demonstrating how the inventor understood the invention and whether the inventor limited the invention in the course of prosecution, making the claim scope narrower than it would otherwise be.”

Of particular note, “the doctrine of construing claims to preserve their validity would apply to AIA trials.”  While some critics may argue that this particular change to Board practice is inconsistent with the purpose of such validity trials, petitioners may see this as an opportunity to frame challenges to either invalidate the challenged claims or compel a narrow construction that preserves validity but precludes infringement.

Comments on the proposed changes may be submitted to PTABNPR2018@uspto.gov within 60 days of the Notice’s official publication on May 9.

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More SAS: PTAB “May” Revoke Institution in Some Pending Trials

The Patent Trial and Appeal Board today hosted a “Chat with the Chief” webinar to elaborate on the practical effects of its April 26 memo implementing the Supreme Court’s decision in SAS Institute Inc. v. Iancu. Of particular note is that the Board seemingly intends to consider revoking some partial institution decisions to retroactively de-institute pending trials.

Many listener questions sought to clarify the impact on prior institution decisions in pending trials. Several addressed the apparent daylight between the memo’s stated intent to consider “all challenges” in instituted trials going forward, and the less-concrete statement that “for pending trials in which a panel has instituted trial only on some of the challenges . . ., the panel may issue an order supplementing the institution decision to institute on all challenges raised in the petition.”

The Board explained that in many cases it will expand institution to include all challenges raised in the petition, but used “may” in the guidance memo to reserve discretion to address two other possible scenarios. First, the Parties may agree to proceed on only the grounds instituted in the original institution decision, rendering unnecessary a supplemental istitution decision.

Second, the Board may decide that it would not have instituted at all had it originally been forced to consider all challenges raised in the petition. The example offered by the Board for this second scenario is that a petition might have one strong ground and nineteen other grounds that are weak and/or otherwise barred, suggesting that retroactively de-instituting should be rare and only when the partially instituted grounds are greatly outweighed by grounds not originally instituted.

One question that went un-asked is whether the Board has statutory authority for a “take back” on its own prior institution decisions, especially if no request for rehearing is pending. Section 314(b) mandates that the Board “shall determine whether to institute an inter partes review . . . within 3 months after—(1) receiving a preliminary response to the petition . . .; or (2) if no such preliminary response is filed, the last date on which such response may be filed.” And, finding no statutory authority for partial institution, the Supreme Court in SAS required the Board—once a trial is instituted—to rule on the patentability of all challenged claims. Expanding an institution decision to include all challenges is plainly consistent with the Supreme Court’s requirement, but it remains to be seen where the Board finds support for authority to revoke its own institution decisions sua sponte.

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PTAB Feeling SASsy: Institutions to Include “All Challenges”

The Supreme Court’s recent decision in SAS Institute Inc. v. Iancu will rapidly impact pending and future AIA trials. According to a guidance memo released by the Patent Trial and Appeal Board on April 26, 2018, future institution decisions “will institute as to all claims or none” and, when granting institution, “will institute on all challenges raised in the petition.” The wording suggests that “all challenges” refers to all grounds on which claims are challenged, rather than merely all challenged claims.

For pending trials in which only a subset of proposed grounds were originally instituted, panels of the Board may also supplement the institution decision to institute on all challenges raised in the petition.

Panels may also order “additional time, briefing, discovery, and/or oral argument” in affected cases, “depending on various circumstances and the stage of the proceeding.” Cases near the 12-month statutory deadline for a final decision “may be extended, on a case-by-case basis, if required to afford all parties a full and fair opportunity to be heard.”

Parties are directed to confer, after receiving an order supplementing the institution decision, on the need for additional briefing and changes to the schedule. Parties should then contact the Board with proposed adjustments. Without specific requests, the Board might not order adjustments, although in some cases the Board may act sua sponte.

The Board will host a “Chat with the Chief” webinar on Monday, April 30, 2018 from 12:00 to 1:00 p.m. ET to discuss the impacts on AIA trials and answer questions.

All-or-Nothing: Supreme Court Requires Instituted IPRs to Address All Challenged Claims

The United States Supreme Court in SAS Institute struck down the Patent Trial and Appeal Board’s practice of instituting inter partes review (IPR) on only a subset of claims challenged in the petition. SAS Institute Inc. v Iancu, 584 U.S. ___, No. 16-969 (2018). Thus, the Board’s final written decisions in IPRs must address the patentability of all challenged claims.

The Board’s claim-by-claim “partial institution” practice was based on the United States Patent and Trademark Office (USPTO) rule stating that the Board “may authorize the review to proceed on all or some of the challenged claims.” 37 CFR § 42.108(a). Pursuant to this rule, the Board has routinely instituted IPRs on only a subset of challenged claims. In those instances, the non-instituted claims have not been further addressed during the trial or in the final written decision.

SAS Institute challenged this practice, arguing that it was contrary to 35 U.S.C. §318(a)’s mandate that the Board “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner” (emphasis added). The Federal Circuit rejected this argument, and affirmed the Board’s partial institution practice.

In a 5-4 decision authored by Justice Gorsuch, the Court reversed, holding that the Board “cannot curate the claims at issue but must decide them all.” The Court did not find any basis in the text of §§ 311-318 for discretion to pick and choose among the challenged claims. The Court instead held that, while the text gives the Board discretion whether to institute a review, that choice is binary—either to institute the review on all challenged claims or not at all.

This decision could significantly impact the Board’s and petitioners’ practices going forward. For example, all-or-nothing institution has the potential to increase the administrative resources required to adjudicate instituted IPRs. In pending IPRs in which some or all briefing has already been completed, additional briefing may be required to permit the parties to address challenged claims on which the Board previously declined to institute review.

This decision will also expand the scope of § 315(e) estoppel in some instances to include patent claims that previously might have been denied institution, but now must be addressed.

There remains an open question, however, about the application of estoppel when a claim is challenged on multiple grounds. While precluding institution of only a subset of challenged claims, the Court did not directly address the Board’s current practice of picking and choosing which grounds to institute. This practice has led to disagreements among district courts about whether § 315(e) estoppel applies to grounds denied institution on the merits. Compare Biscotti Inc. v. Microsoft Corp., 2017 WL 256231 (E.D. Tex. May 11, 2017) (holding that estoppel applies) with Douglas Dynamics, LLC v. Meyer Prods. LLC, 2017 WL 1382556 (W.D. Wis. Apr. 18, 2017) (holding that estoppel does not apply). This decision is not likely to resolve this disagreement.

USPTO Giveth and USPTO Taketh Away: Supreme Court Upholds Constitutionality of AIA Reviews

In its long-awaited Oil States decision, the United States Supreme Court today held that the Constitution does not preclude the United States Patent and Trademark Office (USPTO) from reviewing the validity of issued US patents. Oil States Energy Servs., Inc. v Greenes Energy Group, LLC, 584 U.S. ___, No. 16-712 (2018). In a 7-2 decision authored by Justice Thomas, the Court rejected the argument that patents are private rights subject to revocation only by Article III courts, holding instead that patents are public rights subject to revocation by the USPTO:

This Court has recognized, and the parties do not dispute, that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise. Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration. Thus, the PTO can do so without violating Article III.

The Court distinguished its own earlier decisions on the basis that they turned on “the statutory scheme that existed at that time,” and did “not resolve Congress’ authority under the Constitution to establish a different scheme.”

In a concurring opinion joined by Justices Ginsburg and Sotomayor, Justice Breyer cautioned that the “the Court’s opinion should not be read to say that matters involving private rights may never be adjudicated other than by Article III courts, say, sometimes by agencies.”

And, in a dissenting opinion joined only by Chief Justice Roberts, Justice Gorsuch sympathized with patentees, arguing that, while “[c]eding to the political branches ground they wish to take in the name of efficient government may seem like an act of judicial restraint,” the decision risks eroding the judiciary’s ability to “ensur[e] the people today and tomorrow enjoy no fewer rights against governmental intrusion than those who came before.”

“Informative” Decisions Show How the PTAB Exercises Its Discretion to Deny Petitions Based on Previously-Considered Prior Art and Arguments

In the past several months, the PTAB has designated as “informative” five decisions in which the Board exercised its discretion to deny institution under 35 U.S.C. § 325(d).  That statute provides that the board may reject a petition if “the same or substantially the same prior art or arguments previously were presented to the Office.”  The informative decisions, while not binding on subsequent panels, are meant to provide guidance for parties appearing before the Board.

Below are some important takeaways from these informative decisions:

The Becton decision also sets forth a helpful list of non-exclusive factors that the Board may consider in evaluating whether to exercise its discretion to deny institution:

  • the similarities and material differences in the art;
  • whether the art is cumulative;
  • the extent to which the art was already evaluated during examination, including whether it was the basis for a rejection;
  • the extent of overlap in arguments;
  • whether the petitioner has pointed out sufficiently how the Examiner erred; and
  • the extent to which additional evidence and facts presented in the petition warrant reconsideration of the prior art or arguments.

These decisions show that the Board will closely review the prosecution history of the challenged patent and related patents, and is willing to exercise its discretion to deny institution if the issues raised in the petition have been previously addressed.  They also show that the Board looks to the substance of the issues addressed rather than just the specific combinations of references.

Petitioners should carefully review the prosecution history of the challenged patent and all related patents and consider explaining in the petition how the arguments differ substantively from what has already been addressed.

Patent owners responding to a petition should also carefully review the prosecution history and, where appropriate, take advantage of the Preliminary Response to argue that the petition offers nothing new.

Federal Circuit clarifies what IPR petition must disclose to provide adequate notice to Patent Owner

In In re NuVasive, Inc., the Federal Circuit clarified what constitutes adequate notice to a Patent Owner of “pertinent portions” of a prior art reference relied upon in an IPR petition. Case No. 2015-1672 (Fed. Cir. Nov. 9, 2016).

On appeal to the Federal Circuit after the Board cancelled all but one of the challenged claims under 35 U.S.C. § 103, the Patent Owner argued that it did not receive adequate notice or opportunity to address certain portions of the Michelson reference upon which the Board largely based its obviousness finding. The Federal Circuit agreed in part.

The Petitioner filed two IPR petitions, each of which addressed two claim limitations, a length dimension and a length ratio. In the first petition, the Petitioner relied upon Michelson for the length dimension, but also briefly suggested it disclosed the ratio limitation. Further, in the first petition, the Petitioner briefly cited Figure 18 of the Michelson reference. In the second petition, the Petitioner neither argued that the ratio limitation was disclosed by Michelson, nor cited Figure 18.

NuVasive did not address Figure 18 in either of its Patent Owner Responses to the petitions.

In each of its Replies, the Petitioner cited Figure 18 of Michelson and argued that it disclosed both claim limitations. The Patent Owner objected that this was new grounds for invalidity asserted for the first time in the Replies, and requested leave to file motions to strike or to file Surreplies. The Board denied all requests. Further, at oral argument, the Board neither allowed the Patent Owner to make substantive arguments in response to the alleged disclosure of both claim limitations by Michelson, nor in response to Figure 18 of Michelson.

The Board issued its Final Written Decisions finding all but one of the challenged claims obvious, relying largely on Figure 18 of Michelson for disclosure of both claim limitations. The Federal Circuit reversed as to the second petition but affirmed as to the first petition, noting that the first petition was “barely sufficient” to give NuVasive sufficient opportunity to respond, since it specifically disclosed Figure 18 and referred, tangentially, to both of the claim limitations.

The Federal Circuit held that the second petition “did not notify [the Patent Owner] of the assertions about the pertinent portions of Michelson that later became critical,” violating the Patent Owner’s rights under the Administrative Procedure Act. Noting that the Patent Owner had no notice of the Figure 18 argument before it filed its Patent Owner Response, the Court indicated that it was insufficient that the Patent Owner was given the chance to “respond to other factual assertions about Michelson,” outside of those that the Board relied on to find the claims obvious.

In holding the second petition inadequate, the Federal Circuit provided some guidance as to the factors that render an opportunity to respond to a prior art reference inadequate. For example, the Court noted that the opportunity to cross-examine and file “observations” on the Petitioner’s expert were insufficient. The Court also noted that the Patent Owner’s “cut-and-paste” strategy of similar discussions of Michelson in both of its Patent Owner Responses was insufficient to constitute a reply to the Figure 18 argument.

CAFC requires weighing diligence evidence as a whole and rejects “scouring” for gaps

In Perfect Surgical v. Olympus America, Inc., the Federal Circuit found harmful error in the PTAB’s diligence framework and conclusions, thereby potentially lowering the bar required to establish diligence in PTAB cases. Case No. 2015-2043 (Fed. Cir. Nov. 15, 2016).

In the underlying IPR, the Board found a patent owner did not prove the inventor continuously exercised reasonable diligence throughout the critical period of time needed to antedate a prior art reference, due to three unexplained gaps: (1) an almost three-week period of time where the inventor had a draft application before he provided comments back to a patent attorney; (2) a long weekend without diligence activity; and (3) a two-and-a-half-week gap where the inventor’s patent attorney had a second draft of the application before he filed it.

The Federal Circuit found error in the Board’s approach as a whole, explaining that the Board had relied on the “erroneously heightened” and “too exacting” standard of whether the inventor had “continuously exercised reasonable diligence” throughout the critical period. It distinguished this erroneous standard from “reasonably continuous diligence,” which does not require an inventor to work to reduce his invention to practice every day or to have no uncorroborated gaps during the critical period:

“In determining whether an invention antedates another, the point of the diligence analysis is not to scour the patent owner’s corroborating evidence in search of intervals of time where the patent owner has failed to substantiate some sort of activity. It is to assure that, in light of the evidence as a whole, ‘the invention was not abandoned or unreasonably delayed.’. . . One must weigh the collection of evidence over the entire critical period to make such a determination.”

According to the Federal Circuit, the Board’s focus on an incorrect standard “infected its analysis” such that it did not properly weigh the patent owner’s evidence “under a rule of reason.” Considering the evidence under a rule of reason, the Federal Circuit found that that the patent owner was not required “to corroborate every day the [patent] application was worked on,” including the days of the first gap.

The Federal Circuit also found that the Board’s findings regarding the second gap were not supported by substantial evidence. Finally, regarding the third gap, it explained that a patent attorney is an agent of an inventor, and that it was error for the Board to ignore the attorney’s diligence in preparing the patent application on behalf of the inventor.

Accordingly, the Federal Circuit vacated and remanded the Board’s decision to determine whether the patent owner’s evidence “as a whole and under a rule of reason, collectively corroborates” the inventor’s testimony.

No due process violation where PTAB “previews” new construction at oral hearing

In Intellectual Ventures II LLC v. Ericsson Inc.,[1] the Federal Circuit considered whether the PTAB’s adoption of a new claim construction in its Final Written Decision constitutes a violation of the parties’ due process. Intellectual Ventures argued that it was denied due process because the construction set forth in the Board’s Final Written Decision was not one that any of the parties offered and was never “previewed” to the parties until oral argument. IV contended that the Board’s decision runs afoul of two recent Federal Circuit decisions—In re Magnum Oil International, Ltd. and SAS Institute, Inc. v. ComplementSoft, LLC. The Federal Circuit rejected these arguments.

The Court explained that, under the Administrative Procedures Act, the Board must inform the parties of “the matters of fact and law asserted,” and give each party an opportunity to submit evidence and argument in support of its case (including rebuttal). “Pursuant to these provisions, the Board may not change theories midstream without giving the parties reasonable notice of its change.”

The Court concluded that the Board had met these obligations because IV had both notice and an opportunity to be heard. The proper construction of the term in dispute was vigorously disputed by the parties throughout the proceeding before the Board; thus, “Intellectual Ventures was on notice that construction of this term was central to the case.” At oral argument, the Board previewed its construction and gave the parties a chance to respond.

The Court noted that IV had an additional chance to respond by seeking rehearing after the Board issued its Final Written Decision, but IV did not do so. Additionally, the Court noted that, unlike in SAS, the Board did not change theories midstream by construing the disputed term one way in its Institution Decision and another in the Final Written Decision—the Board did not offer a construction of the disputed term in its Institution Decision. “Given the continuous focus on [the disputed term] before and during oral arguments and Intellectual Ventures’ opportunity to [respond],” the Court found that there had been no due process violation.

The Court also distinguished Magnum Oil. There, “the Board supplied completely new arguments that the petitioner never raised.” Here, that was not the case—the Board considered arguments presented by the parties that contested both whether and how the Board needed to construe the term and questioned counsel extensively over the construction of the term. The Board did not err when, after considering all the arguments and evidence, it adopted a construction different from the constructions proposed by the parties. “The Board is not constrained by the parties’ proposed constructions and is free to adopt its own construction, as it did here.”

[1] This opinion was designated by the Federal Circuit as nonprecedential.

EDTX judge rules that IPR estoppel applies to all grounds included in the petition, except those that are denied for purely procedural reasons

In Biscotti Inc. v. Microsoft Corp., Magistrate Judge Roy S. Payne of the Eastern District of Texas recommended finding that the IPR estoppel statute, 35 U.S.C. § 315(e), applies to all grounds included in an IPR petition except those that are denied institution for purely procedural reasons, such as for redundancy. Case No. 2:13-CV-01015-JRG-RSP (E.D. Tex. May 11, 2017).

After being sued for infringement, the defendant in Biscotti filed several IPR petitions challenging dozens of claims. Some of the grounds were instituted, and the case was stayed pending resolution of the IPR trials, from which several claims survived. After the stay was lifted, the defendant continued to maintain that certain asserted claims were invalid on the basis of grounds that were similar to those that were relied on in the IPRs.

On the plaintiff’s motion for summary judgment that estoppel barred defendant’s invalidity grounds, the Magistrate considered four categories of grounds: (1) grounds that were instituted but failed to establish unpatentability, (2) grounds denied institution on the merits, (3) grounds not included in the petition, but that reasonably could have been, and (4) grounds denied institution for redundancy. The Magistrate recommended that estoppel should apply to the first three grounds, but not to the fourth.

The decision on the fourth category followed the Federal Circuit’s holding in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc. (which we wrote about here), in which the court held that grounds denied institution as redundant were not subject to estoppel under § 315(e)(2).

As for the second and third categories, the Magistrate acknowledged that a broad reading of Shaw, which some other district courts have followed (for example, see our discussion of Verinata here), would exempt these categories from estoppel. However, the Magistrate reasoned that a narrower interpretation of Shaw was more consistent with the purpose of IPRs to streamline patent disputes. Indeed, the Magistrate noted that limiting estoppel to only instituted grounds would have the effect of protracting and complicating litigation rather than simplifying it.

While some courts may read Shaw as broadly exempting from estoppel grounds that were denied on the merits or that were not included in the petition, the Biscotti decision shows that some courts may take a more narrow interpretation and read Shaw to apply only to grounds denied for redundancy. Therefore, in deciding which grounds to include in a petition, it is risky to hold grounds in reserve in the hopes of using them in subsequent district court litigation if needed.

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