“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.

District Court holds that IPR estoppel does not apply to grounds denied institution on the merits

In Verinata Health, Inc. v. Ariosa Diagnostics, Inc., Judge Susan Illston of the Northern District of California held that the IPR estoppel statute, 35 U.S.C. § 315(e), does not apply to invalidity grounds asserted in an IPR petition but denied institution on the merits. Case No. 12-cv-05501-SI (N.D. Ill. Jan. 19, 2017).

The plaintiff in Verinata alleged infringement of claims that had survived an IPR trial.  The petitioner in the trial, who was also a defendant in the infringement suit, had asserted three obviousness grounds: (1) Shoemaker, Dhallan, and Binladen, (2) Dhallan and Binladen, and (3) Quake and Craig.  The Board instituted trial only on Ground 1.  Ground 2 was denied institution as redundant, and Ground 3 was denied institution because the petitioner failed to establish a reasonable likelihood of success on the merits.  At the end of the IPR trial, the Board held that the petitioner failed to show that the challenged claims were unpatentable over the Ground 1 combination.

After the stay was lifted in the infringement suit, the plaintiff moved to strike the defendant’s invalidity contentions that included Grounds 2 and 3, arguing that the defendant was estopped under § 315(e). The court looked to the Federal Circuit’s interpretation of this statute in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc. (which we wrote about here), in which the court held that IPR grounds denied as redundant were not subject to estoppel because the statute applies only to grounds that were raised or could have been raised during the IPR trial, that is, after institution.

The Verinata court interpreted Shaw broadly as standing for the proposition that “IPR estoppel only applies to grounds on which the PTAB actually institutes.”  The court stated that this interpretation ensures that estoppel applies only to arguments that received “proper judicial attention.”

Under this interpretation of § 315(e), the Verinata court held that Ground 3 was not subject to estoppel because it was denied institution and could not, therefore, have been raised during the IPR trial.

Interestingly, although Ground 2 was denied institution as redundant, the court held that it was nevertheless subject to estoppel because, as it was merely a subset of instituted Ground 1, the ground was raised, or reasonably could have been raised, during the IPR trial.

This decision follows another recent district court case, Intellectual Ventures I LLC v. Toshiba Corp., No. 13-453-SLR (D. Del. Jan. 11, 2017), that similarly interpreted Shaw broadly in holding that estoppel did not apply to grounds that could have been included in an IPR petition, but were not.

It remains to be seen whether the Federal Circuit will interpret Shaw so broadly (and § 315(e) so narrowly) when it hears appeals of cases like Verinata and Intellectual Ventures.  As it stands, however, the scope of IPR estoppel appears to be much narrower than many had expected.  If the scope of estoppel remains this narrow, the decision as to which grounds to include in a petition becomes somewhat less fraught.  A petitioner can include additional grounds in a petition without fear that a denial of institution will foreclose those grounds forever.  And a petitioner can hold back grounds as a backup defense for possible district court litigation without fear of being estopped.

Federal Circuit rules that PTAB’s decision on time-bar is still not appealable

A Federal Circuit panel recently confirmed that 35 U.S.C. § 314(d) does not permit appeal of a decision by the PTAB that an IPR petitioner is not time-barred under 35 U.S.C. § 315(b). Wi-Fi One, LLC v. Broadcom Corporation, No. 2015-1944 (Fed. Cir. Sep. 16, 2016).

Patent Owner unsuccessfully argued to the PTAB that Petitioner was time-barred from seeking IPR of its patent because Petitioner was in privity with certain entities involved in parallel district court litigation over the patent who were time-barred under Section 315(b). On appeal, Patent Owner recognized that the Federal Circuit (in Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652, 658 (Fed. Cir. 2015)) held that Section 314(d) “prohibits this court from reviewing the Board’s determination to initiate IPR proceedings based on its assessment of the time-bar of § 315(b).”

Patent Owner argued that the Supreme Court’s decision in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016), implicitly overruled Achates. Specifically, Cuozzo “tied the limitation of judicial review to the Patent Office’s ability to make its substantive patentability determination as embodied in § 314(a)” and left open “the precise effect of § 314(d) on appeals . . . that depend on other less closely related statutes,” such as the time-bar of Section 315(b).

The Federal Circuit rejected Patent Owner’s argument, as Cuozzo stated that the prohibition against reviewability applies to “questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review,” and that Section 315 “is just such a statute.” In fact, Cuozzo addressed Section 312, which governs what form a petition must take and is not related to substantive patentability.

Patent Owner also argued that time-bar issues should be reviewable because parties may argue those issues at trial. However, the Court noted that Achates also rejected this argument, and was not overruled by Cuozzo.

The Federal Circuit has now made clear that decisions under Section 315(b) are not appealable, and that the reviewability ban under Section 314(d) is not limited to issues arising under section 314. Thus, although it was the Patent Owner that was denied appellate review in Wi-Fi One, it is even more critical in the wake of that decision that parties wishing to file an IPR address potential privity issues as early as possible and account for any potential time-bar issues in deciding when to file their IPR.

Federal Circuit Rejects PTAB’s Analysis of Motion to Amend

In Veritas Technologies LLC v. Veeam Software Corporation, the Federal Circuit concluded that the PTAB erred in denying Patent Owner’s motion to amend claims in an IPR proceeding and remanded to the PTAB for further consideration of the substitute claims submitted in the motion. No. 2014-00090 (Fed. Cir. Aug. 30, 2016).

In the IPR, the Board applied the broadest reasonable interpretation standard of claim interpretation and invalidated the challenged claims as obvious over prior art. The Board also denied Patent Owner’s motion to amend, concluding only that Patent Owner and its expert declarant had failed to address whether each newly added feature in each proposed claim, as distinct from the claimed combination of features, was independently known in the prior art. Notably, the Board did not make an evidentiary determination of patentability of the proposed new claims.

The Federal Circuit panel found no error with the Board’s claim construction and affirmed the obviousness determination of the patent claims, but the panel took issue with the Board’s denial of the motion to amend. Applying the Administrative Procedure Act and reviewing the Board’s denial to see if it was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law,” the Federal Circuit noted that Patent Owner did not contest Petitioner’s argument that the substitute claims address the parties’ claim-construction dispute. But rather than determine whether the substitute claims should be construed as Patent Owner argued, the Federal Circuit focused on the inadequacies of the Board’s reasons for denying the motion to amend.

More specifically, the Federal Circuit focused on the fact that the Board denied the motion to amend based on its insistence that the Patent Owner discuss whether each newly added feature was separately known in the prior art. The Board concluded that the motion and accompanying expert declaration were insufficient because they did not discuss the features separately but discussed only “the newly added feature in combination with other known features.” The Federal Circuit held that this analysis and conclusion by the Board, which was the sole basis for denying the motion to amend, was unreasonable and must be set aside as arbitrary and capricious.

According to the Federal Circuit, there was nothing inherently improper in the Patent Owner’s decision to focus only on the combination itself as the “new feature,” given the “long line of Supreme Court and Federal Circuit cases noting that novel and nonobvious inventions often are only a combination of known individual features.”

PTAB denies Petitioner’s motion to suspend prosecution of co-pending applications

In Telebrands Corp. v. Tinnus Enterprises, LLC, the Board denied Petitioner’s request for authorization to file a motion to suspend prosecution of co-pending patent applications that were continuations of the challenged patent. PGR2015-00018, Paper 62 (Aug. 29, 2016).

In several decisions prior to Telebrands Corp., the Board found that the estoppel provision of 37 C.F.R. § 42.73(d)(3)(i), which states in relevant part, “A patent applicant or owner is precluded from taking action inconsistent with the adverse judgment, including obtaining in any patent: (i) A claim that is not patentably distinct from a finally refused or canceled claim,” did not authorize the Board to stay prosecution of co-pending patent applications.

For example, in Chums, Inc. v. Cablz, Inc., Case IPR2014-01240, which we wrote about here, the Board noted that an inter partes review merely involves a review of the involved patent, rather than a family of patents and patent applications. Additionally, in EMC Corp. and VMware, Inc., v. Personal Web Technologies, IPR2013-00083, Paper 12 (March 19, 2013), the Board held that it may stay a reexamination proceeding only in the situation where the involved patent is subject to the reexamination.

These decisions suggest that the estoppel provisions of § 42.73(d)(3)(i) may allow a final written decision in an AIA trial proceeding to impose constraints on prosecution of co-pending patent applications, such as when the challenged patent is the subject of the prosecution-related proceeding, or after a final written decision finally rejecting or cancelling at least one challenged claim, but make clear that any request to impose constraints on prosecution of unchallenged co-pending patents and patent applications prior to the final written decision are premature.

In Telebrands Corp., Petitioner sought to establish the Board’s authority to suspend prosecution of co-pending applications that were continuations of the challenged patent under 37 C.F.R. § 42.3(a) and 37 C.F.R. § 1.103(e). 37 C.F.R. § 42.3(a) states that “The Board may exercise exclusive jurisdiction within the Office over every involved application and patent during the proceeding, as the Board may order,” and 37 C.F.R. § 1.103(e) states that “The Office will notify applicant if the Office suspends action by the Office on an application on its own initiative.” Patent Owner opposed Petitioner’s request, citing several decisions, including the decisions mentioned above, where the Board found that it was not authorized to stay prosecution of unchallenged co-pending patents and patent applications.

In denying Petitioner’s request, the Board found that Petitioner had not persuaded the Board that the co-pending patent applications met the “‘every involved application and patent’ requirement, which triggers [the Board’s] authority under § 42.3(a),” and that Petitioner did not establish that Part 42 of Title 37 incorporates § 1.103(e). Further, the Board noted that Patent Owner cited several Board decisions (e.g., including the two decisions discussed above) to support its position that the Board was not authorized to suspend prosecution of co-pending patent applications, Petitioner was unable to cite to any Board decision granting such relief.

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.