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.

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.