Settlement by Amendment Scenario Thwarted in PTAB Rehearing Reversal

Last March, I explained the strange scenario playing out in ZTE USA Inc., & LG Electronics Inc. v. Cywee Group LTD. (IPR2019-00143).  In ZTE, the original petitioner was joined upon institution by a second petitioner.  As is often the case, the joined petitioners were competitors.  (A joined petitioner takes an understudy role in AIA trial proceedings, absent a settlement between the original petitioner and the patent owner).

Rather than settle, the original petitioner in ZTE decided not to oppose the Patent Owner’s amended claims, or for that matter, even request oral argument.  And, given that the original petitioner was at least still present in the proceeding, the PTAB refused to allow the second petitioner to step in and oppose the amended claims. My previous post pointed out that this was bad policy that could lead to anticompetitive behavior in joinder scenarios.

Last Friday, the PTAB reconsidered its initial decision, and in the wake of Hunting Titan, reversed its earlier decision to allow the amendment opposition of the second petitioner.

In a split rehearing decision (here), the majority explained that with respect to the original petitioner’s decision to cease opposition that:

[T]he trial no longer appears to be meaningfully adversarial. In a new decision by the Board’s Precedential Opinion Panel (POP), the POP stressed the importance, as a matter of Patent Office policy, of the adversarial process in evaluating proposed amended claims for patentability. See Hunting Titan, Inc. v. DynaEnergetics Europe GmbH, IPR2018-00600, Paper 67, at 11 (PTAB July 6, 2020) (precedential).  According to the POP, adversarial briefing by the parties provides the basic framework for the amendment process in AIA trials. That is, the patent owner first proposes the substitute claims in its motion, and the petitioner then has the opportunity to raise grounds of unpatentability in opposition based on evidence and arguments. Relying on this adversarial process to frame the issues for the Board properly places the incentives on the parties to identify the pertinent evidence and make the best arguments for their desired outcome.

Hunting Titan identified certain circumstances where the adversarial system fails to provide the Board with potential arguments for the unpatentability of the proposed substitute claims, such as when a petitioner chooses not to oppose the motion to amend. In such rare situations, the POP held that the Board may raise a ground of unpatentability that a petitioner did not advance. Thus, the holding in Hunting Titan allows for the Office to step in if there is a clear failure in system.

Regardless of the outcome of our decision today, our Final Written Decision must assess the patentability of [Patent Owner’s] substitute amended claims. . . . Although we could raise this or other patentability issues sua sponte in our Final Written Decision, the adversarial system is better served if we allow a Petitioner to raise such issues.

(internal cites and quotations omitted, emphasis added)

Hunting Titan dictated the outcome here. If an original petitioner ceases to participate, the examination of the amended claims falls to the Board. In that limited circumstance, it makes sense for the Board to accept the opposition of another interested party, even if a silent understudy (as emphasized in the dissent)