The ANPRM Proposals That Should Drop Out of the Process

Yesterday I highlighted the ANPRM proposals that are likely to make it into the NPRM this coming fall. Today, I’ll walk through the ones that I expect to be dropped, or at least heavily revised.

The vast majority of these “misfires” suffer from the same fatal deficiency — only Congress can provide for such modifications to the AIA. While the agency has substantive rule-making authority to implement the AIA, it does not have authority to implement regulations that effectively rewrite the AIA statutes themselves.

Given the push back from Congress on the apparent overreach of many of the ANPRM proposals, it is highly unlikely that the agency will carry such proposals forward to the NPRM.

The agency plainly cannot limit access to IPR by expanding agency discretion to swallow entire aspects of the AIA statutes. The statutes clearly contemplate (explicitly and in the legislative history) some of the very same scenarios that are the focus of the ANPRM. For example, the agency cannot require Article III standing for an AIA petition (rejected in legislative history), give deference to previous reexaminations/decisions of the courts (explicitly addressed in AIA estoppel statutes), or foreclose otherwise viable agency options by forced stipulations (explicitly addressed in various AIA statutes).

Petitions Challenging Patent Claims Previously Subject to Final Adjudication in District Court or PTO Proceedings

The ANRPM proposes discretionarily denying petitions under 35 U.S.C. § 314(a) when a prior final adjudication by a district court or in a post-grant proceeding upholds the validity of claims that “substantially overlap” the challenged claims, except where the petitioner:

  • has standing to challenge the validity of the claims in district court or intends to pursue commercialization of a product or service in the field of the invention of a challenged claim,
  • was not a real party in interest or privy to the party previously challenging one or more of the challenged claims (unless any earlier challenge was resolved for reasons not materially related to the merits of the petition, e.g., a post-grant proceeding that was discretionarily denied or otherwise was not evaluated on the merits), and
  • meets a heightened burden of “compelling merits.”

The ANPRM also proposed discretionary denial for prior adjudications of patentability through ex parte reexaminations requested by third parties that are not the patent owner or a real party in interest or privy. As I explained previously, this is antithetical to the AIA statutes, and even if that could be ignored (and it can’t), this change would just fuel gamesmanship.

As to the bullet points above, the agency has no power to require standing (this was expressly rejected for inclusion in the AIA statutes as made clear in the legislative history). The same holds true for the proposal to raise the institution standard based on the identity of the filer. The AIA statutes provide a single standard for all filers.

Finally, the ANPRM proposes as “substantial overlap” analysis to ascertain the overlap in claim scope of a given patent to a previously challenged patent. It is unclear why this concept is proposed as it seems a solution in search of a problem. Nevertheless, this proposal is also contrary to the statutes, which provides the explicit limitations on when a patent can be challenged.

As to these proposals, I don’t see any of them surviving without invoking the wrath of congress, and inviting lawsuits.

Petitions Challenging Under-Resourced Patent Owners

The ANPRM proposes shielding certain entities with limited financial resources by discretionarily denying petitions when:

  • further considering whether the patent owner should meet micro or small entity provisions at the time of the petition;
  • during the calendar year preceding the filing of the petition, the patent owner did not exceed eight times the micro entity gross income level under 37 CFR 1.29(a)(3);
    • further considering other multipliers; and
  • at the time the petition was filed, the patent owner (or a licensee of the patent that started practicing the patent after becoming a licensee) was commercializing the subject matter of a challenged claim.

In this regard, the PTO is further considering, for determining whether a party is under-resourced, whether it should consider:

  • government funding;
  • third-party litigation funding support;
  • the resources of anyone with an ownership interest in the patent owner;
  • anyone with a stake in the outcome of the proceeding.

And finally :

  • whether certain licenses activities should be excluded; and
  • whether the resource status of a petitioner should be considered when analyzing discretionary denials.

First, assuming this proposal would move forward, there might be 2-3 patent owners that would qualify per year (if that). And this assumes that these patent owners would be willing to provide all of this financial information to the Board. I can’t imagine that disclosure being advisable for a patent in litigation, or on the verge of it.

Second, as above, the PTO has no power to decide these kind of big-picture, patent policy issues. If the agency wants to provide extra support for under-resourced inventors, it can offer special assistance as the government frequently does in such circumstances. For example, perhaps some of these concepts can be revisited in a pilot program as gatekeeping controls for access to such agency support. But creating different potential outcomes for different patent owners can’t be done via regulation as that must fall to the legislature (and even then, might present Equal Protection challenges).

I could envision a pilot program to provide access to additional agency resources for under-resourced inventors, but providing different outcomes based on the Patent Owner identity is the job of the legislature.

Substantial Relationship” of Entities

The ANPRM proposes adopting a “substantial relationship” test when handling conflicts and estoppels that would further encompass parties significantly related to a party. This would allow the Office to go beyond the typical real party in interest and privy relationship to reach mere co-defendants and outside business relationships. Examples of parties with substantial relationships may include:

  • A party’s co-defendant in district court (see Valve Corp. v. Electronic Scripting Products, Inc., IPR2019–00062, –00063, –00084, 2019 WL 1490575 (PTAB Apr. 2, 2019) (precedential));
  • Petitioners requesting IPR of a patent that previously joined an IPR proceeding directed to the same patent (see Valve Corp. v.  Electronic Scripting Products, Inc., IPR2019–00064, –00065, –00085, 2019 WL 1965688 (PTAB May 1, 2019));
  • Members of organizations that file IPRs and PGRs; and
  • Entities that pool resources to challenge patents.

The PTO is further considering requiring disclosures from the patent owner::

  • Parties with an ownership interest in the patent owner or petitioner;
  • Government funding related to the patent;
  • Third-party litigation funding support; and
  • Stakes that any party has in the outcome of the proceeding or any parallel proceedings on challenged claims.

As I pointed out above, I don’t think patent owners will embrace the disclosure requirements (lower-most bullet points), and, I don’t see why the PTO needs this information in any event. While the PTO could argue this information as relevant to settlements and potential judicial conflicts, on balance, I think the PTO drops this idea as far more trouble than it is worth.

The substantial relationship stuff (first two bullets) would be an absolute mess in practice. The statutes are specific to RPI or privy; the agency has no power to go further. These relationships would be litigated in every case (because, why not) and just drain the agencies resources in an area that they have no expertise. The federal courts don’t limit an invalidity defense to just the first lawsuit. Creating a de facto rule where the PTAB cannot serve as an alternative to litigation — for anything but the first lawsuit— is plainly beyond the power of the agency, and would undermine the entirety of a statutory framework designed to thwart abusive litigation practices.

As to the remaining bullets, organizations like Open Sky should be rare as the business model imploded (as did the Kyle Bass filings before it). Where there is a question as to such filers gaming the system, the PTAB could transfer those filings to the Central Reexamination Unit (CRU) as a less urgent matter, and a less intensive use of agency resources. However, the agency’s first job is to protect the public. It should not turn away meritorious challenges, regardless of the filer. Indeed, these same filings could be lodged anonymously with the CRU at any time.

I think the vast majority of these proposals are dropped.

Required Stipulations Regarding Post-Grant Proceedings

The ANPRM proposes, as a condition to not discretionarily denying institution under 314(a), requiring petitioners to file a stipulation that they (nor a real party in interest or privy) have not filed prior post-grant proceedings on any of the challenged claims and that they will not challenge any of the challenged claims in a subsequent post-grant proceeding if the proceeding is instituted.

Exceptional circumstances could apply, for example if the claims are broadened through a proposed claim construction (whatever that means)

First, how would this stipulation be enforced? Sotera stipulations can be enforced the by Patent Owner in the district court. If a failed challenger later decides to file an reexam, is the PTO going to try to enforce a contract between it and a private party? Litigate it? Might just want to run that idea by the Justice Dept.

Also, this proposal would not seem to avoid the “substantial relationship” mess noted above, so why would anyone bother with it?

Second, 325(d), 314(a), and 315 already provide for controls over serial filings. Substantially similar art can be denied, estoppel can prevent subsequent filings altogether, and/or serial challenge may be discretionarily denied (in an area of actual agency expertise). As to a later filed reexam that raised the same issues, the CAFC has already made clear that the agency can stop that conduct as well via existing statutes.

I don’t see how the agency can require stipulations from a petitioner it will be left to enforce, or how access to one class of statutory options can be foreclosed in exchange for access to another. This is yet another plain overreach into the legislative realm. Congress has already provided controls to address such issues, agency mandated horse trading is not part of that scheme.

Well, that is all the major proposals. I expect the bulk of the above to be dropped — as well it should.