Business Method Patent Challenge

No Duty to Discuss Closest Prior Art…But you Probably Should Anyway

In implementing the Federal Circuit’s In Re Aqua Products’ holding, the Patent Trial & Appeal Board (PTAB) explains that “practice and procedure before the Board will not change.” And that, “[t]he Board will continue its current briefing practice as to the types, timing, and page limits of briefs.”

As pointed out previously, removing the burden from the Patent Owner Motion to Amend will aid the PTAB in granting far more motions, but ultimately, amendments are not expected to be any more attractive, or common. Continue Reading PTAB: Practice & Procedure Unchanged after Aqua Products

Long Delayed Fee Increase Hits January 16th

Section 10 of the Leahy‐Smith America Invents Act (AIA) authorizes the United States Patent and Trademark Office (USPTO) to, in part, “set or adjust by rule any fee established, authorized, or charged” under Title 35 of the United States Code. At the close of 2016, a Notice of Proposed Rule Making (NPRM) issued requesting comments from the public on proposed fee increases for post-grant patent proceedings, including AIA trials. A Final Rule Notice issued today setting significant increases to take effect on January 16th 2018 for AIA Trial Proceedings. Continue Reading PTAB Trial Fees Set to Increase in January

Aqua Products Decision Deemed “Good Cause”

Earlier this month the Patent Trial & Appeal Board (PTAB) determined, for the first time, that good cause existed to extend a trial beyond the mandated 12 months of 35 U.S.C. § 316(a)(11). While the Board has had trials extend beyond 12 months in cases of joinder — an existing exception to its 12 month mandate — this is the first time that the USPTO Director exercised his discretion to extend a trial schedule for “good cause.” Continue Reading First AIA Trial Extended Beyond 12 Months for Good Cause

Oil States/CAFC to Unravel “Litigation” Premise

Sovereign immunity from proceedings of the Patent Trial & Appeal Board (PTAB) has become inextricably linked with the Oil States debate now before the Supreme Court. That is, the 7th amendment argument in Oil States and the 11th amendment argument for sovereign immunity at the PTAB are both tied to the same basic, threshold premise — IPR is a trial proceeding akin to an Article III lawsuit.

In Oil States, the “trial argument” is made to distinguish IPR proceedings from patent reexamination. It is argued that because an IPR is more trial-like compared to the earlier, examination based system, a jury trial is now required, consistent with the 7th Amendment.

In the sovereign immunity context, immunity applies if an administrative proceeding is similar to civil litigation. Fed. Mar. Comm’n v. S.C. State Ports Auth., 535 U.S. 743 (2002). But, some judges of the CAFC have already signaled a willingness to unravel this “IPR is a trial” premise, and it is my expectation that Oil States will follow suit. Continue Reading Sovereign Immunity at the PTAB a Temporary Phenomena?

Failure to Argue Differing Claim Language of Similar Claims Haunts Appellant

PTAB practitioners must always be mindful of the Board’s longstanding practice to treat grouped claims as standing or falling together. That is, claims should be argued separately where the claims are phrased similarly, but with some deliberate grammatical or additional term difference to distinguish scope.  In those cases, it is important to discuss the implications of the grammatical differences. Simply reciting a claim limitation, and asserting that the limitation is/is not found in the prior art, is not taken by the Board as a separate argument for patentability.

That said, such layered arguments may fall prey to the tight space constraints in AIA trial proceedings where more pressing arguments are necessary.

For example, one of the more particularly tricky aspects of AIA trial practice prior to May of 2016— at least for petitioners— was fitting all of petitioners arguments within the fifteen pages allocated for a Petitioner Reply by the PTAB.  As a result of the limited real estate, some petitioner arguments that might have been otherwise made were often cut for space constraints. Fortunately, in May of 2016, the fifteen page limit was increased to twenty-five pages.

Yesterday’s decision of the Federal Circuit emphasized the risks of claim grouping; perhaps a reflection of the earlier AIA trial briefing constraints.

In HTC Corp. v. Cellular Communications Equipment (here), the Court considered the language of similar method and apparatus claims (claims 1 and 24). In analyzing the key claim construction dispute of the apparatus claim, the Court determined that this claim required separate components where the prior art only showed a single component. Arguably, method claim 1 was broader, and failed to include some of the key language driving the Court’s two-component construction for claim 24. However, rather than reach that issue on its own, the Court found that the Appellant had forfeited that argument, explaining:

In the particular circumstances presented, we will not consider giving claim 1, in the respect at issue, a different scope from that of claim 24, which, we have concluded, requires two separate components .  .   .  . In the PTO, [appellant] did not “fairly put [the Board] on notice as to the substance of” any request to distinguish claims 1 and 24 regarding this critical issue of scope. . . .

It is not plausible that [appellant] inadvertently overlooked the potential for a half win, which it might well have deliberately chosen to discourage by taking an all-or-nothing approach. Moreover, the IPR regime at issue places a special premium on efficient Board resolution of patentability challenges. . . . In these circumstances, we will not decide whether claim 1 should be accorded a different scope from that of claim 24 in the respect at issue.

The majority explained that forfeiture determinations are fact specific, and emphasized the fact that appellant took a position before it (at oral argument) that claims 1 and 24 were not being argued as having a different scope on appeal.

The dissent took issue with the forfeiture determination only, explaining that the majority decision was “incorrect and troubling for future cases.”  The dissent insisted that the petitioner had argued claim 1 separately:

For example, in its IPR petition to the Board, [appellant] presented a detailed claim chart and specific disclosures found in the [prior-art references] that, in its view, made each limitation obvious for each claim at issue; in particular, HTC presented a different set of disclosures found in the prior art with respect to claim 1’s diverting limitation than to claim 24’s diverting limitation. .  .  . In another example, in the Petitioner’s Reply to the Board, [appellant] argued that “CCE’s statement that . . . D’Aviera does not disclose anything . . . that could perform the intervening diverting step is misguided. The language of claim 1 does not preclude the same structure from performing the diverting step and the controlling step.”

(emphasis in original)

While AIA trial petitions routinely cite to differing portions of a reference for similar claims, it remains unclear how this may/may not have been changed by the Board at institution.

As to appellants Reply arguments, it is worth noting that the Court considered a simialr issue in In re Lovin, 652 5 F.3d 1349, 1357 (Fed. Cir. 2011) (holding that the Board reasonably interpreted its rules of practice as requiring “more substantive arguments in an appeal brief than a mere recitation of the claim elements and a naked assertion that the corresponding elements were not found in the prior art” to constitute a separate argument).   While an analysis of a rule construction as opposed to a forfeiture scenario, the Court has previously endorsed the Board’s view of such citations as not being a separate argument.

While space constraints for Petitioner Reply’s are less worrisone than a year ago, petitioner’s faced with cutting brief content might cite to HTC to justify an extension to the page limit; especially in those cases where a Patentee is arguing a significant number of individual claims.

“Closely Tied” Language of Cuozzo & Institution-Centric Statutes

The en banc opinion on the scope of the AIA’s appeal bar (35 U.S.C. §§ 324(e)/314(d)) remains outstanding in WiFi One.  Still, we have seen a few opinions from the Federal Circuit as of late that nibble around the edges of this issue.  From these decisions, we see the Court focusing on the statute underlying the appealed issue, and whether or not that statute is tied, in timing or substance, to the institution stage.  The most recent, Credit Acceptance Corp. v. Westlake Services, found another exception to the appeal bar for CBM estoppel. 35 U.S.C. 325(e)(1).

In Credit, (here) the Court emphasized the potential for estoppel at any stage of the proceeding as a factor that tended to show that the estoppel statute was not “closely related” to institution.  The Court also emphasized that 325(e)(1) estoppel would extend to non-AIA proceedings such as patent reexamination, and that estoppel also impacted Article III proceedings.

As to the underlying facts of Credit, petitioner filed two CBM proceedings against different groups of claims of a same patent.  The first CBM concluded before the second on March 24, 2015. In the first CBM decision the Board found claims 1-9, 13, and 34-42 to be unpatentable under §101.  In light of this final written decision, Patentee moved to terminate the second CBM asserting that petitioner was “estopped from challenging claims 10-12 and 14-33 under §325(e)(1)”. (pg 5 of the opinion).  The Board denied CAC’s motion, explaining that estoppel under §325(e)(1) applies on a claim-by-claim basis and that the final decision in the first CBM was only relevant to claims 1-9, 13, and 34-42; therefore, Westlake was not estopped from maintaining its challenged in the second CBM.

The Board then issued a final decision in the second CBM finding claims 10-12 and 14-33 unpatentable under §101.  Patentee appealed the second CBM decision arguing that petitioner should have been estopped from maintaining its challenge (as well as the holding under §101).

After the Supreme Court’s Decision in Cuozzo, the Federal Circuit first had to explain why the Board’s decision to allow Petitioner to maintain its second CBM was not barred under 35 USC §314(d). The Federal Circuit distinguished the case from Cuozzo by honing in on the word “maintain” in §325(e)(1) as opposed to the word “institute” in §314(d):

The estoppel provision at issue here, § 325(e)(1) (like the comparable IPR provision, § 315(e)(1)), is distinct from the issues addressed in Cuozzo. Specifically, § 325(e)(1) does not refer to “institution” decision and in fact is not limited to institution decisions.

Of course, the statute of interest in WiFi One (315(b)) specifically references institution: [a]n inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date. . . . (emphasis added).  If the “closely tied” language were the only guidance provided by Cuozzo, this might be the end of the road for WiFi One.  But, Cuozzo (as explained in Credit) provided a host of additional, potential carve outs:

[W]e need not, and do not, decide the precise effect of § 314(d) on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond “this section.” Thus, . . . we do not categorically preclude review of a final decision where a petition fails to give “sufficient notice” such that there is a due process problem with the entire proceeding, nor does our interpretation enable the agency to act outside its statutory limits by, for example, canceling a patent claim for “indefiniteness under § 112” in inter partes review.

WiFi One would not seem to present a constitutional issue.  Further, the one-year bar directly references institution, and is therefore a “closely related statute” consistent with Credit.  Left to be answered in Wifi One is when the agency’s institution decision may be challenged as being beyond statutory limits of the AIA.  Such statutory limits cannot be for every AIA statute or the appeal bar would be rendered toothless (and would directly contradict Cuozzo’s holding on 312(a)(3)). So, are we left deciding which AIA statutes are more fundamental to ultimate agency authority than others?  If so, it would seem that a statute such as 315(b) that while closely tied to institution defines what the agency “may not” do, might still be a question of statutory limits under Cuozzo.

We will find out soon enough.

High Court to Review Constitutionality of AIA Trials

The Supreme Court has had at least three occasions over the past 7 months to review the constitutionality of AIA trial proceedings — it declined all three invitations. Thus, the writing appeared to be on the wall when the same question was posed recently in Oil States Energy Services v. Greene’s Energy Group.  But, then the Federal Circuit wavered somewhat as to its conviction in its own precedent on point.  When asked to reconsider the debate as to whether a patent is purely a private right or public right (as previously decided in MCM Portfolio LLC v. Hewlett-Packard Co. et al.) the CAFC’s en banc denial of that request a few weeks ago (here) was a split decision.  (As a reminder, as a public right, a patent may be adjudicated by an Article I court).

Never one to shy away from a new opportunity to set the CAFC straight, the High Court suddenly became interested in the very same debate it only very recently passed over three times, granting certiorari yesterday. (Order here, briefs here)

While the High Court’s cert. decision will be embraced as a clear interest in reversal (as it almost always is), this would be ignoring practical realities of what has occurred here. First, the Court takes patent cases from time-to-time to simply provide guidance on oft debated issues, i4i and Cuozzo being the most recent examples.  With the recent decision of the CAFC in Cascades Projection v. Epson and Sony, (noted above) essentially providing a split among circuits so to speak, and perhaps at least some academic interest on the Court to explain the public right aspects of patents, you can see why the Court may now have incrementally more interest in this debate.

As I explained previously, the issue of whether an intangible intellectual property right is exclusively a public right was recently debated in B&B Hardware, Inc. v. HargisIndus., Inc.,135 S. Ct. 1293, 1316-17 (2015) (Thomas, J., dissenting), which described the idea of IP as a “quasi-private right”: 

[T]rademark registration under the Lanham Act has the characteristics of a quasi-private right” and that, because registration is a “statutory government entitlement, no one disputes that the [Trademark Trial and Appeal Board] may constitutionally adjudicate a registration claim.” Id. at 1317. But the “right to adopt and exclusively use a trademark appears to be a private property right . . .

(emphasis added)

An opportunity to clarify this quasi-private right for patents, correct the CAFC, and overrule/distinguish the statement in McCormick Harvesting Mach. Co. v. Aultman-Miller Co., 169 U.S. 606 (1898), which everyone of these certs. is based on, appears to have finally convinced the Court that feedback was now in order.

Second, if reversal were the goal, the court could have done so in any of the previous three opportunities, it’s not like these previous opportunities were presented decades ago — we are talking October and November of 2016.  All of the previous cases were indistinguishable in terms of being acceptable “vehicles” for the court’s consideration of this broad constitutional principle.

My expectation is that the Court will reinforce the B&B delineation between infringement (private right) and validity (public right) and find the PTAB’s validity-focused reviews constitutional.  

Preliminary Responses Accompanied by Declaration Evidence: Updated Results

Back on May 1st of 2016, the Patent Trial & Appeal Board (PTAB) began to accept new testimonial evidence with patentee preliminary responses.  The PTAB implemented this change to address complaints of patentees who claimed they were disadvantaged by previous rules precluding such new evidence from accompanying a preliminary response. It was argued that the previous rules were especially imbalanced as almost all petitions were accompanied by petitioner declaration evidence, and that absent evidence in kind from patentees, institution was unavoidable.  I had my doubts as to whether this new mechanism would be the boon that patentees had hoped.

Now a year removed, some updated results.

To date, the ability to introduce new evidence during the preliminary proceeding seems to have provided only marginal relief for patentees.

In the below chart the start date of August 15th was chosen to capture those Institution Decisions having preliminary responses due on or after May 15th 2016. In this 9 month window of Board decisions, roughly 30% of filers availed themselves of the new option (this is a slight drop from the initial percentage of 38% I found initially, last fall.)  Of those 276 patent owners availing themselves of the new rule, 53% of the Institution Decisions failed to mention the new evidence at all. And, notably, only 12% of the Institution Decisions relied on the testimonial evidence to deny institution.

In 95 of the Institution Decisions, charted below in orange, the Board considered the evidence when assessing a factual dispute between the parties (likely disputing petitioner declaration evidence, the dispute construed in favor of petitioner for institution purposes). The new evidence was cited as supporting the Board’s Decision not to institute an IPR in only 34 of a possible 276 decisions (charted in red). Of course, it is hard to gauge the value of these submissions in the 147 decisions which did not reference the evidence. For example, although unreferenced, the evidence may have nevertheless reinforced a Board determination one way or the other.


As can be seen in the further chart below, the most effective testimonial submissions during the preliminary proceeding are directed to the technology itself. That is, either explaining a missing claim feature from the perspective of one skilled in the art (59% of cases), or undermining the proffered obvious rationale of the petitioner (39% of cases).


While the data is still modest, clear trends are emerging as to efficacy.  That said, it appears these spotty results still militate in favor of continued caution for patentees.

Focus of CBM Standing Analysis: Claim Language

Yesterday, the Federal Circuit denied en banc review in Secure Axcess LLC v. PNC Bank National Assoc., et al.  The rehearing request sought a full court review of America Invents Act (AIA) Sec. 18’s definition of a “business method patent.” This same issue was denied en banc review in April of this year in Google v. Unwired PlanetAs in that decision, the dissents from denial raised the appeal bar debate now awaiting decision in WiFi One.

In Secure Axcess (here) the majority asserted that the claim based analysis of Unwired Planet was sound statutory construction and provided a manageable resolution to the issue.  The dissent focused on the “used in practice” component of Sec. 18(d)(1) to argue that the context of the infringement assertion, such as banking defendants was more in the spirit of the legislation.  The majority explained the unmanageability of this “used in fact test:

[T]he dissent’s effort to confine the scope of the CBM program to the intended “business method patents” boundary is also intrinsically indeterminate to an unacceptable
degree. What record of lawsuits should count? What happens when more suits are brought? What mention of banking or other particular applications in the specification should count—short of having a claim narrowing effect?

Of perhaps greater interest was some of the dissenting commentary on appeal bar issues.  Judges Dyk, joined by judges Wallach and Hughes explained:

In my view, Versata wrongly held that the appeal bar does not apply to the question of whether the Board correctly determined that a patent is CBM-eligible because it involves a “financial product or service.” Such reviews are inconsistent with the statute as interpreted in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016), which held that the appeal bar in Section 314(d), identical to the appeal bar here, precludes review.
                                                                .        .         .         .          .
Because the “Director may institute a [CBM] proceeding only for a patent that is a covered business method patent,” AIA § 18(a)(1)(E) (emphasis added), determining what is a CBM is not only “closely tied” to the institution decision, but is expressly part of the institution decision itself. Indeed, it would be difficult to see how the CBM review program, as a five-part statute—where the requirement for institution is discussed in Section (a) and the definition for what is a CBM is discussed in Section (d)—can be read as separating the institution decision from the definition of what is a covered business method patent. The two are not just “closely tied,” but are inextricably intertwined.

My post-Cuozzo read was the same as to this point. The Cuozzo language appears to suggest a different outcome for Versata.

The Federal Circuit continues to struggle with the Cuozzo “shenanigans” guidance as to when the 314(d) appeal bar may be excused.

The problem with the “shenanigans” guidepost is that it is more a characterization of a degree of conduct as opposed to specific acts or classification that the Federal Circuit can apply in practice. The lone example given in Cuozzo is the PTAB moving forward on a 112 ground in an IPR; we can all agree that would be an arbitrary and unreasonable departure from the governing statutes/rules. But, in terms of classification guidance, where does that example fall, really?  Jurisdictional?…acting outside statutory limits?  It cannot be the latter as a violation of 312(a)(3) was barred from appeal in Cuozzo.

WiFi One will take another shot at this issue in the months ahead. Given the mixed perspectives in Secure Axcess, and likely WiFi One, I suspect the Supreme Court will see another round of PTAB shenanigans headed its way.

“All or Nothing” PTAB Institution Practice Coming Soon?

Today, the Supreme Court granted certiorari in SAS Institute Inc., v. ComplemenSoft LLC.   As previously explained, SAS argues that partial PTAB trial institutions are inconsistent with the controlling statutes of the America Invents Act (AIA).  That is, if the PTAB finds that at least one claim is demonstrated as likely unpatentable, the PTAB should institute trial for all petitioned claims.

The dispute stems from an IPR filing of SAS in which it challenged all sixteen claims of ComplementSoft’s 7,110,936 patent.  Trial was instituted for claims 1 and 3-10, but claims 2 and 11-16 were denied institution.  On appeal to the Federal Circuit, SAS argued that it was inefficient to institute on only a subset of claims, and that the controlling rule authorizing partial institution (37 C.F.R. § 42.108(a) was in direct conflict with statutes 35 U.S.C. §§ 314(a)/318(a).  The Federal Circuit disagreed.

Basically, SAS is seeking an end-run around the 314(d) appeal bar.  In other words, had the PTAB simply moved forward with trial on all claims, SAS would have been able to appeal any unfavorable decision on claims 2 and 11-16 (presumably would have been found not unpatentable at the close of trial) as part of its appeal from the Final Written Decision (FWD).  As it currently stands, 314(d) prevents the appeal of claims 2 and 11-16 since they were denied institution.

Setting aside for another day the academic debate on the merits, should the high court accept SAS’s argument, Patentees will be significantly prejudiced.

First, partial institutions are of significant value to patentees.  Frequently, stays of concurrent litigation are avoided since “simplification of issues for trial,” a factor in such determinations, is effectively mooted when it is clear the trial will need to go forward as to at least non-instituted claims.  As between the two options, Patentees, even if later winning on some claims at FWD, will not want their litigation efforts needlessly stalled for an 18 month PTAB proceeding (trial + preliminary proceeding).  Likewise, it would seem unlikely that courts would be interested in lifting a stay during the pendency of an appeal covering all challenged (and presumably litigated) claims.  This would significantly undermine settlement opportunities and unnecessarily expand legal spend, and needlessly expand prosecution history for claims that would have otherwise avoided trial under the current trial framework.

Second, patentees have only recently secured the right to submit new testimonial evidence to avoid institution.  Should the all or nothing institution model become reality, there would be even less of an appetite to submit this testimony.  As it stands now, there is value in such submissions since avoiding trial on even a subset of claims is, as noted above, of significant value.  If Patentees now have to defeat every claim to avoid trial, they are better off keeping their evidence and arguments for trial. In my experience the submission of early evidence fosters settlement.

Third, if the PTAB need only find a single claim of a challenged set susceptible to unpatentability the quality of institution decisions will significantly degrade.  For example, as institution would likely analyze the broadest claim, meaningful discussions of narrower claim terms wouldn’t even need to be included in the decision.  Likewise, it is human nature that institution will become far more attractive from the agency perspective (or so it will be argued).  This is because it is far easier to author an opinion to institute on a single claim as opposed to authoring a denial that would need to address every claim.   As it stands, institution decisions offer a great deal of guidance to the parties, and also help facilitate settlements.  The loss of quality institution decision would be a loss for both sides.

To the extent there is any benefit to an “all or nothing” system it would be the simplification of estoppel determinations.  With no partial institutions or redundancy issues to deal with, district courts may have an easier time grappling with the scope of statutory estoppel.  But, having advocated for this benefit previously, I am now convinced it is not worth the significant drawbacks noted above.

There will certainly be a significant amount of amicus briefing on this issue in the months ahead. Stay tuned.