Copycat House Bill to Generate Positive Buzz?

Today, Representative Steve Stivers (R-OH) and Representative Bill Foster (D-IL) introduced H.R. 5340, the so-called “Support Technology & Research for Our Nation’s Growth and Economic Resilience (STRONGER) Patent Act.” The bill (here) is a carbon copy of the Senate Bill (save some cosmetic changes). On the Senate side, the Bill has existed in some form since 2015 but has languished. This is because its proposals would essentially legislate away the patentability trial mechanisms of America Invents Act (AIA). With the mammoth Tech and Bio/Pharma lobbies on opposing sides of that issue, a bill viewed as lopsided by Tech is a non-starter.

If nothing else, the House Bill appears to be an attempt to create some positive, political buzz.

Given the distance between powerful lobbies on these issues, I would not expect meaningful movement on the legislative front any time soon. Some of the more patent friendly changes over the past year have come from the PTAB itself. My expectation is that the agency will continue this trend and address some of these issues via notice-and-comment rulemaking later this year.

Preserving Access to Cost Effective Drugs (PACED) Act

Senator Tom Cotton (R-Arkansas) and Senator Claire McCaskill (D-Missouri) along with Senators Pat Toomey (R-Pennsylvania), Joni Ernst (R-Iowa), David Perdue (R-Georgia) introduced the Preserving Access to Cost Effective Drugs (PACED) Act (S.2514), to “restore the power of the Patent and Trademark Office and federal courts, and the International Trade Commission to review patents regardless of sovereign immunity claims made as part of sham transactions.”

Introduced this past Wednesday, S.2514 is backed by a host of health care entities, including America’s Health Insurance Plans (AHIP), Association for Accessible Medicines, Patients for Affordable Drugs Now, BlueCross BlueShield Association, and Blue Shield of California.

The bill would prevent any patent owner from advancing a sovereign immunity defense, including the sovereign immunity accorded to Indian tribes in any USPTO derivation proceeding, reexamination, Inter Partes Review (IPR) or Post Grant Review (PGR) proceeding.

The background accompanying the bill explains:

  • By avoiding review, pharmaceutical firms can prevent generics from coming to market and raise the cost of drugs.
  • Similarly, if non-practicing entities, often referred to as “patent trolls,” can skirt a review or use a tribe as a straw plaintiff, it becomes harder for businesses to defend themselves against dubious patent claims.
  • This legislation would do nothing to prevent pharmaceutical firms from partnering with Indian tribes for research, development, and licensing of drugs.

Given the bipartisan support, and interest of states in controlling health care costs, this bill may make quick progress. So much for that bit of excitement.

Bill Would Effectively End PTAB

The STRONGER (Support Technology & Research for Our Nation’s Growth and Economic Resilience) Patents Act was unveiled in the U.S. Senate this week.  This is the newest incarnation of a previously stalled bill known as the “STRONG Patent Act of 2015.”  The new bill, like its predecessor, proposes significant modifications to the patentability trial mechanisms of America Invents Act (AIA).  These modifications, if adopted, would for all practical purposes end AIA trial proceedings at the Patent Trial & Appeal Board (PTAB) — the apparent goal of the organizations backing this legislative effort.

Notably, this same agenda prevented the 2015 bill from gaining any real traction. While the new bill does include some improved proposals for amending claim at the PTAB, oddly, it also doubles-down on its anti-PTAB agenda.
The draft bill is found (here)

A summary of the PTAB provisions are provided below along with my commentary on each:

Section 102A: Change to Philips Claim Construction – Mandates the PTAB apply a Philips claim construction.

Rationale Given: “Harmonize” PTAB with courts
Unstated Goal: Overrule Cuozzo

Practical Impact
: None.
As I have stated here ad nauseum, and as the PTAB has demonstrated in every expired patent it interprets, this change would not lead to the same highly nuanced constructions of the courts.

Section 102B: Change Burden of Proof – Mandates that the Board presume patents are valid and require “clear and convincing evidence” to demonstrate unpatentability.

Rationale GIven: “Maintaining” presumption of validity and “clarifying” that district court standards apply to PTAB
Unstated Goal: Repeal AIA Trial Proceedings

Practical Impact:
  Would effectively end PTAB trials.
-The existing RLP standard would still be used at IPR institution, then, during trial the standard would change to clear and convincing.  Paying $23k to secure an institution decision under a RLP standard only to lose at trial on a higher standard (and be estopped on the full universe of patent and printed pub. art. See (f) below) is why this would shut down the PTAB overnight.  Moreover, the judges of the USPTO would be effectively deferring to a patent examiner on questions of patentability, turning the Board’s traditional mission on its head.  Amendment would also still be offered, which is inconsistent with these concepts. These proposals will be non-starters for the tech lobby.

Section 102C: Article III Standing – Requires Article III standing to file an AIA trial petition

Rationale Given: Minimizing abuse and eliminating privateering (i.e., Kyle Bass)
Unstated Goal: A bit of the above, mixed in with a lot of interest in making proactive challenges more difficult.

Practical Impact: To avoid debates over DJ standing, petitions will be likely delayed until after a lawsuit has commenced.
-The Kyle Bass experiment ended in disaster (as I predicted it would). While there may be a few still toying with this business model, there are other ways to address this problem without taking away a valuable due diligence tool.  Parties often proactively file before litigation to increase the chances of a stay, or to simply address problem patents before investing and launching a product that may be accused of infringing. This change would have the unfortunate consequence of making litigation inevitable, where at present, it can often times be avoided.

Section 102D Limitation on Reviews – Mandates that the PTAB may only conduct one AIA trial per claim of a patent.

Rationale Given: Reduce repetitive and harassing attacks
Unstated Goal: Prevent multiple parties of a lawsuit from mounting individual IPR defenses

Practical Impact: Even a settled, but instituted IPR would stop all later IPR challenges
-This bill argues for “harmonization” with district court practices inconsistently.  Here, the PTAB would have a completely different “first-filer” system. 

Section 102E: Interlocutory Appeals from Institution Decisions to CAFC – Patentees may seek interlocutory of institution decision, petitioners may not.

Rationale Given: Institution decisions can have a negative impact on patent owners regardless of trial outcome
Unstated Goal:  None

Practical Impact: More expense for all, more work for CAFC.  Unlikely to move the needle in any material regard for the vast majority of cases.
-The CAFC has enough additional work from the PTAB and the trial would proceed in parallel, which is inefficient. A simpler solution would be to allow for a rehearing to a different PTAB panel (for a fee).

Section 102F: Absolute Estoppel Covering Full Universe of Prior Art – If you lose an IPR, you cannot raise any invalidity grounds on any patents and/or printed publications.

Rationale Given: Eliminate duplicative proceedings
Unstated Goal: Make estoppel absolute

Practical Impact: Coupled with the new standards discussed above, kill the PTAB.
-This change is not highlighted in the summary materials accompanying the bill, and for good reason. This is a radical departure from current practice.

Section 102F: No Second Petition for a Patent  – A petitioner may not file a second IPR (for example, against different claim) unless sued on those claims after the first was filed.

Rationale Given: Eliminate repetitive proceedings
Unstated Goal: Remove Board discretion to accept secondary filings.

Practical Impact: Second petitions of a same party are already a rarity, but can proceed on a discretionary basis (i.e., determined case-by-case by Board)
-The Board should make Conopco precedential so there is more predictability; not all panels follow this case.

Section 102G: Routine Discovery for Real-Party-in-Interest – Broadens concept of the RPI to an entity making financial contributions to challenge is a real-party-in-interest estopped from future challenges, ensuring that no entity gets multiple bites at the apple to challenge a patent. Also broadens routine discovery to explore issue.

Rationale Given: No second bite at the apple
Unstated Goal:  None

Practical Impact:  More discovery, more costs.
-Unlikely to move the needle in the vast majority of cases. The Board is best suited to determine the need for additional discovery on a case-by-case basis.

Section 102H: Exclude Patents Upheld in Federal Court From USPTO Review – If a district court reviews the validity of a patent before the PTAB, the post-issuance
proceeding should not start, if that determination occurs during the PTAB proceeding the PTAB should pause pending appeal.

Rationale Given: Priority given to ITC and federal court decisions
Unstated Goal: Carve out to benefit pharma patents

Practical Impact: Strangely elevates the decision of one administrative agency with expertise in trade matters (ITC) over the USPTO.
-Would create a race between the courts and PTAB like we had with inter partes reexamination, which IPR was designed to improve.  This is a clear attempt to roll back portions of the AIA

Section 102I: Amendment of Claims  – Provides a pathway for patent owners to enter into an “expedited” examination procedure instead of amending claims before the PTAB.

Rationale Given: Provide expedited examination procedure
Unstated Goal:  None

Practical Impact: This is a needed change.
-I proposed this idea three years ago.

Section 103 Tracks 102, but for PGR

Section 104: Composition of PGR and IPR Panels – Mandates that U.S. Patent and Trademark Office (USPTO) adjudicators who decide whether to permit a post-grant proceeding are distinct from the PTAB judges who will decide the outcome of a petition.

Rationale Given: Clarify intent of AIA
Unstated Goal: None

Practical Impact: More expense for PTO, more expense for public. Unlikely to result in statistically significant changes to PTAB trial outcomes.
-A more sensible way to provide the same relief is to allow for a rehearing option that would include a new panel, but at an appropriate fee.  Building this same control into every trial as a default will unnecessarily increase costs for the public and the agency.

Section 105: No Anonymous Reexams + One Year Window – Eliminates ability to file anonymous reexamination and adds 1 year window requirement to reexamination.

Rationale Given: Harmonize reexamination with AIA trials
True Goal: Eliminate reexamination as an option for most patent challengers

Practical Impact:  Reexamination is an ex parte proceeding, one of the the only strategic benefits over IPR (an inter partes proceeding) is anonymity. This loss of anonymity, coupled with the one year window would have a chilling effect on third party filings.
-Reexamination has existed for 30+ years and is primarily a tool for patent owners.  These changes are simply unnecessary.

What’s Next?:

This bill, like its predecessor is not likely to get very far (Bio/Pharma and small inventor organizations will face off against the tech lobby).  Is it a valuable starting point for a broader conversation on patent rights in the U.S.?  I’m not so sure.  Starting the conversation on an extreme end of the spectrum hasn’t been working very well for the folks in Washington — who, it would seem, have some bigger legislative fish to fry in the months/years ahead.

Unified Patents’ Offers First Quantitative Study of TC Heartland Impact

Since TC Heartland v. LLC D/B/A Heartland Food Products Group V. Kraft Foods Group Brands LLC. made clear that patent venue is not coextensive with personal jurisdiction, debate has swirled as to the impact of this case on the Eastern District of Texas (EDTX).  Of course, the focus is properly on the EDTX as it is the district that effectively broke the system, as I and others made clear to the Supreme Court (Unified Patents amicus). But, little if any of the recent speculation has looked at hard numbers, until now.

A study authored by Unified Patents presents the first glimpse at the coming landscape. The text that follows is authored by Unified Patents.


TC Heartland stands poised to dramatically alter where patent cases are brought.  But few of the many voices interpreting the decision have used qualitative means to predict how filing patterns may shift and what impact the decision may have on patent law in general.  To remedy this, we combined data on patent filings in 2015 from Professors Colleen Chien & Michael Risch’s prior estimates of what impact a stricter venue ruling in TC Heartland would have on district court filings.  Doing so, we predict that post-TC Heartland might result in following for all of 2017:

●     A 69% decrease in filings (or almost 1000 fewer new cases) in the Eastern District of Texas (ED Texas). This would still make ED Texas the second-most popular venue.

●     A 230% increase in filings (or almost 500 additional new cases) in the District of Delaware (DED) will make it the largest. This may cause issues, given that two of the District’s four full-time seats are vacant.  (Here)

●     A nearly 300% increase in cases (or almost 300 additional new cases) for the Northern District of California (ND Cal), surpassing Central District of California (CD Cal)

●     Sizable increases for Northern District of Texas (ND Tex) and Southern District of New York (SD NY).

●     Relatively minor increases in most other districts, generally based on the location of corporate HQs.


For almost 30 years, the Federal Circuit has taken a broad view of venue in patent cases, allowing patent holders to bring suit in virtually any Federal District court nationwide.   NPEs have taken advantage of these rulings to file suit in venues where they benefit from early trial dates, broad discovery requirements, a history of large jury verdicts, and other factors that pressure accused infringers to settle quickly.   ED Texas, by far the most popular venue in recent years, is a rural district where few tech companies have any physical presence.  Yet it has played host to thousands of patent suits, with more than 25% of all cases in the nation assigned to a single judge sitting in tiny Marshall, Texas.  In that district, more than 90% of all patent litigation is brought by NPEs.  This has forced many small entities to pay high settlement fees, in order to avoid the significant cost and uncertainty of litigation in a far-flung venue—even when the patents may be invalid.

TC Heartland Decision

In TC Heartland LLC v. Kraft Food Group Brands LLC, Slip Op. 16-341, (May 22, 2017)  the Supreme Court unanimously held that—for purposes of establishing “residency” for venue in patent cases—domestic corporations are only residents in the State in which they are incorporated. This decision marks a major milestone in the battle against NPE litigation, and reverses a decades-old decision by the Federal Circuit that opened the floodgates for thousands of NPE filings in “patent-friendly” venues—most notably, the ED Texas.  Of note, the Supreme Court largely agreed with an amicus curiae brief filed by Unified Patents.

Pre-TC Heartland—Projected 2017 Patent Litigation Venue and Volume

The two charts below project what the 2017 distribution of patent suits might have looked like without the TC Heartland decision.  We calculated this distribution by (1) measuring the percent difference between actual volume of NPE and operating company patent litigation for Q1 2015 and Q1 2017 for each venue and then (2) applying that percent change to calculate the total anticipated patent litigation for 2017 based on 2015’s venue and volume. As you can see, we projected more than 3560 cases in total (including 60.2% NPE cases); more than half of those cases would have likely been filed in ED Tex.
Post-TC Heartland—Projected 2017 Patent Litigation Venue and Volume

In contrast, the two charts below project 2017 patent suits in view of TC Heartland. These post-TC Heartland projections were generated using the anticipated volume of litigation for all of 2017 combined with Professors Colleen Chien and Michael Risch’s research in Recalibrating Patent Venue, 77 Maryland Law Review (forthcoming 2018). In the study, Professors Chien and Risch measured the percentage of NPE and operating company litigation for each of the above-referenced venues in 2015 and estimated the change in those percentages if the Supreme Court reversed the Federal Circuit in TC Heartland.  Using that analysis of in change of venue, the figures below show the estimated 2017 litigation.  (The analysis assumes total volume of litigation would not change because of the decision.)

As you can see, there are approximately 1,000 fewer projected cases (a 69% decrease) for ED Texas and the distribution of cases is more evenly spread around the country.


Key Administrative Law Doctrine on the Congressional Chopping Block & Onerous Rule Hurdles

As pointed out in yesterday’s Top 5 PTAB Trial Developments of 2016, the Administrative Procedure Act (APA) is the constitution of Article I courts. In its 70 years of existence, the APA has never been modified. Yet, over time, common law developments have been intermingled with APA considerations — none more prominent than the “Chevron Doctrine.” Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). This judge made doctrine stands for the proposition that where there is silence or ambiguity in a statute conveying agency authority or action, that courts should apply deference to reasonable agency interpretations. Critics of Chevron argue that it cannot be reconciled with the APA, and has led to a highly inconsistent body of case law.

Politicians argue that Chevron allows regulatory agencies to create law independent of judicial review, and leads to an unwarranted expansion of costly bureaucracy.

Today, the House will begin to consider HR. 5, which not only proposes to eliminate the Chevron Doctrine by amending the APA to expressly exclude it, but also proposes to heap a boatload of additional regulatory roadblocks to the promulgation of agency rules.

H.R. 5 is a collection of bills put together in one package that have been around for a few Congresses. But, given the anti-government mandate of the incoming administration, and the republican majority in both houses, H.R 5 appears primed for passage in some form.

A copy of H.R. 5 is found (here).

Prior to the passage of the America Invents Act (AIA), the Chevron Doctrine was of little value to the USPTO. This is because the USPTO’s decisions on substantive patent law are reviewed de novo and the agency has consistently been found to lack substantive rule making authority.Tafas v. Doll, 559 F.3d 1345, 1352 (Fed. Cir. 2009).  This changed, however, with the passage of the America Invents Act (AIA).  In the AIA, the agency was expressly granted rule making authority. Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016).

As exemplified by Cuozzo, some of the more fundamental challenges to the AIA trial mechanisms have been settled independent of Chevron (side-stepped in Cuozzo based on direct rule making authority of the AIA). Others fundamental mechanisms are seemingly on their way to a recalibration in line with popular opinion. (e.g., In re Aqua Products, WiFi-One).  As such, it may be that the loss of the newly acquired Chevron Doctrine is not a meaningful change for an agency that is accustomed to living without it.

Below is H.R.. 5’s proposed change to the APA.

5 USC § 706
To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action and decide de novo all relevant question of law, including the interpretation of constitutional and statutory provisions, and rules made by agencies. Notwithstanding any other provision of law, this subsection shall apply in any action for judicial review of agency action authorized under any provision of law. No law may exempt any such civil action from application of this section.
The reviewing court shall—

The far bigger headache for the agency will likely be the new regulatory requirements of H.R. 5 for issuing new rules. The proposed requirements are onerous, some of which are to determine the cost and benefits of a proposed rule as it relates to “direct, indirect, and cumulative costs and benefits and estimated impacts on jobs (including an estimate of the net gain or loss in domestic jobs), wages, economic growth, innovation, economic competitiveness, and impacts on low income populations.” (emphasis added)  Even sponsors of the bill admit that these proposals are designed to make rule promulgation more difficult and time consuming.

If I am working on rules packages at the PTO, I’m clearing the decks before anything close to this legislation hits the streets.

Jury Trial/Article III Challenges to PTAB Expectedly Fail at High Court

Yesterday, the Supreme Court of the United States denied certiorari in two cases challenging the constitutionality of AIA trial proceedings. MCM Portfolio LLC v. Hewlett-Packard Co. et al., and Cooper et al. v Lee et al.  These cases largely presented the same constitutional challenge as that lodged against the USPTO’s patent reexamination system in the 1980s, in Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985).  Since that time, patent validity has been found to fall within the “public rights exception,” permitting adjudication before non-Article III tribunals.

These more recent cases hoped to distinguish reexamination from AIA trials on the ground that reexamination was not adjudicative, but examinational.  Of course, after Cuozzo, it has been clear that this line of reasoning was certain to fail.

In terms of those hoping to unravel AIA trial proceedings, a writ of certiorari remains pending in Ethicon Endo-Surgery Inc. v. Covidien LP.  This challenge focuses on the ability of the USPTO Director to delegate her authority to institute AIA trial proceedings to the Board, the same entity providing the ultimate decision on outcome. Certiorari in this case seems equally unlikely.

Now that opponents are running out of options to unhinge the PTAB, attention may shift to legislative efforts and/or rule based modifications coming out of the PTAB.  

For a discussion of expected rule changes and efforts in this regard, don’t miss the November 15th program, IAM Patent Law & Policy 2016.  Speakers this year include former USPTO Director David Kappos, current USPTO Director Michelle Lee, PTAB Chief Judge David Ruschke, former CAFC Chief Judge Paul Michel, and many more. 

Four Years of PTAB Trials

I’ve read quite a few AIA retrospectives over the last week in the run up to Friday’s AIA anniversary. Almost all pose the rhetorical question: “who could have predicted the PTAB would become so impactful?” Well, for starters anyone up to their armpits in NPE lawsuits with the only available USPTO solution being patent reexamination, that’s who.  Prior to the AIA the pent up rage/demand for a more effective USPTO post-grant challenge solution was palpable. For that reason, back in July of 2012, I thought that PTAB trials might break the NPE business model, especially for smaller NPEs.  

In 2016, NPEs still exist.  But, there are far fewer small fish.  Even large patent aggregators yearn for the go-go days before the AIA.  It is clear that the AIA trials ended the golden era of seven figure, cost of defense settlements.  Congress did it—it actually provided a workable USPTO post-grant solution that is cost effective, and fast enough to make a difference.  The PTAB levels the playing field.  No longer are businesses helpless to settle cases of dubious merit because of the lopsided discovery costs of an NPE suit, or risks of outlandish jury verdicts.  

That said, four years into AIA trials the PTAB is not without its critics.   

Since day one, critics have sought to unravel the PTAB or lessen its perceived anti-patent impact.  First came the legal challenges: district court suits, mandamus filings, Cuozzo, and even the very same constitutional challenges that were flung at patent reexamination in the 1980s.  Not surprisingly, all failed (I give the pending cert petitions zero chance). Yet, that is not to say that the PTAB is perfect, or that an adjustment in practices is unwarranted. Indeed, the PTAB has evolved to a significant degree in its few short years of operation.

One of the more controversial aspects of PTAB practice to date has been the ability (or inability as some would argue) to amend.  Since opening its doors, the PTAB has loosened amendment requirements repeatedly.   That is, the PTAB has expanded page limits, added available claim appendices, clarified the Idle Free requirements, and provided guidance that most motions to amend fail to meet patentability burdens.  On this last point, the Federal Circuit is likely to shift the burden of patentability away from the patentee and back to the challenger in Aqua Products. This change may not lead to a drastic uptick in accepted amendments, but it would at least shift the blame away from stringent agency requirements to the evidence of the patent challenger.

Other patentee friendly changes to PTAB practice include the ability to submit witness testimony in preliminary responses.  This change enables a patentee to stand on equal footing with a petitioner prior to the Board’s Institution Decision. Further Board practices have evolved to protect patentees from harassment via serial filings of a same petitioner.  Lastly, the Board is certainly aware of its perceived bias, and in many cases will go out of its way to ensure fairness to the patentee in procedural skirmishes.

All in all, the PTAB will always cancel more patent claims than the courts.  But this truism is more a consequence of the Board’s technical decision makers, and the lower standard of evidence.  Neither of these aspects can be changed absent a radical legislative overhual. 

Critics will certainly try their best to lobby Congress to align agency practices with the courts in the years ahead, or even eliminate AIA trials altogether.  Yet, such extreme views would seem unlikely to resonate with lawmakers given the value provided by the PTAB to various stakeholders.  That’s not to say that targeted legislation will never occur, just that any such changes are likely to be incremental, and directed to ancillary practice issues.  

In the short term, the Trial Practice Guide is expected to be revised to conform to present PTAB practice, and there is always the possibility of new rules, or guidance from the CAFC.  It is the Federal Circuit that is likely to drive practice changes going forward. Stay tuned.

Like it or not, PTAB trials are here to stay.  Happy Birthday!

USPTO AIA Implementation Report Explains Progress, Recommends Changes

Two weeks back, the USPTO provided a report to Congress on the implementation of the America Invents Act (AIA) (as required by the legislation). The 65 page report (here) explains the administrative effort to implement the mechanisms of the AIA, as well as four years of statistics. Of particular interest to me are the recommendations to Congress on adjusting IPR/PGR mechanisms, as well as some of the statistics on such procedures as third party submissions and (the all but forgotten) supplemental examination. 

As to proposed changes for IPR and PGR, the report recommends that the joinder statute be clarified to expressely permit not just party joinder, but issue joinder.  The USPTO explains that:

Section 6 permits the PTAB to join as a party to an IPR any person who properly files a petition that the Director, after receiving a preliminary response or the expiration of the time for filing such a response, determines warrants the institution of an IPR. Section 6 does not state explicitly that a party can join an ongoing trial where the party is already a participant. The USPTO recommends clarifying the joinder provisions to state that same party joinder is permitted. A statutory change would confirm that a party may join claims to an ongoing trial where the party is already a participant. Absent the change, a party could potentially be precluded from challenging newly-asserted claims from related district court litigation. Making the change would encourage efficiency by enabling one proceeding to include more issues, which would be less burdensome on the parties and the USPTO.

This recommendation makes sense given the lack of controlling precedent at the PTAB. (Note: a proposal in the pending Senate legislation suggests altering the 315(b) bar for amended complaints to address the same problem). A change that would greatly simplify joinder would be to omit the aspect of the statute that requires the party seeking party joinder to file an actual copycat petition. A simple paper expressly adopting the positions of the first filer is far more sensible, at least for party joinder. 

Another change relates to issues of real-party-in-interest and privity. 

Additionally, section 6 requires a petition for an IPR to identify all real parties in interest. The USPTO recommends that the statute be amended to allow for timely correction of real party in interest identification where an error in identification arose without deceptive intent. Real party in interest determinations are highly fact-dependent. Courts have avoided rigid definitions or recitation of necessary factors and take the facts into account on a case-by case basis. Errors in identifying real parties in interest sometimes occur without deceptive intent and currently are not correctable. A statutory change is necessary to avoid situations where petitions are denied based on good-faith, inadvertent errors in identifying all real parties in interest.

The PTAB , like most stakeholders, was caught off guard by the focus of this seemingly innocent statutory requirement in many early filings. Given the potential to terminate a proceeding by proving an improper RPI listing (outside of the 12 month window, thus preventing refiling), this issue is pursued in a surprising number of filings.  In some early cases improper RPI listings were simple oversights. But, since that time, petitioners have learned to be wary of this issue. As such, I’m not sure the suggested change is necessary at this point.

The recommendations to change PGR practice mirror those for IPR.

With respect to CBM, the agency points out that the Alice decision is enabling many patents to be defeated under 101 grounds in the district courts. Therefore, the USPTO does not see the continued need for CBM beyond the 2020 sunset date, explaining:

The purpose of the CBM provision was to enable third parties to challenge covered business method patents issued under pre-AIA law for subject matter ineligibility. Since enactment of the AIA, U.S. law has been evolving in the courts. Notably, U.S. judicial practice has evolved in the wake of the Supreme Court decision in Bilski v. Kappos, 561 U.S. 593 (2010), which addressed the subject matter eligibility of business methods and has helped prevent ineligible business methods from being patented. This change in case law renders the need for the CBM provision unnecessary.

While it is true that courts have been especially receptive to 101 challenges since Alice, that is not the case in all districts. Moreover, a CBM challenge under 101 is likely to be far more cost effective at the PTAB. That said, the reason for the original sunset, namely, that few if any patents will exist in 2020 that issued prior to Bilski, remains true.

Finally, some interesting statistics on third party submissions:
Pages from Report on Implementation of the AIA September2015-2 
As can be seen from the statistics above, third party submissions, while far from common, have been filed in a modest number of applications. (It would have been interesting to know how many of these submissions were filed anonymously, I’m guessing most). Whether or not such submissions are a prudent use of invalidating art remains to be seen.

The report also demonstrates the unpopularity of supplemental examination.

Pages from Report on Implementation of the AIA September2015
As a reminder the primary goal of SE was to provide a mechanism to cure potential inequitable conduct issues via a post-grant proceeding. However, the Therasense decision, coupled with the uniquely complex formal requirements of SE filings have rendered such filings unattractive in most circumstances.

Senate Patent Reform Effort Placed Back on Calendar

Whether a favor to pro-reform lobbyists, or just wishful thinking, Senate Bill S.1137 (the “PATENT Act”) has been placed back on the Senate Calendar.  As a reminder, a Manager’s Amendment to the bill last spring included a pile of PTAB changes. The majority of these changes, as was expected when proposed, have since been mooted by similar USPTO rule proposals. The bill still includes the mooted PTAB proposals, as well as a host of other proposals (fee shifting in particular) that have received far more negative attention.  Like the PTAB proposals, the fee shifting proposal has also been undermined by intervening events such as Octane Fitness. (See Federal Circuit Bar Assoc. letter to the House on Octane impact here)

Absent significant, further mark-up, neither the House nor Senate bills seem likely to advance to vote.  

PTAB Proposals on Senate Side

With Congress headed toward a summer recess in a few weeks, it is expected that the pending patent reform bills will be front and center for July. Below is a high level overview of the PTAB proposals currently embodied in the Senate’s Patent Act” (S.1137).  As previously pointed out, many of these proposals are expected to be mooted in a matter of weeks by the PTAB’s July rule package.  Perhaps PTAB movement will cool the legislative appetite for these proposals, time will tell.

1.      Preliminary Response – IPR
§ 313 is modified to add subsection (b), which enables a preliminary response to include affidavits/declarations of supporting evidence and opinions.  In addition, a petitioner may seek leave to file a response to respond to new issues raised in the preliminary response.

(PTAB expected to propose a similar modification)

2.      Institution Decision – IPR
§ 314 is modified to permit non-institution if it “would not serve the interest of justice.”  Factors considered in making this decision include whether the grounds or arguments are the same or substantially the same as those considered and decided in a prior judicial or PTO proceeding and whether there is another proceeding or matter involving the same patent before the PTO.

(appears to target hedge fund filings, but PTAB is likely to take care of that problem on its own)

§ 314 is also modified to state that an IPR shall not be instituted on the basis that the evidentiary standard at the PTO differs from the one used in a court proceeding to adjudicate the claims in the petition.

(Also appears directed to hedgies/PTAB trolls that seek to re-purpose art of a litigation)

§ 315 is modified in subsection (b) to bar institution for “a particular claim” if the IPR is filed more than one year after the date that the petitioner, RPI or privy is served with a complaint alleging infringement of that claim.
§ 315 is also modified to allow a petitioner to add additional patent claims to an instituted IPR within 1 year after the date that the petitioner, RPI or privy was served with an amended complaint or other paper alleging infringement of those claims for the first time.

(Both changes address a common driver behind issue joinder practices, namely, amedned complaints outside the 12-month window.  This change is worthwhile, and not something the PTAB can fix independently)

3.      Representations Regarding Prosecution History – IPR
§ 315 is modified to bind a party, RPI or privy in a subsequent PTO proceeding or civil action to any representations regarding claim construction with respect to the prosecution history that were finally adopted by office in deciding the IPR.

(Assuming a Philips construction is adopted, B&B Hardware would probably do this anyway)

4.      Live Testimony – IPR
§ 316 is modified to provide a right to live testimony including cross examination of an adverse witness prior to the oral hearing if the panel finds it would “facilitate resolution of the case” because genuine issues of material fact, conflicting expert opinions, or issues of witness credibility exist.

(Language still leaves discretion to the Board.  This, like a similar proposal of the PTAB, seems directed at toning down language indicating live testimony will be rare, likely to avoid due process challenges)

5.      Claim Construction – IPR
§ 316 is modified to require claims be construed as in a civil action, i.e., apply Phillips, including construing according to the ordinary and customary meaning as understood by one of ordinary skill and prosecution history.

(As I have pointed out repeatedly, this is likely to hurt patentees more than help them)

§ 316 is further modified to require the PTO to consider previous constructions and validity determinations by a US court.

6.      Claim Amendments – IPR
§ 316 is modified to require that any proposal of one or more substitute claims:
–          Be filed in the first paper following institution and within 30 days of institution;
–          Narrow the scope of cancelled claims and add no new matter; and
–          Respond to a ground of unpatentability involved in the trial.

(The first requirement is nonsensical, and the second and third already exist.  Likewise, the PTAB is expected to issue new rules that make amendment more manageable in the coming weeks)

§ 316 is also modified to provide the petitioner a “meaningful opportunity” to file a written response addressing the above requirements and whether the substitute claim is unpatentable, which the petitioner must prove by a preponderance of the evidence.

(Not sure if this is poking a stick at the old 5 page requirement or not.  Petitioner now get a 12 page response by PTAB rules.  This is no longer needed.)

7.      Post Grant Review
All of the changes above are also made for PGR except for the rule changes for institution decision relating to the different evidentiary standard at the PTO and court, the barring of institution of “a particular claim,” and the possibility to add claims added by amended complaint.

(Keep in mind that PGR must be filed quickly after issuance, so not all of these ontrols are needed for PGR)

8.      Panels
Requiring that within one year of enactment, ensuring that the panel adjudicating the proceeding (IPR or PGR) have no more than one individual that participated in the institution decision.

(PTAB has discussed a similar change)

9.      Rule 11
Any statement, petition, or other submission to the PTO is made under an obligation substantially similar to the obligations in Rule 11 of the FRCP.

(Not sure this adds anything, submissions to the agency are already controlled by ethics rules.)

I’ll go through the House bill tomorrow.