Initiating a USPTO Business Method Patent Challenge After Seeking Declaratory Judgement?

One of the more interesting provisions of the America Invents Act (AIA) is the “transitional program” existing for the next 8 years for so-called business method patents. As described in Section 18 of the AIA, this proceeding will use the standards and procedures of post grant review (PGR). However, unlike PGR, the Transitional Program for Covered Business Method Patents (TPCBMP) will be available for qualifying business method patents on September 16th.

In addition to the requirement that the patent qualify as a “business method” patent, there are other threshold considerations to satisfy in order to properly pursue this proceeding before the USPTO’s Patent Trial & Appeal Board (PTAB). The standing necessary to pursue a TPCBMP of a qualifying patent requires that the petitioner be “charged with infringement,” or previously sued for infringement.

Left with implementing this requirement for proper TPCBMP standing, the USPTO has determined the meaning of “charged with infringement” consistent with the statute Sec. 18(a)(1)(B). In the final TPCBMP rule package issued this past August the USPTO provided Rule 42.302(a), which defines the terminology “charged with infringement”  as ‘‘a real and substantial controversy regarding infringement of a covered business method patent such that the petitioner would have standing to bring a declaratory judgment action in Federal court.’’

Of course when such an imminent threat of patent litigation exists, rather than await the inevitable lawsuit/dreaded Eastern District of Texas venue, a potential defendant may pursue a declaratory judgement to secure a preferred venue and/or establish a lack of liability.

Interestingly, both Inter Partes Review (IPR) and (PGR) are unavailable to a petitioner that has previously filed for declaratory judgment to challenge validity. The reason for this IPR/PGR standing control is to prevent those that have chosen district court in the first instance from burdening the USPTO with a later IPR/PGR challenge.  Since TPCBMP follows the “standards and procedures” for PGR, it may be surprising to some that the USPTO rules for TPCBMP exclude the DJ control.

Looking first to the AIA, Sec. 18 defines TPCBMP as following the “standards and procedures of PGR with the following exceptions:

Section 321(c) of title 35, United States Code, and subsections (b), (e)(2), and (f) of section 325 of such title shall not apply to a transitional proceeding.

-Section 321(c) is the nine month window used in PGR.
-Section 325(b) precludes stays of court actions when a motion for preliminary injunction is pending.
-Section 325 (e)(2) defines PGR estoppel (note: TPCBMP estoppel is different).
-Section 325 (f) precludes PGR for certain reissue patents.

You will note that 321 (a), which is the DJ control provision, is not expressly excluded in the statute.

Next, the USPTO’s final rules define that TPCMP is subject to the PGR procedures except for §§ 42.200, 42.201, 42.202, and 42.204. This is consistent with section 18(a)(1) of the AIA, which provides that the transitional proceeding shall be regarded as, and shall employ the standards and procedures of, a post-grant review with certain exceptions.

-42.200 details procedures of PGR which are provided for elsewhere in the TPCBMP rules.
-42.201 defines the declaratory judgment control for PGR in part (a), as well as petitioner estoppel from pursuing PGR in part (b).
-42.202 relates to the 9 month window for PGR.
-42.204 refers to the content of a PGR petition.

Ostensibly, the USPTO has excluded the DJ control (42.201(a)), while Congress did not. Yet, since an independent standing requirement exists for TPCBMP, the USPTO has seemingly reasoned that the DJ control was to be excluded by implication. Indeed, each of IPR, PGR and TPCBMP has different standing requirements.

USPTO to Host Patent Review Processing System (PRPS) Webinar on September 6th

Further to the discussions this week on the new PRPS system, the USPTO has announced that they will be conducting a training session on the Alexandria USPTO campus (also available by webinar) on September 6th. Information below:

To help potential users of the PRPS electronic filing system, the Office will hold a training session from 10 am – noon on Thursday, September 6, 2012, in the North Auditorium of the Madison Building at the Alexandria Campus of the USPTO. The training session will also be broadcast via WebEx. Information to connect to the training session via WebEx is provided below.

WebEx participants will be able to submit questions through the WebEx chat session.

Satisfying the Electronic Filing Requirements of PRPS

As discussed earlier this week, the Patent Trial & Appeal Board (PTAB) of the USPTO will shortly begin rolling out a new electronic filing system to support the post grant patent trial proceedings of the America invents Act. Unless otherwise authorized by the Board, all PTAB filings must be submitted electronically 37 C.F.R § 42.6(a)(3). The system will be known as the Patent Review Processing System (PRPS). Currently, the USPTO is testing the prototype system, and soliciting public input on its general format and operation. PRPS will be rolled out in the coming weeks, and be up and running by Septemeber 16th. Practitioners will need to preregister with PRPS prior to their first filing.

While PRPS is still a work in progress, there are some practice tips emerging from the prototype testing sessions. (some preliminary screenshots of the system here)

Especially in the short term, obtaining a filing date will be a big deal for petitioners seeking Inter Partes Review (IPR) subject to a parallel litigation. This is because such petitioners only have 1 year (by statute) to petition for IPR from the date of service of the litigation complaint, and there are petitioners that were sued 10-11 months prior to September 16th. These filers must be especially careful not to miss their 1 year deadline by running afoul of PRPS requirements.

First, filers will need to be wary of the payment of the filing fee, $27,200 for Inter Partes Review, and $35,800 for Transitional Program for Covered Business Method Patents (TPCBMP) (PGR filings being unavailable for a few more years). A filing date will only be secured once payment clears (typically 8 days for most payment methods). As the fees are substantial, insufficient payment could be a problem for filers not mindful of their account levels, especially those filing multiple petitions on the same day.

Second, and more problematic, is the intention of the Office (at least as currently expressed in focus sessions) to treat weekend PRPS filings as being filed on the next business day. For example, September 16th is a Sunday. Theoretically, there could be petitioners that were sued on September 16th last year that would be shut out based on the 1 year litigation bar (35 U.S.C. § 315(b)) unless a Sunday filing date is assigned. Likewise, going forward, it would create a system in which petitioners would need to file on the last business day prior to the actual 1 year deadline. As the 1 year deadline is statutory, the USPTO cannot simply accept filings on the next business day, or waive the requirement.

While the simple solution is for petitioners not to wait until the last minute going forward, current, late stage litigants have had to wait for September 16th out of necessity. Likewise, it is unclear how such a policy would comport with 37 C.F.R. ¶ 1.6(a)(4), which awards electronic filing dates at the time of submission.

 

USPTO Publishes Final PTAB Trial Rule “Cheat Sheet”

USPTO Publishes Final PTAB Trial Rule “Cheat Sheet”

The below “cheat sheet” to the final rule changes was published by the USPTO yesterday. Note that the items listed are not exhaustive, but represent most of the major changes.

TABLE 1: Proposed Versus Final Rules for the New Administrative Trials

Proposed Final
1

Fees for claims challenged in excess of 20 based on increments of 10 claims

IPR fee:

  • 1 to 20 claims – $27,200.00

  • 21 to 30 claims $34,000.00

  • 31 to 40 claims – $40,800.00

  • 41 to 50 claims – $54,400.00

  • 51 to 60 claims – $68,000.00

  • Additional fee for each additional 10 claims or portion thereof – $27,200.00

PGR fee:

  • 1 to 20 claims – $35,800.00

  • 21 to 30 claims – $44,750.00

  • 31 to 40 claims – $53,700.00

  • 41 to 50 claims – $71,600.00

  • 51 to 60 claims – $89,500.00

  • Additional fee for each additional 10 claims or portion thereof – $35,800.00

Fees for claims challenged in excess of 20 based on flat per claim fee

IPR fee:

  • 1 to 20 claims – $27, 200.00

  • For each claim in excess of 20 claims – $600.00

PGR fee:

  • 1 to 20 claims – $35,800.00

  • For each claim in excess of 20 claims – $800.00
2

Page limits more restricted, and statement of material facts included in page count

Petition requesting IPR review and opposition: 50 pages

Petition requesting PGR review and opposition: 70 pages

Petition requesting CBM review and opposition: 70 pages

Claim charts must be double-spaced

Page limits increased, and statement of material facts eliminated from page count

Petition requesting IPR review and opposition: 60 pages

Petition requesting PGR review and opposition: 80 pages

Petition requesting CBM review and opposition: 80 pages

Claim charts may be single-spaced
3 Board may recognize counsel pro hac vice during a proceeding upon a showing of good cause, subject to conditions as the Board may impose Same as proposed with the additional specification that lead counsel be a registered practitioner
4

Party may move for additional discovery

Parties may agree to additional discovery between themselves

Parties may agree to mandatory discovery requiring initial disclosures
5 Non-cumulative information that is inconsistent with a position advanced by the patent owner or petitioner must be filed as soon as practicable.  Party submitting the information must specify the relevance of the information Eliminate the non-cumulative requirement as well as requirement to explain the relevance of the information that is inconsistent with a position advanced by the party
6

Due date for patent owner response to petition is two months from the date the IPR/PGR review was instituted

 Default date for filing a patent owner response is three months from the date the IPR/PGR review was instituted
7 Patent owner preliminary response may not include testimonial evidence but instead only documentary evidence Patent owner preliminary response may include new testimonial evidence where a party demonstrates that such evidence is in the interests of justice
8 Petitioner may request to file a motion identifying supplemental information relevant to a ground for which the trial has been instituted and that the request must be made within one month of the date the trial is instituted

Party may file a motion to submit supplemental information if the request for authorization to file the motion is made within one month of the date the trial is instituted and the supplemental information must be relevant to a claim for which the trial has been instituted

Party seeking to file supplemental information one month after the date the trial is instituted must request authorization to file the motion.  Motion must show why the supplemental information reasonably could not have been obtained earlier, and that consideration of the supplemental information would be in the interests of justice

9 Patent owner may file one motion to amend the patent claims but only after conferring with the Board

Patent owner may file an initial amendment without Board authorization but must discuss the amendment in a conference call with the Board prior to filing

Additional motion to amend may be authorized when there is a good cause showing (i.e., where supplemental information is belatedly submitted) or a joint request to materially advance settlement
10

Patent owner is precluded from taking action inconsistent with the adverse judgment, including obtaining in any patent:

(i) A claim to substantially the same invention as the finally refused or cancelled claim;

(ii) A claim that could have been filed in response to any properly raised ground of unpatentability for a finally refused or cancelled claim; or

(iii) An amendment of a specification or of a drawing that was denied during the trial proceeding.

 Modification of  (i) to preclude patent owner from obtaining patentably indistinct claims, and elimination of (ii)

PRPS System Provided for Receiving Post Grant Patent Trial Requests

As previously discussed, the USPTO will shortly begin rolling out a new electronic filing system to support the post grant patent trial proceedings of the Patent Trial & Appeal Board (PTAB). The system will be known as the Patent Review Processing System (PRPS). Over the next 2-3 days the USPTO will be testing and receiving feedback from the public on features of the PRPS.

A link to PRPS will be available on the USPTO web page in the coming weeks, but what will the portal receive on September 16th?

In gauging demand, not only at my own firm, but in talking with others, I would estimate roughly 40-60 trial requests for 2012. Some will certainly be deposited immediately on September 16th (to avoid the closing 12 month litigation window). A steady stream of petitions are expected thereafter, through to 2013. (this is in addition to the surge of patent reexamination filings that are now headed to the USPTO). Not surprisingly, most of the filings will be for Inter Partes Review (IPR) as Post Grant Review petitions are not possible until “first inventor to file patents” begin to issue some years down the road. However, there will also be some Transitional Business Method Patent Challenges (TBMPC). TPCBMPs being perhaps the earliest, and best gauge of the USPTO’s commitment with regard to “limited” discovery.

Final Rule Codifies Existing BPAI Practice

As a reminder, non-registered practitioners have, in limited circumstances, been permitted to appear before the current Board of Patent Appeals & Interferences (BPAI) on a pro hac vice basis. The USPTO proposed adopting this practice for the new post grant patent trial proceedings of the Patent Trial & Appeal Board (PTAB) 37 C.F.R § 42.10(c). The final rule, which issued last week, maintains the pro hac vice provision but adds a bit of a twist.

In the earlier discussion on this topic, I relayed the explanation of Chief Judge Smith as provided on the USPTO website (America Invents Act (AIA) micro site) relative to the proposed pro hac vice rule. In essence, Judge Smith outlined the types of conditions that were contemplated by proposed rule 42.10(c).

The final rule more concretely codifies the expectations of the USPTO while ensuring that registered practitioners drive the PTAB proceedings.

The rule pertaining to counsel (§ 42.10) appearing before the PTAB has been changed as follows:

1. Where the previous rule suggested that lead and back up counsel be identified, the final rule requires such identification. § 42.10(a).

2. Lead counsel must be a registered practitioner, and back up counsel may be recognized pro hac vice upon a showing of good cause (such as where the applying attorney is an experienced litigator AND familiar with the subject patent). The Board reserves the right to impose additional conditions, for example, a stipulation that the recognized attorney be bound by USPTO ethical and disciplinary controls. § 42.10(c)

In essence, the final rule seemingly adopts the previous patent interference rule with an additional, registered practitioner safeguard.

As explained in the previous interference rule, Contested Case Practice Guide, § 41.5 Counsel, [t]he Board may authorize a person other than a registered practitioner to appear as counsel in a specific proceeding. But the practice note of the same section of the Guide emphasizes that [c]contested cases can be technically, legally, and procedurally complex. Consequently, a motion to appear pro hac vice will rarely be granted unless the counsel is an experienced litigating attorney and has an established familiarity with the subject matter at issue in the contested case. (emphasis added)

It remains unclear if pro hac practice will be any more common at the PTAB relative to patent interference practice, especially as registered practitioners are required to be lead counsel irregardless.

Upcoming CLE Programs

For those looking for CLE in the weeks ahead that is focused on practice before the Patent Trial & Appeal Board (PTAB), and the final rules for implementing the new post grant validity trials, consider the following:

1. August 21, 2012 National Assoc. of Patent Practitioners (NAPP) Annual Meeting: Alexandria, Virginia.

2. September 18, 2012 New USPTO Rules for Post Grant Proceedings (Strafford Legal Webinar)

Imminent AIA Changes to Drive Significant Patent Reexamination Filings in the Near Term

In one month’s time, the USPTO will simultaneously switch over to a new patent reexamination fee structure, and to a new inter partes trial model of the Patent Trial & Appeal Board (PTAB). These changes will drive a significant number of ex parte (EXP) and inter partes reexamination (IPX) requests to be filed over the next few weeks.

The short term impetus caused by the change to the fee structure is fairly straightforward to grasp. Simply stated, the EXP that can be filed today for a $2520 government filing fee, will cost $17,750 on the September 16th.

As to the change to the inter partes trial model, September 15th will be the last day for filing an IPX; this is significant for several reasons.

First, some patent challengers actually prefer the longer timeline of IPX relative to IPR. For example, for those petitioners in parallel litigation, IPX offers the ability to pressure a patentee on two fronts with little downside, aside from extra costs. Practically speaking, IPX estoppel is rarely a concern due to the significant pendency of the IPX proceeding. While it may seem counter-intuitive, the greatly accelerated path of inter partes review (IPR) gives some filers pause, especially in view of the earlier attachment of estoppel.

Further, while IPR will effectively replace IPX on September 16th, the IPR option will not exist for some petitioners. This is because 315(b) provides:

An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.

(emphasis added)

Thus, September 15th is perhaps the last chance for those petitioners involved in a mature litigation to avail themselves of a USPTO inter partes, patentability challenge. For these reasons, both the EXP and the IPX filing rates will increase significantly over the next few weeks.

Final Rules Modified to Address Most Common Criticisms

Yesterday’s printing of the final rules to implement the post grant patent proceedings of the AIA is the culmination of well over a years worth of intensive, and tireless effort by the USPTO. The effort throughout 2011 led to the presentation of the proposed rules in February of 2012. Thereafter, the USPTO accepted public comments in April, issuing the final rules yesterday.

As to the public feedback on the proposed rules, it seems the USPTO was listening.

Rather than simply go through the laundry list of changes, some of which are fairly ministerial, I will first address the aspects of the proposed rules that I found to be the most problematic, these were:

1. Page Limits (and here)
2. Fee Structure
3. Patentee Estoppel
4. Supplemental Information

Page Limits

The final rules have increased page limits by 10 pages for all PTAB proceedings. Specifically, Inter Partes Review (IPR) will have a 60 page limit for petitions, preliminary responses, and patent owner response. Post Grant Review (PGR), and Transitional Program for Covered Business Method Patents (TPCBMP) will use an 80 page limit for same filings. Additionally, the Office will allow claim charts to be single spaced, effectively halving page space taken up for this information.

While the increase in page count is helpful, the 14 point font requirement remains. For those challengers that have no choice but to proceed against all claims of a patent, the page count will continue to be an issue, and -structure-a-boon-for-patent-trolls”>ls.

As I pointed out a week back, the filing fees will be split into stages. A first portion due upon filing of the petition, and a second, once the proceeding is instituted. However, this change will be addressed in the forthcoming fee changes issued under Section 10 of the AIA.

Patentee Estoppel

To me, the patentee estoppel of the proposed rules was a very significant problem. As such, I was quite pleased to see the proposal effectively dropped. That is to say, no longer will a Patentee be precluded from later raising a claim that “could have been raised” in the PTAB proceeding in a subsequent USPTO proceeding (such as a pending continuation). Instead, this provision now precludes only claims of a subsequent patent that are not patentably distinct from a finally refused or cancelled claim.

Supplemental Information

This provision has been tightened up to require a showing (in the interest of justice) for submissions presented after the first month of the proceeding. Also, where the proposed rule required the information to be relevant to a “ground” for which the trial was instituted, the final rule requires the information to be relevant to a claim at issue in the proceeding.

Still, if a challenger seeks to present supplemental information within one month, perhaps to address a potential weakness pointed out in a Patentee preliminary response, no showing is necessary. Accordingly, I am still quite wary of this provision and believe it may have a chilling effect on preliminary responses of patentees.

I will discuss the balance of the changes in the days to come.

Final PTAB Rules to Publish in Federal Register Tomorrow

Tomorrow, the final rules to implement the new post grant trial proceedings of the PTAB will publish. A copy of each of the rule packages is linked below, commentary on the changes to follow tomorrow. In addition to the PTAB rule packages, a package will issue that is directed to the final rules for implementing supplemental examination/revising reexamination fees (here), and miscellaneous changes to oath practice (here).

Umbrella Rules
Changes to Implement IPR, PGR & TPCBMP
Trial Practice Guide
Business Method