CAFC Avoids Determining Propriety of Third Party Declaration Practice in Inter Partes Patent Reexamination

Yesterday, in Lingamfelter v. Kappos, (here) the CAFC decided that the Patentee had waived the right to contest the propriety of the third party declarations filed in their inter partes patent reexamination. (earlier post here)

The crux of the Patentee’s argument was that the inter partes reexamination statute permits the USPTO to accept “written comments” from Requesters—and “comments” as recited in the relevant statute cannot embrace testimonial “evidence” of declarants.35 U.S.C.§ 314(B)(2) The Patentee further decried the allegedly improper practice as unfair, pointing out that discovery is not permitted; thus there is no way to demonstrate the inaccuracy of the submitted evidence.

The CAFC seemed intrigued by the Patentee’s contentions during oral argument, but ultimately side stepped the issue finding the argument waived, explaining:

We need not address the merit of Lingamfelter’s arguments, however, because in our view, he has waived them. To begin with, Lingamfelter was too late in challenging the introduction of the evidence into the record. He did not object when third party requesters’ evidence was submitted to the examiner at the early stages of the inter partes proceedings (in July 2005), or when the first appeal from the examiner’s decision was presented to the Board (in December 2006). It was not until he elected to reopen the case before the examiner (in February 2010 and more than four years after the proceedings had begun) that he contended the examiner lacked authority to receive the contested evidence from third party requesters. Even at that late stage, however, Lingamfelter still did not sufficiently brief the issues that he raises in this appeal.

While a loss for this Patentee, it seems very likely that the issue will reemerge at the CAFC in the months ahead.

Unsuccessful Post Grant Challenge Precludes Only New Requests For Patent Reexamination

As discussed yesterday, the final rule package for Changes to Implement Miscellaneous Post Patent Provisions of the Leahy-Smith America Invents Act (AIA) revised the rules for ex parte patent reexamination. The revisions were made to account for the new “office estoppel” provisions of Inter Partes Review (IPR), Post Grant Review (PGR), and the Transitional Program for Covered Business Method Patents (TPCBMP).

The office estoppel of the new proceedings mandate that an unsuccessful petitioner, real party in interest, or privy may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that prior post grant proceeding. 315(e)(1); 325(e)(1). Yesterdays discussion detailed how the USPTO will determine the applicability of office estoppel to anonymous reexamination filers.

Another issue presented in the proposed rules, was the meaning of “request or maintain” as used in the statutes. Initially, the USPTO proposed that an unsuccessful post grant filer could not request a new reexamination, and existing reexaminations of the same petitioner/privy would be vacated, or not “maintained.” Proposed Rule 1.510 However, comments submitted to the USPTO in response to the rule proposal pointed out that it is the Office and not the requester of the ex parte reexamination (EXP) that “maintains” the proceeding. In response to these comments, the USPTO dropped this aspect of the proposed rule, perhaps highlighting another technical defect in the AIA.

It is true that a third party requester does not maintain an EXP proceeding that is conducted between a Patentee and the USPTO. Technically speaking, the same could even be said for inter partes patent reexamination (IPX). There will likely be some IPX proceedings that will be ongoing after the first post grant proceedings conclude. Under the statute it would seem that an unsuccessful petitioner would have to cease active participation, however the Office would continue to conduct the proceeding in an ex parte fashion. (as is the case now when requesters discontinue participation)

By adding the words “or maintaining” to the statute, Congress was clearly trying to capture more than just new request filings. So, it would seem that the statute would need to be tweaked to capture the intent of Congress. In the meantime, this loophole may be exploited as a tool for gamesmanship.

For example, one strategy to exploit the loophole would be to file “piggyback” ex parte reexamination filings with every post grant trial petition. In other words, at roughly the time of the patentees preliminary statement, an ex parte filing would be submitted that would include additional art left out of the filing made two months earlier. (perhaps as a result of page limits). The decision on the post grant filing and EXP filing would be due in roughly the same 3 month time frame. In this way, neither filing would theoretically preempt the other (i.e., cumulative) as they would be decided in the same time frame; one by the Patent Trial & Appeal Board, the other by the Central Reexamination Unit. Once granted, if permitted to proceed, the EXP filing would proceed on a slower track, thus ensuring that a “Plan B” would be “maintained” should the faster post grant filing prove unsuccessful.

Of course, AIA statutes 315(d) and 325(d) provide that the Director may determine the manner in which the [post grant trial proceeding] or other proceeding or matter may proceed, including providing for stay, transfer, consolidation, or termination of any such matter or proceeding. Thus, to avoid gamesmanship, the USPTO could liberally exercise the power to transfer/consolidate parallel requests of the same petitioner, and to terminate any filings submitted by the same petitioner after the post grant trial is ordered. Yet, this solution would essentially combine issues accepted under the old SNQ standard in EXP together with those reviewed under the heightened reasonable likelihood of prevailing (RLP) or More Likely Than Not (MLTN) post grant standard. Likewise, it woud be a clear end around the page limits for post grant trial proceedings.

Tough call until such filings are discouraged by estoppel.

or reasonably could have raised during that inter partes review.

Revised Rule on Anonymous Requests Subject to Practitioner Interpretation

The estoppel provisions of Inter Partes Review (IPR), Post Grant Review (PGR), and the Transitional Program for Covered Business Method Patents (TPCBMP) will impact related court proceedings involving the same patent, and USPTO validity proceedings relating to the same patent.

The aspect of the IPR/PGR estoppel that applies to USPTO proceedings is codified below:

315 (e)(1) Estoppel (applies to IPR; 325(e)(1) codifies the same for PGR & TPCBMP)

PROCEEDINGS BEFORE THE OFFICE- The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

(emphasis added)

Taking the example of 315(e)(1) estoppel, this estoppel applies not only to a subsequent request for IPR from the same requester (or privies), but to any “office proceeding.” The primary USPTO proceeding that will be impacted by 315(e)(1) will be ex parte patent reexamination (EXP). This is because, by definition, a Post Grant Review (PGR) can only be conducted prior to an IPR. Likewise, inter partes reexamination (IPX) will no longer be an option in a few weeks, ending on September 16th. While theoretically there may still be some IPX proceedings that are being “maintained” by the time the first IPR is concluded, it is more likely that the Patent Trial & Appeal Board (PTAB) would consolidate or stay such parallel Office proceedings. (325(e)(1) will not impact office proceedings for PGR for some years, but will apply in the short term to TPCBMP)

As pointed out previously, in many cases EXP is requested anonymously. (MPEP 2213). To account for this practicality the USPTO issued proposed rules requiring that anonymous filers disclose their identity to the Office so the applicability of estoppel could be assessed relative to EXP filers. In the final rules issued this past Monday the USPTO dropped the identity requirement in favor of a simple practitioner certification; but is the final rule enough to protect Patentees from harassment?

In the previous Notice of Proposed Rulemaking for Changes to Implement Miscellaneous Post Patent Provisions of the Leahy-Smith America Invents Act (here), the Office proposed the following rule to track potential EXP estoppel, 37 C.F.R § 1.510(b).

(6) A certification that the statutory estoppel provisions of both inter partes review (35 U.S.C. 315(e)(1)) and post grant review (35 U.S.C. 325(e)(1)) do not prohibit the ex parte reexamination.

(7) A statement identifying the real party(ies) in interest to the extent necessary to determine whether any inter partes review or post grant review filed subsequent to an ex parte reexamination bars a pending ex parte reexamination filed by the real party(ies) in interest or its privy from being maintained.

In proposing 510(b)(7), the USPTO explained that those filers wishing to remain anonymous, were to (1) Submit the statement identifying the real party(ies) in interest as a separate paper; (2) title the paper as a statement identifying the real party(ies) in interest; (3) request in the paper that the Office to retain the paper in confidence by sealing it; and (4) include, in a clear and conspicuous manner, an appropriate instructional label designating the statement as a non-public submission, e.g., NOT OPEN TO THE PUBLIC FOR OFFICE USE ONLY.
The Office will then maintain the real party(ies) in interest statement as a sealed, non-public submission.

Comments to the proposed rule criticized the “sealed submission” provision as a strong disincentive to those filers wishing to protect their anonymity. That is to say, the proposed mechanism for maintaining anonymity was not viewed as being very secure. In the final rules issued this past Monday, the USPTO dropped the requirement to identify the real party in interest. The USPTO explained that 510(b)(7) was not adopted and that instead, the Office would simply rely upon the practitioner certification of 510(b)(6).

Generally speaking, I agree that 510(b)(7) was not a very robust mechanism for protecting anonymity, and thus should have been dropped. However, I am not sure the final rule accounts for the reality of high stakes patent disputes.

First, I don’t see the need at all for a certification unless the subject patent has been through an IPR/PGR/TPCBMP.

Second, assuming the patent has been the subject of an unsuccessful PTAB challenge, and as demonstrated recently in the case of In re Baxter, there will a significant incentive to continue a reexamination attack. Where significant commercial interests are at stake, practitioners often interpret privy/real-party-in-interest quite “creatively.” Take the recent example of inter partes patent reexamination 95/001,893 (here). In that filing, a second reexamination filing of a wholly owned subsidiary of the parent company (that filed the first request), were both being sued on the same patent. In submitting the second filing, the subsidiary took the position that it was not in privity with the parent (despite sharing a CEO); not surprisingly, the USPTO vacated the filing, determining that the two filers were in privity for purposes of 317(a).

Under final rule 510(b), the USPTO has stated that [i]f the Office becomes aware of facts that call the certification into question, the Office will determine, on a case-by-case basis, whether the request for ex parte reexamination is prohibited by statute. Yet, it is unclear how the Office would ever become aware of such facts in an anonymous filing. For example, the above filing, if filed anonymously as an EXP after an unsuccessful PTAB challenge, would have undoubtedly been permitted to proceed under the new, final rule.

PTAB Rule Packages to Publish on August 14th

The final rule packages for the new post grant patent proceedings of the Patent Trial & Appeal Board (PTAB) were expected to issue last week but were obviously delayed.  The USPTO informed the Intellectual Property Section of the ABA (at the ABA annual meeting last weekend) that these final rule packages will publish on August 14th. (available in the Federal Register reading room on the 13th). The delay is a result of the time needed for publishing agencies to review such a significant submission. For example, last Friday the USPTO was asked to adjust minor formatting, section headings/numbering, etc to the original submission made in July.

While the agency was tight lipped as to changes in the final rules during their presentations over the weekend, reading between the lines of some of the commentary, the following changes seem likely:

-a revision to the pro hac vice proposal
-a splitting of the proposed filing fee. The first payment would be due at filing, the second, due upon grant of the petition
-modification to the patentee estopell provision
-further refinement of the proposed duty of patentees to submit “inconsistent information“

In other PTAB news, the new domain PTAB.gov will go live shortly. PTAB.gov will include a link to the electronic portal for filing the new post grant patent trial proceedings. Testing and further details on the portal may be released before August 14th. Also, in addition to the judges already resident in the new Detroit office, the PTAB will be hiring  judges for the other satellite offices (Denver, Dallas, and Palo Alto). These job announcements are expected to publish on USAjobs.com in the coming weeks.

Finally, the rule package entitled “Changes to Implement Post Patent Provisions of the Leahy-Smith America Invents Act” prints today. Attached is a copy of these rules as first published in the reading room yesterday. Major changes to the previous proposal include: dropping the requirement that anonymous ex parte reexamination filers reveal their identity to the agency, and modifying the proposed “office estoppel” rules to allow for ongoing ex parte proceedings to continue independent of IPR/PGR estoppel. I will discuss these changes in more detail in the coming days.

New Bill Seeks to Recover Costs of “Egregious Legal Disputes”

Since the enactment of the America Invents Act (AIA) in September of 2011, the “patent reform” embodied by the AIA has been slowly rolling out. In fact, the bulk of the truly significant changes to patent law are still to come. These changes include the change over to the first inventor to file model in March of 2013, and the kick off of the new post grant patent proceedings next month. With so much change on the immediate horizon it would seem premature to consider further changes to patent law until the last round has had time to take effect. 

Evidently at least one Congressman feels that the AIA does not go far enough to combat frivolous “troll” lawsuits. Congressman Defazio of Oregon is sponsoring a bill entitled “Saving High-Tech Innovators From Egregious Legal Disputes Act of 2012.” The bill proposes that the costs (including attorney fees) of patent lawsuits relating to hardware and software should be recoverable from the Patentee should the court find that the Patentee did not have a reasonable likelihood of succeeding on the merits. (bill here)

Interestingly, the bill offers a fairly expansive definition of software as  “any process that could be implemented in a computer regardless of whether a computer is specifically mentioned in the patent.” This definition would seem to encompass a fair amount of processes that have no relation to hardware and software patent disputes.

While Congressman Defazio’s effort is no doubt well intentioned, it fails to recognize that fighting a patent suit to a final determination can costs tens of millions of  dollars. Very few companies will gamble with that kind of expense/distraction. Assuming this bill had a chance of passage (very unlikely to say the least), the possibility of recovering fees for the more specious patent assertions would not upset the current troll business model in any significant regard.

The true problem is that the economics of fighting vs. settling patent lawsuits, especially where the Patentee is a non-practicing entity with a contingent fee arrangement with their trial counsel, is a no-win situation for high-tech innovators. What is really needed is a low cost alternative to patent litigation that will break the troll/contingency business model. In my opinion Congress has already devised that system, and it kicks off next month. …let’s give it a chance.

 

Fact & Rumor

As noted last Friday, the final rule packages to implement the new patent validity trials of the Patent Trial & Appeal Board (PTAB) are expected to issue this week. (if publication agencies cooperate). While the USPTO has been tight lipped as to the modifications made to the originally proposed rules, some changes have been discussed publicly, while others are beginning to leak out.

First, the USPTO has stated publicly that the proposed fee schedule will be re-calibrated to provide for a more balanced escalation in fees based on the number of claims challenged. While the fee schedule may become more consistent with respect to claim surcharges, the general price levels to initiate these proceedings is not expected to change at all, which is at least $27,500 for Inter Partes Review. Other changes are expected that would synchronize the proposed page limits with fee schedule. (as opposed to a fixed 50 pages regardless if 1 claim or 100 claims are challenged)

As to rumored changes, sources indicate that the USPTO will soften the controversial Patent Owner estoppel provision in the final rules.

For a discussion of the proposed rules, public comments, and perceived issues, see my earlier post (here).  In the meantime, keep an eye on the Federal Register.

New PTAB Rules Imminent

The August 16 deadline is fast approaching for the USPTO issuance of the final rules to implement the new patent validity trials of the Patent Trial & Appeal Board (PTAB). The good news is that the USPTO is rumored to be ahead of schedule. In fact, the rule packages are expected to issue next week. As a result, next week’s CLE programs may be the first to touch upon these final rules and their expected impact this September.

In addition to Thursday’s webinar below, the program set for Friday at the ABA annual meeting in Chicago will include Judge Tierney, lead judge of the  Trial Section of the new PTAB. Friday’s scheduled round table discussion will discuss the proposed/final rules, assuming the planets align and the government printer stays on track.

1. USPTO Post Grant Proceedings –August 2nd 1PM (EST) (Webinar Stafford Legal)

2. Trial & Discovery Practice Before the New USPTO Patent & Appeal Board –August 3rd 4PM (CST) (ABA Annual Meeting Chicago)

Claim-by-Claim Application of RLP Standard a Problem for Patent Challengers in Late Stage, Parallel Litigation 

As the era of Inter Partes Patent Reexamination (IPX) draws to a close, recent third party requesters are finding the the new standard for initiating IPX to be quite problematic. The higher standard, has led to a greater percentage of partial and full IPX denials.

A random review of 80 requests filed under the new Reasonable Likelihood of Prevailing (RLP) standard reveals over 25 requests that were either partially (or even fully denied by examiners). Compared to the prior grant rate of close to 95%, it would seem the new “higher standard” is having Congress’ desired effect.

Of course, when the entire request is denied, requesters may, while time permits, digest the examiner’s comments, polish their proposed rejections, and simply file again. However, this option disappear on September 16th, when IPX is discontinued in favor of the new post grant provisions of the AIA. Those IPX filers that are in parallel litigation, and have their IPX requests denied closer to the September deadline, may soon be forced into some very unfavorable positions. 

First, requesters that are involved in litigations that were initiated (by service of complaint) more than 12 months prior to September 16th will not be able to simply file an Inter Partes Review. As the new IPR statutes preclude late stage litigants from seeking the help of the USPTO. So, after September 16th, refiling may not be an option.

Second, a denied requester can petition the Director’s to review the examiner’s denial of IPX. However,  judging from the few decisions recently rendered, none were found persuasive and the Director’s decision is final and non-appealable. 

Third, a request for ex parte reexamination (EXP) is a less robust option due to the loss of requester participation rights.

For those requesters that are faced with a partial IPX order (less than all requested claims being reviewed), the options are even more problematic. While the IPX proceeding advances in prosecution, a requester’s only option is to petition for relief to the director of the examiner’s determination not to reexamine some claims of the request. A second IPX cannot (absent Director approval) be requested by virtue of 35 U.S.C. § 317; and 37 C.F.R. 1.907. Likewise, for late-stage litigants, IPR would not be available as a second option.

Review of recent requests (both granted and fully or partially denied)  provides insight into the Office’s interpretation of the new RLP threshold. Examiner’s seem to be applying the standard as “if I can reject a particular claim, grant the proceeding as to that claim; if I can’t reject a particular claim, deny the proceeding as to that claim.” In other words, the USPTO is applying the RLP standard on a claim by claim basis rather than “if I can reject at least one claim in the request, grant the proceeding for all requested claims and then either reject claims (adopt rejections) or confirm claims (refuse to adopt rejections) as appropriate”.

Yet, noticeably absent from the reviewed petitions was any argument that the examiner has misapprehend how to apply the new threshold to the proceeding.  The language of the statute makes clear:  “the information presented in the request shows that there is a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged in the request.”  Nowhere does the new statute state or imply that the threshold should be applied on a claim by claim basis, as is typically the case with “SNQ” practice. 

September is shaping up to be a very busy month for all.

Working Patent Reexamination Developments Into the Appeal Record

Previously, I discussed how an appellant sought relief at the CAFC from an earlier Markman Order under Fed. R. Civ. P. 60(b). The Appellant argued on appeal that a recently concluded ex parte patent reexamination of the patent at issue constituted new evidence requiring relief from the earlier decision. The appellant theorized that the USPTO’s analysis as to claim scope should carry significant weight, and were contrary to the court’s earlier Markman and SJ findings. While the CAFC accepted the argument under Rule 60, they ultimately found for the Appellee.

Recently, yet another appeal rule was leveraged to inform the CAFC of USPTO findings in patent reexamination.

In General Electric Co. v. ITC, one issue reviewed by the court was the Commission’s determination of no domestic industry in regard to a particular patent based on its claim constructions. The Federal Circuit reversed the Commission’s construction and ruled in favor of General Electric’s claim construction. The Court noted in a footnote that the other party “submitted a letter in accordance with Fed. R. App. P. 28(j), arguing that General Electric stated a position before the PTO during the ongoing reexamination of the ‘985 patent that contradicts its arguments here. General Electric responds that its argument distinguishing a certain reference does not conflict with its position here. On the information before us, the reexamination arguments do not affect our conclusion.”

Here too, the court was unmoved by the inconsistent reexamination evidence. Yet, the footnote suggests yet another avenue that parties may explore at the appeal stage, namely, filing a letter or submission under Fed. R. App. P. 28(j) as a “citation of supplemental authorities.”

USPTO Issues Final Rules on Pre-Issuance Submissions

Yesterday the USPTO issued the Final Rules for implementing the new pre-issuance submission component of the America Invents Act, entitled: Changes To Implement the Preissuance Submissions by Third Parties Provision of the Leahy-Smith America Invents Act (here). The new pre-issuance provisions will take effect on September 16, 2012 and apply to all applications filed before, on, or after that date.

Minor changes were made to the formal requirements for these submissions as originally proposed, however, the substance of the proposed provisions was not altered in any significant regard with the exception of the applicability to reissue applications. Pre-issuance submissions will not apply to reissue applications as the USPTO has taken the position that patent reissue is a post-issuance proceeding (the same holds true for patent reexamination). Instead, the Protest provisions (37 C.F.R. § 1.291) will provide a similar mechanism for patent reissue.

The timing of the submission must comply with the following conditions:

Pursuant to 35 U.S.C. 122(e), preissuance submissions of patents, published patent applications, or other printed publications must be made in patent applications before the earlier of: (a) The date a notice of allowance under 35 U.S.C. 151 is given or mailed in the application; or (b) the later of (i) six months after the date on which the application is first published under 35 U.S.C. 122 by the Office, or (ii) the date of the first rejection under 35 U.S.C. 132 of any claim by the examiner during the examination of the application.

In order to file a submission, a third party may submit either a paper filing, or employ a new interface of the EFS-web system, but must:

Timely file in writing:

(1) A list identifying the items being submitted;

(2) a concise description of the relevance of each item listed;

(3) a legible copy of each non-U.S. patent document listed;

(4) an English language translation of any non-English language item listed;

(5) a statement by the party making the submission that the submission complies with the statute and the rule; and

(6) the required fee.

(note a different mechanism applies to PCT filings (here))

While a more robust option than previously available, it remains to be seen whether or not pre-issuance submissions will be embraced by the public. Simply stated, information is likely to be given inconsistent treatment across art units and individual examiners. For important matters, this practice will likely be disfavored along the same lines as ex parte patent reexamination. That is to say, procedures which do not permit further third party commentary generally do not produce acceptable results for patent (or in this case, application) challengers.