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PTAB Need Not Address Denied Trial Grounds in Final Decision

The Supreme Court will soon consider the propriety of the “appeal bar” of 35 U.S.C. § 314(d) in Cuozzo. This appeal bar of the America Invents Act (AIA) prevents appeal of institution decisions of the Patent Trial & Appeal Board (PTAB). To date, attempts to circumvent this bar have failed via writ of mandamus to the Court of Appeal for the Federal Circuit (CAFC), and lawsuits against the USPTO under the Administrative Procedure Act (APA).

This week, another attempt to side-step the appeal bar was denied by the CAFC in Synopsys Inc., v. Mentor Graphics Corp.  

In Synopsys, the petitioner challenged claims 1-15 and 20-33 of Mentor Graphics patent 6,240,376 in Inter Partes Review (IPR).  Trial was instituted for claims 1–9, 11, and 28–29.  Claims 10, 12– 15, 20–27, and 30–33 were denied institution.  After the PTAB trial concluded, Synopsys brought a suit in district court under the APA seeking to invalidate the PTAB’s regulation that allows institution of an inter partes review on “all or some of the challenged claims” 37 C.F.R. § 42.108. The suit also challenged the PTO’s practice of issuing final decisions on fewer than all of the claims raised in a petition. The district court denied the suit on jurisdictional grounds.  Synopsys raised the same procedural issues on appeal from the PTAB, among others.

In deciding the issue of whether or not the PTAB must institute trial as to all challenged claims if one is found to be proper, the Court explained (here):

[T]he text makes clear that the claims that the Board must address in the final decision are different than the claims raised in the petition. Congress explicitly chose to use a different phrase when describing claims raised in the petition for inter partes review in § 314(a) and claims on which inter partes review has been instituted in § 318(a). Section 314(a) specifies that Board may not institute inter partes review unless “the information presented in the petition . . . and any response filed . . . shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” 35 U.S.C. § 314(a) (emphasis added). However, in describing the final written decision, Congress stated that the Board must issue a final written decision with respect to any “claim challenged by the petitioner.” 35 U.S.C. § 318(a) (emphasis added). When Congress chooses to use two different words or phrases, this typically suggests that the two were deemed to have two different meanings.         
                     .            .            .            .            .
In addition, the conditional phrase “[i]f an inter partes review is instituted” in § 318(a) also strongly suggests that the “challenged” claims referenced are the claims for which inter partes review was instituted, not every claim challenged in the petition. Thus, the text of § 318(a) demonstrates that the Board need only issue a final written decision with respect to claims on which inter partes review has been initiated and which are challenged by the petitioner after the institution stage.
                    .            .            .            .            .
Although we find that the language is clear, if there were any doubt about the Board’s authority and the statute were deemed ambiguous, the PTO has promulgated a regulation allowing the Board to institute as to some or all of the claims. The regulation “authorize[s] the review to proceed on all or some of the challenged claims and on all or some of the grounds of unpatentability
asserted for each claim.” 37 C.F.R. § 42.108. Contrary to Synopsys’s argument that this regulation is invalid, the PTO has explicit authority to promulgate regulations “setting forth the standards for the showing of sufficient grounds to institute” inter partes review. 35 U.S.C. § 316(a)(2). This regulation is plainly an exercise of that authority. Under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), this regulation is a reasonable interpretation of the statutory provision governing the institution of inter partes review. See Cuozzo, 793 F.3d at 1278. As the PTO noted in adopting the regulation, the claim-by-claim approach streamline[s] and converge[s] the issues for consideration” and “aids in the efficient operation of the Office and the ability
of the Office to complete the [review] within the one-year timeframe.”

Of note to practitioners is footnote 4, which explains: 

We note that an issue relating to institution does not become appealable simply because the Board mentions that issue in its final decision. See Achates Reference Publ’g, Inc. v. Apple Inc., 803 F.3d 652, 658 (Fed. Cir. 2015) (appealability bar applies to institution decisions “even if such assessment is reconsidered during the merits phase of proceedings and restated as part of the Board’s final written decision”).

Judge Newman penned a lengthy dissent that explained her belief that the PTO regulation was inconsistent with the statute and its legslative history, and, therefore, the regulation could not be given Chevron deference.  She also re-visited some of her earlier dissents in Cuozzo and Ethicon, and found the footnote on Achates publishing to be an unnecessary extension of that holding.

Second Pilot Directed to Small & Micro Entities

Back in June, the PTAB began a pilot program to allow appellants with multiple ex parte appeals pending before the Board to expedite review of one appeal in return for withdrawing another. The stated purpose of the Expedited Patent Appeal Pilot is to allow appellants with multiple, pending ex parte appeals (i.e., large patent filers) to have greater control over the priority with which their appeals are decided.  This pilot is also hoping to reduce the backlog of appeals pending before the Board.  

When introduced, I noted that I could not imagine independent inventors being thrilled with a program that allows large filers a slightly faster path to a Board decision.

Fortunately, the agency has now introduced a second pilot directed to small and micro entities.

The second pilot allows small or micro entity appellants with only a single ex parte appeal pending before the PTAB to expedite review of that appeal in return for agreeing to streamline the appeal.

Specifically, the appeal must not involve any claim subject to a rejection under 35 U.S.C. § 112, and the appellant must agree to the disposition of all claims subject to each ground of rejection as a single group and waive any request for an oral hearing. The Streamlined, Expedited Patent Appeal Pilot for Small Entities will allow small or micro entity appellants who streamline their appeals to have greater control over the priority in which their appeals are decided. The streamlining of appeals under this pilot will also assist the Board to more efficiently reduce the overall inventory of appeals pending before the Board. 

Appellants wishing to participate in the pilot program need only make a certification and file a petition to the Chief Judge under 37 C.F.R. § 41.3. The Office has waived the petition fee and provided a form-fillable PDF (Form PTO/SB/441) for use in filing the certification and petition. More information can be found here.

Recently, the USPTO has published statistics on the success of the first pilot.  While a modest response to date, perhaps the ability to receive an appeal decision within one month (of petition grant) will entice a greater response going forward. (chart below).
Expedited Patent Appeal Pilot ending 20150909

First Reversal of PTAB in IPR

Yesterday, in Microsoft Corp v. Proxyconn Inc. (here), the Court of Appeals for the Federal Circuit (CAFC) reversed an Inter Partes Review (IPR) determination USPTO’s Patent Trial & Appeal Board— a first.  (The decision also affirmed-in-part, vacated-in-part, and remanded-in part) The Court found that the Board’s construction of several key terms to be unreasonably broad. The IPR is now remanded for further Board proceedings on a narrowed construction.  In this sense, apart from historical significance, the decision is unremarkable.

As to IPR specific issues, the Court brushed aside another challenge to the use of the Broadest Reasonable Interpretation (BRI) standard in IPR, citing its recent Cuozzo decision. Perhaps of most interest in this decision is the commentary of the Court in affirming aspects of the PTAB’s much maligned amendment practices.
On appeal, Proxyconn argued that the Board’s denial of their motion to amend, which introduced a substitute claim for claims 1 and 3, was improper as it applied art to the substitute claims that was not applied against  claims 1 and 3. More specifically, the Patentee argued that the Board could only deny the motion on factors explicitly enumerated by 37 C.F.R. 42.121.  The USPTO (intervenor) explained that the factors of this Rule were not exhaustive, and that the burden of 37 C.F.R. 42. 20(c) (as it relates to motions to amend) is spelled out in greater detail by decisions such as Idle Free Systems, Inc. v. Bergstrom, Inc., IPR2012-00027, (PTAB June 11, 2013).

The Court agreed with the USPTO, explaining:

At the threshold, we agree with the Director that § 42.121(a)(2) is not an exhaustive list of grounds upon which the Board can deny a motion to amend. In the AIA, Congress gave the PTO authority to “prescribe regulations” “governing inter partes review” and to “set[] forthstandards and procedures for allowing the patent owner to move to amend the patent.” § 316(a)(4), (a)(9). Congress also provided that, upon final decision, the Director should incorporate only those amended claims that are “determined to be patentable.” § 318(b). Given these directives, the PTO promulgated both the general regulation setting forth the patentee’s burden to establish it is entitled to its requested relief, § 42.20, as well as the more specific regulation setting forth particular requirements regarding the amendment process, § 42.121. Both regulations are plainly applicable to motions to amend filed during IPRs, and Proxyconn does not argue that the PTO acted outside its statutory authority in promulgating either one.

What Proxyconn does challenge is the Board’s interpretation of those regulations as permitting it to deny Proxyconn’s motion to amend claims 1 and 3 for failure to establish patentability over DRP—a reference that the Board did not rely on when instituting review of those particular claims. The Director responds that its authority to do so comes from § 42.20(c), as it has been interpreted in Idle Free—namely, as requiring the patentee “to show patentable distinction [of the substitute claims] over the prior art of record.” Idle Free, 2013 WL 5947697, at *4. According to the Director, it is permissible for the PTO to use adjudicative Board decisions like Idle Free, rather than traditional notice and comment rule-making, to set forth all the conditions that a patentee must meet in order to satisfy its burden of amendment under § 42.20(c).
                                                                                                      .          .         .        .        .         .

The Director argues that adjudication is appropriate here because the PTO “has not ‘had sufficient experience with [motions to amend] to warrant rigidifying its tentative judgment into a hard and fast rule’” and that the PTO “thus ‘must retain power to deal with [such motions] on a case-by-case basis if the administrative process is to be effective.’” Intervenor’s Resp. Letter 3, ECF No. 50 (alterations in original) (quoting SEC v. Chenery Corp., 332 U.S. 194, 202–03 (1947)). Because there is merit to these arguments, we cannot say that the PTO has abused its discretion in choosing adjudication over rulemaking.

The decision does note that while the Court endorses the Board’s use of adjudicative decisions to flesh out the burden of 42.10(c) it does not reach the other requirements of Idle Free, such as the more controversial requirement that the patentee show patentable distinction over all “prior art known to the patent owner.” (footnote 4).  That said, this requirement is expected to be dropped soon by the coming rule package anticipated at the end of next month. The new rules are expected to propose a certification from the patentee on this issue, as opposed to an affirmative showing or explanation.

The decision demonstrates the deference given to the agency on such procedural issues. Moreover, the “plainly erroneous or inconsistent with the regulation or governing statutes” is a significant barrier to successfully challenging agency actions. 

Finally, the Court emphasizes the obvious policy need to review amended claims for patentability in IPR:

[T]he very nature of IPRs makes the Board’s interpretation appropriate. During IPRs, once the PTO grants a patentee’s motion to amend, the substituted claims are not subject to further examination. Moreover, the petitioner may choose not to challenge the patentability of substitute claims if, for example, the amendments narrowed the claims such that the petitioner no longer faces a risk of infringement. If the patentee were not required to establish patentability of substitute claims over the prior art of record, an amended patent could issue despite the PTO having before it prior art that undermines patentability. Such a result would defeat Congress’s purpose in creating IPR as part of “a more efficient and streamlined patent system that will improve patent quality and limit unnecessary and counterproductive litigation costs.”

The PTAB does not have a statutory mandate that enforces speed in remands. It remains to be seen how the agency will handle re-work heading back from the CAFC given the already formidable AIA trial workload.

CAFC Again Finds Abuse of Discretion in Denying Stay Pending PTAB Review

Back in July, the CAFC considered an interlocutory appeal from a denial of a motion to stay pending Patent Trial & Appeal Board (PTAB) review in VirtualAgility Inc., v. Salesforce.com Inc., et al. (EDTX). In Virtual Agility, the Court reversed the EDTX’s denial as an abuse of discretion since it seemingly held a “mini-trial” on the merits of the defendant’s CBM petition. Today, in Versata Software Inc., et al. v. Callidus Software (here), the Court considered another interlocutory appeal (unique to the CBM statute) from a decision of Judge Sue L. Robinson of the U.S. District Court for the District of Delaware.  

As in Virtual Agility, the Court side-stepped the question of whether their review should be de novo under the CBM statute by finding the denial was an abuse of discretion. Yet, notably, the Court mentioned its authority to “conduct more searching review of decisions to stay pending CBM review.”

In considering the facts of Versata, the CAFC once again found the district court’s stay analysis wrong as to all of the enumerated factors of the CBM statute. 

The Court explained the relevant inquiry as laid out by Section 18(b)(1) of the America Invents Act (AIA). That is, the four factors that a district court should consider when deciding whether to grant a stay:

(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;
(B) whether discovery is complete and whether a trial date has been set;
(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party;
and
(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.

As to the first factor, the Court explained that it is not necessary for a challenger to challenge all of the claims, or raise all possible defenses, explaining:

The district court seemingly created a categorical rule that if any asserted claims are not also challenged in the CBM proceeding, this factor disfavors a stay. . . .But this type of categorical rule is inappropriate. Stays can be warranted even when a CBM proceeding does not address all asserted patents, claims, or invalidity defenses. . . .
Certainly this simplification factor weighs more strongly in favor of a stay when all of the litigated claims are undergoing CBM review. See, e.g., But there can still be a simplification of the issues when only some, but not all, of the claims asserted in litigation are challenged in a CBM review.

(internal citations omitted)

As to factor 2, the Court faulted the district court’s comparison of relative timelines of PTAB and litigation milestones without considering the efficiencies gained by discontinuing the court procedure.

As to factor 3, the Court criticized the fact finding, explaining:

Although not clear, it appears that the district court may have also found that Callidus’s motions to transfer and dismiss for failure to state a claim amounted to improper tactics. But if this was a consideration in the district court’s analysis, the opinion fails to explain why such motions were improper. For example, Versata does not claim that the motions were frivolous. Litigants are within their rights to seek a proper forum or to dismiss a claim, and these motions by themselves are not improper,without some basis to find otherwise. This record does not suggest any undue prejudice to Versata or clear tactical advantage to Callidus. The district court clearly erred, and we conclude that this factor strongly favors a stay.

The court acknowledged factor 4 is often satisfied together with factor 1:

As in VirtualAgility, we note that the simplification analysis under the first factor often points in the same direction as reducing the burden of litigation under the fourth factor.

The legislative history of Secton 18 of the AIA is quite clear as to the intent of the stay provision. The drafters emphaiszed that they could not imagine a litigation where a stay pending CBM review would not be appropriate. District courts may soon fall in line given the track record of CAFC appeals to date (which practically provide a stay once interlocutory appeal is taken in any event). Moreover, as both Versata and Virtual Agility have taken judicial notice of CBM progress transpiring during the appeal, one is left wondering why any district court judge would stick their neck out in this regard.

Note: Another Versata CBM dispute (Versata Development Group v. SAP America, Inc, on appeal from PTAB) will be heard at the CAFC on December 3rd. In this dispute the applicability of 101 in CBM proceedings will be considered along with the PTAB’s definition of a covered business method.

NDCA vs. EDTX

Prior to the passage of the America Invents Act (AIA) many district courts were less than impressed with the lenghty pendencies of patent reexamination proceedings at the USPTO. For this reason, motions to stay a litigation pending patent reexamination were often denied based upon the perceived prejudice of a 5-6 year delay (typical of reexaminations through appeal). The patent challenge proceedings of the AIA (IPR, CBM and PGR) were specifically designed, at least in part, to remedy the pendency issue.

The new patent challenge proceedings of the AIA are conducted before the USPTO’s Patent Trial & Appeal Board (PTAB) and must conclude, by statute, within 12 months of trial order. (There is a provision allowing for 18 month schedules in exceptional cases but the PTAB has yet to avail themselves of that exception). Many districts across the country have recognized the improved speed of the PTAB. Not surprisingly, the success rate for staying cases pending USPTO review has significantly improved.

That said, there are still significant differences of opinion on the PTAB —across districts, and even across judges of a same district. 

Perhaps most pronounced, is the different attitudes of the EDTX and NDCA on the PTAB.In a recent Order of the NDCA staying Evolutionary Intelligence LLC, v. Sprint Nextel et al., (here) which was transferred out of the EDTX, the court explained with respect to improved speed:

The AIA requires a final determination by the PTO in an IPR proceeding within one year, which may be extended up to six months based upon a showing of good cause. Id. § 316(a)(11). “For comparison, the old reexamination proceeding averaged over thirty-seven months in the second quarter of fiscal year 2013.” Pi-Net Int’l, Inc. v. Focus Business Bank, C-12-4958 PSG, 2013 WL 4475940, at *2 (N.D. Cal. Aug. 16, 2013). In the Pi-Net case, the court noted that such a “promise” of shorter proceedings may convince even “skeptical” judges to exercise their inherent discretion to stay cases pending IPR proceedings at the PTO.

On the topic of the potential for simplification, the court recognized the likelihood of claim cancellation/amendment, explaining:

Defendants argue that a stay would simplify the issues before the court because the entire infringement dispute will become moot if the PTO invalidates the claims in the IPR proceeding. The parties cite statistics showing that: (1) the PTO has granted 81% of IPR petitions (and another 10% settled before the PTO decided on the petition) . . . and (2) in the context of the old inter partes reexamination proceeding, 42% of inter partes reexaminations (from 1999 through September 13, 2013) resulted in all claims being cancelled or disclaimed, Dkt. No. 106-10, McCrary Decl. Exh. G. These figures indicate that there is a high likelihood that at least one of the eight IPR petitions will simplify the issues for trial.

. . .In sum, while there is no guarantee that an IPR will eliminate all the claims at issue, the higher standard to initiate an IPR (“reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition” as opposed to “substantial new question of patentability”) raises at least some likelihood that certain challenged claims will be struck down or amended if the PTO grants the petitions. In addition, the limited statistics available to the court indicate that the PTO will probably grant one of the IPR petitions, at least with respect to some of the asserted claims. The IPR proceedings will likely simplify the issues for trial, and thus this factor also favors granting a stay.

Contrast this policy level perspective with the fact intensive analysis of the EDTX in VirtualAgility Inc., v. Salesforce.com Inc., et al., which, interestingly enough, was denied a transfer to the NDCA. In the initial decision denying a stay pending a pending CBM (here) the court explained the expedited schedule of the PTAB was still prejudicial in some cases:

Defendants  . . . further argue that any prejudicial effect would be minimal because the CBM review occurs in an expedited 12-month time-frame. . .

While the Court is mindful that CBM review generally proceeds on an expedited twelve-month time-frame from the date the PTAB institutes review until it issues a final written decision,  . . . as opposed to inter-partes reexamination that could take up to twenty-four months, the Court is not persuaded that potential loss of market share and consumer goodwill during the intervening one year would necessarily impose only minimal prejudice on VirtualAgility.

Here the Court found that a 12 month delay was prejudicial for a direct competitor dispute. (The question of whether or not VirtualAgility was, in fact, a competitor was in dispute). As to the potential for simplification, the Court explained:

The first statutory factor requires the Court to consider whether a stay will simplify the issues in question and streamline the trial. Defendants argue that the CBM review will simplify the issues in this case because the review may result in some or all of the claims being cancelled. The Court, however, is not convinced that such a result is probable.

The court went on to conclude that based upon the lengthy prosecution and previous reexamination of this patent, and the fact that there were only two grounds of unpatentability in the CBM, that the challenger was unlikely to succeed. (despite the PTAB determination under the more likely than not standard).

While the Court seemed persuaded that the case presented unique facts, it is not at all uncommon for a business method patent application to remain pending at the PTO longer than most. Likewise, it is fairly common for a CBM or IPR to include art previously considered by the PTO, and less than 4 grounds of unpatentability due to page limits. I pointed out earlier this week that since this initial decision the patentee has presented a contingent amendment and  the denial of the stay is now on appeal to the CAFC.

Districts allowing litigation to proceed in parallel with faster PTAB challenges might soon face a jarring re-calibration of perceptions in the months ahead.

CBM challengeTroll Assertions to be Stayed Instantly Upon Filing of CBM

The new post grant patentability trials of the America Invents Act (AIA) are designed to serve as alternatives to costly patent litigation. One of the new post grant options is the very specialized, Transitional Program for Covered Business Method Patents, or “CBM” proceeding. This proceeding, like Inter Partes Review (IPR), is conducted before the administrative patent judges of the USPTO’s Patent Trial & Appeal Board.

The CBM option is noteworthy in several respects, but perhaps of greatest interest to patent challengers is the degree to which courts must defer to the USPTO. That is to say, when faced with the decision to stay or proceed to trial on a qualifying business method/e-commerce patent, the court is left with little choice but to halt proceedings.

As recently demonstrated by the district court in Markets-Alert Pty Ltd. v. Bloomberg Finance LP, et. al (DED), a stay is even warranted for CBM petitions still awaiting initial disposition by the PTAB. (here) Continue Reading Business Method/E-Commerce Patent Trolls Pronounced Dead

New CBM Challenges to Derail Business Method Patent Assertions?

Last September 16th marked the one year anniversary of the enactment of the America Invents Act (AIA). This “patent reform” legislation introduced several new post grant avenues to challenge an issued patent at the USPTO. One of these new options is the very specialized, Transitional Program for Covered Business Method Patents, or “CBM” proceeding.

The CBM option is noteworthy in several respects: first, it is a post grant review challenge that is limited to a special class of patents (i.e., “covered business method” patents); second, only those challengers that have been sued or charged with infringement of a covered patent may petition the USPTO to initiate a CBM proceeding; third, the estoppel is limited to those grounds actually raised in the proceeding (that is, there is no “reasonably could have raised” estoppel); and finally, the CBM statutes include unique controls that virtually ensure that any ongoing litigation at the time of a CBM filing will be stayed pending USPTO review.

As explained above, the CBM proceeding presents an insignificant of estoppel risk. This “free shot” combined with the near certain stay of costly court proceedings presents a “pay to stay” opportunity that qualifying defendants may find hard to resist.

Assuming a petitioner can demonstrate the necessary standing to file a CBM petition, the CBM statutes are designed to guarantee a stay of the parallel court proceeding.

First, the CBM statute mandates that a court considering a motion for stay pending a CBM proceeding apply a four-factor test. Of course, this factor based analysis is already familiar to the courts, however, courts tend to apply a three factor test, namely:

(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;

(B) whether discovery is complete and whether a trial date has been set; and

(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party.

The CBM statutes require all courts to consider a fourth step, which almost always weighs in favor of a stay:

(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.

The addition of this fourth factor is designed to tip the scales in favor of staying the district court proceeding. The legislative history of the AIA could not be clearer in this regard explaining that “[s]ince the entire purpose of the transitional program at the PTO is to reduce the burden of litigation, it is nearly impossible to imagine a scenario in which a district court would not issue a stay.” 157 CONG. REC. S1053 (daily ed. Mar. 1, 2011)

As if the above signals to the district courts were not clear enough the CBM statute also provides for interlocutory review of stay determinations; this review is also de novo. As such, even when the district court court refuses to stay the proceeding, it is effectively derailed for the months required to await the result of the interlocutory review.

It would seem foolish for district courts to deny motions to stay pending CBM proceedings only to have the certain interlocutory review effectively provide the same relief. Indeed, the CBM proceeding will only advance further by the time the CAFC considers the matter on de novo review. The CAFC may also consider the practical implications of upholding a stay denial pending CBM, that is, ensuring that two disputes on the same patent make it on their docket in the months ahead.

Proposed Page Limits Based on Interference Model

As discussed previously, the fees proposed to initiate for Post Grant Review (PGR) and Inter Partes Review (IPR) may be too cost prohibitive for many filers. Yet, perhaps more troubling than the proposed fee structure is the extreme page limits proposed for these proceedings.

The proposed rules set a maximum 50 page limit for requests to initiate IPR, 70 pages for PGR (inclusive of claim charts). The proposed rule explains that federal courts often impose page limits, and perhaps more importantly that the “Board’s experience” in patent interference leads the Office to believe that the current proposals are reasonable. The Office explains that the current page limit for prior art motions in a patent interference is 25 pages. Thus, the Office reasons that the doubling of this existing limit to 50 pages for IPR is quite reasonable.

The Office has borrowed heavily from patent interference practice in arriving at the proposed rules of procedural practice before the Patent Trial & Appeal Board (PTAB); this makes sense. However, one size does not fit all with respect to contested proceedings. There are important distinctions between a patent interference and an IPR/PGR. That is to say, the problem with the Office’s reasoning is that validity challenges in patent interference do not encumber challengers with statutory estoppel that extends to the federal courts; nor are such validity based challenges the focus of a patent interference (i.e., priority dispute). Indeed, as the very ownership of the patent rights are in dispute in a patent interference, there may be strategic reasons for limiting validity challenges.

Rather than gauging the proposed page limits for IPR and PGR on patent interference practices, it would make much more sense for the USPTO to look to the current practice in inter partes patent reexamination (IPX); the very proceeding being replaced by IPR. So far in 2012, the mean page count for IPX requests is 262….a far cry from the 50 pages proposed by the USPTO.

Of the 67 or so odd IPX request filed in 2012 (at the time of this writing), roughly 10 would be compliant if filed this time next year as a request for IPR. The charts below shows the distribution of page counts for 2012 IPX filings, and a comparison to the mean page count for IPX and that proposed for IPR. (Click to Enlarge)

distribution

IPX-pageWhile it is true that the proposed limits may be waived upon successful petition for additional pages, the Office has explained that such cases would be “exceptional.”

It is understandable that the Office propose a page limit control to streamline proceedings that must be completed within 12 months, and one could certainly cite to the long pendency of IPX proceedings as justification for ignoring it as model for future proceedings. Yet the agency would be hard pressed to justify current IPX pendency issues on mere page count alone. Instead, delays are more a result of a separate examination and BPAI phases, each of which have historically taken on the order of 18-14 months. For this reason, IPR was designed to be an adjudicative proceeding (i.e., no examination phase).

Congress has recognized the relationship between IPX and IPR by limiting the number of IPR filings (281) based upon the number of IPX filings in fiscal 2010. As such, it is befuddling that the USPTO would adopt a patent interference based benchmark rather than be guided by current IPX realities.

Courts certainly limit page counts in motions, claim construction, etc. However, expert reports are typically hundreds of pages and often times contain the bulk of the asserted invalidity positions. If IPR/PGR is to be a true alternative to patent litigation, as Congress intended, filers must be able to present their submitted art to the USPTO in a cost effective fashion that adequately balances their risk of estoppel. Otherwise, IPR/PGR filings will be few and far between…especially at the currently proposed fee levels.

Reexamination Certificate Printing Process Streamlined

A patent reexamination proceeding is terminated by the USPTO upon issuance of a Notice of Intent to issue a Reexamination Certificate (NIRC). Thereafter, the proceeding formally concludes with the issuance of the actual reexamination certificate. The certificate functions to communicate the results of the proceeding to the public (claim changes/cancellations, etc.)

Historically, upon issuance of the NIRC the USPTO would hand the file off to a government printing contractor located in Pennsylvania for printing of the reexamination certificate. Once in the hands of the printing contractor, the file would be reviewed to ensure completeness (and was often times shuffled back to the agency for administrative oversights, largely related to IDS filings). Thus, from the time a NIRC is issued, it is not uncommon for a certificate print cycle to span 4-6 months in duration. This delay was more than just a minor inconvenience for Patentees as amended/new claims do not legally exist until printed. In other words, potential infringement damages for such amended/new claims are lost to bureaucratic inefficiency even though the substantive aspect of the reexamination proceeding is effectively finished.

The good news is that the USPTO has now addressed the printing delay and has drastically reduced the duration of the print cycle in recent weeks. During the December 2010 to January 2011 time frame, the USPTO issued 78 reexamination certificates. For these certificates the average printing cycle spanned 120 days. Since that time, the USPTO made changes to the volume of data that is to be printed on a certificate. As a result of the changes implemented this past November the printing cycle has been reduced to 47 days. That is to say, from November 2011 to December 2011 the USPTO issued 70 certificates in an average time of 47 days, including one which issued in only 33 days.

The improvement is charted below (Click to Enlarge):

certificate info

The USPTO Office of Data Management (ODM) has provided me with the following data:

RX-NIRC Dates of December 2010 through January 7, 2011 (duration 6 weeks):
Total volume – 78
Issued on average in 120.6 days
Issue dates ranged from February 22nd to May 24th
40% of these reexams were well over 120 days

RX-NIRC Dates of September 2011 and October 2011 (duration 6 weeks):
Total volume – 102
Issued on average in 52.9 days
Issue dates ranged from November 1st to December 6th
Less than 8% of these reexams were over 100 days.

RX-NIRC Dates of November 2011 and December 2011 (duration 6 weeks):
Total volume – 70
Issued on average in 47.9 days
Issue dates ranged from December 13th to January 31st
0 reexams were over 100 days
1 reexam issued in 33 days

The time reduction was achieved by reducing the amount of data printed on the reexamination certificate. No longer will the certificate list the significant volumes of prior art submitted to the Office during patent reexamination proceedings, instead, this information will now reside in PAIR as a new “tab” of the interface.

The re-engineering of the print cycle is a much welcomed change.

Going forward, it is expected that the USPTO will continue efforts to streamline patent reexamination proceedings. For example, during the recent PLI 2012 Post Grant Patent Practice Program the director of the Central Reexamination Unit (CRU) commented that the previous streamline initiatives were placed on the back burner due to the monumental effort of the Agency to implement the various provisions of the America Invents Act. However, now that the bulk of the AIA rule making effort is complete, the Office expects to get back to their previously proposed streamline initiatives.

Stay tuned!

Historical Patent Reexamination Statistics Belie Modern Practices

When considering whether or not to stay a parallel litigation in view of a pending patent reexamination a district court will consider several factors. While delay is common to all stayed cases, the degree of delay caused by patent reexamination can be considered prejudicial. For this reason, especially when it comes to inter partes patent reexamination, the average length of the proceeding can be instructive to the Court.

Hoping to convince the Court of a prejudicial delay, Patentees will argue that inter partes patent reexamination takes on the order of 5-7 years to complete through appeal, citing those cases that have been fully contested through appeal. Defendants, on the other hand, will cite to published USPTO statistics that indicate inter partes patent reexamination pendency to be an average of 36 months, including appeal. (As pointed out previously, the 36 month statistic is skewed by the small number of completed inter partes patent reexaminations that have been fully contested through appeal).

However, regardless of the statistical theory advanced to the court, what neither theory considers is that historical statistics are weighed down by years of past USPTO practices. As one plaintiff found out recently, the USPTO has greatly streamlined the processing of inter partes patent reexamination relative to past practices.

In LG Electronics USA Inc. et al. v. Whirlpool Corp. et al. (DCNJ), the Court denied Whirlpool’s bid to stay the action last January pending inter partes patent reexamination of the patents in suit. The Court determined at the time that the reexaminations could very well take more than five years and the motion was denied without prejudice.

More recently, Whirlpool was successful in securing a six month stay. Thereafter, LG requested reconsideration. In considering the request, the Court noted:

[I]n its motion for reconsideration, LG insists that the Court was under a false impression that the reexaminations were moving quickly [when deciding to grant the six month stay] and that a final determination is imminent. LG would have the Court ignore what has actually taken place and substitute statistical evidence of the average pendency of inter partes reexamination. This argument is questionable at best. In its February 2011 opinion denying a stay of the case, the Court relied on a prediction that reexamination could take longer than five years. Specifically, in its January opposition brief, LG noted that the average pendency of inter partes reexamination was over 36 months, not including appeal.

In its opposition to the second motion to stay, and in its current brief to the Court, LG offers the same argument, namely that the entire reexamination process, including all appeals, is statistically likely to take as long as four years. Statistical evidence is clearly unconvincing in the face of an actual timeline. It became apparent that reexamination had proceeded much faster than expected, a fact the Court noted during the October 4, 2011 hearing. In particular, three of the four reexaminations have rendered actions closing prosecution and have issued right of appeal notices in under 12 months, far short of LG’s 36 month prediction.

(emphasis added) full decision here

It may be that the the Court was interpreting LG’s 36 month prediction to refer to the examination phase alone. (i.e., “not including appeal”).  Actually, the 36 month figure is published by the USPTO is the average time to NIRC. (so, it does include appeals, but these numbers are skewed as explained in the link above)

Still, statistical debates aside, the issuance of a RAN within 12 months is a significant improvement over past IPX time lines.