Federal Circuit Finds Admissibility of Supplemental Information a Matter of Discretion

When discussing Patent Trial & Appeal Board (PTAB) trial practice, the topics of supplemental information and supplemental evidence are often confused. Supplemental evidence may be filed as a matter of right within 10 days of a party objection. 37 C.F.R. § 42.64(b)(2).  On the other hand, supplemental information is considered only upon motion of  a party. Typically, supplemental information is filed by a petitioner within one month of trial institution to proactively reinforce an active trial ground. (e.g., information not previously available, recently produced in litigation, etc).  37 C.F.R. § 42.123

Early on, Rule 42.123(a) was the target of significant patentee criticism. Patentees argued that the Rule provided a potential avenue for gamesmanship and petitioner sandbagging.  The rule provides:
§ 42.123 Filing of supplemental information.
(a) Motion to submit supplemental information. Once a trial has been instituted, a party may file a motion to submit supplemental information in accordance with the following requirements:
(1) A request for the authorization to file a motion to submit supplemental information is made within one month of the date the trial is instituted.
(2) The supplemental information must be relevant to a claim for which the trial has been instituted.

The patentee criticism was that the Rule permitted a petitioner to file supplemental information as long as it was filed within one month of institution— and relevant to a claim under review.  Indeed, patentees in some early IPRs declined to file a preliminary response for fear that it would be used as a roadmap by the petitioner to fashion its supplemental information filing.  

To its credit, the PTAB has been wary of gamesmanship when it comes to supplemental information. As a result, such motions are scrutinized as to the underlying circumstances leading to the submission— such as whether the information could have been submitted earlier. Yet, a small number of panels appeared to admit supplemental information based on only the timing an relevancy requirements of the Rule. 
Last week, In Redline Detection, LLC, v. Star Envirotech, Inc., the CAFC considered whether the Rule is limited to only timing and relevancy, or whether the PTAB may, as a matter of discretion, deny such information that, for example, could have been earlier submitted. 

In Redline the petitioner did not file a declaration supporting its numerous petition trial grounds together with its petition (filed in January 2013). Instead, it sought to add a declaration after institution, as supplemental information. The petitioner explained that it was more cost effective to provide a declaration limited to the trial grounds actually instituted. The PTAB denied the declaration as information that could have been submitted earlier. That is, the PTAB denied the motion despite the fact that Redline’s motion complied with the timeliness and relevancy requirements of the Rule.

On appeal, Redline argued that the PTAB could not consider additional criteria beyond timing and relevancy requirements of the Rule, and pointed to what it argued as inconsistency in the application of the Rule in several other IPR proceedings. Under an abuse of discretion standard of review, the CAFC affirmed the PTAB’s interpretation of Section 42.123(a). Specifically, the CAFC held that:

[t]he PTAB’s interpretation of its governing regulations is not plainly erroneous … [N]othing in § 42.123 or its regulatory history expressly states or implies that all elements of the [PTO’s] mandate are incorporated into § 42.123(a) and that it must be read to the exclusion of the remaining subsections in that regulation and 37 C.F.R. Part 42, Subpart A.” [Timeliness and relevancy are] additional requirements that must be construed within the overarching context of the [PTO’s] regulations governing IPR and general trial proceedings.

Going forward, petitioners seeking entry of supplemental information should be prepared to address the circumstances that necessitate the submission to allay concerns of gamesmanship. 

No Patentable Weight When Claiming Content of Printed Matter

In the data processing arts, it is not uncommon for a patent examiner to disregard a limitation of a patent claim as constituting “printed matter.”  For example, if one were claiming the data structures internal to an iPod, the fact that a playlist may constitute “jazz” songs is not a patentable distinction. This is because the content of a playlist (as opposed to the functional characteristic of the actual data structures) is “printed matter” that cannot convey patentability.  

Last week, the Federal Circuit clarified the printed matter analysis in In Re: Thomas L. Distefano, III 

In explaining the proper analysis for printed matter, the Court explained (here):

The first step of the printed matter analysis is the determination that the limitation in question is in fact directed toward printed matter. Our past cases establish a necessary condition for falling into the category of printed matter: a limitation is printed matter only if it claims the content of information.                                     
 .          .          .          .    
Only if the limitation in question is determined to be printed matter does one turn to the question of whether the printed matter nevertheless should be given patentable weight. Printed matter is given such weight if the claimed informational content has a functional or structural relation to the substrate. For example, in Gulack we determined that while a sequence of digits printed on a wrist band constituted printed matter, the sequence deserved patentable weight because the informational content of the sequence (what numbers were represented) was functionally related to the endlessband physical structure of the substrate. Similarly, in In re Miller, our predecessor court determined that while the text written on a measuring vessel was printed matter, it must be given patentable weight because there was a “functional relationship between a measuring receptacle, volumetric indicia thereon indicating volume in a certain ratio to actual volume, and a legend indicating the ratio, and in our judgment the appealed claims properly define this relationship.” Thus, as we have consistently held, once it is determined that the limitation is directed to printed matter, one must then determine if the matter is functionally or structurally related to the associated physical substrate, and only if the answer is “no” is the printed matter owed no patentable weight.

In the present case, the Federal Circuit determined that the Board erred at the threshold inquiry, that is, in establishing that the claimed feature constituted “printed matter.”  In particular, the Federal Circuit found that (1) the content of the information communicated by the claimed “web assets” is not claimed, and (2) the source of the information, or the “origin,” is not part of the informational content. 

PTAB Trial Not Necessarily Constrained to Petition Grounds

Patentees often amplify relatively insignificant technical differences between a patent claim and the prior art in district court to great success. Such strategies often fall flat in front of the USPTO where the technical expertise of the agency can expose such distinctions as inconsequential (inherent), or obvious — usually.

For example, in patent reexamination, examiners adopt and/or modify challenges to suit their technical understanding. Later, on appeal, judges of the Patent Trial & Appeal Board (PTAB) may issue new rejections where a trivial patent claim difference is known, or suggested by the art as obvious. More recently, however, the same PTAB judges reviewing AIA trial petitions often times take a hyper-technical view of proposed grounds of unpatentability. That is, judges of the trial section often feel constrained to the grounds presented in a petition even though an argued “distinction” over the proposed grounds is a well-known, trivial feature in the art.

Today, the Federal Circuit reiterated that the PTAB is not so constrained in dealing with AIA trial petitions.  

Previously, in In re Cuozzo, the CAFC did not disturb the PTAB’s decision to institute trial on more claims than challenged in a petition. In today’s decision, the Court found that the PTAB is also not limited by proposed prior art grounds.

In Sightsound Technologies LLC v. Apple Inc. the Court explained (here):

SightSound argues that the Board erred in considering obviousness because Apple failed to include such argument in its petitions. As in Cuozzo, the statute does not limit the Board’s authority at the final decision stage to grounds alleged in the CBM petitions. The reasoning of Cuozzo and Achates applies not only to § 314(d), involved in Cuozzo and Achates applies not only to § 314(d), involved in Cuozzo and Achates, but also to § 324(e), the identical provision applicable to CBM review. 

In addressing the patentees due process complaints concerning the lack of obviousness grounds in the petition, the Court explained in a footnote:

We see no merit in SightSound’s contention that the Board’s approach deprived it of due process, particularly in light of the Board’s care in giving SightSound multiple opportunities to comment on the obviousness issue beyond what was required.

While patentees may lament this decision as yet another “anti-patent” anecdote, the agency owes a duty to the public to correct its mistakes. That is not to say that the PTAB owes it to the public to rewrite every faulty petition filed, not at all. Just that, in this case, the distinction over the anticipation ground was that the reference did not show data being stored to a hard disk. Arguing such a decades-old feature as patentably distinguishing to an expert agency should never fly.

Stagnant Patent Reform Bills More Appealing in Lame Duck Session

While early 2015 generated a number of competing “patent reform” bills in both the House and Senate, all have long since lost traction. The House Bill was pulled given the widening rift between Senate and House bills, and as a result of intense lobbying. Not much has happened on the legislative front since late summer 2015.

When questioned about the prospect of reform for 2016, The Hill reports that House Judiciary Chairman Bob Goodlatte (R-Va.) said that “timing is everything” for getting patent reform through the lower chamber.   The Chairman explained that the House Bill “was pulled from the floor to examine the appropriate time to do this and to have ongoing discussions with some of the folks that had concerns about various issues. And we believe the overwhelming support from the Congress is the reason to bring it to the floor. And to bring it to the floor at a time when the leadership will be looking for a bipartisan bill.”

Of course, the current House Bill will need to be rewritten/synced with the Senate Bill for any realistic chance of success in 2016. How much the current proposals will need to be watered down from present form is anyone’s guess. The Chairman’s statement: “leadership will be looking for a bipartisan bill,” interpreted, means Congress will want to show something for the lame duck session at some point.  If that happens, there might be enough political desperation to refocus again on patent reform.  Since patent reform isn’t sexy enough to sell to the average voter, you can bet that any such effort will be trumpeted as a “jobs bill“— much like the America Invents Act was in 2011.  That is, unless some other piece of legislation comes along sooner, and is an easier sell.

Dissent Finds Burden of Unpatentability Rests with Petitioner for Amended Claims

Back in July, the USPTO’s Patent Trial & Appeal Board (PTAB) issued an informative decision in Masterimage 3D. Inc. v. RealD Inc. (IPR2015-00040) (here). In Masterimage, the Board explained that a patent owner moving to amend before the PTAB bears the burden of distinguishing its amended claims over prior art of record and also prior art known to the patent owner. In doing so the Board defined the scope of “prior art of record” and “prior art known to the patent owner.”  The Board defined prior art of record as:

     a. any material art in the prosecution history of the patent;
     b. any material art of record in the current proceeding, including art asserted in grounds on which the Board did not institute review; and
     c. any material art of record in any other proceeding before the Office involving the patent.

Last week, in Prolitec, Inc., v. Scentair Technologies, Inc, the Federal Circuit considered whether this “prior art of record” burden was appropriate.

In finding the showing appropriate, the Court explained (here):

We conclude that the PTO’s approach is a reasonable one at least in a case, like this one, in which the Board’s denial of the motion to amend rested on a merits assessment of the entire record developed on the motion, not just on the initial motion itself. The Board’s position— that the patentee’s burden on a motion to amend includes the burden to show patentability over prior art from the patent’s original prosecution history—is not in conflict with any statute or regulation. Moreover, it is not unreasonable to require the patentee to meet this burden.The prior art references cited in the original patent’s prosecution history often will be the closest prior art and will already have been reviewed by the patentee. Evaluating the substitute claims in light of this prior art helps to effectuate the purpose of IPRs to “improve patent quality and limit unnecessary and counterproductive litigation costs.”
                                  .                .               .                .                   .
[I]n the combination of its motion and its reply brief supporting the motion, Prolitec simply failed to support adequately its assertion of patentability over Allred (cited in the prosecution history) and Benalikhoudja (the key IPR prior art), even after ScentAir had called attention to Allred in opposing the motion to amend. 

The dissent takes issue with the PTAB’s refusal to enter the amendment.  That is, while the amended claims may not have proven distinguishable over the art, the entry of the amendment should have been granted on procedural grounds (which would have at least disposed of the claim construction dispute of the un-amended claims):

Of primary concern is the PTO’s treatment of the statutory provisions for claim amendment in these postgrant proceedings. The panel majority holds that the PTAB properly refused entry of an amendment, although Prolitec complied with all of the statutory and regulatory requirements. The amendment would have narrowed the claims, potentially avoiding a dispositively adverse claim construction.
                                             .                .               .                .                   . 
PTO regulations authorize denial of a claim amendment that complies with the statute, but only when: 
          (i) The amendment does not respond to a ground of unpatentability involved in the trial; or 
          (ii) The amendment seeks to enlarge the scope of the claims of the patent or introduce new subject matter.                                                                                            .                .               .                .                   . 
When a proposed amendment would resolve a dispositive aspect of claim breadth, refusal to enter the amendment is contrary to both the purpose and the text of the America Invents Act.

The dissent continues on to question whether the motion to amend “burden” as construed by the PTAB conflicts with the statutory burden of proving unpatentability under 35 U.S.C. § 316(e), asserting:

That statutory prescription applies [of 316(e)] whether the “proposition of unpatentability” is for amended or unamended claims. However, the PTAB disregards this statutory requirement by placing on the patentee the burden of proving patentability for a proposed amended claim.
                                          .                .               .                .                   . 
The America Invents Act does not authorize or suggest such a shift in the statutory burden. The PTO, in its Intervenor’s brief, invokes the practice of district court litigation and argues that if the patentee files a motion, it bears the burden of establishing entitlement to grant of the motion. However, this generalization is inapplicable when there are explicit statutory burdens that set a different standard.  

The Act requires the PTAB to analyze the patentability of “any new claim added under section 316(d),” 35 U.S.C. § 318(a), again reflecting the statutory directive that the new claim should be added, provided that it qualifies under the statute. The PTAB then determines patentability of the added claim in accordance with the statutory burdens. The statute places the burden of proving invalidity (unpatentability) on the petitioner. As explained by Senator Kyl, “inter partes reexamination is converted into an adjudicative proceeding in which the petitioner, rather than the Office, bears the burden of showing unpatentability.” 137 Cong. Rec. S1360, S1375 (daily ed. Mar. 8, 2011). The Act makes no distinction between original and amended claims in inter partes review. 

My colleagues on this panel depart from the statute in removing from the petitioner the burden of showing unpatentability of amended claims.

The dissent makes an interesting point.  

If the PTAB were to adopt the view (likely via new legislation) that the burden to enter an amendment is satisfied as long as the amendment is directed to a trial ground, and not enlarging the scope of the claims, patentability determinations could be off-loaded to petitioners. Frankly, as amendment is rare in most PTAB cases due to the intervening rights created, shifting this requirement to petitioners would not be an undo burden.  Any competent amendment opposition would include such unpatentability arguments in any event (as seems to have been the case here).  If every amendment (not enlarging scope or unrelated to the trial grounds) were entered by the PTAB, amended claims could simply be denied on the merits as appropriate. Perhaps more importantly, the amendment/BRI controversy at the PTAB could be put the rest once and for all, saving the agency unnecessary grief.

Federal Circuit Reinforces Patent Rights as a Public Concern of a Regulatory Framework
The constitutionality of USPTO’s Inter Partes Review (IPR) mechanism has been challenged in a few district court cases over the past year. The challenge typically argues that the Patent Trial & Appeal Board (PTAB) cannot abrogate the jurisdiction of an Article III court in assessing patent validity, and/or that the PTAB prevents the 7th amendment right to a jury trial. I have largely refrained from discussing these recent cases as I found the arguments to be a bit too “creative.”  This is because the very same arguments failed decades ago when patent reexamination was first introduced in the 1980s.  Patlex Corp v. Mossinghoff (CAFC 1985)

The recent constitutionality arguments hoped to distinguish the earlier precedent on the basis that, unlike patent reexamination, which is examination based,  IPR is adjudicative.  I always found this position odd given that an unfavorable reexamination may be appealed to several adjudicative bodies, and IPR was a replacement for inter partes patent reexamination (which was also adversarial).

Today, in MCM Portfolio LLC v. Hewlett-Packard Company, the CAFC agreed, reinforcing the Patlex precedent of the 1980s.

The CAFC explained that the 1880s Supreme Court precedent seemingly preventing the USPTO from revoking patents (McCormick Harvesting Machine Co. v. Aultman; “McCormick II”) became inapplicable once Congress granted the USPTO authority to revoke patents, starting with the patent reexamination statutes (here):

McCormick II did not address Article III and certainly did not forbid Congress from granting the PTO the authority to correct or cancel an issued patent. Congress has since done so by creating the ex parte reexamination proceeding in 1980; the inter partes reexamination procedure in 1999; and inter partes review, post-grant review, and Covered Business Method patent review in 2011. 

Next, the CAFC explained that the Supreme Court has recognized the power of Congress to delegate disputes over “public rights’ to non-Article III courts, even disputes between private entities regarding public rights. The CAFC emphasized the important role of expert agencies in resolving disputes between private parties in adversarial proceedings:

More recently, the Court expounded on the public rights doctrine in Stern v. Marshall, 131 S. Ct. 2594 (2011). Stern explained that the Court continued to apply the public rights doctrine to disputes between private parties in “cases in which the claim at issue derives from a federal regulatory scheme, or in which resolution of the claim by an expert government agency is deemed essential to a limited regulatory objective within the agency’s authority. . . . [W]hat makes a right ‘public’ rather than private is that the right is integrally related to particular federal government action.”     .       .        .
Our conclusion that the inter partes review provisions do not violate Article III also finds support in our own
precedent. We had occasion to consider the constitutionality, under Article III, of the ex parte reexamination statute in Patlex Corp. v. Mossinghoff .   .     .

Finally the CAFC noted:

There is notably no suggestion that Congress lacked authority to delegate to the PTO the power to issue patents in the first instance. It would be odd indeed if Congress could not authorize the PTO to reconsider its own decisions.
The Board’s involvement is thus a quintessential situation in which the agency is adjudicating issues under federal law, Congress having devised an expert and inexpensive method for dealing with a class of questions of fact which are particularly suited to examination and determination by an administrative agency specially assigned to that task.’   .        .        .          .A defectively examined and therefore erroneously granted patent must yield to the reasonable Congressional purpose of facilitating the correction of governmental mistakes.

(internal quotes omitted)

New Rejections Raised During Appeal by Patent Examiner?

Just a reminder that the USPTO Patent Trial & Appeal Board (PTAB) still does a lot of appeal work besides conducting AIA trial proceedings.

The PTAB has released guidance on responding to new grounds of rejection in an examiner’s answer.  The article reviews the Board Rules for addressing new grounds of rejection, including responding to new grounds designated as such in an examiner’s answer, responding to undesignated new grounds of rejection, and the regulations providing for tolling of the time period for filing a reply brief while a petition for review of the examiner’s answer is pending.  

The article is found (here).

PTAB Statistics Update & Close of Public Comment Period

Yesterday marked the close of the public comment period for both the Comments on a Proposed Pilot Program Exploring an Alternative Approach to Institution Decisions in Post Grant Administrative Reviews as well as Comments to the Amendments to the Rules of Practice for Trials Before the Patent Trial and Appeal Board. Now, with the benefit of the submitted public commentary, the USPTO will move forward with a “final” rule package for the Amendments to the Rules of Practice, and will consider the whether or not to move forward on the Single-APJ Pilot.  

Given that much of the feedback on the Pilot was negative, it remains to be seen whether this concept will be implemented in practice. Public comments are found (here), including my thoughts.  

The Amendments to the Rules of Practice are far less controversial.  Much of the commentary (bar associations) challenges the use of the broadest reasonable interpretation in AIA trials, despite the fact that the USPTO did not request thoughts on that topic. (here)  My comments are found here.
(Note: full comments may not be posted for a few days)

Today, the Patent Public Advisory Meeting held their quarterly meeting at the USPTO Alexandria campus.  The most recent update on PTAB statistics and operational initiatives is found (here)

Heightened Written Description Requirement for Negative Claim Limitations?

Negative patent claim limitations were once disfavored by the USPTO.  This is because defining claim scope by exclusion was considered less precise relative to more traditional, positive claim scope recitations.  Over the years, the USPTO has been guided to accept negative limitations as in some cases it may be the only way to adequately claim a given invention.  Yet, in assessing written description support for such claim features, the USPTO explains that “the mere absence of a positive recitation in a patent specification is not a basis for exclusion consistent with written description requirements.” MPEP 2173.05(i) 

In some cases, examiners have been known to require explicit support for a negative claim limitation. The degree of specification support necessary to support a negative claim limitation was analyzed last week by the Federal Circuit.

Inphi Corporation (“Inphi”) filed a request for inter partes reexamination of Netlist, Inc.’s (“Netlist”) U.S. Patent No. 7,532,537 (“the ‘537 patent”) directed to computer system memory modules comprising memory chips.  Numerous claims were rejected as obvious.  In overcoming the rejection, Netlist amended its claims, narrowing them and adding a negative limitation.  The negative claim limitation excluded three particular types of memory chip selection signals. 

Inphi appealed to the Board arguing in pertinent part that Netlist’s negative claim limitation failed to satisfy the written description requirement.  The Board affirmed the Examiner’s final decision and denied Inphi’s subsequent request for rehearing.

The question posed to the CAFC was whether Netlist’s negative claim limitation was supported by the specification or constituted impermissible new matter. That is, whether or not the disclosure of alternative implementations was enough, or whether a particular advantage disadvantage of one option to the exclusion of another, was required. 

The CAFC affirmed the Board, holding that simply describing alternative features without articulating advantages or disadvantages of each feature can support a negative limitation. (here)

The parties’ dispute centered on interpreting the key language in Santarus, Inc. v. Par Pharm, Inc.:

Negative claim limitations are adequately supported when the specification describes a reason to exclude the relevant limitation.  Such written description support need not rise to the level of disclaimer.  In fact, it is possible for the patentee to support both the inclusion and exclusion of the same material.

694 F.3d 1344, 1351 (Fed. Cir. 2012).  Inphi argued that the specification in Santarus clearly differentiated between an advantageous option and a disadvantageous alternative, and this was necessary to support a negative limitation directed to the disadvantageous alternative.  The ‘537 patent lacked such clear differentiation, but the Board pointed to three parts of the specification where the chip signaling alternatives were distinguished:  in a standards publication for memory devices that was incorporated by reference, in a table where these three types of chips were listed separately, and in a figure where these three types of chips were displayed on different signal lines.  The Court held that this constituted substantial evidence supporting the Board’s finding, emphasizing that “Santarus did not create a heightened written description standard for negative claim limitations and that properly described, alternative features are sufficient to satisfy the written description standard of § 112, paragraph 1 for negative claim limitations.”

PTAB Impact and Market Adjustment

Has the window of opportunity closed for hedge fund profiteering at the PTAB?  See my contributon to IPWatchdog.com (here)

For DC area practitioners seeking CLE before year end, consider this Tuesday’s IAM Patent Law & Policy 2015: Courts, Congress & the Monetization Landscape.   The program will explore recent decisions, legislation and USPTO practices impacting the monetization and enforcement landscape.