Hedge Fund IPR Scheme Unraveling

Last week, the USPTO’s Patent Trial & Appeal Board (PTAB) authorized a Motion for Sanctions in four IPR proceedings filed by the now infamous Kyle Bass & friends. The motion for sanctions will be based on an alleged abuse of process by Bass & Co. for pursuing four IPR proceedings relating to Celgene patents 6,315,720 and 6,045,501. 37 C.F.R. § 42.12(a)(6) The sanction sought is termination of the proceedings. 42.12(b)(8). (motion here)

The motion authorization, while clearly not an ultimate decision as to the propriety of sanctions is a clear harbinger of things to come. First, as busy as the Board is, any request for additional work is strongly indicative of far more than a passing interest in the topic. Second, the authorization in these cases comes by way of expanded panel. Finally, such motions are exceedingly rare (like less than 1% of cases, rare).  If shares in Hayman Capital were publically traded— like its IPR targets— shares would be significantly down trending on this news. The game is over.
As I pointed out months back, not only does the PTAB have the tools to deny these filings, it, not Congress, is in the best position to do so.  Now that a patentee has stepped up to tackle the issue head on, the Board need not take it up sua sponte. 

In my April post I explained that Rule 42.12 provides the PTAB with the ability to terminate filings that waste agency resources for profit. Congress created AIA trial proceeding to combat trolls, not create an altogether new class of them. Rule 42.12 provides sanctions for abuse of process and other improper use of office filings. When the Wall Street Journal is reporting on the financial schemes driving PTAB filings, it is time to act.

To the Board’s credit, they are doing exactly that. The Order explains:

Patent Owner confirmed that it wishes to move for sanctions against Petitioner, but not Petitioner’s counsel. Specifically, Patent Owner requested authorization to move for dismissal of the Petitions as a sanction for abuse of process by Petitioner or its real parties-in-interest. 37 C.F.R. § 42.12(a)(6), (b)(8). Based on the specific representations made during the telephone conference, we granted the requested authorization. Our decision was based on a determination that briefing will facilitate development of a complete record and, thereby, will promote the just resolution of the issues raised by Patent Owner.
                                                                                                                 .       .        .         .         .
We instructed the parties to address specifically in their briefs (1) the elements required to establish an abuse of process; (2) any evidence of intent that supports or undercuts the allegation of abuse of process in these cases; and (3) the standard of proof that applies when deciding a motion for sanctions.

Of course, if Mr. Bass & Co. are put out of business, the Bio/Pharma lobby will find the wind suddenly taken from its patent reform sails.
Should make for an interesting few months.

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.

New PTAB Pilot to Allow Flexibility in Appeal Priority

Starting Friday, June 19th, the PTAB will begin a new 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 appeal. The stated purpose of the Expedited Patent Appeal Pilot is to allow appellants with multiple ex parte appeals (i.e., large patent filers) pending to have greater control over the priority with which their appeals are decided and reduce the backlog of appeals pending before the Board.  

The backlog of ex parte appeals has remained relatively constant (in the mid 20,000 range) for several years.  This backlog, coupled with much longer delays in appeal briefing cycles, effectively delays Board decision’s on ex parte appeals (outside of reexamination appeals that are accorded special dispatch) for three years, or longer. While I can’t imagine independent inventors will be thrilled with a program that allows large filers a slightly faster path to a Board decision, the hope here is that if enough participate, the backlog will shrink, benefiting all appellants. As the PTO clearly realizes, the backlog is driven by many large, U.S. patent filers that appeal as a matter of course. 

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/438) for use in filing the certification and petition. As part of the petition process, an appellant must certify that docketing notices were issued for the appeal to be made special and the appeal to be withdrawn before June 19, 2015, and that both applications underlying the identified appeals are owned by the same party as of June 19, 2015, or name at least one inventor in common.  Additionally, the appellant must agree to waive any requested oral hearing in the appeal to be made special and acknowledge that any oral hearing fees paid in connection with the appeal to be made special and any appeal fees, including oral hearing fees, paid in connection with the appeal to be withdrawn will not be refunded.

Given the requirement that the appeals have to be docketed by the Board (i.e., have been through a long briefing process), I would not expect this program to make much of a dent in the backlog.  Now if you could unplug appeals that are not yet docketed (providing a longer term reduction in the backlog) you would get more than a few takers. However, that would not provide immediate relief to the the Board’s docket. Once an appeal is docketed at the Board, an applicant has already waited 12-18 months, or longer. The ability to withdraw the appeal (e.g., file an RCE) has always been a possibility (for non-reexam appeals). As such, I just don’t see much motivation to pull a long-standing appeal effort that is now on the Board’s docket just to juice another forward by a handful of months. 

In any event, the Board is trying to reduce the backlog in any way that it can, and that is a good thing.

Bio/Pharma’s Favorite Target Serves a Critical Role

Both Houses of Congress now have bills moving to their respective floors on further patent reform thanks in large part to Kyle Bass. Of course Congress had been toying with the idea of further reform long before everyone’s favorite boogeyman came along. But now, thanks to Mr. Bass, Congress has a story to sell otherwise mind numbing legislation to the masses. Keep in mind that America Invents Act (AIA) wasn’t about patents, but job creation. Remember that? The new patent reform story, at least for the significant Bio/Pharma lobby, is this: Hedge funds are devaluing drug patents to the point that and there may not be any future, ground breaking medications —unless Congress comes to the rescue. Silly, yes, but effective for advancing otherwise stagnant legislative agendas?…you betcha.

The fact of the matter is Kyle Bass has been a boon to Bio/Pharma lobbyists. His stunts (and that’s exactly what they are) allow the debate to turn away from patent quality to one of simple gamesmanship. Everyone can rally around a perceived abuse of legal process, especially when perpetrated by a vilified outsider. But the changes contemplated in the name of stopping Mr. Bass go well beyond that which is necessary. 
The changes seek to capitalize on the notoriety of hedge fund abuse to roll back laws enacted only 3 years ago as part of the AIA. These changes, impossible without Mr. Bass as a distracting firebrand, water down AIA trial proceedings for all patent challengers. The overwhelming majority of these proposals have nothing to do with stopping hedge fund abuse, but everything to do with making patent challenges at  the PTAB less effective. The inconvenient truth is Bio/Pharma has always been wary of opposition style proceedings at the PTO, and would rather not deal with them at all. And, without Mr. Bass, Bio/Pharma could never sell its pro-patent agenda in such a fervent, anti-troll environment.

At the same time, these very same bills are being sold as anti-troll to the public. Yet, as plaintiff attorneys and well-known NPEs lament the impact of AIA trial proceedings on their business model, Congress is looking to water these proceedings down??? Perhaps the greatest insult to Congress in this entire equation is that one of the more prominent NPEs (IP Nav) is partnered with Kyle Bass, another inconvenient truth ignored by legislators.  So, in the end, if these changes pass into law (which is far from certain), Kyle Bass will have made money, indirectly helped maintain drug prices (as opposed to his proclaimed intent), and, most offensively, IP Nav will have effectively undermined the system that has virtually destroyed its patent litigation business. 

Congress is being played like a fiddle.

Patent Act Rewritten to Appease Bio/Pharma Lobby

In a surprising change of course, the Senate bill known as the ‘The Patent Act” (S.1137) has morphed into a PTAB reform bill. The initial version of the Bill hardly touched the patentability trials of the USPTO’s Patent Trial & Appeal Board (PTAB). A competing bill, known as the “Strong Act,” — on the other hand— proposed gutting these highly effective patent challenge mechanisms.  After the Manager’s Amendment to the Patent Act on Tuesday (here), at least with respect to the PTAB, both bills now propose significant alterations to the PTAB’s patent challenge mechanisms.

As a reminder, the impetus behind the AIA of 2011 was to thwart abusive litigation fueled by weak patents. It was argued pre-AIA that patents were issuing from the USPTO of overly broad scope and on questionable technology. These patents were then used as tools by extortionists (patent trolls) to extract large settlements from the domestic tech industry. This cottage industry was spawned from an over abundance of such patents. And, since defeating these patents in a district court was quite difficult (due to the deferential treatment of U.S. patents) and expensive, settlement was the only option. The AIA provided relief from these practices by introducing a low-cost, expedited “opposition” to such patents at the PTAB known as Inter Partes Review (IPR) and Post-Grant Review (PGR). That is, the PTAB challenge proceedings of the AIA were designed to weed out weak patents, quickly and cost effectively. These proceedings have been very effective to the delight of some of America’s largest tech companies (i.e., serial defendants).  

Since enactment of the AIA, however, many have realized that when presented with appropriate evidence, the PTAB does not discriminate.  It is not just weak troll patents that are being cancelled, and this has a bunch of folks, especially the Bio/Pharma lobby, up in arms.

The Manager’s Amendment to S.1137 adds some 17 pages in PTAB changes, below is a list of the major changes proposed with my quick thoughts on each: 

1. Preliminary Responses may include evidence, and petitioners can seek leave to file a reply.
(A similar proposal is expected from the PTAB next month, likely moot)

2. Director given discretion to deny petitions in the “interests of justice.”  Also, the Director may deny filings that seem to simply leverage the difference in evidentiary standards. (i.e., collateral attack on an earlier court finding of no invalidity)
(Presumably this is directed at the hedge fund filings. Not the cleanest way to attack this problem, but, ok) 

3. Exception to 12-month IPR window for amended complaints that add new claims
(This would address a common issue joinder situation, and is a sensible idea)

4. Apply Philips claim construction.  Claim construction will be binding in a later proceeding. 
(I have written about this idea extensively, we already know about the potential for issue preclusion from B&B Hardware.  Patentees will regret pushing for this change, if it happens)

5. Clarify that parties can get live testimony, if the PTAB panel agrees it would be helpful.
(This doesn’t seem to change the status quo.  Also, a similar clarification is expected from the PTAB in July, likely moot)

6. Providing the ability to amend as a matter of right if narrowing, supported, and responsive to trial ground.  Petitioner has burden on unpatentability.
(Also, expecting similar proposal from PTAB in July, likely moot)

7. Force Amendment within 30 days of trial institution.
(Strange idea. Why would a patentee amend before it has even deposed the petitioner’s expert? What value does accelerating this decision bring to anyone?)

8. Presumption of validity to be accorded to challenged patent.
(A presumption serves one basic function, to allocate the burden of proof and accompanying evidentiary standard,  The burden of proving unpatentability is presently on the petitioner. Absent application of a clear and convincing standard, which is not discussed in the bill, what exactly does this presumption change? (other than to create unnecessary confusion)

9. Only one judge in common with Institution Order and Final Written Decision (FWD).
(The PTAB has already announced a similar initiative, moot)

10. Removing “reasonably could have raised estoppel” from PGR
(Bio/Pharma must have been asleep on this one.  Will encourage a far greater use of PGR, which given 101 and 112 grounds cannot be a Bio/Pharma wish.)

11. Fix CBM grounds to include 102(e).
(The most sensible fix in the bill)

Most of the practice changes noted above would be made effective (according to The Bill) at the PTAB within 6 months from enactment, the remainder at 12 months.  The changes would be prospective only.  So, if the presumption of validity and claim construction changes make it into law (far from certain), there would likely be a massive crush of filings in the weeks before the changes to avoid the practice uncertainty to follow.  

With the exception of the changes to the statutes (last two changes, and the 12 month window change), the PTAB already has the power to address all these issues. In fact, in most instances above, these changes are now imminent. Is Congress not talking to the USPTO?  This seems like a very wasteful legislative exercise to me.  In any event, there will undoubtedly be a lot of hearings and debate in the months ahead.  Bills will be rewritten, House bills will appear and be rewritten. This is a long road that may never end, and at a minimum will take us into 2016. Also impacting the legislative dynamic will be opposition lobbying, PTAB rules changes, CAFC rulings, and the approaching change in administration. 

Stay tuned.

June Boardside Chat on AIA Discovery

The USPTO’s Patent Trial & Appeal Board (PTAB) will host its third  “Boardside Chat” lunch webinar for 2015 today from noon to 1PM. The topic is “Discovery in AIA Trials.”  I will be participating on the the practitioner panel. 

Dial-in is as follows:
Webcast Instructions for Tuesday, June 2:

Event:

 PTAB Boardside Chat Webinars
Event address for attendees:

 https://uspto-events.webex.com/uspto-events/onstage/g.php?d=994593512&t=a(link is external)
Date and time:

 Tuesday, June 2, 2015 12:00 pm
Eastern Daylight Time (New York, GMT-04:00)
Duration:

 1 hour
Event number:

 994 593 512
Event password:

 123456
Audio conference:
Call-in toll number (US/Canada)
1-650-479-3208
Access code: 994 593 512
Captions Link:   http://www.captionedtext.com/client/embed.aspx?EventID=2623830

Tomorrow, don’t forget the (9AM-Noon) Duke Law School Center of Innovation Policy program (webinar available for those outside of DC) entitled “The US Patent Office’s Post-Grant Review Proceedings: A Review of the Evidence A Review of the Evidence” . U.S. Senator Christopher Coons, PTAB Chief Judge James Smith and Deputy Chief Judge Scott Boalick will offer their perspectives on the PTAB.  PTO Chief Economist Alan Marco and prominent academic researchers will present fresh, policy-relevant empirical research.  I will join a panel of commentators including, former Chief Judge Paul Michel of the Court of Appeals for the Federal Circuit, Robert Armitage, former Senior Vice President and General Counsel of Eli Lilly, Google Senior Patent Counsel Suzanne Michel, and Comcast Senior Vice President,  Deputy General Counsel and Chief Patent Counsel David Marcus. (Duke in Washington,  201 New York Ave., NW, Suite 600, webinar also available)

First Hedge Fund IPR Ready for PTAB Institution Decision

Earlier this week, Acorda Therapeutics filed its response to the first of the now notorious hedge fund IPR filings in (IPR2015-00720). In its response (here), Acorda points out that unnamed investors are directly funding the filing, yet remain unknown to the public despite the requirements to list all real-parties-in-interest.  Acorda also points out the profiteering nature of the filing as a means to influence the price per share of publicly traded stocks, which is inconsistent with the PTAB’s congressional mandate.

Since the first round of hedge fund filings, the same entities have filed upward of 15 IPRs. Additional copycat IPR filings have followed from other hedge funds. Meanwhile, the demand for the PTAB’s limited resources remains at an all time high from parties with legitimate patent disputes. 

As I have pointed out previously, independent of the RPI issue, the Board has the power to shut down this burgeoning avenue of abuse, and should do so quickly (a decision is not due until 8/26).  While Congress is poised to quickly provide a statutory control to cut off this chicanery, the public would be far better off if the PTAB exercised its discretion. Such decisive action by the agency would avoid the unintended consequences that would certainly follow the current legislative proposals. 
As a reminder the rationale behind hedge fund attacks on Bio/Pharma patents is to spook markets to the benefit of a short position. That is, prior to filing of the IPR, the Fund will take a “short” position in a low cap stock having a market value closely tied to their patent portfolio. In such cases the mere filing of an IPR can spook investors, impacting trading volumes enough to cause a temporary, but significant, price drop (i.e., quick profit for a short seller). For example, Acorda saw a 10% drop in its stock price when the ‘720 IPR was filed—before the merits of the petition were even known.

Current legislative proposals (STRONG ACT) includes a provision that would require standing for IPR petitioners (presumably to thwart such filings). However, companies not only employ IPR as an alternative to ongoing litigation but as a due diligence tool to avoid such situations in the first instance. Innovators looking to develop a new product line, or new area of business should have the freedom to clear the landscape of improvidently granted patents via the PTAB without having to wait for a lawsuit, or threat of one. Such knee-jerk legislative fixes are not only counterproductive, but are plainly urged by disingenuous lobbyists seeking to limit the PTAB’s effectiveness under the guise of stopping the hedge funds.

Instead, the PTAB should simply exercise its discretion and not institute these filings as being inconsistent with their congressional mandate.
In this regard, 35 U.S.C. §326(b) provides :

Considerations- In prescribing regulations under this section, the Director shall consider the effect of any such regulation on the economy, the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to timely complete proceedings instituted under this chapter.

Presumably the same interests that control the prescription of regulations extend to their enforcement.

The manipulation of financial markets through PTAB filings of investment professionals is entirely inconsistent with the guiding principles of §326(b). Indeed, the actions of Congress to quickly outlaw this practice (The Patent Act is rumored to be adjusted in this same regard this week) only reinforces the plain intent of §326. Indeed, the PTAB has recently exercised its discretion to deny institution of otherwise viable IPR petitions on equitable grounds. See Conopco, Inc. v. Procter & Gamble Co., Paper 24, No. IPR2014-00506 (December 10, 2014) (holding that the Director may, but not must, institute a proceeding when an RLP is demonstrated that would unnecessarily tax Board resources).  A petition that by its very nature undermines the integrity of the patent system and unnecessarily tax the agency’s limited resources would seem to be an easy call . While the IPR statutes enable anyone to file an IPR, institution of an IPR is a matter of discretion. 

The PTAB can, and should deny these purely financial gambits on RPI grounds, and as a matter of sound agency discretion as a waste of limited agency resources.

June/July PTAB CLE

The USPTO’s Patent Trial & Appeal Board (PTAB) will host its third  “Boardside Chat” lunch webinar on Tuesday June 2nd from noon to 1PM. This month’s chat will focus on “Discovery in AIA Trials.”  I will be speaking on the practitioner panel.  Registration information for this program is available at the above link.

The PTAB’s bi-monthly chat program updates the public oncurrent Board activities and initiatives. The full schedule is listed at the end of this post, including links to past chats.
An interesting option for those tracking legislative efforts will be
offered on Wednesday June 3rd (9AM-Noon) by the Duke Law School Center of Innovation Policy,entitled “The US Patent Office’s Post-Grant Review Proceedings: A Review of the EvidenceA Review of the Evidence” . U.S. Senator Christopher Coons, PTAB Chief Judge James Smith and Deputy Chief Judge Scott Boalick will offer their perspectives on the PTAB.  PTO Chief Economist Alan Marco and prominent academic researchers will present fresh, policy-relevant empirical research.  I will join a panel of commentators including, former Chief Judge Paul Michel of the Court of Appeals for the Federal Circuit, Robert Armitage, former Senior Vice President and General Counsel of Eli Lilly, Google Senior Patent Counsel Suzanne Michel, and Comcast Senior Vice President,  Deputy General Counsel and Chief Patent Counsel David Marcus. (Duke in Washington,  201 New York Ave., NW, 11th floor, webinar also available)
For those seeking CLE this last week of May, on Thursday 5/28 @ 2-3PM, my colleague Steve Kunin will be speaking on the IPO Chat Channel program entitled “Estoppel at the PTAB, with Judge Michael Tierney: Recent Decisions involving 325 (d) and 315 (e)1“

Finally, for a broader update and discussion on PTAB practice, I, along with my partner Greg Gardella, will host the Strafford Legal webinar entitled: Leveraging Post-Grant Patent Proceedings Before the PTAB on July 9th (register here). 

I hope to speak with you at one of these upcoming programs.

(Board Side Chat Schedule for 2015)

Date

 Time

 Topic

 Speakers
Tuesday, February 3

 Noon to 1 pm Eastern Time

 PTAB Statistics and Key Decisions

 Chief Judge James Donald Smith
Tuesday, April 7

 Do’s and Don’ts for Ex Parte Appeals

 Panel of Administrative Patent Judges
Tuesday, June 2

 Discovery in AIA Trials

 Panel of Practitioners and Administrative Patent Judges
Tuesday, August 4

 AIA Rulemaking and Guidance Changes

 Lead Judge Susan Mitchell
Tuesday, October 6

 Best Practices before the PTAB

 Panel of Administrative Patent Judges

Today’s Federal Register Notice provides the long awaited “quick-fix” rule changes. The rules codify the changes announced on Director Lee’s March 27th blog post, which provided for the use of a claim appendix in Motions to Amend, expanded page limits for such Motions, and expanded page limits for Petitioner Replies.

The final rules (here) provide additional ministerial changes to conform the rules to the Office’s established practices in handling AIA proceedings, including:

• expanding petitioner replies to a motion to amend to 12 pages;
• requiring a 14 point, Times New Roman font to ensure readability of briefs;
• clarifying that more than one back-up counsel can be named;
• clarifying how to count dependent claim challenges to calculate filing fees;
• clarifying that providing a statement of material fact by a party is optional;
• clarifying that routine discovery contemplates only cross-examination of affidavit testimony prepared for the proceeding;
• providing that uncompelled direct testimony must be in the form of an affidavit, not a deposition;
• clarify that that motions in limine are not used in AIA practice;
• requiring that that objections to evidence should be made part of the record by filing them;
• clarifying that only a single request for rehearing may be filed as of right;
• clarifying, that consistent with the AIA, that CBMs may be extended in the case of joinder; and
• clarifying that CBM petitions may not be filed if the petitioner or real party-in-interest filed a civil action challenging the validity of a claim of the covered business method patent.

As stated previously, more substantive changes to the rules and Trial Practice Guide are expected in late 2015.

Changes Clarify Expanded Panel Use & Single APJ Institution Decisions

As discussed on Monday, recent informative decisions explain the PTAB process for designating expanded panels for AIA trials. To apply the expressed rational of these decisions to the entirety of the Board, the Patent Trial & Appeal Board (PTAB) has revised its Standard Operating Procedure (SOP 1) accordingly. The revision addresses the assignment of Administrative Patent Judges to merits panels, interlocutory panels, and expanded panels in appeals, interferences, and AIA Reviews.  Among other things, the revision to SOP 1 clarifies that, although a party may not request an expanded panel, see AOL Inc. v. Coho Licensing LLC, Paper 12, No. IPR2014-00771 (March 24, 2015); Conopco, Inc. v. Procter & Gamble Co., Paper 24, No. IPR2014-00506 (December 10, 2014), a party is permitted to suggest the need for an expanded panel, see PTAB SOP 1 § III.C. (Rev. 14) (May 8, 2015). 

Another, perhaps more noteworthy change, is the ability of a single APJ to decide AIA trial institution. (footnote 1)  Going forward, a single APJ will institute trial, but any perceived prejudice from that single APJ would be avoided (theoretically) by the participation of two additional judges at the time of the final written decision. This change was mentioned in the Director’s blog post some weeks back.

The Board has also released a revised organizational chart and associated explanation (here).