Multiple Factors Drive Downtrend in Amendments at PTAB

Post-issuance amendment of patents has never been popular among patentees. This is because such amendments typically trigger an intervening rights defense that bars the collection of past damages from accused infringers. That is, if the amended or new claim is not substantially identical in scope relative to a previously issued claim, potential infringers of the amended/new claims are provided with an absolute and/or equitable intervening rights defense (35 U.S.C. § 252). For this reason, historically, patentees would rarely amend claims at the USPTO that were asserted in a co-pending litigation.

This calculus changed somewhat with the introduction of the post-grant trial proceedings of the America Invents Act (AIA).

Unlike, the previous patent challenge mechanism, patent reexamination, the new administrative patentability trials are faster — much faster. This increase in speed undermines the previous “war of attrition” model. Patentees can no longer shrug off a patent challenge at the USPTO on the basis that it will never finish in time to matter. Now, at the PTAB, the choice between amending or not is effectively a choice between losing the patent altogether and living to fight another day. Moreover, with the ability to file a contingent amendment (i.e., an amendment not considered unless the original claims are deemed unpatentable) there would appear to be even more reason to “hedge” one’s bet.

For these reasons, amendment at the PTAB was sought in many of the earliest IPR filings. Since that time, however, patentees have reverted to old habits.

Below is a chart of motions to amend relative to the overall filing rate.
Note: The cumulative filing rate of petitions does not equal instituted trials (where amendments are possible). Yet, the number of petitions denied outright and or/settled prior to amendment does not alter the direction of the downtrend. 
AmendCritics will undoubtedly point to the strict requirements for motions to amend as driving their decreasing popularity. While that negative perception may have some impact on filing rates, as pointed out above, amendments are never a first option for highly valued patents. Likewise, many expired patents (or close to expiration) are being challenged at the PTAB. (Partly due to the fact that many older patents were not challengeable in an inter partes fashion under the old system, which required filing of the underlying patent application on or after 11/29/99) For expired, or soon to be expired patents, amendment is not feasible.
As discussed earlier this month, it is expected that requirements on motions to amend will be softened in the months ahead. Should the motion to amend requirements/page limits be adjusted going forward, perhaps some successful, contested amendments will drive an adjustment to the current downtrend.

Board Sanctions Patentee in IPR Proceedings

37 C.F.R. § 42.12 provides that the Patent Trial & Appeal Board (PTAB) the power to sanction parties. The Board  has been reluctant to officially sanction parties given the relative newness of the AIA trial proceedings. The power to sanction parties was only been even alluded to in a handful of cases — which is typically enough. To my knowledge, the Board had yet to officially sanction a party. And then last week, a Patentee came along and pretty much volunteered to be the first.

In SAP America v. Lakshmi Arunachalam (IPR2014-00413, 00414) the pro se patentee appears to have challenged the impartiality of one of the assigned Administrative Patent Judges (APJ) based upon their mutual fund holdings (presumably accessed by a FOIA filing — all PTAB judges fill out a financial disclosure form every year). In doing so, the Patentee uploaded some documents to the Patent Review Processing System (PRPS) that were not only unauthorized, but were quite offensive. Similar statements were put on a web page, along with others accusing quite a few district court and CAFC judges of similar misdeeds.
 

The December 6, 2014 Order (here) explains:

On November 26, 2014, the First Subject Papers were released publicly on an Internet web site referring to Patent Owner by name. The web site includes a picture of Judge McNamara superimposed on a background of simulated targets with a skull and crossbones in a yellow triangle and a link to the First Subject Papers. The “who is” database for the linked site hosting the First Subject Papers lists identification information, at least some of which appears to be fabricated. Attempts to intimidate Judge McNamara, or any of the other persons identified on the Web site, are unacceptable.

As a result, the Patentee is no longer permitted to upload documents to PRPS and must submit (subsequent to pre-approval) paper filings. The patentee was warned that further misconduct would result in adverse judgment.
  

2014 CLE Year Comes to a Close

The PatentsPostGrant.com free monthly webinar series has concluded for 2014, but will resume in January 2015. Yet, there remains at least one option for those a few credits short of their 2014 continuing legal education (CLE) requirements. Next Monday, I will host the Strafford Legal webinar entitled: Evolving PTAB Trial Practices: Navigating Complex Procedural Rules — Strategically Using Routine and Additional Discovery, Requests for Joinder, and Motions to Amend. (register here)

For those looking forward to January 2015, the National CLE Conference (CLE & SKI) will be held in Vail Colorado January 8-11th (register here). This program, now in its 32nd year, will cover a full spectrum of hot topics in IP law. The program features a dialogue between the bench and the bar that will include Judge Reyna of the Court of Appeals for the Federal Circuit. (CAFC)

Review of PTAB Trial Orders Debated by CAFC

In recent weeks, the CAFC has twice considered whether or not the trial orders of the USPTO’s Patent Trial & Appeal Board (PTAB) become appealable once a final written decision is issued. First, on November 3, 2014, the CAFC heard arguments directed to this issue in In re Cuozzo Speed Technologies LLC. The Cuozzo appeal stemmed from the very first Inter Partes Review (IPR) ever filed. Cuozzo appealed the Board’s determination of unpatentability and argued that the IPR never should have been instituted in the first place. This past Wednesday in an appeal stemming from  the very first CBM filed, Versata Development Group v. SAP America, Inc, a similar threshold argument was made to the Court.

Can the CAFC consider an otherwise nonappealable PTAB trial order in reviewing a final written decision?

As a reminder, the CAFC has already determined that 35 U.S.C. § 314 precludes interlocutory appeal from a PTAB Trial Order. In fact the statute is quite clear on this issue.

§ 314. Institution of inter partes review
. . .
(d) NO APPEAL.—The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.

Less clear, is whether or not threshold issues decided in the trial order become appealable once the PTAB has finished the trial.

During Wednesday’s 90-minute oral argument in Versata Judge Neuman was of the opinion that the purpose of §314 was to keep interlocutory appeals from disrupting the trial timeline, and perhaps once the work was done by the agency, the totality of agency actions should be available for review. This consideration was especially critical in the Versata appeal as a key argument was whether or not the challenged patent truly qualified as a “covered business method.” Versata insisted that the PTAB’s definition of business method was not properly grounded in a “financial product or service” as allegedly required by the controlling statute. The Court seemed unimpressed with Versata’s proposed definition. Instead, the Court spent much of the oral argument time exploring the justiciability issue (not surprising given the recent Cuozzo debate and the broader applicability to their work). The panel noted how an ultra vires action of the agency might go unchecked absent review of PTAB trial orders. The Solicitor explained that judicial review bars were not uncommon in administrative law.

Other issues explored during the Versata argument included the applicability of BRI to AIA trial proceedings (an issue also debated in the Cuozzo case), the impact of parallel decisions in the district court, and patentability of computer implemented methods under 35 U.S.C. § 101. The Solicitor was impressive in her response to these varied issues and had a strong knowledge of patent office post-grant history and procedures. With respect to the application of BRI, the PTO explained that the AIA provided more than just procedural rule making authority, and contemplated merger, and consolidation with other office proceedings that applied BRI. It was also explained that amendment was possible before the PTAB, theretofore the court’s blessing of BRI was equally applicable to AIA proceedings. Judge Neuman was skeptical as to amendment options and remarked that the “rumor” was amendment was near impossible.   

The Versata argument’s focus on broader ranging AIA policy issues makes it far more interesting as compared to most appeals from the PTO. Both the Cuozzo and Versata decisions will be significant for post-grant patent practitioners in the month’s ahead. You can access these oral argument recordings (here). 

Patent Reform Propaganda Amps Up

With the incoming Republican majority itching to make their mark, patent reform appears at the top of the legislative agenda for 2015. As discussed previously, 
the interest in further reform is based more on political expediency than true need. That is, selling the American public that legislation has actually been passed to help out “main street” businesses, on a topic relatively few Americans understand, is an enticing political opportunity.

Emboldened by mid-term election results, Republican leaders have begun laying the ground work for a 2015 push for further patent reform. Reception among stakeholders has been tepid at best, with many urging caution. Several key Supreme Court rulings of the last few months on matters such as patentable subject matter, patent claim clarity, and attorneys fees have changed the landscape. Case law reform has taken the wind out of the sails that existed in the Spring of 2014, not to mention the continued and significant impact of the 2011 patent reform legislation.

Going forward, opposition to further reform may come from many that urged the changes embodied by the America Invents Act (AIA) of 2011. Lawmakers would be wise to put their “legislation for legislation’s sake” agenda aside, stop, and listen.

Limitations of Patent Reissue

As provided by 35 U.S.C. § 251, Patent Reissue is a mechanism by which a patent owner may correct an error in an issued patent. A proper reissue application is directed to an error that renders an issued patent wholly, or partly, inoperative. Such an error could be the mere absence of narrower dependent claims. In re Tanaka (CAFC 2011)

Although patent reissue allows for the correction of mistakes in claim scope, the proceeding is not a “do-over” of the original prosecution. For example, claim scope previously surrendered may not be “recaptured” via a broadening patent reissue. This same “public reliance” policy reasoning is utilized in other obscure aspects of patent reissue practice. For example, the Orita doctrine, prevents applicants from obtaining by reissue, claims that because of a requirement for restriction in which they had acquiesced, they could not claim in their patent. Last week, the CAFC explained yet another limitation on patent reissue practice, the “original patent” limitation of patent reissue. 

Antares Pharma, Inc. v. Medac Pharma Inc., (Fed. Cir. 2014), emphasized the original patent requirement of 35 U.S.C. § 251, namely:

Whenever any patent is, through error . . . ,deemed wholly or partly inoperative or invalid. . . by reason of the patentee claiming more or less than he had a right to claim in the patent, the Director shall . . . reissue the patent for the invention disclosed in the original patent . . . .

35 U.S.C. § 251(a) (emphasis added).

In Antares, the defendant argued that the patent was impermissibly broadened by patent reissue as it had recaptured previously surrendered subject matter. In an attempt to side-step recapture, the patentee argued that the broadened subject matter was an overlooked aspect of the invention, and in fact, was an altogether different invention. This position was ultimately fatal under the “original patent” analysis, as the Court explained:
The original claims are significantly different in scope and coverage than the asserted claims. Claims 1–22 are focused on jet injectors, and every one of those claims contains the “jet injection” limitation. The asserted claims are focused on particular safety features and do not contain the jet injection limitation. Indeed, appellants themselves argue that the asserted reissue claims cover a different invention than that originally claimed * * * * The original specification here does not adequately disclose the later-claimed safety features to meet the [original patent standard]. 

Although safety features were mentioned in the specification, they were never described separately from the jet injector, nor were the particular combinations of safety features claimed on reissue ever disclosed in the specification. Rather, the safety features were serially mentioned as part of the broader conversation: how to build the patented jet injection device *****

These “suggest[ions]” or “indicat[ions]” of alternative inventions are not sufficient to satisfy the original patent requirement of § 251. * * * Nowhere does the specification disclose, in an explicit and unequivocal manner, the particular combinations of safety features claimed on reissue, separate from the jet injection invention. This does not meet the original patent requirement under § 251.

(internal citations omitted)

With the emergence of PTAB patentability trials as a serious road block to patent assertion, patent reissue and patent reexamination are increasingly utilized to refine claims prior to assertion. Where broadening patent reissue is pursued, recapture concerns taken together with the original patent requirement can create quite the Catch-22.

Representative Order Suggests Evolving Motion to Amend Practice

Since the passage of the America Invents Act (AIA) the Patent Trial & Appeal Board (PTAB) has successfully fulfilled its charge as a speedy, cost effective alternative to patent litigation. But, that is not to say that the road has been completely bump-free. As discussed previously, there has been some controversy in the early going as patentees struggle to adapt to the motion requirements necessary for amending claims before the PTAB. That is, many patentees perceive the rigid motion requirements as an unfair hurdle, justifying their criticism on the fact that the PTAB has yet to permit a contested amendment.

In response, the PTAB has gathered feedback from the interested public on motion to amend practice in a recent Federal Register Notice entitled: Request for Comments on Trial Proceedings Under the America Invents Act Before the Patent Trial & Appeal Board, which included the query:

What modifications, if any, should be made to the Board’s practice regarding motions to amend?

While the USPTO has yet to issue a response to the recent feedback, it appears that the PTAB is poised to adopt the suggestion to move claims from the body of the motion, to an appendix.

Back in September, I recommended that claim listings accompany the motion as an appendix (i.e., so that page count is not impacted)
That is, current motion to amend practice could be improved by relaxing some formalities that constrain the ability to fully develop the motion, such as page limits. Given the 1-for-1 requirement for substituted vs. cancelled claims, not counting the pages of actual claim text toward the 15 page limit for the Motion to Amend is unlikely to adversely impact PTAB scheduling/workload and would free up additional pages for substantive discussion.

In a recent decision, Corning Optical Communications RF, LLC v. PPC Broadband, Inc., IPR2014-00441, Paper 19, October 30, 2014, listed as a “representative order” on the USPTO website last week, the Board authorized the patent owner to place its substitute claims in an appendix. This claim listing did  not count toward the 15-page limit for a motion to amend claims.

Going forward, those patentees attempting amendment should seek similar relief from the PTAB.

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.

October Brings 195 AIA Patent Challenge Petitions to PTAB

Post-grant, patent challenge mechanisms of the America Invents Act (AIA) continue to surge in popularity. Inter Partes Review (IPR) and Covered Business Method (CBM) patent challenges have been pouring into the Patent Trial & Appeal Board (PTAB). Last month, the Board received an astounding 195 petitions, surpassing the previous high water mark of 190 set in June of this year. If last year’s filing are a guide, these numbers will continue through at least December before cooling off again in January.

PTABOct copy

Trial Section Outpaces PTAB Average

As discussed previously, the PTAB is experiencing a filing rate of 150+ AIA trial petitions per month (184 last month alone). This includes petitions for Inter Partes Review (IPR), Post Grant Review (PGR) and Covered Business Method challenges (CBM). The Board’s Trial Section could see between 1800- 2500 petitions this year alone —  if not more as PGR ramps up. Of those filings that reach a final written decision (60% or more) it  is expected that upward of 60+% of those will include a rehearing request of that decision from one side or both. That is, a significant amount of “re-work” on top of the growing AIA trial workload. Given the statutory deadline on the active docket items, which would not apply to rehearing requests of final written decisions (i.e., statutory clock stops at final written decision), these requests may see a much lower Board priority relative to the growing pile of time sensitive matters. In such a scenario, the overall pendency to a final CAFC resolution will be correspondingly extended.

The good news is that …so far…the Trial Section is outpacing historical rehearing pendencies of ex parte prosecution and reexamination appeals.

In my experience, requests for rehearing in ex parte application appeals and reexamination proceedings hover somewhere between 3-6 months. Such a pendency for AIA trial proceedings would be unfortunate as this delay would provide a clear stall tactic, which could be valuable in Fresenius style races of parallel track proceedings. 

To date, the Trial Section has done surprisingly well in expediting rehearing decisions as compared to their Board counterparts. The chart below tracks the rehearing requests of Final Written Decisions of the last 6 months (filed since May 1, 2014).

rehearing copy

As can be seen, the requests over the last few months are averaging about 30 days to decision (although the 6 month sample is admittedly small). As the number of requests multiply in the months ahead, rehearing pendency will trend beyond 30 days. Hopefully, this pendency can be maintained below historical PTAB standards.