Rehearing Requests & CAFC Remands to Tax PTAB Resources

As discussed on Tuesday, sometimes the Court of Appeal for the Federal Circuit (CAFC) will find it necessary to remand an appeal to the Patent Trial & Appeal Board (PTAB). Likewise, sometimes the Solicitor will seek remand in appropriate circumstances. Historically remand occurs in about 10-15% of appeals from the agency on a yearly basis (sometimes less). In any given year this meant only a handful of cases required “re-work” from the PTAB as the number of appeals from the PTAB to the CAFC was relatively modest.

As to requests for rehearing, the Board sees some volume of requests in patent reexamination proceedings, especially inter partes reexamination. Yet, given the lengthy pendency of such reexamination proceedings, a fair amount of these appeals are avoided. Or, are at least not as hotly contested after the the requesting party settles, which was common. 

Thanks to the wildly popular post-grant patent challenge mechanisms of the America Invents Act (AIA), all of that is about to change.

The PTAB is experiencing a filing rate of 150+ petitions per month (approaching 200 this month), or roughly 1800 AIA trial petitions per year. Given the 12 month trial schedule, the CAFC will soon see a corresponding surge in their appeal docket. Assuming 50% of IPR/CBM/PGR proceedings are settled/denied, that still leaves an eventual steady state of 900 potential new appeals for the CAFC, per year. Of these 900 cases it is expected that upward of 75% will first include a request for rehearing from one side or both. That is, 600+ request s for “re-work” decisions from the PTAB on top of the 1800 petition decision per year, final written decision, orders, teleconferences, etc. Given the statutory deadline on the active docket items, I can’t imagine rehearing requests will not be placed on the bottom of the growing pile. 

As to the CAFC, while historically remand was somewhat uncommon (10-15%), for this first wave of AIA appeals, I would expect that number to hover around 20%-25%. That is, as many as 200+ proceedings will find their way back to the PTAB in the first year or two. These remands are also expected to languish as items outside the statutory deadlines of the AIA. 

Significant delays on rehearing will almost certainly be leveraged as a tactic to forestall finality, especially for non-practicing entities (NPEs). Indeed, if such “delay requests” become the norm, overall pendency of AIA proceedings through appeal to the CAFC will be greatly aggravated. On top of this would be the inevitable lengthening of CAFC pendency due to the influx of new AIA appeals. Given the vision of Congress to provide for an expedited administrative option to patent litigation, keeping the process moving— from start to finish—is imperative to the long term efficacy of the AIA. Should Congress disrupt funding to the agency, or fail to recognize the need for continued support and additional horsepower, the progress made to date could all unravel very quickly. 

CAFC Cites Inconsistencies in Reexamination Appeal Ruling

Back in June, the Court of Appeals for the Federal Circuit (CAFC) decided Q. I. Press Controls, B.V.,v. Quad/Tech, Inc. (here) The appeal stemmed from an inter partes reexamination of U.S. patent 6,867,423 (95/000,526). Of particular interest in the appeal from the Patent Trial & Appeal Board (PTAB) was the allowance of claims 1-60 in view of the rejection of claims 61-72. That is the Board rejected claims 61-72 on a combination of references never applied to claims 1-60, but, the allowed claims (1-60) and rejected claims (61-72) only differed in minor respects.

On appeal, the requester raised this inconsistency with the CAFC and cried foul (despite never having raised the potential rejection formally for claims 1-60). In reversing the Board, the CAFC stated that the combination must be applied to claims 1-60 as a new rejection under 37 C.F.R. § 41.77(b). In doing so, the CAFC opinion could be interpreted to suggest that a new rejection under 41.77 was no longer discretionary, but mandatory.  

The PTO took issue with this aspect of the opinion. Earlier this month, the CAFC declined the PTO’s rehearing request directed to this concern.

The key language of the June decision is as follows:

[T]he Board has the discretion to issue a new ground of rejection if it has knowledge of one. 37 C.F.R. § 41.77(b) (“[S]hould the Board have knowledge of any grounds not raised in the appeal for rejecting any pending claim, it may include in its opinion a statement to that effect with its reasons for so holding, which statement shall constitute a new ground of rejection of the claim.”). In those instances, the “Board must designate its decision a new ground of rejection and provide the appellant with
an opportunity to respond.”
. . . .
Here, when all these references were before the Board, and this court, an obligation is owed to the public not to permit inconsistent results when a proper challenge to that inconsistency is made on appeal. The Board should have observed the similarities between the claims, noted those similarities between the claims and the references before the Board on appeal, analyzed whether the [combination] would have rendered claims 1–60 obvious, and if so, issued a new ground of rejection. The [combination] was before the Board on appeal because those references were cited by the examiner to invalidate claims 61–72. And, given the minor differences between the claims, the Board “[had] knowledge of . . . grounds not raised in the appeal for rejecting [claims 1–60].”

(emphasis added)
In their rehearing request (here), the PTO expressed concern that the discretion of 41.77 was being ignored, explaining:

Although 37 CF.R. § 41.77(b) expressly states that the Board “may” issue a new ground of rejection if it knows of a ground of rejection not raised in the appeal, the panel determined that the Board “must” designate a new ground of rejection in those circumstances, and ordered the Board to consider a new ground of rejection based on the combination . . .The panel appears to have relied on Rambus v. Rea, 731 F.3d 1248 (Fed. Cir. 2013) as support for its decision. Op. at 18. However, Rambus did not hold that if the Board has knowledge of a new ground of rejection, it must enter a new ground of rejection.  . . Rather, Rambus stands for the unremarkable principle that if a Board’s decision relies on a ground for rejecting a claim that was not raised in the appeal, then it must designate that ground as a new ground of rejection to ensure that the appellant is afforded a fair opportunity to respond.  . . . Nowhere did this Court state in Rambus, or in any other decision identified by the Panel, that the Board is required to issue a new ground of rejection if it has knowledge of a rejection not discussed in the appeal.

The PTO rehearing was denied without explanation. But, presumably the panel was satisfied with the below aspect of the opinion, which explained:

We do not hold that the Board should always apply references that are before it affecting some claims to every other claim on appeal, but we do find that in this instance, in which nearly identical claims were found both valid and invalid due to similar combinations of prior art resulting in a Board opinion that was seemingly inconsistent, the Board erred by not considering the [combination] as a new ground for rejection of claims 1–60.

While the case may seem like an outlier in terms of facts, in the predictable arts it is not uncommon to have substantially overlapping claim sets (apparatus, method, system, etc). This case gives requester’s in inter partes reexamination yet another oportunity to defeat challenged claims. While inter partes reexaminations can no longer be requested, there is still a significant number of such proceedings heading to the Board in the months ahead.

Debate Over Issue Joinder Continues

Back in September, the Patent Trial & Appeal Board (PTAB) issued a rare expanded panel Order in Target Corp. v. Destination Maternity Corp., (IPR2014-00508) (here). In the Order, a divided panel denied issue joinder under 35 U.S.C. § 315(c) as a matter of law (i.e., the joining of two petitions of a same petitioning party). The decision was especially surprising given the fact that 315(c) had been previously interpreted by the PTAB as permitting such joinder practices. In fact, one such decision Microsoft Corp. v. Proxyconn, Inc., IPR2012-00026, Paper 17, Dec. 21, 2012 is published on the PTO web site as a representative order.

Since the decision in Target, rehearing has been requested, and other petitioners have begun to assail the PTAB’s perceived change in course on the matter of issue joinder.

Target’s request for rehearing (here) seeks a further expanded panel (7 or more judges), explaining the decision creates a per se prohibition against issue joinder:

[T]he Board found that Target’s joinder motion could not be granted because the corresponding IPR petition was time-barred under 35 U.S.C. § 315(b) on the theory that § 315(c) permits joinder of parties but not an existing petitioner’s new petition filed after § 315(b)’s one-year deadline. (Paper 18, at 3-11.) The Board erred in narrowly interpreting § 315(s) to impose a per se prohibition on a party to an existing IPR proceeding joining to that proceeding a second petition filed by that party along with a timely joinder request.

The rehearing request goes on to emphasize that “any person” of 315(c) includes previous petitioners and that courts interpret the words of a statute in their context and with a view to their place in the overall statutory scheme. Given that the spirit and purpose of the AIA is to improve patent quality and providing a more efficient system for challenging patents, it is argued that a narrow read of 315(c) is an abuse of discretion.

In another ongoing proceeding, Micro Motion Inc. v. Invensys Systems Inc. (IPR2014-01409) (here) joinder is being opposed by the patentee on the basis of the Target decision. The petitioner has characterized Target as a “minority outlier decision”:

Patent Owner’s opposition relies exclusively on Target Corp. v. Destination Maternity Corp., IPR2014-00508 (Paper 18) (Sept. 25, 2014), which is neither “precedential” nor “informative” under the Board’s SOP 2, and therefore is not binding. While Patent Owner characterizes Target as an “expanded panel,” the two judges that were added to the original panel (consisting originally of Judges Bisk, Fitzpatrick, and Weatherly) appear to have been added precisely because of their known, contrary view on the issue. See Ariosa Diagnostics v. Isis Innovation Ltd., IPR2012-00022 (Sept. 2, 2014) (Paper 166) (Green, J.) (holding that § 315(c) authorizes joinder between the same parties); Microsoft Corp. v. Proxyconn, Inc., IPR2013-00109 (Feb. 25, 2013) (Paper 15) (Giannetti, J.) (same).  . . . .Target is directly contrary to at least five prior decisions, including Microsoft—a decision listing the current Vice Chief as a panelist and which the Board itself published on its webpage of “Representative Orders, Decisions, and Notices” as a “Decision granting motion for joinder.” Indeed, Microsoft specifically noted that “the same patents and parties are involved in both proceedings” and stressed that this was “an important consideration here, because Microsoft was served with a complaint asserting infringement of the ʼ717 patent more than a year before filing the second Petition.” Id. at 4. Petitioner here reasonably relied on Microsoft in its motion.  

(emphasis in original)

As I pointed out previously, non-precedential decisions such as Target (which are directly contrary to other decisions of the Board) foster the perception that panel assignment may be outcome determinative, and that the PTAB is an inconsistent forum. Given the expanded role of the PTAB as a trial forum (well beyond the scale of past interference practices), perhaps it is time to revise the Board’s Standard Operating Procedure (SOP) so that a consistent message can be sent with informative/precedential designations. The current SOP was drafted when the Board was 1/3 the current size and requires a majority of all Board members for precedential designation. As the Board grows, the current SOP may be limiting the PTAB’s ability to issue reliable guidance on key issues of AIA trial practice.

Congress Clings to Familiar Patent Reform Issue 

As we approach the witching hour of mid-term elections, Congress begins to turn back to the business of law making. With so few legislative initiatives having meaningful bipartisan support, and a lame duck executive eager to appear — well, not so lame, patent reform offers political opportunity.

Something wicked this way comes.

Assuming some further reform bill can be passed into law (doesn’t really matter what), the administration secures some continued relevancy with the general public and the expected republican Senate can help out “main street” businesses fend off the dreaded “patent troll.”  As to whether or not further reform is actually needed ….wonkish details.

The America Invents Act of 2011 is only now bearing fruit as to providing a demonstrated alternative to nuisance litigation tactics. That is, the Patent Trial & Appeal Board (PTAB) has been labeled a death squad for their quick and cost effective manner in which they are willing to cancel patent claims. The ability to stop patent litigation in favor of lower cost patent office proceedings has never been stronger. In fact, most contingency litigation shops will no longer take on a “business method patent” case. But, we need to go even further?

While the rallying cry for further patent reform has attenuated in recent months due in large part to the efficacy of the AIA, the shrilly propoganda of the anti-patent crowd persists on Capitol Hill. The problem seems to be that Congress is either incapable from separating extremist views from reality….or is simply unwilling to let reality get in the way of a good political opportunity. (After all, the AIA was touted as a “jobs bill.”)

The president’s patent reform commentary of last week is quoted below (emphasis added):

When it comes to intellectual property protection, this is a trickier issue because you end up getting the tech community divided, people are on different sides of it. In some cases, the same company will be really concerned about protecting this aspect of their intellectual property, but feel free to want to stream somebody else’s intellectual property. And so trying to get the right balance is important.I think the basic concept is that you want to have sufficient IP, and — whether patents or copyrights — that you are continually encouraging and rewarding innovation and creativity. But you don’t want those structures so tight, in terms of protecting that intellectual property, that that ends up being actually an inhibitor to people getting good information, folks coming up with new uses for existing information.And then one of the biggest problems that we’ve been working on is how do we deal with these folks who basically are filing phony patents and are costing some of our best innovators tons of money in court; or if they don’t go to court, they end up having to pay them off even though they’re making a bogus claim just because it’s not worth it for you to incur all the litigation costs.So we’ve made some progress on patent reform. We continue to work with Congress to do more. But if we can maintain net neutrality, get the balance right on patents and copyrights, then I’m confident that we’re going to continue to — and, by the way, and then enforce intellectual property, because a lot of the theft of intellectual property that takes place isn’t happening here in the United States, it’s offshore.

In fairness, it is heartening to see an acknowledgement of progress, and a recognition of the fact that some innovators actually oppose further reform.  Let’s just hope any coming legislative effort is as measured as these comments.

Public Comment Deadline Approaches at PTAB 

The extended deadline for responding to the June 27, 2014 Federal Register Notice entitled: Request for Comments on Trial Proceedings Under the America Invents Act Before the Patent Trial & Appeal Board expires tomorrow, October 16th. The USPTO published the request for comments to gather commentary on all aspects of the new administrative trial proceedings, including the administrative trial proceeding rules and trial practice guide.

The comments submitted to date are found here.

Unsuccessful IPR Petitioner Urges Expansive PTAB Estoppel

In a strange twist, an unsuccessful IPR petitioner is currently urging the CAFC to adopt an expansive interpretation of statutory estoppel for Inter Partes Review (IPR). That is, the petitioner argues where only a subset of claims challenged in an IPR petition are actually instituted for trial, the Patent Trial & Appeal Board (PTAB) should nonetheless carry non-instituted claims through trial to the final written decision. In such a case, estoppel would necessarily attach to the non-instituted claims by virtue of their inclusion in the written decision. 35 U.S.C. § 315(e)

Why on earth would a petitioner argue for such a thing?

In IPR2012-00042, petitioner Synopsys asserted unpatentability of claims 1-15 and 20-33 of Mentor Graphics patent 6,240,376. The PTAB trial order indicated that IPR would only be instituted as to claims 1-9, 11 and 28-29. In other words, claims 10, 12-15 and 20-27 were denied trial. As their 2013 trial order could not be appealed (35 U.S.C. § 314(d)), Synopsys recently sued the USPTO under the Administrative Procedure Act (APA) for allegedly failing to follow 35 U.S.C. § 318(a). Synopsys insists that the language of 318(a): “. . .shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner,” obligates the PTAB to address all claims challenged in the original petition in its final written decision. In this way, Synopsys would have an opportunity to appeal the PTAB final written decision not to institute review claims 10, 12-15 and 21-27 after all. 
While creative, such a read of section 318(a) is inconsistent with the statutory framework and would result in a disjointed statutory estoppel scheme that would grind IPR filings to an abrupt halt.
Since the time of the APA lawsuit against the USPTO, the Synopsys IPR has concluded. The 318(a) dispute has been briefed to the Court of Appeals for the Federal Circuit (CAFC). In its brief (here), Synopsys focuses on the highlighted language of 318(a) below. 

35 U.S. Code § 318 – Decision of the Board
(a) Final Written Decision.— If an inter partes review is instituted and not dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner and any new claim added under section 316 (d)

Read alone, the highlighted language of 318 (a) might be construed as requiring all “challenged claims of an IPR petition” to be explained in the final written decision. But, when read in view of the remainder of the statutory framework that interpretation is implausible. Section 318(a) explains what happens at the end of an IPR trial. That is, if the trial does not settle and claims remain “challenged” and/or new claims added, those claims are addressed in a final written decision.

On the other hand, section § 314 (Institution of Inter Partes Review) is, as the title implies, directed to institution of an IPR trial, and § 316 (Conduct of Inter Partes Review) the IPR trial itself. An IPR trial is conducted and instituted on the enumerated “grounds” presented in the petition, not “challenged claims”— this is a critical distinction. Insufficient grounds are denied, as are the “challenged claims” embraced by those grounds. Section 314 explicitly provides the Director discretion in setting forth standards for “sufficient grounds.” 316(a)(2);and (b). This discretion must consider the effect of 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.” Including claims throughout an IPR proceeding that are embraced by insufficient grounds is contrary to 316, and would greatly impact the efficiency of trials that are statutorily mandated to complete within 12 months time.

The PTAB’s established practice of proceeding to trial on a claim-by-claim basis builds on a decade of patent reexamination history. See Sony Computer Entertainment America Inc. v. Dudas, 85 USPQ2d 1594 (E.D. Va 2006). Congress was well aware of this practice when drafting the AIA, in fact, they modified the controlling inter partes reexamination statute without disturbing the Sony holding, shortly therafter, IPR replaced inter partes patent reexamination.

Setting aside the statutory framework, consider the practical realities of that would result from such a narrow read of 318(a).

Petitioner A files an IPR against claims 1-5.  In a first outcome, the entire petition is denied. In that case, no statutory estoppel can apply as there will never be a written decision (i.e., no trial).  

In a second outcome, trial is instituted on claim 1, but not claims 2-5. In this case, under the Synopsys interpretation, claims 2-5 would be carried forward to written decision and estoppel would apply despite the fact that the trial would be directed to claim 1 only. So, there would be no opportunity for a second petition (assuming there was time) to target claims 2-5. This is because estoppel from the first proceeding would shut down any second filing at the time of the first written decision. Moreover, those petitioners seeking to stay the district court litigation (as is usually the case) would not only have claims uncovered by a pending ground, but the claims would be in a holding pattern awaiting the attachment of estoppel. Essentially, these uncovered claims would force the district court to deny the stay given the added bonus of estoppel attaching in 12 months time to preclude any invalidity theory touching patents and printed publications.

Such an interpretation would destroy IPR as a viable alternative to patent litigation. 

Roadshow Announced for Detroit Region

The Patent Trial & Appeal Board (PTAB) has announced Detroit Region Roadshows from November 5-19, 2014, focused on the AIA trials. The PTAB will visit Detroit, Chicago, Pittsburgh, Cleveland, Minneapolis, and Milwaukee for half-day, afternoon programs. 

The roadshows are designed to be interactive, including audience participation in an educational game show (which couldn’t possibly be any geekier unless they required everyone to dress in Star Wars costumes) as well as a hands-on workshop. For the workshop, the audience will work in teams to review and discuss a mock scenario in which a petitioner wishes to assert a challenge against a patent. The teams will discuss which type of petition to file and what issues might arise from both the petitioner’s and patent owner’s perspectives. Topics of discussion will include bars to filing, real party-in-interest and joinder considerations, and claim construction. The teams likewise will decide whether to institute, and if so, on what grounds and for which claims. Several PTAB judges will facilitate the workshop discussion with one assigned to each team. In Detroit, the PTAB will host an actual AIA Trial Hearing in lieu of the workshop. The dates are noted below:

Detroit, MI Nov. 5
1-5 p.m.		 Thomas Cooley Law School
Auburn Hills Campus, Room 145
2630 Featherstone Rd
Auburn Hills, MI 48326
Chicago, IL Nov. 7
1 – 4:30 p.m.		 Chicago Public Library
Harold Washington Library Center
Pritzker Auditorium
400 S. State Street
Chicago, IL 60605
Pittsburgh, PA Nov. 13
1 – 4:30 p.m.		 Carnegie Library of Pittsburgh
Auditorium/lecture hall
4400 Forbes Avenue
Pittsburgh, PA 15213
Cleveland, OH Nov. 14
1 – 4:30 p.m.		 Cleveland Public Library
Louis Stokes Wing Auditorium (Lower Level)
525 Superior Ave.
Cleveland, OH 44114
Minneapolis, MN Nov. 17  
1 – 4:30 p.m.		 Minneapolis Central Library
Pohlad Hall
300 Nicollet Mall
Minneapolis, MN 55401
Milwaukee, WI Nov. 19
1 – 4:30 p.m.		 Milwaukee Public Library
Meeting Room 1
814 W. Wisconsin Ave.
Milwaukee, WI 53233

USPTO Inter Partes Patent Challenge Statistics Remain Consistent

With two full years of Inter Partes Review (IPR) proceedings on the books, we now have an adequate sample of decisions—158 through 9/26/14. While most IPR decisions are still pending appeal, the results are consistent with earlier inter partes reexamination outcomes.

As of September 2013, 696 inter partes reexamination certificates had been issued. (Not even half of the 1919 such proceedings pursued over the thirteen year history of the now defunct, never ending, reexamination option).  Of the 696 inter partes reexamination certificates printed by September 2013, the results indicate:

Total Inter partes reexamination certificates issued (1999 – 9/13) ……….. (373)
a. Certificates with all claims confirmed (44) ……………………………………….12%
b. Certificates with all claims canceled (or disclaimed) (169) …………………45%
c. Certificates with claims changes (160) ……………………………………………43%

That is, ALL claims were cancelled in 45% of inter partes reexamination cases. Complete patentee victories (all claims confirmed w/o amendment) was relatively uncommon at 12%.

With IPR decisions approaching the 200 mark, it is not surprising to see the same general results as to complete cancellations and confirmation. The primary differences in statistics of the two systems is the number of concluded IPR proceedings with claim changes.

For IPR, the results to date are not much different. That is, ALL claims are cancelled in 53% of cases, ALL claims being confirmed in only 10% of cases. Given the speed of IPR, a surprising number of claims are cancelled by operation of patentees requesting adverse judgment. It remains to be seen if this anomaly will persist going forward. As noted above, with amendments being a rare occurrence in IPR, the absence of decisions issuing with some claim changes is the main difference between the outcomes of the old and new inter partes systems.
IPRstats

Follow-On Filings Thwarted by 35 U.S.C. §325(d)

Last Friday, the Patent Trial & Appeal Board (PTAB) designated seven informational decisions. In each decision, the Office denied institution of an inter partes review (IPR) under 35 U.S.C. § 325(d). This statute permits the Director to take into account whether, and reject the petition or request because, the same or substantially the same prior art or arguments previously were presented to the Office. The new informative decisions are: 

These decisions demonstrate

the considerable discretion accorded the agency under 35 U.S.C. § 325(d). As I pointed out last week, rather than denying issue joinder on a strict read of 315(c), 325(d) adequately protects patentees while allowing the Board to move forward when and where appropriate. As emphasized in the ZTE decision linked above, the analysis should hinge on the relative equities:

A decision to institute review on some claims should not act as an entry ticket, and a how-to guide, for the same Petitioner . . .  .      .    .outside of the one-year statutory period, for filing a second petition to challenge those claims which it unsuccessfully challenged in the first petition.

ZTE at pg. 6 (emphasis added)

On the other hand, where a petitioner needs a follow-on petition to target never before challenged claims— responsive to an  amended litigation complaint, or the like— the Board should also balance the needs of the public to thwart such patentee gamesmanship.

The take away from the new informative decisions is that the Board frowns upon: (1) Follow-on petition filings that include issues and claims submitted in an earlier petition filing, by a same petitioner; and (2) petitions that target claims subject to multiple, ongoing proceedings and/or appeals to the CAFC.