Briefing to Review Federal Register Notice Concerns

The Patent Trial and Appeal Board (PTAB) is hosting a free lunchtime webinar on Tuesday, July 29th from noon to 1 pm(EST) to discuss the AIA trials. At the webinar, Acting Vice Chief Judge Scott Boalick, who heads the Trial Section of the Board, will discuss non-rule recommendations received from stakeholders during the recent round tables.  Judge Boalick also will address the 17 questions that the Board posed in the Federal Register Request for Comments.  There will be time for questions and comments during the webinar.

WEBINAR ACCESS INFORMATION:
https://uspto-events.webex.com/uspto-events/onstage/g.php?t=a&d=990690901
Event number: 990 690 901
Event password: 12345

2014 PTAB Institution Rate Retreats to 70% Range

To date, a major patentee criticism of Inter Partes Review (IPR) & Covered Business Method (CBM) patent challenges has been their high rate of institution. Patentees were quick to point to the 85+% institution rate of the Patent Trial & Appeal Board (PTAB) as evincing an anti-patent bias. This dull roar was then amplified by then CAFC Chief Judge Rader labeling the PTAB a patent “death squad.” In response, the PTAB patiently explained the relatively small sample size of instituted proceedings, the fact that trial does not always go forward on all claims, and that there was a natural selection of weak patents in the early days of IPR and CBM. The PTAB suggested that in the months ahead, the institution rate would normalize. Yet, these reassurances fell on mostly deaf ears.

Now that a larger sample size is available (and soon to be growing by 100+ decision every month), the PTAB predictions are beginning to materialize.

As shown below, the institution rate has fallen, on average, by roughly 10 percentage points in the past year.

PTAB Win Rate

Of course, cynics will argue that the PTAB has only become more stingy as a result of their growing workload; and/or the PTAB is bowing to political pressure. On the contrary, I would argue that the drop in institutions is a result of several market factors.

First, a broader cross-section of patents is now coming to the PTAB. While Congress may have created IPRs with NPEs in mind, the PTAB’s speed in resolving patent disputes in a cost effective manner is attractive to any accused infringer. True competitor disputes, such as the narrowly tailored patent claims of Bio/pharma battles are now finding their way to the PTAB. An IPR petition directed to a true innovator patent is not the same “turkey shoot” as a three (3) line patent troll claim.

Second, with increased filings come attorneys that are not only unfamiliar with the PTAB, but unfamiliar with PTO practice altogether. The “one-shot” nature of most IPR petition filings leaves little room for on-the-job-training.

Critics will still urge that even a 70%, the institution rate is still too high (i.e., “how is it that 70% of issued patents are bad!?”). But that criticism fails to account for the fact that many institution orders are only going forward on a subset of challenged claims.

The sky is not falling.

Favorite Criticism of PTAB Proceedings Falls Flat

The Patent Trial & Appeal Board (PTAB) is currently seeking feedback from the public on the first two years of administrative patent trials of the America Invents Act (AIA). The very first issue presented for consideration in the recent Federal Register Notice is the continued use of the broadest reasonable claim interpretation (BRI) in PTAB post-grant patent challenge proceedings.

Since the passage of the America Invents Act (AIA) some patentees have been advancing the notion that BRI should not be employed by the PTAB. Instead, they argue that BRI claim construction should be replaced with the claim construction practices of the district court (i.e., Phillips v. AWH). Critics insist that the new AIA proceedings are more “adjudicative in nature” as compared to examiner based patent prosecution/reexamination practices, and, that PTAB post-grant patent practices should be consistent with the courts. Of course, the true concern at the heart of this “consistency” argument is that the Board is arriving at an unduly broad construction compared to that of the courts. That is, critics of PTAB claim construction practices believe a Phillips analysis to be inherently narrower than BRI. (i.e., more patent validity/patentability friendly).

This belief is mainly driven by cases where a patent claim previously construed by a court, is later construed to have a broader scope by the PTAB. The fault in this logic is two-fold. First, it is assumed that a Phillips analysis necessarily dictates a narrower construction, and, second, that the district court constructions were not unduly narrow in the first instance.

As to the first point, Phillips may be different from the BRI in name only.

The BRI analysis focuses the meaning of a claim term on the supporting specification, as would be understood by one of skill in the art — Phillips does the same. A BRI analysis accords claim terms their plain meaning, as would be determined by one of skill in the art — Phillips does the same. To the extent that there is any demarcation in the two analyses it is the fact that a pure BRI analysis arguably places less weight on prosecution history (intrinsic record). Yet, as emphasized recently in Tempo Lighting Inc.,v. Tivoli LLC., (CAFC 2014), the USPTO must also consider prosecution history (at least for previously closed records). Thus, at the end of the day, the analyses are practically the same.

So, why do we have so many cases in which the district court construction is narrower than the PTAB?

The perspective of the PTAB decision makers is markedly different. That is, while nuanced, multi-sentence definitions are commonly ascribed to patent claim terms in district court Markman Orders, these constructions are rarely guided by the engineering or scientific training of the decision maker. (One might also argue that despite language in Phillips to the contrary, the presumption of validity applied by the courts also colors such constructions). As highly skilled as district court judges are, they are very rarely scientists or engineers. For this reason courts are picking the most persuasive, albeit highly nuanced, claim construction argument. On the other hand, the PTAB is determining a technical truth with the help of the parties, but nevertheless, guided by its own technical and scientific training.

To illustrate this point, the PTAB recently has had occasion to analyze the same claims under both BRI and Phillips. Last week, in Cisco Systems Inc. v. AIP Acquisition LLC (IPR2014-00247; here) the PTAB determined that the subject patent needed to be reconsidered under Phillips due to imminent expiration. (BRI is not applied to expired patents). Upon initial consideration of the claim terms under the BRI, and subsequent reconsideration of the same terms under Phillips, the PTAB found the very same meaning.

As I have previously warned, forcing Phillips on the PTAB may not only fail to achieve the desired results, but take claim construction away from the courts altogether.

This case was brought to my attention by the great Docket Navigator.

EDTX Denial of CBM Stay Deemed Abuse of Discretion

Back in March I recounted the curious case of VirtualAgility Inc., v. Salesforce.com Inc., et al. (EDTX). In this dispute, Salesforce.com sought a stay of the EDTX litigation pending Covered Business Method (CBM) review of the VirtualAgility patent. The CBM petition was filed with the USPTO Patent Trial & Appeal Board (PTAB) on May 24, 2013 as CBM2013-00024.

The EDTX determined that a stay was unlikely to simplify the issues for trial based upon an independent assessment of the CBM. This was despite the fact that the PTAB went forward with the CBM (i.e., determined that all of the claims were more likely than not unpatentable on multiple grounds), and the patentee had already amended their claims. Thereafter the case was effectively stayed anyway pending interlocutory appeal to the CAFC (a right newly provided by the CBM statute).

At the CAFC, the parties debated whether or not the Court’s review of the stay denial should be de novo under Section 18(b)(2) of the America Invents Act (AIA). (statute says review may be de novo). The Court avoided this issue by finding that, in any event, the decision of the EDTX to deny the stay was an abuse of discretion.

The Court explained that not only were the factors considered by the lower court not in favor of the patentee, but, heavily favored the petitioner. Moreover, the Court found that the EDTX’s second guessing of the PTAB to be particularly inappropriate.

Congress clearly did not intend district courts to hold mini-trials reviewing the PTAB’s decision on the merits of the CBM review. To do so would overwhelm and dramatically expand the nature of the stay determination. If the district court were required to “review” the merits of the PTAB’s decision to institute a CBM proceeding as part of its stay determination, it would undermine the purpose of the stay.  . . .The stay determination is not the time or the place to review the PTAB’s decisions to institute a CBM proceeding.

The district court’s decision regarding the first and fourth factors was based predominantly on its improper review of whether the PTAB was correct in its determination that the claims of the ’413 patent were more likely than not invalid. After this review is removed from the calculus, the remaining evidence of record weighs heavily in favor of a stay. We find it significant that the PTAB granted CBM review on all asserted claims of the sole asserted patent. And it determined that all of these claims were more likely than not unpatentable on two separate, alternative rounds.

(emphasis in original) (decision here)

The dissent largely takes issue with the delay caused by post-grant proceedings and the potential for gamesmanship, but relies mostly on case law involving patent reexamination, not the speedier PTAB proceedings.

Going forward, stays pending an active CBM review (i.e., one that is ordered, not just filed) should be easier to come by in the EDTX.

Central Reexamination Unit (CRU) Takes on Patent Reissue Workload

Yesterday, the USPTO issued an internal memo to the Examining Corps informing them that the Central Reexamination Unit (CRU) would be taking responsibility for patent reissue applications going forward. (Memo here) This move was first considered some years back under Director Kappos to remedy the excessive pendencies of patent reissue proceedings. However, that effort was shelved as a result of political headwinds (primarily examiner union complications).

Since that time, the workload of the CRU has lessened thanks to the elimination of inter partes patent reexamination, and to a lesser extent, the lack of interest in supplemental examination. Yet, patent reissue has remained a pendency quagmire due to examiners unfamiliarity and lack of consistent exposure to some of the quirky issues common in reissues (recapture, oaths, correctable defects, etc).

Moving these unique, but important post grant proceedings to a dedicated unit of examination specialists is LONG overdue — and welcome news for patentees.

Filing Rate to Strain PTAB Bandwidth?

In the entire 13 year history of inter partes patent reexamination, 1919 such reexamination requests were filed. Granted, only patents that stemmed from post 11/29/99 patent applications were eligible. But still, even in 2012 (the high water mark for such filings) the USPTO received only 530 in total.

Since passage of the America Invents Act (AIA), Inter Partes Review (IPR) and Covered Business Method challenges continue to break records with each passing month. In June alone the Patent Trial & Appeal Board (PTAB) received over 190 IPR and CBM petitions. By September 16 2014, the PTAB will have seen 2000+ petition filings in 24 months.

Can the PTAB keep up with this unprecedented surge in demand?

July-PTAB

(Click to Enlarge)

As shown in the chart above (accurate through July 2nd), the filing rate has averaged out to about 150 filings (IPR + CBMs) for the past 3 months. This means in 4-6 months time the PTAB will need to issue roughly 150 Trial Orders per month (perhaps as a steady state workload). Furthermore, once these trials approach written decision during the holiday season of 2015, that 150 Trial Orders per month will be in addition to 100+ written decisions, not to mention motion decisions, rehearings, oral hearings, and teleconferences. Of course, anywhere from 10-20% of these disputes may settle — still the increase in PTAB workload over the next few months is quite staggering.

To account for this increased workload, the PTAB continues to bring more judges into the trial section. However, as such judges slowly ramp up it seems inevitable that trial schedules will be pushed out from the current 12 months to the 18 month statutory maximum. That is, unless the filing rate cools, which seems unlikely from where I sit.

July Post-Grant Patent CLE

For those in the Virginia area this July, consider the upcoming day-long Patent Resources group (PRG) program. The program covers post-grant patent practice. (6 Hours of CLE)

July 8, 2014 (Tuesday) Post-Grant Patent Practice: Review Proceedings Instructors:  w.patentresources.com/faculty-bios/kevin-laurence/”>s of PatentsPostgrant.com $495 (register here)

Federal Register Notice to Issue Tomorrow

As promised, even a bit early, the USPTO will issue a Request for Information in tomorrow’s Federal Register. The Notice, entitled,
Request for Comments on Trial Proceedings Under the America Invents Act Before the Patent Trial & Appeal Board, will pose the following 17 questions:

Claim Construction Standard:

1. Under what circumstances, if any, should the Board decline to construe a claim in an unexpired patent in accordance with its broadest reasonable construction in light of the specification of the patent in which it appears?

Motion to Amend:
2. What modifications, if any, should be made to the Board’s practice regarding motions to amend?

Patent Owner Preliminary Response:
3. Should new testimonial evidence be permitted in a Patent Owner Preliminary Response? If new testimonial evidence is permitted, how can the Board meet the statutory deadline to determine whether to institute a proceeding while ensuring fair treatment of all
parties?

Obviousness:
4. Under what circumstances should the Board permit discovery of evidence of nonobviousness held by the petitioner, for example, evidence of commercial success for a product of the petitioner? What limits should be placed on such discovery to ensure that the trial is completed by the statutory deadline?

Real Party in Interest:
5. Should a patent owner be able to raise a challenge regarding a real party in interest at any time during a trial?

Additional Discovery:
6. Are the factors enumerated in the Board’s decision in Garmin v. Cuozzo, IPR2012-00001, appropriate to consider in deciding whether to grant a request for additional discovery? What additional factors, if any, should be considered?

Multiple Proceedings:
7. How should multiple proceedings before the USPTO involving the same patent be coordinated? Multiple proceedings before the USPTO include, for example: (i) two or more separate AIA trials; (ii) an AIA trial and a reexamination proceeding; or (iii) an AIA trial and a reissue proceeding.

8. What factors should be considered in deciding whether to stay, transfer, consolidate, or terminate an additional proceeding involving the same patent after a petition for AIA trial has been filed?

9. Under what circumstances, if any, should a copending reexamination proceeding or reissue proceeding be stayed in favor of an AIA trial? If a stay is entered, under what circumstances should the stay be lifted?

10. Under what circumstances, if any, should an AIA trial be stayed in favor of a copending reexamination proceeding or reissue proceeding? If a stay is entered, under what circumstances should the stay be lifted?

11. Under what circumstances, if any, should a copending reexamination proceeding or reissue proceeding be consolidated with an AIA trial?

12. How should consolidated proceedings be handled before the USPTO? Consolidated proceedings include, for example: (i) consolidated AIA trials; (ii) an AIA trial consolidated with a reexamination proceeding; or (iii) an AIA trial consolidated with a reissue proceeding.

13. Under what circumstances, if any, should a petition for an AIA trial be rejected because the same or substantially the same prior art or arguments previously were presented to the USPTO in a different petition for an AIA trial, in a reexamination proceeding or in a
reissue proceeding?

Extension of 1 Year Period to Issue Final Determination:
14. What circumstances should constitute a finding of good cause to extend the 1-year period for the Board to issue a final determination in an AIA trial?

Oral Hearing:
15. Under what circumstances, if any, should live testimony be permitted at the oral hearing?

16. What changes, if any, should be made to the format of the oral hearing?

General:
17. What other changes can and should be made in AIA trial proceedings? For example, should changes be made to the Board’s approach to instituting petitions, page limits, or request for rehearing practice?

Comments are due to the agency September 16, 2014.  The Notice also address some of the feedback provided to the PTAB during round-table programs of the last few months. An advanced copy of the notice is found (here).

USPTO Reacts Quickly to Landmark 101 Ruling

Although a few minutes late for today’s PatentsPostGrant.com webinar on the topic, the USPTO has now issued Preliminary Examination Instructions on Alice Corporation Pty. Ltd. v. CLS Bank International, et al., No 13-298 (June 19, 2014). Any member of the public may submit written comments by July 31, 2014. In the meantime, the USPTO will use these preliminary instructions when determining subject matter eligibility under 35 U.S.C. 101 of claims involving abstract ideas in view of CLS Bank.