Landmark 101 Ruling to Affect CBM Filing Strategies?

This time last year, I considered whether a negative outcome in CLS Bank v. Alice Corp might serve as a catalyst for 101 challenges at the USPTO’s Patent Trial & Appeal Board (PTAB). That is, with most Covered Business Method (CBM) challenges including 101 grounds, and some only including such grounds for fast-tracking purposes, whether the Decision might encourage a flood of such filings with the PTAB.

Since that time, the CAFC issued an unsatisfying divided opinion, and then last week, the Supreme Court of the United States finally decided the issue. Where does that leave us, and what has changed?

Please join me today, along with my authoritative panel for this special edition of the PatentsPostGrant.com webinar series. Together with my colleagues Michael Kiklis, author of the recently released treatise, “The Supreme Court on Patent Law,” and Stephen Kunin, former Deputy Commissioner for Patent Examination Policy at the USPTO, we will endeavor to explore the impact of this important ruling.

Click HERE to Register.

Free Webinar, Wednesday 6/25

Yesterday, the Supreme Court issued its long-awaited decision in CLS Bank v. Alice Corp. on patent eligibility standards for computer implemented inventions. This decision will impact current 101 challenges in CBM proceedings, and shape patent procurement/claiming strategies for software related methodologies going forward.

Please join me and my authoritative panel for this special edition of the PatentsPostGrant.com webinar series. Together with my colleagues Michael Kiklis, author of the recently released treatise, “The Supreme Court on Patent Law,” and Stephen Kunin, former Deputy Commissioner for Patent Examination Policy at the USPTO, we will endeavor to explore this important ruling.

Click here to Register: http://event.on24.com/r.htm?e=794534&s=1&k=53B7CFD63569A11431583A5913CAEED3

District Court Stays on the Rise Thanks to PTAB

Prior to the passage of the America Invents Act (AIA) many district courts were less than impressed with the lengthy pendencies of patent reexamination proceedings at the USPTO. For this reason, motions to stay a litigation pending patent reexamination were often denied based upon the perceived prejudice of a 5-6 year delay (typical of reexaminations through appeal). The patent challenge proceedings of the AIA (IPR, CBM and PGR) were specifically designed, at least in part, to remedy the pendency issue.

The new patent challenge proceedings of the AIA are conducted before the USPTO’s Patent Trial & Appeal Board (PTAB) and must conclude, by statute, within 12 months of trial order. Many districts across the country have recognized the improved speed of the PTAB. Not surprisingly, the success rate for staying cases pending USPTO review has significantly improved.

(Click to Enlarge)

IPR-stays The chart above is accurate through June 16, 2014. As can be seen, stays are granted, granted-in-part, or granted with stipulations in 75% of the motions to date. (The stipulations are largely co-defendants agreeing to be bound by the estoppel of a failed IPR effort). Also, some of the denials were made without prejudice (i.e., based on the fact that an IPR was not yet instituted). So, given that some denials may change status in the weeks ahead, 75% is on the conservative side.

Given this outcome, and petitioner friendly IPR results to date, it is not surprising that the PTAB is seeing record filing rates in recent months.

Strafford Legal PTAB Webinar

On June 12, Strafford Legal presents the webinar entitled:Leveraging Post Grant Proceedings Before the PTAB. I, along with my partner Greg Gardella, will explore the surging popularity of the PTAB and update registrants on the evolution of PTAB practices over the past 12 months (including a Q&A session). I look forward to participating in this interactive exchange.

Growth in PTAB Post-Grant Filings May Require Changes to Workflow

PTABThis time last year, the Patent Trial & Appeal Board (PTAB) had about 250 Inter Partes Review (IPR) and Covered Business Method (CBM) petitions pending. Only half that number were in the trial phase.

One year later, the PTAB has received 1500 IPR and CBM petitions, roughly half of which are now in trial phase. The surge in filings over the past two months has been especially pronounced, averaging 150 petitions per month. This is the new normal.

The chart below is from June 6, 2014. (Click to Enlarge)

aia_statistics_06_05_2014

As explained at the PTAB roadshow, the Trial Section of the PTAB consists of roughly 70 judges at present. (with plans to add another 52 by October). While the influx of judges will certainly help handle the growing workload, given the magnitude of trials that will soon be pending, the PTAB will need to adjust the daily workflow to maintain their 12 month trial mandate.

One unfortunate side effect of the number of proceedings, is the number of attorneys now practicing before the USPTO that have no experience at all in USPTO proceedings. While in the early days of IPR and CBM administrative patent judges had the luxury of conducting teleconferences to sort out confusion, answer questions, instruct on amendment practices, and referee disputes, those days are now long gone. Yet, if anything, there is now a greater demand for teleconferences on such mundane disputes as font size, page margins, scheduling disputes, unauthorized filings, etc. Certainly the parties are encouraged to work such disputes out themselves, but that is rarely the end result — especially for those more attuned to litigation style antics.

Given the growing workload, it makes absolutely no sense for the merits panel of a given IPR/CBM to be distracted by routine procedural disputes. Instead, it makes far more sense for the PTAB to adopt a filtering structure similar to that used by other courts. For example, every month the Court of Appeals for the Federal Circuit (CAFC) assigns a lead motion judge to decide routine issues. The merits panel is not disturbed for routine matters of procedure. The PTAB could implement a similar structure, or utilize their staff attorneys in a similar fashion.

Another benefit of such a structure would be a reduced demand for such teleconferences. That is, without access to the merits panel, some attorneys will be less inclined to grandstand on a particular issue of little practical import.

Article III Standing a Rare Concern at PTAB

Last week, the Court of Appeals of the Federal Circuit (CAFC) determined that public interest groups challenging patents at the USPTO must demonstrate Article III standing to appeal failed challenges to the Court. In Consumer Watchdog v. WARF, Consumer Watchdog  appealed  a determination of the Patent Trial & Appeal Board (PTAB) to uphold claims of WARF patent 7,029,913 directed to stem cell cultures (inter partes reexamination 95/000,154). (here). In dismissing the appeal, the Court explained that while Consumer Watchdog was provided a procedural right to appeal by the inter partes reexamination statutes, an “injury in fact” was necessary to confer Article III standing. That is, such appeals require “a particularized, concrete stake in the outcome of the reexamination.”  Consumer Watchdog’s status as an entity that does not compete with the patent owner was strongly emphasized in the decision. The court left “it to future panels to decide whether, under other circumstances, the preclusive effect of the estoppel provisions could constitute an injury in fact.”

While an interesting decision, such public interest challenges were exceedingly rare in inter partes patent reexamination (discontinued by the AIA in 2012). On the other hand, Inter Partes Review (IPR) has seen a fair amount of activity from such entities. For this reason, some have speculated that this decision may have a chilling effect on such filings going forward. However, since IPR challenges are not governed by reexamination procedural practices, such filings are likely to continue.

While the right of appeal from an IPR may also be interpreted as a “procedural right” only (i.e., and pose the same Article III issue for consumer agencies), unlike patent reexamination, additional parties may join an IPR. In fact, as I have explained in the past, there is often times a strong motivation for joinder. It would seem highly unlikely that a consumer agency would target a patent that was not of great concern to many entities with standing. So, any such filing (if accepted by the PTAB, and demonstrating strong positions) could be joined by a party with standing for appeal. to avoid the issue. (Note: as CBM essentially requires Article III standing this is solely an IPR/PGR issue).

Of course, there is also the practical reality that many appeals will be from patentees given the challenger friendly standards of the PTAB.

Finally, might there be a situation in the future where a party that is not a public interest group (i.e., just looking to clear the competitive landscape) would be challenged on standing? Probably, but given that most IPRs are forced by litigation and or threat of litigation, those situations will be uncommon. Likewise, as estoppel is effective at the time of written decision, such an adverse result could be persuasively argued to confer standing for appeal. (estoppel is not effective under the old inter partes reexamination system until after all appeals are exhausted)

Outdated Patent Drafting Techniques Present Opportunities.

The Patent Trial & Appeal Board (PTAB) poses a significant threat to patent monetization. Not because the PTAB is anti-patent, far from it, but because the patents challenged today were drafted for the scrutiny of the district court. That is, in a district court invalidity is only found where the presumption of patent validity is overcome by a clear and convincing evidentiary showing. Given the relative low risk of this happening as compared to a non-infringement finding, patents were drafted to obtain the broadest claims possible for ensuring a clean infringement read. Of course, the attractiveness of PTAB challenges is the absence of such pro-patentee standards.

As discussed previously, now that PTAB challenges are becoming the standard, initial hurdle, patents need to be drafted differently, or “post-grant proofed.” This new PTAB centric drafting and prosecution strategy is especially critical in the predictable arts. This is because existing claim drafting strategies might also permit your competitor to game the estoppel flowing from an unsuccessful Inter Partes Review (IPR) challenge.

Under 35 U.S.C. § 315(e)(2) IPR estoppel is applied on a claim-by-claim basis:

(e) Estoppel.—

(2) Civil actions and other proceedings.— The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318 (a), or the real party in interest or privy of the petitioner, may not assert either in a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

This claim based estoppel creates interesting opportunities for patent challengers, especially direct competitors in the predictable arts. Take the typical electrical/software patent drafted within the past 10 years as an example. This patent likely has dependent claims directed to well-known options/features, and different classes of repetitive claim sets (system, method, apparatus) that repeat the same language. Now let’s say that a competitor approaches your organization to take license on that patent. You determine that some independent apparatus claims are a concern, but not the trivial, dependent claims (too narrow, or easily designed around). Likewise, the method claims present divided infringement issues. By challenging the method claims in IPR (i.e., ones that you don’t infringe but include similar language) you can demonstrate the strength of your art, without risking estoppel for the claims that are an infringement concern. If you are subsequently sued, you will benefit from the guidance of the PTAB on claim construction/analysis of the submitted art. Thereafter, you can file a fairly straight forward, second IPR filing…or not.

A reversal of this technique can be used on the dependent claims. That is, an IPR is pursued for the base claims only. If the IPR is successful, a sophisticated competitor is unlikely to sue on trivial dependent claims given the outcome at the PTAB. On the other hand, if the IPR is unsuccessful, estoppel would not apply to these claims under the plain language of the statute. Presumably, the same art would not be used again in court, but the “reasonably could have raised component” of 315(e)(2) could be side-stepped, In other words, the invalidity case for the dependent claims would by necessity include the base claims that were subject to the failed IPR. (assuming the judge does not find some type of equitable estoppel in this regard)

I emphasize these strategies for competitors only because NPEs leveraging the cost of litigation to extract settlements are generally not reasonable actors. Likewise, these options may be of limited value in a litigation context if a stay is desired (i.e., you don’t want to leave asserted claims uncovered). As always, your mileage may vary.

nautilus-112

Decision Indirectly Highlights Value of Post-Grant Challenges

Yesterday, the Supreme Court decided that the Federal Circuit’s “insolubly ambiguous” framework for analyzing indefiniteness was, well…. indefinite.  In Nautilus Inc. v Biosig Instruments, Inc., the court found that “. . .the expressions “insolubly ambiguous” and “amenable to construction” permeate the Federal Circuit’s recent decisions concerning § 112, ¶2’s requirement.  We agree with Nautilus and its amici that such terminology can leave courts and the patent bar at sea without a reliable compass” (here). In reversing the decision of the CAFC, the case was remanded with instructions to consider a re-calibrated standard. That is, whether the claims when read in light of the specification and prosecution history fail to inform, with reasonable certainty, the scope of the claims to one of skill in the relevant art. The new test, as discussed at length in the decision, emphasizes a more fact intensive analysis.

As pointed out in footnote 10 of the decision, the parties dispute over the proper weight to be accorded the underlying proofs (i.e., clear and convincing, or not), and the degree of deference to a previous post-grant determination of the USPTO, were left for another day—That day may be just around the corner. Continue Reading Nautilus Decision to Drive PGR and CBM Filings

Patentee Successfully Narrows Claims in IPR

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 an amendment (save those simply cancelling claims).

This past Tuesday, an amendment finally made it through.

In IPR2013-00124 (International Flavors & Fragrances Inc. v. U.S. Department of Agriculture), the patentee (i.e., Uncle Sam) was able to substitute 19 new claims in place of the originally patented claims (original claims 1-26 were cancelled outright). While critics will certainly point out that the motion was unopposed, and was essentially a settlement by amendment (challenger was satisfied that new claims were no longer a threat and simply walked away), the development does illustrate that it is possible to present a motion to amend that is capable of passing muster. (decision here) (motion to amend here)

For a more expanded discussion of this development, and amendment options/strategies, please join me on today’s IPO Chat Channel program entitled: Amending Claims: Assessing the Options Right Now at the USPTO.