PTAB Begins Front Loading IPR & CBM Schedules

The new patent challenge proceedings of the USPTO’s Patent Trial & Appeal Board (PTAB) are instantly distinguishable from the previous examiner-based, patent reexamination—perhaps most notably in speed. That is, an Inter Partes Review (IPR), Post Grant Review (PGR) or Covered Business Method (CBM) must conclude, by statute, within 12 months of institution. This turnaround is a dramatic improvement over the 3-5 year pendencies that plagued patent reexamination. For this reason, the PTAB has been a major disruption to the business of patent licensing and assertion in the U.S; especially to that of the dreaded “patent troll.”

For patentees faced with a PTAB post grant challenge it’s only getting worse. As of mid-December, the PTAB has accelerated trial schedules so that oral argument is scheduled a mere 7 months from trial institution. This is a full two months earlier than the previous default schedule.

Up until recently, the default Scheduling Order set Due Dates 1-7 as show in black below (example Order here). Since mid-December , the default Scheduling order has been accelerated as shown in red below (example Order here):

Due Date (1) — 3 Months from Institution ——–>2 months
Due Date (2) — 6 Months ”  “—————————>4 months
Due Date (3) — 7 Months ”  “—————————>5 months
Due Date (4) — 7 Months, 3 weeks ”  “————>5 months, 3 weeks
 Due Date (5) — 8 Months ”  “—————————>6 months
Due Date (6) — 8 Months, 1 week ”  “————->6 months, 1 week
Due Date (7) — 9 Months ”  “—————————>7 months

The new default schedule clearly front loads the first seven months of the 12 month trial schedule to give the PTAB a full 5 months to issue a written decision from the date of oral argument. Presumably, this move from a 3 month to 5 month buffer is designed to ensure that the PTAB is able to issue a decision within the statutorily mandated 12 month period. That is, the PTAB will be processing an increasing number of decisions in the months ahead. Couple this growing volume with the newness of a deadline for issuing such decisions, and the significant paralegal and administrative review that each decision receives prior to printing, and it is easy to understand the acceleration in scheduling.

That said, such an accelerated schedule is more bad news for patentees. While the old default schedule provided flexibility to parties to move dates 1-3, now, it will be very difficult to move such dates given the tight deadlines—especially where amendment is contemplated. (i.e., Due Date 3 is relevant). Going forward, petitioners would be wise to ensure that their declarants will be available for deposition 7-8 months from filing. Likewise, it is even more critical for patentees to quickly retain post grant counsel and begin preparing in advance of the Trial Order.

Are NPE Judgments Under Attack?

The primary business distinctions between the USPTO Patent Trial & Appeal Board (PTAB) proceedings and traditional court based patent invalidity proceedings are the vast improvements in cost, predictability, effectiveness, and speed of PTAB proceedings— but it is the speed and effectiveness that is the most disruptive to the patent litigation landscape.

As was made very recently apparent in Fresenius USA v. Baxter Int’l. (Fed. Cir. 2013), a damage judgment is not necessarily safe from collateral attack unless and until it is actually satisfied by the putative infringer.

Since Fresenius, most patentees have taken solace in the fact that such a patent reexamination based fact pattern is exceedingly rare. Yet, if you are one of the many plaintiffs sitting on a large verdict, you will have a new worry in the months ahead—the PTAB troll.

Inter Partes Review (IPR), will conclude within 18 months of filing of the petition, in typical cases. This is a huge difference from the 4-5 year pendency of many patent reexaminations. However, defendants subject to a significant damage award cannot avail themselves of IPR. This is because an IPR must be pursued within a limited window by accused infringers. 35 U.S.C. § 315(b). This statute precludes IPR on any patent once 12 months have elapsed after service of a complaint alleging infringement of that patent.

So, any patentee that is sitting on a sizable verdict would, by definition, be 12 months from service of the complaint. With patent reexamination being too slow to matter in most cases, and the 12 month window precluding IPR from the accused infringers, it would seem that a damage verdict would be relatively safe from collateral attack.  Not so.

The PTAB troll is an uninterested party. An uninterested party (i.e., one not in the lawsuit) is not outside the 12 month window, and just like in Fresenius, could simply repackage the very same art used in court for the forum with more favorable odds, the PTAB. The PTAB troll business model works like this:

Step 1.

Identify a high value damage award in which the prior art presented appears strong, and there are no pending USPTO challenges. Such cases are not uncommon now, as IPR was not possible 2-3 years ago when such cases were first filed.

Step 2.

File an IPR with the same art. Approach patent troll for a quick settlement (e.g.,  few hundred thousand) before the PTAB Trial Order. Meanwhile, defendants wait on the sidelines, or copy the PTAB troll petition and file it together with a motion for joinder awaiting an outcome. (Remember, that joinder is covered by 35 U.S.C. § 315(c), and is the only exception to the 12 month window of 315(b)). Since joinder is not possible until the trial is ordered, there is a 4-6 month window for the PTAB troll to negotiate a settlement and unplug the opportunity for the defendants.

Of course, the IPR filing would need be pursued entirely by the PTAB troll so that the filing is not attacked as a straw man tactic of the defendants.

Step 3.

Settle.  Repeat with next case.

Over the past few months the PTAB has seen a handful of filings that appear to be directed to this business model.

Upcoming Post Grant CLE Programs for 2014

For attorneys seeking post grant patent CLE in 2014, there are a number of high quality programs scheduled between January and April 2014.

First up is the 9th Annual Advanced Patent Law Institute held at the United States Patent & Trademark Office (USPTO) on January 23-24th. This two day program offers several post grant patent discussions, including:  AIA Practice Tips Before the Patent Trial and Appeal Board; Post-Grant Proceedings, Strategies and Practice; and Ex Parte Reexam in View of Fresenius – A Hail Mary Pass Which Should Be in Every Playbook.

In February, the International Intellectual Property Institute (IIPI) will conduct a two day seminar in Arlington, VA entitled AIA Post-Grant Practice Conference. This two day program is directed entirely to post grant practice, the second day including mock hearings an oral arguments.

Last, but certainly not least, is the return of the highly acclaimed Practicing Law Institute program entitled USPTO Post-Grant Patent Trials 2014. This program, dedicated entirely to post grant practice will be held on March 27, 2014 in New York, and again on April 28, 2014 in San Francisco. A live webcast is available for the San Francisco location.

I hope to see you at one of these upcoming events.

Senate Judiciary to Webcast Hearing on Leahy Bill

Next Tuesday the Senate Judiciary Committee will hold a hearing entitled Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse. The 10 AM hearing will be webcast. A witness list is not yet available. The hearing will focus issues for possible mark up so that the Senate Bill can be fast tracked in early 2014. The Senate effort is expected to track the Goodlatte bill to avoid, or significantly minimize issues for conference.

Patent Reform Debate Moves to Senate in January 2014

Yesterday afternoon, the Innovation Act (H.R. 3309) passed through the House with ease by a vote of 325-91. The bill was quickly debated (3 hours) and only slightly amended. The one noteworthy change was the removal of the provision designed to repeal 35 U.S.C. § 145. As a reminder, 145 actions allow unsuccessful applicants for patents to challenge the denial of patent protection by the USPTO in District Court rather than the Court of Appeals for the Federal Circuit (CAFC). (The main benefit of the district court route over the CAFC is the ability to introduce new evidence).

145 actions are exceedingly rare. When instituted such suits can be a significant drain on the Solicitor’s Office of the USPTO, hence the original proposal to repeal 145. It seems legislators failed to realize some patentees like having an option 99.9% will never use.

With the House bill passed, debate will head to the Senate. It is expected that the Leahy bill will be revised to track H.R. 3309 so that conference can be avoided, and “reforms” can  delivered for presidential signature in the early weeks of 2014.

CAFC Considers Article III Injury Requirement for Dissatisfied Patent Challengers

Earlier this week, the CAFC heard oral arguments in Consumer Watchdog v. Wisconsin Alumni Research Foundation (Warf). Although seemingly a routine appeal from an inter partes patent reexamination, the Court took interest in the unique procedural posture of this case a few weeks before argument on the merits. Here, the challenged claims of the patent were confirmed as patentable by the USPTO and appealed by the challenger, Consumer Watchdog, to the CAFC. The CAFC ordered late briefing on the question of Article III standing for CW’s appeal. CW brief (here), WARF brief (here)

For simple folk like me, the question of standing would seem to have a relatively straight forward response. That is, appeal from a PTAB decision is provided, by statute (old 35 U.S.C. § 315 (b)(1), to any party dissatisfied with a decision of the PTAB. This appeal right was actually added in 2002 as the original inter partes reexamination passed in 1999 had no such right. Section 13106 of Public Law 107-273, 116 Stat. 1758, 1899-1906 (2002). So, not only was standing conveyed by Congress, it was conveyed only after denying it in the first legislative go-round. (fact pattern seems rather persuasive to me)

While the CAFC was well aware of the statute, they seemed to be seeking more of an “injury” from the appellant to convey Article II standing, or some kind of indication in the legislative history that Congress intended to convey Article III standing.

As a reminder, old 35 U.S.C. § 315 (b)(1) recites:

(b) THIRD-PARTY REQUESTER.— A third-party requester—

  • (1) may appeal under the provisions of section 134 , and may appeal under the provisions of sections 141 through 144, with respect to any final decision favorable to the patentability of any original or proposed amended or new claim of the patent;

During oral argument on Tuesday, the Court wondered whether there was a necessary injury to CW as a public interest group. While the estoppel that would flow from a failed challenge at the PTAB was explored, the Court did not seem to think estoppel against a non-competitive challenger was a true injury. Throughout the argument the Court repeatedly raised the issue as to the USPTO’s role in the dispute, and their palpable discomfort with the lack of an appearance by the agency on such a significant issue.

The agency’s absence was likely due to the nature of the appeal. In other words, the PTO is not typically defending patentability decisions, and is uncomfortable in that role. Given that participation in such inter partes appeals is discretionary, and the standing issue was raised after briefing was completed, the absence of the agency is not surprising. Still, it would seem that some input from the agency is necessary before the Court rules. As such, late Wednesday, the CAFC issued an Order (here) seeking input from the USPTO and U.S. government on the PTAB standing issue.

If standing were not found in such scenarios, the decision is unlikely to have significant impact on CBM or IPR proceedings. This is because CBM challengers must have standing to begin with (sued or charged with infringement), and the vast majority of IPRs are pursued by petitioners as an alternative to litigation. Still, there is a growing volume of IPRs from public interest, anti-troll, type organizations. Further, the Bio/Pharma community, the most likely targets of future PGR petitions (due to the availability of 101 and 112 grounds) are likely to watch this dispute very closely. (no amicus briefing is expected at present)

Patentees Squeezed Between Competing PTAB Rules

The rules of the new patentability trials of the America Invents Act (AIA) are designed to ensure timely resolution of patentability disputes within the statutorily mandated 12 month time frame. In particular, the Patent Trial & Appeal Board (PTAB) fashioned their new rules to prevent the notorious delays and complications of the previous inter partes patent reexamination system. One way in which the new AIA post grant proceedings are vastly different from the previous inter partes patent reexamination model is the manner in which claim amendments may be proposed.

In the previous inter partes reexamination system, any number of amended claims could be added or submitted prior to the close of prosecution before the examiner. There was no numerical limit on the number of claims that could be submitted. In fact, it was not uncommon practice for patentees to submit hundreds of new claims. By doing so, patentees made it more difficult for the third party to respond to all issues within their 30 day period, and within page limits. Likewise, the addition of such extensive amendments made examiner/APJ processing all the more tedious and time consuming.

In the new AIA proceedings, Inter Partes Review (IPR) and Post Grant Review, the PTAB provides for a reasonable number of substitute claims. 37 C.F.R. § 42.121/221. The “reasonable” aspect has been explained as a one-to-one correspondence in the typical case. Further restricting the ability to amend is the requirement that amendments be presented within the bounds of a 15 page motion to amend. The combination of these controls strictly limits the ability of patentees to amend in any significant regard, which greatly aids the agency in completing the proceedings in a timely manner.

Yet, patentees argue that these strictly enforced procedural controls are inconsistent with the patentee estoppel that attaches to a failed PTAB proceeding.

A PTAB motion to amend is limited to 15 pages, double spaced, and 14 point font. The motion must include a full listing of the amended claims along with an explanation of support, level of ordinary skill, and an explanation as to non-obviousness. (See Idle Free Systems v. Bergstrom Inc., IPR2012-00027, See Also recent clarification on dependent claim listings ZTE Corp. v. ContentGuard Holdings, Inc., IPR 2013-00136). Patentees seeking to amend their patents before the PTAB have found working within the 15 page limit exceedingly difficult, and page limit extensions rarely granted.

In ZTE, the Board explained its strict amendment requirements and general reluctance to grant page extensions as follows:

[A]n inter partes review is more adjudicatory than examinational, in nature, and that if a patent owner desires a complete remodeling of its claim structure according to a different strategy, it may do so in another type of proceeding before the Office.

While generally speaking this policy position makes sense from a USPTO work flow management perspective, it overlooks the patentee estoppel provision that arguably requires any and all amendments be pursued in the PTAB proceeding.  That is, 42.73(d)(3)(i) provides:

(3) Patent applicant or owner. A patent applicant or owner is precluded from taking action inconsistent with the adverse judgment, including obtaining in any patent:

A claim that is not patentably distinct from a finally refused or cancelled claims ; . . .

(emphasis added)

In other words, patentees that fail to make an amendment before the PTAB are in danger of losing that opportunity thereafter. While it is understandable that the Board continue to simplify IPR, CBM and PGR proceedings as much as possible, the Board should remain mindful of the significant impact an adverse judgement will have on a patentees ability to amend in other proceedings as currently suggested.

To date the Board has shown flexibility in extending page limits for motions to amend where patentees forgo their 60 page response (often times patentees file contingent amendments together with a full 60 page response directed to the unamended claims). Yet, in these instances, only 2-5 additional pages are accorded. It is suggested that where more significant amendment is desired, and a full 60 page response waived in favor of amendment, that the Board adopt a more liberal stance for page extensions so that patentees are not unfairly surrendering subject matter to the patentee estoppel of 42.73(d)(3)(i).

The rules of the new patentability trials of the America Invents Act (AIA) are designed to ensure timely resolution within the statutorily mandated 12 month time frame. In particular, the Patent Trial & Appeal Board (PTAB) fashioned their new rules to prevent the notorious delays and complications of the previous inter partes patent reexamination system. One way in which the new AIA post grant proceedings are vastly different from the previous inter partes patent reexamination model is the manner in which claim amendments may be proposed.

In the previous inter partes reexamination system, any number of amended claims could be added or submitted prior to the close of prosecution before the examiner. There was no numerical limit on the number of claims that could be submitted. In fact, it was not uncommon practice for patentees to submit hundreds of new claims. By doing so, patentees made it more difficult for the third party to respond to all issues within their 30 day period, and within page limits. Likewise, the addition of such extensive amendments made examiner/APJ processing all the more tedious and time consuming.

In the new AIA proceedings, Inter Partes Review (IPR) and Post Grant Review, the PTAB provides for a reasonable number of substitute claims. 37 C.F.R. § 42.121/221. The “reasonable” aspect has been explained as a one-to-one correspondence in the typical case. In addition, claim amendments must be presented by motion, in a particular manner. Not surprisingly, patentees are demonstrating that old habits die hard.

– See more at: https://www.patentspostgrant.com/lang/en/2013/06/amendment-procedures-trip-up-patentees-at-ptab#sthash.vc6AnppL.dpuf

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Texas Court Stuns Patent Troll Business Model

Texas has become well known, some would say infamous, for their patent friendly federal district courts. Over the years, “patent trolls” have increasingly flocked to Texas District Courts such as the eastern district (Marshall) to leverage these pro-patentee forums.

Since September 16, 2012, new USPTO post grant patent proceedings have been increasingly leveraged as the first true alternative to patent litigation. Here again, Texas courts offered patentees a benefit over many other districts in the U.S. That is, historically, Texas judges have been reluctant to stay litigation pending USPTO reexamination proceedings. To date, most presumed that this historical bias against staying litigation pending USPTO reexamination would continue despite the increase in speed in the new patent challenge proceedings of the America Invents Act (AIA). Yet, as made clear last week, the heightened standard necessary to institute an Inter Partes Review at the USPTO’s Patent Trial & Appeal Board (PTAB), coupled with the recent outcome in Fresenius USA v. Baxter Int’l. (CAFC 2013), has Texas courts rethinking the wisdom of their previous anti-stay stance. Continue Reading Texas Court Explains PTAB Roadblock to Patent Litigation

Innovation Act Heads to Floor Debate for Last Push in 2013

Now that the Goodlatte Bill, also knows as the Innovation Act (H.R. 3309), has been reported out of the Judiciary Committee there will be a second round of amendment opportunities. The new amendments will be collected from house lawmakers on Monday December 2nd, and the Rules Committee is expected to calendar floor debate shortly thereafter (likely Wednesday or Thursday). It is expected that some of the same amendments that failed during committee markup will be reintroduced, along with a raft of others. Post grant patent issues are expected to be hotly debated, especially those pertaining to the potential expansion of  Covered Business Method (CBM) patent challenges.

The Innovation Act remains on the fast track heading into the close of 2013. Meanwhile, the Leahy Bill will sit idle for the time being. While significant progress can be made in the next few weeks, it seems unlikely that any legislation will be passed into law until early 2014.

Proposed Change to USPTO Claim Construction Practice Will Moot Markman Debates

One of the issues being debated in the current round of patent reform efforts is the current use of the broadest reasonable claim interpretation (BRI) in USPTO post grant patent proceedings. The rationale for this “broadest” interpretation practice of the USPTO has long been the ability to amend patent claims before the agency. That is — patent claims should be interpreted broadly in a forum where claim scope can be freely adjusted by the patentee (intervening rights aside).

Since the passage of the America Invents Act (AIA), a small, but vocal minority of bar association honchos (primarily those employed by large patent filers) have been shortsightedly advancing the notion that BRI should not be employed in the patent challenge proceedings of the AIA (Inter Partes Review (IPR) and Post Grant Review (PGR)). Instead, they argue that BRI claim construction should be replaced with the claim construction practices of the district court (i.e., Philips v. AWH). Their premise is that the new AIA proceedings are more “adjudicative in nature” as compared to examiner based patent prosecution/reexamination practices. Currently, the proposed legislation is adopting these changes for IPR and PGR proceedings (CBM is excluded).

As can be appreciated, large patent filers believe a narrower claim construction at the USPTO will help preserve the patentability of their patents that become subject to post grant patent challenges. Yet, in practice, if this change is implemented, it will have little impact on post grant proceedings. In fact, insisting that the USPTO perform the same analysis as district courts may help invalidate more patents.

First, there is a fundamental error in the assumption that the USPTO will arrive at the same conclusion as the district court on claim construction.

In practice, both forums would be employing the same Philips v. AWH claim construction framework, yet, the perspective of the decision makers is markedly different. That is, while narrower, multi-sentence definitions are commonly ascribed to patent terms via district court Markman Orders, these constrained definitions are rarely guided by the engineering or scientific training. This is because district court judges are rarely scientists or engineers. In contrast, all judges of the Patent Trial & Appeal Board (PTAB) are trained in the technical arts. Moreover, such district court definitions can be colored by the presumption of validity accorded to issued patents in the courts, a presumption that is absent at the PTAB.

We also know from experience that the USPTO does not ascribe such constrained definitions under a Philips analysis.

Expired patents are already accorded a district court claim construction analysis in USPTO post grant proceedings. As someone that has been involved in many such cases, I can attest to the fact that the ability to rely upon the intrinsic record for claim construction purposes (the only major difference with BRI and a Philips analysis) rarely advances the needle in any significant regard.

So, what is the harm in simply making things consistent?

Another major assumption of the backers of this proposal is that the district court claim construction will come first, and that the USPTO will adopt it. Under the current language in the House and Senate bills, the USPTO is not bound by such a decision, they just need to consider it.

Further, the AIA has changed the way patents are litigated. In the vast majority of litigations pursued post-AIA, an IPR challenge is becoming the rule. Since by definition IPRs must be pursued relatively early in the litigation calendar, the IPR Trial Order that includes claim construction will almost always issue in advance of a Markman Order. Currently, while IPR Trial Orders applying BRI can be helpful in calibrating the expectations of a patentee on their overall litigation outlook, it is not binding on the court due to the difference in standards.

Think about it…..if IPR is changed by the legislation to use the same construction as the courts, PTAB construction will almost always be first in time, be derived by technically trained judges, and, will rarely be much narrower than present BRI practices. On what basis will the court ignore this construction now?

Be careful what you wish for patentees, you just might get it.