USPTO Adjusts Examiner Count System to Address Growing RCE Backlog

Some notable pre-grant news this week. A Request for Continued Examination (RCE) is largely a procedural creature of pre-grant, patent application prosecution (patent reissue being the lone exception on the post grant side). Recently, the backlog of RCE filings has increased significantly. This is largely the result of the Office switching the priority of such filings on examiner dockets while reducing examiner credit for processing RCEs. This priority switch was designed to reduce the backlog of unexamined patent applications. Not surprisingly, as the unexamined application inventory went down, RCE inventory went up as illustrated in the above chart.

Starting on October 1st, the USPTO will recalibrate the Count System Initiative (CSI) to incentivize work on the RCE backlog. (Under the previous version of CSI, 1.75 credits were available for the first RCE, and 1.5 for the second and subsequent)

On October 1, 2013 examiners will receive a total of 2.0 counts for the 4th and all subsequent RCEs in which a first office action is done in the first quarter of the fiscal year, and 2.o counts for the 5th and all subsequent RCEs in which a first office action is done in each of the second, third, and fourth quarters of the fiscal year.  

Also, examiners with higher RCE inventories will have more limited inventories of regular new applications available for action until their RCE inventories are reduced below predetermined thresholds.  

Second Round of Patent Reform Efforts to Hit Congress

As expected, the second Goodlatte discussion draft has been circulated. (here) The second draft appears to include additional technical fixs and refinements, including the necessary CBM fix I mentioned being involved with yesterday. The draft also includes many of the concepts introduced in the first draft circulated this past May. I have not had time to review them all in detail, but will in the coming days at the Midwest IP Institute.

Legislative efforts from Senator Leahy and others are expected to follow shortly.

CBM Statute Inadvertently Excludes Best Source of CBM Prior Art

In fashioning the Covered Business Method (CBM) statutes of the America Invents Act (AIA), Congress was sensitive to the resources of the USPTO. That is, Congress realized that certain types of “secret prior art” would be very discovery intensive to analyze within the mandated 12 month time frame that the USPTO must conclude a CBM proceeding. An example of such art would be secret public use of a claimed method that predated a patent filing, such as described in Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co. 153 F. 2d 516 (CA2 1946). To avoid this type of discovery intensive prior art being applied in CBM proceeding, Congress excluded it under the definition of prior art provided in Section 18(C) of the AIA.

The problem with Section 18 (C) is that its definition of prior art inadvertently excluded 102(e).

AIA Sec. 18 recites as follows:

(C) A petitioner in a transitional proceeding who challenges the validity of 1 or more claims in a covered business method patent on a ground raised under section 102 or 103 of title 35, United States Code, as in effect on the day before the effective date set forth in section 3(n)(1), may support such ground only on the basis of–

(i) prior art that is described by section 102(a) of such title of such title (as in effect on the day before such effective date); or

(ii) prior art that–

(I) discloses the invention more than 1 year before the date of the application for patent in the United States; and

(II) would be described by section 102(a) of such title (as in effect on the day before the effective date set forth in section 3(n)(1)) if the disclosure had been made by another before the invention thereof by the applicant for patent.

In a nutshell, Section 18(C) defines CBM art as only art that qualifies under 102(a); or that 102(b) art that is not secret. While it was not the intent of the drafters to exclude 102(e), or even 102(d) for that matter, the language of the statute indicates otherwise. Yet, excluding 102(e) cripples the statute with respect to its intended purpose — combatting suspect business method patents.

102(e) art is also sometimes referred to as “secret” art as it is typically based on a patent application that was not known at the time of a later filing directed to the same invention. This first filed application is later published, and is effective as prior art against the second application based on its filing date. This type of prior art is especially prevalent in the CBM context as many such patents were pursued in the late 1990s in response to State Street Bank, and as a precursor to the “dot-com-bubble.” As patent applications did not publish in the 1990s, it is not uncommon for an application filed in 1997 to be effective prior art against the same application filed in 2000, but the earlier filed application does not issue as a patent until 2002 (i.e., remains non-public). As this type of “secret” art is documented and requires no discovery, it is routinely considered by the USPTO in the patent examination context. This art was not the focus of the Sec. 18(C) carve out but is nevertheless exlcuded by the language of the statute.

To date, many CBM filers have mistakenly assumed that 102(e) art was fair game understanding only that Congress provided a special definition of prior art in Sec. 18(C) to exclude secret public uses. Indeed filers such as Google have based entire petitions on 102(e) art in some cases. The PTAB has also instituted trials on 102(e) art. However, more recently, the PTAB has been sua sponte spotting the issue (CBM2013-00008).

Over the past month I have discussed this issue with legislative staffers working  on the next round of patent reform initiatives, and drafted a fix for their consideration. My understanding is that this technical fix, along with other AIA technical fixes will be included in the next round of patent reform  bills, and that the CBM fix will be made retroactive.

Midwest IP Institute This Week

For those looking for post grant related CLE this week, the Midwest IP Institute will be held in Minnesota September 26-27. The live event will include several post grant panel discussions including an update on legislative efforts, and an overview of post grant practice and strategies under the AIA.

The full brochure is found here. The program will also be webcast.

Expectations of Significant PTAB Discovery Practices Prove Misguided

When discussing Patent Trial & Appeal Board (PTAB) proceedings at CLE events, I am always fascinated by the degree of interest in PTAB discovery procedures. Parties to an Inter Parties Review (IPR) proceeding may obtain what is termed “limited discovery” at the PTAB. Such discovery is limited as it must fall in an accepted class of discovery, namely, “routine discovery” or “additional discovery.” See Rule § 42.51. Routine discovery is easy to understand, it is simply (1) any exhibit not otherwise publicly available or served, (2) cross examination of a declarant, and (3) non-cumulative information that is inconsistent with a position taken by the party before the PTAB. In the typical case, category (2) is the only routine discovery.

“Additional discovery” defines everything outside of the above noted categories. It is the promise of “additional discovery” that seems to enthrall the masses. To seek such additional discovery in an IPR an “interest of justice” showing is required. Since patent challengers in IPR rely on patent and printed publications filed with their IPR petition, there is rarely, if ever, a need for additional discovery that will satisfy the requisite showing. 

Nevertheless, I am routinely asked about “discovery plans” in IPR. In most cases the plan is simple — don’t plan on getting any.

The lack of additional discovery in PTAB proceedings is not a criticism of how the USPTO is operating, quite the contrary. Anyone familiar with past inter partes patent reexamination practices recognized that the need for limited discovery was simply to better adjudicate those few cases in which a party was accused of submitting a seemingly baseless or biased declaration. This problem is solved by category (2) of routine discovery. Yet, outside of the instance where a declaration is baseless or devoid of competence, even this routine discovery is of marginal impact in a typical IPR case.

With district court litigation, often times the expert witness that is believed by the judge or jury is the one demonstrated as most credible, likeable, personable, etc. These factors are easily distorted before non-technical fact finders via deposition sound bites or live testimony, especially in light of the presumption of validity and clear and convincing evidentiary standard applied to patents in the courts. On the other hand, the judges of the PTAB are engineers and/or scientists. These technical judges apply no such presumption and review the written technical record (including deposition transcripts) in light of their own technical training and understanding. As such, PTAB judges will select a “winner” based upon their view of the proferred technical reasoning ….not through the lens of showmanship and presumption applied in district court proceedings. 

For a detailed explanation of the standard for awarding additional discovery in an IPR proceeding, see this post.

Avoid These Litigation Inspired Drafting Errors

One of the biggest misconceptions about the new patentability challenges of the America Invents Act (AIA) is the notion that these administrative  trial proceedings are somehow analogous to district court litigation — nothing could be further from the truth. Rather, the new AIA proceedings simply skip over the previous patent reexamination examiner phase and go straight to the Patent Trial & Appeal Board (PTAB) phase, with a very limited opportunity for expert depositions along the way.

While it is certainly true that Inter Partes Review (IPR), Post Grant Review (PGR) and the Covered Business Method (CBM) proceedings are “trials,” these PTAB trials are governed by their own unique procedures, and are almost exclusively conducted on paper. As is made clear from the 12 months of proceedings to date, discovery practice is quite limited for these trials since they are based on documentary evidence only (i.e., patents and printed publications).

Looking at the top 5 IPR petition drafting mistakes, it is not surprising that most stem from the failure to recognize the key differences between PTAB and district court proceedings.

1. Deficient Evidentiary Declarations

Almost every IPR or CBM petition filed to date has been accompanied by a supporting declaration of one of skill in the art. The reason for presenting a declaration in support of a petition is simple: (1) the Patentee will almost always respond with their own once trial is ordered, and not filing one at the time of petition may foreclose rebuttal opportunity; and (2) Given that the patentee may not introduce new testimonial evidence at the time of the preliminary response, the petitioner declaration should insulate the petition from being denied by the PTAB in most circumstances.

These declarations, properly presented, are not expert reports that provide ultimate opinions. Instead, declarations are intended to provide evidence of the level of skill in the art, scope and content of the art, or technical understanding of a subject patent specification. Keep in mind that unlike district court judges PTAB judges are technically trained in engineering and/or the sciences. In district court litigation, expert reports provide a notice of later testimony intended to be offered at trial, at the PTAB, the declaration is the testimony. For this reason, declarations presented in an expert report style are sometimes deficient with respect to the requisite factual presentation.

2. “Mix and Match” Grounds of Unpatentability

As IPR petitions are commonly pursued at the time preliminary invalidity contentions come due in a concurrent litigation, filers sometimes try to repurpose their invalidity contentions as grounds of unpatentability in their IPR filing; this can have disastrous consequences. For example, preliminary invalidity contentions commonly identify multiple references for every claim element. By utilizing these contentions in an IPR petition there is no coherent ground of unpatentability presented. In such cases, the PTAB is likely to find the majority of combinations redundant, or completely lacking in requisite detail. If the PTAB rejects a petition on such grounds outside of the 12 month IPR window, there may be no way to refile the challenge in a more appropriate form.

3.  Lack of Coherent Claim Construction Positions

It is well known that the claim construction applied by the PTAB is different than that of the district courts. Still, petition filers are hesitant to provide a proper  PTO claim read in their petitions fearing that their adversary will point this out to the court to argue inconsistency. (That is to say, a broad read at the PTO may be inconsistent with a narrower read advanced in court for non-infringment purposes). In such cases, filers will typically discuss/advocate for their district court claim briefing/Markman hearings, or simply take no position whatsoever. Not surprisingly, the PTAB will arrive at a proper BRI construction in the Trial Order. However, the petitioner loses valuable credibility, which could unfavorably color the findings of the Trial Order. 

It would be a rare district court judge that did not have significant experience with concurrent PTO proceedings at this point. Simply explain the rationale for the different construction.

4.  Redundancy in the Grounds of Unpatentability

Similar to mistake (2) above, redundancy is another common trait of district court invalidity contentions. That is, the presentation of lengthy grounds of invalidity without any explanation of the relative strength for any one ground. In some cases the Board found that a §102 ground of unpatentability may be redundant with a §103 which relies on a different primary reference where the Petitioner does not “articulate any meaningful distinction between those separate disclosures in terms of potential strengths and weaknesses in the application of each disclosure to those claim limitations.”  It is therefore incumbent on the Petitioner to explain why various grounds are materially different with respect to their disclosures of the claimed features.

While PTAB page limits constrain the amount of prior art grounds that may be presented, especially as compared to the former inter partes reexamination practice, it is clear that the PTAB will not go forward on multiple grounds absent an explanation. As such, it is crucial to address redundancy to avoid the PTAB inadvertently picking a less preferred ground.

5.  Failure to Recognize the Importance of the 12 Month Window

While not a drafting mistake per se, the last mistake is one of timing. Petitioners have 12 months to file a petition for IPR from the time of being served with a complaint for infringement of the subject patent. Filings made outside this window are time barred. While this limited window would seem straight forward to track, large manufacturers need to be especially mindful of their supply chain and/or customers that are sued on the same patent at an earlier point in time. In some IPR filings, privity between businesses, indemnification obligations, corporate relationships, and the like could trigger the start of the window prior to a complaint being lodged against the parent company. This is because 35 USC 315 (b) extends to service of a complaint on a petitioner, real-party-in-interest or privy of the petitioner

Moreover, even when within the window, waiting to file beyond the 6 month mark means that there will be no second chance if a petition is ineffective due to one or more of the presentation mistakes noted above. Keep in mind that it takes 5-6 months from petition filing to receive the Trial Order.

The First Year of PTAB Patentability Challenges

Today marks the one year anniversary of the new patent challenge mechanisms of the America Invents Act (AIA). Over the past few months there have been many noteworthy rulings in the 550+ Inter Partes Review (IPR) proceedings and 50+ Covered Business Method (CBM) proceedings. This week, I will look at the rulings that helped shape post grant practice before the PTAB over the first year. Today we start at the beginning with formal petition practice. Later this week, I will look at other phases of the proceeding, up to the time of oral argument such as effective petition practices, motion practice, joinder practice, and requests for additional discovery. While these rules and best practices are certain to evolve further, the PTAB’s decisions over the past year provide invaluable guidance far beyond that provided in the statute, legislative history, rules and notices.

The first step in any IPR, CBM or PGR proceeding is the preparation and filing of the petition.  Once filed, a petition is reviewed for compliance with various formatting requirements, page limits, mandatory notices, etc. Formalities requirements are handled in a manner akin to ex parte prosecution. If the petition is deemed “defective” the filing date is still accorded and the submitting party is given several days to submit or correct the missing information so long as the re-submission can be accomplished without substantive change to the petition. Typically, such defects are a relatively minor concern, typical examples include:

1. Improper margins, page limits exceeded
2. Improper exhibit numbering
3. Incomplete mandatory notices
4. Failure to identify related proceedings
5. Non-compliant claim charts

Of the above categories, the first 4 are straight forward. The last category, covers a myriad of issues. In short, while the text of a petition must be double spaced, claim charts can be single spaced. As the PTAB does not want filers to infuse claim charts with extraneous content, such as argument, charts are carefully reviewed by PTAB paralegals to ensure that the filer is not attempting to side step the strict page limits. The PTAB requires charts of a two column format, with minimal prose. Ideally, a chart will look much like the fact section of a typical PTAB opinion.

If a petition is deemed compliant the first official communication is likely to be a Notice of Filing Date Accorded. The notice in IPR2013-00033 (Paper 14, Oct. 26, 2012) is representative and reminds the parties of the due date for the Patent Owner’s Mandatory notices (21 days), Preliminary Response (3 months), requirements for pro hac vice admission and the requirement to file documents electronically

Alternatively the Board may deem the petition “incomplete,” and thus not entitled to a filing date, if correction of the error or omission may require a substantive change to the petition or the accompanying exhibits; such is far less commonplace now that we have had 12 months of filings. Still, such a filing could be very problematic for an IPR filer approaching the end of their 12 month filing window.

Once getting past the paralegals and securing a filing date, perhaps the most important aspect of petition drafting is tested. Tomorrow I will walk through effective presentation techniques.

Court Cites Improved Speed of PTAB as Eliminating Potential Prejudice

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 changing the perspective of the judiciary on staying litigation pending USPTO proceedings.

As most are aware, the old patent reexamination system, at least on the inter partes side, has been replaced by IPR. IPR must be concluded by statute within 12-18 months, a marked improvement over the (roughly speaking) previous 6+year path through the Central Reexamination Unit (CRU), Board of Patent Appeals & Interferences (BPAI) and Court of Appeals for the Federal Circuit (CAFC). These changes are being quickly recognized by courts, several of which have agreed to halt litigation proceedings upon the mere filing of an IPR (months in advance of an Order to grant the IPR petitions).

Previously, when an inter partes or ex parte patent reexamination was the basis for the motion to stay the court proceeding, the strongest plaintiff arguments in opposition were that the significant USPTO delay would prove prejudicial to the plaintiff…not any more.

In SoftView LLC v. Apple Inc., et. al., 1-10-cv-00389 (DED September 4, 2013, Order), Judge Stark (order here) found several aspects of the IPR process militated in favor of a stay, whereas months earlier a motion to stay on patent reexamination grounds was denied. Specifically, the Court found: 

A stay is likely to simplify the issues for trial. Unlike in connection with the earlier requested stay- when only some of the asserted claims stood rejected – the PTAB has granted inter partes review with respect to all of the asserted claims of the patents-in-suit.  . . Should all of the asserted claims be found invalid, this litigation would be “simplified” because it would be concluded. Alternatively, should even some of the asserted claims be found invalid, that finding would reduce the number of issues left to be litigated. Another possibility is that some or all of the claims are found not invalid, yet even in that scenario, litigation should be somewhat simplified due to the estoppel effect on [defendants]- and Moving Defendants’ agreements to be bound certain prior art. Thus, while it remains true that in this litigation Defendants are pursuing invalidity and equitable defenses beyond the scope of what will be considered during the inter partes review, and Softview has reiterated its pledge not to seek to amend claims, the simplification factor favors a stay.

As to the last point on amending, presumably the Patentee agreed to this concession in the hopes of undercuting the argument that a change in claims would frustrate the litigation process and favor a stay. This concession is now a no-win proposition for plaintiffs.

As to the speed of PTAB proceedings compared to earlier stay denial (based on a patent reexamination filing) the Court found:

In the Court’s July 2012 decision denying a stay, the Court noted that the early stage of litigation and lengthy process of reexamination weighed against a stay. . this comparison [is] different now: while the case has substantially progressed, the inter partes review promises to be a more expeditious process than reexamination and appears to be relatively close to completion. . . .by the time case-dispositive motions are filed, the inter partes review is likely to be over. Pursuant to 35 U.S.C. § 316(a)(11 ), the PTAB must issue a final determination within one year of the notice of a review – here by March 29, 2014- unless that period is extended for six months for good cause shown. Hence, while the parties and the Court have dedicated substantial time and resources to this case – and only this case can resolve all of the patent-related disputes among the parties- the Court believes, under the circumstances, it is appropriate to allow the inter partes review a reasonable period to conclude before launching the parties into the expense of expert discovery.

As I predicted when the AIA was first passed, the patent troll game has changed. At least for those wise enough to avail themselves of the new PTAB options.

Fall CLE Programs

For those looking for post grant related CLE, September offers a full slate of options. First up, on September 11th, Strafford Legal offers the webinar Post Grant Proceedings and Pending Litigation: Impact of Fresenius v. Baxter

On September 16, the USPTO (Alexandria) will host a half day program entitled America Invents Act Second Anniversary Forum. The live event will include a range of AIA topics, including a PTAB update, this event will also be webcast.

Finally, the Midwest IP Institute will be held in Minnesota September 26-27. The live event will include several post grant panel discussions including an update on legislative efforts, an overview of post grant practice and strategies under the AIA. The full brochure is found here, this event will also be webcast.

Hope to see you virtually or in person at one of these upcoming events.

Planned Silicon Valley Office in Limbo

Seems Congress is currently winning the never ending fee diversion battle with the USPTO. As a result, efforts to expand USPTO satellite office to Dallas, Denver and Silicon Valley have been significantly slowed. While permanenet office locations in Dallas and Denver have been identified, the search for a permanent Silicon Valley office was recently halted as a result of the sequestration of USPTO funds (you know, the ones they collect from the public in self supporting fees).

The Detroit office remains open. 

It seems unlikely that the planned satellite office will be anything but ceremonial outposts in the near term. Indeed, absent consistent funding, one or more satellite offices could be shelved indefinitely.