Motion Practice Requirements Emphasized by Board

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.

In recent weeks the PTAB has issued several decisions cautioning patentees as to the requirements for motions to amend, and the requirement that the patentee first confer with the panel assigned to the trial before filing the motion. In addition to the limited number of claims that may be proposed by motion, the PTAB is also mindful that the the claims must be proposed to advance the contested proceeding. For this reason, the motion must include very specific information.

Last week, in IPR2012-00005, (here) the Board explained that 42.121(b)1 requires citations for written support in the specification for substitute claims and, 42.121(b)(2) requires citations for support to parent applications.

Then again yesterday, in a more extensive expanded panel Order, the PTAB outlined the requirements 42.121(a)(2) of a contingent claim amendment, the requirement to confer with the Board prior to filing, and the requirements to identify the patentable distinctions in IPR2012-00027. (here) The Board explained relative to patentable distinctions that:

A patent owner should identify specifically the feature or features added to each substitute claim, as compared to the challenged claim it replaces, and come forward with technical facts and reasoning about those feature(s), including construction of new claim terms, sufficient to persuade the Board that the proposed substitute claim is patentable over the prior art of record, and over prior art not of record but known to the patent owner. The burden is not on the petitioner to show unpatentability, but on the patent owner to show patentable distinction over the prior art of record and also prior art known to the patent owner. Some representation should be made about the specific technical disclosure of the closest prior art known to the patent owner, and not just a conclusory remark that no prior art known to the patent owner renders obvious the proposed substitute claims.

Note that the Board provided the patentee with a second chance to correct the missteps above, but, such free passes will likely dry up in the near future as PTAB practice matures.

PTAB Best Practices CLE

For those looking for some CLE that focuses on practice before the Patent Trial & Appeal Board (PTAB), consider tomorrow’s seminar entitled: Post-Grant Patent Proceedings before the PTAB. The Strafford Legal Webinar is a 90-minute live presentation of best practices in Inter Partes Review (IPR) and Covered Business Method (CBM) challenges. The topics include strategies and practice tips for both patentees and third parties.  I am pleased to be presenting along with my partner Greg Gardella.

Courts Grapple With Post Grant Patent Practice

A standard component of any patent litigation is a protective order. Such orders will invariably include a “prosecution bar. ” The prosecution bar operates to ensure that individuals accessing confidential data of an opponent are precluded from prosecuting patent applications in the area of the litigated technology (usually for a fixed duration of time). Absent this bar, patent applications/claims could be fashioned by competitive decision makers involved in the litigation based on the confidential information of their rival.

With concurrent PTAB proceedings now commonplace with most patent litigation, the question becomes:

Should a prosecution bar extend to PTAB post grant patent proceedings?

The answer to the above question varies across district courts, and, of course, is highly dependent upon the agreed upon language of the Order. The problem becomes, in many cases, when outdated boilerplate that does not directly reference new proceedings of the PTAB appears in the Order. In some districts the bar is found to extend to PTAB proceedings to the extent amendments are contemplated. Other courts take the stricter view that manipulation of the intrinsic record of a patent is an unfair advantage. These courts appreciate the value in allowing patentees to use confidential information of an accused infringer as a navigation aid to be used throughout a USPTO post grant patent proceeding. (especially where IPR, PGR and CBM are explicitly contemplated by the Order)

Courts have recently emphasized the new “ajudicative” nature of the post grant challenges of the America Invents Act to distinguish them from previous patent reexamination proceedings; especially where old boilerplate language is at issue in the Order. While it is true that the new PTAB proceedings do not have an examination phase, the intrinsic record is still susceptible to the very same alterations as made during any application/patent prosecution. That is to say, amendments and prosecution history estoppel are added to the intrinsic record just as they were before. The only difference is that patent examiners are no longer involved— a largely irrelevant detail.

Indeed, history has demonstrated that the stricter view of the courts is the most prudent. While there are no completed PTAB proceedings to serve as a guide, courts permitting participation in patent reexamination have greatly aided the patentee. University of Virginia Patent Foundation v. General Electric Company is a prime example. gued by GE to the judge (transcript 9/2/2009), to no avail.

At least for cases relating to complex technologies, prosecution bars that prevent direct participation in post grant patent proceedings would appear crucial to an accused infringer.

White House Suggests Already Existing Initiatives to Congress & USPTO

Yesterday, a White House press release (here) provided 7 “legislative priorities” and 5 executive actions to Congress, the USPTO and other government agencies for the purpose of improving patent quality (i.e., to primarily stomp out patent trolls). While heralded in many tech news outlets as a major development, it seems the press release (associated report here) is primarily recommending Congress and the USPTO to follow through on initiatives they have already been working on.

The 7 legislative initiatives include:

1. Require patentees and applicants to disclose the “Real Party-in-Interest.  (USPTO Notice of November 26 )
2. Permit more discretion in awarding fees to prevailing parties in patent cases (Shield Act, Patent Abuse Reduction Act, Goodlatte Draft)
3. Expand the PTO’s transitional business method patent challenge program (Schumer Bill)
4. Protect off-the-shelf use by consumers and businesses (Goodlatte draft)
5. Change the ITC standard for obtaining an injunction
6. Use demand letter transparency to help curb abusive suits
7. Ensure the ITC has adequate flexibility in hiring ALJs

The 5 Executive Actions are as follows:

1. Making “Real Party-in-Interest” the New Default (PTO to start rule making process, related to (1) above)
2. Tightening Functional Claiming (PTO to start rule making process, concept introduced by USPTO at Partnership for Enhancement of Quality of Software Related Patents, February 2013)
3. Empowering Downstream Users (PTO to educate, Goodlatte Draft)
4. Expanding Dedicated Outreach and Study (Develop more round tables at DOJ, USPTO, FTC)
5. Strengthen Enforcement Process of Exclusion Orders (Enhance Border Protection analysis)

With the exception of the ITC related provisions, which seem to be designed to make exclusion orders more difficult for patent trolls, the vast majority of the “recommendations” and executive actions have been in motion for some time. With significant bipartisan momentum and the White House lining up against patent trolls, it is expected that some of these legislative concepts will be passed into law in a matter of months.

Congress to Choose Between Competing Definitions

One of the more intriguing mechanisms of the America Invents Act (AIA) is the Transitional Program for Covered Business  Method (CBM) Patents. To date, these speciailized post grant patent challenges have been pursued in relatively limited numbers as compared to the more generic Inter Partes Review (IPR) proceedings. The reason for the disparity between CBM and IPR filing rates is quite simple — IPR is available for any technology not just “business method patents.” Yet, the CBM proceding is far superior to IPR in many strategic respects.

Recognizing the potential of CBM filings to have a greater impact on the patent litigation landscape, Congress is actively considering alterations to the existing statutory framework that would encourage greater use of this AIA mechanism. The first proposal comes from Senator Schumer (D-NY) as Senate Bill S.866 or the “Patent Quality Improvement Act.” This bill was introduced some weeks back to amend Sec. 18 of the AIA, which pertains to CBM standing. The Bill proposes to remove the language “a financial product or” from the standing definition. In its place, the bill proposes “an enterprise, product, or.” The change would effectively make clear that any e-commerce patent, even if not related to finances per se, is subject to a CBM challenge. (Note that the USPTO has been sued very recently on the importance of this “financial” component of the statute.)

The second proposal is part of the “discussion draft” proposed by Congressman Goodlatte (R-Va). The draft discussion seeks to import the holding of the decision made in SAP America, Inc. v. Versata Dev. Group, Inc., CBM2012–00001, Paper 36 (January 9, 2013). This is the USPTO decision that is subject to the lawsuit noted above.

In chosing between the two, Senator Schumer’s language would arguably expand CBM proceedings in the direction of e-commerce software applications (i.e., “enterprise products” is a more generic reference to non-financial methodologies/apparatus than currently recited in the statute). This language would also undercut arguments that patents reciting standard computer elements for implementing non-financial business methodology are outside of the scope of the statute as “technological inventions.”

The Goodlatte proposal would simply clarify the already existing landscape, namely, a financial component is not required for proper CBM standing. On the other hand, the Schumer proposal will accomplish the clarification of the Goodlatte proposal while simultaneously providing increased opportunities for patent challengers.  Seems to me that the Schumer Bill is the most likely result going forward considering the significant anti-troll sentiment driving these legislative initiatives.

Competing Bills Target Patent Troll Business Model

Congress has gotten the patent troll memo in a big way. The political stage is being set for a summer of legislative festivities. Like any good summer festival, Congress is separately establishing main and side stage legislative spectacles. The side stage spectacles, the more alternative acts, such as the Shield Act; Patent Abuse Reduction Act of 2013; and the Patent Quality Improvement Act will occupy many until the main stage effort takes shape. Last Friday the main stage act was announced.

House Judiciary Committee Chair Bob Goodlatte (R-VA), a key participant in the legislative effort behind the America Invents Act (AIA) released a draft bill that seeks to sweep in many of the concepts of the competing bills, while introducing fixes to the AIA. (here). The bill puts a new spin on the competing legislative proposals that address discovery controls, loser pay mechanisms, and the revision to notice pleading (brief overview here). Certainly these “troll” specific proposals will get the bulk of the attention from Congress and the public. As to the proposed “improvements and technical fixes” to the AIA, the draft post grant proposals are a mixed bag.

First, the “technical fix” aspect of the AIA changes relates to post grant estoppel. The House Bill seeks to address what many have argued was a technical defect in the AIA, namely, the failure to omit the “reasonably could have raised” estoppel component of 325(e)(2). This “technical fix” did not make it into the first technical amendment as there are many opposed to such a legislative change. Still, this change has long been discussed as necessary to make Post Grant Review (PGR) more attractive to potential challengers.

The second change would make Patent Trial & Appeal Board (PTAB) proceedings unattractive to patent challengers. The proposed change seeks to mandate district court claim construction practices on the PTAB:

‘‘(14) providing that for all purposes under this chapter, each claim of a patent shall be construed as such claim has been or would be in a civil action to invalidate a patent under section 282, including construing each claim of the patent in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art, the prosecution history pertaining to the patent, and prior judicial determinations and stipulations relating to the patent.’’

Consistent with 35 U.S.C. § 282(a), the above provision would require the PTAB to apply a presumption of validity in construing patent claims. Also, the proposal could force the USPTO to honor prior “judicial determinations” such as Markman Orders.

Courts construe patent claims with a presumption of validity. On the other hand, PTAB proceedings assess patentability, not validity. There is no presumption of patentability at the PTAB. Instead, amendments and expansion of the intrinsic record are permitted. (long the justification for applying the broadest reasonable claim construction rubric).

This proposed “improvement,” if enacted into law, will undermine the purpose and efficacy of the PTAB patentability proceedings as an alternative to high cost patent litigation. Strange that such a proposal would be added to a bill seeking to thwart abusive litigation practices. Undermining a favorable, low cost venue for patent challengers seems more than a bit misplaced.

Other changes to PTAB practice include the adoption of the definition of “business method” as provided in SAP America, Inc. v. Versata Dev. Group, Inc., CBM2012–00001, Paper 36 (January 9, 2013). This would effectively moot the current law suit on point. Also, the declaratory judgment aspects of 35 U.S.C. §§ 315/325 may be excused for petitioners stepping in for their customers in some instances.

Clearly, this bill is just a jumping off point and there are sure to be many, many amendments and modifications to come.

Congress Proposes Yet Another Anti Patent Troll Bill

Fresh on the heels of the Patent Quality Improvement Act (S.866) comes the Patent Abuse Reduction Act of 2013 (here) introduced yesterday by Senator John Cornyn (R-Tx). The newest Senate bill, like the one from earlier this month, also is designed to target patent trolls. While the earlier bill sought a way to short circuit high cost litigation through a more cost effective USPTO post grant review procedure, the newest bill seeks to create a loser pays system and completely revamps patent litigation pleading and discovery practices.

On the pleading side, the Bill proposes that simplistic Form 18 of the Federal Rules of Civil procedure (FRCP) be abandoned in favor of very detailed allegations that identify specific claims, infringing products/methods by name and model #, detailed claim mappings to each product, and a host of other information. The Bill also proposes a “pay to play” discovery system in which certain types of discovery are financed by the requesting party, and a loser pays outcome in certain situations.

The Bill is essentially a wish list of every company that has ever been sued by a troll, but does it throw out the baby with the bath water?

The recent flurry of legislative effort to combat trolls is understandable, and many would argue long overdue. Yet, the system can’t be torn down to the point that it becomes worthless to everyone. For example, while trolls certainly benefit from the notice pleading standard (Twombly aside), such pleadings are actually necessary in many disputes between technology companies as the internal operation of many high tech devices can only be confirmed after discovery. Likewise, rather than carve out special exceptions to the FRCP for patent cases, the more sensible solution seems to be embodied by Senator Schumer’s bill (which builds on a reform that is already stopping trolls and disrupting their business model); namely, take the troll out of the high cost venue so they can no longer leverage cost inefficiencies to extort settlements.

Right now the Bill is just an opening bid, and I suspect it will need to be watered down significantly to have any chance at passing into law. Simply stated, making patent litigation more expensive for plaintiffs might kill trolls, but at the expense of the very companies the legislation is seeking to help. Higher plaintiff costs will make it impossible for small tech companies to compete and negotiate with the market behemoths on patent issues.

After Final USPTO Initiative Retooled

Some pre- grant news of note this week. Last Friday the USPTO announced the After Final Consideration Pilot Program 2.0 (Federal Register Notice here). The revised pilot program modifies the initial concept by introducing a patent examiner feedback component.

Recall that the USPTO launched version 1.0 as the  “After Final Consideration Pilot” (AFCP) to foster compact prosecution and to slow the growing RCE backlog. The pilot program allotted additional productivity time to patent examiners in exchange for their consideration of after final amendments that might result in allowance of the application. Prior to the pilot program even amendments requiring nominal further consideration were routinely denied under 37 C.F.R. § 1.116.

Under the terms of the first version of the pilot, examiners decided whether the after final amendment could be fully considered, including any additional search required, within the three hour time limit provided for by the program. (i.e., fully considered and allowed). There was no need to file any special request in the previous version of the program.

Recognizing that some examiners were treating such submissions inconsistently, and that unsuccessful amendments proceeded along the normal course without any additional added value (e.g., acknowledgment/feedback from the examiner), the USPTO has provided for examiner further communication in version 2.0.

Under the terms of the revised pilot program, applicants must:

-submit an amendment (narrowing only, no broadening) of at least 1 independent claim.
-submit a form to participate in the pilot that indicates a willingness to interview the examiner should the amendment fail to result in allowance of the application.
-Only one request per application is permitted.

If the amendment does not result in allowance, the examiner must contact the applicant to schedule an interview to discuss the result.

Note: this program does not apply to patent reexamination or reissue proceedings.