PTAB Selective on Trial Grounds

Having now completed the multi-city tour for the Practicing Law Institute’s USPTO Post Grant Patent Trials 2013 (on demand program here), I am still struck by the degree of doom and gloom expressed by the patent monetization crowd. Throughout the program stops in Chicago, New York City and earlier this week, San Francisco, many attendees expressed the concern that the new post grant PTAB proceedings were “patent killers.” Specifically, the institution rate of the trial orders issued to date was considered high (only two being denied). This, coupled with the more favorable challenger standards of the PTAB, has more than a few patentees quite worried.

While it is certainly true that the PTAB is a more favorable venue for patent challengers (no presumption of patent validity, no clear and convincing evidentiary requirements, etc), the trial orders issued to date show an intent on behalf of the PTAB to simplify and focus the dispute for trial. This simplification vastly reduces the workload of patentees relative to the old inter partes patent reexamination system. And with the addition of discovery before the PTAB, ultimate success for patentees seems far more likely before the PTAB relative to the old, never-ending, patent reexamination timelines.  

Under the old reexamination model, patentees were typically faced with 20+ rejections backed with declaration evidence. The declaration evidence was taken at face value due to the inability to cross-examine the declarant. In many cases, these reexamination proceeding were pending (fully contested to the CAFC) for five years or more.

On the other hand in the PTAB Trial Orders to date, redundant grounds are filtered out and trial is ordered on the strongest grounds (as determined by the panel of judges). As to the initial institution rate, this should not come as a surprise. That is to say, given the one-sided nature of the preliminary proceeding before institution (no declaration evidence permitted from the patentee prior to Order), petitioner evidence will typically prevail over attorney argument. The ultimate outcome of the trial could be quite different.

Below is an overview of the petition results to date. (Click to Enlarge)

denied/accepted and accepted/redundant refer to instances where a ground was treated differently (split) as to some claims. As you can see below, the PTAB is denying grounds and finding grounds redundant in the majority of filings.

IPR Petitions

uspto_logo

Public Can Listen to Arguments Telephonically

As discussed last week, the very first petition for a Covered Business Method Patent Challenge (CBM) was filed on September 16th by SAP (CBM2012-00001). The petition (here) challenged U.S. Patent  6,553,350 of Versata Development Group. In May of 2011, Versata secured a $391 million dollar verdict in the Eastern District of Texas against SAP. The verdict is currently on appeal to the CAFC.

The PTAB has expedited this CBM to oral argument as the issues have been narrowed to 101 grounds only.

The USPTO has published the dial-in-number to listen to the argument (here)

(571) 270-3000

meeting ID number 28001#

password 7448#

Popular Daily Email Service Now Includes PTAB Ruling & Filings

 Docket Navigator is well known to practitioners for its highly popular daily Docket Report. This subscription report is emailed out every morning and includes not only the new complaints/actions filed in the district courts and ITC, but also all notable decisions and Orders. Recognizing the emerging importance of the USPTO’s Patent Trial & Appeal Board (PTAB), the Docket Report now includes information on new PTAB filings and noteworthy decisions as they occur. 

The expanded Docket Report will be of great value to PTAB practitioners by providing every new and noteworthy filing/order within a day of filing/issuance. The new PTAB petitions will be reported along with notable orders, each being accompanied by a short, explanatory synopsis of the facts and result.  

Stay Calculus to Encourage Multi-Defendant Attacks

As the new patentability trials of the America Invents Act (AIA) have only been available for 7 months their impact is only now beginning to be felt in the district courts. The new USPTO Patent Trial & Appeal Board (PTAB) proceedings permit suspect patents of any vintage to be reconsidered in a far more speedier, cost effective, and challenger friendly manner relative to that of the federal district courts. Not surprisingly, there has been a robust demand for these proceedings with over 200 such petitions filed since September 16th—many of which target the patents of non-practicing entities (NPEs).

The impact of these new PTAB proceedings are beginning to be felt in the district courts as motions to stay the costlier court proceedings pending PTAB review are being considered almost daily. And, many courts are staying the parallel litigation in favor of the speedier USPTO proceedings. Interestingly with the argument of multi-year USPTO reexamination delays now eliminated by the faster PTAB proceedings, Patentees (NPEs in particular) are now emphasizing to the courts that estoppel only applies to the petitioner or real party in interest—not necessarily every defendant in a multi-defendant suit. As such, NPEs argue that a concluded PTAB proceeding will not simplify issues for trial because defendants that did not join in the petition filing would be free to raise the very same issues decided in the PTAB proceeding upon lifting of the stay.

The solution for non-petitioning defendants facing such an argument is really quite simple…..just pile on.

Joinder practice at the Patent Trial & Appeal Board (PTAB) provides strategic opportunities for multi-defendant lawsuits. Joint Defense Groups (JDGs) are especially common in lawsuits that target an industry, such as those typically lodged by non-practicing entities. Petitions from co-defendants of a JDG for joinder of an ongoing post grant patentability trial (i.e., IPR, PGR or CBM) that are filed within one month of trial institution at the PTAB, which do not raise substantial issues beyond those presented in the previously granted petition, or those that simply file a copy of the previously granted petition, are likely to be liberally granted. (Rules 42.122, 42.222)

Joinder practice enables co-defendants to actively participate in the ongoing post grant proceeding before the PTAB. As can be appreciated, through joinder, individual defendants can secure the opportunity to participate in a proceeding they would otherwise have no control over, or no recourse should the original petitioner decide to settle.

Perhaps more importantly, those co-defendants that are faced with the court ultimatum of agreeing to sign onto estoppel or be forced to move forward with the costlier litigation proceeding have nothing at all to lose by agreeing to be bound by estoppel — assuming they seek joinder.

First, by definition, joinder occurs once trial is instituted and a preliminary claim interpretation issued. Joinder filers in many cases will have the benefit of the wait-and-see-approach.

Second, practically speaking, should the petition effort fail at the PTAB it is very unlikely that the co-defendant would want to go to trial on the same evidence anyway.

Third, as to the “reasonably could have raised” aspect of estoppel (CBM excluded), the co-defendant is free to add-on any such grounds desired in their joinder filing. To be sure, additional grounds advanced in a joinder petition may be deemed as raising substantial issues leading to a denial as to those issues. But, such a denial would arguably insulate the co-defendant from the “reasonably could have raised” estoppel. In other words, demonstrably, such issues could not have been raised, and the co-defendant had no control over the first filing (which the record shows they did not support at the time of filing). This creates a situation in which the original petitioner may be bound by the “reasonably could have raised” estoppel but the co-defendants, at least in some respects, are not. So, in essence, co-defendants are agreeing to sign onto a proceeding in which the art raised, if unsuccessful, could not be reused in court….which, as noted above, would be the practical result in any case.

uspto_logo

PTAB Considers Broadcast of First AIA Oral Hearing

The very first petition for a Covered Business Method Patent Challenge (CBM) was filed on September 16th by SAP (CBM2012-00001). The petition (here) challenged U.S. Patent  6,553,350 of Versata Development Group. In May of 2011, Versata secured a $391 million dollar verdict in the Eastern District of Texas against SAP. The verdict is currently on appeal to the CAFC.

Back in January, the PTAB held that SAP’s CBM petition had demonstrated that it was more likely than not that the claims of the ‘350 patent were unpatentable under 35 U.S.C. §§ 101 (Trial Order here). The PTAB agreed to expedite the trial schedule and move the oral hearing to April 17, 2013. (decision here) The six month acceleration in the proceeding was provided in exchange for SAP dropping the prior art defenses, and agreeing to move forward only on their 101 challenge to the Versata patent.

Three weeks back, Versata filed suit against the USPTO challenging the agency’s definition of a “business method,” and the ability to raise 101 as a statutory ground in a CBM. (101 is argued as not being embraced by 35 U.S.C. § 282, complaint here)

At last week’s ABA meeting it was noted that broadcast access (webcast or audio) was being considered for the April 17th hearing (limited to 101 grounds). It appears that at least the patent owner has agreed to the broadcast (statement here).

I will post more information on the broadcast as it becomes available.

The PTAB Has Instituted 34 IPR Proceedings to Date

Since September 16th 2012, the USPTO has received roughly 207 petitions for patentability trials of the America Invents Act (AIA) 11 CBMs and 190 IPRs. These proceedings must, by statute, be completed within 12 months (exceptional cases may be extended to 18 for good cause). Of course, this 12 month time frame applies to the trial proceeding, which begins upon issuance of an Order instituting trial. In order to gauge the complete USPTO processing time for conducting an IPR/CBM to a written decision it is also necessary to consider the preliminary proceeding.

The preliminary proceeding begins upon filing of the petition. Three months thereafter the Patent Owner has the opportunity to file a preliminary response. Once this response is entered, the USPTO has three months, by statute, to Order trial. As can be appreciated this “front end” or preliminary proceeding can span a maximumn of 6 months. Of the 34 trials Orders issued to date, the average time is hovering right around the 5 month mark.

As shown below for preliminary proceedings in which a preliminary response is filed in IPRs, the PTAB is issuing an Order around the 155 day mark. For those in which the preliminary response is waived, roughly one month sooner at 122 days. (Click to Enlarge)

IPR SimpleThese categories can be further broken down into cases where the preliminary response was affirmatively waived (3 cases) and those where the Patentee just did not file anything (2nd chart). Cases where no preliminary repsonse was filed, and no affirmative waiver received are averaging 171 days.

IPR front end

Suit Takes Aim at “Business Method” Definition & Propriety of 101 Grounds

The very first petition for a Covered Business Method Patent Challenge (CBM) was filed on September 16th by SAP (CBM2012-00001). The petition (here) challenged U.S. Patent  6,553,350 of Versata Development Group. In May of 2011, Versata secured a $391 million dollar verdict in the Eastern District of Texas against SAP. The verdict is currently on appeal to the CAFC.

Back in January, the PTAB held that SAP’s CBM petition had demonstrated that it was more likely than not that the claims of the ‘350 patent were unpatentable under 35 U.S.C. §§ 101 (Trial Order here). The PTAB agreed to expedite the trial schedule and move the oral hearing to April 17, 2013. (decision here) The six month acceleration in the proceeding was provided in exchange for SAP dropping the prior art defenses, and agreeing to move forward only on their 101 challenge to the Versata patent. 

Two weeks back, Versata filed suit against the USPTO challenging the agency’s definition of a “business method,” and the ability to raise 101 as a statutory ground in a CBM. (101 is argued as not being embraced by 35 U.S.C. § 282, complaint here) 

Liberal Stay Policy Thwarts Patent Suits in New Jersey

Non-practicing entities or “patent trolls” are generally those plaintiffs that seek to enforce patent rights against an industry in which they themselves do not compete. Stated another way, an NPE’s only business is patent litigation.

Often times the patents an NPE is enforcing were purchased from a traditional technology company for the sole purpose of exacting royalties from the relevant industry. In the hands of an NPE, which has no technological industry subject to a patent counter suit by their industry targets, the NPE patents become especially powerful weapons of economic coercion.

Over the last decade, law firms have recognized the efficacy of NPE litigation campaigns and have signed on in great numbers to get a piece of the action. Typically, an NPE will team up with a law firm that will conduct the campaign on their behalf in exchange for a contingent fee arrangement. (i.e., percentage of the collected settlements). This profiteerring business model has lead to a significant proliferation of patent infringement suits.

Just not in New Jersey.

When faced with the high cost of a patent infringement suit defendants increasingly avail themselves of post grant patent alternatives offered by the USPTO, such as patent reexamination or a new patentability trial proceeding of the America Invents Act (AIA). On this basis, defendants will seek to stay the higher cost court proceeding in favor of the lower cost USPTO proceeding. In those cases that are stayed, the patent troll business model begins to unravel. Yet, in many districts, the grant of the stay is far from certain and based on many factors.

The New Jersey district courts, however, are increasingly recognized for their liberal stay policy. In fact, they have rarely, if ever, declined a motion to stay pending USPTO review of the patent. This is the case not only for disputes involving patent trolls, but any patent case. As recently made clear in Synchronoss Technologies inc. v. Asurion Mobile Applications, Inc. (DNJ) (here) the court explained:

[W]hile courts balance the costs and benefits associated with staying a matter pending reexamination of a patent by the PTO, courts have noted that granting a stay pending reexamination is favored. . . .The Court finds that stays pending reexamination are freely given in this District, as “almost every reported New Jersey District Court opinion that has considered the issue has granted a stay where a reexamination request was pending.”

Of course the new patentability proceedings of the AIA provide a significant improvement in speed relative to reexamination model. With New Jersey courts providing stays in almost every case of  the slower, reexamination model, it would seem wise for patent plaintiffs of all kinds to avoid the Garden State…especially patent trolls.

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

Robust Filings Reported for Some AIA Proceedings

Late last week, the USPTO issued a Final Rule to implement the Technical Amendment to the America Invents Act (AIA). The Notice essentially revises 37 C.F.R. § 42.102 to eliminate the “dead zone” for certain first inventor to file patents. You can find the straight forward rule notice (here) The rule became effective yesterday, March 25th.

In other news, the Patent Public Advisory Committee (PPAC) convened on March 15th at the USPTO Alexandria campus. During the meeting, the USPTO reported on the progress of AIA filings to date. There continues to be robust demand for Inter Partes Review (IPR), but others of the new AIA mechanisms have not proven nearly as popular as originally thought.

First, there have only been nine (9) requests for supplemental examination since September 16th. (Click to Enlarge)

Supp_ex

In operation, Supplemental Examination (SE) allows a Patentee to submit very detailed explanations of potential issues that may render the patent invalid under an inequitable conduct theory. Upon submission of Substantial New Questions of Patentability (SNQs) detailing such potential defects, the Office will reconsider the information; that is to say the Office will perform a “supplemental examination.” Once such issues are considered and dispatched by an SE certificate, the subject patent would be free of inequitable conduct charges based on the issues considered in the SE. On the other hand, should the materials presented raise an SNQ, a form of patent reexamination is conducted (differing from typical practices in that it is not limited to patents and printed publications).

Pre-Therasense there would have been significant value to SE, but now it is best reserved for only the most egregious cases. It seems very unlikely that the USPTO will receive the 110 filings they initially anticipated in their rule proposals. (SE was seen as potentially replacing all patent owner initiated reexamination requests)

As to petitions for challenging patents before the PTAB, the USPTO reports robust IPR filings, but limited demand for Covered Business Method (CBM) Patent Challenges. (Click to Enlarge)

IPR

CBMAs CBM filings offer a tremendous value for challengers, it seems that the public is either slow to appreciate the benefits, or there just are fewer patents that fall cleanly into the “business method” definition. For example, as such patents often include “system claims” that present issues of divided infringement, it may be that such patents are being asserted less frequently since the Global Tech/Golden Hour line of cases.

New York City Webcast March 27th

The Practicing Law Institute’s USPTO Post Grant Trials-2013 (now in its 4th year) will be making 3 more stops across the country in the coming weeks. Next week, the program will make its way to New York City (also available via webcast), several hundred attendees have already registered for the NYC program.

Late faculty additions to the program include former USPTO Director Dave Kappos, and ITC Administrative Law Judge (ALJ) Theodore Essex. This year’s program, which I am once again pleased to chair, coincides with the release of the new treatise entitled Post Grant Proceedings Before the Patent Trial & Appeal Board.

Aside form next week’s stop in NYC, remaining stops include:

Hope to see you there.