AIA Cited by CAFC  as Remedying Known Patent Reexamination Deficiency

As predicted based upon the earlier oral argument, the Federal Circuit closed the door on the potential for discovery in inter partes patent reexamination in Abbott Laboratories v. Cordis Corp. (here) Specifically, the CAFC held that parties to such a patent reexamination proceeding cannot subpoena documents or testimony before the USPTO under 35 U.S.C. § 24.

Interestingly, as was the case earlier in Lingamfelter v. Kappos, the Court utilized the developments of the recent AIA legislation as a lens by which to view the earlier inter partes reexamination statutes, contrasting the earlier legislative intent as:

Congress’s most recent amendment to the Patent Act further demonstrates that Congress intended for subpoenas under section 24 to be made available in those proceedings in which depositions are relied upon by the PTO. In 2011, Congress replaced inter partes reexamination with a new proceeding called inter partes review.  . . . The purpose of this reform was to “convert[] inter partes reexamination from an examinational to an adjudicative proceeding,” and one of its touted “improvements” over the former proceeding is to allow the limited use of depositions.  . . . In particular, Congress provided for depositions of affiants in the proceeding, and also authorized parties to “seek such discovery as the Patent Office determines is otherwise necessary in the interest of justice.”  . . . In the course of implementing these mandates, the PTO has recognized that the AIA authorizes parties to seek section 24 subpoenas in the new proceedings.

The Court also shot down arguments on due process grounds explaining that there is an opportunity to be heard by a disinterested decision maker in patent reexamination. As such the need for extra controls, such as discovery, are not justified by a “serious constitutional problem.”

Raising of Evidentiary Informalities Prior to Trial Institution

During PTAB patentability proceedings, the Federal Rules of Evidence are applied. And, while the USPTO’s definition of a “proceeding’ includes the preliminary proceeding (i.e., petition filing, preliminary response) it is important to keep in mind that the the trial Order is not the final word of the PTAB on patentability; it is simply a preliminary gauge of the merits prior to trial. The “trial” itself does not actually begin until after institution. As such motions by the Patentee that are directed to perceived evidentiary defects of the petition are deemed premature prior to trial institution.

This issue is often raised in the context of printed publications accompanying a petition to the PTAB for a patentability trial. While patents are considered self authenticating by the USPTO, publications can be considered inadmissable if not authenticated (and perhaps hearsay as to undated submssions) by the petitioner. But, the PTAB has set the time to challenge such evidence post-institution via a motion to exclude.

As made clear in IPR2013-00020 (here), the USPTO provides a period by which such evidentiary defects can be remedied by a petitioner post-institution. So, disputing such issues via pre-institution motion, or in a preliminary response is fruitless.

When a party objects to evidence that was submitted during a preliminary proceeding, such an objection must be served within ten business days of the institution of trial. The objection to the evidence must identify the grounds for the objection with sufficient particularity to allow correction in the form of supplemental evidence. This process allows the party relying on the evidence to which an objection is timely served, the opportunity to correct, by serving supplemental evidence within so many days of the service of the objection. See, 37 CFR 42.64(b)(1) and (b)(2). If, upon receiving the supplemental evidence, the opposing party is still of the opinion that the evidence is inadmissible, the opposing party may file a motion to exclude such evidence.  . . .

[Petitioner’s] “motion to exclude” [prior to institution] is premature and also prevents [patentee] from correcting as permitted by the rules. If a trial is instituted, [petitioner] will have full opportunity to object, serve, reconsider any supplemental evidence and finally file a motion to exclude evidence.

(emphasis added)

Of course, while such printed publications need not be authenticated for the purpose of the petition review, best practices dictate that authentication be provided to avoid wasteful jousting on admissability post-institution.

Fee Setting Authority Decreases Post Grant Costs

Based upon the fee setting authority provided in Section 10 of the America Invents Act (AIA), the USPTO post grant filing fees will be downwardly adjusted for both patent reexamination and the patentability trial proceedings of the Patent Trial & Appeal Board (PTAB). The new fees are discounted from the rates that became effective last September 16th, and take effect tomorrow, March 19th. (final rules here)

The fees for PTAB proceedings will be broken up into petition and trial phases. The apportionment enables the office to more precisely calibrate costs so that refunds may be provided, where appropriate. The petition portion of the fees correspond to the cost of considering the petition filing only. The trial portion of the fees corresponds to the cost of conducting the trial. The fees for patent reexamiantion will decrease for all filers, but will drop by 60-80% for those requesters qualifying as small and micro entities.

A more detailed explanation of the fee changes is provided below.

First, the filing fee for patent reexamination will decreases as follows:

Previous fee for all parties $17,750     

3/19 Fee (large entity) to $12,000    
3/19 Fee (small entity) $6000             (note that small entity and micro entity discounts are now being offerred for the first time)
3/19 fee (micro entity) $3000 

The filing fees for supplemental examination is likewise decreased.

Turning now to the apportionment of post grant fees, to date, post grant fees have been all inclusive. For Inter Partes Review (IPR) the filing fee was set at $27,200, and $35,800 for Post Grant Review (PGR) and Covered Business Method Patent Challenges (CBM). These all inclusive fees are non-refundable (excess claim fees may also apply). These fees were also adjusted down, and apportioned to allow for refunds should the PTAB decline to institute trial.

The new fee for IPR is: $23,000
The new fee for PGR is: $30,000

As to IPR/PGR fee apportionment for refunds, using IPR as an example, the first fee component is the cost of reviewing the petition. The IPR fee for petition review is a flat $9000 (up to 20 claims). The second fee component is a $200 surcharge per claim for each claim in excess of 20. If the IPR is not instituted, neither fee is refundable as the USPTO performs this review to decide the petition (it is unclear if this fee is refundable for a pre-institution settlement).

The third and fourth fee components are trial institution fees,and are refundable if trial is not instituted. The third is $14000 for an IPR trial of up to 15 claims. The fourth fee is a $400 surcharge per claim for each claim over 15. In the example above, if the trial is not instituted at all, components 3 and 4 are refunded. If trial is not instituted as to all requested claims, the claim surcharge is refunded on a pro-rata basis.

There are no small entity or micro entity discounts for PTAB proceedings.

Comprehensive Coverage of Old & New Post Grant Practices

Several former USPTO administrative patent judges now in private practice, including my collegaue Lee Barret, have collaborated to publish the new book y trials of the AIA, derivation, supplemental examination, and more, the perspective  of these former insiders will serve as an invaluable reference. 

Increased Speed and Heightened Threshold Showing for New PTAB Proceedings Drive Stays

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 a patent reexamination was the basis for the motion to stay the court proceeding, the strongest plaintiff arguments in opposition were: (1) the significant USPTO delay would prove prejudicial to the plaintiff; and (2) the SNQ standard of patent reexamination led to a 97% grant rate—both of these arguments are now falling very flat.

Most recently in Capriola Corp., et. al., v. LaRose Industries LLC., et al (FLMD), the court considered a motion to stay pending IPR. Here too, the IPR had been filed but not yet instituted. In granting the stay the court explained: (here)

[A]s the plaintiffs state, the standard for the PTO’s granting an inter partes review under AIA is higher than the standard for the former re-examination . . .In sum, the likelihood of inter partes review appears lower than the earlier likelihood of re-examination but the statutory arrangement promises an expeditious response from PTO on whether to conduct inter partes review. In other words, if the PTO declines inter partes review, little time is lost, but if PTO grants inter partes review, the promise is greater for an important contribution by the PTO to resolution of the governing issues in the litigation. . . .

[B]ecause the PTO apparently will not consume much time unless the PTO perceives an important patent issue within the PTO’s particular expertise; and because an important issue that appears in the litigation also appears to fall within the PTO’s province and particular expertise, prudence commends resort to a stay until either the PTO declines review or, finding an important issue within the PTO’s special province, the PTO grants and completes review to the benefit of the parties, the court, and the public. In other words, the investment of some time at this juncture appears wise.

Coming soon to a court near you.

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

Joinder Practice Extends Beyond Dissimilar Parties

Joinder practice at the Patent Trial & Appeal Board (PTAB) provides strategic opportunities for members of Joint Defense Groups (JDG). JDGs are especially common in patent troll assertions. Petitions from JDG co-defendants for joinder of an ongoing post grant patentability trial (i.e., IPR, PGR or CBM) that are filed within one month of trial institution and 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. Such joinder practice enables JDG co-defendants to actively participate in the ongoing post grant proceeding before the PTAB. As can be appreciated, through joinder, individual joint defense group members 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.

Interestingly, the 12 month window of 35 U.S.C. § 315(b) that prevents defendants from pursuing an IPR beyond the 12 month anniversary of a service of complaint for patent infringement of a subject patent does not apply to joinder petitions (such as might typically be desired by JDG co-defendants). The legislative history on this exception is scant, but, the thinking seems to be that once a post grant patentability proceeding is seasonably initiated,the PTAB should be able to receive input from all interested parties.

Recently, in Microsoft Corp v. Proxyconn Inc. (IPR2013-00109, here) the PTAB has further clarified that joinder practice is not only a tool for “joinder of parties” to an existing post grant trial proceeding, but may also be leveraged to join together two proceedings of a same petitioner (as long as the first is seasonably presented). This “joinder of claims” practice may be especially helpful for those petitioners battling patent trolls.

In Microsoft, a first petition IPR2012-00026 was filed within the 12 month window to challenge claims 1,3, 10-12, 14 and 22-24 of the Proxyconn patent. Thereafter, and at a time outside of the 12 month window, Proxyconn added 6 claims uncovered by the first IPR petition to the parallel litigation. It may be that the claims were added late to the litigation to stave of a motion to stay pending the IPR (i.e., arguing the case would still need to proceed to trial regardless of the IPR outcome). After adding these 6 claims to the litigation Proxyconn decided to reverse course and join in the defendants request to stay the litigation, agreed to expedite the exiting IPR (waive their preliminary response), and to cooperate in seeking joinder of a second IPR filed by Microsoft targeting the added claims (IPR2013 -0109). It appears this violent change in tactics was due to the stipulation by all defendants to be bound by the results of the IPR (and likely Proxyconn’s view that they are going to win) (stipulation here)

The PTAB agreed to join the proceedings explaining that:

The same patents and parties are involved in both proceedings. There is an overlap in the cited prior art. There is no discernible prejudice to either party. Petitioner has been diligent and timely in filing the motion. And while some adjustments to the schedule have been necessary, there is not undue delay. In sum, the relevant factors of which we are aware all weigh in favor of granting this motion.

As a common troll tactic is to delay identification of claims for trial as late as possible in a litigation, this development is a positive for petitioners up against a 12 month deadline.

postgrantCLE

Post Grant Patent CLE

For those seeking CLE in the coming months, there are numerous upcoming options. The Spring Meeting of the Intellectual Property Law Section of the American Bar Association (ABA-IPL) will convene on April 3-5th in Arlington Virginia. On Thursday April 4th, the meeting will kick off with the program “Patentability Trials of the AIA: The First 120 Days.” I will participate in a plenary session with Trial Section Lead, Hon. Michael Tierney of the Patent Trial & Appeal Board. (PTAB)

For those having a particular interest in business method and software patents, I will be speaking at the American University Washington College of Law program entitled: iWars: Legislative, Judicial, and Executive Challenges to the Validity of Computer-Implemented Business Method Patents in the Wake of the Leahy-Smith America Invents Act of 2011 on April 12th.

On April 11th and 12th my partner Todd Baker will be speaking in Dallas Texas on Nuances and strategies for successfully prosecuting and defending IPRs, PGRs, CBMRs before the Board at the AIPLA’s Advanced Practice Under the America Invents Act.

The Practicing Law Institute’s USPTO Post Grant Trials- 2013 (now in its 4th year) will also be making 3 more stops across the country. This year’s program, which I am pleased to chair, coincides with the release of the new treatise entitled Post Grant Proceedings Before the Patent Trial & Appeal Board, the remaining stops include:

Hope to see you see you at an upcoming event.

PTAB’s Limited Discovery Practices Emphasized in IPR

Parties to an Inter Parties Review (IPR) proceeding may obtain “limited discovery” at the USPTO’s Patent Trial & Appeal Board (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 generally categorized as: (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.

“Additional discovery” defines everything outside of the above noted categories. To seek such additional discovery in an IPR an “interest of justice” need must be demonstrated…quite difficult in all but the most exceptional of circumstances.

As IPRs are patentability trials based on publicly available patents and printed publications, categories (2) and (3) of routine discovery provide the only significant opportunity for discovery. Of course, category (2) is straight forward enough—if there is a declarant submitting testimony— that declarant can be deposed. This leaves category (3) which, as I predicted last April, will be cited by patent owners seeking to embark on district court style fishing expeditions in the name of purported “secondary considerations of non-obviousness.” As made clear last week in the very first IPR filing, IPR2012-00001 (Garmin International Inc, et al v. Cuozzo Speed Technologies LLC) the PTAB is having none of it. (here)

In the Garmin IPR, Patentee Cuozzo filed a motion for additional discovery seeking interrogatories, documents and what appeared to be a F.R.C.P style 30(b)(6) deposition on the topic of secondary considerations of non-obviousness. In filing their motion for additional discovery, Cuozzo curiously explained that the information sought actually qualified as routine discovery(which, of course, requires no such motion), citing category (3) above as permitting discovery requests that target information inconsistent with positions Garmin had taken in its Petition.

In other words, Cuozzo hoped to transform category (3) into a general requirement of “relevance” akin to district court practice for the purpose of opening the discovery floodgates at the PTAB.

In response, the PTAB explained the reality of USPTO trial practice to Cuozzo:

. . .Cuozzo is not referencing information known to Garmin to be inconsistent with positions taken in the petition. Rather, Cuozzo casts a wide net directed to broad classes of information which may not include anything inconsistent with positions taken by Garmin.

Routine discovery under [category (3)] is narrowly directed to specific information known to the responding party to be inconsistent with a position advanced by that party in the proceeding, and not broadly directed to any subject area in general within which the requesting party hopes to discover such inconsistent information. Cuozzo’s attempt to label very broad discovery requests as narrowly tailored routine discovery is misplaced.

[I]nter partes review, discovery is limited as compared to that available in district court litigation. Limited discovery lowers the cost, minimizes the complexity, and shortens the period required for dispute resolution. There is a one-year statutory deadline for completion of inter partes review . . .. What constitutes permissible discovery must be considered with that constraint in mind.

The PTAB then explained that Cuozzo’s motion was equally deficient as a motion for additional discovery under the interests of justice standards, explaining 5 factors that must be considered in that regard as follows:

1. More Than A Possibility And Mere Allegation — The mere possibility of finding something useful, and mere allegation that something useful will be found, are insufficient to demonstrate that the requested discovery is necessary in the interest of justice. The party requesting discovery should already be in possession of evidence tending to show beyond speculation that in fact something useful will be uncovered.

2. Litigation Positions And Underlying Basis — Asking for the other party’s litigation positions and the underlying basis for those positions is not necessary in the interest of justice. The Board has established rules for the presentation of arguments and evidence. There is a proper time and place for each party to make its presentation. A party may not attempt to alter the Board’s trial procedures under the pretext of discovery.

3. Ability To Generate Equivalent Information By Other Means – Information a party can reasonably figure out or assemble without a discovery request would not be in the interest of justice to have produced by the other party. In that connection, the Board would want to know the ability of the requesting party to generate the requested information without need of discovery.

4. Easily Understandable Instructions — The questions should be easily understandable. For example, ten pages of complex instructions for answering questions is prima facie unclear. Such instructions are counter-productive and tend to undermine the responder’s ability to answer efficiently, accurately, and confidently.

5. Requests Not Overly Burdensome To Answer — The requests must not be overly burdensome to answer, given the expedited nature of Inter Partes Review. The burden includes financial burden, burden on human resources, and burden on meeting the time schedule of Inter Partes Review. Requests should be sensible and responsibly tailored according to a genuine need.

The PTAB then explained how the Cuozzo discovery requests were deficient in all regards, especially with regard to the first of the above enumerated factors.

For those plaintiff Patentees brought before the PTAB that are accustomed to abusing oppressive district court discovery practices, you are not in Kansas anymore…or for that matter the Eastern District of Texas.

160+ Petitions on File in First 6 Months

Yesterday, at the Practicing Law Institute’s USPTO Post Grant Trials- 2013, the USPTO provided an update on the demand for the post grant patentability trials introduced by the America Invents Act this past September. (AIA). As shown in the slide below, the demand has been quite substantial, especially on the electrical/software side. This is not surprising considering the typical patent troll case is also in these same arts.

AIA Adm Trials - Technology Percentages (03-01-13)The remaining stops for the PLI program include:

The programs coincide with the release of the new treatise entitled Post Grant Proceedings Before the Patent Trial & Appeal Board.

Decrease in Patent Reexamination Docket Leads to Faster Orders

Back on September 16, 2012, the America Invents Act (AIA) replaced the old inter partes patent reexamination system with a new proceeding, known as Inter Partes Review (IPR). Since petitions for IPR are not handled by patent examiners, but instead, the judges of the Patent Trial & Appeal Board (PTAB), the USPTO’s Central Reexamination Unit (CRU) has experienced a significant cut to their incoming workflow. This change in workflow, coupled with the fact that requests for ex parte reexamination are also off by roughly 50% of pre-AIA filing rates, has resulted in an apparent benefit for patent challengers.

Ex parte patent reexamination requests are being processed faster.

As shown in the chart below requests for patent reexamination (made in the last 3 months) are being granted in roughly 43 days on average, some as fast as 29 days. As a reminder, the USPTO has 90 days, by statute to grant such requests. Historically, the average time to an Order has been about 60 days. (Click to Enlarge)

reexamination orders 2013

The above charts correspond to those reexamination filings made on or after December 16, 2012. This date was chosen to study a steady state of operations at the CRU post-AIA. Keep in mind that leading up into the September 16 change in the law there was a significant bolus of reexamination filings that had to be ordered within 90 days (i.e., prior to 12/16/12)

While it is true that the CRU is also responsible for a new stream of work, Supplemental Examination (SE), the volume of this work has been negligible with fewer than 10 such filings to date. Simply stated, post-Therasense, many inequitable conduct defenses are falling at the summary judgement stage. Thus, Therasense has largely eliminated the need for this proceeding outside of the most limited of circumstances.

Going forward, the CRU will be left with a much smaller docket. Absent a reduction in head count at the CRU, it is expected that the pendency of new proceedings will necessarily decrease. This is because the existing inventory of legacy inter partes reexamination prosecution will soon be exhausted and examiners will increasingly turn to new ex parte patent reexamination filings.

Should patent reexamination pendency drop in a significant manner going forward it may become a more attractive option for real time business disputes.