AIA technical amendment

Congress Returns to Action

With the election season now concluded, Congress will shift their focus back to more traditional duties, like playing chicken with the world economy as we teeter on the “fiscal cliff.” The pessimist in me would find it hard to believe that the much discussed technical amendments to the AIA are anywhere near the top of the legislative agenda, but, hope springs eternal ….and there are quite a few tweaks that are in order on the post grant side of the equation.

Perhaps the most pronounced “error” of the AIA, whether deemed truly “technical” or not, is the all encompassing estoppel provision of Post Grant Review (PGR). Continue Reading Congress to Tackle Potential AIA Fixes?

PTAB Issues Decision Denying Appearance of Non-registered Practitioner

Non-registered practitioners may, in limited circumstances, be permitted to appear before the Patent Trial & Appeal Board on a pro hac vice basis. 37 C.F.R § 42.10(c). Last week, I pointed out the expanded panel order of the PTAB in IPR2013-00010 (order here), which outlined the base qualifications of potentially qualified attorneys.

Tuesday’s decision in CBM2011-00001 demonstrates the depth of the PTAB’s analysis relative to these base qualifications. In yesterday’s decision the application for pro hac vice admission was denied (here).

Reexamination Filing Surge Dismissed as Speculative

Back in September, I explained that the USPTO received an unprecedented number of reexamination filings in the closing days before the September 16th. This surge was a result of several factors: First, the fee for ex parte patent examination was jumping from $2520 to $17,500 as of the 16th;  and, as a result of the one year anniversary of enactment of the America Invents Act (AIA) on the 16th, September 15th was the last day to file a request for inter partes patent reexamination.

Currently, the Central Reexamination Unit (CRU) is working through the bolus of filings, still trying to get them all docketed and reviewed within the 90 day statutory period. Seizing upon this influx of work, a Patentee recently argued against staying their district court proceeding pending inter partes patent reexamination — arguing that the USPTO process would now be much slower.

In Polaris Industries v. BRP US Inc. and Bombardier, the Court dismissed this argument, explaining that:

Regarding the length of the reexamination process, Polaris argues that the recent influx of requests for reexamination at the PTO will cause extraordinary delay. The Leahy-Smith America Invents Act (the “Act”) amended the inter partes reexamination process for all requests filed after September 15, 2012. . . . Because of this deadline, the PTO received an unusually large volume of reexamination requests in September 2012.  . . ., Polaris argued that this high volume of requests will cause the PTO’s reexaminations of the ’285 and ’923 patents to extend to 7 to 10 years.

 However, the actual effect of the Act on the PTO’s reexamination process remains to be seen. See Inogen, Inc. v. Inova Labs, Inc., No. SACV 11–1692–JST, 2012 WL 4748803, at *3 (C.D. Cal. Mar. 20, 2012) (noting reluctance to rely on current reexamination statistics given the Act’s amendments). The court in Inogen posited that because the Act raised the threshold for granting requests for inter partes reexaminations (termed “inter partes reviews” under the Act), the PTO may actually grant fewer requests in the future. Id. Given the uncertainty of the PTO’s future workload, Polaris has not provided persuasive evidence that the reexaminations of the ’285 and ’923 patents will be pending for nearly a decade. On the other hand, BRP promptly requested the reexaminations after the dispute between the parties emerged, and BRP has not engaged in improper litigation tactics that might otherwise warrant declining a request for a stay.

As I pointed out previously, there will almost certainly be a short term slowing at the Central Reexamination Unit (CRU) while the bolus of filings is processed; however that affect should be short lived. This is because there are far fewer filings coming in the door now that the fees for ex parte reexamination have been drastically increased and inter partes patent reexamination is no more.  (Note that the new PTAB trial filings do not go to the CRU)

CAFC Denies En Banc Review of In Re Baxter Decision

Earlier this year, the CAFC decided In re Baxter International Inc. (here). As a reminder, in Baxter, the CAFC considered an appeal from the Board of Patent Appeals & Interferences (BPAI) that found certain claims of U.S. Patent 5,247,434 unpatentable in an ex parte patent reexamination.

The request for patent reexamination was filed by Fresenius USA Inc. in 2007 during a patent infringement litigation with Baxter. Interestingly, the Court first considered the validity of the ‘434 patent on appeal from that litigation. In that first appeal, based on some of the very same art applied in the reexamination, the Court found the patent not invalid in 2009. In the second appeal, decided in May of 2012, the same art was presented to the Court. Viewing the same art in 2012, on appeal from the BPAI, the Court affirmed the determination of the BPAI that the claims were obvious over the applied prior art.

Judge Newman issued a strong dissent to the second outcome, explaining that “[t]he validity of the Baxter patent was resolved upon litigation in the district court and on appeal to the Federal Circuit. This judgment cannot be “revised, overturned or refused full faith and credit by another Department of Government. . . .. Nonetheless, the court again departs from this principle, trivializes our prior final judgment, and simply defers to the conflicting agency ruling. This is improper.”

Not surprisingly, Baxter petitioned for rehearing and en banc review of the earlier decision.

This week, the Court denied the petition. The concurring opinion noted the philosophy of the majority as follows:

. . .In a court proceeding, a patent is not found “valid.” A judgment in favor of a patent holder in the face of an invalidity defense or counterclaim merely means that the patent challenger has failed to carry its burden of establishing invalidity by clear and convincing evidence in that particular case—premised on the evidence presented there. . . . If the PTO later considers the validity of that same patent, it does so based on the evidence before it and under the lesser burden of proof that applies in reexamination proceedings. As the majority notes, Congress granted the PTO the right to act within the realm of its authority. . . ..

These conclusions do not mean, however, that, when the PTO does act in the context of a reexamination proceeding, its conclusions can alter the binding effect of a prior judgment in a judicial proceeding. They cannot, and the PTO concedes as much in its response to the petition for rehearing en banc when it states that “[i]f a federal court awards relief to a patent holder against an infringer, a subsequent reexamination decision that the patent is invalid does not disturb the judgment of the court or alter its binding effect on the parties.” . . .

As the patent reexamination was ex parte, Fresenius could not participate in the appeal. Here, the court seems to reason that yes, the patent can fall in reexamination, but Fresenus will still be bound to the first result. Arguably, this line of reasoning does not comport with the earlier decisions of the Court in the Translogic or Standard Havens cases.

Judge Newman was quick to point out this inconsistency, noting:

It is time for this court to confront its conflicting precedent, founded in Standard Havens Products, Inc. v Gencor Industries, Inc., 996 F.2d 1236, 1993 WL 172432 (Fed. Cir. May 21, 1993), where this court held that “contrary to the assumption of the trial court, the reexamination proceeding ‘would control’ the infringement suit.” Id. See also In re Translogic Tech., Inc., 504 F.3d 1249 (Fed. Cir. 2007); Translogic Tech., Inc. v. Hitachi,Ltd., 250 Fed. Appx. 988 (Fed. Cir. 2007).

In Standard Havens, the Court explained that a patent lost in patent reexamination is void ab initio; perhaps the majority can distinguish this discussion as dicta. As to Translogic, the BPAI and district court appeals arrived at the CAFC at the same time, so, it could be reasoned that res judicata was not an issue.

One issue that I found confusing in the Order was the repeated reference to USPTO proceedings as examining “patent validity.” The USPTO does not assess patent validity at all….the agency assesses patentability. The reasoning of the majority would have been  easier to digest had the Order made this distinction. As to Fresenius….although the reexamination killed the patent, the Court seems to reason that the earlier judgment still stands.

Reasonably Could Have Raised?

The new post grant trial proceedings of the Patent Trial & Appeal Board (PTAB) provide game changing opportunities for patent challengers. These opportunities include the virtual guarantee that certain business method patent litigation will be stayed pending the outcome of a Covered Business Method (CBM) patent challenge, and the ability to challenge an entire portfolio at one time. Indeed, the later opportunity was never before possible in any proceeding, USPTO, district court, or otherwise.

Yet, the new proceedings are not without some risk. For example, Inter Partes Review (IPR), much like its’ predecessor inter partes patent reexamination, operates to estop the challenger from making arguments in a later proceeding that were either raised or “could have been raised” in the previously concluded PTO proceeding. This “could have been raised” estoppel was revised for IPR proceedings, slightly, to embrace issues that “reasonably could have been raised.” The legislative history indicates that this change was designed to impart some term of degree of practicality to the new IPR estoppel standard.

While the prospective estoppel that may apply to petitioners of IPR proceedings has been softened, unlike patent reexamination requests, IPR petitions are limited to 60 double spaced pages. So, practically speaking, there are a limited number of issues that can be presented in 60 double spaced pages.

How will this IPR page limitation impact the “reasonableness” analysis of the district court?

Recently, some IPR petitioners have attempted to get out in front of this issue. For example, in (IPR2012-00006), the petitioner sought waiver of the page limit (here) explaining:

Substantial, material prior art is available which demonstrates that claims of the ‘698 patent for which review is sought are invalid. Petitioner has drafted the Page Limited Petition to provide the arguments and analysis as succinctly as possible. However, even with such succinct drafting, the 60 page limit will bar the Petitioner from making any additional grounds for invalidity. Accordingly, Petitioner respectfully submits that in the interests of justice, the 60 page limit must be waived for the present petition due to the number of invalidating and noncumulative prior art references available and due to the length and number of claims challenged. Failure to grant this petition will prevent Petitioner from raising or reasonably raising any additional grounds for invalidity such as those included in the Proposed Petition.

(emphasis added)

In their opposition (here), the Patentee noted that:

The Board explicitly rejected the suggestion that “page limits be based, in whole or in part, on the number of grounds raised or number of proposed

rejections in a petition.” 77 FED. REG. 48,635 (Aug. 14, 2012). Indeed, if a single Petition limited to 60 pages was not sufficient to address all of Illumina’s proposed rejections, Illumina could have filed multiple petitions (and paid the appropriate fees) directed to subsets of related claims in the patent-at-issue, but chose not to do so. 77 FED. REG. 48,635 (Aug. 14, 2012) (where one petition is not sufficient, “multiple petitions directed to subsets of related claims should be considered.”).Thus, Illumina’s statement that “the 60 page limit will bar the Petitioner from making any additional grounds for validity” (D.I. 4 at 2) rings hollow.

(emphasis added)

It seems likely that the PTAB will continue to see motions for waiver of page limits, particularly for cases in involved in concurrent litigation. Where concurrent invalidity positions are being filed with the courts (without concern of page limits), additional grounds not found in the IPR petition are almost certainly to be on the record as issues that “reasonably could have been raised” in the IPR petition.  For this reason, there may be a greater degree of “placeholder motions” in IPRs that are conducted in parallel to litigation proceedings.

Expanded PTAB Panel Outlines Requirements for Unregistered Practitioners

Non-registered practitioners may, in limited circumstances, be permitted to appear before the Patent Trial & Appeal Board on a pro hac vice basis. 37 C.F.R § 42.10(c). In a previous discussion on this topic, I relayed the explanation of Chief Judge Smith that was provided on the USPTO website (America Invents Act (AIA) micro site) relative to the philosophies behind the PTAB’s pro hac vice rule proposal.

Earlier this month, an expanded panel of the PTAB issued the first order authorizing motions for pro hac vice admission in (IPR2013-00010) (order here).

The Order outlines the requirements for the motion an accompanying declaration as follows:

Content of Motion

A motion for pro hac vice admission must:

a. Contain a statement of facts showing there is good cause for the Board to recognize counsel pro hac vice during the proceeding.

b. Be accompanied by an affidavit or declaration of the individual seeking to appear attesting to the following:

i. Membership in good standing of the Bar of at least one State or the District of Columbia;

ii. No suspensions or disbarments from practice before any court or administrative body;

iii. No application for admission to practice before any court or administrative body ever denied;

iv. No sanctions or contempt citations imposed by any court or administrative body;

v. The individual seeking to appear has read and will comply with the Office Patent Trial Practice Guide and the Board’s Rules of Practice for Trials set forth in part 42 of the C.F.R.;

vi. The individual will be subject to the USPTO Code of Professional Responsibility set forth in 37 C.F.R. §§ 10.20 et seq. and disciplinary jurisdiction under 37 C.F.R. § 11.19(a);

vii. All other proceedings before the Office for which the individual has applied to appear pro hac vice in the last three (3) years; and

viii. Familiarity with the subject matter at issue in the proceeding.

c. Where the affiant or declarant is unable to provide any of the information requested above in part 2(b) or make any of the required statements or representations under oath, the individual should provide a full explanation of the circumstances as part of the affidavit or declaration.

With respect to the IPR and CBM filings to date, pursuit of pro hac vice admission appears to be relatively uncommon (roughly 10-15% of cases). (Note that item (vi) will be necessary until the proposed professional responsibility rules are implemented).

InconsistencyCourt Troubled by Own Inconsistent Precedent

As explained very recently by Director Kappos, the USPTO has a well established practice of applying a broadest reasonable claim interpretation (BRI) in proceedings before the USPTO. For this reason, Director Kappos explained that although the AIA was silent on the type of claim analysis to be applied in the new post grant proceedings of the Patent Trial & Appeal Board (PTAB), BRI was deemed necessary for, inter alia, administrative consistency.

Yesterday, in Flo Healthcare Solutions, LLC. v. Kappos, the CAFC advanced a similar consistency theory in questioning whether or not USPTO claim constructions should be reviewed under a de novo standard, as is the court’s routine practice. Or, whether the USPTO’s constructions should be entitled to a different, “reasonableness” analysis as enunciated in some of the court’s more recent precedent. (decision here) Continue Reading CAFC Contemplates De Novo Review of USPTO Claim Constructions

USPTO Adopts ABA Model Rules

Today the USPTO will publish a notice in the Federal Register to update the USPTO Rules of Professional Responsibility and to revise procedures for disciplinary investigations and proceedings. (reading room copy here). The notice explains that the notice of proposed rulemaking is designed to align USPTO Rules of Professional Responsibility with that of most other U.S. jurisdictions.

Of particular interest for post grant patent practitioners is Proposed Rules 11.19(a).

Proposed Rule 11.19(a) is revised to expressly provide jurisdiction over non-registered practitioners that provide or offer to provide legal services before the Office. This provision would allow the USPTO to more effectively police non-registered practitioners such as those that may apply to appear before the PTAB on a pro hac vice basis.

Unsuccessful CBM Challengers Forced Back into Court?

As discussed last week, the Transitional Program for Covered Business Method Patents, or “CBM” proceeding offers significant advantages to qualifying patent challengers. While technically a Post Grant Review (PGR) proceeding, CBM is free of the Draconian estoppel provision applied to PGR. CBM estoppel is limited to those grounds actually raised in the proceeding (that is, there is no “reasonably could have raised” estoppel as in PGR).

More specifically, Sec. 18 of the America Invents Act (AIA) defines a CBM proceeding as following the “standards and procedures of PGR with the following exceptions:

Section 321(c) of title 35, United States Code, and subsections (b), (e)(2), and (f) of section 325 of such title shall not apply to a transitional proceeding.

-Section 321(c) is the nine month window employed in PGR.
-Section 325(b) precludes stays of court actions when a motion for preliminary injunction is pending.
-Section 325 (e)(2) defines PGR estoppel (“raised or reasonably could have been raised”)
-Section 325 (f) precludes PGR for certain reissue patents.

By eliminating the “reasonably could have been raised”  aspect of PGR estoppel the CBM proceeding ostensibly presents a  “free shot” proposition for patent challengers….but, unsuccessful CBM challengers may be surprised to learn that PGR estoppel will apply to the challenger in later, USPTO proceedings.

As noted above, the CBM statute excludes 325(e)(2), which relates to the application of PGR estoppel in later civil actions and ITC proceedings. Notably, however, 325(e)(1) is not excluded by the CBM statute. That is to say, PGR style estoppel still applies internal to the USPTO under 325(e)(1). Thus, unsuccessful challengers that arguably “could have raised” an issue during the CBM, but did not, would be free to introduce that issue in a later district court or ITC proceeding, but not in another CBM proceeding, Inter Partes Review (IPR) or patent reexamination. (Note: if the challenger was earlier sued by the Patentee IPR may be foreclosed as a later option).

The legislative history of the AIA makes clear the intent to maintain the “could have raised” estoppel for both IPR and PGR for the purpose of preventing harassment of Patentees. Yet, the sponsors of the CBM provision were also attempting to reduce business method patent litigation. By presenting a more favorable estoppel path through the courts for failed CBM challengers, one is left wondering whether this asymmetrical CBM estoppel was truly intended, or is yet another technical error of the AIA.

New CBM Challenges to Derail Business Method Patent Assertions?

Last September 16th marked the one year anniversary of the enactment of the America Invents Act (AIA). This “patent reform” legislation introduced several new post grant avenues to challenge an issued patent at the USPTO. One of these new options is the very specialized, Transitional Program for Covered Business Method Patents, or “CBM” proceeding.

The CBM option is noteworthy in several respects: first, it is a post grant review challenge that is limited to a special class of patents (i.e., “covered business method” patents); second, only those challengers that have been sued or charged with infringement of a covered patent may petition the USPTO to initiate a CBM proceeding; third, the estoppel is limited to those grounds actually raised in the proceeding (that is, there is no “reasonably could have raised” estoppel); and finally, the CBM statutes include unique controls that virtually ensure that any ongoing litigation at the time of a CBM filing will be stayed pending USPTO review.

As explained above, the CBM proceeding presents an insignificant of estoppel risk. This “free shot” combined with the near certain stay of costly court proceedings presents a “pay to stay” opportunity that qualifying defendants may find hard to resist.

Assuming a petitioner can demonstrate the necessary standing to file a CBM petition, the CBM statutes are designed to guarantee a stay of the parallel court proceeding.

First, the CBM statute mandates that a court considering a motion for stay pending a CBM proceeding apply a four-factor test. Of course, this factor based analysis is already familiar to the courts, however, courts tend to apply a three factor test, namely:

(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;

(B) whether discovery is complete and whether a trial date has been set; and

(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party.

The CBM statutes require all courts to consider a fourth step, which almost always weighs in favor of a stay:

(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.

The addition of this fourth factor is designed to tip the scales in favor of staying the district court proceeding. The legislative history of the AIA could not be clearer in this regard explaining that “[s]ince the entire purpose of the transitional program at the PTO is to reduce the burden of litigation, it is nearly impossible to imagine a scenario in which a district court would not issue a stay.” 157 CONG. REC. S1053 (daily ed. Mar. 1, 2011)

As if the above signals to the district courts were not clear enough the CBM statute also provides for interlocutory review of stay determinations; this review is also de novo. As such, even when the district court court refuses to stay the proceeding, it is effectively derailed for the months required to await the result of the interlocutory review.

It would seem foolish for district courts to deny motions to stay pending CBM proceedings only to have the certain interlocutory review effectively provide the same relief. Indeed, the CBM proceeding will only advance further by the time the CAFC considers the matter on de novo review. The CAFC may also consider the practical implications of upholding a stay denial pending CBM, that is, ensuring that two disputes on the same patent make it on their docket in the months ahead.