January/February 2017
CIPA Journal
By Jason L. Romrell; Daniel C. Cooley; J. Derek McCorquindale
Five years after the passage and signing into law of the America Invents Act (AIA) in September 2011,1 courts have begun to weigh-in decisively on many of the procedural nuances that the new post-grant proceedings raise. The latter half of 2016—time enough for such issues to percolate up to the Federal Circuit en banc and even to the Supreme Court—has seen many questions put to rest, with others still to come. This article explores some of these recent procedural holdings.
Some answers and more questions: In In re Cuozzo, a split panel of the Federal Circuit—reviewing the first inter partes review (IPR) petition ever filed—held that the appeals court lacked jurisdiction to review the Patent Trial and Appeal Board’s (PTAB’s) institution decision, even after the PTAB’s final written decision.2 Moreover, the majority held that the PTAB was not obligated to use the same Phillips3 standard that district courts use for claim construction, but may use the same "broadest reasonable interpretation standard" for claim construction that the USPTO has employed for decades.4 And in a 6-5 ruling, the Federal Circuit declined to review the panel decision en banc.5
The Supreme Court agreed with the original panel majority, holding that despite the strong presumption in favor of judicial review, 35 U.S.C. §314(d) explicitly bars challenges to the PTAB’s decision to institute an IPR.6 The Court did not, however:
"decide the precise effect of §314(d) on appeals that implicate constitutional questions, that depend on other less closely related statues, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond 'this section."7
The Court also affirmed that the "broadest reasonable interpretation" standard was a reasonable exercise of rulemaking authority that Congress had delegated to the USPTO.8 While declining to directly weigh-in on the USPTO’s handling of motions to amend claims, the Court noted that the:
"opportunity to amend, together with the fact that the original application process may have presented several additional opportunities to amend the patent, means that the broadest reasonable construction standard is, as a general matter, not unfair to the patent holder in any obvious way.”9
A sneak peek at IPR estoppel? In Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., the Federal Circuit addressed a common situation in PTAB proceedings—institution on some grounds, but not all grounds.10 In particular, the PTAB did not institute review on the "Payne" reference, reasoning that the petitioner Shaw’s "Payne-based" arguments were "redundant" of other instituted grounds.11 While the PTAB ultimately found some of the challenged claims unpatentable, other claims survived.12 Shaw petitioned for a writ of mandamus, arguing that extraordinary relief was necessary to avoid estoppel as the Payne reference under 35 U.S.C. §315(e).13
The Federal Circuit denied mandamus relief, holding that the petitioner had not shown that such a "drastic and extraordinary" remedy was necessary.14 The court noted that under §315(e), an IPR petitioner may not later assert that a "claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review."15 But this provision, the court reasoned, would not bar Shaw from raising the Payne reference in a future proceeding.
"Shaw did not raise—nor could it have reasonable raised—the Payne-based ground during the IPR. The plain language of the statute prohibits the application of estoppel under these circumstances.16"
In other words, because the Payne-based grounds of unpatentability were never actually instituted as part of the IPR, Shaw could not have raised them "during the IPR," and thus, estoppel would not apply.
Judge Reyna concurred in the result, but noted that: "[w]hether estoppel applies… is not for the Board or the PTO to decide. Nor is it for us to decide in the first instance… because the issue is not properly before us."17 According to Judge Reyna: "whether the 'redundant' grounds are subject to estoppel must be determined in the first instance by the district court or the U.S. International Trade Commission."18
Federal Circuit looks at burdens in IPR: In re Magnum Oil Tools Int’l, Ltd. presented another interesting procedural issue. In the case, McClinton Energy had filed a petition for IPR against Magnum’s U.S. Patent No. 8,079,413.19 The patent relates to fracking and a "shearable" release mechanism for a "setting tool."20 The Board instituted review based on three prior art references: Lehr, Cockrell, and Kristiansen.21 The Board eventually held all claims unpatentable for obviousness on the basis of these references.22
On appeal, Magnum argued that neither the petitioner nor the Board had established a prima facie basis for the rejection.23 The USPTO, who had intervened in the appeal, argued that "upon institution of an IPR, the Board necessarily finds that the petitioner has demonstrated a 'reasonable likelihood of success,'" and that this finding "operates to shift the burden of producing evidence of non-obviousness to the patentee."24 The USPTO thus implied that "the Board’s conclusion on obviousness in an IPR can be based on less than a preponderance of the evidence if the patent holder does not affirmatively disprove the grounds upon which the IPR was initiated."25 The Federal Circuit disagreed.
The Federal Circuit explained that there are two distinct burdens of proof: the burden of persuasion and the burden of production.26 Regarding the burden of persuasion, this burden is always on the petitioner to prove "unpatentability by a preponderance of the evidence," 35 U.S.C. §316 (e), and the burden never shift s to the patentee.27 The court noted that the Supreme Court has never imposed a formal burden shifting framework.28
Regarding the burden of production, where the only question is:
"whether due consideration of the four Graham factors renders a claim or claims obvious, no burden shifts from the patent challenger to the patentee…29 This is especially true where the only issues to be considered are what the prior art discloses, whether there would have been a motivation to combine the prior art, and whether that combination would render the patented claims obvious."30
After addressing the proper burden shifting framework, the Federal Circuit analyzed the Board’s decision to rectify some of the deficiencies in the petition:
"[W]e address the PTO’s assertion that the Board did not err in making an obviousness argument on behalf of [the petitioner] based on the primary reference Lehr because this argument 'could have been included in a properly-drafted petition'… It is true that the entire IPR process is one designed as an 'efficient system for challenging patents that should not have issued'. Cuozzo Speed Techs., 136 S. Ct. 2131 (quoting H.R. Rep. No. 112-98, pt. 1, at 39-40 (2011)). But it is still a system that is predicated on a petition followed by a trial in which the petitioner bears the burden of proof."31
The Court concluded that: "the Board erred in shifting the burden of proof on obviousness in this IPR from the petitioner, McClinton, to the patent owner, Magnum."32 As a result, the Court reversed.
Federal Circuit will look en banc at burdens on motions to amend: For patent owners, the AIA’s inclusion of the ability to amend claims during post-grant proceedings was touted as a salutary feature.33 But since 2012, only a handful of motions to amend have been granted by the Board.34 The Federal Circuit has looked at this issue of burdens on motions to amend several times,35 before and aft er the Supreme Court’s decision in Cuozzo, but has now resolved to settle the matter en banc.
Aqua Products, Inc.’s ("Aqua") U.S. Patent No. 8,273,183 claims a jet-propelled pool cleaner.36 A competitor, Zodiac Pool Systems, sought inter partes review of numerous claims of the ’183 patent. During the proceedings, Aqua moved under 35 U.S.C. §316(d) to amend claims 1, 8, and 20 of the ’183 patent.37 Aqua explained that the substitute claims had specification support and were narrower in scope than the original claims, satisfying the statutory requirements.38 Aqua further detailed why the substitute claims were patentable over the prior art relied on to institute the inter partes review. But the Board denied the motion to amend.39 It held that Aqua failed to satisfy its burden of showing patentability in order to prevail on its motion,40 based on its regulation governing motions practice generally: "The moving party has the burden of proof to establish that it is entitled to the requested relief."41
Aqua appealed, inter alia, the Board’s amendment procedures that require the patent owner to demonstrate that amended claims are patentable over the prior art of record. Aqua argued to the Federal Circuit panel42 that the statute expressly places the burden on the petitioner, including demonstrating the unpatentability of amended claims under 35 U.S.C. §316(e), which states:
"In an inter partes review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence."
Aqua further argued that it had satisfied its only statutory obligation with respect to amended claims, i.e., demonstrate that the amendments do "not enlarge the scope of the claims of the patent or introduce new matter."43 The panel opinion, issued May 2016, nonetheless noted that:
"Pursuant to the statutory framework, the Patent and Trademark Office (PTO) promulgated 37 C.F.R. §42.121, which allows the Board to deny a motion to amend if the amendment expands the claim scope or "does not respond to a ground of unpatentability involved in the trial." Because PTO regulations place the burden for any motion on the movant, see 37 C.F.R. §42.20(c), the Board has interpreted §42.121 as placing the burden on the patentee to show that the proposed amendments would make the claims patentable over the known prior art."44
The Federal Circuit panel determined that "precedent has upheld the Board’s approach of allocating to the patentee the burden of showing that its proposed amendments would overcome the art of record."45
Aqua sought en banc review on 6 June 2016, and on 12 August 2016, its petition was granted on the following questions:
a. When the patent owner moves to amend its claims under 35 U.S.C. §316(d), may the PTO require the patent owner to bear the burden of persuasion, or a burden of production, regarding patentability of the amended claims as a condition of allowing them? Which burdens are permitted under 35 U.S.C. §316(e)?
b. When the petitioner does not challenge the patentability of a proposed amended claim, or the Board thinks the challenge is inadequate, may the Board sua sponte raise patentability challenges to such a claim? If so, where would the burden of persuasion or a burden of production, lie?46
The additional briefing on these issues is now complete, and the en banc court will hear the case on 9 December 2016.47
While the Federal Circuit and Supreme Court have now addressed several important procedural issues, the courts are still in the process of deciding additional issues unique to AIA proceedings. These additional issues remain for another day.
Endnotes
1 Leahy-Smith America Invents Acts (AIA), Pub. L. No. 112-29, 125 Stat. 284 (2011).
2 In re Cuozzo Speed Technologies, LLC, 793 F.3d 1268, 1273 (Fed. Cir. 2015)
3 Phillips v. AWH Corp., 415 F.3d 1303 (Fed Cir. 2005) (en banc).
4 In re Cuozzo, 793 F.3d at 1276-79.
5 In re Cuozzo Speed Technologies, LLC, 793 F.3d 1297 (Fed. Cir. 2015).
6 Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131, 2139 (2016).
7 Id. at 2141.
8 Id. at 2142-46.
9 Id. at 2145.
10 Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293 (Fed. Cir. 2016).
11 Id. at 1296-97.
12 Id. at 1297.
13 Id. at 1299.
14 Id.
15 Id. at 1299-1300 (quoting 35 U.S.C. §315(e)).
16 Id. at 1300.
17 Id. 1304.
18 Id.
19 In re Magnum Oil Tools Int’l, Ltd., 829 F.3d 1364, 1367 (Fed. Cir. 2016).
20 Id. at 1368-69.
21 Id. at 1369.
22 Id. at 1373.
23 Id. at 1374.
24 Id.
25 Id.
26 Id. at 1375.
27 Id. (citing Dynamic Drinkware, LLC v. Nat’l Graphics, Inc., 800 F.3d 1375, 1378 (Fed. Cir. 2015)).
28 Id.
29 Id. at 1376.
30 Id.
31 Id. at 1380-81.
32 Id. at 1381 ("Thus, while the PTO has broad authority to establish procedures for revisiting earlier-granted patents in IPRs, that authority is not so broad that it allows the PTO to raise, address, and decide unpatentability theories never presented by the petitioner and not supported by record evidence.").
33 See Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309, 1326 (Fed. Cir. 2016) (Newman, J., dissenting); see also Id. at 1326-27, 1341-42 (discussing the "extensive policy balances in the AIA, as eventually enacted.").
34 See Patent Trial and Appeal Board Statistics (7/31/2016), available at www.uspto.gov/sites/default/files/documents/2016-07-31%20PTAB.pdf; PTO, Patent Trial and Appeal Board Motion to Amend Study 4 (Apr. 30, 2016), https://www.uspto.gov/sites/default/files/documents/2016-04-30%20PTAB%20MTA%20study.pdf.
35 See, e.g., Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292 (Fed. Cir. 2015); Prolitec, Inc. v. ScentAir Techs., Inc., 807 F.3d 1353 (Fed. Cir. 2015); Nike, Inc. v. Adidas, AG, 812 F.3d 1326 (Fed. Cir. 2016).
36 In re: Aqua Prods., 823 F.3d 1369, 1371 (Fed. Cir 2016) (vacated by the en banc order).
37 Id. at 1372.
38 See 35 U.S.C. §316(d); see also 37 C.F.R.§42.121(a)(2)(ii).
39 In re: Aqua Prods., 823 F.3d at 1372.
40 Id.
41 37 C.F.R. §42.20.
42 Before Chief Judge Prost, circuit Judge Reyna (author), and the Honorable Leonard P. Stark, Chief District Judge, United States District Court for the District of Delaware, sitting by designation.
43 35 U.S.C. §§316(d).
44 In re: Aqua Prods., 823 F.3d at 1373.
45 Id. (citing Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292, 1307−08 (Fed. Cir. 2015); Prolitec, Inc. v. ScentAir Techs., Inc., 807 F.3d 1353, 1363 (Fed. Cir. 2015); and Nike, Inc. v. Adidas, AG, 812 F.3d 1326, 1333−34 (Fed. Cir. 2016)).
46 In re Aqua Prods., 2016 U.S. App. LEXIS 14862 (Fed. Cir., Aug. 12, 2016). A pending petition for rehearing en banc raising the same issues, Prolitec, Inc. v. ScentAir Technologies, 807 F.3d 1353 (Fed. Cir. 2016), was stayed by the same order pending resolution of the matter in Aqua. Id.
47 Id.
Originally printed in CIPA Journal in January/February 2017. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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