September 2015
CIPA Journal
Authored by Timothy P. McAnulty and Anthony C. Tridico, Ph.D.
In August 2015, the U.S. Patent and Trademark Office (USPTO) released a proposed rule package proposing changes to the rules governing America Invents Act (AIA) trial proceedings, also known as Patent Trial and Appeal Board (Board) trials or proceedings. The proposed rules are in response to public feedback that the USPTO received over the last several months to ten questions it proposed to the public on the following topics: (1) claim construction; (2) motions to amend; (3) patent owner preliminary responses; (4) additional discovery; (5) obviousness (inventive step); (6) real party in interest; (7) multiple proceedings; (8) extension of one year period to issue a final determination; (9) oral hearing; and (10) general topics. The USPTO received numerous comments and responded to them when releasing the proposed rules.
The USPTO characterizes the proposed rules as providing "more involved" changes to AIA practice as compared to the rules the USPTO recently issued in May 2015 that made changes the USPTO characterized as "more ministerial." The USPTO is soliciting comments from the public on the proposed rules, with comments due by October 19, 2015. There is no timeline for when the USPTO will finalize and implement the new rules, but we expect that it will do so sometime in early 2016.
The proposed rules impact five main aspects of the AIA trials: claim construction, evidence, page/word limits on substantive pleadings, demonstratives for oral argument, and duty of candor. Some of the proposed rules, like those relating to construction and demonstratives, implement practices that are generally already in effect. These rules are likely to have little impact on future proceedings, although the USPTO is likely to receive significant comments regarding claim construction. The proposed rules also implement some changes that should be beneficial to patent owners, including allowing new testimonial evidence pre-institution and replacing page limits with word count limits. In addition, the proposed rules implement a more explicit duty of candor and good faith for all persons practicing before the Board.
The proposed rules clarify that the broadest reasonable interpretation standard will apply to all claims in patents that will not expire before the Board will reach a final decision in the proceeding. But the plain and ordinary meaning standard, applicable in U.S. district courts during patent litigation, will apply to all claims in patents that will expire before the Board will reach a final decision. This rule would formally implement several decisions from the Board in cases where the patent expired or would expire before the Board would reach its decision. See, e.g., Toyota Motor Corp. v. Leroy G. Hagenbuch, IPR2013-00483, Paper 21 (Apr. 16, 2014). Effectively, this rule would maintain the status quo for interpreting claims before the Board, but it is likely to generate a significant amount of comments from the public nonetheless because of the ongoing debate (in commentary, courts, and even U.S. Congress) as to what standard the USPTO should use for AIA trials.
When assessing patentability, the USPTO gives claim terms their broadest reasonable interpretation (BRI) consistent with the specification. It applies the BRI standard during prosecution, as well as other post-grant procedures like reissue applications and reexaminations. See In re Yamamoto, 740 F.2d 1569 (Fed. Cir. 1984). The BRI standard is generally broader than the "plain and ordinary" meaning that U.S. courts use when interpreting claims during litigation for the purpose of determining both infringement and validity. Although the USPTO and courts use different standards, the Federal Circuit has acknowledged and approved this practice. Indeed, the USPTO has applied the BRI standard during prosecution for over 100 years and during reexamination for over 30 years.
Since the start of the AIA trials, the USPTO has likewise applied the BRI standard to claims under review in patents that would not expire before the Board reached a final decision. Notably, there have been several challenges to the USPTO's use of the BRI standard in AIA trials for any claim. See, SAP Am. Inc. v. Versata Develop. Group, Inc., CBM2012-00001 Paper 70 (final written decision in first covered business method review); Garmin Int'l, Inc. v. Cuozzo Speed Tech., LLC., IPR2012-00001 Paper 59 (final written decision in first inter partes review). The USPTO's central justification for the continued use of the BRI standard in AIA trials is the ability for patent applicants/owners to amend the claims to resolve disputes in claim interpretation and overcome prior art. See id. The broader construction also helps ensure a claim will be valid when construed more narrowly later. See Ex Parte Papst-Motoren, 1 U.S.P.Q.2d 1655, 1655-56 (B.P.A.I. Dec. 23, 1986). However, many practitioners have argued that in practice there is little opportunity for patent owners to make amendments during AIA trials. See In re Cuozzo Speed Techs., LLC, 793 F.3d 1268 (Fed. Cir. 2015), reh'g en banc denied, 793 F.3d 1297 (Fed. Cir. 2015). But the Federal Circuit has approved the USPTO's use of the broadest reasonable interpretation standard. Id.; Versata Development Group, Inc. v. SAP America, Inc., 793 F.3d 1306 Fed. Cir. 2015).
But, because an applicant or patent owner cannot amend an expired claim, the USPTO applies the plain and ordinary meaning standard as used by the courts. See In re Rambus, Inc., 694 F.3d 42, 46 (Fed. Cir. 2012). The USPTO has generally applied this practice to other post-grant proceedings (e.g., reexaminations), see id., and has done so in the relatively few AIA trials involving expired patents.
Thus, while the proposed rules merely align AIA trial practice with other post-grant practice before the USPTO, the debate as to whether the USPTO should apply the BRI standard in post-grant proceedings continues.
In what is the most significant change of the new rules, patent owners would be allowed to submit new testimonial evidence with their preliminary response. While petitioners cannot file a reply to that response as a matter of right, the proposed rules do permit petitioners to seek authorization to do so. Under the current rules, patent owners are specifically prohibited from doing so. See 37 C.F.R. §§ 42. 107(c) (inter partes review), 42.207(c) (post-grant review and covered business method review). To date, many commenters believe patent owners have a disadvantage pre-institution because practically all petitioners submit at least some testimonial evidence from a technical expert to support the grounds they raise in the petition. Thus, under the current rules, when the Board is deciding if the petitioner has met its burden and trial is warranted, the Board can consider expert testimony from only the petitioner.
The proposed change should help patent owners reduce the number of grounds or perhaps avoid institution altogether. For example, petitioners must construe claim terms and must show with particularity how the prior art discloses the elements of the claims. See 35 U.S.C. § 312(a)(3). Expert testimony can be helpful to explain how one of ordinary skill in the art would understand the challenged claims and interpret the prior art. Under current practice, the Board generally has only the petitioner's expert's views on these issues, which may favor petitioners.
Additionally, many patent owners raise secondary considerations to show non-obviousness, e.g., commercial success, industry praise, or unexpected results, in response to obviousness challenges. These issues are frequently bolstered by expert testimonial support and are difficult, if not impossible, for patent owners to raise before the Board institutes trial. With the ability to file testimonial evidence pre-institution, patent owners could raise these issues earlier in the proceeding. Moreover, patent owners will have the opportunity to submit testimonial evidence directly rebutting the petitioner's substantive anticipation (novelty) and obviousness (inventive step) grounds. Patent owners must keep in mind, however, that the rules contemplate the ability of petitioner's to reply to the preliminary response. Thus, patent owners may want to balance the benefits of introducing testimonial evidence early in the proceeding with what may amount to petitioner's ability to file a "second" petition.
To avoid factual disputes on a limited record before institution, the proposed rules also specify that the Board will view any disputed material fact (e.g., competing expert testimony) in the light most favorable to the petitioner when deciding whether to institute. While this may tip the balance on closely disputed facts in favor of the petitioner, it is unlikely that countervailing testimony from the patent owner will have no effect on the Board's institution decision. Moreover, early submission of expert testimony may help frame the issues for later, even if the Board decides to institute trial.
The proposed rules also replace current page limits with word count limits for petitions, patent owner preliminary responses, patent owner responses, and petitioner replies. Like the current page limits, the new word count limits do not include: a table of contents, a table of authorities, a certificate of service or word count, exhibits, appendices, or claim listings. However, the word count limits like current page limits do include claim charts. Notably, the proposed rules do not make any changes to the current page limits for motions, including motions to amend, oppositions to motions to amend, and replies to oppositions, leaving all of the page limits intact.
In particular, the proposed rules implement the following changes. They replace the current 60-page limit with a 14,000-word limit for petitions for inter partes review (the most common type of petition to date). Similarly, they replace the 80-page limit for petitions for covered business method reviews and post-grant reviews to 18,700 words. Patent owner preliminary responses (filed before the Board makes an institution decision) and patent owner responses (filed after the Board institutes trial) are the same as the corresponding petition. The rules would also replace the 25-page limit for petitioner's replies (filed after patent owner responses) to 5,600 words for all proceedings.
While these changes apply to both petitioners and patent owners, they may be more of a detriment to petitioners. Most petitions include claim charts comparing claim elements to portions of the prior art. Under the rules, claim charts can be single spaced, as compared to the double-space requirement for all other arguments. Based on an informal review of several cases, petitions that use claim charts and just meet the current page limit will very likely exceed the proposed word count. However, petitions that do not include claim charts will very likely meet the proposed word count. While it is common for petitioners to use claim charts to compare the challenged claims to the prior art, patent owners rarely do.
Thus, if the word count limits go into effect, petitioners may need to forego claim charts, include less written arguments, challenge fewer claims, or file multiple petitions. None of which may be ideal. For example, petitioners who challenge a large number of claims and use claim charts may need to consider the benefits of doing so compared with providing more written arguments. Notably, the Board has denied to institute grounds or entire petitions where the petitioner fails to sufficiently explain where the prior art teaches particular elements and how those elements can be combined. See, e.g., Apple Inc. v. Evolutionary Intelligence, LLC, IPR2014-00079, Paper 8 (Apr. 25, 2014) (rejecting petition for including "vague" explanation that did "not identify specifically what Petitioner regards as the" relevant feature of the prior art).
All practitioners practicing before the USPTO, including before the Board, owe a general duty of candor and good faith to the Office, see 37 C.F.R. § 11.303, and shall not bring or defend frivolous actions, see id. at § 11.301. The proposed rules would also supplement this current duty of candor requirement with a specific certification for all papers filed with the Board in AIA trials.
In particular, the proposed rules expressly set forth that an attorney, registered practitioner, or unrepresented party certifies by signing, filing, submitting, or later advocating, that all representations made to the Board are, to the best of the person's knowledge, information, and belief formed after inquiry reasonable under the circumstances:
1) not presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of a proceeding,
2) include claims, defenses, or other contentions warranted by existing law or by a non-frivolous argument for extending, modifying, or reversing existing law,
3) based on factual contentions that have evidentiary support, and
4) based on denials of factual contentions warranted on the evidence.
The proposed rules also revise sanctions and specify that the Board can impose sanctions on an attorney, registered practitioner, law firm, patent agent, or party that violated the required certification. The proposed rules also specify that a law firm will be held jointly responsible for a violation committed by its partner, associate, or employee absent exceptional circumstances. This new certification would not apply to disclosures and discovery requests, responses, or objections.
Under the current rules, the Board may impose sanctions against a party for misconduct or egregious behavior while practicing before the Board. See 37 C.F.R. § 42.12(a). Sanctions can include admitting or excluding evidence, holding particular facts to be admitted, precluding a party from arguing particular issues, providing for monetary compensation (e.g., attorney fees), patent term disclaimer, or adverse judgment. See id. at § 41.12(b). Although the Board has not imposed many sanctions in AIA proceedings to date, this may soon change. During the recent USPTO roadshow presentations that included a discussion on the proposed rules, the USPTO indicated that the new certification would provide the USPTO more robust means to police misconduct before the Board.
In addition, the current rules do not specifically permit parties to file a motion for sanctions when they believe misconduct has occurred. Under current practice, parties must seek relief through general motion practice. See, e.g., Shire Dev. LLC v. LCS Group LLC, IPR2014-00739, Paper 14 (Dec. 23, 2014) (granting petitioner authorization to file a motion for sanctions). The proposed rules would specifically permit parties to seek sanctions by motion or on the Board's initiative.
Parties presenting arguments at an oral hearing in an AIA trial may use demonstrative exhibits at the hearing. The current rules and practice guide provide only minimal requirements regarding demonstrative exhibits. Demonstrative exhibits must be served at least five business days before the oral argument and filed no later than the time of the oral argument. See 42.70 (b). And demonstrative exhibits cannot raise arguments that a party did not raise earlier in the proceeding. See Patent Trial Practice Guide, 77 Fed. Reg. 48756, 48768 (August 14, 2012). Parties may object to an opposing party's demonstrative exhibits, the parties may resolve any disputes over proposed demonstrative exhibits before they are filed, and the Board may exclude or not consider those exhibits that do not comply with the rules.
Another proposed rule change would require parties to serve demonstrative exhibits on opposing counsel seven days before oral argument. This is two days earlier than the current rules and will give parties more time before the hearing to work out disputes over the demonstratives.
To summarize, the most significant changes in the proposed rules relate to the ability of patent owners to submit new testimonial evidence with preliminary responses (before institution) and replacing page limits with word count limits. The proposed rule regarding testimonial evidence benefits patent owners and, on balance, the proposed word count limits are likely more detrimental to petitioners. Considering these changes, petitioners who are planning or contemplating petitions may want to do so before the new rules go into effect to take advantage of the current page limits and patent owners inability to submit new testimonial evidence with a preliminary response.
The proposed rules also include several comments and responses related to motions to amend and multiple proceedings (joinder, stays), but do not include any substantive changes to these areas of practice. Further guidance in these areas will likely be provided through individual Board decisions. For example, in MasterImage 3D Inc. v. RealD Inc., the Board recently provided guidance on the requirements for patent owners seeking to amend challenged claims. IPR2015-00040, Paper 42 (July 15, 2015). The Board designated the MasterImage decision as a "representative order" signaling that it carries increased precedential weight. The Board also continues to provide additional guidance within the frequently asked question section on its website. For example, the Board recently clarified the requirement that parties are limited to presenting arguments at oral hearing that were specified in the oral hearing request. Finally, the Board issues and revises its Standard Operating Procedures and has issued two to date: one regarding how judges are assigned to panels and one regarding how the Board designates informational, representative, and precedential opinions and orders.
Finally, as part of the comments accompanying the proposed rules, the USPTO indicated that it will publish a revised Office Patent Trial Practice Guide with the final rules. The Practice Guide does not have the same authority as the rules, but provides further explanation and guidance on how the Board interprets and applies the rules. Throughout the comments and responses, the USPTO indicated that the revised Guide will include additional guidance on several topics, including claim construction; discovery (including additional discovery and confidential information); amendment practice; real party in interest issues (impacting estoppel); and copending cases before the USPTO (multiple petitions and reexaminations).
AIA trials went into effect in September 2012, and we have seen this area of practice in the U.S. grow significantly over the last three years. As of July 2015 (the most recent statistical tally), over 3600 AIA petitions have been filed. While the proposed rules may not drastically change practice before the Board, they will impact strategy for petitioners and patent owners alike. Stay tuned: we will provide further updates on AIA trials and practicing before the Board in the coming months.
Originally printed in CIPA Journal. 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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