September 2014
CIPA Journal
By Anthony C. Tridico, Ph.D.; Daniel C. Cooley; J. Derek McCorquindale; Jason L. Romrell
Authored by Daniel C. Cooley; J. Derek McCorquindale; Anthony C. Tridico, Ph.D.; and Jason L. Romrell
As most of you are aware, the Leahy-Smith America Invents Act ("AIA") created three new proceedings—Inter Partes Review ("IPR"), Post-Grant Review ("PGR"), and Covered Business Method Review ("CBM")1—to address the validity of U.S. patents at the USPTO. These proceedings were intended to be less-expensive alternatives to district court action and are quickly becoming an integral part of many patent-litigation strategies. In fact, as of September 4, 2014, parties have filed 1,742 IPR petitions. And more IPRs have been filed in the last five months than were filed in all of 2013. CBM proceedings have likewise gained in popularity, with three times more CBMs filed to date in 2014 than in the entire year of 2013. As PGR proceedings become available,2 many expect that the number of post-grant proceedings will only increase.
The reasons for the rising popularity of IPRs and PGRs are manifold, but their effectiveness no doubt plays a large part. As of August 7, 2014, 69% of challenged claims have been cancelled in IPRs reaching a final written decision, and 100% of challenged claims have been cancelled in CBMs. Indeed, only 14 out of 114 patents survived Patent Trial and Appeal Board ("PTAB") proceedings unscathed (no claims cancelled or amended); only 26 IPRs had at least one claim survive; and all claims were cancelled in 60 IPRs decided to date.
Parties are only able to take advantage of IPRs and PGRs if they can convince the PTAB to institute a review of the targeted patent. In its gatekeeping function, the PTAB alone decides whether an IPR petition satisfies the minimum threshold showing of a "reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition."3 The standard for a PGR or CBM is slightly higher, requiring that a petition establish "that it is more likely than not that at least 1 of the claims challenged in the petition is unpatentable."4 The PTAB's institution decision is by statute "final and nonappealable."5
After the PTAB issued its decision on whether or not to institute (required within three months), many parties unsatisfied with the outcome have tested the contours of the statutory language "final and nonappealable," and sought 'appellate' review. Some pursued review in district court under the Administrative Procedure Act ("APA"), which provides judicial review to individuals who have been adversely affected by a final agency action.6 Others sought direct review by the U.S. Court of Appeals for the Federal Circuit. As detailed below, the institution challenges to date have been unsuccessful.
Mentor Graphics Corp. v. Rea involves an APA action filed in the U.S. District Court for the Eastern District of Virginia.7 The patent owner, Mentor, filed the action to challenge the PTAB's decision to institute an IPR on one of its patents.8 The district court dismissed the action, holding that the PTAB's decision was "plainly interlocutory in nature" and therefore did not satisfy the APA's requirement for a "final agency action for which there is no other adequate remedy in court."9 The district court further concluded that it lacked jurisdiction because Mentor had the "alternative and adequate remedy" of "direct review of the PTAB's final written determination [by] the Federal Circuit."10
Dominion Dealer Solutions, LLC v. Lee presented a situation where the PTAB denied institution of five different IPR proceedings.11 The petitioner, Dominion, filed an action arguing that the PTAB's decision not to institute was arbitrary, capricious, an abuse of discretion, and contrary to law in violation of the APA.12 The district court dismissed the action for lack of jurisdiction, concluding that an APA action was an "appeal" and therefore was precluded by § 314(d)'s statement that institution decisions are "nonappealable."13 The district court further noted that "[i]t is entirely logical . . . for Congress to reserve the right of appeal for those petitioners who were able to obtain IPR, and to bar judicial review for those petitioners who were unable to satisfy the comparatively low threshold of ʻreasonable likelihood' in their petitions."14
B. Mandamus Petitions to the Federal Circuit Challenging Institution and Non-Institution Decisions
In addition to its APA challenge, Dominion filed a petition for a writ of mandamus at the Federal Circuit challenging the PTAB's non-institution decision.15 The Federal Circuit denied the extraordinary writ pursuant to its jurisdictional statute and § 314(d), noting that, "given our conclusions about the statutory scheme, Dominion has no 'clear and indisputable' right to challenge a non-institution decision directly in this court, including by way of mandamus."16
In re Procter & Gamble Co.17 also arrived at the Federal Circuit as a petition for mandamus, but this case involved a patent owner challenging the PTAB's decision to institute.18 The Procter and Gamble Company ("P&G") had argued against institution below because the IPR petitioner had already filed a declaratory judgment action against P&G, which P&G argued barred the petitioner under § 315(a) from filing an IPR.19 The PTAB disagreed, so P&G petitioned for a writ of mandamus.20 Again pointing to its jurisdictional statute and § 314(d), the Federal Circuit denied the petition.21 The Federal Circuit noted that "this is not one of the rare situations in which irremediable interim harm can justify mandamus."22
In St. Jude Medical, Cardiology Division, Inc. v. Volcano Corp.,23 St. Jude filed a petition for IPR, but the PTAB concluded that St. Jude's petition was barred because it had not filed the IPR within the time frame contemplated by 35 U.S.C. § 315(b).24 St. Jude appealed to the Federal Circuit. The Federal Circuit dismissed the appeal for lack of jurisdiction, concluding that only the final written decision of the PTAB could be appealed. The court stated that § 314(d)'s "broadly worded bar on appeal . . . may well preclude all review by any route" but "certainly bars an appeal of the non-institution decision here."25
Although district courts and the Federal Circuit have thus far been reluctant to review institution decisions, several scenarios remain which the courts have yet to decide.
A. Direct Appeal to the Federal Circuit of a Non-Institution Decision After the PTAB Issues Its Final Written Decision
In In re Procter & Gamble, the Federal Circuit stated that it was a "separate question" whether § 314(d) "means that the decision to institute the review is unchallengeable later—if the Board reaches a decision under section 318(a) and an appeal is taken under section 319."26 Thus, some appellants may argue that even if the final written decision subsumes the PTAB's threshold determination about the patentability of the claims, certain jurisdictional requirements covered in the decision to institute are still subject to review upon appeal of the final written decision.
Along these lines, the appellant in In re Cuozzo Speed Technologies, LLC has argued that "non discretionary" jurisdictional requirements may be appealed.27 According to In re Cuozzo, these "non discretionary" requirements include "the petition must be filed by a person who is not the patent owner (35 U.S.C. § 311(a))"; "the grounds of unpatentability must be limited to 35 U.S.C. § 102 or 103 and only based on patents or printed publications (35 U.S.C. § 311(b))"; "the petitioner or real party in interest cannot have filed a civil action challenging the validity of a claim of the patent (35 U.S.C. § 315(a))"; and "the petitioner, real party in interest or privy of the petitioner cannot have been served with a complaint alleging infringement of the patent more than 1 year before the date on which the petition is filed (35 U.S.C. § 315(b))," amongst others.28
B. Appeals of Constitutional Challenges to Institution and Non Institution Decisions
Another scenario that the Federal Circuit has not yet addressed is a constitutional challenge to an IPR or CBM institution/non-institution decision (e.g., a due-process challenge) or a direct constitutional challenge to the statutory scheme itself. The Federal Circuit has recently, and for the first time, explicitly confirmed its jurisdiction for review of constitutional challenges to the AIA.29
A constitutional question is presented in Cooper v. Lee in the form of an APA suit.30 In Cooper, the patent owner has argued that an instituted IPR proceeding violates the Seventh Amendment by denying individuals the right to have their property rights adjudicated by a jury.31 The patent owner has also argued that IPR proceedings violate "separation of powers" principles by giving Article I tribunals matters reserved for Article III courts.32 The government has filed a motion to dismiss the action, arguing that the patent owner's reliance on the APA is improper because it has yet to exhaust administrative remedies by completing the IPR.33 The government contends that if patent owners do not prevail, "they can attempt to raise their constitutional challenge with the Federal Circuit in their statutorily-guaranteed direct appeal from the USPTO's 'final written decision.'"34
Parties have also challenged institution decisions on other statutory grounds. For example, in Synopsys, Inc. v. Lee, the petitioner has filed an APA challenge and argued that pursuant to 35 U.S.C. § 318(a), the Director "has no statutory authority to grant petitions in part as to only subsets of the challenged claims."35 In particular, the petitioner argues that
the regulations of the United States Patent and Trademark Office ("USPTO") purport to authorize the Board to grant review limited to a subset of the claims identified in an inter partes review petition. 37 C.F.R. § 42.108. The governing statutes, however, mandate granting or denying an inter partes review petition as a whole and then, if granted, considering it as a whole, so long as a reasonable likelihood that the petitioner would prevail is found as to one challenged claim. See 35 U.S.C. §[§] 314(a), 318(a).36
Some commentators suggested that the PTAB could resolve this issue by including a patentability analysis of all challenged claims in the final written decision.37
As parties continue to engage in post-grant proceedings, they must carefully consider if and how they should appeal their institution/non-institution decisions. This analysis requires an intimate understanding of the statutory scheme, the developing legal precedent, and the policy considerations at issue. Even though the courts have thus far been unwilling to second guess the PTAB, it remains to be seen whether the right set of factual or procedural circumstances will cause them to crack open the door.
Endnotes
1 The CBM transitional program is designed for challenges to a subspecies of patents for "covered business methods," and will be available only until 2020. The AIA defines the term "covered business method patent" as "a patent that claims a method or corresponding apparatus for performing data processing . . . , except that the term does not include patents for technological inventions," AIA § 18(d)(1) (emphasis added), and the USPTO has since adopted this definition, applying it broadly. The petition may seek an unpatentability determination on any of §§ 101, 102, 103, and 112 grounds. A CBM proceeding may only be sought if the petitioner has been sued for infringement of the subject CBM patent. Id. § 18(a)(1)(B). Conversely, the petitioner must not have previously challenged the validity of the patent in a civil action. Id. § 18(a)(1)(D).
2 PGRs are only available to challenge the patentability of patents with an effective filing date on or after March 16, 2013.
3 35 U.S.C. § 314(a).
4 Id. § 324(a).
5 Id. §§ 314(d), 324(e).
6 5 U.S.C. § 702.
7 No. 1:13-cv-518, 2013 WL 3874522 (E.D. Va. July 25, 2013).
8 Id. at *1.
9 Id. at *2 (quoting 5 U.S.C. § 704).
10 Id. at *3.
11 No. 3:13CV699, 2014 WL 1572061, at *1 (E.D. Va. Apr. 18, 2014).
12 Id.
13 Id. at *3-4.
14 Id. at *6.
15In re Dominion Dealer Solutions, LLC, 749 F.3d 1379 (Fed. Cir. 2014).
16 Id. at 1381.
17 749 F.3d 1376 (Fed. Cir. 2014).
18 Id. at 1377.
19 Id. at 1378.
20 Id.
21 Id. at 1378-79.
22 Id. at 1379.
23 749 F.3d 1373 (Fed. Cir. 2014).
24 Id. at 1375.
25 Id. at 1376.
26 In re Procter & Gamble Co., 749 F.3d 1376, 1379 (Fed. Cir. 2014) (emphasis added).
27 Reply Brief of Appellant, In re Cuozzo Speed Techs., LLC, No. 2014-1301, 2014 WL 3055159, at *2 (Fed. Cir. June 23, 2014).
28 Id. at *2-3.
29 MadStad Eng'g, Inc. v. Lee, Nos. 2013-1511, -1512, slip op. at 8-9 (Fed. Cir. July 1, 2014) (finding expressly time that "this appeal 'arise[s] under' an Act of Congress relating to patents within the meaning of both 28 U.S.C. §§ 1338 and 1295(a)(1) and that we, thus, may properly exercise jurisdiction over this appeal" challenging the constitutionality of certain provisions of the AIA); cf. Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985) (deciding the constitutionality of the patent reexamination statute, but without express analysis of the jurisdiction question).
30 Complaint for Declaratory Judgment of Unconstitutionality of 35 U.S.C. §§ 311-19, Cooper v. Lee, No. 1:14-cv-00672 (E.D. Va. June 5, 2014), Dkt. No. 1.
31 Id. at 7-8.
32 Id. at 8.
33 Memorandum of Law in Support of Defendants' Motion for Summary Judgment & in Opposition to Plaintiffs' Motion for Summary Judgment at 1, Cooper v. Lee, No. 1:14-cv-00672 (E.D. Va. July 23, 2014), Dkt. No. 15.
34 Id. at 1-2.
35 Complaint of Synopsis, Inc. Under the Administrative Procedure Act at 7, Synopsis, Inc. v. Lee, No. 1:14-cv-00674 (E.D. Va. June 5, 2014), Dkt. No. 1.
36 Id. at 2.
37 See Timothy K. Wilson, PTAB Partial Institution of IPR and CBM Review Violates the AIA– But There Is a Simple Fix, Patently-O Blog (May 29, 2014), http://patentlyo.com/patent/2014/05/partial-institution-violates.html.
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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