December 2013
CIPA Journal
Authored by Timothy P. McAnulty and Anthony C. Tridico, Ph.D.
The new patent trials before the U.S. Patent and Trademark Office (USPTO), contesting the validity of issued patents, are quickly becoming a popular and useful tool in the U.S. patent strategy landscape. Over 700 petitions to institute a patent trial have been filed since the new patent trials became available just 18 months ago as part of the American Invents Act (AIA).
These new trials are substantially different from opposition proceedings before the European Patent Office, and include two primary proceedings: Post Grant Reviews (PGR) and Inter Partes Reviews (IPR). All trials are held before a three-judge panel from the newly created Patent Trial and Appeal Board (Board) at the USPTO. PGRs generally apply to patents with at least one claim that has an effective filing date after March 16, 2013, and can be filed against a patent anytime within the first nine-months from issue. IPRs, on the other hand, are available for any granted U.S. patent. For patents that are eligible for a PGR proceeding, an IPR can only be filed against the patent after the nine-month PGR period or after conclusion of a PGR, if one was filed. The available grounds of invalidity are also different between the proceedings. For PGRs, petitioners may raise any ground of patentability. For IPRs, petitioners are limited to raising grounds of patentability based on prior art patents and printed publications. The AIA also established a transitional program that allows petitioners to challenge "covered business method patents" under the PGR regime regardless of the effective filing date of the patent.
One important aspect of the new trials is that they carry significant estoppel effects for petitioners when the Board issues a final written decision. Petitioners challenging claims in a PGR of IPR are barred from requesting or maintaining a proceeding before the USPTO on any ground that that the petitioner raised or reasonably could have raised against that claim during the PRG or IPR. Petitioners are likewise barred from asserting invalidity in a district court or before the U.S. International Trade Commission on any ground the petitioner raised or reasonably could have raised during the PGR or IPR.
The estoppel provisions are statutory and their exact scope will ultimately be decided by the U.S. courts. For now, the full effects are not fully defined and some questions have arisen as to whether the estoppel will be interpreted on a specific claim-by-claim basis or more broadly on a patent-by-patent basis. For example, there is a debate whether estoppel will apply to all claims of a patent, when a petitioner challenges only some of the claims and the Board issues a final written decision on the challenged claims. Additionally, there is some debate whether estoppel will apply when a petitioner proposes grounds of unpatentability against claims that the Board does not adopt when the Board institutes a trial against other claims. That is, is a petitioner barred from later raising proposed but non-instituted grounds when the Board issues a final written decision on other grounds? Both of these scenarios will not result in a final written decision by the Board (a requirement of the statute) on particular claims of the patent, but the petitioner nevertheless raised or might have been reasonably able to raise unpatentability grounds against them.
The estoppel debate generally relates to the scope of what a petitioner "reasonably could have raised." And it has reached the U.S. Congress with at least one proposed bill that would delete the "reasonably could have raised" language from the statute.1 Although each new patent trial will be completed within 12-18 months, we may need to wait several years until these questions work their way through the U.S. courts.
As PGRs start becoming available, a strategy worth considering is to wait and challenge an otherwise PGR-eligible patent with an IPR to reduce estoppel effects in subsequent proceedings. For example, a petitioner can raise any invalidity challenge in a PGR, e.g., unpatentable subject matter, insufficient disclosure, indefiniteness, and novelty and obviousness based on prior art. In comparison, a petitioner can raise only prior art challenges in an IPR. Thus, an unsuccessful PGR petitioner will be barred from later raising any ground that it raised or reasonably could have raised in the PGR. Depending on the ultimate scope of the estoppel provisions, this could effectively mean a PGR petitioner is barred from bringing any subsequent invalidity challenges. By waiting nine months, a petitioner can bring an IPR and challenge the claims in view of patents and printed prior art. Thus, an unsuccessful IPR petitioner can later raise other invalidity arguments, e.g., unpatentable subject matter, insufficient disclosure, or indefiniteness, in a subsequent court proceeding, because these grounds of invalidity are statutorily excluded from IPRs.
Additionally, estoppel effects do not attach to a petitioner if the patent trial is terminated by way of a settlement with the patent owner before the Board issues a final written decision. However, the Board is not required to terminate proceedings when the parties settle, and estoppel may take nevertheless apply.2
To date, 52 trials have settled.3 Many of these settlements occurred after a petitioner filed a petition but before the Board instituted a trial, and in some instances before the patent owner even filed any substantive papers.4 Other trials have settled and have been terminated shortly after the Board instituted a trial.5 In these latter scenarios, the Board terminated the trial even though it had decided the petition proposed grounds that demonstrated there was a reasonable likelihood that at least one of the challenged claims was unpatentable.6
But the Board is not required to terminate the trial and can otherwise determine patentability. In Interthinx, Inc. v. Corelogic Solutions, LLC, the parties reached a settlement late in the trial, and the Board terminated the proceeding with respect to Interthinx (the petitioner) but did not terminate with respect to Corelogic (the patent owner).7 While parties may agree between themselves to settle any issue in a patent trial, the Board is not a party to the settlement and may independently determine patentability.8 In deciding not to terminate the trial and issue a final written decision in Interthinx, the Board noted that the matter was fully briefed and ready for oral hearing.9 By comparison, Interthinx is significantly farther into the merits than other trials that the Board terminated due to settlement.10
Although the parties reached a settlement and the Board terminated the proceeding as to Interthinx, because the Board will still issue a final decision, the statutory estoppel effects may nevertheless apply against Interthinx. On the other hand, Corelogic is still at risk of losing one or more claims if the Board ultimately determines they are unpatentable. Thus, neither party is effectively out of the case after they "settled" the trial. If the Board continues to follow this example, it may be in the best interest of the parties to settle early if they are going to settle at all.
The USPTO recently published updated statistics for the patent trials.11 The vast majority of the petitions filed so far are for IPRs—over 600 petitions. Though there continues to be a steady filing of Covered Business Method (CBM) petitions under the AIA's transitional practice of filing a PGR proceeding on covered business method patent. Since October 2013, 22 CBM petitions were filed. This is already about half of the total number of CBM requests filed between October 2012 and September 2013. As of November 2013, no PGRs have been filed other than those filed as CBMs. However, we expect the first "AIA patents," i.e., those patents with an effective U.S. filing date after March 16th, 2013, to issue soon and likewise expect the first "regular" PGR petitions to be filed shortly thereafter.
Over 70% of the patent trials so far, CBMs and IPRs combined, involve Electrical/Computer patents. Petitions on patents in the mechanical fields are a distant second and represent only about 15% of the total filings. Petitions for patents in the Chemical and Bio/Pharma fields respectively represent about 8% and 6% of the total filings. Interestingly, there have also been 6 IPR petitions filed against design patents.
Patent owners are filing preliminary responses in response to only about 50% of the IPR and CBM petitions so far. In 82 cases, about 11%, the patent owner waived its right to file a preliminary response, effectively expediting the proceeding. A preliminary response is a voluntary paper that a patent owner can file, after a petitioner files a petition for either an IPR, PGR, or CBM, for the Board to consider before it decides whether or not to institute a trial. The preliminary response is limited to arguments and reasons why the Board should not institute the proceeding, e.g., why the petitioner is barred from seeking review, why the petitioner's proposed claim construction is unreasonable, and presenting clear deficiencies of the asserted prior art that affect all of the challenged independent claims.12 Although a preliminary response cannot include any new evidence, e.g., no expert testimony, unless authorized by the Board and cannot include any claim amendments,13 it is the patent owner's first opportunity to respond to the Petitioner's proposed grounds of rejection. In addition, if the Board institutes a trial, the patent owner files its response and motion to amend, if desired, before the petitioner files any additional papers after the petition.14 By filing a preliminary response, the patent owner takes advantage of an opportunity to file two papers opposing the rejections and supporting patentability to the petitioner's single petition. Considering the page limits for papers in the new patent trials, forgoing a preliminary response effectively cuts the patent owner's arguments in half.15
So far, the Board has decided 256 petitions. It has instituted a total of 210 trials on at least one of the proposed ground in the petition. The Board has joined 10 petitions to other trials and has only denied 36 petitions. Considering IPR and CBM petitions together, the Board is instituting trials about 85% of the time. Overall, it appears, at least initially, that the Board is inclined to institute patent trials.
The Board has held two oral hearings and has issued two final written decisions. One in the first-filed CBM—SAP America, Inc. v. Versata Development Group16—and one in the first-filed IPR—Garmin International, Inc. v. Cuozzo Speed Technologies LLC.17 Each of these oral hearings has been structured like an appellate oral hearing, based on the record and briefs of the case, rather than a typical trial with the presentation of evidence and live testimony of witnesses. In keeping with the Board's emphasis on keeping as much of the trial open to the public, it has opened each of these hearings up to the public, even allowing anyone to listen live by calling into a teleconference line. Each hearing has lasted approximately two hours and has been very interactive, with the judges directing numerous questions to counsel for both sides.
During each hearing, the Board has placed considerable focus on claim construction. And claim construction has been a central focus of each written decision.
Moreover, in view of the Board's decisions in SAP and Garmin, Petitioners seeking to invalidate claims may have the best opportunity to do so before the Board in an IPR or PGR trial. In a U.S. district court, there is a presumption that the patent is valid, courts interpret the claims under a narrower claim construction, and there is a practical limit to the number of prior art references that non-technical judges and juries will combine to invalidate claims for obviousness. Whereas, before the Board in an IPR or PGR, there is no presumption of validity, the Board interprets the claims under a broader claim construction, and all of the judges on the Board have a technical background. In addition, the Board appears more inclined to adopt multiple reference obviousness rationales.
In SAP, the Board provided a lengthy explanation as to why it will construe claims for IPRs and PGRs under the Broadest Reasonable Interpretation that the USPTO had used for over 100 years and not the generally narrower plain and ordinary meaning construction used by U.S. district courts.18 The Board then went on to provide an explanation and interpretation of four key claim terms that the parties disputed. The disputed terms and the Board's claim constructions directly impacted the issue before the Board—whether the challenged claims were directed to statutory subject matter.
As explained by the Board, Versta's patent is directed to a method and apparatus for pricing products and services. The central concept of the patent involves hierarchical data arrangements that are said to reduce the need for large tables of data by arranging customers and products into hierarchical groups. The Board construed four claim terms, each dealing with pricing, and analyzed the challenged claims to determine if they were directed to patent eligible subject matter. Although the patent owner argued that the claims should be interpreted as they were by the U.S. district court in a prior infringement suit, the Board construed the claims more broadly than the patent owner proposed. Nevertheless concluded that the claims were directed to nonstatutory subject matter under either construction.19
In Garmin, the issue before the Board was whether claims were patentable as nonobvious (inventive-step) over two separate combinations of prior art references. Again, claim construction was central to the Board's ultimate determination that the challenged claims were obvious. According to the Board, Cuozzo's patent relates to a speed limit indicator and method for displaying speed and the relevant speed limit for the current location of a vehicle. The patent described a mechanical embodiment having a speedometer mounted on a dashboard, with a backplate made of plastic, speed denoting markings painted on the backplate, a colored display made of a red plastic filter, and a plastic needle rotatably mounted in the center of the backplate. Based on GPS data, a control unit rotates the red plastic filter to cover portions of the speed denoting markings that are above the speed limit for the current location of the vehicle.
The challenged claims each included a speedometer integrally attached to said colored display. The Board construed the term "integrally attached" to require discrete parts joined together, although Cuozzo argued for a different construction that would include two parts combined to work as a complete unit.20
Based on this construction, the Board analyzed two proposed rejections and found the claims unpatentable over both combinations—first a combination of three prior art references dated 2003, 1976, and 1955 and second a combination of four prior art references dated 2003, 1998, 1976, and 1955. In concluding that the claims were unpatentable, the Board first combined separate prior art teachings of stationary but replaceable color filter for identifying speed limits and manually adjustable needle for doing the same. For the three-reference combination, the Board concluded it would have been obvious to automate the combined teachings of the manually adjustable color filter in view of a prior art electronic speed limit indicator using a GPS receiver to look up and set the applicable speed limit for a vehicle. For the four-reference combination, the Board concluded it would have also been obvious to automate the combined teachings of the manually adjustable colored filter in view of a reference that electronically indicated a speed limit on an electronic speedometer and another reference that uses GPS data to retrieve and report a speed limit to a driver for the current location of the vehicle. Throughout its analysis, the Board emphasized that it is not necessary to find precise teachings in the prior art that are directed to the claimed subject matter because inferences and creative steps that a person of ordinary skill in the art can be taken into account.
While these are some of the major developments in the new AIA patent trials, this is a growing practice area in the United States and we continue to monitor the activity and stay abreast of Board decisions. There are a number of other trends and additional Board guidance that is outside the scope of this paper. For example, many of the petitioners filing IPRs or CBMs were involved in a related patent infringement litigation. We will be watching to see if this trend continues or if petitioners start challenging claims before infringement suits are threatened or brought. Additionally, the Board is not instituting on all of the invalidity grounds that petitioners' propose and is denying so-called "redundant grounds." The Board has started to provide some guidance on the scope of these redundant grounds and how petitioners may be able to propose additional grounds during the trial when, for example, a patent owner files a motion to amend the patent claims. Stay tuned: we will continue to provide further guidance on these and other lessons from the Board in the coming months.
Endnotes
1 Discussion Draft by House Judiciary Chairman Goodlatte "To amend title 35, United States Code, and the Leahy-Smith America Invents Act to make improvements and technical corrections, and for other purposes", September 6, 2013.
2 37 C.F.R. § 42.74(a).
3 Patent Trial and Appeal Board AIA Progress, Statistics as of 7 November, 2013.
4 See, e.g., Komatsu America Corp. v. Leroy G. Hagenbuch, IPR2013-00130, Paper No. 10 (May 6, 2013).
5 See, e.g., Macuto U.S.A. v. BOS GmbH & KG, IPR2012-00004, Paper No. 23 (Feb. 20, 2013).
6 A petitioner must show a reasonable likelihood that at least one challenged claim is unpatentable before the Board will institute a trial in an IPR. See 37 C.F.R. § 108(c). A petitioner for an PGR must show that a claim is more likely than not unpatentable. See 37 C.F.R. § 208(c). "The 'more likely than not' standard requires greater than 50% chance of prevailing." Fed. Reg. vol. 77, No. 157 at 48765. "A 'reasonable likelihood' requirement is a lower threshold than 'a more likely than not' requirement." Fed. Reg. vol. 77, No. 157 at 48702.
7 Interthinx, Inc. v. Corelogic Solutions, LLC, CBM2012-00007, Paper No. 47 (Nov. 12, 2013).
8 37 C.F.R. § 42.74(a).
9 Interthinx, Paper No. 47.
10 Cf Interthinx, Paper No. 47 with Macuto, Paper No. 23.
11 Patent Trial and Appeal Board AIA Progress, Statistics as of 7 November, 2013.
12 37 C.F.R. §§ 42.107, 42.207.
13 37 C.F.R. §§ 42.107, 42.207.
14 See 37 C.F.R. §§ 42.120, 42.121, 42.220, 42.221.
15 The petition, preliminary response, and patent owner response (after institution) are each limited to 60 pages for an IPR and 80 pages for a PGR. The petitioner reply (to the patent owner response) is limited to limited to 15 pages. 37 C.F.R. § 42.24.
16 SAP America, Inc. v. Versata Development Group, CBM2012-00001, Paper No. 70 (Jun. 11, 2013).
17 Garmin International, Inc. v. Cuozzo Speed Technologies LLC, IPR2012-00001, Paper No. 59 (Nov. 13, 2013).
18 SAP, Paper 70.
19 SAP, Paper 70.
20 Cuozzo's proposed construction was not merely broader than the Board's. Cuozzo interpreted "integrally attached" to require an "integral display" reading out the "attached" feature such that there were no longer separate identities between the speedometer and the colored display.
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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