April 5, 2016
Law360
By Jason E. Stach; Aaron J. Capron; Joshua L. Goldberg; Cory C. Bell
Authored by Cory C. Bell, Aaron J. Capron, Joshua L. Goldberg, and Jason E. Stach
On April 1, 2016, in response to comments received on proposed rules released Aug. 20, 2015, the U.S. Patent and Trademark Office released amendments to the rules of practice for trials before the Patent Trial and Appeal Board. These amendments, in the form of final rules, become effective on May 2, 2016, and apply to "all AIA petitions filed on or after the effective date and to any ongoing AIA preliminary proceeding or trial before the Office." We address several significant provisions of the new rules.
Original Rules 100(b), 200(b), and 300(b) specified that a claim in an unexpired patent would be given its "broadest reasonable construction," but they were silent as to how a claim in an expired patent would be construed. Despite this silence, and consistent with the USPTO’s approach in reexamination proceedings, the board has routinely construed claims in expired patents in the same way that a court would (i.e., in accordance with Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005 (en banc)). In addition, the board has often construed claims in patents that will expire before the issuance of a final written decision in the same way that a court would. But the mechanisms for figuring out which standard applies in a given proceeding have varied. Some panels have asked for briefing on the issue, while others have waited for one of the parties to raise it.
Final Rules 100(b), 200(b), and 300(b) create a specific procedure for figuring out which claim construction standard applies in a proceeding. First, they reiterate that "[a] claim in an unexpired patent that will not expire before a final written decision is issued shall be given its broadest reasonable construction in light of the specification of the patent in which it appears." The final rules also clarify that "relevant prosecution history should be considered when specifically cited, explained, and relied upon by the parties."
Final Rules 100(b), 200(b), and 300(b) further specify that "[a] party may request a district court-type claim construction approach to be applied if a party certifies that the involved patent will expire within 18 months from the entry of the notice of filing date accorded to the petition. The request, accompanied by a party’s certification, must be made in the form of a motion under § 42.20, within 30 days from the filing of the petition." Notably, either party can make the request. According to the PTO’s comments accompanying the final rules, doing so will trigger a conference call with the panel of judges hearing the case to determine (1) whether such a motion is appropriate under the circumstances and (2) whether any other briefing is necessary for each party to adequately apply the appropriate construction standard. For example, the PTO’s comments state that if the standard differs from what the petitioner applied in its petition, the panel may allow the petitioner to brief an alternative construction before the patent owner files its preliminary response.
The final rules bring some welcome guidance to parties on how to figure out which claim construction standard applies. While they are consistent with the Federal Circuit’s decision in In re Cuozzo Speed Techs. LLC, 793 F.3d 1268, 1278 (Fed. Cir. July 8, 2015), the U.S. Supreme Court has granted certiorari on which claim construction standard the board should apply for unexpired patents. Accordingly, despite the clarity of the final rules, it may be prudent for both petitioners and patent owners to consider multiple claim construction standards when preparing their papers.
Practitioners have long had a duty of candor to the USPTO, and Final Rule 42.11(a) reiterates that this duty applies in proceedings before the board. Perhaps less well-known than the general duty of candor is 37 C.F.R. § 11.18, which imposes more specific signature and certification requirements to ensure that any information presented to the Office is not knowingly false or presented for an improper purpose. Proposed Rule 42.11 reiterated many of Rule 11.18’s requirements, but some commenters were concerned about how the proposed rule related to existing Rule 11.18 and questioned which rule would control in the event of a conflict. Final Rule 42.11 largely removes the redundant language, instead opting to cross-reference the relevant portions of Rule 11.18. For example, Final Rule 42.11(b) states in part, "Every petition, response, written motion, and other paper filed in a proceeding must comply with the signature requirements set forth in § 11.18(a) of this chapter." Final Rule 42.11(c) similarly requires that representations to the Board comply with the certification requirements of Rule 11.18(b)(2).
Proposed Rule 42.11 did not have a mechanism for pleading contentions or denials likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. The USPTO heard the commenter’s complaints about this issue and revised the rule to cross-reference the provisions of Rule 11.18(b)(2), which already permits these types of contentions and denials.
The board may sanction parties for violating their obligations to the USPTO, but in the past, the mechanisms for conferring with the opposing party and for notifying the board of sanctionable conduct have varied. Final Rule 42.11(d) provides a new framework for addressing sanctionable conduct in a way that mirrors Federal Rule of Civil Procedure 11. Under Final Rule 42.11(d), a party may seek authorization to file a separate motion for sanctions, but it must first serve the motion on the opposing party at least 21 days before seeking authorization to file it. The receiving party then has 21 days (or within a different timeframe, if the board sets one) to correct the issue. If the board is required to resolve the dispute, it may award reasonable expenses, including attorneys' fees, to the prevailing party. While the board will continue to decide the merits of sanctions disputes on a case-by-case basis, the new procedures in Rule 42.11(d) will at least ensure procedural consistency across panels.
Final Rules 42.11(d)(4) and (5) also guide the board in how it may issue sanctions. On the merits, "[a] sanction imposed under this rule must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated and should be consistent with § 42.12," which also addresses sanctions before the Board. And procedurally, "[a]n order imposing a sanction must describe the sanctioned conduct and explain the basis for the sanction." These rules attempt to provide a baseline the Board’s sanctions decisions must meet.
The final rules are also notable for what they omit. Proposed Rule 42.11 stated that the rule did not apply "to disclosures and discovery requests, responses, and objections." Some commenters felt this provision was inconsistent with other provisions and should be eliminated from the final rule. The USPTO adopted this suggestion, so the original exemption is no longer expressly stated in the rule. The USPTO also removed the provision that would have made law firms liable for sanctions. In its rulemaking comments, the USPTO stated that it "believes that sanctions directed to practitioners and parties are sufficient deterrents."
Parties rarely seek sanctions before the board, so the new Rule 42.11 may have a limited effect. Nonetheless, it clarifies the obligations practitioners have before the board, and it provides some procedural consistency in addressing sanctionable conduct.
Original Rules 42.107 and 42.207 limited the patent owner’s ability to include new testimonial evidence with its preliminary response. While the board had discretion to grant patent owner’s request to include this evidence before institution, in practice, patent owners faced almost insurmountable odds to get this evidence into the record.
Proposed Rules 42.107 and 42.207 allowed the patent owner to file new testimonial evidence with its preliminary response. But because petitioners did not get the right to cross examine the declarant or file a reply brief, the USPTO proposed amending Rules 42.108 and 42.208 to state that "disputed material facts will be viewed in the light most favorable to the petitioner for purposes of deciding whether to institute" a proceeding. In light of this new evidence, the USPTO also proposed amending these rules stating that the petitioner may seek leave to file a reply.
While the final rules still allow the patent owner to submit new testimonial evidence, they narrowed the scope of facts that are resolved in favor of the petitioner from "disputed material facts" to "material fact[s] created by such testimonial evidence." See Final Rules 42.108 and 42.208. That is, the proposed rules were not previously limited to disputed facts caused by the new testimonial evidence, so it applied to any disputed facts—not just those raised by the new testimony. The final rules, however, make clear that the presumption only applies to issues of material fact created by the new pre-institution testimonial evidence.
And while the comments raised concerns regarding how the presumption in favor of petitioner for disputed factual issues may be counter to the statute, the Office declined to specifically address that concern. The statute requires that to institute an inter partes review proceeding, the record must show "there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition." 35 U.S.C. § 314(a). For post-grant review proceedings, the statute requires that the record must show that it is "more likely than not" that at least one claim is unpatentable. 35 U.S.C. § 324(a). Based on these statutes, commenters argued that the institution determination is based on the record as a whole — it does not favor one set of facts over another. Those commenters may continue to find it difficult to reconcile this presumption in the final rules with the existing statutes.
Final Rules 42.108 and 42.208 also made explicit that the petitioner must show "good cause" in order to file a reply to any new testimonial evidence.
Final Rule 42.24 changes some, but not all, brief limits from page counts to word counts. Petitions and responses change to word counts, with IPR and derivation filings receiving 14,000 words, post-grant review petitions and responses receiving 18,700 words, and replies to patent owner responses receiving 5,600 words. But all motions briefing, including motions to amend, continue to be governed by page limits.
This change to word counts likely will be welcomed by both the parties and the PTAB. First, the change to word count will allow the parties to format briefing for readability rather than to fit content on a page. This will be of particular importance in complex cases where references to figures are critical. Second, the new rules exempt the mandatory notices and grounds for standing from the word count, which were previously included in the page limit. Particularly in cases where the patent has been asserted in a large number of litigations, this will give several pages back to the petitioner that were previously spent on formalities. Third, the PTO previously treated arguments contained in single-spaced claim charts as though they attempted to circumvent the page limits, which relied on arguments being double-spaced, but moving to word counts should resolve this issue. In a comment implementing the word limits, the PTO stated that "petitions will no longer be reviewed to determine if any claim charts contain argument, thereby streamlining administrative review of petitions and reducing the number of non-compliant petitions that require correction." Although some of these changes have a greater effect on petitioners, these changes will give both petitioners and patent owners more flexibility in presenting their cases.
In August of last year, the USPTO sought comments on a proposed pilot program where a single judge would determine whether to institute a PTAB trial. Two other judges would then be assigned to the panel if a case was instituted. A majority of commenters opposed this pilot program, although some supported modified versions of it. The USPTO has decided not to pursue the pilot program at this time, so the new rules do not implement it.
In general, the final rules provide additional clarity on procedural issues and a few substantive areas. While this clarity is likely to streamline certain aspects of the proceedings, allowing patent owners to present testimonial evidence before institution will complicate the pre-institution phase. Complexity is not necessarily a bad thing, however, and it will be interesting to see whether the ability to present pre-institution testimony will have the benefits patent owners have been seeking since shortly after enactment of the America Invents Act. It will also be interesting to see how consistently different panels of PTAB judges interpret the new rules. As the nation’s busiest patent tribunal, people will continue to watch the PTAB with great interest.
Originally printed in Law360 (www.law360.com). Reprinted with permission. 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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