June 2017
CIPA Journal
Just over four-and-a-half years ago, the America Invents Act (AIA) created post-grant proceedings at the U.S. Patent and Trademark Office (USPTO), which created an alternative path to challenge the validity of patents. These proceedings have become very popular, with over 5,000 challenges filed since they became available.
Although three separate post-grant review proceedings were created under the AIA—IPR, CBM, and PGR1—they all have common procedural features. We have discussed the details of the various procedures in several earlier CIPA Journal articles, but all post-grant proceedings can generally be divided into two phases: pre-institution and post-institution. The pre-institution phase begins when a petitioner files a petition challenging the validity of at least one claim of a patent.2 The patent owner has the option to file a preliminary response and explain why a proceeding should not be instituted, whether on procedural or substantive grounds.3 A panel of three administrative patent judges (Board) then reviews the petition and preliminary response and issues an institution decision either granting or denying institution based on whether the petitioner has sufficiently shown that it is likely to prevail on the merits at final written decision.4 Post-institution, the patent owner may object to a petitioner’s evidence, cross-examine petitioner’s expert witnesses, file additional expert testimony supporting patentability, and file a patent owner response rebutting the petitioner’s arguments. After the Board holds an oral hearing, it issues a final written decision and determines whether the challenged claims are patentable.5
The distinction between pre-institution denials and a final written decision post-institution is significant. For example, when the Board issues a final written decision, the AIA’s estoppel provisions attach and the petitioner is precluded from arguing at district court or at the USPTO that the claims decided in the final written decision are unpatentable on various grounds.6 This estoppel does not attach if the Board denies institution. When a Board institutes a proceeding, it also increases a petitioner’s ability to obtain a stay of a co-pending litigation, which will delay trial and a potential judgment on infringement and damages until after patentability is resolved at the USPTO. While an ultimate finding of unpatentability by the Board could moot the litigation, a finding of patentability can simplify the issues at trial by removing certain defenses. A finding of patentability in a final written decision can therefore have a significant impact on corresponding litigations.
This article surveys the Board’s final written decisions issued during the first quarter of 2017 to determine trends in why the Board "reverses" its initial institution decision, where it found a petitioner likely to show at least one claim unpatentable at institution, yet found that the petitioner failed to make the required showing that the challenged claims are unpatentable at final written decision.
Copies of the 193 final written decisions issued between 1 January and 11 April 2017, were pulled using Docket Navigator.7 These decisions were reviewed to determine whether the fi nal written decision found one or more claims patentable. Decisions finding at least one claims patentable were analyzed to determine the reason the Board found the claim patentable and categorized into groups, as discussed below.
Of the 193 final written decisions reviewed, 59 decisions (30.6%) found at least one instituted claim8 patentable. Of those 59 decisions, 43(22.3% of the total decisions) found all instituted claims patentable and 16 (8.3% of the total decisions) found at least one instituted claim patentable and the remainder unpatentable. The remaining 134 decisions (69.4%) found all instituted claims unpatentable. Based on this survey, after institution there is about a two-thirds chance that all instituted claims will be found unpatentable in the final written decision. [See chart below.]
Although the number of decisions finding all instituted claims unpatentable may appear high, it roughly corresponds to the USPTO’s own data that 65% of all IPR final written decisions and 81% of all CBM final written decisions found all claims unpatentable.9, 10 Significantly more IPR petitions are filed than CBM petitions, and our compiled data from the first quarter of 2017 appears to be similar to the USPTO’s reported overall data.
It is also worth noting that of the 59 decisions finding at least one claim patentable at final written decision, practically all of the "reversals" were in IPRs. Only one CBM decision found all claims patentable11 and only one CBM decision found some claims patentable (while still finding other claims unpatentable).12
The lower rate of "reversals" for CBM proceedings could be due to the different thresholds for instituting review. For an IPR to be instituted, the petitioner must show:
"that the information presented in the petition… shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition."13
In CBM proceedings, a petitioner has a different threshold and must show that:
"the information presented in the petition… if such information is not rebutted, would demonstrate that it is more likely than not that at least one of the claims challenged in the petition is unpatentable."14
For both proceedings, a petitioner must prove "a proposition of unpatentability by a preponderance of the evidence."15 The threshold to institute a CBM is closer to the final evidentiary burden to establish unpatentability than the threshold to institute IPR, which may account for the lower "reversal" rate of CBMs in the cases surveyed. CBM proceedings can also be instituted on more grounds, including purely legal bases such as patent-ineligible subject-matter under 35 U.S.C. §101, which may also account for the lower "reversal" rate of CBMs.
Each of the surveyed decisions finding at least one claim patentable was reviewed and the Board’s reasoning was categorized into one of the groups in the table opposite. The percentage of decisions representing each category is shown in the bar chart.16
This data17 appears to show a few relevant trends that are applicable to both patent owners and petitioners. The three most common reasons for finding claims patentable at final written decision were claim construction, missing elements, and lack of motivation to combine references. The Board relied at least one of these three bases in almost 30% of its final written decisions. By contrast, the Board relied on the next most common basis—that a reference was not a printed publication—just 11% of the time.
Although this may seem like a substantial gap, context may explain why claim construction and missing elements are two of the most common reasons for "reversal." These arguments form the basis for almost all disputes between petitioners and patent owners and are relevant in nearly all proceedings, applying equally to anticipation and obviousness challenges. As such, they are probably the most common arguments made by patent owners. Other reasons, such as lack of motivation to combine, lack of reasonable expectation of success, and secondary considerations, are relevant only to obviousness challenges. Similarly, the defense that a reference is antedated is available only in certain circumstances.
An interesting note about this data is that the most common basis for finding claims patentable—failure to show motivation to combine references—is an argument available to patent owners facing just obviousness challenges. The relatively high proportion of decisions citing a petitioner’s failure to show motivation to combine may be due to recent Federal Circuit decisions vacating18 or reversing19 final written decisions where the Board did not properly assess whether the petitioner provided a sufficient motivation to combine the references.
Another notable basis for finding claims patentable is where the petitioner failed to show that a reference is prior art. Patent owners have this argument available only when a petitioner relies on non-patents references, for example, journal articles, dissertations, white papers, or industry presentations, which makes it a less common argument available to patent owners. The Board’s reliance on this basis may be buoyed by the Federal Circuit’s decision in Blue Calypso v Groupon20, which affirmed the Board’s reasoning in a final written decision that a reference raised by the petitioner was not prior art.21 Patent owners as well as petitioners should consider the overall impact of the Court’s reasoning in Blue Calypso when non-patent literature documents are used as part of a prior art challenge.
To further highlight these bases—lack of motivation to combine and failure to show that a reference is prior art—we discuss each of them in more detail through a case study. As these studies show, the Board treats the petitioner’s burden to establish motivation to combine references and that documents are prior art as meaningful throughout post-grant proceedings. Petitioners should bear this in mind when developing their arguments before filing a petition to anticipate patent owner’s counterarguments and help avoid having an institution decision "reversed" at final written decision. Patent owners may also wish to consider this when planning their response strategies both before and after institution. We also provide a short study of another case to provide some context regarding other reasons the Board has found instituted claims patentable in a final written decision.
Case Study A: Failure to Show Motivation to Combine References
Spectrum Brands v Assa Abloy22 provides an instructive example of the Board’s reasons for determining that the petitioner failed to show a sufficient motivation to combine references. In Spectrum Brands, the petitioner argued that a combination of two published patent applications—Nielsen23 and Karkas24—rendered two patent claims obvious.25 Although the Board instituted the IPR, in the final written decision, it determined that petitioner failed to show a motivation to combine these references, because petitioners: "[did] not explain sufficiently why the skilled artisan would turn to Karkas’s teaching in order to remedy the acknowledged deficiency in Nielsen."26 The Board faulted the petitioner for providing only "general reasons" to combine the references. For example, the Board took issue with the petitioner’s alleged rationales that "both references were published in the same year, and both disclose analogous access control systems… [b]oth references describe using mobile devices as keys, electronic locks, and a central management system;" and both "describe mobile phones with embedded electronic access codes and similar wireless communication protocols."27 The Board found these reasons generic and insufficient to show motivation to combine the teachings of the references because they did not "identify any specific benefit to be gained from using Karkas’s PIN number as Nielsen’s password."28 The Board also found the purported similarities of the references unconvincing, stating that the "mere fact that Nielsen and Karkas are 'similar' in many respects… is not itself a reason to combine their teachings in the manner claimed."29
Case Study B: Failure to Show Printed Publication
In Sony v Imation30, the Board found that the petitioner failed to show that two technical specifications—the "MMC Specification"31 and the "SD Specification"32—were publicly available before the challenged patent’s filing date.33 The Board explained, even if these standards were generally "known, or even well-known," that "does not provide evidence regarding the specific documents relied on by Petitioner."34 The Board explained that "general citation[s] to the standards in the prior art cannot substantiate the publication status of the specifically cited MMC Specification and SD Specification documents" relied on by petitioner.35 In other words, the Board found that the petitioner failed to link the standards known in the prior art to the specific documents relied upon in the petition.36, 37
The Sony v Imation decision presents a useful case study, not only for its substantive value, but also because the patent owner did not challenge whether the MMC Specification and SD Specification were prior art.38 The Board raised this issue on its own, explaining that a "Petitioner must demonstrate… that the challenged claims are obvious and one aspect of such a showing is that the references relied upon are patents or printed publications."39 Thus, this case shows that the Board may interpret a petitioner’s burden to show unpatentability as including demonstrating that printed publications are prior art, even when the patent owner does not raise that argument. The outcome in Sony could be due to the evidentiary difference between the threshold for institution ("reasonable likelihood")40 and the higher threshold to show unpatentability at final written decision ("preponderance of the evidence").41
Case Study C: "Other" Reasons for Finding Patentability
One other notable category is the "other" category. During the time period surveyed, only two decisions fell into this category, both of which related to procedural issues unique to practicing before the Board: Nissan v Joao Control42 and Coxcom v Joao Control.43 These final written decisions highlight potential institution decision pitfalls that could result in estoppel at final written decision if not timely corrected. In Nissan v Joao Control, the Board found that a dependent claim was patentable on one asserted ground44 because the petitioner failed to explicitly include all of the references relied on to challenge the independent claim as part of the combination challenging the dependent claim.45 The Board explained that, because only two references were relied on in the dependent claim, which did not include a third reference relied on to challenge the independent claim, the petition did "not have a specific allegation as to how and why the teachings of all three references… may be combined" to show that the dependent claim was unpatentable.46 In Coxcom v Joao Control, the Board determined that a dependent claim was patentable because it depended from an independent claim, which the Board did not institute IPR on.47 The petitioner relied on the same arguments for the dependent claim as it did for the independent claim that the Board already found unpersuasive.48 As a result, the Board determined that the dependent claim was patentable at final written decision for the same reasons that it declined to institute the independent claim.49
Although the reasons for finding claims patentable at final written decision are instructive, it is also useful to consider whether the arguments the Board found persuasive were previously argued in a preliminary response prior to institution. As shown below, in just 39% of cases, patent owners presented the same argument in a preliminary response pre-institution as they did post-institution.50 Of the remaining 61% of cases, the vast majority of them (57.8% of the total cases) included patent owners fi ling a preliminary response, but raising new arguments after institution. In just a small percentage of the cases (4.7% of the total cases), the patent owner did not file a preliminary response.51 Thus, new arguments presented after institution may have a statistically higher chance of persuading the Board that the challenged claims are patentable rather than repeating arguments presented pre-institution. While every case has its own facts and warrants its own strategy, the practical implications of the two-phases of post-grant proceedings are worth considering.
In more than half of the cases, the patent owner did not raise the ground the Board found persuasive until after institution. This has several interesting implications. It may indicate that patent owners "saved" their more persuasive arguments until after institution or that they adjusted their arguments based on the Board’s institution decision. It may also be affected by the lower institution threshold for IPRs, such that patent owners choose to reserve some arguments until after institution in the event the IPR is instituted.
It is worth noting that the final written decisions in this study are cases that were in cases with petitions (and preliminary responses) filed before the Board implemented its new rules allowing patent owners to submit expert testimony prior to institution.52 Thus, in all of these cases, the patent owner could not submit new expert testimony until after institution, which may also explain why certain arguments were not raised in a preliminary response. For example, some arguments may be more persuasive with testimony from a technical expert. While these arguments could have been made pre-institution before the USPTO changed its rules, they would be based almost entirely on attorney argument. Although patent owners can now submit testimonial evidence pre-institution, the Board’s rules require any disputed material facts to be "viewed in a light most favorable to the petitioner" for purposes of institution.53 Thus, in certain instances, some arguments may still be more persuasive after institution, when viewed by the Board on a full record.
In the first quarter of 2017, the Board’s reasons finding claims patentable at final written decision were heavily weighted in three general categories, but the Board relied on several different bases over that time. Although the strongest arguments available to patent owners depends on the facts of each case, it appears that there is a trend in decisions issued in the first quarter of 2017 to enforce petitioners’ burdens of proof with respect to motivation to combine references in obviousness analyses and to show that references were publicly available prior art. This trend may also prove useful to patent owners defending against petitions and to petitioners who might place additional emphasis on these aspects of their petitions moving forward.
Endnotes
1 Inter partes review (IPR), post-grant review (PGR), and covered business method patent review (CBM).
2 See 35 U.S.C. §§ 311, 312, 321, 322.
3 See 35 U.S.C. §§ 313, 323.
4 See 35 U.S.C. §§ 314, 324. The standard for institution of IPR, CBM, and PGR proceedings varies, but each has a threshold showing that a petitioner must meet for the Board to institute. 35 U.S.C. §§ 314 (petitioner must show "that there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition" in IPR); 35 U.S.C. § 324 (petitioner must show "that it is more likely than not that at least one of the claims challenged in the petition is unpatentable" in PGR and CBM).
5 See 35 U.S.C. §§ 318, 328.
6 See 35 U.S.C. §§ 315(e), 325(e). A full discussion of the scope of estoppel in each of IPR, CBM, and PGR proceedings is beyond the scope of this article.
7 The information in this article was compiled from all Patent Trial and Appeal Board final written decisions on the merits available on Docket Navigator (www.docketnavigator.com) as of 11 April 2017, using the filter "Patent Trial and Appeal Board" and the sub-category filters "Termination," "Final Decisions," and "PTAB Final Written Decision—Patentability of Challenged Claims." Each discrete Final Written Decision was counted as a separate case, even where multiple decisions addressed the same patent. On the other hand, when multiple cases were joined into a single Final Written Decision, such cases were considered to be a single decision.
These statistics do not include settlements, requests for adverse judgment, motions to terminate, still-pending cases, requests for rehearing, or appellate outcomes. The statistics reflect case outcomes on a per-case basis, and incorporate a number of decisions and assumptions designed to eliminate redundancy while providing the most impartial, accurate, and useful information possible. While care has been taken to ensure the accuracy of this data, the numbers presented here should be treated as an estimate.
8 This article refers to "instituted claims" to mean claims that were adjudicated at final written decision.
9 See Patent Trial and Appeal Board Statistics 3/31/2017, at 10, available at https://www.uspto.gov/sites/default/files/documents/AIA%20Statistics_March2017.pdf.
10 No post-grant review (PGR) final written decisions found claims patentable during this time period.
11 See TradeStation Group v Trading Technologies, CBM2015-00161, Paper 129 (Feb. 17, 2017).
12 See TradeStation Group v Trading Technologies, CBM2015-00182, Paper 129 (Feb. 28, 2017).
13 35 U.S.C. § 314(a).
14 35 U.S.C. § 324(a).
15 35 U.S.C. §§ 316(e), 326(e).
16 Although the authors have tried to apply these categories consistently, there is sometimes some gray area between them. For example, "claim construction" may overlap with "missing elements" of a claims because the Board might explain the meaning of a claim element without providing a formal construction. To the extent it may be possible to recategorize some decisions, the authors do not believe it would materially affect the trends discussed here.
17 The total percentage adds up to more than 100% because in several decisions the Board relied on multiple bases to find claims patentable.
18 In re Nuvasive, Inc., 842 F.3d 1376 (Fed. Cir. 2016).
19 In re Magnum Oil Tools Int’l, Ltd., 829 F.3d 1364 (Fed. Cir. 2016).
20 Blue Calypso, LLC v Groupon, Inc., 815 F.3d 1331 (Fed. Cir. 2016).
21 Id. at 1348-51.
22 IPR2015-01562, Paper 35 (Jan. 12, 2017)
23 U.S. Patent Application Publication No. 2002/0180582
24 U.S. Patent Application Publication No. 2002/0031228
25 See Spectrum Brands v Assa Abloy, IPR2015-01562, Paper 35, at p. 10. Petitioner also asserted that Nielsen alone rendered additional claims obvious. Id.
26 Id. at 33.
27 Id. at 32-33.
28 Id. at 33.
29 Id. at 33-34 (citing Kinetic Concepts, Inc. v Smith & Nephew, Inc., 688 F.3d 1342, 1369 (Fed. Cir. 2012)).
30 IPR2015-01557, Paper 19 (Jan. 3, 2017).
31 MMCA Technical Committee, the Multimediacard System Specification, Version 1.4 (1998).
32 SD Group, SD Memory Card Specifications—Simplified Version of: Part 1 Physical Layer Specification Version 1.01 (2001).
33 IPR2015-01557, Paper 19, at 28-34. The Board ultimately determined that the claims were unpatentable, on other grounds. See id. at 10-28, 33.
34 Id. at 31-32.
35 Id. at 32 (emphasis added).
36 Id.
37 35 U.S.C. § 316(e).
38 Id. at 30.
39 Id.
40 35 U.S.C. § 314(a).
41 35 U.S.C. § 316(e).
42 Nissan N. Am., Inc. v Joao Control & Monitoring Sys., LLC, IPR2015-01508, Paper 31 (Jan. 25, 2017).
43 Coxcom, LLC v Joao Control & Monitoring Sys., LLC, IPR2015-01762, Paper 35 (Feb. 15, 2017).
44 The claim was found unpatentable on another instituted ground. Nissan, IPR2015-01508, Paper 31, at 27.
45 Id. at 35-36.
46 Id.
47 Coxcom, IPR2015-01762, Paper 35, at 25.
48 Id.
49 Id. at 25-26.
50 In many cases whether the same argument was presented by patent owners in the preliminary response is subjective, because the argument relied on by the Board may be a variation on the same argument. The authors have attempted to draw reasonable distinctions where the argument relied upon was sufficiently different from the preliminary response. The data presented here, however, should be treated as an estimate.
51 Arguments raised sua sponte by the Board, such as discussed above with respect to Sony v Imation, are considered as having been first
raised post-institution.
52 81 Fed. Reg. 18750-66 (Apr. 1, 2016).
53 42 C.F.R. §§ 42.108, 42.208.
54 The statistics referenced and relied on in this article provide several perspectives on post-grant practice at the USPTO, and additional statistics are available at Finnegan’s AIA Blog at www.aiablog.com. Various other PTAB metrics collected and generated by Finnegan are reserved for the use of Finnegan and its clients.
55 This information is a purely public resource of general information that is intended, but not guaranteed, to be correct and complete. It is not intended to be a source of solicitation or legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. The laws of different jurisdictions may be implicated, and facts and circumstances can vary widely. Therefore, the reader should not rely or act upon any information in this article, but should instead seek independent legal advice.
Originally printed in CIPA Journal in June 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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