In June, a bipartisan group of senators introduced the STRONGER Patents Act 2017 (Support Technology & Research for Our Nation’s Growth and Economic Resilience).1 Its stated intent is to "strengthen the position of the United States as the world’s leading innovator by amending title 35 of the United States Code, to protect the property rights of the inventors that grow the country’s economy."2 A considerable majority of the Act is directed to changing the rules and standards for inter partes review (IPR) and post-grant review (PGR) proceedings.3 In this article, we provide an overview of the proposed modifications and the potential implications of these changes for inter partes disputes.
The STRONGER Act proposes to amend to 35 U.S.C. §316(a) so that claims challenged in an inter partes review will be construed the same was as they would be in a district court litigation, which typically leads to a narrower construction.4 This amendment effectively nullifies the Supreme Court’s decision in Cuozzo Speed Techs. v. Lee, which affirmed the USPTO’s rule requiring that claims be construed according to the broadest reasonable interpretation (BRI) during post-grant reviews.5 Proponents of the bill state that this will "harmonize" the claim-construction standards between the two forums, but there is no published analysis showing that such harmonization is necessary or would result in any difference in the claim constructions applied.6
In practice, both standards—the BRI and a district court construction—rely heavily on intrinsic evidence from the specification, claims, and prosecution history of the patent at issue.7 Thus, a shift away from the BRI for post-grant proceedings may, in reality, affect the outcome in only a small number of cases. The change may increase the PTAB’s reliance on extrinsic evidence, such as expert testimony or dictionary definitions, which is more prevalent under the district court Phillips approach.8 As a result, we may see an uptick in expert declarations submitted with patent owner preliminary responses to ensure that relevant extrinsic evidence is considered by the Board at the preliminary stage, since the PTAB frequently provides an initial claim construction in its institution decisions. Patent owners, however, may want to weigh such submissions against the PTAB rule requiring testimonial evidence to be viewed in the light most favourable to the petitioner at this preliminary stage, when there is a genuine issue of material fact.9 The STRONGER Act does not change that rule.
The stickier implication for this proposed amendment may be in how the PTAB reconciles the use of different standards within the USPTO itself. The bill, for example, does not appear to clarify whether its reference to a "challenged claim of a patent" includes proposed substitute claims added in a patent owner’s motion to amend. The Act also does not change the BRI standard currently used during reexamination, reissue, or interference proceedings. In Cuozzo, the Supreme Court noted that different standards between district court litigations and post-grant proceedings made sense for the sake of inter-office consistency.10 And the PTAB justified the use of BRI in IPRs because 35 U.S.C. §315(d) provides for the consolidation of an IPR with a pending reissue or reexamination involving the same patent, stating that "it would be anomalous for the Board to have to apply two different standards in the merged proceeding."11 Thus, the Act may turn this carefully crafted consistency on its head, requiring the Board and PTAB litigants to juggle more than one claim construction analysis.
The STRONGER Act raises the stakes for potential petitioners by providing for a presumption of validity during post-grant proceedings, and requiring that unpatentability must be proven by "clear and convincing evidence," as is the case in district court litigation.12 A comparison in statistics of patent owner success between district court litigation and the PTAB indicates that this change may result in a significant shift in patent owners’ favour. Statistics, current as of June 2017, show that patent owners succeed approximately 33% of the time in IPR proceedings.13 But according to a study from 2007-2012, patent owners succeeded approximately 63% of the time before a district court judge.14
While this change in standard from "preponderance of the evidence"15 to "clear and convincing" evidence increases a petitioner’s burden during an IPR, it is not currently clear if this change will affect the PTAB’s institution rates. Under 35 U.S.C. §314(a), the Director may not institute unless there is "a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition."16 But as the Trial and Practice Guide states, "the 'reasonable likelihood' standard is a somewhat flexible standard that allows the Board room to exercise judgment."17 Therefore, it is possible that the heightened standard will not effect the PTAB’s institution rate.
Purporting to "minimize abuses of post-issuance proceedings," the proposed STRONGER Act eliminates the inclusive nature of IPR proceedings and adds a standing requirement to file an IPR petition.18 Under the proposed amendment to 35 U.S.C. §311, only those parties that have been sued for infringement or charged with infringement may file a petition.19 Proponents of the bill state that this new requirement will have the effect of "reducing incentives for privateering or extortion of nuisance settlements."20 No statistics or details on the prevalence of these activities have been provided. What this amendment will do is prevent companies from using post-grant proceedings to proactively challenge what Senator Leahy characterized as "low quality patents [that] are a drag on the economy because they provide monopoly rents over products or processes that were not inventive."21 The Act also does nothing to address those companies who plan to enter the market in good faith but may not be able to take advantage of the post-grant review process before being sued.
The STRONGER Act also seeks to "reduce repetitive and harassing attacks" on patents by limiting the review power of the USPTO and eliminating repetitive challenges by the same petitioner.22 Section D of the bill amends 35 U.S.C. §314 to broadly prevent the authorization of an IPR on a claim, if a petition had previously been instituted on that claim.23 The bill does not factor in whether new art or evidence is provided in the second petition. Therefore, a claim that survives a first IPR is immune from subsequent IPRs even if new prior art or evidence is uncovered, regardless of whether it is a new petitioner.
Similarly, section F of the bill provides that petitioners can only challenge a patent once.24 This removes the USPTO’s discretion under 35 U.S.C. §325(d) to consider subsequent petitions and instead, implements a one petition per petitioner per patent rule. This bar extends to real parties in interest and those in privy to the petitioner.25 Section F also provides that if an IPR is instituted, a petitioner cannot assert in a district court that the claims are invalid under 35 U.S.C. §102 or §103 based on prior art.26 As currently written, this estops a petitioner as of institution (before any final written decision is issued) and does not account for settlement.27 The bill also prevents any prior art ground under sections 102 and 103, even those based on new prior art that could not have reasonably been raised during the IPR.28 If enacted, these strict estoppel provisions may provide a chilling effect on the use of AIA proceedings to challenge patents.
To "allow for more appellate court guidance on recurring legal issues,"29 the bill provides for interlocutory appeals when the Director determines whether to institute an IPR proceeding.30 The text of the bill currently states that an interlocutory appeal may challenge the institution decision on any basis other than under 35 U.S.C. §314(a)(1).31 Under section D of the bill, 314(a) (1) is the Director’s determination that there is a "reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition."32 Interlocutory appeals may therefore be used for issues such as the real party in interest requirement under 35 U.S.C §312, the one-year bar under 35 U.S.C. §315, or the USPTO’s discretion under 35 U.S.C. §325. Such appeals will not stay the IPR proceedings unless the Director or the Federal Circuit orders a stay.33
This section both expands the definition of a real party in interest to one that makes financial contributions and expands the scope of discovery during post-grant proceedings to "evidence identifying the petitioner’s real parties in interest."34 Right now, real parties in interest are those that primarily exerted control over the petition.35 The proposed, more expansive, definition will increase the burden on petitioners to identify those that also provide financial support to the filing of a petition, thus potentially exposing more actors involved in patent challenges. Previously the PTAB had granted discovery requests related to real party in interest if it was determined to be in the interest of justice.36 The specific enumeration of discovery relating to real party in interest seems to equate such discovery with the deposition of witnesses submitting affidavits, which the USPTO characterizes as "routine discovery," which does not require Board authorization.37 It will be up to the USPTO, however, to define the metes and bounds of this discovery (depositions, interrogatories, discovery requests), and the timing for when it should occur (pre- or post-institution).
The STRONGER Act includes a new provision giving precedence to district courts and International Trade Commission (ITC) decisions over IPR proceedings.38 In sum, institution will be "barred" if a final judgement has been entered by a district court or the ITC, deciding the validity of the patent under §102 or §103.39 If an appeal of the final judgement is still available, the PTAB must stay any "ongoing" IPRs pending final decision.40 The bill does not require any similarity between the prior art or arguments in the IPR and the ITC or District Court.41 Although the bill provides some technical and conforming amendments as a result of this new provision, it does not set forth how the one-year deadline for a final determination in IPRs will be impacted by a stay of the proceedings. Moreover, district court judges may be more unwilling to stay district court proceedings given this provision, depending on the respective timelines involved.
Section I of the STRONGER Act provides a "pathway" for patent owners to pursue an "expedited" examination procedure for amending claims.42 Under the bill, patent owners will have the option of proposing substitute claims to be adjudicated by the PTAB or to be examined by an expedited IPR reexamination.43 Under the PTAB’s adjudication, the PTAB may order an "expedited patentability report" from a patent examiner.44 The patent owner will be entitled to a substitute claim if there is no rebuttal of its motion or by a preponderance of evidence.45 Under the expedited IPR examination proceeding, a patent examiner has 18 months to complete the process and the procedures established for initial examination will be followed.46 Participation by the petitioner is currently not allowed during the expedited IPR examination. The expedited examination procedure provides patent owners a significant new option for surviving an IPR challenge with claims intact; however, it considerably extends the time for resolution of the case and entirely excludes the petitioner from the process. It also appears that Section F’s "Eliminating Repetitive Proceedings" would prevent the petitioner from challenging any newly amended claims in a later petition.47
Section 104 of the STRONGER Act is intended to "clarif[y]" that those who decide to institute a post-grant proceeding should be distinct from the PTAB judges who decide the outcome of a proceeding.48 This may cause significant strain on the USPTO’s resources by requiring two sets of three panel judges to become familiar with the arguments in the petition, the technology of the patent, and the asserted prior art. A similar pilot programme was proposed by the USPTO in which a single APJ would determine whether to institute a trial, with two additional APJs being assigned if a trial was instituted.49 In response to, a majority of, negative comments received by the USPTO, the pilot programme was not pursued.50
In addition to changes affecting IPRs and PGRs, the act also proposes changes that will significantly impact district court litigation. Notably, section 106 of the Act overrules eBay, Inc. v. MercExchange, LLC, 547 U.S. §388 (2006) by proposing to restore a presumption of injunctive relief when a patent is found valid and infringed.51 Moreover, the Act expands the text of 35 U.S.C. § 271(b) to explicitly state that induced infringement only requires showing that the accused infringer intended to cause the acts of infringement; expands the scope of infringing parties under §271(f) to those supplying designs for patented products or specifications for performing patented processes from the U.S. to induce otherwise infringing outside the U.S.; and eliminates the requirement that a single entity perform the steps of a patented process for induced or contributory infringement, allegedly to clarify the holding in Akamai Techs v. Limelight Networks.52 Therefore, in addition to having significant implications for inter partes disputes, the STRONGER Act also substantially amends the law on the district court side. Stay tuned: currently the bill has been referred to the Committee on the Judiciary.53
1 S.1390, 115th Cong. (2017)
3 Id.; "The STRONGER Patents Act of 2017, Section by Section," https://www.coons.senate.gov/imo/media/doc/STRONGER%20Patents%20Act%20of%202017%20Section-By-Section.pdf (last accessed July 19, 2017) ("Section by Section website").
4 S.1390, §102 (a).
5 Cuozzo Speed Techs. v. Lee, 136 S. Ct. 2131 (2016); 37 CFR §42.100(b).
6 Section by Section website.
7 Cuozzo Speed Techs. v. Lee, 136 S. Ct. 2131 (2016); Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc)
8 Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc).
9 37 C.F.R. §42.108(c).
10 Cuozzo Speed Techs. v. Lee, 136 S. Ct. 2131 (2016) ("[T]o try to create uniformity of standards would consequently prove difficult. And we cannot find unreasonable the Patent Office’s decision to prefer a degree of inconsistency in the standards used between the courts and the agency, rather than among agency proceedings.")
11 77 Fed. Reg. 48697-98.
12 S.1390, §102 (b); Section by section website.
14 PricewaterhouseCoopers, "2013 Patent Litigation Study: Big cases make headlines, while patent cases proliferate," at 9; www.finnegan.com/resources/articles/articlesdetail.aspx?news=e7ad4528-cec4-4889-a23d-d17bca527ca2.
15 35 U.S.C. §316(e).
16 35 U.S.C. §314(a).
17 Office Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,765 (Aug. 14, 2012)
18 S.1390, §102(c).
19 S.1390, §102(c).
20 Section by section website.
21 "Leahy: Now Is The Time To Act On Patent Reform," March 8, 2011(https://www.leahy.senate.gov/press/leahy-now-is-the-time-to-act-onpatent-reform)
22 Section by section website.
23 S.1390, §102(d).
24 S.1390, §102(f).
25 S.1390, §102(f).
26 S.1390, §102(f).
27 S.1390, §102(f); see 37 C.F.R. §42.73(d)(1).
28 See S.1390, §102(f).
29 Section by section website.
30 S.1390, §102(e).
31 S.1390, §102(e).
32 S.1390, §102(d).
33 S.1390, §102(e).
34 S.1390, §102(g).
35 Office Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,765 (Aug. 14, 2012).
36 See Garmin Int’l. Inc v. Cuozzo Speed Tech. LLC, IPR2012-00001 (Paper 26) (March 5, 2013).
37 Id. at 3; 37 C.F.R. §§41.51(b)(1)(i); Office Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,761 (Aug. 14, 2012)
38 See Section by section website; S.1390, §102(h).
39 S.1390, §102(h).
40 S.1390, §102(h).
41 See S.1390, §102(h) (only requiring a decision on the "validity of the patent claim with respect to section 102 or 103").
42 Section by section website.
43 S.1390, §102(i).
44 S.1390, §102(i).
45 S.1390, §102(i); Section by section website.
46 S.1390, §102(i).
47 S.1390, §102(f).
48 Section by section website; S.1390, §104.
49 Amendments to the Rules of Practice for Trials Before the Patent Trial and Appeal Board, 81 Fed. Reg. 18750, 18751 (April 1, 2016).
50 Id.; "Comments on a Proposed Pilot Program Exploring an Alternative Approach to Institution Decisions in Post Grant Administrative Reviews," https://www.uspto.gov/patents-application-process/patent-trial-and-appeal-board/comments-proposed-pilot-program-exploring.
51 S.1390, §106.
52 S.1390, §108; Akamai Techs. v. Limelight Networks, 134 S. Ct. 2111 (2014); "The STRONGER Patents Act of 2017, Section by Section," https://www.coons.senate.gov/imo/media/doc/STRONGER%20Patents%20Act%20of%202017%20Section-By-Section.pdf (last accessed July 19, 2017).
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