IPR Time-Bar Institution Decision Is Appealable

Maier & Maier

In Wi-Fi One, LLC v. Broadcom Corp., 15-1944 – 2018-01-08, the Federal Circuit reviewed whether an inter partes review (IPR) Institution Decision can be appealed based on a time-bar under 35 U.S.C. § 315(b).  Sitting en banc, the Federal Circuit ruled Institution Decisions made under 35 U.S.C. § 315(b) are appealable.

35 U.S.C. § 315(b) states “[a]n inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”

In 2010, the owner of the patents at issue, Ericsson, filed a complaint against three defendants in the Eastern District of Texas.  Broadcom was not a named defendant.  Ericsson prevailed on the infringement claims.  In 2013, Broadcom filed three separate petitions with the Patent Trial and Appeal Board (PTAB) for inter partes review (IPR) against the individual patents at issue.  Wi-Fi One, LLC acquired the patents at issue from Ericsson while the IPRs were pending.  Wi-Fi argued that Broadcom was time-barred from filing the IPRs because Broadcom was in privity with the defendants of the previous lawsuit filed more than 1 year prior.  Wi-Fi filed a motion with the PTAB seeking indemnity agreements, defense agreements, payments, and communications as evidence of such privity.  The PTAB denied Wi-Fi’s motion, instituted the IPR proceedings, and found the claims unpatentable.

Wi-Fi One appealed the Final Written Decisions to the Federal Circuit including arguments that the PTAB’s time-bar determination be overruled.  On appeal, the Federal Circuit affirmed the Decisions relying precedent from Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652, 658 (Fed. Cir. 2015), which ruled § 315(b) time-bar determinations are final and nonappealable under 35 USC § 314(d).

Despite this ruling, Wi-Fi again sought relief by petitioning for a rehearing en banc.  This petition was granted.

On January 8, 2018, the Federal Circuit, sitting en banc, ruled that PTAB institution decisions made based the statutory timing provisions of 35 U.S.C. § 315(b) of the America Invents Act are appealable.  In the majority Opinion, Judge Reyna emphasized the “strong presumption” for judicial review, noting “[i]n view of this strong presumption, we will abdicated judicial review only when Congress provides a ‘clear and convincing’ indication that it intends to prohibit review.” Wi-Fi One, LLC v. Broadcom Corp., 15-1944 – 2018-01-08 (citing Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131, at 2140 (2016)).

35 U.S.C. § 314(d) states “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”  The en banc Federal Circuit determined the natural reading of “under this section” limits its reach to institution determinations made under § 314.  Since the time-bar provision is found in section 315(b) of the statute and not § 314, the en banc Federal Circuit ruled that 35 U.S.C. § 314(d) did not apply and consequently the institution decision was appealable.  This decision overruled the prior Federal Circuit holding in Achates.

Oral Arguments in Oil States Show a Divided Supreme Court

Maier & Maier

On November 27, 2017, the Supreme Court of the United States heard oral arguments in Oil Sates Energy Services, LLC v. Greene’s Energy Group, LLC. This much anticipated case is set to determine whether inter partes review proceedings at the United States Patent and Trademark Office (USPTO) Patent Trial and Appeal Board (PTAB) violate the Constitution by extinguishing private property rights through a non-Article III forum without a jury.
Over 50 amicus briefs were filed leading up to oral arguments in the widely anticipated and heavily scrutinized case.  The amicus briefs showed a relatively even split in support for the positions of the Petitioner and the Respondent.  Similarly, there appeared to be a split among the Supreme Court Justices during oral arguments.  The Justices asked tough questions of all parties and it will be interesting to see how they ultimately rule.
A large portion of the questions directed to the Petitioner, Oil States, centered around whether ex parte reexam and inter partes reexam proceedings are constitutional, and, if so, how inter partes review is distinguishable.  Counsel for Oil States conceded that ex parte reexam and inter partes reexam are constitutional, calling out that those proceedings are examinational and not adjudicational in nature.  In other words, those proceedings are between the USPTO and the Patent Owner, whereas inter partes review proceedings are between two private parties.
Questions for the Respondent, Greene’s Energy, included a focus on due process, whether patents are a public or private right, and whether a patent owner’s rights could ever vest due to reliance on the patent’s presumed validity.  Lastly, counsel on behalf of the federal government faced questions on the USPTO’s ability to decide infringement and concerns of panel stacking at the USPTO.
While it is dangerous to speculate on the ultimate ruling based merely on oral arguments, it does appear unlikely that the Court will rule unanimously.

Federal Circuit Opens the Door for IPR Amendments

Maier & Maier

In Aqua Products, Inc. v. Matal, No. 2015-1177 (Fed. Cir. Oct. 4, 2017), an en banc Federal Circuit determined that it was improper for the Patent Trial and Appeal Board (PTAB) to place the burden of establishing the patentability of mid-IPR claim amendments on the patent holder.  Instead, the ruling determined that the burden should be placed on the petitioner to prove any amended claims are unpatentable.
Previous panels of the Federal Circuit had held that, if the patent owner in an inter partes review proceeding (IPR) wanted to amend the claims of the patent, the patent owner was required to show that the amended claims would be patentable over the prior art.
The en banc Federal Circuit in Aqua Products instead held that the AIA’s statutory language in 35 USC §316(e), which places the burden of proving a proposition of unpatentability by a preponderance of the evidence onto the petitioner in an IPR case, would likewise extend to claim amendments. While the en banc court produced five different opinions, a majority of judges held that the statute that establishes the evidentiary standard for IPRs, 35 U.S.C. § 316(e), was ambiguous with regard to whether the burden of persuasion of establishing the unpatentability of substitute claims should be on the petitioner. As such, the court was required to reach step two of Chevron. From this, the court reached two legal conclusions: first, that the PTO has not adopted a rule that is entitled to deference that would place the burden of persuasion on the patent owner, and, second, that in the absence of such a rule entitled to deference, the PTO was not entitled to place that burden on the patent owner.
However, even though this decision is likely to result in many more patents being able to survive the inter partes review process in some form or another, it is unlikely to be a permanent solution. The en banc decision is narrow and makes clear that the Patent Office would have the ability to again place the burden of persuasion for claim amendments back on the patent owner. The Federal Circuit noted that, because a majority of the judges in the en banc proceeding only overturned the PTO’s present amendment practice because they believed that the statute was ambiguous with regard to amendments, if an official interpretation of the statute was made by the Director of the Patent and Trademark office, the court would be required to give deference to it under the Chevron standard. However, to do this, the USPTO would have to first go through proper notice and comment stages for such rule-making.
There are also certain downsides to filing claim amendments for the patent owner. Any amended claim will likely be subject to “intervening rights,” where the change in scope of the claim restricts its applicability to past or present infringement. Because many if not most patents in IPR proceedings will also be involved in concurrent district court litigation, if an IPR can be used to force the patent owner to make an amendment to the asserted claims, the litigation may not be able to continue.

Federal Circuit Clarifies How Venue Under TC Heartland Will Be Applied

Maier & Maier

In In re Cray Inc., No. 2017-129 (Fed. Cir. Sept. 21, 2017) the Federal Circuit issued a decision clarifying the Supreme Court’s ruling in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017). This Supreme Court case had rejected long-standing patent venue precedent, clarifying that, for the purposes of the patent venue statute, a domestic corporation “resides” only in its state of incorporation. As such, a patent plaintiff is restricted to suing a domestic corporate defendant in its state of incorporation, or in a judicial district where the defendant allegedly has committed acts of infringement and has a “regular and established place of business”.

In the district court decision below, Raytheon Co. v. Cray, Inc., No. 2:15-cv-01554-JRG, 2017 WL 2813896 (E.D. Tex. June 29, 2017), Judge Gilstrap of the Eastern District of Texas had outlined a four-factor test for whether the defendant had a “regular and established place of business” in a district, requiring consideration of the following four factors:

(1) The extent to which a defendant has a physical presence in the district, including but not limited to property, inventory, infrastructure, or people.

(2) The extent to which a defendant represents, internally or externally, that it has a presence in the district.

(3) The extent to which a defendant derives benefits from its presence in the district, including but not limited to sales revenue.

(4) The extent to which a defendant interacts in a targeted way with existing or potential customers, consumers, users, or entities within a district, including but not limited to through localized customer support, ongoing contractual relationships, or targeted marketing efforts.

Applying this test, Judge Gilstrap found that venue was proper over the defendant, Cray, in the Eastern District, based on the fact that two sales employees of Cray worked from their homes within the district.

The Federal Circuit somewhat unsurprisingly overturned this determination, holding that venue was improper and the four-factor test was “not sufficiently tethered to [the] statutory language” and thus “fail[ed] to inform each of the necessary requirements of the statute.” Instead, the Federal Circuit set forth its own venue factors under TC Heartland, requiring that each element of a three-prong test be met before venue would be proper. Specifically:

“(1) there must be a physical place in the district;” (that is, there must be some physical, geographical location within the district in which the business of the defendant is carried out)

“(2) it must be a regular and established place of business;” (that is, business must be conducted in more than a sporadic fashion) and

“(3) it must be the place of the defendant” (that is, the defendant corporation rather than a mere employee of the defendant must operate or exercise control over that location).

Applying this test, the Federal Circuit found that the factors were not met, and an employee working from home on their own does not sufficiently “establish or ratify” the place of business as being a place of business of the defendant corporation.

Tribal Sovereign Immunity: Defense Against Inter Partes Review

Maier & Maier

On September 8, 2017, Allergan PLC (“Allergan”), a global pharmaceutical company, publicly announced the assignment of all Orange Book-listed patents for its dry-eye drug RESTASIS® to the Saint Regis Mohawk Tribe (“Tribe”) in upstate New York. In a unified statement about the transaction, the Tribe Council stated, “This is a viable and sound opportunity for the Saint Regis Mohawk Tribe to enter into the patent, technology and research sector as part of our overall economic diversification strategy.” Under the terms of the agreement, Allergan retains an exclusive license in the patents related to the product, while the Tribe receives an initial payment of $13.75 million and up to $15 million in annual royalties for the life of the patents. The patents are set to expire on August 27, 2024.

Allergan’s Chief Legal Officer, Bob Bailey, stated, “The Saint Regis Mohawk Tribe and its counsel approached Allergan with a sophisticated opportunity to strengthen the defense of our RESTASIS® intellectual property…” With the unorthodox transfer of ownership, Allergan aims to shield the RESTASIS patents from invalidity challenges at the Patent Trial and Appeals Board (“PTAB”) by asserting the Tribe’s sovereign immunity. In fact, on September 22, 2017, the Tribe did just that – filing a Motion to Dismiss the IPR proceedings for lack of jurisdiction based on tribal sovereign immunity.

Inter Partes review (“IPR”) is an adjudicatory proceeding conducted by the Patent Trial and Appeals Board (“PTAB”) in which a petitioner can challenge the validity of any issued patent.[1] The proceeding became an available vehicle for post-grant opposition of patents one year after the enactment of the Leahy-Smith America Invents Act in 2011. An IPR proceeding is initiated by the filing of a petition requesting to cancel as unpatentable one or more claims of the patent in dispute.[2] While there is no time limit for requesting an IPR during the life of a patent, certain limitations may bar a party from utilizing the process. For instance, under 35 USC §315 (b), a party cannot file a petition more than one year after the date on which “the petitioner is served with a complaint alleging infringement of the patent.”[3] Furthermore, a party is barred from filing a petition if “before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.”[4] Congress implemented both of these statutory bars to avoid the redundant and costly expenses of parallel USPTO and district court proceedings.[5]

On June 3, 2016, Mylan Pharmaceuticals Inc. petitioned for an IPR of U.S. Patent 8,685,930, then owned by Allergan, Inc., covering RESTASIS. The PTAB rendered a Decision to institute IPR on December 8, 2016. Mylan was later joined by Teva Pharmaceuticals USA, Inc. and Akorn Inc. (additional competitor generic drug manufacturers) in the IPR proceeding.

On September 8, 2017, Allergan filed a Patent Owner’s Updated Mandatory Notices to inform the PTAB that the Saint Regis Mohawk Tribe (“Tribe”) had become a real party-in-interest based on an Assignment. In the Patent Owner’s Updated Mandatory Notices, the Tribe made a special appearance to request the PTAB to stay all proceedings in the IPR pending resolution of the Tribe’s motion to dismiss the IPR based on sovereign immunity.

As a federally recognized, sovereign Indian Tribe, the Tribe asserts inherent sovereign immunity.[6]  Sovereign immunity is codified in the Eleventh Amendment to the U.S. Constitution, providing “Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” The broad doctrine prohibits actions against foreign states in federal courts and administrative tribunals. Legal precedent also favors a successful defense.[7]

On September 19, 2017, the PTAB rendered an Order concluding that “briefing on the issue of Tribe’s alleged tribal sovereign immunity from these proceedings is warranted.” The Order authorized the Tribe to file a motion to terminate the IPR on the basis of sovereign immunity and the petitioners to file an opposition to the motion.

[1] See 35 U.S.C. §311.

[2] Id. Patentability of claims may only be contested on grounds under 35 U.S.C. §102 or §103, and only on the basis of prior art consisting of patents or printed publications. Id. Additionally, a petition may only be filed after the later of either nine months after the grant of the patent or the termination of a post-grant review proceeding. Id.

[3] 35 USC §315 (b)

[4] 35 USC 315(a)(1). Notice, however, that this provision does not bar a petitioner from filing both an IPR and a declaratory judgment action in federal court on the same day.

[5] See Rules of Practice for Trials Before the Patent Trial and Appeal Board, 77 Fed. Reg. 48,663 (Aug. 14, 2012).

[6] See Motion to Dismiss

[7] See Covidien LP v. University of Florida Research Foundation Incorporated; Neochord, Inc. v. University of Maryland Baltimore; Reactive Surfaces Ltd., LLP v. Toyota Motor Corporation

Federal Agencies Have Standing to File CBM

Maier & Maier

In Return Mail, Inc. v. USPS, 16-1502, the Federal Circuit ruled that the United States Postal Service had standing to challenge Return Mail’s patent claims in a Covered Business Method proceeding (CBM), despite not being sued for patent infringement under the Patent Act.  Under 37 CFR 42.302, a petitioner may not file to institute covered business method review, unless the petitioner, real party in interest, or a privy of the petitioner has been sued for infringement of the patent or has been charged with infringement under the patent.  Being “charged with infringement” is defined as a real and substantial controversy regarding infringement, such that the petitioner would have standing to bring a declaratory judgment action.
Return Mail sued the USPS under 28 U.S.C. § 1498(a), a provision providing a cause of action against the federal government when a patented invention is used or manufactured by or for the United States without a license or right do so.  The Federal Circuit ruled that the claim under 28 U.S.C. § 1498(a) qualified as a suit for infringement for purposes of standing.  The opinion noted that infringement is a prerequisite to § 1498(a) liability.
The CBM raised other concerns regarding estoppel, since the current CBM estoppel provision only applies to petitioners litigating in district court or the ITC, not the United States Court of Federal Claims, where a claim under § 1498(a) is litigated.  However, the Federal Circuit indicated that this concern should be addressed by Congress, not the courts.
On review, the Patent Trial and Appeal Board found Return Mail’s claims covering methods of processing undeliverable mail items to be patent-ineligible.

Iancu Nominated for USPTO Director

Maier & Maier

It was announced on Friday, August 25, 2017, that Andrei Iancu has been nominated for Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office (USPTO).   Iancu will replace Joseph Matal, who has been serving as interim Director since Michelle Lee’s resignation in June.

Andrei Iancu comes from a successful career in private practice, where he currently serves as managing partner of Irell & Manella LLP.  Iancu is also currently an adjunct professor at UCLA School of Law. He has handled all aspects of intellectual property, including prosecution and litigation.  His primary focus has been intellectual property litigation, where he has extensive experience representing both patent owners and alleged infringers in Federal Courts and in post-grant proceedings at the USPTO.  In addition to his representative matters, Iancu has been recognized for his publications, including several on the patent eligibility of software.

Some members of the IP community are touting his experience representing patent owners against large technology companies as reflecting a pro-patent ideology.  Some of his more notable casework includes the successful representation of TiVO Corporation enforcing patent rights against tech giants including AT&T, Motorola, Microsoft, Cisco, and EchoStar.  The cases led to over $1.5 billion in payments to TiVo.  Iancu has also successfully represented defendants of patent infringement claims, such as Ariosa Diagnostics, Inc. in Ariosa Diagnostics, Inc. v. Sequenom, Inc, resulting in cancellation of Sequenom’s patent as an ineligible natural phenomenon under 35 U.S.C. 101.

The nomination of Andrei Iancu, ends a long period of speculation over the new Administration’s plans for the USPTO, which were amplified by Michelle Lee’s resignation as Director in June.  However, the confirmation process is likely to endure for several months to come.

USTR Makes IP a Focus of NAFTA Renegotiation

Maier & Maier

Earlier this month, the US Trade Representative (USTR), Robert Lighthizer, released a detailed and comprehensive summary of the negotiating objectives for the US’s forthcoming renegotiation of the North American Free Trade Agreement (NAFTA). The text of these objectives are available in a press release here.

In particular, the USTR seeks to add a substantive section on intellectual property, aimed at “ensur[ing] provisions governing intellectual property rights reflect a standard of protection similar to that found in U.S. law.” Listed objectives include securing greater compliance with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), particularly with respect to meeting enforcement obligations under TRIPS; eliminating government involvement in the violation of intellectual property rights, such as through cybertheft and piracy; and “prevent[ing] the undermining of market access for U.S. products through the improper use of a country’s system for protecting or recognizing geographical indications, including failing to ensure transparency and procedural fairness and protecting generic terms.” The last objective appears to be aimed at the increasing levels of protection that have been offered by some countries to products with geographical indications, such as champagne or Parmesan cheese.

Federal Circuit Rules Trial Court Abused Discretion by Not Awarding Attorney Fees

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In AdjustaCam v. Newegg, No. 2016-1882 (Fed. Cir. July 5, 2017), the Federal Circuit reversed the denial of attorney fees based on the Octane Fitness standard, determining that the trial court had abused its discretion by not awarding fees.

AdjustaCam (a subsidiary of NPE Acacia Research) had sued Newegg for infringement of U.S. Patent No. 5,855,343 (“the ’343 patent”), which issued in 1999 and is entitled “Camera Clip.” The Markman hearing interpreting the claims in this case had interpreted a limitation of the claims, “rotatably attached,” to mean that each of the camera and support frame would have to rotate around a single axis. Newegg’s allegedly infringing product made use of a ball-and-socket joint, and as such the interpretation necessarily excluded Newegg’s product. AdjustaCam continued to pursue the case.

Newegg moved to dismiss the case with prejudice on the grounds that AdjustaCam’s infringement allegations were objectively baseless, and also demanded attorney’s fees. The court denied the motion and Newegg appealed. While the appeal was pending, the Supreme Court decided Octane Fitness, which clarified the standard for obtaining fees. The Federal Circuit remanded the case in order for the trial court to determine whether it was an “exceptional case” under the new standard.

The trial court reassigned the case to a new judge, who determined that the case was not “exceptional.” The Federal Circuit reversed this, finding that the District Court abused its discretion by failing to evaluate whether the case was exceptional based on the totality of the circumstances. Specifically, the Federal Circuit found that the evidence submitted by AdjustaCam showed that its lawsuit was baseless, that AdjustaCam failed to advance any arguments as to why Newegg’s products could be considered to infringe the claims as interpreted by the Markman order, and that AdjustaCam litigated the case in an “unreasonable manner.” Specifically, AdjustaCam had made “repeated use of after-the-fact declarations,” served a new expert report on Newegg the day of that expert’s deposition, filed a supplemental declaration without disclosing it as new on appeal, and had a pattern of filing cases against multiple defendants in order to settle for less than the cost of litigation.

Bipartisan Group of Senators Introduce “STRONGER Patents Act of 2017”

Maier & Maier

In late June, three Democratic senators (Chris Coons (D-DE), Dick Durbin (D-IL), and Mazie Hirono (D-HI)) and one Republican senator (Tom Cotton (R-AR)) introduced the “STRONGER Patents Act of 2017.” This bill appears to have been motivated by a recent report from the U.S. Chamber of Commerce that had been heavily critical of the U.S. patent system, ranking it tenth in the world, down from a rank of first in their previous report. The legislators have claimed, in a one-pager released by Senator Coons’s office, that the bill would “enact balanced reforms to restore the U.S. patent system to the world’s gold standard.”

The bill includes a number of significant revisions to the inter partes review (IPR) and post-grant review (PGR) procedures set forth by the America Invents Act, as well as several attempts to legislatively overturn Supreme Court decisions. Four of the most significant are as follows:

  • First, the bill would significantly narrow the scope of who can institute an IPR or PGR and introduce greater estoppel rules. The proposed legislation states that “the Director shall not authorize an inter partes review to be instituted on a claim challenged in a petition if the Director has previously instituted an inter partes review or post-grant review with respect to that claim.’’ IPRs and PGRs would also only be able to be petitioned for by entities that have been sued for infringement or that have been threatened with such a suit. This would bring post-grant actions into greater conformity with the rules for filing a declaratory judgment in federal district court.

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