Supreme Court Upholds IPR Proceedings; Rejects Partial Institutions

Maier & Maier

Two Supreme Court Decisions came down April 24, 2018 with potentially significant impacts on patent practice. First, in Oil States v. Greene’s Energy, the Court rejected Oil States’ Article III and 7th Amendment challenges to inter partes review (IPR) proceedings, declaring the proceedings constitutional under the public rights doctrine. Second, the Court ruled that Patent Trial and Appeal Board (PTAB) Final Written Decisions must address the patentability of all challenged claims if an IPR is instituted in SAS Institute v. Iancu, eliminating partial institutions.

Oil States Energy Services v. Greene’s Energy Group

After Oil States Energy Services sued Greene’s Energy Group for infringement in federal district court, Greene’s Energy challenged the patent at the PTAB, successfully arguing the patent was invalid. Oil States then appealed the decision to the Federal Circuit, challenging both the decision and the constitutionality of IPR proceedings at the PTAB as a whole. Oil States argued that patents were a private right and that actions revoking a patent must be limited to Article III courts before a jury, and alternatively that the Seventh Amendment requires a jury trial as patent validity was traditionally decided by a jury. Attempting to distinguish IPR proceedings from re-examination proceedings, which have previously been ruled constitutional, Oil States pointed out how the adversarial process of IPR proceedings mimicked the procedure of Article III courts, while re-examination mimicked the prosecution process at the PTO.

The Court’s 7-2 decision to uphold rested primarily on the finding that because patent rights are public rights, reconsideration of those rights need not be reviewed in an Article III court. Public rights are those “arising between the government and others, which from their nature do not require judicial determination and yet are susceptible of it.”[1] The Court then explained that to whatever extent patent rights are granted to a patent holder, they are statutory rights which cannot exceed the scope allowed by statute. The Court reasons that since the AIA is a statutory limitation of the patent rights, any rights granted to the patent owner are granted subject to continual review by the PTO and possible revocation.[2] Based on this construction reserving review for the PTAB, the Court resolved the Seventh Amendment challenge as moot, since it only applies when Congress has not properly assigned a matter to adjudication outside of an Article III tribunal.

Justice Gorsuch, joined by Justice Roberts, dissented from the opinion, specifically objecting to the conflation of the constitutional power of the executive to issue patents with the power to also revoke patents. He concludes his detailed history of the difference between those powers with an appeal to Article III’s purpose, explaining that “enforcing Article III isn’t about protecting judicial authority for its own sake. It’s about ensuring the people today and tomorrow enjoy no fewer rights against governmental intrusion than those who came before. And the loss of the right to an independent judge is never a small thing.”[3]

Despite these concerns, the Oil States decision has assured that any patent rights enjoyed today and tomorrow will be subject to review at the PTAB.

SAS Institute v. Iancu

SAS Institute challenged all 16 claims in ComplementSofts’s software patent in an inter partes review proceeding before the Patent Trial and Appeal Board (PTAB).  The PTAB instituted review on only some of the claims (claims 1 and 3-10).  The PTAB found claims 1, 3, and 5-10 invalid in the Final Written Decision, only upholding the validity of claim 4. SAS appealed this decision to the Federal Circuit, objecting to the PTAB’s failure to address all 16 challenged claims. The Federal Circuit upheld the PTAB in a 2-1 decision, which the Supreme Court has now reversed 5-4.

The majority relies on the plain language of the statute, the America Invents Act (AIA), in its ruling that the PTAB must address all challenged claims once it institutes an IPR. Justice Gorsuch, the author of the majority opinion, declared, “The statute, we find, supplies a clear answer: the Patent Office must ‘issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.’ In this context, as in so many others, ‘any’ means ‘every.’”[4]

This holding will impact the PTAB’s procedures, taking away their discretion to partially deny institution on individual challenged claims where they do not find a ‘reasonable likelihood of success”. Justice Ginsburg emphasizes efficiency as a concern in her dissenting opinion, rhetorically asking “Why should the statute be read to preclude the Board’s more rational way to weed out insubstantial challenges?. . . the Court’s opinion offers no persuasive answer to that question, and no cause to believe Congress wanted the board to spend its time so uselessly.”[5]

The removal of the PTAB’s current institution practice puts Director Iancu’s plan for issuing updated procedural guidance to the PTAB in the spotlight moving forward, and emphasizes the importance of the multiple patent reform bills currently being debated in Congress as potential solutions.

Meanwhile, the Court has remanded this case to be decided in accordance with their statutory interpretation, and the outcome will bear watching as it continues.

[1] Ex parte Bakelite Corp., 279 U. S. 438, 451 (1929).

[2] Oil States Energy Services v. Greenes Energy Group, Slip Op. at 10-11. (April 24, 2018).

[3] Oil States Energy Services v. Greenes Energy Group, Slip Op. at 12. (April 24, 2018) (Justice Gorsuch, dissenting).

[4] SAS Institute v. Iancu, Director, United States Patent and Trademark Office, Slip Op. at 1 (April 24, 2018).

[5] SAS Institute v. Iancu, Director, United States Patent and Trademark Office, Slip Op. at 1 (April 24, 2018). (Justice Ginsburg, dissenting)

Introduction of New Patent Legislation in Congress Looms Over PTAB Litigation Practice

Maier & Maier

Two new pieces of legislation were introduced in the past few weeks, one each in the House and the Senate, and both could have drastic implications for PTAB practice. The PACED Act, introduced in the Senate, would eliminate Tribal Immunity as a defense for all Patent Owners in proceedings before the Patent Office. The STRONGER Patents Act, introduced to the House as the counter part to the previous iteration in the senate, would make a number of changes to patent enforcement, including the reversal of the Supreme Court by making the validity standard in the PTAB match the standard in District Court.

The PACED Act

The ongoing Allergan appeal in the Federal Circuit on Tribal Immunity in an IPR is the apparent inspiration for the PACED Act, which would explicitly remove Tribal Sovereign Immunity as an option for defense in IPR’s. The PACED (“Preserving Access to Cost Effective Drugs”) Act, introduced by Senator Tom Cotton, abrogates sovereign immunity in all derivations, reexams, IPRs, post-grant reviews, and in federal reviews of the aforementioned proceedings.[1]

Cotton makes the motivation behind the bill clear, explaining that “This bill will make sure unscrupulous patent holders can’t game the system and block their competitors from entering the market”[2] referring to the ongoing appeal by Saint Regis and Allergan described here. The bill seeks to remove Allergan’s strongest argument, that Sovereign Immunity exists unless the Tribe has waived it or congress has specifically permitted the suit, as outlined by the Supreme Court.[3]

It should be noted that the proposed bill specifically limits the scope of these exceptions to Sovereign Immunity, explicitly stating that “shall apply only to the extent permitted under the 11th amendment to the Constitution of the United States.”

Whether the PACED Act successfully passes through the Senate and on to the House will be something to watch moving forward, though it is possible the Allergan appeal may resolve the issue without legislative intervention.

The STRONGER Patents Act

The STRONGER (“Support Technology & Research for Our Nation’s Growth and Economic Resilience”) Patents Act is the House version of the act introduced to the Senate with the same name last June, co-sponsored by senators Chris Coons, Tom Cotton, Mazie Hirono, and Dick Durbin. The House bill was introduced by the bipartisan duo of Steve Stivers and Bill Foster, and would represent the biggest overhaul of the U.S. patent system since the AIA in 2011[4].

Most of the notable changes proposed for the PTAB involve the relationship between the PTAB and federal District Court, with a goal of increasing efficiency and limiting litigation. Specifically, the bill would align the PTAB’s invalidity standards with the District Court’s, require the PTAB to consider District Court claim constructions along with prosecution history, and preclude institution if validity on § 102 or § 103 grounds had already been decided by a Federal Court or by the ITC.

Additional language weighing the scales in Patent Owners’ favor would require petitioners to demonstrate a reasonable likelihood of being sued for infringement of the patent or competitive harm from the validity of the patent and allow Patent Owners access to an expedited amendment process before a patent examiner during IPR and PGR proceedings. Conversely, the bill would also empower the ITC and state attorneys to curb bad faith demand letters for misleading language about their right to enforce a patent against the recipient.

With the bill now being introduced in both houses of Congress by bipartisan sponsors, and gaining considerable support, it will be worth monitoring moving forward.

[1] https://www.govtrack.us/congress/bills/115/s2514/text

[2] https://www.cotton.senate.gov/?p=press_release&id=901

[3] Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 754 (1998).

[4] https://stivers.house.gov/uploadedfiles/stronger_patents_act.pdf

Tribal Sovereign Immunity: Federal Circuit Stays Proceeding after PTAB Cast Doubt On Patent Defense Strategy

Maier & Maier

Last fall, Maier & Maier highlighted a new defense strategy for Patent Owners against IPR (Inter Partes Review) Petitions in an overview of the ongoing Allergan “Tribal Immunity” Proceeding. In sum, Allergan transferred their patent portfolio to the Saint Regis Mohawk Tribe (“Tribe”) in upstate New York, paying them a lump sum and royalties in exchange for retaining an exclusive license for the patent. In doing so, the Tribe became the Patent Owner, availing them of protection from suit under the Eleventh  Amendment.[1] As explained by the Supreme Court, “As a matter of federal law, an Indian tribe is subject to suit only where Congress has authorized the suit or the tribe has waived its immunity.”[2]. After the assignment, the Tribe filed a motion to dismiss based on their Tribal Immunity. Just last month, the Patent Trial and Appeal Board (PTAB) denied that motion and set forth an expedited schedule for oral argument on April 3, 2018. The Federal Circuit issued a stay of that proceeding, giving Allergan another opportunity to plead its case for the Tribe’s sovereign immunity.

The PTAB Decision

The PTAB panel primarily based its decision on two findings: 1). Tribal Immunity does not apply to the petition for IPR; and 2). Even if it does, the Tribe is not an indispensable party that the Proceeding could not continue without.

The Board relied on a few factors for the first finding, including an absence of statutory support for applying Tribal Immunity to administrative proceedings like the PTAB and the fact that the PTAB decision would be applied to the patent itself, not the Tribe as the patent holder.

Even if Tribal Immunity applied, the Board ruled that the proceeding would still continue because the Tribe is not an indispensable party. To come to this result, the Board conducted a thorough analysis of the sale to the Tribe and the alleged license back to Allergan. As explained in the decision, the involved parties/ characterization of an agreement as a license compared to a full assignment is not determinative, with precedent relying more heavily on the terms than the label given to it. According to the Board, Allergan’s exclusive right to practice the patent, coupled with the Tribe’s ‘illusory’ rights to enforce it, indicated that the agreement was an assignment and not a license. This in turn makes Allergan an owner and allows the proceeding to continue, as any of the Tribe’s interests could be fully represented by Allergan, tipping the scales in the indispensable party analysis.[3]

The Stay

After the PTAB decision, the Board sua sponte set forth an expedited schedule which would have brought a Final Written Decision by June.[4] Allergan filed an interlocutory appeal of the Board’s decision, requesting a stay of the IPR, which the Federal Circuit has granted. In the stay order, the Federal Circuit declared that “exclusive jurisdiction to resolve the threshold issue of whether these proceedings must be terminated vests in this court, and that the Board may not proceed until granted leave by this court.”[5]

The briefing schedule for the appeal is scheduled to be completed by May 18, 2018, including any amicus briefs, which are sure to be filed. Consequently, the IPR will not be heard anytime soon, and even upon the Federal Circuit’s ruling, the PTAB may not regain jurisdiction immediately. As the order explains, “The stay shall remain in effect until the day after oral argument in the appeals in June 2018.  The court will address whether the stay shall remain in effect or whether it will be lifted at that time based on further consideration of the merits of the appeals.”[6]

Implications

If the PTAB’s decision stands, it is unlikely that the Tribal Immunity defense will be a useful tool for Patent Owners in IPR proceedings. The PTAB ruled both against its application to IPR’s and established an alternate means to continue with the proceedings with the Tribe’s licensee, making the appeal an uphill battle.

Until the appeal is settled, anyone still seeking protection for their patents under Tribal Immunity will need to push the balance of their license agreement farther than Allergan and give the Tribe more than ‘mere royalties’ and an ‘illusory’ right to enforce so that 1). the licensee would not be determined the true owner and 2). the Tribe would not be deemed indispensable.[7]

The board’s decision struck another blow to sovereign immunity defenses, as just this past December the PTAB ruled that State Sovereignty could not be applied to dismiss an IPR proceeding when the Patent Owner has filed an infringement suit asserting the patent. In the Board’s view, the act of bringing suit is as a waiver of the Eleventh Amendment right that would otherwise apply to the proceeding.[8]

As we wait for the IPR to proceed again, you can check for updates at the PTAB’s online E2E tool, or at websites like PostGrant.com which allow for full-text searching and automatic update alerts.

[1] The Eleventh Amendment provides that “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.” U.S. Const. amend. XI.  See also Covidien LP v. University of Florida Research Foundation Incorporated; Neochord, Inc. v. University of Maryland Baltimore; Reactive Surfaces Ltd., LLP v. Toyota Motor Corporation.

[2] Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 754 (1998).

[3] Mylan Pharmaceutocals Inc., et al. v. Saint Regis Mohawk Tribe, IPR2016-01127, Paper 130 at 39 (PTAB, February 23, 2018).

[4] Mylan Pharmaceutocals Inc., et al. v. Saint Regis Mohawk Tribe, IPR2016-01127, Paper 132 at 4 (PTAB, February 23, 2018)

[5] Saint Regis Mohawk Tribe, Allergan, Inc. v. Mylan Pharmaceuticals Inc., et al., 2018-1638, Document 4 at 2 (Fed. Cir. March 28, 2018).

[6] Saint Regis Mohawk Tribe, Allergan, Inc. v. Mylan Pharmaceuticals Inc., et al., 2018-1638, Document 4 at 2-3 (Fed. Cir. March 28, 2018).

[7] See Luminara Worldwide, LLC v. Liown Elecs. Co., 814 F.3d 1343, 1351 (Fed. Cir. 2016) (“a financial interest . . . without more does not amount to a substantial right.”); see also Propat Int’l Corp. v. RPost, Inc., 473 F.3d 1187, 1191 (Fed. Cir. 2007) (“[T]he fact that a patent owner has retained a right to a portion of the proceeds of the commercial exploitation of the patent, . . . does not necessarily defeat what would otherwise be a transfer of all substantial rights in the patent.”)

[8] Ericsson Inc. v. Telfonaktiebolaget Lm Ericsson, IPR2017-01186, Paper 14 at 4 (PTAB, December 19, 2017).

Tribal Sovereign Immunity: PTAB Decision Casts Doubt On Patent Defense Strategy

Maier & Maier

Last fall, Maier & Maier highlighted a new defense strategy for Patent Owners against IPR (Inter Partes Review) Petitions in an overview of the ongoing Allergan “Tribal Immunity” Proceeding. In sum, Allergan transferred their patent portfolio to the Saint Regis Mohawk Tribe (“Tribe”) in upstate New York, paying them a lump sum and royalties in exchange for retaining an exclusive license for the patent. In doing so, the Tribe became the Patent Owner, availing them of protection from suit under the Eleventh  Amendment.[1] As explained by the Supreme Court, “As a matter of federal law, an Indian tribe is subject to suit only where Congress has authorized the suit or the tribe has waived its immunity.”[2]. After the assignment, the Tribe filed a motion to dismiss based on their Tribal Immunity. Just last month, the Patent Trial and Appeal Board (PTAB) denied that motion.

The Decision

The PTAB panel primarily based its decision on two findings: 1). Tribal Immunity does not apply to the petition for IPR; and 2). Even if it does, the Tribe is not an indispensable party that the Proceeding could not continue without.

The Board relied on a few factors for the first finding, including an absence of statutory support for applying Tribal Immunity to administrative proceedings like the PTAB and the fact that the PTAB decision would be applied to the patent itself, not the Tribe as the patent holder.

Even if Tribal Immunity applied, the Board ruled that the proceeding would still continue because the Tribe is not an indispensable party. To come to this result, the Board conducted a thorough analysis of the sale to the Tribe and the alleged license back to Allergan. As explained in the decision, the involved parties/ characterization of an agreement as a license compared to a full assignment is not determinative, with precedent relying more heavily on the terms than the label given to it. According to the Board, Allergan’s exclusive right to practice the patent, coupled with the Tribe’s ‘illusory’ rights to enforce it, indicated that the agreement was an assignment and not a license. This in turn makes Allergan an owner and allows the proceeding to continue, as any of the Tribe’s interests could be fully represented by Allergan, tipping the scales in the indispensable party analysis.[3]

Implications

Moving forward, it is unlikely that the Tribal Immunity defense will be a useful tool for Patent Owners in IPR proceedings. The PTAB has ruled against its application to IPR’s, established an alternate means to continue with the proceedings with the Tribe’s licensee, and any appeal to the Federal Circuit would face an uphill battle.

In the meantime, anyone still seeking protection for their patents under Tribal Immunity will need to push the balance of their license agreement farther than Allergan and give the Tribe more than ‘mere royalties’ and an ‘illusory’ right to enforce so that 1). the licensee would not be determined the true owner and 2). the Tribe would not be deemed indispensable.[4]

This decision strikes another blow to sovereign immunity defenses, as just this past December the PTAB ruled that State Sovereignty could not be applied to dismiss an IPR proceeding when the Patent Owner has filed an infringement suit asserting the patent. In the Board’s view, the act of bringing suit is as a waiver of the Eleventh Amendment right that would otherwise apply to the proceeding.[5]

Allergan and the Tribe will now continue their defense in the IPR Proceeding with the PTAB, with a Final Decision expected by June, at which point it will likely go to the Federal Circuit for an appeal.[6] You can check for updates using the USPTO E2E platform or subscribe to case alerts here: www.postgrant.com.

[1] The Eleventh Amendment provides that “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.” U.S. Const. amend. XI.  See also Covidien LP v. University of Florida Research Foundation Incorporated; Neochord, Inc. v. University of Maryland Baltimore; Reactive Surfaces Ltd., LLP v. Toyota Motor Corporation.

[2] Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 754 (1998).

[3] Mylan Pharmaceutocals Inc., et al. v. Saint Regis Mohawk Tribe, IPR2016-01127, Paper 130 at 39 (PTAB, February 23, 2018).

[4] See Luminara Worldwide, LLC v. Liown Elecs. Co., 814 F.3d 1343, 1351 (Fed. Cir. 2016) (“a financial interest . . . without more does not amount to a substantial right.”); see also Propat Int’l Corp. v. RPost, Inc., 473 F.3d 1187, 1191 (Fed. Cir. 2007) (“[T]he fact that a patent owner has retained a right to a portion of the proceeds of the commercial exploitation of the patent, . . . does not necessarily defeat what would otherwise be a transfer of all substantial rights in the patent.”)

[5] Ericsson Inc. v. Telfonaktiebolaget Lm Ericsson, IPR2017-01186, Paper 14 at 4 (PTAB, December 19, 2017).

[6] Mylan Pharmaceutocals Inc., et al. v. Saint Regis Mohawk Tribe, IPR2016-01127, Paper 132 at 4 (PTAB, February 23, 2018)

Maier & Maier Secures IPR Victory for Foxrun Development before the PTAB

Maier & Maier

The internationally recognized Maier & Maier PLLC law firm won a major IPR victory for Foxrun Development securing a non-institution decision from the PTAB, overcoming 4 challenges to their network security patent asserted by Terralink in IPR2017-02102.

The patent reviewed (9,460,319 B1) relates to enhancing computer network security by physically blocking unused computer ports with “linear actuators” and a “securing member”. Terralink challenged the patent on two counts of obviousness, one count of anticipation and one count under 35 U.S.C. § 112(f) by referencing two patent applications (US 2016/0294098 and US 2015/0020189 A1), which also related to physically blocking unused computer ports.

In response to the September 13, 2017 Petition by Terralink, Maier & Maier argued that the § 112(f) ground was invalid for an IPR proceeding, while the other three grounds failed to meet the statutory standard. As the PTAB decision explained, Terralink neglected to explain “where each element of the claim is found in the prior art patents or printed publications relied upon” by failing to identify both corresponding components and corresponding functionality.

Maier & Maier successfully argued that none of the asserted grounds for unpatentability demonstrated a reasonable likelihood of success as discussed above, and obtained the PTAB’s non-institution decision for Foxrun Developments on March 6, 2018-less than six months after the petition was filed.

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 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.

Apple Inc. Patent Revived After Federal Circuit Reverses PTAB Decision

Timothy Maier

On September 19, 2016, the Federal Circuit issued an opinion in In Re: Lemay, in which it reversed the Patent Trial and Appeal Board’s (“PTAB”) denial of Apple Inc.’s patent application directed to a method of streaming online videos to a portable device.  The Federal Circuit’s opinion addresses the topic of claim construction.

 

BACKGROUND

The patent application at issue, filed back in December 2007, recites a method of interacting with a graphical user interface primarily through finger contact and gestures on a touch-sensitive display.[1]  A USPTO examiner rejected the application as obvious over various combinations of prior art, mainly US. Patent No. 7739271 (“Cook”) and U.S. Patent Publication No. 2007/0024646 (“Saarinen”). The PTAB affirmed the rejection on the majority of claims, agreeing with the Examiner that one skilled in the art would have recognized that the combination of Cook and Saarinen teaches or suggests the disputed limitations of the invention. Specifically, the PTAB’s final written decision found all but two of the disputed claims to be unpatentable in view of the cited prior art references.  Apple subsequently filed an appeal, contesting, among other issues, the PTAB’s rejection of claims as obvious and arguing the USPTO’s “sparsely reasoned” decisions ignored important evidence.

In a split decision (2-1), the three-judge Federal Circuit panel found there was not enough evidence to support the PTAB’s determination that Cook and Saarinen teach the subject elements of the disputed claims. The opinion acknowledged that the ultimate determination of obviousness is a question of law, but noted that the determination is based on underlying factual findings.[2] The Federal Circuit reviews the PTAB’s factual determinations for substantial evidence and its legal determinations de novo.[3] The ruling focused its analysis on the first claim of the patent application, as the parties agreed it would be representative of the rest. As noted in the opinion, a claim is considered representative when the arguments presented in support of that claim apply to other claims grouped with such so that all grouped claims rise and fall based on the representative claim.[4]

 

No Substantial Evidence Supports the PTAB’s Finding that Cook and Saarinen Teach Each and Every Limitation of the Claimed Invention

The first issue presented was whether the Cook reference taught the element recited in the final clause of claim 1, which requires “that ‘in response to detecting (1) a finger gesture on a respective icon in the plurality of icons, displaying, on the touch screen display of the portable electronic device, (2) a corresponding list of information about online video items.” Simply put, the invention claims the use of touch screen icons like “Most Viewed” and “Featured” to bring up corresponding lists of YouTube and other website videos. According to Lemay, the tapping of the user’s finger, for example on the “Most Viewed” icon, and the resulting display of video titles and associated information illustrate the two elements in the final clause of claim 1, respectively.

The Federal Circuit determined that the USPTO erred in its finding that Cook teaches these elements (in combination with Saarinen, which teaches a touch screen and finger gestures). The Court explained that the USPTO cited two distinct “list[s] of information” corresponding to an icon when the claim had earlier provided the antecedent basis for “the plurality of icons” and their corresponding lists of information. In particular, the Court noted “if the ‘list of information’ corresponding to an icon is represented by album titles, artist names, and release dates generated as the results of the search query, the same list cannot also be represented elsewhere as a list of track titles.”

The second issue presented was whether the Cook reference taught “displaying . . . a first list of information about online video items in a plurality of lists of information about online video items,” as is recited in the first clause of claim 1.  Appellants argued that the use of the word “items” indicates that “the first list of information must be about multiple online video items.” The USPTO, on the other hand, argued that Lemay’s argument “misses the mark” because the “sample(s)” illustrated in Cook Figure 3B are the “items” referred to in claim 1, and the “list of information” corresponding to these items is the list of search results illustrated in Figure 3B.

The Federal Circuit sided with the Appellants, finding the USPTO’s reasoning to be “internally inconsistent.” Specifically, the majority explained that “[i]f each of the three sets of title, artist, and price information constitutes one of the ‘lists of information,’ it cannot also be correct that the search results as a whole … constitute one of the lists.” The majority therefore disagreed with the PTAB’s conclusion that Cook discloses “a first list of information about online video items…” The majority additionally noted that “if each of the three sets of title, artist, and price information constitutes one of the lists of information, then each such list corresponds only to a single item,” rather than multiple “online video items.”

Lastly, the majority determined that there is no substantial evidence to support the PTAB’s obviousness determination for three dependent claims, as they depend on nonobvious independent claims.

 

DISSENT

In her dissent, U.S. Circuit Judge Kimberly A. Moore argues that there was substantial evidence to support the PTAB’s finding that Cook and Saarinen disclose the disputed limitations of claim 1. Unlike the majority, Judge Moore contends that the claim’s “plurality of lists of information about online video items” is a different element from the same claim’s “a corresponding list of information about online video items.” In particular, she argues that there is no antecedent basis to support limiting “a corresponding list” to one of the “plurality of lists.” She also states that the limitations themselves use different words to describe the two different lists of information. Finally, she explains that during prosecution, the USPTO gives terms their broadest reasonable construction, which, in her view, further suggests a differentiation between the terms “a corresponding list” and “the plurality of lists.”

 

CONCLUSION

Although the deposition is nonprecedential, the Federal Circuit’s reversal of the PTAB’s ruling takes an unusual turn in favor of the patent applicant. Typically, the standard of appellate review makes it difficult to challenge the PTAB’s factual findings as to what is taught by the prior art. These findings are upheld if supported by substantial evidence, “something less than the weight of the evidence but more than a mere scintilla of evidence.” However, in this case, the Federal Circuit sided with Apple Inc., finding that no substantial evidence supported the PTAB’s factual findings.

 

[1] See U.S. Patent Publication No. 2008/0320391

[2] See In re Gartside, 203 F.3d 1305, 1316 (Fed. Cir. 2000). The underlying factual findings include (1) “the scope and content of the prior art,” (2) “differences between the prior art and the claims at issue,” (3) “the level of ordinary skill in the pertinent art,” and (4) the presence of secondary considerations of nonobviousness, such as “commercial success, long felt but unsolved needs, [and] failure of others.” Graham v. John Deere Co. of Kan. City, 383 U.S. 1, 17–18 (1966).

[3] Substantial evidence is “‘such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’” In re Applied Materials, Inc., 692 F.3d 1289, 1294 (Fed. Cir. 2012) (quoting Consol. Edison Co. v. N.L.R.B., 305 U.S. 197, 229 (1938)).

[4] See 37 C.F.R. § 41.37(c)(1)(iv) (2012) (“For each ground of rejection applying to two or more claims, the claims may be argued . . . as a group (all claims subject to the ground of rejection rise and fall together).