The Federal Circuit reconfirmed its interpretation of the IPR joinder rules of 35 U.S.C. § 315(c) after the panel’s rehearing in Facebook, Inc. v. Windy City Innovations, LLC, No. 2018-1400, 2020 WL 5267975 (Fed. Cir. Sept. 4, 2020).  Appellant Facebook, Inc. had filed a combined request for panel rehearing and rehearing en banc.  The rehearing en banc was denied, but the panel granted the panel rehearing to the extent that it replaced its original precedential opinion with a revised opinion on September 4, 2020.  The conclusions of the Federal Circuit remained unchanged: § 315(c) does not permit either same-party joinder or joinder of new issues.

For more details on the Federal Circuit’s reasoning for reversing the Patent Trial and Appeal Board’s interpretation of the statute, see our previous article on the Federal Circuit original Facebook v. Windy City Innovations decision here.

Last week, Microsoft got tripped up at oral argument on the blocking and tackling of IPR practice:  making sure your prior art is prior art.

The specific error was eminently avoidable, though perhaps also eminently understandable. Under Federal Circuit law, a reference generally does not count as prior art unless it was “indexed.” (Think Dewey Decimal system, or the USPTO’s classification system). To clear this “indexing” hurdle, Microsoft found a document that helpfully titled itself an “index” and linked to the reference-in-question. A good start, no doubt, but it turns out the document had padded its resume:  it was more “list” than “index.” And, under Federal Circuit law, a “list” may not be good enough.

This List Wants You to Believe It Is an Index

The patent owner, Uniloc, sagely caught the error, citing Samsung Elecs. Co. v. Infobridge Pte. Ltd., 929 F.3d 1363 (Fed. Cir. 2019) for the relevant point of law.

When a reference is uploaded to a website or deposited in a library, the fact that the reference is indexed or cataloged in some way can indicate that it is publicly accessible. In Acceleration Bay, for example, the reference at issue was uploaded to a university website. 908 F.3d at 773. While this made the work technically accessible—someone could theoretically find it on the Internet—we explained that “public accessibility requires more than technical accessibility.” Id. (internal quotation marks omitted). And while the website indexed references “by author and year,” we agreed with the Board that this did not mean the reference at issue had been “meaningfully indexed such that an interested artisan exercising reasonable diligence would have found it.” Id. at 774; see also SRI, 511 F.3d at 1196 (“[T]he FTP server did not contain an index or catalogue or other tools for customary and meaningful research.”). On this record, we affirmed the Board’s finding that the reference was not publicly accessible even though it had been uploaded to a website.

Id. at 1369 (emphasis added). In other words, you need an index—not a list. This makes sense when you consider that public accessibility law is based on cases from the 1980’s dealing with PhD theses that were physically printed and shelved in library stacks. If not for the Dewey Decimal system, how could anything be found?

At the oral hearing, Microsoft added a new wrinkle to its argument, submitting that a skilled artisan would have plodded unguided through the whole of the 20-page list because the artisan would already have been familiar with a reference that was located on the same website as both the list and the reference-in-question.

The PTAB panel seemed unimpressed with Microsoft’s argument, as Administrative Patent Judge Jameson Lee pointedly noted:  “I mean, you’re just making it up right now. That story wasn’t in your petition.”

Moral of the story: when you’re filing an IPR petition that relies on non-patent literature, it pays to double- and triple-check that all of the technical requirements for prior art status are met. This includes having a cogent explanation for why a skilled artisan would have found the reference-in-question. These technicalities, when overlooked, are often case-dispositive and impossible to fix post-institution.

The case is IPR2019-01116.

Last week, four major technology companies – Apple, Cisco, Google, and Intel – brought suit against the United States Patent and Trademark Office (“USPTO”), challenging its authority to reject petitions for inter partes review (“IPR”) based on two precedential decisions by its Patent Trial and Appeal Board (“PTAB”).  The decisions, Apple Inc. v. Fintiv, Inc.,[1] and NHK Spring v. Intri-Plex Techs.,[2] allow the PTAB to deny institution of IPRs based on a number of factors related to the existence of a parallel United States district court proceeding on the same challenged patents.  The tech companies have sued in the District Court for the Northern District of California, arguing that the rule violates both the Leahy-Smith America Invents Act (“AIA”), which created the IPR procedure, and the Administrative Procedure Act (“APA”), which created the system of organization and procedures that all administrative agencies of the federal government must follow.

The three arguments of the complaint are that (1) the NHK-Fintiv rule is contrary to the policy and text of the AIA; (2) the rule is arbitrary and capricious as the factors are vague and have already led to unjustifiable and unpredictable disparities among similarly-situated IPR petitioners; and (3) the rule is otherwise procedurally invalid because it was not adopted through notice-and-comment rulemaking required by both the AIA and the APA.  The tech companies are seeking to have the rule set aside and have the USPTO enjoined from relying on the rule to deny institution of IPRs.

While the arguments certainly have merit, Federal Circuit and Supreme Court precedent supports the USPTO’s discretion both to deny petitions and to formulate policy.  The Supreme Court recently stated in Cuozzo Speed Tech., LLLC v. Lee that an “agency’s decision to deny a petition is a matter committed to the Patent Office’s discretion.”[3]  The Court has also long acknowledged that notice-and-comment is not the only method of lawmaking available to agencies.[4]  Thus, while the challenges may make sense from a policy standpoint, it may not be enough to prove the USPTO has acted unlawfully.

[1] No. IPR2020-00019, Paper 11 (Mar. 20, 2020).

[2] No. IPR2018-00752, Paper 8 (Sept. 12, 2018).

[3] 136 S. Ct. 2131, 2140 (2016).

[4] N.L.R.B. v. Bell Aerospace Co., Div. of Textron, Inc., 416 U.S. 267, 293 (1974) (“‘the choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion of the administrative agency.’”) (quoting SEC v. Chenery Corp., 332 U.S. 194, 203 (1947)).

In Uniloc 2017 LLC v. Hulu, LLC, Netflix, Inc. (July 22, 2020), the Federal Circuit held that the Patent Trial and Appeal Board (“the PTAB”) may consider, in its review of substitute claims proposed in an inter partes review (“IPR”), the patentability of the claims under 35 U.S.C. § 101.

Hulu, LLC and Netflix, Inc. (together “Hulu”) filed a petition for an IPR, challenging claims 1-25 of U.S. Patent No. 8,566,960 (“the ’960 patent”) owned by Uniloc 2017 LLC (“Uniloc”). During the IPR proceeding, Uniloc filed a motion to amend the ’960 patent, asking the PTAB to enter the substitute claims 26-28 if the PTAB found claims 1, 22, and 25 of the ’960 patent unpatentable. Hulu opposed the motion by arguing, inter alia, that the substitute claims are patent ineligible under § 101. Uniloc replied to the opposition, arguing that Hulu was not permitted to raise § 101 in opposition to the substitute claims. Uniloc, however, did not make any substantive arguments that the substitute claims are patent-eligible under § 101. The PTAB issued its final written decision (i) finding that the challenged claims are unpatentable and (ii) denying Uniloc’s motion to amend solely on the ground that Hulu had shown by a preponderance evidence that the substitute claims are directed to non-statutory subject matter under § 101. Uniloc requested a rehearing of the PTAB’s denial of its motion to amend. The PTAB denied Uniloc’s request for rehearing, concluding that, in determining patent eligibility of substitute claims submitted during the IPR proceeding, the PTAB may consider patent eligibility under § 101. Uniloc appealed.

35 U.S.C. § 311(a) allows any person who is not the owner of a patent to file a petition to institute an IPR of the patent, and 35 U.S.C. § 311(b) allows the petitioner to request cancelling one or more claims as being unpatentable “only on a ground that could be raised under section 102 or 103.”

Uniloc argued that the PTAB is limited in its review of substitute claims proposed in an IPR to anticipation or obviousness, as disclosed in § 311(b). The Federal Circuit disagreed and held that the text, structure, and legislative history of the IPR Statutes confirm that the PTAB may review substitute claims proposed during an IPR under § 101.

First, the Federal Circuit pointed out that “[t]he IPR Statutes plainly and repeatedly require the PTAB to determine the ‘patentability’ of proposed substitute claims,” and that “a § 101 analysis constitutes a ‘patentability’ determination.” The Federal Circuit also held that “section 311 is confined to review of existing patent claims, not proposed ones” as it limits a request to cancel as unpatentable one or more claims of a patent to ‘a ground that could be raised under sections 102 and 103,’” and that substitute claims are not claims of a patent.

Second, the Federal Circuit held that the legislative history of the IPR Statues confirms that the PTAB is allowed to review proposed substitute claims for patentability outside of anticipation and obviousness. The Federal Circuit pointed out that the scope of reexamination proceedings is limited to substantial new question of patentability, and “[p]roposed substitute claims in an IPR proceeding have not undergone a patentability review by the USPTO.” The Federal Circuit concluded that “[p]rohibiting the PTAB from reviewing patent eligibility would indeed ‘strip … [the PTAB] of a critical legal tool[.]’”.

Third, the Federal Circuit agreed with the comment the USPTO made as intervenor — that “‘if a patent owner seeking amendments in an IPR were not bound by § 101 and § 112, then in virtually any case, it could overcome prior art and obtain new claims simply by going outside the boundaries of patent eligibility and the invention described in the specification[,]’ … allowing patents with otherwise invalidated claims ‘to return from the dead as IPR amendments.’”

It is clear from this opinion that the PTAB’s review of patentability of substitute claims proposed during an IPR proceeding is not bound by § 102 and § 103. Thus, while the owner of a patent that is subject to an IPR may avoid, by submitting substitute claims, the possibility of having its patent invalidated under § 102 and/or § 103, it should bear in mind that the substitute claims will need to withstand scrutiny under § 101 (and probably § 112), not just § 102 and § 103.

With an unusual fact pattern, and a Federal Circuit opinion that touches on standing to appeal, joinder of parties, and agency obligations, Fitbit, Inc. v. Valencell, Inc., 964 F.3d 1112 (Fed. Cir. 2020), seems closer to a law school teaching aid than an actual inter partes review (“IPR”) appeal. Without addressing the asserted grounds of unpatentability, the Patent Trial and Appeal Board (“the Board”) issued a Final Written Decision finding no unpatentability, resulting in a petitioner appealing claims its IPR petition never challenged.

At the PTAB

Valencell, Inc. owns U.S. Patent No. 8,923,941 (“the ’941 patent”) directed to systems for obtaining and monitoring information such as blood oxygen level, heart rate, and physical activity.  Apple, Inc. challenged the validity of claims 1–13 of the ’941 patent by IPR in IPR2017-00319.  On June 6, 2017, the Board instituted the IPR of the ’941 patent on claims 1, 2, and 6–13.  After institution Fitbit, Inc. filed its own IPR petition challenging claim 1, 2, and 6–13 of the ’941 patent, along with a motion to grant joinder to the instituted Apple IPR.  The Board granted the motion and joined Fitbit as a party.

Between the time of the PTAB trial and the Board’s Final Written Decision, the Supreme Court decided SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348 (2018), holding all patent claims challenged in an IPR petition must be reviewed by the Board.  The Board re-instituted the IPR, adding claims 3–5 of the ’941 patent.  In its Final Written Decision, the Board found claims 1, 2, and 6–13 unpatentable, and claims 3–5 not unpatentable.  Following the decision, Apple withdrew from the proceeding and Fitbit appealed the decision on claims 3–5.

Appeal to the Federal Circuit

At the Federal Circuit, Fitbit found itself in the unusual position of appealing the Board’s decision on three claims that it did not challenge in its IPR petition.  This provided the basis for Valencell’s challenge to Fitbit’s standing to appeal.  According to Valencell, Fitbit only sought IPR for claims 1, 2, and 6–13, and therefore, Fitbit did not have standing to challenge the Board’s decision that relates to claims 3–5.

The Federal Circuit rejected the lack of standing argument based on the statutory language granting the right to appeal. Under 35 U.S.C. § 315(c), the Board exercised its discretion to “join as a party to that inter partes review any person who properly files a petition…” when it joined Fitbit to Apple’s IPR.  Similarly, “[a] party dissatisfied with the final written decision” may appeal it in accordance with 35 U.S.C. § 319.  The court rejected Valencell’s arguments, noting Fitbit’s rights as a joined party applies to the entirety of the proceedings, including the right of appeal.

On the merits of the appeal, the Federal Circuit vacated and remanded the Board’s decision on claims 3–5 because the Board performed an incomplete analysis.  For claim 3, the Board rejected Fitbit’s proposed claim construction and deemed the patentability inquiry over based on its construction.  The Federal Circuit remanded for the Board to fulfill its duty to address the asserted grounds of obviousness after claim construction.

The court held the Board similarly erred when it failed to apply the cited prior art references to claims 4 and 5.  For these claims, the Board declined to analyze the prior art because it could not determine the meanings of the claims when one of the claim terms lacked antecedent basis.  Both Fitbit and Valencell agreed that there was an error in claim dependency during an amendment in the prosecution of the patent that neither the examiner nor patentee had noticed.  The Board declined to accept the parties’ shared view of the correct antecedent.

The Federal Circuit found error with the Board’s refusal to accept the parties’ uniform position, a position that was not subject to reasonable debate.  The court noted there is authority for the Board to correct errors and that the Board is the preferable agency to resolve the merits of patentability.  On remand, the Board should seek a reasonable resolution that comports with the agency’s assignment to resolve patentability issues.

Thanks to a decision handed down by the Patent Office’s Patent Trial and Appeal Board (“PTAB”) last month, patent owners may find some difficulty in having petitions to institute inter partes review (“IPR”) dismissed based on the PTAB’s discretion under Section 314(a) of the patent act.  In Sand Revolution II, LLC v. Continental Intermodal Group,[1] the PTAB changed course on rehearing and reversed its denial to institute review based on supplementary briefing and new precedent.  Relying on the recent precedential decision Apple Inc. v. Fintiv, Inc.,[2] the PTAB identified six factors that considered together warranted modifying its original order and granting institution of IPR.

In the original institution decision, the PTAB had determined that another precedential decision – NHK Spring Co., Ltd. v. Intri-Plex Techs., Inc.[3] – controlled the outcome of the case based on the preliminary record.  In NHK Spring Co., the PTAB denied institution partly under its Section 314(a) discretion on the basis that institution of IPR would be an inefficient use of its resources in light of the “advanced state” of the parallel district court with the same parties, patent, and invalidity contentions.[4]   In the decision denying institution, the Sand Revolution II panel found that the same facts supporting the NHK panel’s inefficient use decision were present: the district court litigation involved the same parties, the jury trial would begin before the requested IPR proceeding would issue a final written decision, the claim language at issue in the litigation was asserted in the petition and was interpreted similarly between the two, and the grounds asserted in the petition were asserted for invalidity in the litigation.

However, in between that decision and the decision last month, the panel in Fintiv issued its precedential decision elaborating on the application of NHK and laying out the six factors relevant in deciding whether to use the PTAB’s discretion to deny institution based on a parallel district court action:

  1. whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted;
  2. proximity of the court’s trial date to the Board’s projected statutory deadline for a final written decision;
  3. investment in the parallel proceeding by the court and the parties;
  4. overlap between the issues raised in the petition and in the parallel proceeding;
  5. whether the petitioner and the defendant in the parallel proceeding are the same party; and
  6. other circumstances that impact the Board’s exercise of the merits.

These factors, as stated by the Fintiv panel, would help determine whether efficiency, fairness, and the merits would support the PTAB’s exercise of authority to deny institution in view of an earlier trial date in a parallel proceeding.

After supplemental briefing on these factors on rehearing, the panel in Sand Revolution II concluded that “a holistic view” of the evidence submitted on the Fintiv factors pointed to not invoking its §314(a) discretion and granting institution.  While it was a close call, the panel found that proximity of the court’s trial date, overlap of issues between proceedings, and other circumstances including merits favored granting institution more so than the amount of investment in the parallel proceeding and the fact that the petitioner was the defendant in the parallel proceeding weighed against it.  In particular, the panel paid attention to the fact that, although trial had been scheduled to occur at least five months before any final decision would be due, the scheduled deadlines were extended three times since the PTAB’s initial denial decision and once since supplemental briefing for the rehearing had concluded.  All three extensions were in response to joint motions from the parties.  The panel also noted that the language the court used in conjunction with its scheduled deadlines for the trial indicated a degree of recognized uncertainty, in stark contrast to the PTAB’s one-year statutory deadline for entry of final decisions.  These findings, coupled with the additional fact that the PTAB has been fully operational and on normal schedule despite the impact of COVID-19, led the panel to award the factor “marginally” in favor of granting institution.

The panel acknowledged the fact that petitioner and defendant were the same party, and that the court and parties have invested in the district court litigation.  However, despite the patent owner’s assertions that the investment had been substantial, the panel concluded that the court’s investments had been related to ancillary matters not tied to the validity issue; and the district court’s Markman Order, which was only two pages long, did not suggest a different conclusion.  Though the case had exchanged infringement and invalidity contentions, conducted a Markman hearing and entered the order, repeatedly set and amended the case’s schedule, granted several pro hac vice motions, heard and denied a motion to dismiss, and transferred the case between judges; the panel found the factor only marginally weighed in favor of exercising §314(a) discretion, if at all.

PTAB data over the past few years suggest that institution rate of IPRs has been falling, while denials based on §314(a) discretion has been rising, and that both will continue to do so.[5]  However, given the impact COVID-19 has had on litigation proceedings throughout the country, the PTAB may be more inclined to let defendants in delayed district court cases bring their fight into IPRs, especially when the invalidity contentions and the record present a strong case against the patent.

[1] No. IPR2019-01393, Paper No. 24 (PTAB June 16, 2020).

[2] No. IPR2020-00019, Paper No. 11 (PTAB Mar. 20, 2020).

[3] No. IPR2018-00752, Paper No. 8 (PTAB Sept. 12, 2018).

[4] The PTAB also denied institution based on its discretion under Section 325(d) based on similar arguments/prior art in a previous proceeding before the PTAB.

[5] PTAB Procedural Denials and the Rise of §314, Unified Patents (May 13, 2020), https://www.unifiedpatents.com/insights/2020/5/13/ptab-procedural-denial-and-the-rise-of-314?utm_source=Unified+Patents+Newsletter&utm_campaign=ca8294e39b-EMAIL_CAMPAIGN_2019_10_02_08_16_COPY_01&utm_medium=email&utm_term=0_5140119467-ca8294e39b-124506621.

On June 18, 2020, the Federal Circuit granted JHO Intellectual Property Holdings, LLC’s (“JHO”) motion to vacate the PTAB’s final written decision and remand the case in light of the court’s decision in Arthrex. In an ex parte reexamination proceeding, the PTAB denied JHO’s request for rehearing of its decision affirming the Examiner’s rejections of all pending claims of JHO’s U.S. Patent No. 8,445,466.

In its motion, JHO argued that Arthrex applies because the duties of administrative patent judges (“APJs”) are similar in both inter partes review (“IPR”) and ex parte reexamination proceedings. JHO argued that in both proceedings APJs hear oral argument, review pro hac admissions and issue final written decisions containing fact findings and legal conclusions relating to the patentability of the claims at issue. JHO also argued that in ex parte reexamination when the APJs issue a final written decision the only recourse available is to appeal the decision to the Federal Circuit.

The USPTO argued that the issue of constitutional appointment of APJs is not present for ex parte reexamination proceedings because the Director has substantially greater control over such proceedings and may make unilateral decisions concerning the examination of the claims at issue. The Federal Circuit rejected the USPTO’s argument and relying on its reasoning in VirnetX Inc. v. Cisco Systems, Inc., instead held that Arthrex applied in the context of ex parte reexaminations.

Last month, in VirnetX Inc. v. Cisco Systems, Inc., 958 F.3d 1333 (Fed. Cir. May 13, 2020), the Federal Circuit denied the USPTO and Cisco Systems, Inc.’s petitions for rehearing and again held that Arthrex applied to inter partes reexaminations. The USPTO had argued that APJs should at least be considered constitutionally appointed officers when it comes to hearing appeals of inter partes reexaminations. Relying on Freytag v. Commissioner, 501 U.S. 868 (1991), the Federal Circuit held that they “look not only to the authority exercised in [an appellant]’s case but to all of that appointee’s duties when assessing an Appointments Clause challenge.” See id. at 1335.  According to the Federal Circuit, if in light of Arthrex, APJs are unconstitutionally appointed principal officers with respect to their duties in IPRs, then under Freytag, “vacatur would be appropriate for all agency actions rendered by those APJs regardless of the specific type of review proceeding on appeal.” Id.  However, the Federal Circuit noted that although Freytag would appear to apply to all Board proceedings, it declines to go that far. The Federal Circuit held that the analysis applies here to appeals of inter partes reexaminations because they are similar to IPRs in that both involve “third-party challenges to the claims of an issued patent” and in both “APJs exercise significant authority on behalf of the government by issuing final decisions that decide the patentability of the challenged claims.” Id.

Applying this reasoning to the present case, the Federal Circuit held that although the appeal arises out of an ex parte reexamination, there is no relevant distinction between that proceeding and an inter partes reexamination proceeding such that the reasoning of Virnetx should not apply.

Conclusions

The Federal Circuit’s decision here joins a long line of recent decisions issued in response to Arthrex. We previously reported on some of these decisions here. We can expect to see more Federal Circuit decisions analyzing the boundaries and applications of Arthrex in the near future. However, because the PTAB issued an order suspending all activity in the remanded cases, the PTAB will not be issuing any decisions until the Supreme Court decides the issue.

Earlier this month, the U.S. government, Smith & Nephew, Inc. and ArthroCare Corp. filed briefs in opposition to Arthrex’s petition for certiorari. Arthrex submitted its reply brief on June 19, 2020. The Supreme Court is set to discuss the briefs at conference on September 29, 2020.

The Supreme Court also already considered three other petitions for certiorari raising the same issue: Collabo Innovations, Inc. v. Sony Corp., No. 19-601 (filed Nov. 4, 2019); Celgene Corp. v. Peter, No. 19-1074 (filed Feb. 26, 2020); and Enzo Life Sciences, Inc. v. Becton, Dickinson & Co., No. 19-1097 (filed Mar. 3, 2020). On June 22, 2020, the Supreme Court denied all three petitions. It is worth noting that the questions presented in each of these petitions did not directly address the constitutional appointment of APJs. Rather, the appointment issue was merely hinted at or noted somewhere in the petition. As such, the Supreme Court may not have analyzed the merits of the issue when deciding those three petitions.

Thus, until the Supreme Court makes a decision in September, the Federal Circuit will have to continue to navigate the minefield of appeals left behind by Arthrex while the rest of the patent world waits.

The Patent Trial and Appeal Board (“the PTAB”) for the United States Patent and Trademark Office recently published a decision on appeal which overturned an Examiner’s rejection in application number 15/322,059. The PTAB held that the Examiner failed to adequately explain how a disputed reference taught the claimed subject matter. Ex parte Kensuke Matsumura, Masayiki Watanabe, and Yusaku Miyazaki, No. 2019-004113, at 3 (P.T.A.B. May 13, 2020) (hereinafter Kensuke).

The claims at issue concern a mold cleaning system which include a laser oscillator, a laser head, an arm, a control device, and a camera. The camera is “configured to acquire three-dimensional image data” to guide the laser head in irradiating the molding surface with the laser beam. Page 3 of PTAB Decision on Appeal.

The Examiner rejected claims 1, 3, and 5 under 35 U.S.C. 102 as allegedly anticipated by Soska (US 6,369,353 B1) and rejected claim 4  under 35 U.S.C. 103 as allegedly unpatentable over Soska in view of Tokura (US 2010/0038560). Soska relates to a cleaning system for removing residual material from a mold. In some examples, Soska provided a robot which “optionally include[s] a machine vision system provided by, for example, video cameras … so that the robot 14 can recognize the location of the end effector and adjust its position to ensure that the cleaning device 10 performs as desired during a cleaning operation.” Soska, column 4, line 65 through column 5, line 4. The Examiner argued:

“[A] camera, such as the video camera of Soska[,] is inherently capable of acquiring image data, and if the subject matter in the visual field of the camera is a three-dimensional object, that image data would necessarily be three-dimensional image data (for example, objects at differing distances from the camera’s lens would appear in different degrees of focus[)].”

 Examiner’s Answer dated February 28, 2019, page 8.

The Yokohama Rubber Co., LTD. (hereinafter Yokohama), the Appellant in the present case, presented several arguments against the cited portions of Soska, including: (1) Soska failed to disclose a camera acquiring any image data of the mold, (2) the camera of Soska was incapable of acquiring image data, and (3) Soska failed to disclose movement of the arm carrying the laser being controlled based on 3D image data of the molding surface. Kensuke, at 5.

The PTAB agreed with the Appellant, stating that the claimed language, under a broadest reasonable interpretation, required “that the camera is positioned and includes hardware and software necessary to acquire 3D image data of the molding surface … sufficient to enable the control device to control motion of the arm on the basis of the image data.” Id., at 6. The PTAB disagreed with the Examiner, who argued that the claim term “configured to” was equivalent to “capable of.” Id. Rather, the PTAB held that “configured to” generally “supports a narrower meaning … to require that the camera is designed such that it is able to perform the particular use, purpose or situation recited in claim 1.” Id.

Furthermore, the PTAB responded to the Examiner’s arguments that the disputed limitations were solely an intended use or intended function. The PTAB held the claimed structure was defined, both in the claims and in the specification, by its actual functionality, not by its possible functionality. Id., at 7. By contrast, the Examiner did not establish that Soska could possibly perform the required three-dimensional functionality because the robotic arm of Soska moved through only predetermined movement sets, and, generally, the Examiner failed to explain how focus differences in a captured two-dimensional image equated to three-dimensional image data. Id., at 7-8.

Altogether, Kensuke provides guidance regarding the acceptable level of detail required in the claims and the specification to overcome a cited reference, which includes similar components but different functionality than the claimed limitations. Applicants can use functional claim language, so long as the language is reliant on the actual design of the claimed element and not just a possible use.

On May 27, 2020, the U.S. Patent and Trademark Office (“USPTO”) proposed amendments to its rules governing post-grant proceedings, addressing three topics.  First, petitions for post-grant proceedings would require institution of all claims or denial of the petition. Second, patent owners would be permitted to file sur-replies to principal briefs. Third, the rules would eliminate the presumption in favor of the petitioner for a genuine issue of material fact created by testimonial evidence submitted with a patent owner’s preliminary response.

Petitions Are Instituted on All Claims or Denied Entirely

In SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018), the Supreme Court held that the Patent Trial and Appeal Board (“the Board”) must address all claims in the IPR petition if the proceeding is instituted. Shortly after this decision, the USPTO updated its guidance that the Board would institute a trial on all claims and all grounds or deny the petition in IPR, PGR, and CBM proceedings. Some of the proposed rules would codify that guidance by amending 37 C.F.R. §§ 42.108 and 42.208 to require the Board to either institute review on all of the challenged claims and grounds of unpatentability presented in the petition or deny the petition.

Patent Owners May File Sur-replies

The USPTO proposes to amend the rules to allow the patent owner to file sur-replies to the principal briefs. Specifically, 37 C.F.R. § 42.23 would be modified to permit a sur-reply to a reply to a patent owner response or to a reply to an opposition to a motion to amend. A sur-reply would be limited to the same page and word limits as the corresponding reply and could only address arguments raised in the corresponding reply.

Eliminating a Presumption in Favor of Petitioners

The USPTO also proposes an amendment to eliminate the presumption in favor of the petitioner when considering testimonial evidence during the institution decision of IPR, PGR, or CBM proceedings. Instead, the Board will consider the evidence in the context of the applicable standard for institution for the proceeding. The proposed changes to 37 C.F.R. §§ 42.108(c) and 42.208(c) would replace the current rule language creating the presumption, “but a genuine issue of material fact created by such testimonial evidence will be viewed in the light most favorable to the petitioner solely for purposes of deciding whether to institute,” with a more neutral instruction for the Board to consider all the evidence.

These proposed rule changes are available in the federal register (available here). The public may provide comments on the rulemaking until June 26, 2020.

The Halloween 2019 decision, Arthrex v. Smith & Nephew,[1] created a new right to rehearing in the Patent Trial and Appeal Board (“PTAB”), and has sent ripples through the judiciary and legislative branches that will continue to be felt for the foreseeable future.  In the case, the Federal Circuit opinion announced that the appointment of the PTAB’s administrative patent judges (“APJs”) – who preside over the inter partes review (“IPR”) proceedings at the United States Patent & Trademark Office – violated the Appointments Clause of the Constitution.[2]  The decision resolved that violation by striking down APJ removal protections from the Patent Act;[3] found that its resolution could not cure PTAB decisions such as the one at issue and that a remand for rehearing was required;[4] and that this and other such future rehearings must be conducted by a new panel of APJs.[5]

Although the Federal Circuit limited the availability of Arthrex rehearings to those cases that had both been pending appeal at the time of the Arthrex decision and where the appealing party had raised the Appointments Clause during appeal briefing, the court has faced a steady stream of Arthrex-type appeals.  The list below represents a number of pertinent developments regarding the Arthrex appeals, as well as further attempts by the court to elaborate on them:

  1. Customedia Tech., LLC v. Dish Network Corp., 941 F.3d 1173 (Fed. Cir. 2019), decided November 1, 2019: This case, decided the day after Arthrex, denied the availability of the Arthrex rehearing to a party who had failed to raise the Appointments Clause issue in its opening brief or in a motion filed prior to opening briefs. Instead, Customedia had attempted to raise the challenge on a notice of supplemental authority.
  2. Bedgear, LLC v. Fredman Bros. Furniture Co., Inc., 783 Fed. Appx. 1029 (Fed. Cir. Nov. 7, 2019): The decision itself was a one-page grant of the Arthrex rehearing, but Judge Dyk’s concurrence raised a number of points that have been used in future discussions criticizing the Arthrex Judge Dyk addressed the extra burden the Arthrex decision could place on the PTAB by requiring rehearings.  In Judge Dyk’s view, the severance of the removal provisions that cured the Appointments Clause issue could have been retroactively applied, so no rehearings would be necessary.  At the heart of Judge Dyk’s concurrence was his view on the judiciary’s role of interpreting what the law is, not making the law; and that retroactive application is a natural characteristic of this role.
  3. Ciena Corp. v. Oyster Optics, LLC, No. 2019-2117, 2020 WL 2124762 (Fed. Cir. May 5, 2020): Originally decided as a nonprecedential order on January 28, 2020, this case was redesignated the previous month. In the opinion, the Federal Circuit held that IPR petitioners do not have the right to raise the Appointments Clause issue on appeal unless the issue was first raised before the PTAB.   That is, because a petitioner affirmatively requests that the Board adjudicate through its petition, it forfeits any Appointments Clause challenge.  The court rejected the argument that structural constitutional concerns, such as separation of powers, require that a court forgives a party’s waiver or forfeiture of claims, instead concluding that such forgiveness is up to the court’s discretion.  In choosing not to exercise its discretion, the court noted that petitioners have an alternative forum to challenging patent claims – the district court.  The Court redesignated the opinion upon the Patent Office’s request, which argued that since the Ciena decision petitioners have repeatedly appealed on the Appointments Clause issue without raising it with the PTAB.
  4. Caterpillar Paving Products Inc. v. Wirtgen Am., Inc., No. 2020-1261, 2020 WL 2176034 (Fed. Cir. May 6, 2020): The Federal Circuit reiterated that the window of eligibility for an Arthrex rehearing is quite narrow. The Federal Circuit denied appellant Caterpillar’s motion to vacate and remand the case, concluding that Arthrex did not compel a remand in this case because the opinion in Arthrex issued before the PTAB’s final written decision.  Caterpillar argued that even though the Arthrex decision had issued before the PTAB had issued its final written decision, the Board’s “thinking and conclusions” throughout the proceeding up until the Arthrex decision remained uncured.  The court was unconvinced, and noted that this argument had also been rejected by the Arthrex  Thus, the Arthrex rehearing remains limited to those cases where the final written decision has already been issued and where the party raised the Appointments Clause challenge in its appeal brief.

A number of events in the Arthrex proceeding itself have determined the current status of these rehearings.  In the months following, the Federal Circuit has refused to reconsider the decision en banc, although four of the judges dissented.  It has also refused to stay its mandate requiring the PTAB to proceed on the rehearings while the Arthrex parties await the Supreme Court’s decision on Arthrex’s petition for certiorari, despite both parties supporting such a stay.  The pending April 9, 2020 petition involves a separate patent and proceeding and does not address the constitutionality of the Federal Circuit’s Appointments Clause decision, but Arthrex is expected to file a separate petition on the Appointments Clause issue sometime soon.  The petition does, however, address a relevant issue of whether forfeiture should apply when there has been an intervening change in law while an appeal is pending.

In the meantime, Chief Administrative Patent Judge Scott R. Boalick of the PTAB issued a general opinion at the start of the month holding all the rehearings in abeyance until the Supreme Court has the chance to consider the constitutional questions raised in Arthrex.  In view of Judge Boalick’s order, remanded cases will now be delayed for several months or even a year until the Supreme Court resolves this issue.  In turn, this means that even if the Federal Circuit grants a party’s motion for vacatur and remand, there is no guarantee as to when a party may get a date for a second hearing thereby putting both petitioners and patent owners in limbo.

On the legislative side, although a House IP Subcommittee hearing was held on the Arthrex case in the weeks following the decision, Congress has preferred to focus on other (understandably) pressing issues and let the situation in the judiciary play out.

The next chapter in the Arthrex story unquestionably lies with the Supreme Court.  While the Court could close the book on the whole issue with a definitive ruling, anything less may mean that the legislative branch has to step in.  Not only are hundreds of IPR cases currently hanging in limbo, the job security of the APJs – who are now fireable at will – remains uncertain.  Until the Supreme Court makes a move, however, it appears that nothing further will be done.

[1] 941 F.3d 1320 (Fed. Cir. 2019).

[2] Id. at 1335.

[3] Id. at 1338.

[4] Id. at 1340.

[5] Id.