The United States Patent and Trademark Office (USPTO) recently enacted new rules for post grant proceedings before the Patent Trial and Appeal Board (PTAB). (Federal Register, vol. 81, No. 63, at pp. 18750-18766, April 1, 2016). The new rules were formulated from public comments to proposals published in August 2015 and a series of PTAB listening tours. While the new rule changes cover a vast array of topics, the major rule changes are directed to (i) allowing patent owners to submit new testimonial evidence in a patent owner’s preliminary response, (ii) permitting Phillips-type claim construction in post grant proceedings, and (iii) introducing Rule 11-type certification for papers filed in post grant proceedings.
Preliminary Responsive Testimonial Evidence
37 C.F.R. § 42.108(c) is amended to recite (added portion underlined):
Inter partes review shall not be instituted for a ground of unpatentability unless the Board decides that the petition supporting the ground would demonstrate that there is a reasonable likelihood that at least one of the claims challenged in the petition is unpatentable. The Board’s decision will take into account a patent owner preliminary response where such a response is filed, including any testimonial evidence, 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 an inter partes review. A petitioner may seek leave to file a reply to the preliminary response in accordance with §§42.23 and 42.24(c). Any such request must make a showing of good cause.
37 C.F.R. § 42.208(c) is similarly amended.
The amended rules now allow patent owners to submit testimonial evidence (e.g., a declaration) accompanying a patent owner’s preliminary response to achieve a better balance by providing both the petitioner and patent owner the opportunity to present testimonial evidence prior to institution of a post grant proceeding. Recognizing that a denial of institution is final and non-appealable, the rules aim to provide two safeguards for petitioners. First, as expressly stated in the rules, “a genuine issue of material fact created by testimonial evidence will be viewed in the light most favorable to the petitioner solely for purposes of deciding whether to institute” a post grant proceeding. The USPTO noted that this presumption in favor of the petitioner for disputed facts is appropriate given the effect of denial of a petition and the opportunity to fully vet the disputed facts during trial where cross-examination of declarants is available. (Federal Register, vol. 81, no. 63, at 18756). The USPTO noted, however, that the mere presence of dueling expert testimony is not sufficient to create a genuine issue of material fact. (Id. ) (citing Mortgage Grader, Inc. v. First Choice Loan Servs., No. 2015-1415, 2016 WL 362415, at *8 (Fed. Cir. 2016)).
Second, petitioners “may seek leave to file a reply to the preliminary response” upon a showing of good cause. Despite some comments requesting that petitioners should have a reply as of right when the patent owner submits testimonial evidence in the preliminary response, the USPTO noted that affording petitioners the opportunity to submit a reply to the preliminary response will be granted on a case-by-case basis. (Id. at 18756 – 757). Furthermore, although not stated in the rules, the USPTO indicated that “[i]n appropriate circumstances, a panel, in its discretion, may order some limited discovery, including cross-examination of witnesses, before institution.” (Id. at 18756). The USPTO did not provide any guidance regarding what circumstances would be appropriate for granting additional discovery for petitioners prior to institution of trial. However, given the PTAB’s track record for granting additional discovery after institution of trial, the availability of additional discovery for petitioners prior to institution of trial is expected to be very limited.
Phillips-type Claim Construction
37 C.F.R. § 42.100(b) is amended to recite (added portion underlined):
A claim in an unexpired patent that will not expire before a final written decision is issued shall be given its broadest reasonable construction in light of the specification of the patent in which it appears. A party may request a district court-type claim construction approach to be applied if a party certifies that the involved patent will expire within 18 months from the entry of the Notice of Filing Date Accorded to Petition. The request, accompanied by a party’s certification, must be made in the form of a motion under § 42.20, within 30 days from the filing of the petition.
37 C.F.R. §§ 42.200(b) and 42.300(b) are similarly amended.
As indicated in the amended rules, the procedure for requesting a Phillips-type construction must be made via motion. The USPTO considered whether this request should be made in the petition itself, but ultimately decided that placing such a requirement in the petition would be a burden on the petitioners. (Federal Register, vol. 81, no. 63, at 18753). Thus, the USPTO considered providing either party the opportunity to request a Phillips-type claim construction via motion as the best approach. (Id.)
Accordingly, within 30 days from when the petition is accorded a filing date, either party (i.e., petitioner or patent owner) is permitted to request by motion a Phillips-type construction if the requesting party certifies that the patent will expire within eighteen months from the entry of the accorded filing date. Once the request is filed, a conference call will be conducted with the PTAB panel to discuss whether the request is appropriate and whether any other briefing is necessary for each party to be able to address adequately the appropriate construction standard. The petitioner may be afforded an opportunity to address a Phillips-type construction analysis before the patent owner is required to file its preliminary response. (Federal Register, vol. 81, no. 63, at 18752).
Despite amending the rules to permit a Phillips-type claim construction standard, the USPTO response to the public comments indicated a clear preference for the broadest reasonable interpretation (BRI) standard. Particularly, the USPTO emphasized that “applying the broadest reasonable interpretation for a claim is consistent with the Office’s long-standing practice in post-issuance proceedings and encourages clear and unambiguous claim drafting,” further noting that this standard “promotes consistency across all reexaminations, reissues, and AIA proceedings involving the same patent or family of patents before the Office.” (Id.). For example, the USPTO expressed concern that adopting a Phillips-type claim construction standard could lead to inconsistent results where a Phillips claim construction standard is applied in inter partes review and BRI is applied in a reexamination for the same patent. (Id.). Notably, the USPTO indicated that determining whether a Phillips-type claim construction standard is permitted is within the discretion of the PTAB panel. (Id. at 18753). Thus, although a patent will expire before the PTAB issues a final written decision, the PTAB may deny a party’s motion to apply a Phillips-type claim construction standard. In this regard, a concurrent reexamination of the same patent may persuade the PTAB to deny applying the Phillips-type claim construction to avoid inconsistent results.
Rule 11-type Certification
37 C.F.R. § 42.11 is amended to prescribe a duty of candor owed to the USPTO, to include a Rule 11-type certification for papers filed with the PTAB with a provision for sanctions for noncompliance, and setting forth the procedure for pursuing a motion for sanctions. Particularly, 37 C.F.R. § 42.11(b) is added specifying that “[e]very petition, response, written motion, and other paper filed in a proceeding must comply with the signature requirements set forth in §11.18(a).” Furthermore, 37 C.F.R. § 42.11(c) is added specifying that “[b]y presenting to the Board a petition, response, written motion, or other paper …an attorney … attests to compliance with the certification requirements under §11.18(b)(2).” Additionally, 37 C.F.R. § 42.11(d) is added permitting the board to impose sanctions if “after notice and a reasonable opportunity to respond, the Board determines that” 42.11(c) is violated.
Notably, the rules specify the procedure for filing a motion for sanctions. In this regard a moving party in a motion for sanctions (1) must specify the conduct that violates paragraph (c), (2) seek authorization from the Board to file the motion for sanctions, and (3) serve the motion on the other party 21 days prior to seeking the authorization from the Board. Moreover, the amended rules permit a party to cure any alleged misconduct where the moving party is not permitted to file the motion for sanctions if the challenged paper, claim, defense, contention, or denial is withdrawn or corrected within 21 days after service of the motion, or within another time set by the Board. 37 C.F.R. § 42.11(d)(2).