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Implications of PTAB’s Transition to the Phillips standard for Claim Construction

The PTAB will soon implement a change in its claim construction standard in post-issuance reviews, moving from the broadest reasonable interpretation (“BRI”) standard to the standard articulated in the Federal Circuit’s opinion, Phillips v. AWH Corp.[1]  We previously covered this on our blog here. The effects of the change may be significant in some respects, such as potentially creating issue preclusion in district court based on a final PTAB decision.  In view of this harmonization in claim construction standards, this article examines the potential application of preclusion principles based on PTAB decisions.

The starting point is the Supreme Court’s opinion in B&B Hardware.[2]  There, the Court addressed whether an administrative decision on an issue could be given preclusive effect with regards to litigation of the same issue in district court.  The Court decided that, “so long as the other ordinary elements of issue preclusion are met, when the usages adjudicated by the TTAB are materially the same as those before the district court, issue preclusion should apply.”[3]  In other words, when the analysis is the same, issue preclusion may apply.  This decision was given in the context of the Lanham Act’s likelihood of confusion standard used for both trademark registration at the TTAB and trademark infringement in Article III courts.  The factors listed supporting the Court’s decision were that (1) nothing in the Lanham Act explicitly barred the application of issue preclusion, (2) the differences that do exist between the TTAB and Article III courts do not affect the overall outcome, and (3) there was no reason to doubt the quality, extensiveness, or fairness of the TTAB’s procedures.  Applying this template to the PTAB’s new Phillips standard, it is conceivable that the Court would arrive at the same conclusion, at least for final decisions as they pertain to claim construction.

First, although the AIA contains explicit estoppel provisions for IPR, PGR, and CBM proceedings, there is nothing in the text of the statute that bars issue preclusion from applying. Further, the Supreme Court has identified a rebuttable presumption in favor of the application of preclusion principles: “issue preclusion is available unless it is ‘evident’… that Congress does not want it.”[4]  Given that the AIA lacks text showing intent by Congress to bar issue preclusion and rebut the presumption in favor of its application, this factor arguably supports issue preclusion attaching to PTAB decisions.

Second, the factors that will be considered in PTAB procedures and district court procedures are by definition the same, at least for claim construction under the USPTO’s newly adopted rule change.  The UPSTO has also stated many times that its intent is to use the same standard as district courts.  Thus, in the context of claim construction, it would appear that this factor may support the application of issue preclusion.  Certainly other issues that are affected by the presumption of validity that applies in district court, but not the PTAB, and the corresponding differences in the standards of proof in proving invalidity and unpatentability, may not be subject to issue preclusion as these differences may affect the outcome.  But for issues such as claim construction, these differences likely have no effect and thus may not pose a bar to the application of preclusion.

Finally, there is little reason to believe that the Court would find that PTAB procedures are fundamentally poor, cursory, or unfair.  PTAB procedures are quite similar to the TTAB procedures considered in B&B Hardware.[5]  Both proceedings are decided by skilled Administrative Judges, have written procedural rules, offer discovery, and use the Federal Rules of Evidence.  Both decisions are also appealable to the Federal Circuit.[6]  Significantly, the Court identified the use of Rule 26 of the Federal Rules of Civil Procedure as a persuasive example of similarity to Article III procedures.[7]  The Supreme Court’s decision in Oil States arguably supports this conclusion for PTAB reviews, as the Court noted that there are similarities between inter partes review and adversarial litigation in Article III courts.[8]

This application of preclusion has the potential to limit a party’s ability to raise issues pertaining to claim construction in district court after a final PTAB decision takes effect.[9]  But aside from the application of issue preclusion, this result could also affect strategies in other aspects of parallel district court and PTAB proceedings.  For example, in a stay analysis, the application of issue preclusion to claim construction could result in final PTAB decisions having greater potential to simplify the issues that would otherwise need to be litigated in Article III courts.  But this presupposes that the stay is sought prior to a Markman decision in district court.  Thus, stays may be somewhat easier to obtain following the change in claim construction standards depending on the timing in which they are sought.  But this also puts petitioners at a potential disadvantage as they attempt to balance the constructions they seek in district court to avoid infringement with those that may be used to attack a patent before the PTAB.  Additionally, a patent owner or petitioner may wish to appeal a final PTAB decision in order to contest an adverse claim construction ruling that it otherwise would not have appealed had the PTAB’s earlier BRI standard been used.  In sum, in formulating their strategies in both district court and before the PTAB, parties would be well-advised to consider the potential application of issue preclusion and its effects.

 

[1] See 415 F.3d 1303 (Fed. Cir. 2005)

[2] 135 S.Ct 1293 (2015).

[3] Id. at 1310.

[4] Id. at 1306.

[5] Id.

[6] Id.

[7] Id. at 1309.

[8] Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 138 S.Ct. 1365, 1378 (2018).

[9] Future articles will examine the effect of non-final claim constructions, such as those made before settlement and the potential for preclusion under those circumstances, as well as other potential situations in which preclusion may apply.