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Key Takeaways from a Flurry of Precedential Decision Designations

Between March 7 and April 5, 2019, the Patent Trial and Appeal Board (“the PTAB” or “the Board”) designated a series of decisions as either “precedential” or “informative.”  As part of its revised standard operating procedures (SOP2), the PTAB may designate an otherwise routine decision as precedential—a binding authority in subsequent matters involving similar facts or issues.  While anyone may nominate a decision to be designated as precedential, the nominated decision must undergo a multi-level review process involving a screening committee, an executive judge’s committee, and the Director of the Patent & Trademark Office (“the PTO”).  An informative opinion is not binding authority, but may provide useful guidance regarding various issues including, but not limited to, norms on recurring issues, guidance on issues of first impression, and guidance on PTAB rules and practices.  Such designations provide useful guidance to parties in PTAB proceedings and are intended to simplify and streamline proceedings to further enhance post-grant proceedings as an alternative to district court litigation.

As we have previously discussed, parties and attorneys involved in PTAB proceedings should be aware that the PTAB has its own set of precedential decisions, and the PTAB is required to follow its precedential decisions.  In fact, there are currently seventy-eight precedential decisions listed on the PTO’s website.  In the past six weeks, the PTAB has designated six decisions as precedential and three decisions as information.

Most recently, the PTAB designated as precedential its decision in Huawei Device Co., Ltd. v. Optis Cellular Tech., LLC, Case IPR2018-00816, Paper 19 (PTAB Jan. 8, 2019), which provides further insights on procedures and standards for submitting new evidence on rehearing.  Specifically, the PTAB explained that “[i]deally, a party seeking to admit new evidence with a rehearing request would request a conference call with the Board prior to filing such a request so that it could argue ‘good cause’ exists for admitting the new evidence.  Alternatively, a party may argue ‘good cause’ exists in the rehearing request itself.”  The takeaway message from this decision is that any party seeking to submit new evidence as part of a request for rehearing should request a conference call with the Board to satisfy the good cause requirement.

In another precedential decision, Amazon.com, Inc. v. Uniloc Luxembourg S.A., Case IPR2017-00948, Paper 34 (Jan. 18, 2019), the PTAB clarified the grounds that can be raised against substitute claims under AIA § 316(d).  This decision expands the scope of PTAB proceedings because motions to amend can now be challenged on grounds other than anticipation and obviousness, e.g., subject matter eligibility, written description, enablement, and definiteness.  Specifically, in Amazon.com, the patent owner filed a contingent motion to amend if the PTAB were to find the patent owner’s existing claims unpatentable. The PTAB not only determined that the existing claims were unpatentable, but also found that the patent owner’s substitute claims were directed to non-statutory subject matter and therefore patent ineligible.  The patent owner requested a rehearing, arguing that the PTAB was not permitted to consider whether the substitute claims constitute statutory subject matter. However, the PTAB held that the law did not preclude the PTAB or the petitioner from considering the patentability of amended claims under other grounds and thereby exerted its authority to deny addition of substitute claims based on grounds other than anticipation or obviousness.  The takeaway message from this decision is that patent owners should be judicious and carefully consider the scope of claims filed in motions to amend, and petitioners should consider challenges to substitute claims on other grounds in addition to anticipation and obviousness.

Both DePuy Synthes Prods., Inc. v. Medidea, L.L.C., Case IPR2018-00315, Paper 29 (Jan. 23, 2019), and K-40 Elecs., LLC v. Escort, Inc., Case IPR2013-00203, Paper 34 (May 21, 2014), relate to live testimony at oral argument and were designated precedential.  In K40 Electronics, the PTAB granted the patent owner’s motion to have the inventor present live testimony at the oral arguments.  The PTAB noted that the inventor’s live testimony would be “case-dispositive” because the patent owner had relied on a declaration of the inventor to antedate two references used by the petitioner to challenge the patent in dispute.  The declaration served to establish a prior reduction to practice.  The PTAB explained that the inventor’s demeanor was critical to evaluating the inventor’s credibility, and that a fact witness’ demeanor is more indicative of credibility than the demeanor of an expert witness.  Further, the PTAB explained that the decision did not establish a “de facto” rule permitting live testimony at oral hearings and was limited to circumstances to be decided on a case-by-case.  In DePuy Synthes Prods, the other precedential decision involving live testimony, the PTAB rejected a request to allow an inventor’s live testimony because the inventor had not yet provided declaratory evidence and live testimony would have impermissibly presented new evidence.  The takeaway message from these decisions is that limited live testimony may be allowed, but the Board must be convinced that the live testimony will not introduce new evidence and is necessary for judging credibility based on the witness’ demeanor.

In Proppant Express Investments, LLC v. Oren Techs., LLC, Case IPR2018-00914, Paper 38 (Mar. 13, 2019), as discussed in detail here, the PTAB addressed same party and issue joinder and clarified that § 315(c) allows discretionary same-party joinder and new issue joinder, and described policies to contain that discretion.  The takeaway message from this decision is that both patent owners and patent challengers should appreciate the PTAB’s focus on eliminating gamesmanship in patent litigation.

In Lectrosonics, Inc. v. Zaxcom, Inc., Case IPR2018-01129, 01130, Paper 15 (Feb. 25, 2019), the PTAB clarified the requirements and burdens under AIA § 316(d).  One takeaway message from this decision is that a substitute claim proposed in a motion to amend will meet statutory claim scope requirements “if [the substitute claim] narrows the scope of at least one claim of the patent…in a way that is responsive to a ground of unpatentability involved in the [IPR] trial.” Lectrosonics at 5–6.  Further takeaway messages are that the petitioner may submit additional testimony and evidence with an opposition to a motion to amend and that in a sur-reply it may only respond to arguments made in a patent owner’s reply and related declarant testimony, and may only submit new evidence in the form cross-examination testimony of any reply declarants.  Id. at 9.

In designating Chevron Oronite Co. LLC v. Infineum USA L.P., Case IPR2018-00923, Paper 9 (Nov. 7, 2018) and Deeper, UAB v. Vexilar, Inc., Case IPR2018-01310, Paper 7 (Jan. 24, 2019) as informative, the PTAB put petitioners on notice that it will increasingly exercise its discretion to deny institution where there are an insufficient number of proposed grounds/challenges to claims that are believed to meet the reasonable likelihood standard.  Thus, the key takeaway message for petitioners is to present petitions with reasonably strong arguments for most or all challenged claims, to reduce or eliminate weak arguments from petitions, and possibly break up challenges into multiple petitions.  The key takeaway message for patent owners is to present arguments in the preliminary response that highlight the weaknesses in the petitioner’s arguments against a large number of the challenged claims so that reasonable likelihood standard can only be met by a small subset.  Patent owners should also argue that the PTAB’s time and resources would not be efficiently used if trial is instituted because so many of the claims would likely survive the challenge.

In designating Ex parte Smith, 2018-000064 (Feb. 1, 2019) as informative, the PTAB applied the 2019 Revised Patentable Subject Matter Eligibility Guidance (hereinafter “SME Guidance”) to reverse an examiner’s rejection of claims as being directed to patent ineligible subject matter.  The PTAB explained that while most of the recited claim limitations were directed to a judicial exception of a fundamental economic practice, the claims recited additional limitations that “integrated the judicial exception into a practical application” under the SME Guidance Step 2A-Prong 2, and that these limitations provided a specific technological improvement over prior derivatives trading systems based on explanations in the specification regarding the advantages thereof.  The key takeaways from Ex parte Smith are the importance of drafting specifications that explain the technological advantages associated with the claim limitations, explaining that the particular solutions to technological problems are not merely inherent, and crafting arguments that take into account such disclosures and the SME Guidance.

In view of the recent flurry of precedential and informative decision designations, parties in AIA proceedings should keep abreast of the PTAB’s guidance in these decisions and carefully consider whether any may affect their proceedings.