On August 16, 2018, the en banc Federal Circuit held that 35 U.S.C. § 315(b) unambiguously triggers the one-year time bar to file an inter partes review (IPR) petition after a complaint is served, regardless of what may follow. In its decision, Click-to-Call Technologies, LP v. Ingenio, Inc., __ F.3d __, 2018 WL 3893119 (Fed. Cir. Aug. 16, 2018)[1], the court found that the Patent Trial and Appeal Board (“the Board” or “PTAB”) had committed legal error by concluding that a petitioner was not time-barred because an earlier district court infringement action was voluntarily dismissed without prejudice, and it vacated the Board’s Final Written Decision on the basis that the PTAB lacked the jurisdiction to institute the IPR.

The rather complex procedural history of the case goes back to June 8, 2001, when Infrorocket.Com (“Infrorocket”), the exclusive licensee of U.S. Patent No. 5,818,836 (“the ‘836 patent”), filed a civil action in the U.S. District Court for the Southern District of New York against Keen, Inc. (“Keen”), a predecessor-in-interest of appellee, Ingenio, LLC (“Ingenio”). Infrorocket served a complaint asserting infringement of the ‘836 patent on Keen on September 14, 2001. However, on March 21, 2003, following a merger of the parties, Infrorocket voluntarily dismissed the suit “without prejudice,” and the case was dismissed.

Appellant, Click-to-Call Technologies, LP (“CTC”), subsequently acquired the ‘836 patent, and, on May 29, 2012, asserted patent infringement claims against multiple parties, including Ingenio. Almost a year later, on May 28, 2013, Ingenio, together with Oracle Corp., Oracle OTC Subsidiary LLC, and YellowPages.com LLC (together, “Petitioners”), filed a single IPR petition challenging the claims of the ‘836 patent on both anticipatory and obviousness grounds. Despite acknowledging that Ingenio was served with the infringement complaint back in 2001, the Board ultimately concluded that the service did not bar Ingenio’s IPR petition, reasoning that a voluntary dismissal without prejudice “leaves the parties as though the action had never been brought” and essentially nullifies the effect of service for the purposes of applying the statutory IPR time bar.

In reviewing the Board’s statutory interpretation pursuant to Chevron, U.S.C., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the Federal Circuit first looked to whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case. Section 315(b) provides that an IPR “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.”[2] The court found that the phrase “served with a complaint” is clear and unequivocal, and explained that the statute does not contain any exceptions for complaints that are served and then subsequently dismissed, with or without prejudice. Noting that Congress could have included additional language to address the effect of a dismissal, but chose not to do so, the court refused to read such a limitation into the meaning of the statute, and instead took the statute text as Congress’s “final expression of its intent.” This understanding of the time bar, the Federal Circuit reasoned, is consistent with the legislative history of §315(b) and the Supreme Court’s notion that the core purpose of service is to provide notice of the pendency of a legal action, such that defendants are provided with a reasonable opportunity to identify and understand the patent claims. Finding no gap to fill or ambiguity to resolve in the statutory language, the Federal Circuit had no need to proceed to Chevron’s second step.

While the Board relied on Graves v. Principi, 294 F.3d 1350 (Fed. Cir. 2002) and Bonneville Assocs., Ltd. P’ship v. Barram, 165 F.3d 1360 (Fed. Cir. 1999) as support for its assertion that the Federal Circuit has consistently interpreted the effect of voluntary dismissals as leaving the parties as if the action had never been brought, the court found both cases to be inapplicable here. Whereas Graves and Bonneville both concern whether an appellant’s filing of a notice of appeal and the subsequent dismissal of that appeal tolls the jurisdictional deadline to appeal from the decision below, the appropriate question in the instant case is whether the voluntary, non-prejudicial dismissal of a civil action in which a complaint had been served nullifies an administrative time bar that is triggered by service of that complaint.

The Federal Circuit also rejected Petitioners’ alternative arguments. First, Petitioners argued that, because the claims of the ‘836 were materially changed during a 2008 ex parte reexamination, they were not served with a complaint alleging infringement of this patent more than one year before the IPR petition was filed. However, the court distinguished reexamination and reissue, noting that only the latter resulted in the surrender of the original patent and the issuance of a new patent. Second, the Petitioners asserted that even if the § 315(b) time bar applied to Ingenio, it would not apply to the YellowPages.com, Oracle Corp., or Oracle OTC Subsidiary LLC, as they were not in privity with Ingenio at the time of service of the complaint in 2001. However, the Federal Circuit explained that the efforts to separate Ingenio from the other Petitioners to save the petition were in vain, because all four petitioners had declared themselves as “the Petitioner” in their sole IPR petition, and because § 315(b) is applied petition-by-petition, not petitioner-by-petitioner. The court also refused to entertain arguments directed to what-if scenarios regarding separate petitions and joinders, noting that “the availability of a path not taken does not validate the path actually taken.”

Judge Dyk, joined by Judge Lourie, dissented, urging that 1) the meaning of “service of a complaint,” is not on its face unambiguous[3]; 2) treating voluntary dismissals without prejudice as restoring the parties to the situation that existed before the case had ever been brought is a well-established principle; and 3) any intention to deviate from this well-established rule would be explicitly stated in the statute or rule. A concurrence by Judge Taranto addresses these criticisms and offers additional support for the majority’s opinion.

It is uncertain how patent owners will use the Federal Circuit’s decision in Click-to-Call, but it is speculated that patent owners could strategically file and serve a complaint, and then immediately voluntarily dismiss the case, as a means to control the clock start for the one-year IPR filing deadline of opponents, without the hassle of seeing a civil infringement action all the way through. However, patent owners would only be able to do this once, pursuant to F.R.C.P. 41(a)(1)(B), and may face punishment if the filed suit is found to be frivolous.

[1] Available at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1242.Opinion.8-16-2018.pdf.

[2] 35 U.S.C. § 315(b).

[3] Relying on Kasten v. Saint-Gobain Performance Plastics Corp., 563 U.S. 1 (2011), in which the Supreme Court found the language “filed any complaint” to be ambiguous as to whether the complaint could include written and oral complaints.

Based on recent Patent Trial and Appeal Board (“PTAB” or “the Board”) decisions, the best practice to establish an academic thesis as a printed publication in an IPR proceeding is to demonstrate that it has been indexed by subject matter and then corroborate the index date by independent evidence, or demonstrate that another publication can serve as a “roadmap” to the thesis.

The PTAB has followed Federal Circuit law for this inquiry, primarily citing the seminal case of In re Hall, 781 F.2d 897 (Fed. Cir. 1986). In Hall, the Federal Circuit held that a single copy of a doctoral thesis that was catalogued and shelved in a single library in Germany was sufficiently accessible to the interested public so as to qualify as a printed publication for the purposes of 102(b). The court was satisfied that the thesis was catalogued and indexed in such a way to “constitute[] sufficient accessibility to those interested in the art exercising reasonable diligence” because it was shelved in the general stacks and indexed by subject matter. Id. at 900.

Hall discussed and distinguished previous cases in which theses were held not to have been sufficiently accessible to constitute a printed publication.[1] To be publically accessible, a thesis must be actually accessible (e.g. on an open server or in a general library section)[2] and must also be categorized by subject matter so that an interested member of the public could locate the resource without advance knowledge of its existence.[3] The PTAB has followed this framework. The Board, in Fujitsu Semiconductor Ltd. v. Zond, LLC, No. IPR2014-00781, Paper No. 53 (P.T.A.B. Aug. 14, 2015), held that a copy of a Russian doctoral thesis was sufficiently accessible to qualify as a printed publication. Because the patent owner did not object to the evidence at trial, the Board relied on a catalog entry purporting to show that the thesis had been catalogued by author, title, and subject matter as of a date seven years prior to the critical date.  The Board found it immaterial that the thesis was located in a different country and that an exact date of publication could not be established because the “[t]hesis was made available to interested persons by virtue of its title and “Subject” characterization” prior to the critical date. Id. at 44. The Board has been explicit in recent decisions that actual evidence of indexing or cataloging is necessary to corroborate a publication date despite what the thesis may state on its face. See Decision, Petitioner’s Request for Rehearing, Apple, Inc. v. DSS Tech. Mgmt., Inc., No. IPR2015-00369, Paper No. 14 at 6 (P.T.A.B. Aug. 12, 2015) (stamped date on thesis from MIT library was hearsay and would not have shown when or if the thesis was actually available to the public); Decision Den. Institution of Inter Partes Review, Symantec Corp. v. The Trustees of Columbia Univ., No. IPR2015-00370, Paper No. 13 at 8-9 (P.T.A.B. June 17, 2015) (despite approval for public release and a list of keywords in an abstract facilitating an electronic-database search, petitioner still failed to demonstrate when or if the thesis was actually indexed or catalogued).

Accordingly, the Board held that a thesis purportedly shelved in the University of Houston library was not sufficiently accessible because the petitioner provided insufficient evidence of indexing, cataloguing, shelving, or actual access of the thesis. Decision Den. Institution of Inter Partes Review, Actavis, Inc. v. Research Corp. Techs., Inc., No. IPR2014-01126, Paper. No. 22 at 11 (P.T.A.B. Jan. 9, 2015). The Board, in Actavis, stressed that a person of ordinary skill in the art would not be informed of what the subject matter was based on the title of the thesis alone. Therefore, absent evidence of actual access or meaningfully indexing, the thesis was not accessible even if printed before the critical date. Id.

The petitioner in Actavis argued that a citation to the thesis in question in a separate publication was a sufficient “roadmap” to the thesis so as to make it publically accessible. Ultimately, the Board rejected this theory because the citation was not informative enough. Id. at 12-13 (noting that the citation only referred to the “Masters dissertation of this author” and did not cite to the thesis “in such a way as to give any reader the tools he would need to access the thesis”)(internal quotations omitted). Several cases at the Federal Circuit have held that publically accessible publications, such as patents and peer-reviewed publications, can serve as “research aids” that can aid an interested person in locating the invalidating thesis even if the thesis is not indexed sufficiently. See, e.g., Blue Calypso, LLC v. Groupon, Inc., 815 F.3d 1331, 1350 (Fed. Cir. 2016) (“a published article with an express citation to [a] potentially invalidating reference would…provide the necessary guidance [to satisfy public accessibility]”) (citing Cornell Univ. v. Hewlett-Packard Co., No. 01-cv-1974, 2008 U.S. Dist. LEXIS 39343, at *20-21 (N.D.N.Y. May 14, 2008); see also Bruckelmyer v. Ground Heaters, Inc., 445 F.3d 1374, 1379 (Fed. Cir. 2006) (holding similarly within the contexts of patents citing the reference). Thus, the argument in Actavis regarding the “roadmap” theory failed only because the citation was too vague.

Based on the foregoing, a petitioner seeking to institute an IPR based on an academic thesis would be well-advised to determine when the thesis was indexed, catalogued, and generally made available to the public. If the thesis is indexed at least by subject matter it should be sufficiently accessible. However, independent evidence may be needed to corroborate these dates. For example, a librarian at the institution may swear out an affidavit regarding data about shelving date and typical library practices. Another useful source for affidavits is third party aggregators of theses, such as, e.g., ProQuest (formerly University Microfilms International, or UMI). If it cannot be shown that the thesis was indexed in a meaningful way, then a published article or patent expressly citing to the thesis may be another way to establish a publication date.

[1] See Application of Bayer, 568 F.2d 1357 (C.C.P.A. 1978) (finding no public accessibility because only a limited number of people could have accessed the thesis); In re Cronyn, 890 F.2d 1158 (Fed. Cir. 1989) (holding that an undergraduate thesis filed only by student name and title was not indexed in a meaningful and therefore not publically accessible).

[2] Cf. Application of Bayer, 568 F.2d 1357 (C.C.P.A. 1978).

[3] Cf. In re Cronyn, 890 F.2d 1158 (Fed. Cir. 1989).

On Friday, July 20, 2018, the Federal Circuit, in a precedential opinion, affirmed the Patent Trial and Appeal Board’s (“PTAB’s”) decision that tribal sovereign immunity does not apply in inter partes review (“IPR”) proceedings and that the U.S. Patent & Trademark Office (“USPTO” or “the Office”) has the authority to decide the validity of several patents that had been transferred by Allergan to the St. Regis Mohawk tribe after they were challenged by generic drug companies.

As discussed here, Allergan transferred the patents for its dry eye drug, Restasis®, to the Saint Regis Mohawk Tribe (“the Tribe”) in an attempt to take advantage of its sovereign immunity status and ward off challenges to the patents. Under the deal, the Tribe received an upfront payment of $13.75 million and will receive $15 million a year in royalties for the duration of the six Restasis® patents. Although state sovereign immunity has been applied at the PTAB, there was no PTAB decision applying tribal sovereign immunity. In finding that the Restasis® patents were not immune from IPR, the PTAB recognized differences between state sovereign immunity and tribal sovereign immunity doctrines.

Citing several recent Supreme Court decisions, the Federal Circuit explained that an IPR is neither clearly a judicial proceeding instituted by a private party nor clearly an enforcement action brought by the federal government. It is a “hybrid proceeding” with “adjudicatory characteristics” similar to court proceedings, but in other respects it “is less like a judicial proceeding and more like a specialized agency proceeding.”[1] The court explained that the government’s central role in an IPR and the Office’s role in protecting the public interest made the Director of the USPTO politically responsible for the decision of whether or not to institute,[2] and the adjudicatory aspects involve the petitioner’s role in defining the contours of the proceeding[3].

The court cited several factors supporting the idea that an IPR proceeding is more like an agency enforcement action than a civil suit brought by a private party.

First, the court stated that it is the Director, a politically appointed executive branch official, and not a private party, who ultimately decides whether to proceed against a sovereign party. It distinguished IPR proceedings from civil suits and other agency proceedings where, absent immunity, a private party could unilaterally hale a sovereign before a tribunal.

Second, the court noted how IPR proceedings may continue in the absence of either the petitioner or the patent owner. This, the court stated, reinforced that the agency is acting to reconsider its own grant of a public franchise.

Third, the court pointed to the differences between the Federal Rules of Civil Procedure and the rules governing IPR proceedings, such as: the ability of plaintiff to make significant amendments to a complaint in civil litigation (petitioner may only make clerical or typographical corrections to petitions); a patent owner’s ability to amend its patent claims during IPR proceedings (unavailable in civil litigation); and the limited discovery available in IPR proceedings.

Finally, the court noted that just because more inquisitorial reexamination proceedings exist in which immunity does not apply does not necessarily mean that immunity applies in a different, more adjudicatory type of proceeding before the same agency.

Thus, the Federal Circuit concluded that “[t]he Director’s important role as a gatekeeper and the Board’s authority to proceed in the absence of the parties convinces us that the USPTO is acting as the United States in its role as a superior sovereign to reconsider a prior administrative grant and protect the public interest in keeping patent monopolies ‘within their legitimate scope.’”[4]

The court explicitly limited its holding to whether tribal immunity applies in IPR proceedings and left open the question of whether the same reasoning applies to state sovereign immunity in IPR proceedings.

Judge Dyk concurred with the panel opinion but wrote separately to describe the history of USPTO review proceedings, reinforcing that IPR proceedings are fundamentally an agency reconsideration assisted by third parties rather than an adjudication of a private dispute.

The interpretations and applications of the Supreme Court’s recent Oil States and SAS Institute decisions in this opinion will undoubtedly have implications on state and foreign sovereign immunity claims, as well as other procedural aspects of IPRs. There is also a good chance that the Supreme Court will review this decision and address the question of whether an IPR proceeding is limited to the Director exercising jurisdiction over the patent itself as distinguished from exercising jurisdiction over the sovereign tribe through its property.

It will also be interesting to see what effect the decision will have on the “PACED Act” introduced this past March by Senator Tom Cotton (R-AR) and Senator Claire McCaskill (D-MO), along with Senators Pat Toomey (R-PA), Joni Ernst (R-IA), and David Perdue (R-GA).  Senator Cotton released a statement today on the Federal Circuit’s decision: “The Federal Circuit struck a blow for patients today by ruling drug companies can’t jack up prices by shielding dubious patents from scrutiny. Now Congress should follow up this victory by passing my bill, the PACED Act, so the loophole Allergan tried to exploit will be closed once and for all.”[5]

[1] Citing Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2143–44 (2016).

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

[3] Citing SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018).

[4] Quoting Cuozzo, 136 S. Ct. at 2144.

[5] https://www.cotton.senate.gov/?p=press_release&id=983

The Patent Trial and Appeal Board (“PTAB”) rarely grants motions for additional discovery filed by a party in an inter partes review (“IPR”) proceeding. Typically, a party’s motion will be denied for failing to satisfy the burden under the established factors. The PTAB has also denied motions for additional discovery where the party failed to define the discovery requested with specificity or failed to identify why the discovery is necessary for the interest of justice. Thus, parties and attorneys should be aware of the factors the PTAB considers and the weight given to each factor.

A motion for additional discovery may be granted if the party demonstrates “that such additional discovery is in the interests of justice.” 37 C.F.R. § 42.51(b)(2); see also 35 U.S.C. § 316(a)(5) (requiring discovery in IPR proceedings to be limited to “what is . . . necessary in the interest of justice”). When determining whether additional discovery is in the interest of justice, the PTAB examines five factors. See Garmin Int’l, Inc. v. Cuozzo Speed Techs. LLC, Case IPR2012-00001, slip op. at 6–7 (PTAB Mar. 5, 2013) (Paper 26). The Garmin factors include: (1) more than a possibility and mere allegation that something useful will be discovered; (2) requests that do not seek other party’s litigation positions and the underlying basis for those positions; (3) ability to generate equivalent information by other means; (4) easily understandable instructions; (5) requests that are not overly burdensome to answer. Id.

The PTAB has also stated that to meet this heightened burden, the moving party must explain with specificity what discovery is being requested and why the discovery is necessary in the interest of justice. Medtronic, Inc. v. Robert Bosch Healthcare Sys., Inc., Case IPR2014-00488, slip op. at 4 (PTAB Nov. 5, 2014)(Paper 25); Ventex Co., LTD v. Columbia Sportswear North America, Inc., Case IPR2017-00651, slip op. at 4 (PTAB Nov. 13, 2017) (Paper 32) (denying motion for additional discovery where patent owner  did not “directly address its requests and explain what, specifically, they are likely to produce in response, or how the existence of the supplier agreement and certain emails indicates that other more probative documents exist”).

When assessing the Garmin factors, the PTAB generally does not afford each factor equal weight. Rather, the first and fifth factors tend to be those frequently addressed by the PTAB in its analyses, with the first factor generally being afforded more weight than the fifth.

Factor 1: More Than a Possibility and Mere Allegation

When examining the first Garmin factor, the PTAB has stated that the party “should already be in possession of evidence tending to show beyond speculation that in fact something useful will be uncovered.” See Garmin Int’l, Inc. v. Cuozzo Speed Techs. LLC, Case IPR2012-00001, slip op. at 6–7 (PTAB Mar. 5, 2013) (Paper 26). “Useful” in this context means “favorable in substantive value to a contention of the party moving for discovery,” not just “relevant” or “admissible.” Id. at 7. The moving party needs to put forth a “threshold amount of evidence tending to show that the discovery it seeks factually supports its contention.” General Electric Co. v. Transdata, Inc., Case IPR2014-01380, slip op. at 4 (PTAB Nov. 12, 2014) (Paper 15).

This factor carries a great deal of weight, as the PTAB has occasionally made a decision based on this factor alone. For example, in Apotex Inc. v. Novartis AG., Case IPR2017-00854, slip op. at 4-5 (PTAB Feb. 5, 2018) (Paper 47), the PTAB granted-in-part Petitioner’s motion by balancing the “strong showing under Garmin Factor 1” against Patent Owner’s arguments that the requests was unduly burdensome. Additionally, even when the discovery requests are not narrowly tailored, if the moving party presents sufficient evidence to show more than a possibility and mere allegation that something useful will be discovered, the PTAB has granted the discovery requests and merely limited their scope. See Samsung Electronics, LTD, v. Black Hills Media, LLC, Case IPR2014-00735, slip op. at 7 (PTAB Oct. 2, 2014) (Paper 17) (granting Patent Owner’s three interrogatories and two of its document requests but limiting their scope as the discovery requests were overly broad).

There is no clear line as to what amount of evidence the PTAB considers to be enough and what instead only amounts to mere speculation. The facts underlying each motion for additional discovery are generally decided on a case-by-case basis. Thus, when considering whether to draft a motion for additional discovery, it is important to consider what type of information is being sought and whether the party has some proof that the information (1) exists and (2) would be useful in the proceeding.

Factor 5: Requests Not Overly Burdensome to Answer

Although the first factor can outweigh the other factors, it remains important to submit discovery requests that are specific and not overly broad. The discovery requests must be narrowly tailored such that they do not cause an overdue burden on the non-moving party. See Garmin Int’l, Inc. v. Cuozzo Speed Techs. LLC, Case IPR2012-00001, slip op. at 7 (PTAB Mar. 5, 2013) (Paper 26); Ventex Co., LTD v. Columbia Sportswear North America, Inc., IPR2017-00651, slip op. at 5 (PTAB Nov. 13, 2017) (Paper 32) (denying request as not narrowly tailored where the request for production sought “[d]ocuments constituting or relating to communications involving [customer] and Petitioner that concern or relate to the [customer] Litigation.”).

The PTAB has granted motions for additional discovery where the discovery requests are narrowly tailored and few in number. See Arris Group, Inc. v. C-Cation Techs., LLC, IPR2014-00746, slip op. at 3 (PTAB July 24, 2014) (Paper 15)(granting motion where the Patent Owner made a very limited request for an indemnification agreement between Petitioner and a nonparty); Medtronic, Inc. v. Robert Bosch Healthcare Sys., Inc., IPR2014-00488, slip op. at 4 (PTAB Nov. 5, 2014)(Paper 25)(finding the two document requests and single interrogatory narrowly tailored where they were limited to communications between Petitioner and nonparty “regarding preparation or filing of the [present] IPRs”); Ventex Co., LTD, V. Columbia Sportswear North America, Inc., Case IPR2017-00651, slip op. at 3-4 (PTAB Dec. 19, 2017) (Paper 40) (granting motion for additional discovery where Patent Owner requested production of “relevant testimony concerning secondary consideration of non-obviousness” and the requests were narrowly tailored).

When drafting a motion for additional discovery, discovery requests should be specific, narrow, and few in number. The party should be able to identify precisely the documents, information, or testimony being sought. It is generally not enough to merely identify the subject matter of the information sought, rather, the party should specifically identify the type of documents sought and the relevant time period, when possible.

Additionally, when assessing the fifth factor, the PTAB may also consider the timing of the discovery requests and their potential impact on the trial schedule. For example, in Wavemarket Inc. v. Locationet Systems Ltd., Case IPR2014-00199, slip op. at 8 (PTAB Aug. 11, 2014)(Paper 34), the PTAB denied the Patent Owner’s motion, stating that the “the requested discovery may place a significant burden on meeting the time schedule of inter partes review.” As to timing, it is important to ensure that when submitting discovery requests, the requests are (1) ripe and (2) timely. See Apple v. Evolutionary Products, Case IPR2014-00086, slip op. at (PTAB June 3, 2014) (Paper 13)(denying motion because “the issue is not ripe for discovery” as a final decision in the present proceeding has not been rendered and the district court cases are stayed); see also  Douglas Dynamics, LLC v. Meyer Prods. LLC, Case IPR2015-01839, slip op. at 8 (PTAB July 26, 2016)(Paper 29) (finding that “delay in requesting additional discovery weighs against granting the motion” where patent owner waited over four months after institution to request authorization to file a motion for additional discovery).

Conclusions

While motions for additional discovery are rarely granted, there are instances where the PTAB has granted discovery requests. As such, when drafting a motion for additional discovery, parties should discuss the Garmin factors, paying particular attention to the first and fifth factors. Additionally, parties should be cognizant of the timing of a motion, making sure to request authorization to file a motion for additional discovery as soon as possible.

The Patent Trial and Appeal Board (“the Board”) recently held that Customedia Technologies, LLC (“Customedia”) could not moot the CBM proceeding with a post-institution disclaimer of the claims found to recite a financial activity element. Dish Network Corp. v. Customedia Techs., LLC, CBM2017-00023, Paper 48 at 23 (P.T.A.B. June 11, 2018).

A patent is considered a covered business method patent if it “claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.”  AIA § 18(d)(1); 37 C.F.R. § 42.301(a) (same). The Federal Circuit has rejected the standard that claims need only be “activities ‘incidental to’ or ‘complementary to’ a financial activity.”  Unwired Planet, LLC v. Google Inc., 841 F.3d 1376, 1382 (Fed. Cir. 2016), cert. denied, No. 17-357, 2018 WL 1994803 (U.S. Apr. 30, 2018); see also Blue Calypso, LLC v. Groupon, Inc., 815 F.3d 1331, 1340-41 (Fed. Cir. 2016) (determining that patent was within “the statutory definition of CBM patent” where the claims recited “an express financial component in the form of a subsidy, or financial inducement, that encourages consumers to participate in the distribution of advertisements”).

“CBM patent review eligibility is determined based on the claims of the challenged patent as they exist at the time of the decision whether to institute.”  Facebook, Inc. v. Skky, LLC, CBM2016-00091, Paper 12 at 11 (PTAB Sept. 28, 2017) (precedential) (emphasis added).  Patent owners have successfully avoided CBM review by disclaiming claims that recite a financial product or service prior to an institution decision.  See, e.g., Commvault Systems, Inc. v. Realtime Data LLC, CBM2017-00061, Paper 10 at 6-9 (P.T.A.B. Jan. 18, 2018).  However, the Board has made clear that disclaimers made after an institution decision will not affect the Board’s jurisdiction.  See, e.g., Emerson Electric Co. v. SIPCO, LLC, CBM2016-00095, Paper 39 at 8 (P.T.A.B. Jan. 16, 2018) (“[T]he belated post-institution disclaimer of claims [reciting a financial activity element] does not affect our CBM patent review eligibility determination.”).

Here, Customedia disclaimed the dependent claims found in the institution decision as reciting financial activity elements.  Customedia argued that, regardless of whether or not the disclaimed claims met the financial product or service prong, they could not form the basis for CBM review because the claims must be treated as never having existed.  The Board rejected Customedia’s argument, stating that “[d]isclaimed claims are not considered in determining whether a patent is eligible for CBM patent review if a patent owner timely files a statutory disclaimer before institution.”  Dish Network Corp., CBM2017-00023, Paper 48 at 21 (emphasis added).  Accordingly, the Board held that Customedia’s untimely disclaimer did not deprive the Board of jurisdiction, and it went on to find that all of the challenged claims were unpatentable.

An important lesson for Patent Owners is to analyze potential claims that can be disclaimed that may form the basis for CBM jurisdiction, and if warranted file such disclaimers, before an institution decision.  As the Board has made clear, post-institution disclaimers of all financial claims are not sufficient to deprive the Board of jurisdiction or terminate the proceedings.

The Supreme Court held in SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018), that the Patent Trial and Appeal Board’s (“PTAB” or “the Board”) practice of so-called partial institutions was contrary to the statute.  The Supreme Court explained that once an inter partes review (“IPR”) is instituted, the PTAB must decide on the invalidity of all challenged claims.  But while answering one question, the Supreme Court opened a host of others, including how the U.S. Court of Appeals for the Federal Circuit should dispose of appeals involving the now-improper partial institutions.

In PGS Geophysical AS v. Iancu, No. 2016-2470, 2016-2472, 2016-2474 (Fed. Cir. June 7, 2018), the Federal Circuit (“the Court”) provided some clarity, holding that the Federal Circuit has jurisdiction to assess the merits of a final written decision of the Board despite the Board’s error in “limiting the scope of the IPRs it instituted and hence the scope of its final written decisions.” Slip Op. at 2.

In November 2014, WesternGeco filed three IPR petitions directed to PGS’s Patent No. 6,906,981.  The Board instituted review on some, but not all, of the requested grounds of invalidity, with the IPR proceeding to a final written decision.  Both parties appealed, but WesternGeco withdrew its appeal after settling, with the Director intervening under 35 U.S.C. § 143.

The Court first held that the Board’s actions had been contrary to SAS’s dictate.  The Court explained:

We read [ ] the SAS opinion as interpreting the statute to require a simple yes-or-no institution choice respecting a petition, embracing all challenges included in the petition, and we have seen no basis for a contrary understanding of the statute in light of SAS. We note that it is a distinct question (not presented here) whether, after instituting on the entire petition, the Board, in a final written decision, may decide the merits of certain challenges and then find others moot, the latter subject to revival if appellate review of the decided challenges renders the undecided ones no longer moot.

Slip Op. at 8.

The Court then turned to the threshold question of whether it possessed jurisdiction over the appeal.  The panel concluded that it did, relying on 28 U.S.C. § 1295(a)(4)(A), which provides the Federal Circuit with “exclusive jurisdiction…of an appeal from a [final] decision of …. the [Board] with respect to [an] inter partes review under title 35.” Slip Op. at 9. The panel held that the Board’s decision, while legally flawed, was nonetheless a “final agency action” under the Administrative Procedures Act, concluding that a “legal error does not mean lack of finality.” Slip Op. at 11.

Having concluded that it possessed jurisdiction, the Court concluded that it could rule on the merits.  Importantly, the Court noted that neither party sought “SAS-based relief,” remand, and the Court “uncovered no legal authority that require[ed it] sua sponte to treat the Board’s incorrect denial of institution as to some claims and grounds either as a basis for disturbing or declining to review the Board’s rulings on the instituted claims and grounds or as a basis for reopening the IPRs to embrace the non-instituted claims and grounds.”  Slip Op. at 11.  Finally turning to the merits, the Federal Circuit affirmed the Board’s final written decision.

PGS intentionally left certain questions unanswered, and hinted at the answer to others.  For example, the opinion’s language would make it seem likely that if a party (and in particular, a petitioner) were to request SAS-based relief, the Federal Circuit would be willing to grant some form of relief.  (And indeed, the Court has granted such relief in non-precedential orders.  See Nestle Purina Petcare Co. v. Oil Dri-Corp. of America, Case No. 17-1744 (Fed. Cir. June 11, 2018).  Likewise, the Federal Circuit left open the possibility that the Board could issue a final written decision that addressed some, but not all, petitioned grounds of invalidity.

Ultimately, while PGS provides some answers, the full scope of SAS’s impact on PTAB proceedings is yet to be determined.

Typically, the Patent Trial and Appeals Board (PTAB) is thought to disfavor non-patent literature—that is, “printed publications” under 35 U.S.C. § 102(b) that are not patents, patent publications, or patent applications.

To the extent that this is true, it most likely stems from the fact that members of the PTAB are, by training, used to dealing with patents, patent publications, or patent applications.  Further, it is relatively easy to determine the date of a printed publication that is a patent, patent publication, or patent application.  There can be tricky issues arising from Section 102(e), such as whether the date of a provisional application can be relied on.  However, there is not really any dispute about whether such applications were filed or when they were filed.

Not so with so-called non-patent literature.  One common area where this arises is with theses and dissertations.  If they are housed in a university library but not indexed by subject or searchable, do they qualify as “printed publications”?  What about a manuscript stored away in an attic?  These and other questions often arise in determining what qualifies as a “printed publication” under § 102(b).

In Medtronic v. Barry, No. 2017-1169, 2017-1170 (Fed. Cir. June 11, 2018), a precedential decision, the Federal Circuit confronted just this issue.  In providing an overview of the caselaw, the Federal Circuit noted that whether a document is a “printed publication” is “a case-by-case inquiry into the facts and circumstances surrounding the reference’s disclosure to members of the public.”  Slip op. at 19.  The court noted that the key to making this determination was if the reference was “publicly accessible”:

“Because there are many ways in which a reference may be disseminated to the interested public, ‘public accessibility’ has been called the touchstone in determining whether a reference constitutes a ‘printed publication’ bar under 35 U.S.C. § 102(b).” Blue Calypso, 815 F.3d at 1348 (quoting In re Hall, 781 F.2d 897, 898–99 (Fed. Cir. 1986)). “A reference will be considered publicly accessible if it was ‘disseminated or otherwise made available to the extent that persons interested and ordinarily skilled in the subject matter or art exercising reasonable diligence[] can locate it.’

Slip op. at 19.

The issue presented itself in Medtronic v. Barry because, in the underlying IPR, Medtronic sought to rely on non-patent literature.  Specifically, Medtronic sought to rely on a video entitled “Thoracic Pedicle Screws for Idiopathic Scoliosis” and slides entitled “Free Hand Thoracic Screw Placement and Clinical Use in Scoliosis and Kyphosis Surgery” (video and slides).  The video and slides were presented to spinal surgeons at various industry meetings and conferences in 2003.

The PTAB concluded in its final written decision that these were not prior art because they were accessible only to members of the “Spinal Deformity Study Group” (SDSG).  On appeal, the Federal Circuit vacated that part of the decision because the PTAB did not fully consider all the factors for determining whether the video and slides were publicly accessible.

The Federal Circuit noted that, of the factors relevant to this case, “the size and nature of the meetings and whether they are open to people interested in the subject matter of the material disclosed are important considerations. Another factor is whether there is an expectation of confidentiality between the distributor and the recipients of the materials.”  Slip op. 21-22.  One major fault of the PTAB’s decision is that it did not differentiate between one conference attended only by SDSG members and other conferences attended by other surgeons.  Also, the PTAB apparently did not address whether the disclosure to the SDSG members was confidential.  The court stated: “It may be relevant, for example, to consider the purpose of the meetings and to determine whether the SDSG members were expected to maintain the confidentiality of received materials or would be permitted to share or even publicize the insights gained and materials collected at the meetings.”  Slip op. at 22.

Because the PTAB did not consider the various case-specific factors necessary to determine whether a non-patent literature qualifies as a “printed publication”, the Federal Circuit vacated that part of the PTAB’s final written decision.  Both Petitioners and Patent Owners alike can benefit from this opinion.  Petitioners can use it to bolster their arguments that a relied-upon reference qualifies as a printed publication.  Likewise, Patent Owners can use the opinion to help identify weaknesses in such arguments.

Ignore PTAB Precedent At Your Peril

Given the popularity of AIA post-grant proceedings, many patent litigators have been newly drawn into proceedings before the Patent Trial and Appeal Board (“PTAB”).  However, parties and attorneys involved in such 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-three precedential decisions listed on the Patent & Trademark Office’s website.

On May 25, 2018, the PTAB issued a Final Written Decision in Dell Inc., v. Realtime Data LLC[1], applying its precedential decision in Ex Parte Schulhauser[2] even though the claim construction framework set forth in Schulhauser was not argued in the Petition.  Rather, the Petitioner first raised the issue of whether claims including conditional limitations should be given patentable weight pursuant to Schulhauser in the Reply.  Nevertheless, the PTAB held that it was bound to follow its precedent and the Patent Owner’s arguments based on Administrative Procedure Act (hereinafter, “APA”) concerns, due process concerns, sufficiency of notice and potential prejudice were insufficient because the PTAB granted supplemental briefing to both parties and “because Patent Owner should have been aware of Schulhauser.”[3]

As background, the PTAB’s precedential decision in Schulhauser provides the following guidance and relies on, inter alia, the following Federal Circuit decisions:

A proper interpretation of claim language, under the broadest reasonable interpretation of a claim during prosecution, must construe the claim language in a way that at least encompasses the broadest interpretation of the claim language for purposes of infringement. “[I]t is axiomatic that that which would literally infringe if later anticipates if earlier.” Bristol-Myers Squibb Co. v. Ben Venue Labs, Inc., 246 F.3d 1368, 1378 (Fed. Cir. 2001). Based on the manner in which claim 1 is written, the modified method of Kramer would literally infringe claim 1 by virtue of its performance of only the “collecting,” “comparing,” and “triggering” steps. See, e.g., Appelera Corp. v. Illumina, Inc., 375 Fed. Appx. 12, 21 (Fed. Cir. 2010) (unpublished) (affirming a district court’s interpretation of a method claim as including a step that need not be practiced if the condition for practicing the step is not met); Cyber settle, Inc. v. Nat’l Arbitration Forum, Inc., 243 Fed. Appx. 603, 607 (Fed. Cir. 2007) (unpublished) (“It is of course true that method steps may be contingent. If the condition for performing a contingent step is not satisfied, the performance recited by the step need not be carried out in order for the claimed method to be performed.”).

Id. at *5.

The Patent Owner made numerous arguments that Schulhauser was inapplicable and inapposite

The Patent Owner argued that the PTAB was legally foreclosed from finding unpatentability based on Schulhauser for various reasons.  First, it argued that Petitioner did not timely present an argument or theory based on Schulhauser and therefore waived the argument.  Patent Owner argued that Schulhauser’s precedential designation predated the Petition, but the Petition did not raise the issue.  Further, the Patent Owner argued that it did not have a full and fair opportunity to develop responsive evidence or argument.  Additionally, Patent Owner argued that applying Schulhauser in the context of the inter partes review (hereinafter, “IPR”) proceeding would be arbitrary and capricious, and unconstitutional because the Schulhauser decision arose in the context of a pending prosecution during which a patent applicant can address Schulhauser by simply amending claims to avoid limitations that will not be given patentable weight.

Furthermore, Patent Owner argued that during prosecution it had no notice from the Office of Schulhauser or the prospect that certain limitations of its claims would be given no patentable weight.  Patent Owner argued that during reexamination of the patent at issue, the Office gave the limitations at issue patentable weight.  Patent Owner argued that it maintained the limitations on that basis, and made significant investments and expenditures to enforce and defend the claims.  Patent Owner argued that the Office must undertake notice and comment rulemaking to apply the rule of Schulhauser to IPRs, and that the Office has not issued any rule, regulation, or policy complying with the requirements of the APA that extends Schulhauser to issued claims later challenged in an IPR.

Patent Owner argued that Schulhauser is directed to prosecution, not IPRs. Patent Owner also argued that there is no express Congressional grant to support such retroactive rulemaking, and it is thus foreclosed by the APA and United States Supreme Court precedent.[4]  And Patent Owner argued that applying Schulhauser in this case would violate the Due Process Clause because Schulhauser only arose here after the time to bring a motion to amend had passed.  Further, Patent Owner argued that depriving it of the weight that the Office once afforded to its issued claim limitations would constitute an unlawful taking.

Patent Owner also argued that Schulhauser rests entirely on two non-precedential Federal Circuit decisions that do not support its holding, and it is legally incorrect. Patent Owner argued that the Board should, instead, direct its attention to Applera v. Illumina, 375 F. App’x. 12, 21 (Fed. Cir. 2010) (hereinafter, “Applera”).  Patent Owner argued that Applera held that all limitations were practiced, not that the claim could be met even if some limitations were never practiced.

Patent Owner also argued that the broadest reasonable interpretation under Federal Circuit standards prohibits a construction that reads out limitations explicitly recited in a claim, or that causes the claim to read onto prior art approaches expressly taught away from in the specification.[5]

The PTAB found Patent Owner’s arguments unconvincing and that precedent must be followed

The PTAB held that its Standard Operating Procedures (“SOP”) require it to follow its precedential decisions. PTAB SOP No. 2, Rev. 9, 3 (Sept. 22, 2014) (“A precedential opinion is binding authority in subsequent matters involving similar facts or issues.”).  To address APA concerns, due process concerns, the sufficiency of notice and potential prejudice, the PTAB explained that it allowed the parties the additional opportunity to brief the issue.  In view of the additional briefing, the PTAB found that the Patent Owner did not identify any Federal Circuit cases that overruled Schulhauser.  The PTAB found it informative that Petitioner cited another IPR decision in which the panel, in reliance on the PTAB’s SOP, authorized additional briefing in a sua sponte post-hearing order to resolve whether Schulhauser applies to the conditional method limitations recited in the claims.[6]

With regard to Patent Owner’s argument that Schulhauser arose in the context of prosecution, such that a patentee could have worked around Schulhauser by simply amending claims to avoid limitations that would not be given patentable weight, the PTAB held that nothing in Schulhauser explicitly or implicitly limits its holding only to prosecution, that Patent Owner should have been aware of Schulhauser since at least the time of Petitioner’s Reply, and that Patent Owner was free to seek leave to file a late motion to amend the claims.  The PTAB pointed out that the motion to amend deadline is not a statutory deadline and can be adjusted by the panel, but the Patent Owner did not contact the PTAB regarding amending the claims.

Accordingly, the PTAB held that because Schulhauser is precedential and applies to IPRs, it should apply given its potential applicability to the construction of the claims at issue.

The PTAB applied Schulhauser in construing the claims and found them to be obvious

Having found that Schulhauser was applicable in an IPR setting and to this IPR in particular, despite not having been raised in the Petition, the PTAB applied the broadest reasonable construction in light of the specification.  It analogized the claims involved in the IPR to those in Schulhauser, in which illustrative method claim 1 recited if A, then perform step X; if not A, then perform step Y.  The PTAB found that both of the challenged claims required that only one condition be satisfied in the prior art to render the challenged claims anticipated or obvious.

Patent Owner argued that interpreting the claims to be met by ignoring the conditional clauses would be exactly what the Specification teaches against and cannot be correct under the broadest reasonable interpretation standard.  The PTAB disagreed, finding that the Background of the Specification described “limitations” with using content dependent compression, but did not teach away because it merely expresses a general preference for an alternative invention but does not “criticize, discredit, or otherwise discourage” investigation into the invention claimed.[7]   The PTAB explained that even if the broadest reasonable construction in light of the specification were not dictated by Schulhauser, construing claims 104 and 105 based on the Specification would have led to the same construction because certain flow charts in Figures 14A-D illustrated a logical path that did not use the conditional part of the claimed method.  Accordingly, the PTAB held that because the broadest reasonable construction in light of the specification specifically teaches that one aspect of the invention logically includes a method as construed by the PTAB, then the Specification cannot be said to teach against that construction.

Finally, with regard to Patent Owner’s argument that the only expert testimony of record demonstrates that all of the limitations of the claims must be met under Petitioner’s obviousness theory, or else obviousness cannot be found, the PTAB held that the application of Schulhauser to claim construction is a matter of law, whereas expert testimony is used to aid a judge’s comprehension of claim language that is unknown to a judge rather than such matters of law.

Accordingly, the Board applied Schulhauser to determine that only one of the bolded conditions needed to be satisfied in the prior art to render the claims anticipated or obvious:

  1. A computer implemented method for compressing data, comprising:

analyzing data within a data block of an input data stream to identify one or more data types of the data block, the input data stream comprising a plurality of disparate data types;

performing content dependent data compression with a content dependent data compression encoder if a data type of the data block is identified; and

performing data compression with a single data compression encoder, if a data type of the data block is not identified;

wherein the analyzing of the data within the data block to identify one or more data types excludes analyzing based only on a descriptor that is indicative of the data type of the data within the data block.

  1. A computer implemented method comprising:

receiving a data block in an uncompressed form, said data block being included in a data stream;

analyzing data within the data block to determine a type of said data block; and

compressing said data block to provide a compressed data block;

wherein if one or more encoders are associated to said type, compressing said data block with at least one of said one or more encoders, otherwise compressing said data block with a default data compression encoder, and

wherein the analyzing of the data within the data block to identify one or more data types excludes analyzing based only on a descriptor that is indicative of the data type of the data within the data block.

Applying the prior art to the foregoing claim interpretations, the PTAB found that the Petitioner had established by a preponderance of the evidence that the claims were unpatentable because they would have been obvious over the prior art.

Takeaways and conclusions

As discussed here, the U.S. Patent & Trademark Office has proposed to change the claim construction standard used in America Invents Act (“AIA”) reviews to the standard applied in the federal district courts and International Trade Commission (“ITC”) proceedings. Under the proposed revision, the PTAB would no longer use the “broadest reasonable interpretation” standard and would instead construe patent claims in accordance with the principles that the Federal Circuit articulated in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc).  If the new rule is adopted, it will be interesting to see how the PTAB reconciles the changed standard with its precedent in Schulhauser.  The PTAB may seek to avoid an argument as to a conflict between its Schulhauser precedent and the Phillips standard by instead relying on the Federal Circuit decisions cited in Schulhauser (and their progeny) rather than the Schulhauser decision itself.

More generally, parties in AIA proceedings should be aware of the PTAB’s precedential decisions and carefully consider whether any of those decisions may be impactful given the PTAB’s SOP to follow its precedent even when the issue is not raised in the Petition.  Otherwise, parties may be surprised by the emergence of detrimental precedent that the PTAB will dutifully follow.

[1] Case IPR2017-00176, Paper 35 (P.T.A.B. May 25, 2018).

[2] 2016 WL 6277792, No. 2013-007847 (PTAB 2016) (precedential) (hereinafter, “Schulhauser”).

[3] Dell Inc., v. Realtime Data LLC, Paper 35 at p. 12.

[4] citing Bowen v. Georgetown Univ. Hospital, 488 U.S. 204, 208–09 (1988).

[5] citing In re Suitco Surface, 603 F.3d 1255, 1260–61 (Fed. Cir. 2010); In re Smith, 871 F.3d 1375, 1382–84 (Fed. Cir. 2017); In re NTP, Inc., 654 F.3d 1279, 1287–88 (Fed. Cir. 2011).

[6] Reactive Surfaces LTD., LLP, v. Toyota Motor Corp., IPR2016-01914, Paper 60 (PTAB Jan. 12, 2018).

[7] Quoting DePuy Spine, Inc. v. Medtronic Sofarmor Danek, Inc., 567 F.3d 1314, 1327 (Fed. Cir. 2009).

No matter how groundbreaking, innovative, or brilliant the advance, innovators in mathematical techniques, particularly in the finance field, may think twice about seeking patent protection in view of the Federal Circuit’s recent precedential Section 101 decision in SAP America, Inc. v. Investpic, LLC, No. 2017-2081 (Fed. Cir. May 15, 2018).

There, claim 1 of U.S. Patent No. 6,349,291 is directed to calculating, analyzing, and displaying investment data by: (a) selecting a sample space, wherein the sample space includes at least one investment data sample; (b) generating a distribution function using a re-sampled statistical method and a bias parameter, wherein the bias parameter determines a degree of randomness in a resampling process; and (c) generating a plot of the distribution function.  In May 2017, the district court granted SAP’s motion for judgment on the pleadings, finding that the claims were directed to “performing statistical analysis,” and that the claims “add no inventive concept to the mathematics to which they are directed—merely (a) further-specified mathematical calculations and (b) pre- and post-solution activities like use of the internet or generic computer hardware.”  Op. at 6.

The Federal Circuit affirmed, explaining that under step one of the Alice analysis, the claims are directed to “selecting certain information, analyzing it using mathematical techniques, and reporting or displaying the results of the analysis,” which “is all abstract.”  Op. at 8.  At step two of Alice, the Federal Circuit “readily conclude[d] that there is nothing in the claims sufficient to remove them from the class of subject matter ineligible for patenting and transform them into an eligible application.”  Op. at 11.

What is perhaps most interesting about SAP America is the Court’s guidance at the very end of the opinion:

“In the absence of the required ‘inventive concept’ in application, the claims here are legally equivalent to claims simply to the asserted advance in the realm of abstract ideas—an advance in mathematical techniques in finance.  Under the principles developed in interpreting § 101, patent law does not protect such claims, without more, no matter how groundbreaking the advance.  An innovator who makes such an advance lacks patent protection for the advance itself.  If any such protection is to be found, the innovator must look outside patent law in search of it, such as in the law of trade secrets, whose core requirement is that the idea be kept secret from the public.”

Op. at 13.

While the Federal Circuit has made it abundantly clear that an advance “in mathematical techniques in finance” is patent-ineligible subject matter, it is arguably less clear as to whether advances in mathematical techniques in other fields, such as in artificial intelligence and machine learning, constitute patent-eligible subject matter.

The Court, however, did provide two useful data points.  First, in characterizing McRO Inc. v. Bandai Namco Games America Inc., 837 F.3d 1299 (Fed. Cir. 2016), the Court explained that the “claimed improvement was to how the physical display operated (to produce better quality images), unlike (what is present here) a claimed improvement in a mathematical technique with no improved display mechanism.”  Op. at 9.  Second, the Court characterized the claims at issue in Thales Visionix Inc. v. United States, 850 F.3d 1343, 1348-49 (Fed. Cir. 2017) as being directed to “a physical tracking system,” where the “use of mathematics to achieve an improvement no more changed the conclusion that improved physical things and actions were the subject of the claimed advance than it did in Diamond v. Diehr, 450 U.S. 175 (1981).”  Op. at 10.

These two examples indicate that a practical application of mathematics to achieve a “physical” improvement to a device (e.g., a display) may indeed constitute patent-eligible subject matter.  Otherwise, mathematical innovations directed to a mathematical technique itself and/or a purely non-physical result may be better protected as a trade secret.

Following the SAS Institute decision by the Supreme Court (which we covered in a separate post on the PTAB Law blog), the U.S. Patent and Trademark Office (“PTO”) must now address every challenged claim in a trial if a trial is instituted as to any one claim.  The PTO has further decided that it will address every ground raised where trial is instituted even though SAS does not appear to require as much.

Now that all challenged claims will be involved post-institution, Patent Owners should consider limiting their preliminary response to focusing at most on the independent claims that are challenged. Prior to SAS Institute, there could be strategic value in challenging institution of a dependent claim if that claim were at issue in a related litigation. For example, denial of institution as to even one claim could affect the calculus involving a stay, and could also promise to keep litigation alive following a Patent Trial and Appeal Board (“PTAB” or “the Board”) trial. However, as the PTO must now consider all claims challenged if any one claim results in institution, then saying anything about a dependent claim at the preliminary response stage would only give the Petitioner a preview of the Patent Owner’s eventual arguments and also potentially make those arguments less effective if the Board rejects them at the institution phase. Additionally, there is little reason to argue for dependent claims.  If any claim is instituted, all claims will be instituted; so arguments that affect only a subset of the claims will not affect the Board’s institution decision.

That said, while this is the conventional wisdom so far, in the immediate aftermath of SAS Institute there is at least one reason why addressing some dependent claims could be strategic at the preliminary response stage.  In particular, where the PTO’s discretion under Section 325(d) is a basis for challenging institution, there may be strategic value in arguing for dependent claims.  The PTO can no longer deny institution as to particular challenged claims, but if it decides under Section 325(d) that there is a discretionary basis to deny institution, , then arguably the Board ought to deny institution as to all claims under SAS Institute.

An example of this would be where there is a follow-on IPR petition that addresses additional claims and that comes after previous institution decisions addressing some of those claims. One factor that the Board uses in exercising its discretion to deny institution is if a Petitioner has used a previous institution decision as a roadmap in crafting a follow-on petition. This is thought to be prejudicial to the Patent Owner and improper gamesmanship by the Petitioner.

Accordingly, if a follow-on petition challenges a claim that was previously denied institution (e.g. from a pre-SAS Institute institution decision denying a specific claim), or otherwise seeks to use another IPR proceeding to tactically gain an improper advantage, a Patent Owner may argue that the entire petition should be denied.  That is, because the Board no longer has the power to deny as to a specific claim, and because the Patent Owner would be prejudiced by institution as to a specific claim, then the Board may use its discretion to deny institution of all claims.

Strategies following SAS Institute are still being refined, and it remains to be seen how the Board will implement the PTO’s post-SAS Institute guidance in practice. But Patent Owners and Petitioners alike should consider the interplay between Section 325(d) and SAS Institute as one variable affecting their respective strategies.