On Wednesday, May 9, 2018, the U.S. Patent and Trademark Office published a notice of proposed rulemaking in the Federal Register[1], announcing its plans 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 Patent Trial and Appeal Board (“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).

As directed by 37 C.F.R. 42.100(b), 42.200(b), and 42.300(b), the PTAB currently construes unexpired patent claims and proposed claims in AIA trial proceedings by giving the claim “its broadest reasonable construction in light of the specification of the patent in which it appears” (the “BRI” standard)[2].  While this BRI standard is consistent with longstanding agency practice and examination procedure, it differs from the claim construction standard used in civil actions and ITC proceedings. In the federal district courts and the ITC, the claim construction principles set forth in the Phillips line of cases controls under which claims are given their ordinary and customary meaning as understood by one of ordinary skill in the art in view of the specification and the prosecution history pertaining to the patent[3]. Where the ordinary and customary meaning of a term is disputed, the courts will first look to the specification for guidance as to the term’s definition, followed by the prosecution history, which can “inform the meaning of the claim language by demonstrating how the inventor understood the invention and whether the inventor limited the invention in the course of prosecution, making the claim scope narrower than it would otherwise be.”[4] Extrinsic evidence, such as expert testimony and dictionary definitions, may also be helpful, although it is less significant than the intrinsic evidence.

This difference in claim construction standards between the PTAB and federal district courts means that decisions construing the same claim in different forums may produce different results. The discrepancy tends to be disadvantageous for patent owners, who must show infringement with a claim construction standard that is potentially much narrower than that which may be used to invalidate the patent before the PTAB. A number of attorneys and bar associations, including the American Intellectual Property Law Association, have also expressed concerns of the unfair practice and a desire to have the same standard applied across the board.[5]

In addition to increasing fairness, aligning the PTAB claim construction standard with that used in civil actions is expected to lead to greater uniformity and predictability in the patent system. One study found that nearly 87% of patents at issue in an AIA trial proceeding were also the subject of a district court litigation, revealing significant overlap between the forums, and supporters of the new claim construction standard believe that it will help increase judicial efficiency overall.[6] Because the proposed rule change will also include a provision that the PTAB will consider any prior claim construction determination concerning a term of the involved claim in a civil action or ITC proceeding that is timely made of record in an IPR, PGR, or CBM proceeding, claim construction before the PTAB will be streamlined and more predictable for all parties involved. This proposed approach ultimately brings the AIA administrative proceedings closer to what Congress intended: quick and cost-effective alternatives to litigation.

While this shift in claim construction standards at the PTAB may impact strategy decisions and forum selection for both litigants and petitioners, and may render decisions like the Supreme Court’s upholding of the BRI standard at the PTAB in Cuozzo v. Lee obsolete, the change is not expected to drastically affect validity determinations. Although the new standard is narrower, practitioners find that BRI and the Phillips standards do not differ significantly in most instances, and a change to Phillips would not necessarily mean that any more patents will be upheld at the PTAB.[7] What will be interesting is the effect a PTAB claim construction may have on co-pending district court litigation.  Under B&B Hardware v. Hargis Industries, issue preclusion may apply.  Should the new standard go into effect, issue preclusion will very likely be an important variable that patent owners and petitioners consider as they develop their strategies.

 

[1] Changes to the Claim Construction Standard for Interpreting Claims in Trial Proceedings Before the Patent Trial and Appeal Board, 83 Fed. Reg. 90 at 21221-21226 (May 9, 2018), available at https://www.gpo.gov/fdsys/pkg/FR-2018-05-09/pdf/2018-09821.pdf .

[2] 37 C.F.R. 42.100(b); 37 C.F.R. 42.200(b); 37 C.F.R. 42.300(b).

[3] Phillips v. AWH Corp., 415 F.3d 1303, 1312-14 (Fed. Cir. 2005)(en banc) (“word of a claim are generally given their ordinary and customary meaning,” which is “the meaning that the term would have to a person of ordinary skill in the art in question at the time of the invention, i.e., as of the effective filing date of the patent application.”).

[4] Id. at 1317.

[5] Matthew Bultman, USPTO Wants AIA Claim Construction to Match District Court (May 8, 2018), available at https://www.law360.com/ip/articles/1041426/uspto-wants-aia-claim-construction-to-match-district-court?nl_pk=5322242a-d1b4-4b1f-9c03-364988e91a34&utm_source=newsletter&utm_medium=email&utm_campaign=ip.

[6] Saurabh Vishnubhakat, Arti K. Rai & Jay P. Kesan, Strategic Decision Making in Dual PTAB and District Court Proceedings, 31 Berkeley Tech. L.J. 45 (2016), available at https://ssrn.com/ abstract= 2731002.

[7] Matthew Bultman, The Impact of Changing the PTAB’s Claim Construction Test (April 23, 2018), available at https://www.law360.com/articles/1036401/the-impact-of-changing-the-ptab-s-claim-construction-test.

Yesterday, the U.S. Supreme Court issued two important decisions relating to inter partes review (IPR) proceedings before the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office (PTO).

Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, U.S., No. 16-712, 4/24/2018

In Oil States, the Supreme Court ruled that IPR proceedings are not unconstitutional and that the PTAB has the authority to invalidate issued patents.  Specifically, the Court characterized IPRs as a “reconsideration of the Government’s decision to grant a public franchise,” and as such, a question pertaining to “public rights.”  And, because “the decision to grant a patent is a matter involving public rights – specifically, the grant of a public franchise,” reconsideration of that grant is permissibly assigned to the PTO by Congress without violation of Article III.   The distinction that IPR “occurs after the patent has issued” was deemed to “not make a difference here,” as patents remain subject to the PTO’s authority to “cancel outside of an Article III court.”

In upholding the IPR process and the PTAB’s authority, the Court rejected the argument that prior decisions recognizing patent rights as the “private property of the patentee” rendered the IPR process unconstitutional, and disagreed with the broader proposition that patent validity, by nature, “must be decided by a court.”  The Court disagreed with “the dissent’s assumption that, because courts have traditionally adjudicated patent validity in this country, courts must forever continue to do so.”  The Court also disagreed with the argument by Oil States that because the PTO “uses court-like procedures,” it is improperly exercising judicial power.

Additionally, because the court determined that Congress has properly assigned inter partes review to the PTO, there is no violation of the Seventh Amendment by such proceedings.

Finally, the court emphasized “the narrowness of [the] holding,” explaining that: (1) it did “ not address whether other patent matters, such as infringement actions, can be heard in a non-Article III forum,” (2) it did not need to consider whether IPR would be constitutional “without any sort of intervention by a court at any stage of the proceedings,” and (3) this decision “should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.”  The Court specifically noted that “Oil States [did] not challenge the retroactive application of inter partes review” to patents issued before the AIA, and did not raise “a due process challenge.”

The bottom line from the Supreme Court’s decision in Oil States is that IPRs and the PTAB’s authority to invalidate patents remain unchanged, at least for now.  We will surely see newly filed petitions for certiorari seeking review by the Supreme Court challenging the IPR process and the PTAB’s authority based on the Due Process Clause and/or Takings Clause, as well as the constitutionality of subjecting patents issued prior to the AIA to inter partes review.

SAS Institute Inc. v. Iancu, U.S., No. 16–969, 4/24/2018

In SAS, the Supreme Court held that when the PTAB institutes IPR of a patent, it is required to decide the patentability of all of the claims challenged by the petitioner.  The Court specifically rejected the PTAB’s “partial institution” power, indicating that the decision as to whether to institute is “a binary choice—either institute review or don’t.”

The Court’s decision is based on the plain text of 35 U.S.C. § 318(a), which provides that the PTO “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.”  The court explained that “[t]his directive is both mandatory and comprehensive,” and “[i]n this context, as in so many others, ‘any’ means ‘every.’” As such, the PTO “cannot curate the claims at issue but must decide them all.”  In doing so, the Court disagreed with the Director’s view that “he retains discretion to decide which claims make it into an inter partes review and which don’t.”

Referring to 35 U. S. C. § 314(a), the Court further explained that, before instituting review, the Director must determine, based on the parties’ papers, “that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.”  The court reasoned that this section “does not require the Director to evaluate every claim individually,” but rather, “it simply requires him to decide whether the petitioner is likely to succeed on ‘at least 1’ claim.” Thus, once the “single claim threshold” is met, “it doesn’t matter whether the petitioner is likely to prevail on any additional claims; the Director need not even consider any other claim before instituting review.”  The Court concluded that the statute anticipates a process “where a reasonable prospect of success on a single claim justifies review of all.”  Section 314 only allows the Director to decide “whether” to institute, not “whether and to what extent.”  To this end, the Court contrasted the IPR statute with the ex parte reexamination statute, which allows the Director to institute (or not) on a claim-by-claim basis.

Importantly, the Court rejected the Director’s argument that the Court “lack[ed] the power” to forbid the partial institution practice based on § 314(d) and the Cuozzo decision.  In doing so, the Court rejected the argument that these authorities broadly “foreclos[e] judicial review of any legal question bearing on the institution of inter partes review.”  The court reiterated the “strong presumption” in favor of judicial review, and stated that “[i]f a party believes the Patent Office has engaged in ‘shenanigans’ … judicial review remains available consistent with the Administrative Procedure Act.”

Lastly, and consistent with the Court’s prior discussion of the PTAB’s duty to decide the patentability of all challenged claims, the Court held that if an IPR is instituted and not dismissed, at the end of the proceeding the final written decision issued by the PTAB must address the patentability of every patent claim challenged by the petitioner.

For the most part, the SAS decision appears to be a win for patent challengers.  To gain institution of an IPR for all challenged claims, a petitioner need only establish a reasonable likelihood of prevailing on a single claim.  For example, if the petitioner challenges ten other claims in the petition, the PTAB, even if it never considered those additional ten claims in deciding to institute, must determine the patentability of those ten claims along with the one it considered in instituting the IPR.   One possible upside for patent owners is that this should make clear that any estoppel will apply to all challenged claims, and may cause petitioners to be more careful in determining which claims to challenge.  Moreover, the decision appears to suggest more rigorous judicial review of any PTO “shenanigans” with respect to the IPR process.

Another interesting—and likely complicating—issue is how this decision will affect currently pending IPRs involving partial institutions.  Right now it is anybody’s guess.

In an attempt to challenge the patentability of an issued claim, petitioners every so often come across a prior art reference that discloses all the recited features of the claim at-hand except for one limitation.  Rather than bringing in another reference to teach that one limitation, petitioners sometimes merely refer to the knowledge and creativity possessed by one of ordinary skill in the art to supply the missing limitation.

The Supreme Court notably approved this approach in KSR Int’l Co. v. Teleflex Inc.[1] by holding that in an obviousness analysis, “a court can take account … the inferences and creative steps that a person of ordinary skill in the art would employ.”  The Supreme Court further noted that “[a] person of ordinary skill in the art is also a person of ordinary creativity, not an automaton.”[2]  Thus, in making an obviousness determination, one may look outside the explicit disclosure of the cited art to supply a motivation to combine or fill in a missing limitation.

In light of KSR, one may initially assume that simply depending on the creativity and common sense possessed by one of ordinary skill in the art to supply a missing limitation in the cited reference is a sound strategy.  The Federal Circuit, however, has cautioned against this sort of reliance on “ordinary creativity” and “common sense” as a gap-filler for a missing limitation.  Most recently, in DSS Tech. Mgmt. v. Apple Inc., the Federal Circuit provided further guidance on the limits of invoking “ordinary creativity” in an obviousness analysis.

Background

In DSS, a divided panel of the Federal Circuit reversed a PTAB (or “the Board”) decision nixing claims 1-4 and 9-10 of U.S. Patent No. 6,128,290 (“the ’290 patent”) owned by DSS Technology Management, Inc. (“DSS”). The claims of the ’290 patent are directed to data network systems for effecting coordinated operation between a server microcomputer unit and multiple peripheral devices.  The claims require that transmitters in both the microcomputer unit and the peripheral devices be energized at select time intervals by operating in a low duty cycle pulsed mode, which ultimately reduce the power consumed by the batteries in both the microcomputer unit and the peripheral devices.

PTAB Proceedings

After being sued by DSS for infringement, Apple Inc. (“Apple”) filed two petitions for inter partes review (“IPR”) challenging the patentability of the ’290 patent by alleging that two sets of claims were obvious over U.S. Patent No. 5,241,542 to Natarajan et al. (“Natarajan”) and U.S. Patent No. 4,887,266 to Neve et al. (“Neve”).  During the IPR proceedings, the Board’s obviousness analysis focused primarily on Natarajan.

Natarajan relates to a digital data communication system comprising a base station and one or more mobile stations.  Natarajan describes that the mobile stations operate according to a “scheduled access multi-access protocol” that enable the transceivers in the mobile stations to consume power only when actively transmitting or receiving a message to and from the base station.

With respect to claim 1, DSS conceded that all but one limitation was disclosed by the combination of Natarajan and Neve.  Specifically, DSS argued that the cited art failed to disclose or suggest the recited feature “said server … transmitters being energized in low duty cycle RF bursts” because only the mobile units, not the base station of Natarajan, operate in “low duty cycle RF bursts.”

In its final written decision, the Board sided with Apple and found that all the challenged claims were obvious over Natarajan, in view of Neve.  While the Board acknowledged that Natarajan failed to disclose a base station operating in “low duty cycle RF bursts,” the Board found that it would have been obvious to have the base station of Natarajan operate in an analogous manner.  The Board supported its position by asserting that a skilled artisan is a person of ordinary creativity and that there was no persuasive evidence of record demonstrating that it would have been unusually difficult for one of ordinary skill in the art to make such modification to the base station of Natarajan.

Appeal

On appeal, the sole issue was whether the Board erred in finding that it would have been obvious to modify the base station transmitter in Natarajan to be “energized in low duty cycle RF bursts.”  The majority (i.e., O’Malley, J., and Reyna, J.) determined that the Board failed to provide sufficient explanation for its obviousness finding, and therefore, reversed the Board’s decision finding the ’290 patent unpatentable.

In determining that the Board failed to provide sufficient explanation for its obviousness finding, the majority equated the Board’s application of “ordinary creativity” to the reliance on “common sense” as a gap-filler in an obviousness analysis.  The majority further explained that while “common sense and common knowledge have their proper place in the obviousness inquiry … there are at least three caveats to note in applying ‘common sense’ in an obviousness analysis.”[3]  “First, common sense is typically invoked to provide a known motivation to combine, not to supply a missing claim limitation.”[4]  Second, common sense is invoked to fill in a missing limitation only when “the limitation in question was unusually simple and the technology particularly straightforward.”[5]  Third, referencing to common sense in an obviousness analysis should not be used as a “wholesale substitute for reasoned analysis and evidentiary support, especially when dealing with a limitation missing from the prior art references specified.”[6]

With this framework in mind, the majority noted that the Board invoked “ordinary creativity” to supply a missing claim limitation, “said server … being energized in low duty cycle RF bursts.”  The majority found that the claim limitation at-issue was not unusually simple and that the wireless communication technology at-hand was not particularly straightforward.  The majority further found that the Board’s analysis contained in a single paragraph was insufficient.  In particular, the majority noted that the Board failed to consider the different transmission requirements imposed by the multi-access protocol of Natarajan on the base station and the mobile units, and that the Board failed to analyze how the proposed modification to the base station of Natarajan would account for the different transmission requirements between the base station and the mobile units.  Accordingly, the majority found that the Board “relied on ‘ordinary creativity’ as a wholesale substitute for reasoned analysis and evidentiary support,” thereby failing to provide an adequate explanation for its obviousness conclusion.[7]

In the dissenting opinion, Judge Newman disagreed with the majority by finding that the Board’s explanation was sufficient and suggesting that in the event that the Board’s findings were deemed inadequate, the proper appellate response would be to remand.

Future Implications

Moving forward, petitioners should be mindful in supplying a missing limitation by “common sense” or “ordinary creativity.”  Before invoking “common sense” or “ordinary creativity” to supply the missing limitation, petitioners should assess the complexity of the technology at-hand and determine the significance of the missing limitation.  If the relevant technology is not straightforward and the missing limitation plays a major role in the claimed subject matter, petitioners should consider relying on the teachings of another reference to supply the missing limitation, either as a combination of references under § 103 or as support for their expert’s statement that adding such as limitation to the prior are would have been obvious to a person of skill in the art.

 

[1] 550 U.S. 398, 418 (2007).

[2] Id. at 421.

[3] DSS Tech. Mgmt. v. Apple Inc., No. 2016-2523, slip op. at p. 11 (Fed. Cir. Mar. 23, 2018) (quoting Arendi S.A.R.L. v. Apple Inc., 832 F.3d 1355, 1361 (Fed. Cir. 2016)).

[4] Id.

[5] Id.

[6] Id.

[7] Id. at pp. 16-17.

Since the Federal Circuit’s October 5, 2017 decision in Amgen Inc. v. Sanofi[1] overruling the so-called “newly characterized antigen” test for written description under 35 U.S.C. 112, patent challengers in the pharmaceutical and biotechnology fields have gained powerful tools for attacking antibody claims for lack of adequate written description.  More broadly, patent challengers are likely to extrapolate the court’s findings to support various types of attacks on other types of pharmaceutical and biotechnology claims.

Section 112 of 35 U.S.C. requires that the specification “contain a written description of the invention … in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains … to make and use the same….”  The Federal Circuit has previously explained that this requirement seeks to ensure “that the inventor actually invented the invention claimed” and that the specification provides a “precise definition” for a claim to a genus via disclosure of “a representative number of species falling within the scope of the genus or structural features common to the members of the genus so that one of skill in the art can ‘visualize or recognize’ the members of the genus.”[2]

The “newly characterized antigen” test, as articulated by the U.S. Patent & Trademark Office (“PTO”) in Manual of Patent Examining Procedure (“MPEP”) § 2163 provides the following guidance:

Although structural formulas provide a convenient method of demonstrating possession of specific molecules, other identifying characteristics or combinations of characteristics may demonstrate the requisite possession. As explained by the Federal Circuit, “(1) examples are not necessary to support the adequacy of a written description; (2) the written description standard may be met … even where actual reduction to practice of an invention is absent; and (3) there is no per se rule that an adequate written description of an invention that involves a biological macromolecule must contain a recitation of known structure.” Falkner v. Inglis, 448 F.3d 1357, 1366, 79 USPQ2d 1001, 1007 (Fed. Cir. 2006); see also Capon v. Eshhar, 418 F.3d at 1358, 76 USPQ2d at 1084 (“The Board erred in holding that the specifications do not meet the written description requirement because they do not reiterate the structure or formula or chemical name for the nucleotide sequences of the claimed chimeric genes” where the genes were novel combinations of known DNA segments.). For example, disclosure of an antigen fully characterized by its structure, formula, chemical name, physical properties, or deposit in a public depository provides an adequate written description of an antibody claimed by its binding affinity to that antigen, if “generating the claimed antibody is so routine that possessing the [antigen] places the applicant in possession of an antibody.” Centocor Ortho Biotech, Inc. v. Abbott Labs.,636 F.3d 1341, 1351-52, 97 USPQ2d 1870, 1877 (Fed. Cir. 2011), distinguishing Noelle v. Lederman, 355 F.3d 1343, 1349, 69 USPQ2d 1508, 1514 (Fed. Cir. 2004) (holding there is a lack of written descriptive support for an unknown antibody defined by its binding affinity to an antigen that itself was not adequately described). Centocor concerned claims to antibodies with specific properties, including high affinity to a particular antigen, which was characterized in the prior art. The patent disclosed the antigen, but did not disclose any antibodies with the specific claimed properties. The court held that the claimed antibodies were not adequately described because the generation of such antibodies was not possible using conventional, routine or well-developed technology as of the priority date of the patent.

MPEP § 2163(II)(A)(3)(a)(emphasis added).

Reacting to the Federal Circuit’s decision, on February 22, 2018, the PTO issued a memorandum to the Patent Examining Corps that the “newly characterized antigen” test should not be used in determining whether there is adequate written description under 35 U.S.C. § 112(a) for a claim drawn to an antibody, even when preparation of such an antibody is routine and conventional.

The Federal Circuit explained that this test was contrary to the law because it allows patentees to claim antibodies by describing something that is not the invention, i.e., the antigen, and thereby contradicts the statutory “quid pro quo” of the patent system where “one describes an invention,  and, if the law’s other requirements are met, one obtains a patent.”[3]  The Federal Circuit noted that Congress has not created a special written description requirement for antibodies as it has, for example, for plant patents.[4]  Further, the Federal Circuit explained that it could not conclude that the underlying science has established that a finding of routine or conventional production equates to the required description of the claimed products because the Court “would have to declare a contested scientific proposition to be so settled as to be entitled to judicial notice.”  Fed. R. Evid. 201(b).  As such, the Federal Circuit held that an adequate written description must contain enough information about the actual makeup of the claimed products—“a precise definition, such as by structure, formula, chemical name, physical properties, or other properties, of species falling within the genus sufficient to distinguish the genus from other materials,” which may be present in “functional” terminology only when the art has established a correlation between structure and function. This is in contrast to cases in which it has been disputed that knowledge of the chemical structure of an antigen gives the required kind of structure-identifying information about the corresponding antibodies.

Furthermore, in challenging the patent in district court, Sanofi sought to introduce post-priority date evidence to show that the patent purportedly did not disclose a representative number of species.  In reversing the district court’s exclusion of that evidence, the Federal Circuit explained that the use of post-priority-date evidence to show that a patent does not disclose a representative number of species of a claimed genus is a proper means for challenging written description.

Patent challengers will likely feel emboldened to attack claims beyond those in the antibody context on various broader grounds by extrapolating the Federal Circuit’s holdings in Amgen.

Claims that specify claim elements functionally rather than structurally are subject to attack for lack of written description where the art has not established a correlation between structure and function.  By reading the decision as requiring that an established correlation comply with Fed. R. Evid. 201(b), i.e., be a fact that is either “generally known” or “accurately and readily [discernible] from sources whose accuracy cannot reasonably be questioned,” patentees will have difficulty meeting this high bar when challenged.  Patent challengers can attack claims for lack of written description by contesting that there is an art-established correlation between structure and function.  Particularly, the decision encourages patent challengers to generate post-priority date evidence that the patent does not disclose a representative number of species, including evidence of species that fall within the claimed genus but are not disclosed by the patent.  In other words, patent challengers are encouraged to attack claims for lack of written description by submitting evidence that one of skill in the art could not have “visualized or recognized” the members of the claimed genus based on the specification disclosures.

While traditionally analyzed in the context of the enablement requirement of 35 U.S.C. § 112, one may extrapolate the foregoing analysis to attack written description support of patents in which in vitro data is disclosed in the specification but the claims encompass in vivo methods, or where animal model data is disclosed in the specification but the claims are directed to human treatment methods:

  1. Method of treatment claims supported by in vitro data may be subject to attack for lack of written description where an argument can be made that the art has not established a correlation between in vitro activity and in vivo Thus, patent challengers can attack claims for lack of written description by contesting that there is an art-established correlation between in vitro activity and in vivo efficacy. Particularly, the decision encourages patent challengers to conduct testing to find species within the claimed genus that do not have correlative in vivo activity and to use that post-filing data against the patentee’s claims in support of an argument that persons skilled in the art could not have “visualized or recognized” the members of the claimed genus.
  2. Method of human treatment claims supported by animal model data are subject to attack for lack of written description where an argument can be made that the art has not established a correlation between animal model data and human Thus, patent challengers can attack claims for lack of written description by contesting that there is an art-established correlation between animal model data and human efficacy, including by submitting post-priority date evidence.

Finally, by apparently heightening the standards for meeting the written description requirement and providing challengers with new tools to generate data demonstrating a lack of written description, the decision encourages patent challengers to look to the specification of priority documents to demonstrate that the granted claims lacked written description support in the priority documents, thereby denying priority benefit claims and using intervening prior art to invalidate the claims on obviousness or anticipation grounds.  Accordingly, patent challengers may find it beneficial to generate post-priority date evidence showing that the priority document did not disclose a representative number of species falling within the genus of the granted claims.  By denying the priority benefit claim, an intervening disclosure of a species within the claimed genus would be available to the patent challenger as anticipatory prior art.

Pharmaceutical patent challengers will have more options and strategies available to attack patents.  For example, in a petition filed on April 2, 2018, Alnylam Pharmaceuticals, Inc. (“Alnylam”) has sought post grant review of U.S. Patent No. 9,695,423 (“the ’423 patent”) assigned to Silence Therapeutics GmbH for, inter alia, lack of written description.[5]  Alnylam has sought to use post-priority dated evidence in reliance on the Amgen decision to show that the inventors did not have possession of the claimed genus, that the claims are not entitled to the priority benefit claimed, and are anticipated by intervening prior art.  Even though the ’423 patent claims priority to a series of applications filed as early as 2002, Alnylam challenges the legitimacy of the priority claims based on lack of written description and alleges that it is therefore eligible for challenge in a Post Grant Review proceeding.[6]  Accordingly, the Federal Circuit’s decision in Amgen will likely further encourage challenges of pharmaceutical and biotechnology patents in various types of proceedings, including Post Grant Review challenges of patents claiming priority benefit to applications filed prior to March 16, 2013.

 

[1] Amgen Inc. v. Sanofi, 872 F.3d 1367 (Fed. Cir. 2017).

[2] Ariad Pharm., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1350-51 (Fed. Cir. 2010) (en banc).

[3] Ariad, 598 F.3d at 1345.

[4] Citing 35 U.S.C. § 162 (exempting plant patents from § 112 “if the description is as complete as is reasonably possible”) as an example.

[5] Alnylam Pharmaceuticals, Inc. v. Silence Therapeutics GmbH, Case PGR2018-00059, Paper 1 (P.T.A.B. April 2, 2018).

[6] Post-grant review is available for patents reciting at least one claim that is not entitled to a priority date earlier than March 16, 2013.

Making up only around 7% of post-grant trials at the PTAB (according to statistics released by the USPTO from February 2018), the number of petitions for Covered Business Method (“CBM”) reviews has experienced a decline every year since its peak in 2014. With 34 filings in 2017,[1] the 16 filed so far this year in roughly the first quarter of 2018, on first glance, might seem to indicate an upswing in filings. However, filings made by Miami International Holdings (“MIAX”) in the last weeks of March through early April make up nearly half of those filed so far in 2018, indicating that a small number of petitions (in this case, in response to one underlying district court litigation) can make up a large proportion of the CBM footprint at the PTAB.

Following the dispute from its beginning in court, Nasdaq filed a lawsuit in the District of New Jersey on September 1, 2017, alleging that MIAX and its subsidiary companies had infringed claims of seven U.S. patents and had also misappropriated trade secrets by hiring key Nasdaq employees.

MIAX (which runs the MIAX Options and MIAX PEARL exchanges) responded with a Motion to Dismiss on December 4, 2017, arguing, among other things, that the statute of limitations had expired for the trade secrets claims, that an asserted claim of U.S. Patent No. 6,618,707 (“the ’707 patent”) had previously been found invalid, and that all asserted patent claims are directed to the abstract concept of trading financial instruments and are not patent eligible under 35 U.S.C. § 101. A ruling on the Motion to Dismiss is still pending.

Beginning on March 23, 2018, MIAX filed its first petition for CBM review, CBM2018-00021, challenging all current claims of the ’707 patent (the petition notes that claim 4 was previously invalidated in District Court proceedings and as such was not challenged). This petition argues that the claims of the ’707 patent are directed to the abstract idea of “trading a financial instrument according to allocation rules,” which “may include order-type priority and/or size based allocation,” that is ultimately just automation of a process traditionally performed by human trading agents.

On March 27, 2018, MIAX filed CBM2018-00020, challenging all claims of U.S. Patent No. 8,386,371 (“the ’371 patent”). This petition argues that the challenged claims are directed to the abstract idea of “collecting marketing information, identifying the occurrence of an event from the collected market information, and cancelling pending orders,” in a way which is “nothing more than common financial practices implemented using generic computer components operating in a conventional way.” A second filing on March 27, CBM2018-00028, challenged all claims of U.S. Patent No. 7,599,875 (“the ’875 patent”), arguing that the challenged claims are directed to the abstract idea of “receiving, posting, and/or sending financial quote information, from a person to a destination.”

MIAX also filed CBM2018-00029 on March 27, challenging all claims of U.S. Patent No. 7,747,506 (“the ’506 patent”). This petition argues that the challenged claims are directed to the abstract idea of “monitoring the online status of a primary recipient” to allow redirection of a message regarding security trading to be redirected to a backup recipient. The petition further alleges that the claims are unpatentable under 35 U.S.C. § 112 for inadequate written description.

On March 29, MIAX filed CBM2018-00030, challenging all claims of U.S. Patent No. 7,921,051 (“the ’051 patent”). The petition argues that the claims are directed to the abstract idea of “routing information to an assigned destination using a lookup table.” On March 30, MIAX filed CBM2018-00031, challenging all claims of U.S. Patent No. 7,246,093 (“the ’093 patent”). The claims are argued to be directed to the abstract idea of “allocating an executing an order based on selected information and responses that are received within a predetermined time period.”

Finally, on April 2, MIAX filed CBM2018-00032, challenging the last of the seven asserted patents, U.S. Patent No. 7,933,827 (“the ’827 patent”). The petition challenged only those claims asserted in the underlying District Court litigation, arguing that the claims are directed to the abstract idea of “routing information to an assigned destination using generic computer technology.”

Of note is that MIAX is represented by both Reed Smith LLP and Fish & Richardson P.C. in the district court litigation. In the litigation, Fish & Richardson is indicated as having their representation exclude Counts III-VI, which refer to the infringement allegations of the ’875, ’506, ’051, and ’827 patents. The same firms are handling the CBM petitions and similarly follow these lines, with Reed Smith representing MIAX for the petitions challenging the above four patents, and  Fish & Richardson representing MIAX for the matters concerning the ’093, ’371, and ’707 patents.

In the district court litigation, Nasdaq has challenged Fish & Richardson’s representation of MIAX as to any claim, arguing in a Motion to Disqualify filed March 2, 2018, that the firm had served a prosecution counsel to Nasdaq for thirteen years and had prosecuted the four patents in suit from which Fish has excluded their representation. On April 2, 2018, Fish filed a brief in opposition, its arguments including that all prosecution representation ended six years previously, that screens were put in place regarding the four patents, and that the remaining counts presented no conflict.

It will be interesting to note how the District Court rules on the Motion and whether the ruling (or the underlying alleged conflict) might impact Fish’s representation of MIAX in the CBM reviews.

We will provide updates should there be any major developments in the CBM proceedings.

 

[1] These numbers based on available petitions as found in the PTAB End to End (E2E) System.

On Thursday, March 15, 2018, Commissioner for Patents, Andrew Hirshfeld, announced that the USPTO is making progress on its “Access to Prior Art Project,” which will serve as an automated tool to identify relevant prior art early in the review process.[1] The goal of the project is to increase patent examination quality and efficiency by providing examiners with access to an initial pool of relevant prior art and search reports from related applications at the earliest point possible.

The idea for the automated search mechanism started back in August of 2016, with a Federal Register Notice asking for user input on specific aspects of the project.[2] The Federal Register Notice explained that the automated tool would first identify the applicant’s other applications that have the same or substantially the same disclosure (e.g., domestic parent and counterpart foreign applications) as the U.S. application being examined. It would then pull all of the cited prior art and search reports from those applications and import them into the U.S. application file for the application currently under review. Written comments in response to the Federal Register Notice were accepted until October 28, 2016.

The Federal Register Notice further announced a public roundtable to provide a forum for discussion, which was subsequently held on September 28, 2016.[3] During the roundtable, the USPTO sought participant feedback on the following questions:

  1. In balancing the goals of examination quality and efficiency, should the USPTO monitor other applications, besides domestic parent and counterpart foreign applications, for relevant information located therein for consideration in the instant U.S. application?  If so, which other applications should be monitored (e.g. siblings, applications involving the same or related technology, etc.)?
  2. What is the most convenient way to bring an application to the USPTO’s attention that should be monitored for information during the examination of a U.S. application (e.g., automated system, applicant notifies the USPTO, etc.)?
  3. How should the USPTO determine which information from the monitored applications to provide examiners while ensuring they are not overburdened with immaterial and marginally relevant information?
  4. If the USPTO were to implement a fully automated system to import information from applicant’s other applications, how should the USPTO document the information automatically imported into the image file wrapper of the instant U.S. application?  For example, should the record reflect which domestic parent or counterpart foreign application the information was imported from, the date that the information was imported, and whether the examiner considered the imported information?
  5. Taking into consideration the information that is publicly available in PAIR, what information should be part of a patent?  For example, should prior art references and classification information still be listed on the front page of a patent?

Since the public roundtable and Federal Register Notice, the USPTO has continued to engage in internal and external stakeholder outreach to better understand examiner and applicant needs and how the system should be designed and controlled. While still in its early stages, the USPTO is currently investigating exactly how to implement the function of identifying related applications and how to leverage the electronic resources currently available to examiners, including Global Dossier, Common Citation Document, WIPO’s PatentScope, and USPTO internal IT systems such as PAIR and EAST, in order to import the most relevant prior art into the file for consideration during prosecution. The system will also be limited to importing only those prior art references and search reports that are likely to provide a running start for the examiner in conducting his or her own search, so as to not overburden the examiner with loads of only marginally relevant information which could prove more time consuming than just starting a search from scratch.

In addition to streamlining the examination process for examiners, the automated tool may also alleviate some of the burden on applicants in meeting their duty of disclosure. As this required disclosure of related prior art to the USPTO is often cumbersome and costly, requiring constant monitoring of the prosecution and prior art considered in related or foreign counterpart applications, the new automated system will likely make it easier for applicants to fulfill this obligation.

As Mr. Hirshfeld noted last week, the scope of the automated searches is still an open question. While the initial design may be limited to just prior art from the patent family, he hopes that it will eventually expand to other related information that may be helpful to the examiner to further improve examination efficiency and examiner performance and ultimately produce stronger patents in a shorter amount of time. Completion of the initial phase of the program is expected sometime this fall.

 

[1] Access to Prior Art Project, available at https://www.uspto.gov/patents-getting-started/access-prior-art-project (last accessed on March 22, 2018).

[2] Request for Comments and Notice of Roundtable Event on Leveraging Electronic Resources to Retrieve Information From Applicant’s Other Applications and Streamline Patent Issuance, 81 Fed. Reg. 167 (August 29, 2016), available at https://www.gpo.gov/fdsys/pkg/FR-2016-08-29/pdf/2016-20703.pdf  (last accessed on March 22, 2018).

[3] Roundtable on Importing Prior Art Automatically & Streamlining Patent Issuance, available at https://www.uspto.gov/patent/initiatives/patent-application-initiatives/roundtable-importing-prior-art-automatically (last accessed on March 22, 2018).

Section 315(c) of the America Invents Act (“AIA”) provides that if the Director of the U.S. Patent and Trademark Office (“USPTO”)

institutes an inter partes review, the Director, in his or her discretion, may join as a party to that inter partes review any person who properly files a petition under section 311 that the Director, after receiving a preliminary response under section 313 or the expiration of the time for filing such a response, determines warrants the institution of an inter partes review under section 314.

35 U.S.C. § 315(c) (emphasis added). On its face, § 315(c) only authorizes the Director to “join as a party” to an instituted inter partes review (“IPR”) any person that is not already a party to the IPR proceeding. It would seem to be a simple matter of logic that a person cannot be “joined” to an instituted review “as a party” if that person is already a party to the instituted review. However, the Patent Trial and Appeal Board (“PTAB” or “the Board”) has held that the words “join as a party” in § 315(c) authorizes an existing party to join itself to its own case and add new issues. And since § 315(b) provides that the one-year time-bar for filing a petition does not apply to requests for joinder under § 315(c), the Board has held that these two sections allow a petitioner to add an otherwise time-barred claim to an existing IPR proceeding by allowing the petitioner to join itself as a party to a proceeding in which it is already a party.

When a panel of the Board has interpreted § 315(c) to only allow joinder of petitioners who were not already a party to the proceeding, the USPTO has convened expanded panels to reconsider the decisions and allow self-joinder. See, e.g., Target Corp. v. Destiny Maternity Corp., Case No. IPR2014-00508, slip op. (P.T.A.B. Feb. 12, 2015) (Paper 28) (expanded panel). According to the USPTO, any time a panel rejects self-joinder, the agency convenes an expanded panel to overturn the decision and allow self-joinder. In expanding panels to overturn decisions denying self-joinder, the USPTO stated, it “has acted to ensure that its pronouncements remain consistent on this issue.” Brief for Intervenor at 37, Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co., 868 F.3d 1013 (Fed. Cir. 2017), 2017 WL 151221.

Last year, in Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co., Nidec appealed a final written decision by the Board in a case where an expanded panel allowed Broad Ocean to join itself as a party to its own IPR proceeding. 868 F.3d at 1014. About one month after the Board instituted an IPR on Broad Ocean’s first petition, Broad Ocean filed a second IPR petition with a motion to join the second petition to the first petition, pursuant to § 315(c). A panel of Administrative Patent Judges (“APJs”), in a 2-1 decision, declined to institute an IPR on the second petition. The majority of the panel determined that Broad Ocean filed its second petition more than one year after it had been served with an infringement complaint and therefore, the second petition was time-barred under § 315(b). Id. at 1015. The panel majority held that the exception to the time-bar for requests for joinder in § 315(b) did not apply because the joinder provision does not permit a party to join issues to a proceeding in which it is already a party. Id.

Broad Ocean filed a request for rehearing of the panel decision. Id. An expanded panel of five APJs granted Broad Ocean’s motion for rehearing and set aside the original panel decision, concluding that

§ 315(c) permits the joinder of any person who properly files a petition under § 311, including a petitioner who is already a party to the earlier instituted [IPR]. We also conclude that § 315(c) encompasses both party joinder and issue joinder, and, as such, permits joinder of issues, including new grounds of unpatentability, presented in the petition that accompanies the request for joinder.

Id. (citation omitted). Determining that the joinder statute allows joinder of issues by the same party, the expanded panel instituted review of the second petition and granted the request for joinder. Id. The expanded panel issued a final written decision determining the challenged claims unpatentable under § 103 as obvious over the references in the first petition and unpatentable under § 102 as anticipated by the reference in the second petition.

On appeal, Nidec challenged the Board’s joinder decision as well as the Board’s obviousness and anticipation determinations. Id. at 1016. The Director for the USPTO and Broad Ocean argued their interpretation of the joinder statute and also argued that the Board’s joinder determination is non-appealable in light of 35 U.S.C. § 314(d)’s bar of judicial review for institution decisions. Id. In its intervenor brief, the USPTO cited Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652, 658 (Fed. Cir. 2015) as prohibiting the Federal Circuit under 35 U.S.C. § 314(d) from reviewing the Board’s decision of whether § 315(b) bars the petitioner from filing a petition. Brief for Intervenor at 13-14, Nidec Motor Corp., 868 F.3d 1013, 2017 WL 151221. But the Federal Circuit declined to decide the self-joinder or appealability issues because it affirmed the Board’s conclusion that all of the challenged claims were unpatentable as obvious over the references in the first petition, mooting the appeal.

Although the Federal Circuit declined to address the appealability issue in Nidec Motor Corp., the Court recently overruled Achates, holding that time-bar determinations under § 315(b) are appealable. Wi-Fi One, LLC v. Broadcom Corp., 878 F.3d 1364, 1367 (Fed. Cir. 2018). In Wi-Fi One, the majority noted “the ‘strong presumption’ favoring of judicial review of agency actions.” 878 F.3d at 1372 (citing Cuozzo Speed Technologies, LLC v. Lee, 136 S.Ct. 2131, 2140 (2016)).  In holding that time-bar determinations are appealable, the Federal Circuit reiterated the Supreme Court’s reasoning in Cuzzo that

§ 314(d) bars judicial review both when a patent holder merely challenged the Patent Office’s determin[ation] that the information presented in the petition … shows that there is a reasonable likelihood of success with respect to at least 1 of the claims challenged, § 314(a) and, in addition, when a patent holder grounds its claim in a statute closely related to that decision to institute inter partes review.

Id. at 1373 (quoting Cuozzo, 136 S.Ct. at 2142) (alterations in original) (internal quotations omitted) (emphasis in original). The court stated that “[w]hether a petitioner has complied with § 315(b) is not such a determination, as it has nothing to do with the patentability merits or discretion not to institute.” Id. at 1373-74. Instead, “§ 315(b) controls the Director’s authority to institute IPR that is unrelated to the Director’s preliminary patentability assessment or the Director’s discretion not to initiate an IPR even if the threshold ‘reasonable likelihood’ is present.” Id. at 1373.

In light of the Federal Circuit’s reasoning and holding in Wi-Fi One, it follows that the issue of whether the § 315(b) one-year time-bar for filing a petition applies to requests for joinder under § 315(c) would also be appealable. See id. at 1374 (“Thus, the statutory scheme as a whole demonstrates that § 315 is not “closely related” to the institution decision addressed in § 314(a), and it therefore is not subject to § 314(d)’s bar on judicial review.”).

Moreover, two Federal Circuit judges have expressed concern over the USPTO’s self-joinder and related expanded panel practice. In the concurring opinion in Nidec Motor Corp., Judges Dyk and Wallach stated that they had “serious questions as to the Board’s (and the Director’s) interpretation of the relevant statutes and current practices.” 868 F.3d at 1019 (Dyk, J. and Wallach, J., concurring). The judges framed the issue as “whether the time bar provision allows a time-barred petitioner to add new issues, rather than simply belatedly joining a proceeding as a new party, to an otherwise timely proceeding.” Id. at 1020. The judges stated that “[s]ection 315(c) does not explicitly allow this practice,” and believed “it unlikely that Congress intended that [a petitioner] could employ the joinder provision to circumvent the time bar by adding time-barred issues to an otherwise timely proceeding, whether the petitioner seeking to add new issues is the same party that brought the timely proceeding, as in this case, or the petitioner is a new party.” In their view, “the exception to the time bar for ‘request[s] for joinder’ was plainly designed to apply where time-barred Party A seeks to join an existing IPR timely commenced by Party B when this would not introduce any new patentability issues.” Id.

The judges also expressed concern “about the USPTO’s practice of expanding administrative panels to decide requests for rehearing in order to ‘secure and maintain uniformity of the Board’s decisions.’ ” Id. (citation omitted). The judges “recognize[d] the importance of achieving uniformity in USPTO decisions, [but] question[ed] whether the practice of expanding panels where the USPTO is dissatisfied with a panel’s earlier decision is the appropriate mechanism of achieving the desired uniformity.” Id. However, the judges noted that the joinder and expanded panel issue, as well as “the predicate issue of appealability,” did not need to be addressed by the Court in the case because the majority had disposed of the case on the merits. Id.

The Federal Circuit’s decision in Wi-Fi One that time-bar determinations under § 315(b) are appealable, together with the concerns expressed by Judges Dyk and Wallach in Nidec Motor Corp., suggest that the Board’s current practices regarding self-joinder may possibly come to an end if appealed in a future case. It seems unlikely that Congress intended § 315(c) to allow petitioners to circumvent the § 315(b) one-year time-bar in the way the Board has allowed.  However, until the Federal Circuit addresses the issue, the Director’s position on joinder and the use of expanded panels is likely to continue.

In Titanium Metals Corp. v. Banner[1], the Federal Circuit notably held that it is “an elementary principle of patent law” that when a claim recites a numerical range, the claimed range is anticipated by a prior art reference that discloses a point or an example within that range.  Accordingly, when seeking to anticipate a recited range of a claim, both petitioners and patent examiners have often attempted to rely on a reference that discloses a broader range that overlaps the claimed range and contend that overlapping range falls within the recited range, thereby anticipating the claim.

However, a reference, which simply discloses a broader, overlapping range without providing any specific examples that fall within the recited range, may not necessarily anticipate the claim.  The prior art reference must disclose the numerical range with “sufficient specificity such that a reasonable fact finder could conclude that there is no reasonable difference in how the invention operates over the ranges.”[2]  In other words, a case-by-case determination must be made to determine whether the broader, overlapping range disclosed in the prior art anticipates a narrower range recited in the claim.

The recent final written decision in Koios Pharm. LLC v. Medac Gesellschaft Fur Klinische Spezialpraparate MBH, Case IPR2016-01370 Paper 54 (Feb. 7, 2018) provides further guidance in determining whether a claimed range is disclosed “with sufficient specificity” to constitute an anticipation of the claim.  In Koios, the patent at issue was U.S. Patent No. 8,664,231 (“the ’231 patent”), which relates to a method for treating inflammatory autoimmune disease, such as rheumatoid arthritis.  Claim 1 of the ’231 patent recites:

A method for the treatment of inflammatory autoimmune diseases in a patient in need thereof, comprising subcutaneously administering to said patient a medicament comprising methotrexate in a pharmaceutically acceptable solvent at a concentration of more than 30 mg/ml.

The Board instituted review on several grounds, including that claim 1 was anticipated by U.S. Patent No. 6,544,504 (“Grint”).

Grint describes treating autoimmune diseases by administering a combination of interleukin 10 and methotrexate, either together in a single composition or separately.  Grint discloses that an effective amount of methotrexate may range from 0.01 to 400 mg in a pharmaceutically acceptable carrier.  In addition, Grint presents a study evaluating the administration of interleukin-10 and methotrexate to patients, and in that study, Grint indicates that doses of methotrexate in the amount of 12.5 – 25 mg/week were given to the patients by oral, subcutaneous, or intramuscular administration.

In contending that Grint anticipated claim 1, the Petitioner relied on the combination of Grint’s statement that “methotrexate is generally present in from about 0.1 to about 40 mg/ml of carrier”[3] and the example of administration of methotrexate described in the study.  The Petitioner further provided expert testimony alleging that one of ordinary skill in the art would understand Grint to disclose subcutaneous administration of methotrexate in concentrations greater than 30 mg/ml for treatment of autoimmune diseases.

In response, the Patent Owner argued that Grint’s disclosure of using methotrexate is so broad and generic that it fails to provide any information on how to administer the methotrexate.  The Patent Owner supported his position by asserting that Grint never correlated any methotrexate concentration with any particular mode of administration.  Consequently, one of ordinary skill in the art would not understand all of the points within Grint’s disclosed concentration range to be applicable to each disclosed mode of administration.

Siding with the Patent Owner, the Board held that the Petitioner failed to establish that claim 1 was anticipated by Grint.  In reaching its decision, the Board noted that anticipation requires a prior art reference to not only disclose all the elements of the claim, but also to disclose those elements as “arranged as in the claim.”[4]  To establish that Grint disclosed all the recited elements as arranged as in claim 1 of the ’231 patent, the Board held that the Petitioner must show that the upper portion (i.e., above 30 mg/ml) of Grint’s disclosed range of 0.1 mg/ml to 40 mg/ml is linked to subcutaneous administration.  The Board found that one of ordinary skill in the art would not envision the upper portion of Grint’s disclosed concentration range to apply specifically to subcutaneous administration.  The Board based this finding on the fact that the only embodiment in Grint that discloses subcutaneous administration is tied to a dose of 12.5-25 mg/week.

Moving forward, when seeking to anticipate a claimed range, petitioners should be cautious in relying on a reference disclosing a broader, overlapping range.  As reflected in this decision, petitioners should be sure that the reference discloses the recited range with sufficient specificity.

Furthermore, petitioners should always consider challenging the patentability of the claimed range on the grounds of obviousness.  Rather than proving that the reference discloses the claimed range with sufficient specificity, the petitioner may establish obviousness by showing that any differences between the disclosed and recited ranges may be discovered by routine experimentation.  Establishing obviousness through routine experimentation gives the petitioner more flexibility in its approach, compared to the more rigid analysis conducted under an anticipation challenge.

 

[1] 778 F.2d 775, 782 (Fed. Cir. 1985)

[2] Ineos USA LLC v. Berry Plastics Corp., 783 F.3d 865, 869 (Fed. Cir. 2015)

[3] Grint at 6:60-7:1.

[4] Final Written Decision at 16-17 (quoting Net MoneyIN, Inc., v. VeriSign, Inc., 545 F.3d 1359, 1369 (Fed. Cir. 2008).

The Patent Trial and Appeal Board (“the PTAB”) ruled last Friday, February 23, 2018, that tribal sovereign immunity does not apply to the Saint Regis Mohawk Tribe. The issue has been percolating for months. For more background on the issue, see these previous blog articles – Tribal Sovereign Immunity: The New Defense Against IPRs? and Recent Decisions Cast Doubt on the Fate of Tribal Sovereign Immunity at the PTAB.

In this case, to recap, Allergan transferred the patents for its dry eye drug, Restasis®, to the Saint Regis Mohawk Tribe (“the Tribe”) 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. But, it appears that Allergan’s efforts to shield its patents from PTAB review were unsuccessful.

In its analysis, the PTAB began by finding that the issue was one of first impression. Although state sovereign immunity has been applied at the PTAB, there was no decision applying tribal sovereign immunity. Though other cases applying tribal sovereign immunity were cited, the PTAB noted that it was not bound by those cases. The PTAB also noted that “the immunity possessed by Indian Tribes is not co-extensive with that of the States.” Kiowa, 523 U.S. at 756; see also Three Affiliated Tribes of Fort Berthold Reservation v. Wold Eng’g, 476 U.S. 877, 890 (1986) (“Of course, because of the peculiar ‘quasi-sovereign’ status of the Indian tribes, the Tribe’s immunity is not congruent with that which the Federal Government, or the States, enjoy.”).

The PTAB summarized its conclusion as follows: “In view of the recognized differences between the state sovereign immunity and tribal immunity doctrines, and the lack of statutory authority or controlling precedent for the specific issue before us, we decline the Tribe’s invitation to hold for the first time that the doctrine of tribal immunity should be applied in inter partes review proceedings.”

In reaching this conclusion, the Board made several observations. First, Congress enacted a generally applicable statute, making IPRs available for any patent. Second, the review proceedings, in addition to providing a forum for the parties to resolve a dispute, also serve an important public purpose of correcting the agency’s own errors in originally issuing the patent. The PTAB also distinguished cases cited by the Tribe and several amici, and further noted that IPR proceedings were not the type of suit that tribes would have been immune from at common law. The PTAB also observed that the tribe’s participation in the IPR was not required, and that in any event the PTAB did not exercise in personam jurisdiction over the Tribe for purposes of the IPR proceeding, but rather in rem jurisdiction over the challenged patent.

Finally, the PTAB concluded alternatively that, even if tribal immunity applies, the proceedings could continue with Allergan as the “true owner” of the challenged patents. Under well-established law regarding the ownership of patents, the PTAB found that the license agreement transferred “all substantial rights” back to Allergan, and  that the Tribe retained only an illusory or superficial right to sue for infringement of the challenged patents. The PTAB also concluded that “[b]ecause the claims of the challenged patents are directed to pharmaceutical compositions and methods used to treat human medical conditions, we find Allergan’s exclusive right to exploit the challenged patents ‘for all FDA-approved uses in the United States’ to be a substantial right.” The PTAB further found the license gave Allergan the right to sublicense, reversionary rights, substantial litigation or licensing proceeds, the right to pay maintenance fees and control prosecution and other PTO proceedings, and the right to assign. Given this, the PTAB found that Allergan remained the effective patent owner.

In conclusion, the PTAB’s decision states that tribal sovereign immunity does not apply in IPR proceedings, and that, even if it did, under the specific license of the challenged patents at issue, Allergan remains the effective patent owner. This is unlikely to be the last time the PTAB is faced with a sovereign immunity defense, and it will be interesting to see how the Federal Circuit responds when the issue is raised on appeal.  In the meantime, patent owners should continue to monitor this developing area of the law.

On Monday, February 12, 2018, the Federal Circuit reversed the Patent Trial and Appeal Board’s (“the Board”) anticipation rejections and vacated and remanded the obviousness rejections against U.S. Patent Application No. 12/906,222 (“the ’222 application”), an application directed to a valve assembly for draining contaminants, condensation, and other fluids that adversely affect the efficiency and function of a pressurized system.

In the precedential decision, the Federal Circuit said the Board’s decisions must be made with sufficient detail so the Court can verify that the Board’s decision is supported by “substantial evidence.”  And more specifically, the Federal Circuit held that finding that a feature in a prior art reference is “similar” to a claimed limitation is not sufficient to support a legal conclusion of anticipation without further explanation.

In the present case, inventor Kenneth Andrew Hodges appealed from examination of the ’222 application, where the Board affirmed the Examiner’s rejection of all claims as anticipated and/or obvious.  The Examiner relied on two prior art references: (1) U.S. Patent No. 5,531,241 to Rasmussen (“Rasmussen”) and (2) U.S. Patent No. 3,262,464 to Frantz (“Frantz”).

The Federal Circuit held that the Board failed to provide substantial evidence to support a finding of anticipation.  The first rejection turned on whether an unlabeled valve containing an inlet seat is defined by Rasmussen’s valve body in Figure 7.  The Board argued that the positioning of Rasmussen’s valve is similar to the positioning of a second member recited in claim 1 of the ’222 application.  However, the Federal Circuit concluded that substantial evidence does not support a finding of anticipation, reasoning that the Board failed to support its assertion of similarity and failed to explain how the positioning of the unlabeled valve would be enabled without undue experimentation.

The Federal Circuit also noted that the Patent Office did not attempt to defend the Board’s findings in the second rejection over Frantz because it was based on an unreasonably broad interpretation of the term “signal,” which the Board construed as “an act, event, or the like that causes or incites some action.”  The Federal Circuit concluded that such a broad construction would “encompass virtually any mechanical component within the valve drain that moves in response to the flow of fluid through the drain.”

The Federal Circuit reversed both rejections based on anticipation because the Board failed to meet its burden to establish all of the claim limitations were disclosed.

On the question of obviousness, the Federal Circuit said that the Board must “explicate its factual conclusions enabling us to verify readily whether those conclusions are indeed supported by ‘substantial evidence’ contained within the record.”  The Federal Circuit found that the Board’s reasoning failed to meet this threshold.  First, in reaching its conclusion, the Board asserted that it would have been obvious to modify a valve depicted in Rasmussen’s Figure 7, but provided no reasoning for how such a modification would have been made.  Second, the Board alleged that it would have been obvious to include a sensor disclosed in Rasmussen as part of the valve body taught in Frantz for the purpose of generating a control signal, but again the Board did not explain how the sensor would operate according to the claims.  Therefore, the Federal Circuit vacated the obviousness rejection and remanded for further factual findings, stating the Board’s reasoning was insufficient and thus precluded meaningful review on appeal.

Judge Wallach dissented in part with respect to the anticipation rejection over Rasmussen, concluding that the majority went too far in reversing the Board’s decision.  Specifically, Judge Wallach contended that the rejection should be vacated and remanded, reasoning that in reversing a deficient agency decision, the majority improperly acts as the fact-finder.