On February 9, 2018, in vacating and remanding parts of an obviousness decision, the Federal Circuit found that the Patent Trial and Appeal Board (“PTAB” or “the Board”) erred in parts of its analysis of motivation, teaching away, and commercial success in cancelling all claims of Polaris’ U.S. Pat. No. 8,596,405 (“the ’405 patent”) in Polaris Indus., Inc. v. Arctic Cat, Inc. Polaris appealed, alleging various errors in claim construction, analysis of motivation and teaching away, and consideration of commercial success.

Rival all-terrain vehicle (ATV) maker Artic Cat has been involved in proceedings against Polaris in federal district courts as well as in inter partes review (“IPR”) proceedings.  The PTAB found all thirty-eight claims of the ’405 patent unpatentable as obvious in IPR2014-01427 (“1427 decision”) over one set of prior art references, but not unpatentable over another set of references in IPR2014-01428 (“1428 decision”). The Federal Circuit affirmed the PTAB’s findings in part and vacated the PTAB’s obviousness determination as to claims 17–19, 34, and 36–38, and remanded for further proceedings.

Polaris attacked the 1427 decision on three grounds. First, it argued that the obviousness finding for claims 15–19 was predicated on an improper claim construction or was too cursory. Second, it argued that the Board relied on impermissible hindsight in combining features of the prior art references, failing to articulate a valid motivation to combine these references, and applying a “subjective preferences” analysis that finds no basis in Federal Circuit precedent.   Finally, it contended that the Board erred in rejecting the undisputed evidence that Polaris introduced regarding the commercial success of its RZR vehicles that purportedly embody claims 34 and 36–38.

The Federal Circuit rejected Polaris’ first set of attacks, finding both that the PTAB’s broadest reasonable interpretation of claim terms was consistent with the specification and the testimony of Arctic Cat’s expert, which the Board credited, and that the Board’s obviousness reasoning with regard to claims 15-19 was sufficient given that it was at least commensurate with Polaris’ presentation of its non-obviousness arguments.

PTAB Erred in Failing to Properly Consider Motivation and Teaching Away Evidence

Polaris’ second set of attacks highlighted inadequacies in the PTAB’s analysis for several reasons.  The Federal Circuit explained that the Board (1) failed to consider Polaris’ uncontested evidence that skilled artisans would not have been motivated to place a fuel tank under Denney’s seats; and (2) applied a legal analysis that not only finds no support in the caselaw, but also runs contrary to the concept of teaching away.

With regard to the first point, the Federal Circuit pointed out that while Polaris introduced undisputed evidence that placing a fuel tank underneath one of Denney’s seats would have required significantly raising the occupancy area, which would have been contrary to Denney’s teaching that doing so would raise the center of gravity of the ATV resulting in decreased vehicle stability and increased risk of rollovers, the PTAB failed to analyze whether Denney “teaches away” from claims 17-19.

With regard to the second point, the Federal Circuit explained that rather than evaluating the teaching away arguments, the PTAB erred in finding that “one of ordinary skill has the ability to weigh the various benefits and disadvantages based on subjective preferences in an analysis largely unrelated to obviousness.”  The Court emphasized that it has never articulated a “subjective preferences” analysis or permitted a tribunal to wholly disregard the significance of prior art teachings based on such a characterization.  Thus, the Federal Circuit found that the PTAB erred in not conducting a proper analysis of whether Denney’s stated desire for a low center of gravity “teaches away” from making modifications that would raise the ATV’s center of gravity for three reasons:

  1. By completely disregarding certain teachings as ill-defined “subjective preferences,” the Board’s approach invited the “distortion caused by hindsight bias” into the fold.
  2. The Board focused on what a skilled artisan would have been able to do, rather than what a skilled artisan would have been motivated to do at the time of the invention.
  3. The Board’s analysis encouraged the fact-finder to outright discard evidence relevant both to “teaching away” and to whether skilled artisans would have been motivated to combine references.

The Federal Circuit explained that even if a reference is not found to teach away, its statements regarding preferences are relevant to a finding regarding whether a skilled artisan would be motivated to combine that reference with another reference.  Further, the Court noted that the PTAB compounded its errors by transforming Polaris’ argument that “[t]here are many other potential locations for a gas tank in an ATV” into an admission that it would have been obvious to place a fuel tank underneath one of the two seats in Denney and failed to consider that “[m]erely stating that a particular placement of an element is a design choice does not make it obvious.” Cutsforth, Inc. v. MotivePower, Inc., 636 F. App’x 575, 578 (Fed. Cir. 2016).  Instead, the Board must explain why a person of ordinary skill in the art “would have selected these components for combination in the manner claimed.” In re Kotzab, 217 F.3d 1365, 1371 (Fed. Cir. 2000).  Thus, the Federal Circuit vacated the findings of obviousness for claims 17-19 and ordered the PTAB on remand to “analyze whether Denney ‘teaches away’ from claims 17–19 under the framework that our caselaw has articulated.”

PTAB Erred in Failing to Properly Consider Commercial Success Evidence

With regard to claims 34 and 36-38, the Federal Circuit found that the PTAB erroneously dismissed evidence of commercial success on grounds that it was “conclusory.”  The Court explained that Polaris’ expert testified that he had reviewed the ’405 patent and all claims recited therein, reviewed the RZR vehicles and literature (e.g., parts catalogs and parts drawings) associated therewith, construed the claim terms recited in the claims as one of ordinary skill in the art would understand them, and compared the RZR vehicles to the claims,  determining, based on his inspection, analysis, and study, that a list of eight RZR vehicles embody each element recited in claims 34 and 36–38 of the ’405 patent.  Arctic Cat presented no contrary evidence.

Despite this undisputed testimony, the Board rejected the evidence in its entirety as “conclusory.”  The Federal Circuit explained that its case law does not require a patentee and its expert to go further than Polaris did here to demonstrate that its commercial products are the inventions disclosed in the challenged claims where the proffered evidence is not rebutted and the technology is relatively simple.  The Federal Circuit rejected the implication that either a “limitation-by-limitation analysis” or “documentary evidence” is required.  Citing to its explanation in PPC Broadband, Inc. v. Corning Optical Communications RF, LLC, 815 F.3d 734, 745-747 (Fed. Cir. 2016), the Court reiterated how the Board should treat undisputed evidence from a patentee that its product is the invention disclosed in the challenged claims:

When the patentee has presented undisputed evidence that its product is the invention disclosed in the challenged claims, it is error for the Board to find to the contrary without further explanation. There was no such explanation here. The Board in its opinions did not explain why the SignalTight connectors fail to embody the claimed features, or what claimed features in particular are missing from the SignalTight connectors. Nor does Corning justify this finding on appeal. Substantial evidence does not support the Board’s finding on this point.

Because the Board failed to point to any claim limitation that was missing in the RZR vehicles, the Court found the PTAB’s analysis to be erroneous.

The United States Patent and Trademark Office (USPTO) published new and updated guidelines on subject matter eligibility on February 5, 2018, including a quick reference sheet on decisions holding patent claims eligible and identifying abstract ideas, an index of examples, and a chart of subject matter eligibility court decisions.

One update to note in the guidelines is the addition of the Federal Circuit’s recent nonprecedential decision in Move, Inc. v. Real Estate Alliance, No. 2017-1463 (Fed. Cir. Feb. 1, 2018), where the Court addresses the eligibility of a claim directed to a graphical user interface (GUI).   Move stands in contrast to the other GUI cases included in the USPTO’s guidelines, such as the Federal Circuit’s decisions in Core Wireless and Trading Technologies holding that certain GUI related claims are directed to patent-eligible subject matter.   Additionally, example 23 in the USPTO’s July 2015 Update Appendix 1: Examples suggests that a claim that recites specific graphical features that scale and relocate textual information in overlapping windows is directed to patent-eligible subject matter because it “improves the ability of the computer to display information and interact with the user” and “improves the functioning of the basic display function of the computer itself.”  July 2015 Update Appendix 1: Examples, at pp. 11-12.

The introduction of Move to the guidelines shows that not all GUI-related claims are created equal under the USPTO guidelines and the two-step patent-eligibility analysis articulated in Alice Corp. Pty. V. CLS Bank Int’l, 134 S. Ct. 2347 (2014).  In Move, the Federal Circuit affirmed that a method claim reciting a “zoom feature” for geographically searching for real estate properties is directed to patent-ineligible subject matter under 35 U.S.C. § 101.  By way of background, Real Estate Alliance Ltd. (“REAL”) is the owner of U.S. Pat. Nos. 5,032,989 (“the ’989 patent”) and 4,870,576, and appealed the district court’s summary judgment holding, inter alia, the ’989 patent invalid for claiming ineligible subject matter under 35 U.S.C. § 101.  The ’989 patent relates generally to a method of searching for real estate properties geographically on a computer,  and claim 1 of the ‘989 patent describes a “zoom” feature where a user can zoom in on a map in order to identify available real estate properties within the database that are located within the zoomed-in area.   Representative claim 1 reads as follows:

  1. A method using a computer for locating available real estate properties comprising the steps of:
    a) creating a database of the available real estate properties;
    b) displaying a map of a desired geographic area;
    c) selecting a first area having boundaries within the geographic area;
    d) zooming in on the first area of the displayed map to about the boundaries of the first area to display a higher level of detail than the displayed map;
    e) displaying the zoomed first area;
    f) selecting a second area having boundaries within the zoomed first area;
    g) displaying the second area and a plurality of points within the second area, each point representing the appropriate geographic location of an available real estate property; and
    h) identifying available real estate properties within the database which are located within the second area.

The panel, consisting of Judges Lourie, Wallach, and Stoll, held claim 1 ineligible under section 101 in view of the two-step patent eligibility test articulated in Alice.

Under step 1 of Alice, the Court agreed with the district court’s analysis, holding that claim 1 of the ’989 patent is “directed to the abstract idea of ‘a method for collecting and organizing information about available real estate properties and displaying this information on a digital map that can be manipulated by the user.’”  Op. at 8.  Specifically, the Court noted that “[c]laim 1 is aspirational in nature and devoid of any implementation details or technical description that would permit us to conclude that the claim as a whole is directed to something other than the abstract idea identified by the district court.”  Op. at 8; see also Op. at 10 (“While the claim limitations provide steps for using the computer to perform the search, they contain no technical details or explanation of how to implement the claimed abstract idea using the computer.”).  Notably, the Court dismissed the graphical “zooming in” on a selected geographical area feature of the claim, explaining that “[i]nstead of focusing on the technical implementation details of the zooming functionality, for example, claim 1 recites nothing more than the result of the zoom.”  Op. at 11. (emphasis added).  The Court further distinguished between “technological improvements” and non-technical “improvements in the identification of available real estate properties.”   See Op. at 12 (“While the ideas of storing available real estate properties in a database and selecting and displaying a particular geographic area may well be improvements in the identification of available real estate properties, there is no evidence that these ideas are technological improvements.”).

Next turning to Alice step two, and again focusing on the zoom feature, the Court notes that “the claim language does not explain what is inventive about the zoom feature or explain how it is accomplished,” and highlights “the specification’s teaching that the invention can be performed using a generic ‘IBM or compatible personal computer system.’”  Op. at 14.  REAL attempted to fill in the gap with an expert declaration, which provided: “It was considered neither routine nor conventional in the mid-1980s for a computer-displayed map to be able to zoom to display a higher level of detail in the sense of displaying information that wasn’t present at the lower level of detail at all, and this zooming step cannot be performed by a human.”  Op. at 13.  The Court, however, characterized such testimony as “conclusory,” noting that there are “no citations to support this assertion” and that it “contains no additional rationale.”  Opp. at 14.  Ultimately, the Court found that “the failure to provide any implementation details for the zoom feature suggests that the zoom feature utilizes only existing computer capabilities,” and affirmed the district court’s ruling that the claim is directed to patent-ineligible subject matter.  Opp. at 14.

It will be interesting to see how the USPTO (and courts) will assess the eligibility of claims directed to graphical user interfaces (GUI) in view of the Move decision.  As is clear from the Court’s analysis, patent practitioners would be well advised to include specific details in the claim and the specification not only as to how a claimed interface is achieved, but why it offers a technical solution to a technical problem in the art.

In MaxLinear, Inc. v. CF Crespe LLC, the Federal Circuit recently confirmed that issue preclusion applies to administrative agency decisions, including those from the Patent Trial and Appeal Board (“PTAB”) in IPR proceedings.  In MaxLinear, Inc., the Federal Circuit was presented with the appeal of a PTAB decision upholding the patentability of the challenged claims, including claims that were recently found to be unpatentable in related IPR proceedings.  In the instant IPR (i.e., IPR2015-00592), MaxLinear, Inc. unsuccessfully challenged claims 1-4, 6-9, and 16-21 of CF Crespse LLC’s U.S. Patent No. 7,075,585 (“the ’585 patent”).  In its final written decision, the PTAB analyzed only the two independent claims—claims 1 and 17—and held that since the remaining claims depended from one of these two claims, they were also patentable over the relevant prior art.

The ’585 patent was not new to the Federal Circuit, as it had recently affirmed two PTAB decisions involving the very same patent.  Namely, the Federal Circuit affirmed PTAB decisions in IPR2014-00728 and IPR2015-00615 finding that claims 1, 17, and 20 of the ’585 patent were unpatentable.  Even though IPR2014-00728 and IPR2015-00615 involved different prior art references than the art at issue in IPR2015-00592, the Federal Circuit needed to assess what impact, if any, those prior IPR decisions would have on the instant appeal.

The Federal Circuit concluded that collateral estoppel or issue preclusion compelled a determination that claims 1, 17, and 20 in the present case were unpatentable.  Relying on Supreme Court precedent, the Federal Circuit concluded that “[i]t is well established that collateral estoppel, also known as issue preclusion, applies in the administrative context.”  Decision at 5 (citing B&B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1303 (2015)).  The Federal Circuit held that collateral estoppel applied even though the related IPR proceedings did not become final until the present proceeding was on appeal.  Since the PTAB’s decision in the instant IPR proceeding was premised on the fact that claims 1 and 17 of the ’585 patent were patentable, the Federal Circuit set aside the PTAB’s final written decision.  Further, the case was remanded to the PTAB for further consideration of the patentability of the dependent claims at issue.

On remand, the PTAB will need to determine whether or not the subject matter of the dependent claims materially distinguishes those dependent claims from the unpatentable independent claims.  As guidance for the PTAB on remand, the Federal Circuit pointed to its prior decision, Ohio Willow Wood Co. v. Alps South, LLC, 735 F.3d 1333, 1342 (Fed. Cir. 2013), holding that “precedent does not limit collateral estoppel to patent claims that are identical . . . .  If the differences between the unadjudicated patent claims and adjudicated patent claims do not materially alter the question of invalidity, collateral estoppel applies.”   Pursuant to the recent PTAB guidance on remand procedures, we expect the PTAB to issue a new decision within six months of the Federal Circuit mandate.

On January 24, 2018, the Federal Circuit affirmed a decision of the Patent Trial and Appeal Board (“PTAB”), finding that 37 C.F.R. § 42.73(b) allows the PTAB to enter an adverse judgment prior to an institution decision when the patent owner disclaims all of the challenged claims. In Arthrex, Inc. v. Smith & Nephew, Inc., Arthrex appealed an adverse judgment entered by PTAB in an inter partes review (“IPR”) proceeding. Smith & Nephew filed an IPR petition challenging claims 1-9 of U.S. Patent No. 8,821,541, directed towards suture anchors for use in preventing abrasion and cutting of sutures during attachment. Following the petition, Arthrex disclaimed claims 1-9 and filed a preliminary response arguing that an IPR should not be instituted pursuant to 37 C.F.R. § 42.107(e)[1]. Arthrex further argued that its action of filing a statutory disclaimer should not be taken as a request for adverse judgment. The PTAB issued an adverse judgment under 37 C.F.R. § 42.73(b), stating that it has authority to interpret a statutory disclaimer as a request for adverse judgment even if it occurs prior to an institution decision.

On appeal, two main issues were presented before the Federal Circuit: (1) whether the adverse judgment is appealable; and (2) whether the PTAB properly exercised its authority to enter an adverse judgment pursuant to 37 C.F.R. § 42.73(b).

Adverse Judgments are Final and Appealable

The Federal Circuit held that the language of 28 U.S.C. § 1295(a)(4)(A) provides grounds for appeal in this case. The statute provides that the Federal Circuit shall have jurisdiction “of an appeal from a decision of—the Patent Trial and Appeal Board…with respect to…inter partes review under title 35.” The Federal Circuit held that the adverse judgment satisfied the statute as it is a final decision of the PTAB in an IPR proceeding.

Smith and Nephew argued that 35 U.S.C. § 319 should apply and because the adverse judgment is not a “final written decision” under § 319 it should not be appealable. The Federal Circuit rejected this argument, stating that § 319 on its face does not provide the exclusive circumstances for filing an appeal of an IPR decision and thus does not bar the present appeal. The Federal Circuit held that because the adverse judgment disposed of the IPR proceeding, it was a final decision within the confines of § 1295 and thus appealable.

The PTAB Properly Construed 37 C.F.R. § 42.73(b)

37 C.F.R. § 42.73(b) provides that “[a] party may request judgment against itself at any time during a proceeding. Actions construed to be a request for adverse judgment include…[c]ancellation or disclaimer of a claim such that the party has no remaining claim in the trial.” Arthrex argued that the language “no remaining claim in the trial” should be construed to mean that the section should only apply if a trial has been instituted. The Federal Circuit rejected this interpretation and held that the PTAB’s interpretation was correct. Although the definition of “trial” in the rule requires “a contested case instituted by the Board based upon a petition,”[2] the Federal Circuit held that the present language “in the trial” could be construed to mean that there are no remaining claims for trial. The Federal Circuit also looked to the purpose of the statute as support for its interpretation, arguing that the statute’s purpose is to establish the settings where estoppel under § 42.73(d) would apply. § 42.73(d) precludes a patent owner from obtaining a patent with claims that are not patentably distinct from cancelled claims. The Federal Circuit reasoned that in this case, there is “no meaningful distinction between claims that are cancelled before an IPR proceeding is instituted and claims that are cancelled after an IPR proceeding is instituted.”[3]

Arthrex also argued that because it specifically asserted that it was not requesting an adverse judgment, the PTAB should not have applied the statute. The Federal Circuit disagreed and stated that the PTAB has authority under the statute to construe the actions of a patent owner as a request for adverse judgment. The Federal Circuit stated that it is the PTAB’s characterization of the actions that matters, not the patent owner’s. The Federal Circuit further reasoned that accepting Arthrex’s argument would render the rule useless because then a patent owner would have the ability to always avoid an adverse judgment by simply making an explicit statement.

Judge O’Malley’s Concurrence

Judge O’Malley concurred in the opinion, stating that she agreed that the Federal Circuit has jurisdiction to review adverse judgments and that the PTAB properly interpreted the statute. However, she questioned whether the Director of the USPTO had the authority to issue the regulation in the first place and whether the PTAB has authority to issue adverse judgments prior to an institution decision, suggesting that such a finding may be inconsistent with prior PTAB and Federal Circuit precedent. For example, Judge O’Malley stated that the term “proceeding” in § 42.73(b) has been construed broadly and that the USPTO defines the term to include both a preliminary proceeding and a trial.[4] She argued, however, that in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293, 1300 (Fed. Cir. 2016), the Federal Circuit held that an IPR does not begin until it is instituted. She concluded that the PTO’s current interpretation of what constitutes a “proceeding” would be inconsistent with Shaw.

Judge Newman’s Dissent  

Judge Newman dissented from the majority. She argued that the PTAB did not have authority to enter an adverse judgment when the claims were disclaimed prior to an institution decision. Judge Newman argued that the language “in the trial” in § 42.73(b) explicitly refers to procedures in the trial and not at the institution phase. She stated that the PTO regulations provide that a “trial” means “a contested case instituted by the Board based upon a petition”[5] and thus § 42.73(b) should be construed to mean “[c]ancellation or disclaimer of a claim such that the party has no remaining claim in a contested case instituted by the Board based upon a petition.”[6] Judge Newman stated that a trial can only occur after institution and in this case there was no trial. She also noted that the PTAB’s interpretation was contrary to the statute because Arthrex explicitly requested no adverse judgment. She argued that the majority’s view that “estoppels can nonetheless be involuntarily imposed by the PTAB when no claims were subject to trial exceeds the PTAB’s statutory authority.”[7]

Conclusions

The Federal Circuit’s opinion appears to provide some clarity as to the circumstances in which the PTAB may issue an adverse judgment. However, it appears to raise more questions as to the PTAB’s – and more specifically the PTO’s – authority when it comes to adverse judgments. Judge O’Malley raised the important question—a question the majority declined to address—of whether the PTO had authority to issue the regulation in the first place. Adverse judgments, by way of estoppel, can severely impact a party who has multiple continuation applications relating to the patents at issue. As such, this question may be an issue the Federal Circuit faces in the near future.

 

[1] 37 C.F.R. § 42.107(e) provides that “[t]he patent owner may file a statutory disclaimer under 35 U.S.C. 253(a) in compliance with § 1.321(a) of this chapter, disclaiming one or more claims in the patent. No inter partes review will be instituted based on disclaimed claims.”

[2] 37 C.F.R. § 42.2.

[3] Arthrex, Inc. v. Smith & Nephew, Inc., No. 2017-1239, slip op. at 8 (Fed. Cir. Jan. 24, 2018).

[4] 37 C.F.R. § 42.2.

[5] Id.

[6] Arthrex, Inc. v. Smith & Nephew, Inc., No. 2017-1239, slip op. at 4 (Fed. Cir. Jan. 24, 2018) (Newman, J., dissenting).

[7] Id. at 7.

Patent litigation often involves the intersection of practice before the PTAB and district courts.  Not surprisingly then, the subject of this post—the Federal Circuit’s recent opinion concerning the reexamination of U.S. Patent No. 6,284,471 (“the ʼ471 patent”)—directly relates to a litigation analyzed on our firm’s companion blog, BiosimilarsIP.com.  See here and here.

In re Janssen Biotech, Case No. 2017-1257 (Fed. Cir. Jan. 23, 2018), concerns an appeal from the PTAB addressing obviousness-type double patenting and the limits of 35 U.S.C. § 271’s safe harbor provisions.  For present purposes, the district court litigation is relevant because the court, like the PTAB, concluded that the ’471 patent was invalid for obvious-type double patenting in view of U.S. Patent Nos. 5,656,272 (“the ʼ272 patent”) and 5,698,195 (“the ʼ195 patent”), two patents that descended from the same parent application as the ’471 patent.  The Federal Circuit provided the helpful graphic below to assist in understanding the prosecution history culminating in this appeal.

Slip Op. at 3.

The issue on appeal was the application of Section 121’s safe harbor provision and whether it “protected” the ’471 patent from the ’272 and ’195 patents.  That statute, the Federal Circuit explained, is to be applied strictly, and “by its literal terms, protects only divisional applications (or the original application) and patents issued on such applications.  Accordingly, patents issued on CIP applications are not within the scope of § 121.” Slip Op. at 9 (citations omitted).  Looking to the diagram above, it is clear that the ’271 patent does not meet these requirements, as it was designated a continuation-in-part (“CIP”) from two separate applications.  The novel issue on appeal then was whether the patent owner could “retroactively bring the challenged patent within the scope of the § 121 safe harbor by amending the CIP application during a reexamination proceeding to redesignate it as a divisional application.”  Slip Op. at 10.  The Federal Circuit concluded that a patent owner could not, affirming the PTAB’s determination.

The Federal Circuit’s analysis was grounded first and foremost in the strict language of the statute.  Once a patent issues on a continuation application, it cannot have “issued” on a divisional application.  To receive the benefit of the safe harbor provision, the application must be designated as a divisional “at the very latest” by the time the challenged patent issues.  While the statutory language settled the matter, the Court also briefly addressed Janssen’s policy-oriented arguments.  For example, Janssen argued that it had not actually “benefitted” from its designation as CIP from the two applications.  The Federal Circuit disagreed, noting that “more than thirty patents” had issued claiming priority through the ’471 patent.  Slip Op. at 13.  Finally, the patent owner pointed to practices before the Patent Office which allegedly permitted patentees to designate applications as both a CIP and a divisional.  The Court declined to address whether these practices were permissible because Janssen did not follow them here.

As noted at the outset, a district court reached the same conclusion as the PTAB, and that decision was likewise appealed to the Federal Circuit.  In light of the affirmance of the PTAB opinion, the Federal Circuit issued a one-page order dismissing the district court appeal as moot.  But the district court litigation lives on, albeit with one less patent at play.

On Friday, January 19, 2018, in a Federal Register notice, the USPTO identified four regulations that it is proposing to abolish.[1] The proposals comply with Executive Order 13777, signed by President Trump in February of 2017, which require federal agencies to review all existing regulations and identify those that should be repealed, replaced, or modified because they are potentially outdated, unnecessary, ineffective, costly, or unduly burdensome to both government and private sector operations.

To carry out the executive order, the Department of Commerce established a Regulatory Reform Task Force (“Task Force”), comprising, among others, agency officials from the National Oceanic and Atmospheric Administration, the Bureau of Industry and Security, and the USPTO. To support its efforts on the Task Force, the USPTO then created a Working Group on Regulatory Reform, charged with reviewing the USPTO’s regulatory practices and suggesting opportunities for reform.

The USPTO’s most recent proposals for streamlining its regulations include eliminating those regulations governing 1) reservation clauses in patent applications; 2) petitions from the refusal of a primary examiner to admit an amendment; 3) the publication of amendments to the regulations; and 4) the limits that the Director can impose on the number of inter partes reviews and post-grant reviews heard by the PTAB. Each is addressed in further detail below.

  1. Regulation: 37 C.F.R. § 1.79 prohibits a pending patent application from containing a reservation for a future patent application of subject matter disclosed, but not claimed, in the pending application. This regulation dates back to a time when claiming priority to a prior application was still a developing and unsettled practice.
    Reasons for Removal: The USPTO states that the removal of § 1.79 is not an invitation to now include reservation clauses in patent applications. Furthermore, the Office notes that even if a reservation clause is added to future applications in the absence of the regulation, it would provide no legal benefit. The requirements for a later-filed application to claim the benefit of an earlier-filed application are already set forth in the statutory and regulatory provisions, on which reservation clauses have no bearing. See, e.g., 35 U.S.C. § 120 and 37 C.F.R § 1.78.
  2. Regulation: 37 C.F.R. § 1.127 indicates that a petition to the Director may be filed under 37 C.F.R. § 1.181 upon a refusal by a primary examiner to admit an amendment, in whole or in part.
    Reasons for Removal: The USPTO found that this round-about way of getting to 37 C.F.R. § 1.181 through another rule was unnecessary. 37 C.F.R. § 1.181 is sufficient to stand alone, and makes clear that a refusal by a primary examiner to admit an amendment, in whole or in part, is petitionable.
  3. Regulation: 37 C.F.R. § 1.351 states that all amendments to the regulations in 37 C.F.R. part 1 will be published in the Official Gazette and in the Federal Register.
    Reasons for Removal: The Administrative Procedure Act (APA) generally requires the USPTO to give public notice of any regulatory change, and guidance from the Office of Management and Budget (“OMB”) makes clear that publication in the Federal Register is the means to provide such public notice. Furthermore, the USPTO notes that it intends to continue its practice of publishing all amendments in 37 C.F.R. part 1 in the Official Gazette. Thus, even with removal of the regulation, the USPTO will continue to publish all changes to the rules just as before.
  4. Regulation: 37 C.F.R. § 42.102(b) and § 42.202(b), respectively, provide that the Director may impose a limit on the number of inter partes reviews and post-grant reviews that may be instituted during each of the first four one-year periods that the Leahy-Smith America Invents Act (AIA) is in effect.
    Reasons for Removal: Both of these regulations are now out of date because the fourth anniversary of the effective date of the AIA has passed.

The following table provides a summary of the proposed rule changes. The Federal Register notice specifies that written comments on the changes must be received on or before February 20, 2018.

 

[1] United States Patent and Trademark Office; Changes to Eliminate Unnecessary Regulations, 83(13) Fed. Reg. 2,759 (Jan. 19, 2018), available at https://www.gpo.gov/fdsys/pkg/FR-2018-01-19/pdf/2018-00769.pdf (last accessed Jan. 23, 2018).

Seven new IPRs were filed against patents held by Alacritech Inc. on December 27, 2017. These IPRs (four of which were filed by Dell and three by Cavium) join eight others filed by Intel, Dell, or jointly by Wistron, Wiwynn, and SMS InfoComm since November. Earlier in the year, 24 IPRs were filed against Alacritech-held patents by Cavium and Intel.

To provide context for the 39 IPRs filed against Alacritech in 2017, Alacritech operated in the area of network interface devices and network storage but appears to have ceased manufacturing activity in late 2013. Alacritech’s website, as it stands today (and as it appears to have read since December 2013), states that “Alacritech continues to license its patented accelerator technology,” and that it will continue to support existing customers, but that it is no longer manufacturing its products.

All seemed quiet on the legal front in 2014 and 2015, but on June 30, 2016, Alacritech filed suits in the Eastern District of Texas against Dell (in which Cavium and Intel later intervened); SMS InfoComm, Wistrom, and Wisynn Corporations; and against CenturyLink, CenturyLink Communications, Cyxtera, and Tier 3. Eight patents were asserted across the three cases.

Intel responded by filing 12 IPRs between May and June of 2017. While these petitions were pending, Cavium also filed 12 IPRs between June and July of 2017. Cavium filed motions for joinder for each of its IPRs to the corresponding Intel IPRs.  Institution decisions came down in November and December, with Cavium being granted joinder on the instituted grounds.

Of the 12 sets of IPRs, institution was granted to at least some asserted grounds in seven. Of the eight patents involved in the IPRs, at least some asserted grounds were instituted against six. The remaining patents with no instituted ground were U.S. Patent Nos. 7,945,699 and 8,805,948.

On November 21 and 22, 2017, Intel filed two additional IPRs, each referencing an IPR denied in the first wave of IPRs (including one targeting the ’948 patent, for which no grounds had been instituted) where the denial was due to what the board deemed to be a failure to demonstrate that an asserted reference was available as prior art, and each providing supplementary evidence of the references’ statuses as prior art publications. As we have covered in more depth in several previous articles, demonstrating the status of an asserted reference as a printed publication is becoming an increasingly important point that must be adequately addressed in a petition itself.

Around this time in the underlying litigation, the three district court cases were stayed pending resolution of the IPRs. The order, entered on December 5, 2017, stayed the cases pending final written decisions or decisions not to institute of 22 of the 26 IPR proceedings that had been filed at that time (we have not been able to determine the rationale of the missing IPR proceedings—none of the missing proceedings had been terminated at the time of the order, and one of the IPRs not listed in the stay had already been instituted at the time of the stipulation leading to the stay).

In December 2017, Dell began filing their own IPRs, beginning with three IPRs filed on December 20, followed by another four on December 27. These petitions asserted identical grounds to the seven already instituted IPRs filed by Intel and already joined by Cavium. While these petitions would normally be time barred as having been filed more than one year after Dell was served in the underlying litigation, this time bar does not apply to joining an existing IPR. The grant of a joinder in such a situation is discretionary, however.

Dell’s petitions and motions for joinder seem to have been filed in a way to minimize concerns that the Board might have regarding joinder. For example, the IPRs were all filed within a month or so of the institution of the earlier-filed IPRs, all explicitly state that they will have no change in the instituted grounds or to the existing schedule, and all state that Dell only intends to assume an active role in the proceedings in the events that Intel and Cavium “are no longer a party to these proceedings.”

On December 21, 2017, Wistron (with SMS InfoComm and Wiwynn) similarly filed three IPRs seeking joinder to already instituted Intel-filed IPRs (also filed within one month of institution, asserting no impact to the existing schedule, and stating that the parties would not have an active role unless other earlier-filing parties attempt to terminate their IPRs). Unlike Dell, Wistron does not yet appear to have filed IPR petitions seeking joinder to the remaining four instituted IPRs. If Wistron would do so now, they would not be able to claim that they had filed within one month of the institution of the remaining IPRs.

Coming finally to the remaining December 27, 2017, filings, Cavium filed three IPR petitions asserting previously rejected grounds. Two of these petitions seek joinder to the November filings by Intel that attempt to demonstrate the prior art publication status of previously questioned references. The third IPR presents essentially the same argument as a previously denied IPR for the ’699 patent, but with supplementary declarations regarding the prior art publication status of a reference.

In summary, with the 39 IPR petitions filed against Alacritech-owned patents in 2017 accounted for above, seven IPRs (filed by Intel and with Cavium having been granted joinder) are currently instituted against six Alacritech patents.  Two Alacritech patents at issue in the district court do not currently have any grounds successfully instituted against them.

Currently pending in the pre-institution phase at the board are five IPRs (two by Intel with Cavium seeking joinder and one additional IPR by Cavium) all similarly attempting to address issues with the status of certain references as prior art publications. Also pending are IPRs filed by Dell requesting joinder to the seven instituted proceedings, and IPRs by Wistron requesting joinder to three of the seven. With a total of 12 motions for joinder before the board, in addition to the seven motions previously granted with regard to Cavium, it will be interesting to observe whether the PTAB is convinced by arguments that the parties will only take an observational role unless the senior filers “are no longer a party to these proceedings,” or whether up to three motions for joinder on a single petition might be too much for the Board, even if the parties have stated they will only have an “understudy” role.[1]

 

[1] A non-exhaustive review of PTAB joinder practice revealed a case in which the PTAB granted joinder to two parties, Akorn Inc. and Teva Pharmaceuticals USA, Inc., to IPR2016-01128, Mylan Pharmaceuticals Inc. v. Allergan, Inc. where both parties agreed to an understudy role. A joinder was denied to a third party, Famy Care Limited, where the party wished to use their own expert and asserted a right to present their own arguments at oral argument, in addition to Mylan.

In Wi-Fi One, the Federal Circuit held en banc that time-bar determinations by the PTAB under      § 315(b) are appealable and remanded the associated IPRs for further proceedings pertaining to the time-bar issue.

Appeals from IPR decisions of the PTAB are limited in scope by § 314(d), which states that “the determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”  The appropriate scope of § 314(d) has now been reconsidered by the Federal Circuit in light of the Supreme Court’s decision in Cuozzo Speed Technologies , LLC v. Lee (2016).  More specifically, the question presented for the en banc rehearing by the Federal Circuit was whether a PTAB determination under § 315(b), which states that “[a]n inter partes review 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,” is subject to judicial review.

By way of background, Ericsson filed a complaint against multiple parties in district court for infringement of three patents in 2010. Importantly, Broadcom, the appellee, was not a defendant in the district court litigation.  In 2013, Broadcom filed three separate IPRs of the three patents-at-issue.  During the pendency of the IPRs, Ericsson transferred ownership of the three patents to Wi-Fi One.  In response to Broadcom’s petitions, Wi-Fi One argued that the IPR petitions were time-barred under § 315(b) because Broadcom was in privity with multiple parties in the district court litigation where the patents-at-issue were asserted more than a year prior to the filing of the petitions.   The PTAB denied Wi-Fi One’s motion for discovery regarding the relationship between Broadcom and the multiple defendants, held that the IPRs were not time-barred under § 315(b), and ultimately found that the challenged claims were unpatentable.  Wi-Fi One appealed the Final Written Decisions of the IPRs, arguing, among other things, that the PTAB’s time-bar determinations should be reversed or vacated.  The initial panel of the Federal Circuit held that the time-bar determinations were nonappealable.

Sitting en banc, the Federal Circuit held that time-bar determinations by the PTAB under § 315(b) are appealable.  In deciding this issue, the Federal Circuit relied on the strong presumption favoring judicial review of administrative actions and did not find any clear and convincing indication in the statutory language in the AIA, the specific legislative history of the AIA, or the statutory scheme as a whole that demonstrates Congress’s intent to bar judicial review of time-bar determinations.  The Federal Circuit explained that the natural reading of § 314(d) restricts reviewability to determinations by the Director whether to institute IPR “under this section,” that is, as set forth in § 314.  In accordance with Cuozzo, the Federal Circuit noted that such determinations were closely related to the preliminary patentability determination or the exercise of discretion not to institute.  The Federal Circuit stated that time-bar determinations have nothing to do with patentability merits or discretion not to institute.   Rather, the Federal Circuit explained that time-bar determinations set limits on the Director’s authority to institute.  Accordingly, the Federal Circuit held that time-bar determinations are not “closely related” to the institution decision addressed in § 314(a), and therefore are not subject to § 314(d)’s bar on judicial review.

While the Federal Circuit makes clear that this holding applies only to the review of § 315(b) time-bar determinations, it will be interesting to see whether this case becomes a basis for further broadening of the scope of permissible challenges  to PTAB institution decisions.  For example, issues unrelated to preliminary patentability determinations or the exercise of discretion not to institute may be deemed appropriate for appeal.

The topic of sovereign immunity was raised a number of times in inter partes review (IPR) proceedings in 2017, and it was cast into the national spotlight when Allergan transferred several patents for its dry-eye drug Restasis® to the St. Regis Mohawk Tribe in an attempt to shield them from PTAB review. But a recent case by the Board may cause problems for Allergan and others who have transferred or are considering transferring their patents to sovereign immune entities.

Last month in Ericsson Inc. v. Regents of the University of Minnesota, an expanded PTAB panel denied the University of Minnesota’s motion to dismiss in a case involving state sovereign immunity in an IPR proceeding.[i] The University of Minnesota, the patent owner, argued that it is entitled to avoid IPR proceedings entirely because the State is a sovereign that is immune under the Eleventh Amendment of the U.S. Constitution. The expanded panel disagreed.

The first issue the Board decided was whether the Eleventh Amendment applies to IPR proceedings. The Board agreed with past panels who determined that Eleventh Amendment immunity is available to States as a defense to IPR proceedings.[ii] The Board compared IPRs to other administrative proceedings, noting that the Supreme Court decided sovereign immunity applies to administrative adjudications similar to civil litigation in Fed. Mar Comm’n v. S.C. State Ports Auth., 535 U.S. 743 (2002), and that the Federal Circuit ruled that state sovereign immunity was available in interference proceedings before the PTAB’s predecessor in Vas-Cath, Inc. v. Curators of Univ. of Mo., 473 F.3d 1376 (Fed. Cir. 2007). Accordingly, the Board confirmed that state sovereign immunity is available as a defense in IPR proceedings.

The second issue the Board confronted was an issue of first impression: whether the University of Minnesota waived its immunity by filing a patent infringement action involving the same patent challenged in the IPR petition. The Board held that the filing of an infringement action in federal court waives a patent owner’s Eleventh Amendment sovereign immunity defense. In finding waiver, the Board analogized IPR petitions to compulsory counterclaims under Fed. R. Civ. P. 13(a), explaining that “because a state as plaintiff can surely anticipate that a defendant will have to file any compulsory counterclaims or be forever barred from doing so, it is not unreasonable to view the state as having consented to such counterclaims.”[iii] Similarly, the Board found that “a party served with a patent infringement complaint in federal court must request an inter partes review of the asserted patent within one year of service of that complaint or be forever barred from doing so.”[iv] Thus, the Board found it “reasonable to view a State that files a patent infringement action as having consented to an inter partes review of the asserted patent.”[v]

The Board further noted that it is the State’s action in filing an infringement suit in federal court that triggers the one-year statutory bar for IPRs, and

[i]t would be unfair and inconsistent to allow a State to avail itself of the federal government’s authority by filing a patent infringement action in federal court, but then selectively invoke its sovereign immunity to ensure that a defendant is barred from requesting an inter partes review of the asserted patent from a different branch of that same federal government.[vi]

Therefore, the Board held that the University of Minnesota waived its Eleventh Amendment immunity by filing an action in federal court alleging infringement of the patent being challenged in the proceeding.[vii]

This decision is notable because Chief Judge Ruschke expanded the panel from the normal three administrative patent judges to seven judges, including himself and the Deputy and Vice Chief Administrative Patent Judges, and he authored the opinion himself. The Chief Judge “decided to expand the panel due to the exceptional nature of the issues presented” and determined the expansion was warranted “to ensure uniformity of the Board’s decisions involving these issues.”[viii]

The expanded panel’s opinion directly calls into question the strategy of assigning patents to Native American tribes to avoid IPR proceedings. The Board has not yet decided whether a transfer to a Native American tribe is adequate to give rise to a sovereign immunity defense. In the Restasis® IPR proceeding, the Board issued an Order in November inviting amicus briefing and adjusted the deadline for the final written decision to April 6, 2018.[ix]

In response to the Ericsson decision, the Saint Regis Mohawk Tribe filed a request for oral hearing on Tuesday, January 2, 2018, regarding its request for discovery into the “identity and impartiality” of the panel assigned to the case. The Tribe stated that “the discovery sought by the Patent Owner concerns due process, the impartiality of the merits panel in this case, and whether political or third-party pressure has been asserted to reach an outcome inconsistent with the binding Supreme Court and Federal Circuit precedents.”[x] The request comes after the Board refused to allow the Tribe to file a motion seeking the desired discovery, stating that the information requested is not within the scope of allowable discovery under 37 C.F.R. § 42.51.

This is an important issue to Saint Regis, as the Tribe was allowed to join the infringement lawsuit that Allergan previously filed in federal court. However, if a state is deemed to have waived sovereign immunity guaranteed by the Eleventh Amendment of the U.S. Constitution when it files an infringement action in federal court, it likely follows that Native American tribes will also be deemed to have waived sovereign immunity guaranteed by statute if the tribe files an infringement action. Thus, it would not be surprising if the expanded panel’s decision in Ericsson is extended to tribal sovereign immunity as well.

 

[i] Ericsson Inc. v. Regents of the University of Minnesota, Case No. IPR2017-01186, Paper 14 (PTAB Dec. 19, 2017).

[ii] See Reactive Surfaces Ltd., LLP v. Toyota Motor Corp., Case IPR2016-01914 (PTAB July 13, 2017) (Paper 36); NeoChord, Inc. v. Univ. of Md., Balt., Case IPR2016-00208 (PTAB May 23, 2017) (Paper 28); Covidien LP v. Univ. of Fla. Research Found. Inc., Case IPR2016-01274 (PTAB Jan. 25, 2017) (Paper 21).

[iii] Ecrisson, Paper 14, at 8 (quoting Regents of Univ. of New Mexico v. Knight, 321 F.3d 1111, 1126 (Fed. Cir. 2003)).

[iv] Id.

[v] Id.

[vi] Id. at 8-9.

[vii] Id. at 11.

[viii] Id. at 3-4.

[ix] Mylan Pharmaceuticals Inc. v. Saint Regis Mohawk Tribe, Case IPR2016-01127, Paper 98 (PTAB November 3, 2017).

[x] Mylan Pharmaceuticals Inc. v. Saint Regis Mohawk Tribe, Case IPR2016-01127, Paper 122 at 2 (PTAB November 3, 2017).

As set forth in the statute and upheld by the Supreme Court in Cuozzo,[1] the Patent Trial and Appeal Board’s (“PTAB” or “Board”) institution decisions are “final and nonappealable.”[2]  Accordingly, a petitioner who fails to get a review instituted by the Board has limited options to maintain its validity challenge.  One recourse available for a dissatisfied petitioner is filing a request for rehearing.

A request for rehearing is simply a request to the original panel to reconsider its original decision based on an abuse of discretion standard.  “The request must specifically identify all matters the party believes the Board misapprehended or overlooked, and the place where each matter was previously addressed in a motion, an opposition, or a reply.”[3]  In other words, the request should not merely be an attempt to reargue positions that the Board disagreed with in its initial decision.

Most often, the Board declines a request for rehearing, which may discourage a practitioner from seeking one.  However, given the lack of options, dissatisfied petitioners should always consider filing a request for rehearing, especially if a petitioner can specifically identify an overlooked or misapprehended matter on the record.

For example, in Cook Group Incorporated and Cook Medical, LLC v. Boston Scientific Scimed, Inc., IPR 2017-00134, Paper No. 23 (P.T.A.B. Dec. 18, 2017), the Board granted a rehearing over its original decision denying institution of a challenged claim in U.S. Patent No. 8,709,027 (“the ’027 patent”) after determining that it misapprehended a claim limitation and overlooked evidence identified in the petition.

The ’027 patent relates to a method and a medical device for causing hemostasis of blood vessels along the gastrointestinal tract.  The ’027 patent consists of three independent claims (i.e., claims 1, 13, and 20).  Claims 1 and 13 are directed to a medical device, and claim 20 is directed to a method of inserting the medical device into a body.

After being sued by Boston Scientific for infringement of the ’027 patent, Cook filed an IPR petition challenging the patentability of the claims on four separate grounds.  Specifically, Cook asserted that claims 1, 3-6, 13-15, 17, and 20 were anticipated by U.S. Patent No. 5,749,881 (“Sackier”) (i.e., ground 1) and that claims 1-20 were obvious over Sackier in view of U.S. Patent No. 5,843,000 (“Nishioka”) (i.e., ground 2).  Cook further contended that claims 1-12 and 20 were anticipated by U.S. Patent No. 5,626,607 (“Malecki”) (i.e., ground 3) and that claims 1-12 were obvious over Malecki (i.e., ground 4).

The Board instituted review only on ground 2 that claims 1-19 were obvious over Sackier and Nishioka.  In reaching its decision to decline review of claims 1-20 based on ground 1, the Board found that Sackier did not disclose the recited feature “the control member moved distally relative to the clip,” and held that all three independent claims, including claim 20, required such a feature.  Nonetheless, the Board found that Nishioka cured Sackier for this deficiency, thereby instituting review of claims 1-19 based on the ground of obviousness.  However, the Board declined review of independent claim 20 based on ground 2 because the Board found that Cook improperly combined features from two different embodiments in Sackier, a first clip shown in FIGS. 11-14 and a second clip shown in FIGS. 15-17, to meet the recited step “positioning the medical device at a desired deployment location.”  The Board supported its position by asserting that the clip shown in FIGS. 11-14 of Sackier is intended to be easily detached within the body, whereas the clip shown in FIGS. 15-17 of Sackier cannot be detached from a clip applier within the body.  The Board further found that Malecki failed to disclose or suggest the recited feature “the control member is moved distally relative to the clip,” thereby declining to institute review of claims 1-12 and 20 based on grounds 3 and 4.

Following the Board’s decision to decline review of claim 20, Cook filed a request for rehearing, identifying two particular matters that were misapprehended or overlooked by the Board.  First, Cook asserted that the Board mistakenly held that claim 20 included the recited feature “the control member moves distally relative to the clip.”  Second, Cook contended that the Board overlooked evidence identified in the petition that demonstrated that the clip shown in FIGS. 15-17 of Sackier detached from a clamp applier within the body.  Cook’s request concluded by asking the Board to reconsider independent claim 20 over grounds 1 and 2 in view of the two overlooked or misapprehended matters.

The Board found both of Cook’s arguments to be persuasive, acknowledging that it mistakenly held claim 20 to include the recited feature “the control member moves distally relative to the clip,” and overlooked evidence that demonstrated that the clip shown in FIGS. 15-17 of Sackier detached from a clamp applier.  Accordingly, the Board readdressed claim 20 over the first and second grounds.

As to its review of claim 20 on ground 1, the Board maintained its decision declining institution because Cook picked features from distinct embodiments in Sackier to meet a claim element.  The Board noted that anticipation cannot be established by combining features from unrelated embodiments in a single reference.  However, in its review of claim 20 on ground 2, the Board retracted its initial non-institution decision and held that Cook established a reasonable likelihood that it would prevail in showing that claim 20 is obvious over Sackier and Nishioka.  Specifically, the Board found that Sackier suggests the recited step “positioning the medical device at a desired deployment location,” in light of the overlooked evidence.

This case demonstrates that filing a request for a rehearing may be an effective measure to persuade the Board to reconsider its initial institution decision — perhaps even retract its initial decision — if a practitioner can bring to light any submitted evidence not considered in the institution decision or any legal errors, such as claim construction, that would alter the outcome.  However, practitioners should be cautious not to use a request for a rehearing as simply an attempt to convey disagreements with the Board’s findings.

 

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

[2] 35 U.S.C. § 314(d).

[3] 37 C.F.R. § 42.71(d).