A difference between post-grant proceedings (i.e., inter partes review and covered business methods) and its predecessor (i.e., ex parte and inter partes reexaminations) is the ability for parties in post-grant proceedings to settle and request termination of the proceedings.  Both federal statutory authority and USPTO rules govern the nature of settlements in post-grant proceedings.  According to 35 U.S.C. §§ 317(a) and 327(a), a post-grant proceeding “shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner, unless the Office has decided the merits of the proceeding before the request for termination is filed.”  The USPTO further clarifies that “the Board is not a party to the settlement and may independently determine any question of jurisdiction, patentability, or Office practice.” 37 C.F.R. § 42.74(a).  Accordingly, even though the parties may reach a joint settlement agreement, termination of the post-grant proceeding with respect to both the petitioner and patent owner is not guaranteed.

The stage of the post-grant proceeding is a key factor in determining when the Board will (i) deny a request to terminate for both the petitioner and patent owner, (ii) grant the request to terminate for the petitioner only, or (iii) grant the request for both the petitioner and patent owner.  Generally, PTAB panels have consistently granted a request to terminate a proceeding for both the petitioner and patent owner when the request is filed before briefing has completed.  See e.g., Itron, Inc. v. Certified Measurement, IPR 2015-00570, Paper 28, at  2-3 (February 16, 2016)(terminating the proceedings for both patent owner and petitioner while noting that since “Petitioner has not yet filed a Reply in any of the cases, … if we do not terminate these proceedings with respect to Patent Owner, … [the Board] will be required to determine patentability on less than a full record”); CB Distributors, Inc. and DR Distributors, LLC v. Fontem Holdings 1 B.V., IPR2014-01529, at 4 (December 7, 2015)(terminating the proceedings for both patent owner and petitioner where a reply to the patent owner response had yet to be filed).

However, after briefing has completed, the post-grant proceeding is considered to be in an advanced stage, and termination of the proceeding for both the petitioner and patent owner is not guaranteed.  See e.g., Interthinx, Inc. v. Corelogic Solutions, LLC, CBM2012-0007, Paper 47, at 2 (November 12, 2013)(denying joint request to terminate with respect to patent owner noting that the proceedings were at an advanced stage where the “matter was briefed fully and ready for oral hearing at the time the parties moved to terminate”). The following cases highlight a few factors the Board considers when terminating a post-grant proceeding at an advanced stage.

I. Decision on the Merits

As stated in 35 U.S.C. §§ 317(a) and 327(a), where there is a joint request by the petitioner and patent owner to terminate a post-grant proceeding, the proceeding shall be terminated with respect to any petition “unless the Office has decided the merits of the proceeding before the request for termination is filed.”  When a decision on the merits has not been reached, the Board is required to terminate the proceeding with respect to the petition.  See e.g., Lam Research Corp. v. Flamm, IPR2015-01764, Paper 27, at 6 (December 15, 2016) (noting that for a joint request to terminate filed after the oral hearing, the Board was required to terminate the proceeding with respect to the petitioner as the Board had yet to reach a decision on the merits).

When the oral hearing has been conducted, however, both the patent owner and petitioner run the risk of the Board reaching a decision on the merits even though the Board has not issued a final written decision.  For example, in Kinetic Technologies, Inc. v. Skyworks Solutions, Inc., the Board denied a joint request to terminate the proceedings for both the patent owner and petitioner noting that settlement was reached after the oral hearing was conducted, and after the Board had substantially decided the merits of the proceedings.  IPR2014-00690, Paper 43, at 20-21 (October 19, 2015).  Similarly, in Apple Inc. v. OpenTV, Inc., where a joint request to terminate the proceedings was filed after oral hearings were held, the Board denied the request, noting that “[a]lthough the panel has not yet issued a Final Written Decision …, the panel deliberated and decided the merits … before the requests were filed.”  IPR2015-00969, Paper 29, at 4 (September10, 2016).  Notably, in Kinetic Technologies, the joint request to terminate the proceedings was filed a mere eight days after the oral hearing, thereby demonstrating the risk parties face by waiting to settle after conducting the oral hearing.  See IPR2014-00690, Paper 43, at 20 (noting that the oral hearing was held on June 4, 2015 and the joint motion to terminate the proceedings was filed on June 12, 2015).

II. Inability to Construe Claims

The Board may also be more inclined to deny a joint request to terminate, filed at an advanced stage of a proceeding, if issuing a final written decision would clarify claim construction issues of the challenged claims or proposed substitute claims.  For example, in Blackberry Corp. v. MobileMedia Ideas, LLC, the Board cancelled an oral hearing based on a request by the parties and terminated petitioner’s involvement based on a joint request to terminate the proceedings.  However, the Board maintained the proceeding against the patent owner noting that “the trial issues had been briefed fully at the time the parties moved to terminate the proceeding,” and “in view of the advanced stage of … [the proceedings], … the Board will proceed to a final written decision.”  IPR2013-00016, Paper 31, at 3 (December 11, 2013).  In the Board’s decision denying the motion to terminate for patent owner, the Board noted that the patent owner filed a motion to amend in lieu of a patent owner response, and the petitioner agreed not to oppose the motion to amend.  Id. at 2.  The Board subsequently issued a final written decision denying the motion to amend, noting that means-plus-function features recited in the proposed substitute claims could not be construed due to the lack of sufficient structure in the specification for performing the recited function.  IPR2013-0016, paper 32, at 12-15 (February 25, 2014).

Similarly, in Blackberry Corp. v. Mobilemedia Ideas, LLC, the Board terminated petitioner’s involvement based on a joint request to terminate the proceedings, but maintained the proceeding against the patent owner, noting the advanced stage of the proceedings where the oral hearing had been completed.  IPR2013-00036, Paper 64, at 3 (January 21, 2014).  The Board subsequently issued an order terminating the proceedings, noting that due to an inability to construe means-plus-function features recited in the challenged claims, the Board could not conduct a proper factual inquiry for determining obviousness of the challenged claims.  IPR2013-00036, Paper 65, at 20-21 (March 7, 2014).

III. Impact on Other Co-Defendants and/or Petitioners

When a joint request to terminate is filed after the oral hearing is conducted, the Board may take into account how termination of the proceeding with respect to both the petitioner and patent owner impacts other parties (e.g., co-defendants in co-pending litigations or petitioners in co-pending post-grant proceedings).  For example, in Yahoo!, Inc. v. Createads, LLC, where a joint request to terminate the proceeding was filed after conducting oral argument, the Board terminated petitioner’s involvement in the IPR but maintained the proceeding against the patent owner, noting the advanced stage of the proceedings and that the patent owner had asserted the patent in other district court cases that were stayed pending the outcome of the IPR proceeding.  IPR2014-00200, Paper 40, at 2 (October 31, 2014).

On the contrary, in Lam Research Corp. v. Flamm, where a joint request to terminate the proceedings was filed after conducting oral argument, the Board terminated the proceedings for both the petition and patent owner.  IPR2015-01764, Paper 27, at 6 (December 15, 2016).  The Board noted that since the “parties completed all briefing, the Board held oral hearings, and the statutory deadline for rendering final written decisions is approximately two months away,” it would “not be unreasonable … to proceed to final written decisions, thereby providing the parties and the public with certainty on the grounds of unpatentability.”  Id. at 4.  However, the Board ultimately granted the request to terminate for both parties, noting that there were other pending proceedings that cover all of the claims at issue in the current proceeding, and any narrowing of issues in the other proceedings by issuing a final written decision in the present proceeding would be speculative.  Id. at 5.  The Board further found “it significant that many of the remaining parties sued for infringement of the challenged patents are petitioners in those pending inter partes review proceedings, and will have the opportunity to challenge the patents there, as well as in the District Court actions.”  Id.

Thus, the Yahoo!, Inc. and Lam Research Corp. cases represent two ends of the spectrum regarding termination of proceedings after conducting oral arguments when multiple parties are involved.  In Yahoo!, Inc., where multiple defendants were sued over the same patent in the District Court actions, only one IPR petition was filed at the PTAB with the remaining cases stayed pending resolution of this IPR proceeding.  In contrast, in Lam Research Corp., multiple petitions were filed by multiple defendants over the same group of patents with non-overlapping grounds, where issuing a final written decision would not likely narrow issues in the remaining proceedings.  As such, the Board maintained the proceeding against the patent owner in Yahoo!, Inc. while terminating the proceeding for both the petitioner and patent owner in Lam Research Corp.

IV. Conclusion

As the above cases illustrate, when the Board will terminate a proceeding at an advanced stage (e.g., after briefing is completed) depends on the particular circumstances of the case.  As demonstrated in the Kinetic Technologies and Apple Inc. cases, if the Board has already invested the resources to come to a decision on the merits, the Board is likely to deny a joint request to terminate with respect to both the patent owner and petitioner even though a final written decision has not issued.  Furthermore, as demonstrated in the Blackberry Corp. cases, if issuing a final written decision would clarify claim construction issues for future proceedings, the Board is likely to deny a request to terminate with respect to the patent owner.  Additionally, as demonstrated by the Yahoo! and Lam Research Corp. cases, when multiple parties have been sued over the same patent, whether other parties have the ability to challenge the patent in other proceedings or are waiting on the result for the present proceeding is likely to determine whether the Board terminates with respect to only the patent owner, or both the patent owner and petitioner.

The Federal Circuit recently changed the scope of CBM eligible patents. While the Patent Trial and Appeals Board (PTAB) had previously interpreted its jurisdiction broadly, the Federal Circuit, in two recent decisions, considerably narrowed the universe of patents eligible for CBM review. This post analyzes the results of those decisions as they have played out in practice.

To recap briefly: On November 21, 2016, the Federal Circuit held in Unwired Planet, LLC v. Google Inc., 841 F.3d 1376 (Fed. Cir. 2016), that the PTAB had incorrectly and over-broadly interpreted the “financial product or service” requirement to include a patent that claimed a method or apparatus incidental or complementary to a financial activity.  See a previous post discussing that case.  The Federal Circuit re-emphasized this holding three months later, in the case Secure Axcess LLC v. PNC Bank Nat’l Ass’n, 848 F.3d 1370 (Fed. Cir. 2017). Following these decisions, the PTAB must look to the statutory definition (from AIA Section 18(d)(1)) of a “covered business method patent,” and not such non-statutory terms as incidental or complementary to a financial activity.

Following the latest Federal Circuit decision (Secure Axcess, dated February 21, 2017), up until June 27, 2017 (when this post was written), there have been 16 CBM petitions filed (over a span of about five months).  In the preceding five-month period, there were 33 CBM petitions filed, and in the five months before that, 37 CBM petitions were filed.  This appears to indicate a drop in number of petitions filed of roughly 50%.  This may indicate that potential petitioners are deciding not to file a CBM petition where they would have before under the looser standard of what was CBM eligible. Though this drop appears to be significant, given that the volume of CBM petitions is small, especially as compared to IPR petitions, and may fluctuate for other reasons, these numbers alone do not reveal the full effect of the Federal Circuit’s decisions.

To see more clearly what effect the decisions have had, we next look at institution decisions, and particularly at those decisions denying institution. Because an institution decision issues approximately six months after filing a petition in most cases, decisions that are now being denied institution were filed when practitioners were still operating under the looser standard of what was considered CBM eligible. Since February 21, 2017, 90% of CBM institution decisions have denied institution. In 15 of 17 (~88%) of the decisions denying institution in that period, the denial was premised on the challenged patent not being CBM eligible. In the preceding five-month period, only about 47% of CBM institution decisions were denied institution, and 8 of 24 (~33%) of the decisions denying institution in that period were premised on the challenged patent not being CBM eligible. In the five months before that, about 30% of CBM institution decisions were denied institution, and 6 of 11 (~55%) of the decisions denying institution in that period were premised on the challenged patent not being CBM eligible.

These numbers are even more stark than the roughly 50% drop in CBM petitions being filed. Whereas before the Federal Circuit decisions in Unwired Planet and Secure Axcess, most CBM petitions were instituted, now an overwhelming percentage are denied (~90% of petitions), and they are being denied mostly because of eligibility problems (~88% of denials). Because of the large difference in numbers of IPR petitions and CBM petitions filed, it is difficult to tell if there is any appreciable increase in IPR petitions due to the decline in CBM petitions. Notwithstanding, what is clear is that the high rate of denial will signal to future potential CBM petitioners that they should carefully consider whether a challenged patent meets the more narrow test for eligibility following the decisions in Unwired Planet and Secure Axcess.

On Monday, June 12, 2017, the Supreme Court granted certiorari in Oil States Energy Services LLC v. Greene’s Energy Group, LLC, No. 16-712, to answer the question whether the PTAB could properly examine the validity of a patent in an inter partes review.

Oil States first filed an infringement suit against Green’s Energy Group in the Eastern District of Texas.  After roughly a year of litigation and after a Markman hearing in the district court, the defendant filed a petition for inter partes review of Oil States’ patent.  As a result of the two parallel proceedings, the PTAB and the district court both interpreted claim terms of the patent-at-issue, and interpreted some terms inconsistently.  The PTAB ultimately found Oil States’ patent invalid, and the Federal Circuit, on May 4, 2016, affirmed that decision without an opinion under Rule 36.  The Federal Circuit rejected a petition for rehearing on July 26, 2016.

Oil States’ petition for certiorari asks the Supreme Court to rule on a constitutional argument and two procedural arguments relevant to inter partes reviews before the PTAB: (1) whether patents are a property right that may not be revoked by the Executive Branch instead of a jury in an Article III court, (2) whether the PTAB’s stringent amendment process conflicts with Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016), and (3) whether the Supreme Court’s instruction for the PTAB to use the “broadest reasonable interpretation” when interpreting claims requires the PTAB to apply claim construction principles traditionally used by district courts.  The Supreme Court granted certiorari on the first issue only.

This issue has drawn the most public attention, and can have wide implications, for the possible effect this case might have on the popular PTAB inter partes reviews if the Supreme Court finds the proceeding unconstitutional.  Oil States’ argument is grounded in the Seventh Amendment of the Constitution guaranteeing a jury trial for suits brought at common law.  Oil States argues that because patent infringement cases –including patent validity – in 18th century England were adjudicated in courts of law, and patent rights are private property rights that exist “wholly apart from the government when granted,” patent validity can only be finally decided by Article III courts.

Greene’s Energy disputes Oil States’ characterization of patent rights as a private right that can only be adjudicated by an Article III court and jury.   First, historically, 18th century England tried patent disputes before a jury only where damages were sought.  Second, while patents may have some elements of a private right, it is “so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution.”  While the Constitution refers to patent rights, it delegated the establishment of the patent system to Congress, along with the right to decide which ideas are deserving of a patent.  Therefore, Greene’s Energy concludes, the agency which has the right to decide initially if a patent should be awarded should also be allowed to decide if a patent should be revoked.

Supreme Court and Federal Circuit case law are in conflict whether a patent is a public or private right.  In a 19th century case, McCormick Harvesting Mach. Co. v. C. Aultman & Co., 169 U.S. 606 (1989), the Supreme Court thought a patent has the same legal rights as other private property, and “is not subject to be revoked or canceled by the president, or any other office of the Government.”  Greene’s Energy disputes the applicability of McCormick, which predated post-issuance procedures at the USPTO.  Rather, Greene’s Energy relies on Federal Circuit case law finding USPTO post-issuance proceedings to be constitutional as the Federal Government has a right to cure a defect in a governmental action – namely a wrongly granted patent.  See Patlex Corp. v. Massinghoff, 758 F.2d 594 (Fed. Cir.) modified on other grounds on reh’g, 771 F.2d 480 (Fed. Cir. 1985); Joy Techs., Inc. v. Manbeck, 959 F.2d 226 (Fed. Cir.), cert. denied, 506 U.S. 829 (1992).

Per Oil States’ petition for certiorari, 80% of patents reviewed in an inter partes review are invalidated, having a cumulative effect on the U.S. economy on the order of hundreds of billions of dollars.  In at least three instances, the Supreme Court has refused to grant certiorari on this precise question, and, just last week, the Federal Circuit refused to grant an initial en banc hearing for a case also raising this issue.

If the Supreme Court does reverse the Federal Circuit here, it will once again upend the current patent litigation climate.  Both the breadth of its decision, as well as its applicability to the thousands of patents already invalidated in an inter partes review, will be issues to watch for as well.

Two IPRs (IPR2016-00663 and IPR2016-00669) filed on patents asserted against Microsoft in district court have ended with victory for the tech giant in an unusual procedural turn. Claims of the two patents were cancelled as a result of adverse judgment being entered against the owner of record, Global Technologies, Inc., after the PTAB deemed that the Patent Owner had abandoned the IPR proceedings.

The conflict between the parties began when Keith Raniere filed suit against Microsoft in the Northern District of Texas alleging infringement of the patents. The issue of patent ownership became a point of contention in the litigation, with Microsoft ultimately moving to dismiss the case for lack of standing. A hearing was heard on the issue, and the district court dismissed the case with prejudice on the same day. A key issue appears to have been that Mr. Raniere, one of several named inventors on the patents, held himself out as the sole shareholder and director of Global Technologies, Inc. (“GTI”), but was unable to provide credible evidence that any of the original owners of GTI had either transferred their shares in the company or their interest in its patents to Mr. Raniere.

Around the time the district court dismissed the underlying litigation, Microsoft filed petitions on March 2, 2016, against two patents Mr. Raniere had asserted. The petitions noted that Patent Office records indicated GTI as the owner of the patents, but that as Mr. Raniere had asserted his ownership in the underlying litigation, that they had served Mr. Raniere and GTI according to its correspondence address at the Patent Office.

On March 17, 2016, an assignment executed in 2014 was recorded at the USPTO from GTI to Mr. Raniere, with Mr. Raniere holding himself out as the President and sole shareholder of GTI. In the IPRs, preliminary responses were filed on behalf of Mr. Raniere. When trials were instituted for both patents in September 2016, the Board noted the recorded assignments and stated that it would treat Raniere as the Patent Owner for the proceedings.

Through the preliminary proceedings and eventually institution of the IPRs, the dismissal of the district court litigation was the subject of appeals to the Federal Circuit. On January 18, 2017, the dismissals were affirmed. This set off a series of actions in the IPRs, beginning with a conference call discussing the issue of patent ownership in context of the district court dismissals. That discussion included review of a transcript of the district court hearing which discussed the same assignment from GTI to Raniere that had been recorded at the USPTO, with the district court finding the assignment ineffective, and found Mr. Raniere’s testimony to be “wholly incredible” and “untruthful.” It was noted that no evidence had been produced which supported either a transfer from owners of GTI to Raniere or evidence that Raniere otherwise had an interest in GTI that would allow him to transfer its assets to himself. The Board accepted these findings, and asked both parties, as well as the firm representing Raniere, to address issues related to representation of the Patent Owner and the impact on the IPR proceedings.

The law firm responded with evidence from the prosecution of the patents with Raniere listed as president of GTI, including powers of attorney signed by Raniere as President, and its brief argued that either Raniere was the owner, or that the law firm was authorized to represent GTI as all potential owners had given it power of attorney during prosecution of the patents. Microsoft’s briefing asked for all filings on behalf of Raniere to be expunged from the proceedings.

The Board ultimately decided that Raniere had not demonstrated an ownership interest in GTI or to the patents as the issue had been decided by the district court, which had considered and found insufficient the same documents that Raniere had presented in the IPRs. The Board also held that the law firm’s representation of GTI may have been ineffective as it relied primarily on documents executed by Raniere.

Attempting to locate an actual “authorized representative” of GTI, the Board asked both the law firm to produce a new power of attorney signed by someone other than Raniere and asked Microsoft to serve the individuals shown in the record to have ownership interests in GTI. When the law firm was unable to produce a new power of attorney, the Board expunged the Preliminary Response, Patent Owner Response and associated exhibits from the record.

Although one individual associated with GTI was in contact with the Board regarding the proceedings following receipt of service by Microsoft, ultimately no individual or entity made an appearance for GTI. Ultimately, the Board held that GTI had abandoned the proceedings, which was construed as a request for adverse judgment. As a result, the claims for which the IPRs had been instituted were cancelled.

While this case certainly presents a unique procedural background, it also gives a lesson so fundamental that many patent owners may overlook it or assume it is not an issue: if a party claims ownership of a patent, make sure there are no gaps in their paperwork tracing back to the assignment from inventors. Here, Mr. Raniere was an inventor on the patents and had held himself to be a representative for GTI for nearly two decades. In his mind, there may have been little issue with ownership he could foresee. Even so, the lack of documentation of either transfer of ownership to Raniere or sufficient evidence that Raniere was authorized to act on behalf of GTI was fatal not only to his suit, but also to the survival of claims of the patents.

On May 11, 2017, the Federal Circuit denied a request for an initial hearing en banc in Cascades Projection LLC v. Epson Am., Inc., Nos. 2017-1517, 2017-1518 (Fed. Cir. May 11, 2017).  Although the denial was not surprising, the level of interest from the Court was. With multiple amicus briefs, two dissenting opinions, and a lukewarm concurrence by Judge Newman, the en banc denial will likely not be the last we hear about the issues presented in the petition.

Briefly, Cascades Projection (“Cascades”) took the unusual step of petitioning the Federal Circuit for an initial hearing en banc to address whether a patent right is a private right such that a non-Article III body can constitutionally review issued patents in IPR proceedings. The Court, in a per curiam decision, denied the petition.

Judge Reyna dissented in a thorough twenty-four page opinion.  Specifically, Judge Reyna stated that the Supreme Court’s McCormick Harvesting Mach. Co. v. Aultman, 169 U.S. 606 (1898) decision dictates that only an Article III court may annul an issued patent.  This reasoning conflicts with the Federal Circuit’s own precedent in MCM Portfolio, LLC v. Hewlett-Packard Co., 812 F.3d 1284 (Fed. Cir. 2015) cert. denied 137 S. Ct. 292 (2016), and Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985), both of which purport to distinguish McCormick.  Moreover, Judge Reyna stated that Patlex and MCM are in conflict with each other as to whether McCormick was decided on statutory or constitutional grounds.  Finally, Judge Reyna stated that the petition raises larger separation of powers issues implicated by the increased use of administrative law judges, a practice he found “in need of a clear limiting principle.”

Judge O’Malley likewise dissented from the denial, noting she was “far from certain that MCM’s underlying premise—that patent rights are public rights—is correct.”

Judge Newman concurred in the denial of the petition, on the grounds that “the matter should be resolved after full opportunity for panel consideration.”

Finally, Judge Dyk issued an opinion (joined by Chief Judge Prost and Judge Hughes) “solely to address three points raised by today’s dissents.”  That is, Judge Dyk stated that MCM and Patlex were not in conflict, and further, that both decisions distinguished McCormick on statutory grounds.  Finally, Judge Dyk stated that “the Supreme Court has repeatedly recognized that patent rights are public rights flowing from congressional legislation.”

Cascades likely found solace in the unusual interest its petition was able to garner, and therefore is likely to continue to advocate for this position through panel briefing and beyond.  As Judge Newman noted, Cascades may re-raise the need for en banc review following the panel’s review.  Finally, Cascades may decide to take its fight up with the Supreme Court.  Indeed, while MCM appears consistent with Federal Circuit precedent, the Supreme Court’s recent decision in TC Heartland LLC v. Kraft Foods Grp. Brands LLC demonstrates that the Supreme Court is not adverse to questioning what otherwise appears to be well-settled Federal Circuit principles, particularly when there is a potential conflict between a prior Supreme Court decision and the Federal Circuit’s more recent pronouncements.

On May 22, 2017, the Supreme Court granted certiorari in SAS Institute, Inc. v. Lee, No. 16-969, 2017 WL 468440 (U.S. May 22, 2017). The issue in this appeal is whether the America Invents Act permits the Patent Trial and Appeal Board (“the Board”) to partially institute IPR proceedings (as it has been doing). If the Supreme Court determines that partial institution is not permitted (thought to be a likely ruling by many, given that the Supreme Court typically does not take Federal Circuit cases to affirm the decision), this could have significant effect on, inter alia, the scope of estoppel attaching to the Board’s decisions.

Partial institution is the common practice in which the Board institutes review of some but not all of the claims challenged in a petition. One of the central problems with this practice is that it multiplies litigation without adequately simplifying the issues in dispute. Because a defendant faces liability for infringement of even a single valid claim, litigants must resolve the validity of each and every asserted claim. When the Board institutes review of only some of those claims, it forces the parties to litigate the validity of the remaining claims in another forum, thereby bifurcating the proceeding. Judge Newman has forcefully addressed the inefficiencies resulting from this practice in a trio of dissenting opinions. Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016) (Newman, J. dissenting); SAS Inst., Inc. v. ComplementSoft, LLC., 825 F.3d 1341 (Fed. Cir. 2016) (Newman, J. dissenting); SAS Inst., Inc. v. ComplementSoft, LLC., 842 F.3d 1223 (Fed. Cir. 2016) (Newman, J. dissenting).

If the Supreme Court reverses in SAS Institute, it will likely rely on 35 U.S.C. § 318(a) in doing so. Section 318(a) instructs that the Board “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” On first inspection, this language appears to foreclose the Board’s practice of partial institution. The Federal Circuit has held, however, that the language in Section 318(a)—“any patent claim challenged by the petitioner”—refers not to the claims challenged in the petition, but rather to the claims upon which the Board institutes review. See Synopsys, 814 F.3d at 1315; SAS Inst., 825 F.3d at 1352.

In support of the Federal Circuit’s interpretation of Section 318(a), it has cited to subtle differences in the statutory language found in Sections 314(a) and 318(a). Section 314(a), which defines the threshold for instituting inter partes review, refers to the petitioned claims as “claims challenged in the petition.” Section 318(a), by contrast, refers to the claims to be addressed in the final written decision as “any patent claim challenged by the petitioner.” Citing this linguistic distinction, the Federal Circuit concludes that Sections 314(a) and 318(a) do not refer to the same set of claims, and that the Board is therefore not required to address all of the petitioned claims in the final written decision. Synopsys, 814 F.3d at 1315.

The opposite conclusion—that these strikingly similar linguistic formulations refer to the same set of claims—is at least as plausible as the holding reached by the Federal Circuit. Thus, if the Supreme Court finds itself persuaded by policy considerations, it will have a statutory basis to reverse the Federal Circuit’s ruling.

From a practical perspective, reversal in SAS Institute would convert the institution decision into an all-or-none approach whereby the Board would be forced to institute all of the claims challenged in a petition or none at all. For petitioners, the advantage of such a regime is clear—by showing that one challenged claim is likely invalid, the petitioner may be able to obtain review of all challenged claims. The allure from the patent owner perspective, meanwhile, is that an all-or-none approach would strengthen the estoppel provisions under 35 U.S.C. Section 315(e). But the degree to which estoppel may be strengthened by a Supreme Court reversal in SAS Institute may be limited for reasons discussed below.

The Patent Office regulation governing institution of inter partes review, 37 C.F.R. § 42.108(a), provides for two types of partial institution. First, the Board may elect to institute review on only some challenged claims. Second, the Board may elect to institute review on only some of the grounds of unpatentability asserted for each claim. This latter class of discretionary denials is quite significant and includes, for example, many of the Board’s redundancy determinations.

As the authors have previously written, the scope of estoppel under Section 315(e) appears to be significantly narrower than originally expected. This is due not just to the partial institution (of claims) issue discussed above, but also, in part, to the Federal Circuit’s guidance in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016), which has led at least one district court to conclude that estoppel is limited to the grounds actually decided in the Board’s final written decision. See Intellectual Ventures I LLC v. Toshiba Corp., No. CV 13-453-SLR, 2016 WL 7341713, at *13 (D. Del. Dec. 19, 2016). While SAS Institute presents a suitable vehicle to reverse the Board’s practice of instituting review on only some challenged claims (and thus resolve the estoppel issue related thereto), it is unclear whether SAS Institute (or any USPTO regulations that follow from a reversal in SAS Institute) will speak to the arguably larger estoppel issue related to instituting review on only some of the asserted grounds of unpatentability.

Importantly, SAS Institute does not argue that Section 318(a) compels adjudication of all of the asserted grounds of patentability. The Supreme Court may therefore decline to address this issue in its opinion. Given the likelihood that judicial economy and finality will be central to the Court’s analysis of Section 318(a), however, the Court may find it difficult to ignore the Board’s treatment of secondary grounds and the potential that such treatment may undermine Congressional intent to provide an alternative—rather than supplementary—forum to adjudicate patent validity.

Until the Supreme Court rules in SAS Institute, practitioners would be wise to closely monitor the Board’s partial institution practices and the impact that such practices may have on estoppel. As one example, in cases where the Board issues a final written decision on less than all of the claims challenged in a petition, both parties could potentially have basis to appeal since the petitioner may have been denied the opportunity to invalidate claims upon which review was not instituted, and the patent owner may have been denied the benefit of a final determination and estoppel attaching to those claims.

The Federal Circuit’s May 8, 2017 opinion in Intellectual Ventures II LLC v. Ericsson, Inc., while non-precedential, provides useful insight into bounds of procedural due process requirements in an IPR proceeding.  Due process necessitates “notice and an opportunity to be heard.”  Further, because IPRs are a formal administrative adjudication under the Administrative Procedure Act (“APA”), each party is entitled to present oral and documentary evidence.  Therefore, the Board may not change theories “midstream without giving the parties reasonable notice of its change.”  The question for the Court here was how far these protections extend.

Intellectual Ventures argued that the Board deprived it of due process by adopting a construction that was not advanced by the parties.  The Court disagreed.  Specifically, the Court explained that “the Board is not constrained by the parties’ proposed constructions and is free to adopt its own construction, as it did here.”  The Court contrasted two recent opinions, In re Magnum Oil International, Ltd., 829 F.3d 1364, 1381 (Fed. Cir. 2016) and SAS Institute, Inc. v. ComplementSoft, LLC, 825 F.3d 1341, 1351 (Fed. Cir. 2016), where the Federal Circuit faulted the Board for reaching conclusions without giving the aggrieved party a sufficient opportunity to respond.  In the present case, the Court noted that the claim term was “central to the case” and “extensively litigated,” including at oral argument.  The Court also noted that Intellectual Ventures did not seek to file a sur-reply at the briefing stage or request rehearing. Under these circumstances, the Court determined that Intellectual Ventures was not deprived of due process.

The takeaway from this opinion is that the Board is constrained by due process requirements, and cannot advance a theory “midstream” and then deny a party an opportunity to respond.  But as a practical matter, a party that feels it has been deprived of its ability to respond to the Board should seek any and all means of redress before the Board, and not rely on the Federal Circuit alone for relief.

On Thursday of last week, the Federal Circuit sitting en banc heard oral arguments in Wi-Fi One, LLC v. Broadcom Corporation. At its core, this rehearing focuses on the relatively narrow issue of whether USPTO determinations regarding the timeliness requirements of 35 USC § 315(b) are eligible for judicial review. However, based on the questions posed by the judges of the Federal Circuit, the decision in this case could have broader applicability in interpreting the Supreme Court’s Cuozzo decision and its interpretation of the scope of § 314(d), which states that certain decisions regarding institution of IPRs are not reviewable.

To put the appeals in context, this case began with three IPRs filed by Broadcom in 2013. Throughout the process, from pre-institution motions, post-institution argument, requests for rehearing, and through appeals to the Federal Circuit, the Patent Owner (Wi-Fi One, LLC became the Patent Owner while the IPRs were in progress), had pursued a theory that the IPRs were not allowed under § 315(b). This section requires that IPRs be filed within 1 year of service of a complaint alleging infringement of the patent to the petitioner, a real party in interest to the IPR, or a privy of the petitioner. As the patents had been asserted in litigation more than one year prior to the filing of the IPRs, Wi-Fi One’s position was that if either Broadcom could be shown to be in privity with the defendants of that litigation, or those defendants could be shown to be real parties-in-interest to the IPRs, the IPRs should either not be instituted, be dismissed, or be overruled (depending on the timing in the case) under § 315(b).

Wi-Fi One sought discovery on the privity issue prior to institution of the IPRs, but the Board denied the motion for insufficient evidence that there was more than a mere possibility that evidence would be uncovered showing privity. Despite that, Wi-Fi One maintained its position that § 315(b) should bar the IPRs following institution and through the Final Written Decision by the Board. Ultimately, the Board found claims of the challenged patents unpatentable, and also addressed the § 315(b) issue, maintaining its position that Wi-Fi One had not demonstrated that petitioner was in privity with the litigation defendants or that any defendants were real parties-in-interest to the IPRs.

After denial of requests for rehearing, Wi-Fi One appealed the three IPRs to the Federal Circuit. While the appeals challenged the Board’s findings of unpatentability, they heavily focused on whether the Board’s decision regarding § 315(b) was reviewable. Central to these appeals is the scope of § 314(d), which states that institution determinations of inter partes reviews are nonappealable. Although Wi-Fi One presented a few positions and theories on why the scope of § 314(d) should not prevent the review, the panel essentially held that the issue had been decided in a prior Federal Circuit case, Achates Reference Publishing, Inc. v. Apple Inc. That case held that § 314(d) prohibited review of Board determinations based on the time-bar of § 315(b), both as part of the institution decision, or “even if such assessment is reconsidered during the merits phase of proceedings and restated as part of the Board’s final written decision.”

Addressing this case, Wi-Fi argued that Achates had been implicitly overruled by the Supreme Court in Cuozzo Speed Technologies, LLC v. Lee which also dealt with § 314(d). The Federal Circuit panel decided that not only did Achates remain intact, but that Cuozzo held that statutes related to decisions to institute IPRs were not reviewable, and that § 315 thus fell into the scope of Cuozzo’s holding. Wi-Fi’s arguments based on statutory language, and that the issue had come back up post-institution, were also rejected as having been previously decided in Achates.

Identical petitions for rehearing and rehearing en banc were filed by Wi-Fi One in each of the three appeals. Wi-Fi One argued that the Supreme Court in Cuozzo provided new guidance to the Federal Circuit on § 314(d) issues, and left it to the Federal Circuit to decide those issues in light of its holding. The cases were ultimately accepted for en banc review with supplemental briefs requested on the limited question of whether Achates should be overruled with respect to whether PTO decisions regarding § 315(b) should be reviewable. Following grant of the petition, the Patent Office intervened to join the case.

Finally arriving at the oral arguments last week, as might be expected, the discussion centered on interpretations of Cuozzo and how the Supreme Court dealt with § 314(d). Judges had tough questions for all of the arguing parties, Wi-Fi One, Broadcom and the USPTO, addressing the scope of what Cuozzo had decided and what it had left for lower courts, how to read the details of Cuozzo and how to possibly distinguish it.

Wi-Fi One attempted to steer the conversation towards not just what the Supreme Court had held in Cuozzo, but how they had reached that decision. Namely, they argued that the strong presumption favoring judicial review had to be overcome by “clear and convincing indications that Congress intended to bar review.” While the Supreme Court had found that to be the case for the sections addressed in that case, it was Wi-Fi One’s position that none of the Supreme Court, the prior panel opinions, or Achates had addressed that point sufficiently.

Many questions to counsel for Wi-Fi One seemed concerned with the procedural consequences should the court rule in their favor. Judge Newman seemed concerned with the timing and form of future challenges: whether they would be interlocutory reviews, mandamus petitions, or would only come on appeal of final written decisions. When counsel responded that it would be reviewable after the final decision as such issues often continued during the trial phase, Judge Prost was interested in whether time bar issues would be reviewable if it was not addressed in the final written decision.

Judge O’Malley seemed interested in the recourse each party would have with a time bar ruling going against them and possible asymmetry created by allowing an appeal of a final written decision when an appeal of a denied institution decision was not allowed. Judges Hughes and Bryson dug into this issue as well, asking whether a petitioner could appeal a time bar question if it was ultimately decided against them in a final written decision.

Questions from the court on the core issue began with attempting to draw the line between what Cuozzo had found to be unavailable for review and what it had left open for future decisions. Judge Dyk, for example, asking similar questions to counsel for Wi-Fi One during both his argument and rebuttal, asked whether the Cuozzo opinion, which addressed portions of § 312, also addressed other portions of the same section, such as requiring the identification of all real parties in interest.

Judge Chen, however, asked questions which seemed to ponder whether the Supreme Court had in fact already addressed § 315(b). His questions included what effect Justice Alito’s dissenting opinion in Cuozzo, which characterized the majority opinion, had in interpreting the holding. Justice Alito’s opinion, for example, criticized the majority opinion for making “courts powerless to correct such abuses” as instituting IPRs which should have been barred under § 315(b). Counsel’s response that the majority attempted to explicitly draft a narrow holding touched upon possibly the central dispute in this case, as many of the judge’s questions to counsel for Broadcom concerned exactly how narrowly that holding should be read.

For example, Judges Chen and Prost seemed concerned with questions regarding the text of § 314(d) in interpreting not only the statute, but also in interpreting the Supreme Court’s reading of that section and the explicitly narrowed scope of the Cuozzo opinion. Judges O’Malley, Wallach, and Stoll questioned how the Cuozzo majority’s statements as to the intended scope of its holding should be interpreted. Namely, is the section of statute regarding the time bar sufficiently “closely related” to institution decisions or is it one of unnamed “less closely related statutes.”

Other than the scope of what the Supreme Court had held to be unreviewable as closely related to institution decisions, several judges had questions which indicated that allowing institution in cases where the time bar applied could raise potential constitutional issues. Judges Newman, Reyna, and O’Malley asked questions on whether institution decisions allowing IPRs in cases which should not be allowed under the time bar were in fact examples of “shenanigans” referred to by the Supreme Court if such institutions are outside the statutory authority of the director of the USPTO.

The government argued that the Cuozzo decision gave the clear impression that it was meant to bar judicial review of several portions of the statue, including the time bar, that are considered during institution decisions, and that most reviews of such issues should be limited to clear, facially obvious violations of statute. Several issues were focused on policy and consequences, for example, a question acknowledging PTAB expertise in matters of patent law, but questioning whether they had expertise in determining issues such as privity which could raise concerns about their decisions on such matters being unreviewable. Policy issues such as this were countered by the government position that patents found invalid should not be restored based on reversals of procedural threshold questions.

Ultimately, predicting the ultimate outcome or how any judge might decide based on this oral argument would require reading more into the judges’ questions and apparent attitudes than is warranted. It is interesting to note, however, that many questions to counsel for Wi-Fi One seemed to focus on procedural and policy consequences should review be allowed, while the bulk of questions to counsel for Broadcom were focused on distinguishing § 315(b) from the sections dealt with by Cuozzo or determining the limits of the Supreme Court’s intended holding in that case.

While Cuozzo and the statutory language was obviously the central point of arguments yesterday, it is also clear that policy considerations and the impact on the appeals process moving forward were on many judges’ minds.

A failure to provide an adequate explanation for findings of obviousness is becoming the Federal Circuit’s recurring rationale for vacating decisions by the Patent Trial and Appeal Board. In recent months, the Federal Circuit has consistently overturned decisions by the Patent Trial and Appeal Board based on the Board’s lack of an adequate reason or basis for its decisions. The latest in this string of decisions is Securus Technologies. Inc., v. Global Tel*Link Corp., Case No. 2016-1993 (Fed. Cir. April 25, 2017), in which the Federal Circuit vacated-in-part the decisions in IPR2014-01278 and IPR2014-01282 declaring that the holdings pertaining to certain dependent claims were insufficient.

Globus Tel*Link had filed petitions for inter partes review challenging the patentability of U.S. Patent No. 7,860,222 and alleging that all of the claims were obvious. The claims are directed to information systems and methods for the acquisition and analysis of investigative information. The Board issued final written decisions finding all of the claims to be obvious. Securus appealed the Board’s decisions on several grounds one of which was that it failed to articulate any explanation as to why certain dependent claims were obvious. The Federal Circuit agreed with this argument, finding that the Board failed to provide any reasoning in either of its decisions and that such reasoning is required to allow for meaningful review by the court. Citing previous precedent, the Federal Circuit noted that “[w]e do not require perfect explanations and will uphold the Board’s decision if we may reasonably discern that it followed a proper path, even if that path is less than perfectly clear.  However, it is not adequate to summarize and reject arguments without explaining why the [Board] accepts the prevailing argument.” Slip op. at 14(citations omitted).

This most recent decision joins a long line of cases over the last year where the Federal Circuit has consistently criticized final decisions by the Board for a lack of adequate explanation. It appears that this trend will only continue to grow in 2017 as the Federal Circuit has already issued several opinions in the last couple months vacating Board decisions.

For example, in In re Van Os, Case No. 2015-1975 (Fed. Cir. Jan. 3, 2017), the Federal Circuit vacated the Board’s decision upholding a patent examiner’s obviousness rejection of Van Os’ claims. In its decision, the Board incorporated the examiner’s analysis and found the claims to be obvious based on the fact that the combination of the prior art would have been “intuitive”. The Federal Circuit explained that since the Supreme Court’s decision in KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007), the Federal Circuit has consistently stated that obviousness findings based on common sense must provide a clear explanation giving a reason for why common sense forces an obviousness rejection. The Federal Circuit found in this case that the Board did not point to any motivation to combine or provide any explanation for why modifying the prior art references would have been intuitive. Specifically, the Federal Circuit stated that “[absent some articulated rationale, a finding that a combination of prior art that would have been ‘common sense’ or ‘intuitive’ is no different than merely stating the combination would have been obvious. Such a conclusory assertion with no explanation is inadequate[.]” Slip op. at 5.

Similarly, in In re: Schweickert, Case No. 2016-1266 (Fed. Cir. Jan. 26, 2017), the Federal Circuit found the Board’s obviousness determination deficient because it failed to explain why or how a person of ordinary skill in the art would modify or manipulate the cited prior art to create the features of the claimed invention. Specifically, the Federal Circuit noted that “the Board, at best, merely posits that a skilled artisan could combine [the references], notwithstanding any difficulties, and would do so because these references were within the knowledge of a skilled artisan.” Slip op. at 12.

More recently, in Personal Web Technologies, LLC v. Apple, Inc., Case No. 2016-1174 (Fed. Cir. Feb. 14, 2017), the Federal Circuit called the Board’s decision inadequate due to its failure to sufficiently explain and support its determination that a person of ordinary skill in the art would have been motivated to combine the cited prior art references to arrive at the claimed invention. The Federal Circuit reasoned that the Board’s limited explanation “seems to say no more than that a skilled artisan presented with two references, would have understood that they could be combined.” Slip op. at 11. The Federal Circuit further emphasized that “the Board nowhere clearly explained, or cited evidence showing, how the combination of the two references was supposed to work.” Slip op. at 12.

As demonstrated by these recent decisions, there is a consensus that the Board must provide more than mere conclusory statements in support of its findings of obviousness. These decisions also further articulate the Federal Circuit’s recurring themes to not only hold the Board accountable for its decision-making process but also to seek to ensure that its decisions are based on adequate reasoning. As such, both patent owners and petitioners would be wise to carefully review the Board’s final decisions as either party may have a strong argument on appeal if the Board failed to provide sufficient reasoning for its determinations.

The PTAB does not appear to have weighed in, one way or another, on the question of how many references is too many for an obviousness challenge under 35 U.S.C. § 103—at least not explicitly.  Implicitly, the PTAB has regularly instituted inter partes review of patents where four or more references have been used to attack an independent claim.

A 1991 Federal Circuit case, In re Gorman, 933 F.2d 982 (Fed. Cir. 1991), rejected an argument that the combination of a large number of references “of itself weighs against a holding of obviousness.”  The Patent Office has also weighed in on the matter, saying that “reliance on a large number of references in a rejection does not, without more, weigh against the obviousness of the claimed invention.”  MPEP § 707.07(f).  However, there appears to be some skepticism of these holdings, post-KSR, as 717Madison Place and Patently-O consider “whether it is time to revisit In re Gorman.”  In particular, at the blog 717Madison Place, several highlights of oral argument are presented from recent cases, including questioning by Judge Moore that is highly skeptical of “four reference obviousness rejections”:

Judge Moore:  The question I asked is actually quite personal.  How often have you seen a four reference obviousness rejection; because, I never have.  Not out of the PTO.  Never.  I’ve seen people try to argue it in litigation, sure.  But, I’ve never seen the PTO go to four separate references and cherry pick items and then combine them together.

As a practical matter, going to a jury with four or more references is a challenging undertaking.  However, given the technical experience and more detailed patent knowledge of PTAB judges, one might reasonably expect such arguments to fare better in front of the PTAB.  And indeed, notwithstanding this skepticism noted above, the PTAB actually institutes on four reference obviousness grounds regularly.  For example, in Garmin International Inc. v. Cuozzo Speed Technologies LLC, IPR2012-00001 – the very first IPR filed – the PTAB instituted obviousness grounds over three- and four-reference combinations.  More recently, other panels have instituted on four or more reference combinations, including, e.g., IPR2016-01612 (four references, Feb 27, 2017), IPR2016-01412 (four references, Feb 14, 2017), IPR2016-01289 (four references, Dec 27, 2016), IPR2016-0118 (four+ references, Dec 23, 2016), and IPR2016-01370 (four references, May 2, 2016).

Even when the PTAB disregards one of the references presented in a multi-reference ground, the PTAB may still institute over the remaining references.  For example, in Geox S.p.A v. Outdry Technologies Corporation, where four references were presented in a ground, the PTAB disregarded one of the references the PTAB considered to be in a different field of endeavor than the other references.  IPR2014-01244, Institution Decision, Paper 5, at 4, 7, 8 (December 19, 2014).  However, despite not considering all the references presented in the ground, the PTAB still instituted on the challenged claims noting that the petition demonstrated a reasonable likelihood that the challenged claims were obvious over the combination of the remaining references.  Id. at 8.  Thus, the Geox case, in addition to the other cases highlighted above, indicates that there is low risk in pursuing multi-reference grounds.  However, when using multiple references, the petitioner should (1) make sure that the references support or complement one another rather than contain disclosures that teach away; and (2) highlight, if possible, where a claimed feature is taught by more than one reference to reduce the risk of being denied institution should the PTAB choose to disregard one of the references.

To be clear, the PTAB does sometimes deny institution of multi-reference obviousness grounds.  However, to our knowledge, the PTAB has never used the number of references as a factor in such denial.  Usually, the fault is that the Petitioner has used conclusory statements, or lacked a detailed obviousness analysis that includes specifying the scope of the prior art, differences with the claimed invention, and especially a motivation to combine references.  A typical example of this can be found in IPR2015-02007, where the Board faults the Petitioner, inter alia, for “various vague conclusions regarding alleged reasons to combine that do not specify which elements Petitioner is proposing to combine to reach the claim elements.”  IPR2015-02007, slip op. at 8.

Unfortunately, clear statistics of PTAB institution practice are hard to come by.  None of the USPTO, Docket Navigator, or Lex Machina, collect statistics or make it easy to search cases by the number of references on which an obviousness challenge was instituted or denied institution.  Other factors also make it harder to get a clear picture on how the Board views multi-reference obviousness grounds, such as the Board denying institution on multi-reference combinations as redundant to other grounds.  A detailed analysis of institution decisions, determining how often four or more references are granted or denied institution, would be useful.  However, lacking such a detailed analysis, we have conducted a quick study of recent institution decisions and found the following rough impression of recent PTAB activity.

In just the past six months, the PTAB has reviewed over 750 petitions for inter partes review that included an obviousness challenge under 35 U.S.C. § 103.  While most of the challenges relied on two- and three-reference combinations, there were still a significant number of petitions, nearly 200, that comprised obviousness grounds based on four or more references.  From the figure below, which details the number of references used in each petition (where a petition may include multiple grounds), the number of references used does not appear to correlate to the PTAB’s decision to institute or not institute a particular ground.  This recent data indicates that petitioners should not shy away from asserting obviousness challenges based on multiple references.

*Data collected from inter partes review institution decisions with an order filing date between September 10, 2016 and March 10, 2017.