In some circumstances, patent applicants may petition the Patent Office to suspend non-statutory rules under 37 CFR § 1.183. As the text of the rule indicates, the Patent Office will only grant such petitions “[i]n an extraordinary situation, when justice requires,” but does not clarify the type of situations where this requirement would be met.  Specifically, 37 CFR Section 1.183 provides:

In an extraordinary situation, when justice requires, any requirement of the regulations in this part which is not a requirement of the statutes may be suspended or waived by the Director or the Director’s designee, sua sponte, or on petition of the interested party, subject to such other requirements as may be imposed. Any petition under this section must be accompanied by the petition fee set forth in § 1.17(f).

To provide further insight into the practices of the Patent Office, the present analysis reviews § 1.183 petition decisions between 5/1/2020 and 5/11/2021.  These decisions were gathered after a FOIA request to the Patent Office.

37 CFR § 1.183 Petitions – Decisions from 5/1/2020 – 5/11/2021

Summary of Petitions Granted

As the summary chart above shows, statistical analysis of petitions granted or dismissed is unlikely to reveal any trends given the small sample size.  At a minimum, one cannot dismiss the option to file a petition as unlikely to succeed.  The Patent Office grants a significant proportion of the petitions filed.  As the following discussion indicates, there are some consistent scenarios in which petitions are granted.

Granted Petitions after Patent Issuance

Notably, eleven of the twelve granted pertained to reconsideration of term adjustment after issuance. The § 1.183 petition waived the timing issue of the certification statement under 37 CFR § 1.704(d), and thus the petitioners were permitted acceptance of a certification statement after the filing of the Information Disclosure Statement. The Office found the extraordinary situation to arise from the lack of specificity of § 1.704(d) regarding the necessity to submit duplicative statements in subsequent IDS submissions  The remaining petition after issuance was granted to correct an assignee’s name after issuance—although treated under 37 CFR 3.81(b).

Granted Petitions on Applications that Eventually Issued as Patents

Eight granted petitions were for applications that subsequently issued as patents. Of those eight petitions, six were granted in situations involving a joint research agreement—specifically to waive the requirement in 37 CFR § 1.321(d) that the reference being disclaimed over in the terminal disclaimer be disqualified as prior art. The Office found the relationship between § 1.321(d) and 35 U.S.C. 102(c) in joint research agreements to create an “extraordinary and unjust situation” under 35 U.S.C. 102(a)(2). Thus, § 1.183 waiver was necessary to remedy the situation. Another petition granted waiver of sequence disclosure under 37 CFR § 1.821 as the contrived sequence shown in the example did not qualify as prior art and listing it would contaminate the sequence listing database. The final petition granted waiver of the single signature requirements of 37 CFR 1.32(b)(4) as the applicants had divergent interests in the subject matter of the application, which would create an “unjust situation” if either party were able to unilaterally extinguish the property rights of the other.

Petitions of Other Pending/Abandoned Applications

Of the twenty-one petitions granted, fourteen concerned the waiver of the § 1.321(d) with respect to the same joint research agreement situation as explained above. Other petitions were granted in situations where the applicants were unable to reach all inventors after sufficient attempts, which permitted completion of power of attorney filings and correct identification of applicants on the original ADS.

Conclusion

The Patent Office found a situation to be “extraordinary” when: (1) the applicable rules either created the situation, (2) the rules failed to provide the necessary remedy, and (3) compliance with the rule was impossible.

Summary of Dismissed Petitions

For dismissed petitions, a few trends appear in this sample set.  The dismissed petitions sought waiver of a much broader range of rules, so looking specifically into the three categories discussed above is not as informative.  Rather, the reasoning for the dismissals may be broken down into a few groups.

Correction Possible Under Different Rule

The most common reason for dismissal of § 1.183 waiver was when the Office found that the applicant’s desired correction could be made under a different rule. Of the sixty-one total petitions dismissed, fifteen were denied for this reason. The Office was sometimes abrupt in this dismissal—simply highlighting the lack of an “extraordinary situation, where justice requires waiver of the rules” because the applicant had different avenues for the relief sought.

Insufficient Evidence

A second common reason for dismissal was a finding of insufficient evidence to show an “extraordinary situation.” Applicants needed to provide adequate explanation to support such a finding, noting that a previous failure to comply with a rule is not sufficient evidence to show an “extraordinary situation.”

Failure to Supply Accompanying Materials

Some of the § 1.183 dismissals were straightforward procedural defects that do not merit further discussion. For example, denials where the applicant had failed to provide the requisite fee or accompanying document.

Waiver Unnecessary

Distinct from dismissal when correction was possible under a different rule, the Patent Office also understandably dismissed petitions when there was no rule that needed to be waived. Rather, the applicant had incorrectly believed that they did not comply with a rule and therefore sought unnecessary waiver, or the relief sought had been previously granted.

Conclusion

When considering filing a 37 CFR § 1.183 petition for suspension of the rules, there are a few preliminary issues that an applicant may want to consider.

First, check to see if waiver is actually necessary, whether the remedy sought can be granted under another rule or if there is anything to remedy at all.

Second, provide adequate evidence supporting why waiver is necessary—i.e. why an extraordinary and unjust situation exists by establishing the: (1) the applicable rules that created the situation, (2) the failure of the rules to provide the necessary remedy, or (3) inability to comply with the on-point rule.

Third, and most obvious, comply with the procedural requirements and file a complete petition. The Patent Office is quick to dismiss any incomplete petitions.

 

*Bryan B. Thompson, a summer associate in the Washington, D.C. office, contributed to this blog post.

Last month, in Qualcomm Inc. v. Intel Corp., the Court of Appeals for the Federal Circuit (“the CAFC”) vacated and remanded the Patent Trial and Appeal Board (“the Board”) on six inter partes review (“IPR”) decisions that held claims 1-15, 17-25, and 27-33 of Qualcomm’s U.S. Patent No. 9,608,675 (“the ’675 Patent”) unpatentable as obvious.

Background

At a basic level, a wireless device, such as your smartphone, transmits data with a transmitter and receives data with a receiver. To send data, the transmitter processes the data into output samples, conditions the output samples to generate a radio frequency (“RF”) signal, amplifies the RF signal, and transmits via antenna the amplified signal to a base station (e.g., a cell tower). To receive data, the receiver obtains via antenna a received RF signal and may amplify and process the received RF signal and recover the data originally sent by the transmitter. Essentially, the ’675 Patent relates to this data transmission and reception process in that the ’675 Patent discloses techniques “for generating a power tracking supply voltage for a circuit (e.g., a power amplifier) that processes multiple transmit signals sent simultaneously,” including “transmissions sent simultaneously on multiple carriers at different frequencies.”

Intel challenged the validity of the ’675 Patent by filing six IPRs, with each petition proposing that the phrase “a plurality of carrier aggregated transmit signals” means “signals for transmission on multiple carriers at the same time to increase the bandwidth for a user.” Qualcomm proposed a different construction, contending that the phrase should mean “signals from a single terminal utilizing multiple component carriers which provide extended transmission bandwidth for a user transmission from the single terminal.” However, both parties agreed, congruent with a parallel proceeding at the International Trade Commission, that the signals were required to increase user bandwidth. At an oral hearing, one judge asked Intel about this increased bandwidth requirement, but the Board never requested briefing on the matter.

When the Board issued its six final written decisions (where it concluded all challenged claims were unpatentable) the Board construed the term “a plurality of carrier aggregated transmit signals” in such a way that omitted any requirement that the signals increase or extend bandwidth. Additionally, the Board found “the power tracker limitation” in claim 28 of the ’675 Patent to be a means-plus function limitation, with “power tracker 582” as the corresponding structure.

Qualcomm appealed.

Discussion

The CAFC centered its discussion on two issues raised by Qualcomm. First, on a procedural issue, Qualcomm argued it was not given notice or adequate opportunity to respond to the Board’s construction of the term “a plurality of carrier aggregated transmit signals.” Second, on an issue of claim construction, Qualcomm appealed the Board’s construction of “the power tracker limitation” for failing to include an algorithm in the corresponding structure. The CAFC agreed that the Board violated Qualcomm’s procedural rights by failing to give notice or sufficient time to respond. However, the CAFC did not find error in the Board’s construction of the “power tracker limitation.”

Regarding the procedural issue, the CAFC looked to the Administrative Procedure Act (APA) and the Court’s prior holdings. “We have held that the Board may adopt a claim construction of a disputed term that neither party proposes without running afoul of the APA.” However, the CAFC said that by construing a term both parties agreed on, and in a way that diverged from the agreed-upon construction, the Board “did not merely adopt its own construction of a disputed term.” The CAFC noted that neither party briefed the term, and that the International Trade Commission had already adopted the agreed-upon interpretation.

Intel countered that, even assuming a procedural violation, Qualcomm did not demonstrate prejudice. The CAFC responded that it is not clear whether Qualcomm needed to show prejudice in the first place. However, even assuming Qualcomm did need to show prejudice, the fact that the Board’s claim construction eliminated the requirement for increased bandwidth meant that the Board eliminated a claim element that Intel bore the burden of proof to show. Additionally, without giving Qualcomm the opportunity to brief the elimination of the increased bandwidth requirement, the Board further prejudiced Qualcomm.

Further, Intel contended that the oral hearing and the option to move for a rehearing provided adequate opportunity to respond. The CAFC was not persuaded. The brief exchange at the oral hearing was inadequate and uninformative. The Board “never asked Qualcomm any question of any kind about the requirement,” and the Board did not ask for briefing following the hearing. The CAFC found the option to move for rehearing similarly inadequate because it would require “an aggrieved party to seek rehearing before appealing a Board’s failure to provide notice and an opportunity to respond.”

Concluding, the CAFC found for Qualcomm and held that the Board needed to give notice of and an adequate opportunity to respond to its construction – therefore, the Board violated Qualcomm’s procedural rights under the APA.

Regarding, the claim construction issue, the CAFC first noted that it reviews questions or claim construction de novo. The Board’s holding was that the “power tracker limitation” in claim 28 had the function of “determining a single power tracking signal,” with the corresponding structure being the “power tracker 582,” which it found to be a circuit, rather than a computer. Qualcomm argued that the corresponding structure was in fact the integrated circuit on which the power tracker may be implemented, and that this must include algorithms for programming the circuit. The CAFC disagreed with Qualcomm.

Citing to its previous holding in Nevro Corp. v. Bos. Sci. Corp., the CAFC stated that its case law “does not require a specific algorithm when the identified structure is not a general-purpose computer or processor.” While Qualcomm acknowledged that the “power tracker 582” is not a general-purpose computer or processor, it did ask the CAFC to extend its holding in Nevro Corp. to circuitry. However, the CAFC disagreed: “Unlike a general-purpose computer or microprocessor, circuitry does not ‘perform very different tasks in very different ways.’” In rejecting Qualcomm’s proposed extension, the CAFC also invoked a specter of jeopardizing “a plethora of patents in the electrical arts that rely on circuitry as the corresponding structure for their means-plus-function claim limitations.”

Conclusion

The CAFC’s defense of the procedural rights of patent owners before the Board may be seen as a boon. However, practitioners should also take note of the CAFC’s rejection of Qualcomm’s argument and the CAFC’s subsequent refusal to extend its algorithm claim construction precedent to circuitry. This holding should give pause to patent applicants to carefully consider drafting means-plus-function claims when the corresponding structure is circuitry.

Earlier this month, the United States Patent and Trademark Office (USPTO) published a notice in the Federal Register providing guidance regarding the proper presentation of prophetic examples and working examples in a patent application. According to the guidance, the proper presentation of prophetic and working examples requires them to be described in a manner such that they are clearly distinguished.

Prophetic examples (a.k.a., paper examples) describe “reasonably expected future or anticipated results.” In other words, they describe experiments or results that have not in fact been performed or obtained. In contrast, working examples describe work that was performed or experiments that were conducted, which yielded actual results.  According to the Manual of Patent Examining Procedure (MPEP), prophetic examples should not be described using the past tense. See M.P.E.P. 608.01(p), subsection II.  Rather they may be written in future or present tense.

Written Description and Enablement Requirements

According to the guidance, prophetic examples may be used to meet the written description requirement and the enablement requirement. Also, a patent application does not need to provide a guarantee that a prophetic example actually works. The presence of a prophetic example alone is a sufficient basis for establishing that the specification is not enabling. However, when a prophetic example is described in a patent application in a manner that is ambiguous or that implies that the results are actual, claims of the patent applications can be rejected for failing to satisfy the enablement and/or written description requirements of 35 U.S.C. 112(a).

Applicant’s Duty of Disclosure

According to the guidance, knowingly describing in a patent application prophetic examples as working examples is fraud.  For example, “[k]nowingly asserting in a patent application that a certain result ‘was run’ or an experiment ‘was conducted’ when, in fact, the experiment was not conducted or the result was not obtained is fraud.”

Given the notice’s emphasis on the importance of clearly distinguishing prophetic and working examples, instead of solely relying on grammatical tense for the distinction, expressly labeling an example in a patent application as either a prophetic example or a working example may be beneficial in certain situations.

This week, in United States v. Arthrex, Inc., the Supreme Court vacated and remanded a decision by the Court of Appeals for the Federal Circuit (“the CAFC”), holding that the administrative patent judges (“APJs”) at the Patent Trial and Appeal Board (“the Board”) are unconstitutionally appointed. While the CAFC came to the same conclusion as the Supreme Court, the CAFC’s response was to make APJs removable at will by the Secretary of Commerce. In the Supreme Court’s words, the CAFC’s solution “satisfied no one.” The Court, in a plurality decision, formulated its own solution: grant the Director of the United States Patent and Trademark Office (“the Director”) the power to review the decisions of the APJs.

Background

Arthrex, Inc., a medical device company headquartered in the United States, is the assignee of a large patent portfolio, including U.S. Patent No. 9,179,907 (“the ’907 patent”). In 2015, Arthrex filed suit in the Eastern District of Texas (“the District Court”), alleging numerous claims of patent infringement by the British multinational Smith & Nephew plc and its U.S. subsidiary ArthroCare Corporation (collectively, “Smith & Nephew”). One of the many patents Arthrex accused Smith & Nephew of infringing was the ’907 patent.

A little over a year after the filing of Arthrex’s complaint, Smith & Nephew petitioned for inter partes review (“the IPR”) of multiple claims of the ’907 patent, including claims 4, 8, 16, and 27. Meanwhile, just a few weeks after Smith & Nephew’s petition, a jury in the District Court found that Arthrex had proved by a preponderance of the evidence that Smith & Nephew infringed claims 4, 8, 16, and 27 of the ’907 patent. Shortly thereafter, Arthrex and Smith & Nephew settled and filed a Joint Stipulated Motion for Dismissal with Prejudice, which the District Court granted. However, the parties agreed that their settlement did not preclude the IPR, and, in 2018, the Board found the challenged claims of the ’907 patent had been shown to be unpatentable.

Arthrex appealed the Board’s decision to the CAFC. In its appeal, Arthrex argued that, under the Appointments Clause of the Constitution, the APJs were unconstitutionally appointed. For context, the Appointments Clause distinguishes between two types of officers. First, are so-called “principal officers,” such as ambassadors and Supreme Court Justices, who must be appointed with the advice and consent of the Senate. Second, are the unfortunately titled “inferior officers,” officers specified by acts of Congress, and whose appointment Congress may place in the President, in the head of an executive department, or in a court. Essentially, Arthrex’s argument was that the APJs are “principal officers” – therefore, an APJ’s appointment by the Secretary of Commerce is unconstitutional.

The CAFC agreed with Arthrex that APJs are “principal officers” because neither the Secretary of Commerce (“the Secretary”) nor the Director had the authority to review APJ decisions or remove an APJ at will. The CAFC “solved” this constitutional violation by making APJs removable at will by the Secretary, rending them “inferior rather than principal officers.” Then, the CAFC vacated and remanded the Board’s decision. Both Arthrex and Smith & Nephew, as well as the United States government (“the Government”), requested a rehearing en banc, which the CAFC denied. Subsequently, each of these parties requested review of the panel’s decisions in three petitions for certiorari, all of which the Supreme Court granted.

The Supreme Court’s Opinion, Parts I and II

Chief Justice Roberts delivered Parts I and II of the Court’s opinion, which was joined by Justices Alito, Gorsuch, Kavanaugh, and Barrett.

The Court’s opinion begins with a brief history of the Appointments Clause before citing to Edmond v. United States, 520 U.S. 651 (1997), wherein the Court held that an “inferior officer” must be “directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.” (Emphasis added). In the context of the Board, the Court writes that APJs, while designated by Congress as “inferior officers,” in fact exercise “significant authority” when they issue decisions on patentability. However, the APJ’s decisions may be reviewed only by a petition for rehearing, and that Congress unambiguously stated that such review is a power designated to the Board. Hence, the Director does not “direct” or “supervise” decisions by the APJs on issues of patentability, and APJs are effectively more akin to “principal” rather than “inferior” officers.

Smith & Nephew, along with the Government, countered by positing that the Director may still affect the Board’s decision process by, for example, deciding whether to initiate an IPR, designating the APJs who will decide a particular case, and potentially vacating his or her earlier decision to institute an IPR.  The Supreme Court rejected these arguments, finding that Smith & Nephew and the Government pointed to the problem, not the solution. By outlining a roadmap for the Director to “evade a statutory prohibition on review without having him take responsibility for the ultimate decision,” the parties highlighted the hazards of the current system.

Next, the Court’s opinion turns to arguments by Smith & Nephew and the Government that there are other contemporary officers in the modern administrative state that are appointed by heads of departments but still exercise final authority. However, the Court rejected the other officers as incomparable. For example, while Smith & Nephew and the Government point to the Board of Veteran Affairs, which may make final decisions but whose decisions are reviewed by the Court of Appeals for Veteran Claims, the Court notes in its opinion that the Court of Appeals for Veteran Claims is an Executive Branch entity.

The Court’s opinion concludes by holding that the APJ’s wield unreviewable authority that is “incompatible with their appointment by the Secretary to an inferior office.” It goes on to state explicitly that “[o]nly an officer properly appointed to a principal office may issue a final decision binding the Executive Branch in the proceeding before us.” Having found the exercising of “significant authority” by the APJs in adjudicating the rights of private parties to be unconstitutional, the opinion then turns to the appropriate way to resolve the constitutional violation.

The Supreme Court’s Opinion, Part III

 Chief Justice Roberts delivered the opinion of the Court with respect to Part III, which was joined by Justices Alito, Kavanaugh, and Barrett.

In fashioning its solution, the Court declined to adopt Arthrex’s proposal to hold the “entire regime” of IPRs unconstitutional. The Court looked to the structure of the Patent and Trademark Office and spotted a “clear course,” wherein APJs would be subject to the Director’s review. By the Court’s reasoning, the Director already had authority from Congress to oversee APJs in all areas except review of the Board’s decisions on patentability. While the current patent statute prevents the Director from rehearing and reversing a final decision by the APJs, the Court’s opinion states that giving the Director “authority to take control” of a Board proceeding would cause the APJs to “properly function as inferior officers.”

The plurality emphasizes that its decision does not render the current patent statute incomplete or unworkable. Essentially, the Court did not alter the patent statute, except to the extent that the Director may supervise APJs in “adjudicating petitions for inter partes review.”

To remedy the present dispute between Arthrex and Smith & Nephew, the Court remanded to the Acting Director of the Patent and Trademark Office for him to decide whether to rehear the original petition.

Concurrences and Dissents

Justice Gorsuch

Justice Gorsuch filed an opinion concurring in part and dissenting in part. His dissent begins by discussing the history of patent rights in the United States. He considers the decision to allow Executive Branch officials to “cancel” issued patents to be a departure from the Constitution’s separation of powers. Hence, allowing those officials to “cancel” issued patents without being accountable to anyone else in the Executive Branch would be an even greater departure, and he joined with the Court’s opinion as to Parts I and II. However, with respect to Part III, Justice Gorsuch declined to join.

In his dissent from the Court’s crafted solution in Part III, Justice Gorsuch points out that Congress did not put any “fallback” provisions in the statute to suggest a solution, and that the present violation is a “combination of separate statutory provisions that conspire to create a constitutional violation.” He goes on to recognize that there are multiple possible solutions, not just the one the Court chose. “In circumstances like these, I believe traditional remedial principles should be our guide.” (Emphasis added). In effect, he would rather “set aside” the Board’s decision in the present case, not “sever” a portion of the statute entirely, as the plurality does.

One key argument Justice Gorsuch makes is that the Court’s decision in Part III to give the Director the authority to review is based on the “standard federal model” for agency adjudication, but he critically notes that Congress specifically drafted the current patent statute to reject this model. “Multiple amici contend that Congress did so specifically to ensure APJs enjoy ‘independence’ from superior executive officers and thus possess more ‘impartiality.’”

The dissent concludes by noting that each decision by the Supreme Court seems to highlight more and more problems that exist within the present statutory scheme, particularly since the Court’s decision in Oil States a few years ago.

Justice Breyer

Justice Breyer filed an opinion, joined by Justices Sotomayor and Kagan, concurring in the judgment in part and dissenting in part.

First, Justice Breyer argues that the Appointments Clause issue is not as fraught as the Court seems to believe. In his view, the Court should interpret the Appointments Clause as giving Congress “a degree of leeway” in establishing and empowering offices. He cites to the Court’s decision in Buckley v. Valeo, noting that “[n]othing in [the provisions at issue] represents an effort by the ‘Legislative Branch [to] aggrandize itself at the expense of the other two branches.’”

Second, Justice Breyer considers the Court’s decision “formalist” and a “judicial-rules-based approach,” and that instead the Court should embark on a “functional examination of the offices and duties in question.” He cites to the case of Wiener v. United States, 357 U.S. 349 (1958) as a good example of how the Court can consider “the practical consequences that are likely to follow from Congress’ chosen scheme.” Under this reasoning, Justice Breyer states, the Court’s result would be undermined because the need for expertise and the importance of avoiding political interference led Congress to grant the APJs a “degree of independence.” He goes on to contend that the Court’s ruling does not have the precedential foundation that the Court claims.

Justice Breyer concludes by lamenting the shift to a more formalist separation of powers doctrine, rather than a functional one, but he agrees with the Court’s chosen remedy because it does address the specific problem of the reviewability of APJ decisions.

Justice Thomas

Finally, Justice Thomas filed a dissenting opinion, which Justices Breyer, Sotomayor, and Kagan joined with respect to Parts I and II.

In Part I, Justice Thomas lays out the hierarchical structure of the Executive Branch, and points out that the APJs are on a relatively low rung. He proposes leaving the system intact, arguing that because “both the Federal Circuit and this Court would take so much care to ensure that administrative patent judges, appointed as inferior officers, would remain inferior officers at the end of the day suggests that perhaps they were inferior officers to begin with.”

In Part II, he cites Supreme Court precedent on the Appointments Clause to the extent that the Court has never developed a “rigid test” for dividing “principal officers” from “inferior ones.” However, he states “[t]here can be no dispute that administrative patent judges are, in fact, inferior,” noting their lower rank to at least two different officers, that they serve in the Patent and Trademark Office run by the Director, and that they are appointed by the Secretary of Commerce. He goes on to critique the majority’s opinion almost point-by-point, concluding with a theory that the “Court appears to suggest that the real issue is that this scheme violates the Vesting Clause.”

In Part III, Justice Thomas dissents from the Court’s remedy. The Court’s remedy, he contends, “makes extra clear what should already be obvious: Administrative patent judges are inferior officers.” At any rate, whether they are or are not principal officers does not support the Court’s proposed remedy, Justice Thomas argues. If the APJs are “principal officers,” then Arthrex would be entitled to a new hearing before officers “untainted by an appointments violation.” If APJs are “inferior officers,” then no constitutional violation has occurred because the Board did not misinterpret its statutory authority or try to prevent Director review.

Lastly, in Part IV, Justice Thomas engages in a lengthy (and in his words “unnecessary to resolve this suit”) analysis of the Court’s Edmond decision, or at least the part cited by the majority, and considers how it “aligns with the text, history, and structure of the Constitution.”

Conclusion

In an immediate sense, the Supreme Court’s decision in Arthrex returns the present case to the Acting Director of the Patent and Trademark Office to decide whether or not to rehear the original IPR petition. The plurality’s decision in Part III seems fairly straightforward: the Director may review the decisions of the Board. However, complicated broader issues remain unaddressed, such as the practicality of the Director reviewing what could be hundreds or thousands of Board decisions, as well as ethical concerns of granting the Director (a political appointee) review authority. Finally, the several dissents and concurrences in this case indicate separation of powers questions that the Court has yet to resolve.

 

Further Reading:
1) https://www.ptablaw.com/2020/06/29/federal-circuit-grants-remand-in-ex-parte-reexam-while-world-waits-for-supreme-court-to-weigh-in-on-arthrex/
2) https://www.ptablaw.com/2019/11/21/the-federal-circuits-determination-that-administrative-patent-judges-are-unconstitutionally-appointed/

Earlier this month, the Patent Trial and Appeal Board granted a request for rehearing in Maxlite, Inc. v. Jiaxing Super Lighting Elec. Appl. Co., Ltd., No. IPR2020-00208, Paper 14 (P.T.A.B. June 1, 2021), thereby instituting a previously-denied Inter Partes Review. In the decision, the Board admitted to abusing its discretion in initially denying Institution.

In Maxlite, the Petitioner submitted a request for rehearing under 37 C.F.R. § 42.71(d), which provides that:

A party dissatisfied with a decision may file a request for rehearing. The burden of showing a decision should be modified lies with the party challenging the decision. The request must specifically identify all matters the party believes the Board misapprehended or overlooked, and where each matter was previously addressed in a motion, opposition, or a reply.

The Petitioner sought rehearing on two grounds. First, “[t]he Board’s denial of Institution was based on an erroneous conclusion of law that improperly shifts the burden to [Petitioner] to bring forth all arguments with respect to why the challenged claims are not entitled to an earlier priority date.” Second, “the Board improperly shifted the burden to [Petitioner] with respect to the ’636 [Chinese] application inventorship issue.”

As for the first issue, the Board incorrectly shifted the burden of production back to the Petitioner notwithstanding that the Patent Owner failed to support the priority date with respect to all limitations of the challenged claims. The Petitioner made the initial showing that the challenged patent was potentially obvious because of a prior art patent. Typically, when a Petitioner makes this showing, the burden then shifts to the Patent Owner to provide evidence that the challenged patent has a priority date before the priority date of the asserted prior art. Here, the Patent Owner relied on the priority date of a Chinese application that was an ancestor to the challenged patent. In doing so, the patent owner made a showing that the ancestor application supported just one of the limitations in the challenged claims. At first, the Board incorrectly found this support sufficient to satisfy the Patent Owner’s burden to claim priority from the ancestor application. However, on rehearing, the Board recognized that this ruling was in error because the Patent Owner needed to show that the ancestor application supports all the limitations in the challenged claims before shifting the burden back to the Petitioner.

As for the second issue, the Board did not address inventorship of the Chinese application when it first denied Institution. On rehearing, the Petitioner contended that the Board “erroneously failed to consider [Petitioners]’s argument that Patent Owner is not entitled under 35 U.S.C. § 119(a) to rely on the [ancestor] application because that application does not share a single common inventor with the [challenged] patent.” According to the Federal Circuit, a foreign application may only create priority under 35 U.S.C. § 119(a) “if that application was filed by either the U.S. applicant himself, or by someone acting on his behalf at the time the foreign application was filed.” However, in MaxLite, the ancestor application and the challenged patent did not share common inventors, nor was there evidence that the ancestor application was filed on behalf of the inventors of the challenged patent. The Patent Owner sought to allege a sufficient nexus between the ancestor application and the challenged patent by showing that both shared a common assignee. On rehearing, the Board found that the Patent Owner’s assertion was insufficient to satisfy its burden of proving inventorship. Instead, the Board found no nexus between the inventors of the ancestor application and the challenged patent. Thus, the Patent Owner did not provide adequate evidence to support a finding that the challenged patent can properly claim the priority of the ancestral application.

This case demonstrates a viable recourse exists for Petitioners who might be dissatisfied with the Board’s denial of Institution. Because the Board is willing to reverse denials of Institution when it abuses its discretion, Parties should keep in mind 37 C.F.R. § 42.71(d) and conduct a thorough review of the Board’s decision. In reviewing the Board’s decision, Parties should especially keep an eye out for issues that the Board might have decided incorrectly or failed to address entirely. While the granted rehearing seen in Maxlite is rare, 37 C.F.R. § 42.71(d) and the Board’s decision provide hope to Parties initially denied Institution.

Earlier this month, in the precedential decision  New Vision Gaming & Development, Inc. v. SG Gaming, Inc., FKA Bally Gaming, Inc., the Court of Appeals for the Federal Circuit (“the CAFC”) vacated and remanded a decision by the Patent Trial and Appeal Board (“the Board”) on the ground that the decision issued after the CAFC’s Arthrex, Inc. v. Smith & Nephew, Inc. decision (where the CAFC made administrative patent judges of the Board “inferior officers” under the U.S. Appointments Clause). New Vision is appealing two covered-business method review final written decisions in which the Board held all claims of the patents at issue patent ineligible under 35 U.S.C. § 101. The CAFC’s opinion, delivered by Judge Moore, is short and largely unremarkable. What is more interesting, however, is Judge Newman’s dissent.

While Judge Newman agreed that Arthrex applied and also agreed with vacatur, she went on to state that the CAFC should have addressed a threshold issue that would have made remand unwarranted: New Vision and SG Gaming had agreed to a forum selection clause. “New Vision and SG Gaming, Inc. mutually agreed, in their patent licensing agreement, that if ‘any dispute’ arose, jurisdiction would be ‘exclusive’ in the appropriate federal or state court in the state of Nevada.”

Judge Newman noted that originally, when the dispute first arose, New Vision sued SG Gaming in Nevada district court, per the agreement, but that SG Gaming then went to the Board and filed the petitions on appeal. When the issue of the forum selection clause was raised, the Board refused to apply it. The Board stated, in its Institution Decision, that it “[does] not discern, nor has Patent Owner pointed to, any portions of chapter 32 or § 18 of the AIA, or authority otherwise, that explicitly provide for a contractual estoppel defense.” Citing the Supreme Court’s 1972 decision in M/S Bremen v. Zapata Off-Shore Co., Judge Newman found that precedent required the forum-selection clause be respected.

Andrew Hirshfield, the Acting Director of the Patent and Trademark Office, intervened in the appeal, arguing that the CAFC had no jurisdiction under 35 U.S.C. § 324(e) (“The determination by the Director whether to institute a post-grant review under this section shall be final and nonappealable.”). Judge Newman disagreed, however, finding that “the Board’s rejection of the parties’ choice of forum is indeed subject to judicial review, for § 324(e) does not bar review of Board decisions ‘separate . . . to the institution decision.’” (citing Facebook, Inc. v. Windy City Innovations, LLC, 973 F.3d 1321, 1332 (Fed. Cir. 2020)).

Judge Newman concluded by stating: “[T]he question of forum selection is not thereby resolved; it is merely postponed to determination by a new, constitutionally organized Board. It is both inefficient and unnecessary to require replacement PTAB proceedings if the new PTAB does not have jurisdiction to proceed.” Although she ultimately agreed with the Court’s decision to remand under Arthrex, Judge Newman’s dissent in favor of judicial efficiency is compelling. Future litigants who are subject to a forum-selection clause should bear the dissent in mind when contemplating petitions to the Board. Ultimately, whether the parties’ forum-selection clause plays a part in the case on remand, or in any forthcoming appeals, remains to be seen.

Further Reading: In the case of Kannu v. Samsung (discussed in this post by my colleague Richard Waterman) decided earlier this year by the District Court for the Southern District of New York, the Court held that petitions for inter partes review did not fall within the scope of an agreement’s forum-selection clause.

On April 15, 2021, the United States Patent and Trademark Office (“USPTO”) implemented the COVID-19 Prioritized Examination Pilot Program (“Pilot Program”) to fast-track ex parte appeals of products or processes subject to an applicable FDA approval for COVID-19 use.

Generally, appeals to the Patent Trial and Appeal Board (PTAB) are taken up for decision in the order they are docketed, with an average of 13 months from the time the PTAB receives the appeal to the date of the final decision.

For qualifying appeals, the PTAB has set a target of issuing a decision on the merits of the appeal within six months from the date that a petition for fast-track review is granted.  Appellants can expect a decision on their petition for fast-track status in approximately two business days.

To qualify for fast-track status under the Pilot Program, appellants must meet the following three conditions:

  1. The application must be an original utility, design, or plant non-provisional application claiming a product or process subject to an applicable FDA approval for COVID-19 use;
  2. The appeal must be an ex parte appeal for which a notice of appeal has been filed and a PTAB docketing notice has been issued by the USPTO (i.e., the appeal is pending before the PTAB); and
  3. The appellant must file a petition under 37 C.F.R. § 41.3 and certify that the application involved in the appeal claims products or processes that are subject to an applicable FDA approval for COVID-19 use.

The USPTO is offering the Pilot Program on a temporary basis and will accept petitions for fast-track review until 500 appeals have been accepted into the Pilot Program.

Hearings in ex parte appeals under the Pilot Program will be conducted according to ordinary PTAB hearing procedures.

Currently, the PTAB is conducting hearings by telephone only, until further notice.

In In re: Board of Trustees of the Leland Stanford Junior University (“Stanford”), No. 2020-1012 (Fed. Cir. Mar. 11, 2021), the Federal Circuit was presented another opportunity to analyze patent-eligible subject matter.  In affirming the § 101 rejection of the claims, the court held the mathematical calculations and statistical modeling improvements to determinations of haplotype phase were not sufficient to make the claims patent eligible.

In 2012, Stanford filed Application No. 13/445,925 (“the ’925 application”) directed to methods and computing systems for determining haplotype phase, a process for determining the parental source of an inherited gene.  The invention uses calculations and statistical modeling of large amounts of genetic data to determine haplotype phase.  The methods purportedly improved the number of haplotype phase predictions over those in the prior art by incorporating additional data, such as “linkage disequilibrium data” and “transition probability data.”  According to Stanford, improved haplotype phasing techniques have the potential to revolutionize personalized health care.  The Patent Trial and Appeal Board rejected the claims as covering patent ineligible abstract mathematical algorithms and mental processes and Stanford appealed.

The Federal Circuit held that the ’925 application did not contain patent eligible claims under the Alice framework.  Stanford argued that the specific application of the steps was novel and enabled accurate haplotype phasing at 97.9% of all heterozygous positions, whereas the previous methods only achieved approximately 80%.

The court noted that, even accepting the improvements as true, current legal precedent would not protect the claims no matter how groundbreaking the advance.  The court held that: (1) the claims were directed to ineligible mathematical algorithms; (2) the claims were not transformed into an eligible form by any specialized computer memory or hardware, whether the elements were taken individually or in combination; and (3) without more, the improvements in the mathematical analysis itself was an insufficient innovation to warrant patent protection.

Earlier this month, in the precedential decision Uniloc 2017 LLC v. Facebook Inc., the Court of Appeals for the Federal Circuit (“the CAFC”) upheld the Patent Trial and Appeal Board (“the Board”) on the issue of estoppel (or lack thereof) when multiple parties file multiple, substantially similar petitions challenging a patent’s patentability.

1) The Proceedings Before the Board

The prosecution history is tangled:

First, in November 2016, Apple filed a petition for inter parties review (IPR) of U.S. Patent No. 8,995,433 (“the ’433 patent”) assigned to Uniloc, challenging claims 1-6 and 8.

Second, in May and June 2017, Facebook filed two petitions (“Facebook’s ’1427 and ’1428 petitions”) for inter partes review of the ’433 patent. The ’1428 petition was substantially identical to the Apple IPR, and was filed along with a motion to join Apple’s IPR. The ’1427 petition challenged claims 1-8 of the ’433 patent on new grounds.

Third, in September 2017, LG filed IPR petitions substantially identical to Facebook’s ’1427 and ’1428 petitions, along with a motion to join Facebook’s ’1427 and ’1428 petitions.

Fourth, in October 2017, the Board instituted Apple’s IPR and granted Facebook’s motion to join Apple’s IPR. Then, a few months later, the Board instituted Facebook’s ’1427 and ’1428 petitions. Additionally, the Board instituted IPRs based on LG’s petitions and granted LG’s motion to join Facebook’s ’1427 and ’1428 petitions. At this point, Facebook was party to its own ’1427 and ’1428 petitions and Apple’s IPR challenging claims of the ’433 patent, and LG was party to Facebook’s ’1427 and ’1428 petitions.

Fifth, in May 2018, the Board issued a final written decision in the Apple IPR upholding the patentability of all challenged claims. Later that month, the Board dismissed Facebook in part from the ’1427 petition (with respect to all but claim 7), finding Facebook estopped from maintaining the proceeding with respect to the claims that had been challenged (and upheld) in the Apple IPR. However, LG was not similarly estopped.

Finally, in the Board’s final written decision in the consolidated IPRs for Facebook’s ’1427 and ’1428 petitions, the Board found all challenged claims unpatentable. Uniloc sought rehearing, which was denied. Uniloc then appealed on several grounds, including that 1) the Board erred in not finding LG estopped from challenging claims 1-8 of the ’433 patent and 2) in finding Facebook not estopped from challenging claim 7 of the ’433 patent.

2) Whether the Board Could Review Uniloc’s Estoppel Arguments

On appeal, the CAFC first addressed whether it could review Uniloc’s estoppel argument. Uniloc contended that because Facebook was estopped by the Apple IPR decision from maintaining a challenge to those claims, LG (by virtue of having joined Facebook, who had joined Apple) was an alleged “real party in interest [RPI] or privy of the petitioner” and should have been estopped as Facebook was. This argument was legally complicated because while 35 U.S.C. § 314(d) dictates that the “determination by the Director [of the Patent Office] whether to institute an inter partes review under this section shall be final and nonappealable,” the CAFC’s case history was mixed when it came to reviewability.

The CAFC ultimately found that it was not precluded from reviewing the Board’s decision, citing to the “strong presumption of reviewability of agency action” and its holding in Credit Acceptance Corp. v. Westlake Services, 859 F.3d 1044 (Fed. Cir. 2017). “Critically, the particular circumstances in Credit Acceptance, i.e., one in which no cause for termination at the time of petition existed and the basis for termination developed while the proceeding was ongoing, is exactly that which happened here.” (Emphasis added).

3) Affirmance of Finding that LG Not Estopped from Challenging Claims 1-8 of the ’433 Patent – Serial Joinder Doesn’t Require Finding of Real Party in Interest or Privity

 On the merits regarding whether LG was estopped from challenging claims 1-8 of the ’433 patent on the same grounds that Apple and Facebook had, the CAFC stated that the determinations as to whether a party is a real party in interest or in privity with another are highly fact-dependent. Regarding real party in interest, the test includes “whether a []party exercises [or could exercise] control over a petitioner’s participation in a proceeding, or whether a []party is funding the proceeding or directing the proceeding.” Regarding privity, “it is important to determine whether the petitioner and the prior litigant’s relationship . . . is sufficiently close that it can be fairly said that the petitioner [already] had a fully and fair opportunity to litigation the issues it now seeks to assert.”

The CAFC agreed with the Board that the evidence did not establish “control” for the real party in interest analysis. “[J]ust because LG expressed an interest in challenging the ’433 patent’s patentability . . . does not by itself make LG an RPI to Facebook’s IPR.” Additionally, the CAFC found the record insufficient to establish any sort of “preexisting, established relationship” that would indicate “coordination.” “The mere fact that the Board procedurally required LG and Facebook to consolidate their arguments and evidence in combined filings in this proceeding does not, without more, make them privies . . .”

4) Affirmance of Finding that Facebook Not Estopped from Challenging Dependent Claim 7 of the ’433 Patent, Notwithstanding Estoppel With Respect to Independent Claim 1

Similarly, the Board found that Facebook was not estopped from challenging claim 7 of the ’433 patent. Uniloc asserted that because the Board found Facebook estopped from challenging claims 1-6 and 8, the estoppel should apply to claim 7 because claim 7 depends on claim 1. The CAFC disagreed with Uniloc, finding the plain language of the statute rebutted an estoppel argument.

The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a) . . . may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review. 35 U.S.C. § 315(e)(1)(emphasis added).

The CAFC also found its case law on the issue supported the Board’s decision, and found against Uniloc.

5) Conclusion

Uniloc also challenged the obviousness determinations, but the CAFC affirmed the Board, finding the decision supported by substantial evidence. The CAFC’s review of the Board’s institution decision, despite an occasionally confusing case history, may indicate an increased likelihood of reviewing estoppel-related decisions in the future. Further, although here there was a lack of evidence regarding a relationship (either as a real party in interest or in privity) between LG and Facebook, which may distinguish this case from future cases, the precedential nature of this decision may indicate the CAFC’s reluctance to reverse the Board on findings of estoppel, generally. Petitioners should take note of the potential advantages of filing substantially similar petitions when challenging patents facing simultaneous challenges from other petitioners. However, the possibility of being estopped based on another petition also means that petitioners should exercise discretion.

In SynQor, Inc. v. Vicor Corp., Case No. 19-1704 (Fed. Cir. Feb. 22, 2021), the Federal Circuit vacated the inter partes reexamination decision from the Patent Trial and Appeal Board (the “Board”).  As part of the decision, the court held that collateral estoppel (issue preclusion) can apply where the Board’s prior determinations involving different claims of related patents addressed the same issue(s).

In the PTAB’s inter partes reexamination decision, the Board held several original claims and newly-presented claims of the 7,072,190 patent (“the ’190 patent”) unpatentable as obvious.  SynQor raised several arguments on appeal, but only two are of relevance in this discussion.  Namely, in appealing the decision concerning the newly presented claims, SynQor argued the decision should be vacated because the patent had expired during the appeal process.   As to the original claims, SynQor argued that common law issue preclusion arising from the Boards’ decisions in two patent family member reexamination proceedings collaterally estopped the Board from making its obviousness holding in the reexamination of the ’190 patent.  Each is addressed, in turn, below.

On the obviousness of the newly-presented claims, the Federal Circuit found that the issue was moot.  The Court reasoned that because newly-presented claims during reexamination do not go into effect unless a reexamination certificate incorporates them, and further because here a reexamination certificate could not amend the claims due to the ’190 patent’s expiration, the issue of whether the newly-presented claims were obvious or not was moot.  See 37 C.F.R. § 1.520(j) (“[N]o amendment, other than the cancellation of claims, will be incorporated into the patent by a [reexamination] certificate issued after the expiration of the patent.”).  Consequently, the Federal Circuit vacated the Board’s decision as to those claims.

On the original claims and the collateral estoppel issue, the Federal Circuit’s decision requires a bit of background.  Importantly, two other patents in same family as the ‘190 patent were subject to reexamination proceedings, patent numbers 7,564,702 (“the ’702 patent”) and 8,023,290 (“the ’290 patent”).  The same combination of prior art references, Steigerwald and Cobos, was presented in the reexamination proceedings of each of the three patents.  In the ’702 patent and ’290 patent proceedings, the Board found the prior art references incompatible, and therefore determined the claims at issue were not unpatentable.  The Federal Circuit affirmed each of those decisions.  However, in the ’190 reexamination, the Board found the prior art references were compatible in its obviousness decision.  The Board’s inconsistent treatment of the compatibility of the prior art references became the basis of the issue preclusion claims.

The Federal Circuit reviewed the applicable statutory provisions and determined that issue preclusion is available in inter partes reexaminations.  The court noted that prior decisions had held that issue preclusion applies to inter partes reviews.  The estoppel that results from inter partes reexamination indicated that issue preclusion should apply equally there also.  The rights and procedures available in a reexamination proceeding met the requirements for issue preclusion to be available generally.

On the facts, the Federal Circuit held that the issues related to the prior art were the same in all three patent reexaminations.  Because the Board had found the same prior art incompatible in the ’702 and ’290 reexamination, it could not now determine the opposite in the ’190 patent proceeding.  Although the court determined it was not clear that the Board relied on new evidence to reach its different conclusion, the principles of collateral estoppel would still apply even if new evidence exists.  This type of second bite at the apple is the interest in finality that collateral estoppel is intended to prevent.  Therefore, the Federal Circuit vacated the Board’s decision on the original claims.