In Coalition for Affordable Drugs VIII, LLC, v. The Trustees of the University of Pennsylvania, No. IPR2015-01835, Paper No. 56 (P.T.A.B. March 6, 2017), the PTAB concluded that despite evidence that the combinations of prior art references may have disclosed the claimed invention, an ordinary artisan would not have had a reasonable expectation of success in combining the references. The PTAB also considered whether a slideshow prior art reference qualified as a printed publication.  The Board ultimately held that the Petitioner failed demonstrate that claims 1-10 of U.S. Patent No. 8,618,135 were unpatentable as obvious.

The patent at issue teaches “methods for treating a subject suffering from a disorder associated with hyperlipidemia and/or hypercholesterolemia.” Specifically, the challenged claims recite the administration of a microsomal triglyceride transport protein (“MTP”) inhibitor, lomitapide, in three separate doses. The claims disclose “first dose level is from about 2 to about 13 mg/day, a second dose level is from about 5 to about 30 mg/day, and a third dose level is from about 10 to about 50 mg/day.” Slip op. at 7.

Petitioner argued that the claims were unpatentable as obvious based on combinations of the prior art references. Petitioner asserted that the claims were obvious in in view of Stein (a slide presentation teaching the use of MTP inhibitors specifically implitapide in the treatment of hypercholesterolemia) and Chang (discusses animal studies of implitapide and lomitapide and the clinical efficacy of the inhibitors). Petitioner also argued that the claims were obvious in view of Chang and Pink Sheet (discusses how PPD was conducting proof-of-concept studies on the use of implitapide in statin therapy with the hope of establishing its safety and efficacy for use in the treatment of hypercholesterolemia).

With respect to the issue of a “printed publication”, Petitioner asserted that Stein was presented and that a hyperlink for the presentation was disseminated to interested parties. Using the specific factors provided set forth in In re Klopfenstein, 380 F.3d 1345, 1350 (Fed. Cir. 2004), the Board held that there was no evidence that ordinary artisans would have located the hyperlink because the hyperlink was not targeted at skilled artisans interested in MTP inhibitors. The Board further concluded that Petitioner’s use of a Wayback Machine screenshot of the hyperlink was not sufficient to establish that the hyperlink worked or that the slides could be obtained through the link by ordinary artisans.  The PTAB held that Stein failed to qualify as a printed publication and then focused its analysis of the issue of “reasonable expectation of success.”

Patent Owner argued that a person of ordinary skill in the art would not have had a reasonable expectation of success in substituting lomitapide for implitapide in the process taught by the prior art.  A person of ordinary skill in the art would not have looked to lomitapide because of its known liver toxicities.  Relying on expert testimony, Patent Owner argued that the prior art only discloses a proof-of-concept study, lacking any reported results which would have been necessary in order to successfully develop a dosing regimen.

Petitioner, quoting the Board’s Institution Decision asserted that “as explained by the Board, Petitioner has made this showing: ‘Given Chang’s teaching that CP-346086, implitapide (BAY-13-9952), and lomitapide (BMS-201038) have similar efficacies, we determine that Petitioner has sufficiently demonstrated a reasonable expectation of success of substituting lomitapide for implitapide and achieve a dosage level that would fall within the claimed ranges.’” Slip op. at 36.

In its analysis, the PTAB held that while it is a “close call”, a person of ordinary skill in the art would not have had a reasonable expectation of success in combining the prior art references to arrive at the present invention. The PTAB rejected Petitioner’s reliance on its Institution Decision, stating that that decision was based on evidence of record at the time and that the evidence put forth by the Patent Owner weighed in favor of reaching a different conclusion from its previous decision.

The PTAB emphasized that the ‘135 patent noted that previous clinical development of lomitapide for the use in the treatment of hypercholesterolemia had been discontinued due to serious hepatotoxicities. The PTAB held that Petitioner failed to provide any evidence of what doses of lomitapide exhibited hepatotoxicities. The PTAB relied on Patent Owner’s expert who explained that although the prior art disclosed that lomitapide has been tested in human trials, the methods, dosages and results were never disclosed and thus were unknown to a person of ordinary skill in the art.

The Board further stated that with respect to the reasonable expectation of success, absolute predictability is not required. Specifically, the Board found persuasive Patent Owner’s evidence that not all MTP inhibitors act the same and as such an ordinary artisan would not anticipate that dosages used for implitapide would have the same effect when substituted with lomitapide. The Board thereby concluded that a person of ordinary skill in the art would not have had a reasonable expectation of success that using the dosages taught by the prior art for implitapide would provide a therapeutically effective lomitapide with reduced hepatotoxicities.

The Board also found the evidence of secondary considerations to be substantial, specifically commercial success. Patent Owner asserted that in 2013 its licensee, Aegerion received FDA approval for JUXTAPID, a lomitapide treatment using the claimed method and began to market the drug. Petitioner argued that Patent Owner failed to establish the proper nexus between the commercial success and the claims. Citing PPC Broadband, Inc. v. Corning Optical Comm. RF LLC, 815 F.3d 734, 747 (Fed. Cir. 2016)), the Board noted however, that the nexus is presumed as petitioner has the ability to rebut a patent owner’s evidence. The Board further noted that the Petitioner did not contest that the marketed drug is a commercial success and as such the Patent Owner’s evidence thus established that the marketed drug is a commercial success. Therefore, the Patent Owner prevailed with respect to both challenges.

This case offers a variety of insight into the Board’s analysis of printed publications. The Board has demonstrated that a screenshot from the Wayback Machine is not sufficient to establish proof of a printed publication. A petitioner relying on the Wayback Machine must be sure that the reference was actually available to ordinary artisans as prior art. This case also highlights the importance of the “reasonable expectation of success” factor and the role it may play in the minds of the panel. Such evidence has previously not been widely effective at PTAB, but may now provide patent owners with successful path to rebutting challenges to patentability.

In a rare reversal of a Board IPR decision, the Federal Circuit in Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co. Ltd., No. 2016-1900 (March 14, 2017) (Judges Lourie, Moore, and Taranto), distinguished between an anticipatory reference that explicitly discloses multiple possible combinations and a reference that fails to disclose all claim elements even if a person of ordinary skill in the art would envision the missing element upon reading the reference.

Nidec owns U.S. Patent No. 7,208,895 (the “’895 patent”), which discloses a system for controlling torque of an electromagnetic motor.  Motor control values are expressed either relative to a stationary frame of reference or a rotating frame of reference.  The former is a value calculated relative to the stator, and the latter is a value calculated relative to the rotor.

Nidec’s claim 12, from which claim 21 depends, requires, inter alia, an “IQdr demand”, which the Board construed as “a current demand that includes Q- and d-axis current demands”.  The q-axis and d-axis components together are used to express a signal in the rotating frame of reference.  The parties did not challenge this construction on appeal.  The patent’s specification confirms that the IQdr demand must be a signal in the rotating frame of reference, and both parties advocated this position during the IPR proceedings.

The Board instituted IPR2014-01122 of claim 21 on January 21, 2015 as anticipated by U.S. Patent No. 5,569,995 (“Kusaka”) under 35 U.S.C. § 102(b).  Kusaka is a Toyota patent that discloses a motor control system that has three inputs that are in the rotating frame reference, and three outputs that are expressed in the stationary frame of reference.  The Board, in its Final Written Decision, did not take into account that the outputs from Kusaka were expressed in the stationary frame of reference when it found that the Kusaka outputs, as a set, were an IQdr demand.

In support of its Final Decision, the Board relied on Kennametal, Inc. v. Ingersoll Cutting Tool Co., 780 F.3d 1376, 1381 (Fed. Cir. 2015).  “[A] reference can anticipate a claim even if it ‘does not expressly spell out’ all the limitations arranged or combined as in the claim, if a person of skill in the art, reading the reference, would ‘at once envisage’ the claimed arrangement or combination.’” Final Written Decision at 15.  The Federal Circuit distinguished Kennametal, however, as Kennametal listed fifteen combinations, and so a personal of ordinary skill in the art could “immediately envisage” the claimed combination, because the possible combination was disclosed explicitly in the anticipatory reference.   Kusaka did not explicitly disclose an IQdr demand in a rotating frame of reference, nor did it list it as a possibility.  Kennametal cannot be used as an alternative to inherent anticipation.  If a reference does not explicitly or inherently disclose each and every claim element, even if a person of ordinary skill in the art would immediately envision the missing claim element upon reading the reference, the reference cannot anticipate the claim.

This opinion provides useful guidance for PTAB practitioners.  Petitioners alleging anticipation should clearly identify where each element is disclosed expressly or inherently in the reference.  Where an element is missing, Petitioners should consider whether to allege obviousness in view of that reference and possible secondary references.  If Petitioner’s are relying on a Kennametal theory, they should provide expert testimony that the reference discloses the claimed combination and that a person of skill in the art would readily envisage that combination.  For patent owners, it is imperative to identify specific limitations that are not disclosed in the reference, whether expressly or inherently, or why the claimed combination would not be readily apparent in view of the reference.

Final Written Decisions were entered on March 7, 2017 in 6 IPRs brought by Qualcomm Inc. against ParkerVision, Inc (IPR2015-01828, -01829, -01831, -01832, -01833, and -01834). These 6 IPRs all challenged patent 6,091,940 (the ’940 patent), a patent directed to methods and systems where a signal with a lower frequency is up-converted to a higher frequency. Across the 6 IPRs, 12 grounds of unpatentability were instituted against various of the 374 claims of the ’940 patent and relying on various combinations of 8 references. The Board found 51 claims of the ’940 patent unpatentable on at least one ground, while 9 challenged claims were not found unpatentable on any ground.

In reaching its conclusions as to patentability, beyond the Board’s analysis of the disclosures of the references and the law of obviousness as applied to the challenged claims, it also had to grapple with issues raised by ParkerVision in the six IPRs regarding the proper scope of a reply brief submitted by a petitioner. In three of the Final Written Decisions, the Board was able to address these issues in a relatively brief manner. In IPR 2015-01829, the Board found that an alleged “new” argument challenged by ParkerVision as being first disclosed in the reply was originally disclosed in the Petition. In IPR2015-01831, the argument challenged by ParkerVision was ultimately not relied upon by the Board in reaching its decision, and the issue was thus considered moot. In IPR2015-01828, however, the Board agreed that Qualcomm had presented new arguments in its Reply. Although neither the cited evidence supporting the argument nor the reference being applied to a claim limitation were new, the Board found that the manner in which Qualcomm argued the limitation was disclosed was new. Specifically, the “new” arguments were based on it being obvious to select conditions which would lead to a limitation, while Qualcomm had originally argued that the limitation was itself actually taught in the asserted reference.

The three other IPRs (IPR2015-01832, -01833, and -01834) go into greater detail regarding the alleged new arguments, for example providing charts summarizing both the sections of Qualcomm’s reply challenged by ParkerVision and Qualcomm’s response to each section. At issue in these three IPRs, similar to IPR2015-01828 discussed above, is the manner in which Qualcomm argued that a limitation was disclosed by a reference. All grounds instituted in these three IPRs have a common reference, and the issue of proper scope of the reply brief is based on whether Qualcomm’s argument that a limitation was would have been obvious in light of the reference was argued in the petitions of these IPRs. The discussions of this issue in all three IPRs are largely the same.

The Board did not accept Qualcomm’s position that the arguments were initially raised in the petitions, stating that the petition had argued that the reference recited the limitation in question, not that it rendered the limitation obvious. Similarly, the Board rejected the assertion that the “would have been obvious” argument was merely responsive to ParkerVision’s argument that the limitation was not expressly disclosed. The Board stated:

An argument that a claim limitation is disclosed by a particular teaching in a prior art reference is not the same as an argument that the claim limitation would have been rendered obvious by the teaching in that reference. If Petitioner wanted to argue that these claim limitations would have been obvious, it was incumbent upon Petitioner to raise the argument in the Petition and not wait until its Reply to do so.

As the Board did not find support for the argument in the petitions and rejected the assertion that they were responsive, the Board did not rely on the challenged sections in making its decision.

No claims were found unpatentable in these three IPRs. The question of the proper scope of a reply brief ultimately may have been outcome-determinative, as all of the challenged claims in the three IPRs contained the limitations which the “new” arguments from Qualcomm addressed. As these limitations were not found to be expressly disclosed in the reference and whether they were rendered obvious by the reference was not considered, all challenges to claims of the ’940 patent in these IPRs failed.

The PTAB here sends a clear message to petitioners: be thorough in petitions not just in ensuring what references apply to all limitations, but also ensuring that the manner in which all references disclose or render those limitations obvious. To the Board, these are two different arguments, and there will be no second chance to make it if disclosure is challenged.

As discussed in Part I of this article, the scope of IPR estoppel under 35 U.S.C. § 315(e) remains unclear.  In Part II, we explore several approaches that courts may apply.

Specifically, the approaches considered herein contemplate the meaning of the phrase “reasonably could have raised” in the IPR estoppel statute.  Clearly, Congress did not intend for estoppel to apply only to grounds actually raised in an IPR, or else Congress would have said this—like it did in the actually-raised provision for CBMs.  What is not clear is whether Congress intended for all grounds that could have been raised (that is anticipation or obviousness based on any patent or printed publication) to be estopped, or only some of these grounds (giving meaning to the word “reasonably” in the statute).

In determining the meaning of the phrase “reasonably could have raised” in 35 U.S.C. § 315(e), courts will have to weigh the merits of a rule-bound approach that promotes certainty but may at times produce unfair results, against a more flexible standard-bound approach that is responsive to the equities in a given case, but lends lesser predictability. Courts will also have to consider two different categories of grounds: (1) grounds raised in a petition, but not instituted; and (2) grounds not raised at all.

Until courts clarify the issues set forth above, the full range of possible permutations should be considered when preparing IPR petitions.

(1) Grounds raised in a petition but not instituted

(a) Never estopped

One possibility (perhaps most likely given the Federal Circuit’s opinions to-date) is that a petitioner will never be estopped from asserting grounds raised in a petition that were not instituted.  This outcome is consistent with Shaw and its progeny, and it advantageously prevents the application of estoppel to grounds that the petitioner was not permitted to fully litigate before the PTAB.  See, e.g., Shaw Indus. Group., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293, 1300 (Fed. Cir. 2016).  See generally Part I of this article.

One problem with this approach is that it encourages petitioners to game the system by including “laundry lists” of possible grounds in order to avoid estoppel effects.  Or less blatantly, a second- or third-favorite ground might be cursorily included in a petition, with the expectation that it would most likely be denied institution, for the purpose of preserving that ground for district court.  This gamesmanship would tend to erode the benefits that the estoppel provision is designed to promote, and consequently, district courts may be less inclined to stay proceedings pending the outcome of a related IPR.

(b) Sometimes estopped

Another option is that estoppel will apply to grounds not instituted because they are purportedly cumulative or duplicative of the instituted grounds, but estoppel will not apply to grounds denied institution on the merits or for some other procedural reason.  This option would be responsive to the case where a non-instituted ground is thought to be so similar to a ground that is fully litigated before the PTAB that it can be treated as such.

This option is consistent with Verinanta Health, and has the benefit of considering the context of an institution decision.  This does not address the gamesmanship problem noted above, however, because petitioners could still include “laundry lists” of minimally related grounds without fear of estoppel.  Further, it is not clear how well tailored this approach is to judicial economy.  That is, if the PTAB has denied institution based on the merits, it may signal that a court should not reconsider the grounds (absent a good reason to do so).

One problem with this approach is that the PTAB does not always clarify why it is not instituting on a ground.  That is, it may decline to institute based simply on the fact that two proposed grounds address the same claim, and one ground has already been instituted (i.e., redundancy per se).  Or it may decline to institute because it believes full adjudication of all of the asserted grounds would be administratively infeasible.  Where the PTAB fails to explain itself in detail, courts may have to substantively weigh in on the merits of the grounds to determine whether they are in fact duplicative, thus at least partially negating the benefits of estoppel.

(c) Exception for bad faith

Courts may also apply an exception to the general “no estoppel” rule, where it appears that a petitioner has included grounds in a petition solely for the purpose of preserving them in district court.  The more egregious examples of “laundry list” pleadings would be easy to spot, permitting straightforward application of estoppel in such cases.  However, it may be difficult in some instances to draw a line.  If a petitioner has two or three strong grounds, the petitioner may strategically raise the second- and third-strongest grounds in abbreviated form in order to avoid estoppel.  Where some  meaningful analytical detail is provided, it may be less clear whether estoppel should apply.

Of course, if the PTAB instituted on all grounds or on none, and stopped its practice of partial institution, such gamesmanship would not be an issue.  As explained in Part I of this article, this type of institution appears to be what Judge Newman envisions.  See, e.g., SAS Institute, Inc. v. ComplementSoft, LLC, 825 F.3d 1341, 1358 (Fed. Cir. 2016) (“The ‘complete substitution’ for section 102 and 103 issues cannot occur unless all the claims challenged in the petition are included when post-grant review is accepted.”).    But given the statutory time limits on the IPR proceedings, 35 U.S.C. § 316(a)(11), the PTAB may be administratively unable to fully adjudicate the merits of every ground raised in an IPR petition.  Cf. CBM2012-00003, Paper 7, 1-2 (PTAB 2012) (petitioner raised 422 grounds against 20 claims).

(2) Grounds not raised at all in petition

(a) Always estopped

It is possible that petitioners will be estopped from raising any grounds not included in a petition.  This is a strong form of estoppel, and is consistent with most practitioners’ original interpretation of the IPR estoppel provisions under 35 U.S.C. § 315(e)—i.e., an IPR petitioner whose petition resulted in a final written determination should be estopped from arguing in district court any §§ 102 and/or 103 challenge based on prior art patents or printed publications.

This approach is a bright-line rule, and also encourages petitioners to bring the best art forward in a petition.  Diligence and care are required to make sure that grounds are not overlooked.  This approach is most likely to make IPR proceedings become substitute validity proceedings, and consequently, greatly simplify the corresponding litigation.  Thus, under this approach, district courts will be most likely to stay litigations pending the outcomes of IPRs, which is in the interest of judicial efficiency.

Yet the rule fails to consider how diligent the petitioner was in searching for prior art and why certain art may not have been included in an IPR petition.  Accordingly, courts may be inclined to grant some reprieve where sympathetic facts are presented.

(b) Sometimes estopped

A more lenient standard could hinge the application of estoppel to grounds not raised in a petition on whether a diligent search would have found the reference.  This analysis may be akin to a rebuttable presumption.  For example, IPR estoppel is presumed to apply, but the petitioner can rebut the presumption by showing that the reason the reference was excluded was because the reference did not show up in a diligent search—not because petitioner decided not to include the reference, or failed to conduct a diligent prior art search.  Alternatively, the presumption could go the other way—IPR estoppel is presumed not to apply, but the party asserting estoppel can rebut the presumption by showing that a diligent search would have found the reference.

As explained in Part I of this article, this is consistent with the approach that the Northern District of Illinois took in Clearlamp.  There the court found that a newly discovered prior art reference could be used “only if it could not have been found by a skilled searcher performing a diligent search,” and further that the burden is on the party asserting estoppel to show that a diligent search would have found the reference.

This approach inserts some murkiness into the IPR issue, which would hinge on what courts determine a reasonable diligent search would discover.  At one extreme of this spectrum, only prior art that was of severely limited availability would be exempt from estoppel (e.g., thesis that is not available in electronic form and is only at a specific institution).  At the other end, a petitioner may be able to claim exemption merely from having hired a prior-art search firm (or multiple search firms) to conduct a search.  At the first extreme, this “sometimes estopped” approach would have only negligible benefits over the “always estopped” approach.  At the second extreme, a narrow estoppel risks allowing defendants to raise some prior art challenges in an IPR and others before the district court, permitting the sort duplicate litigation that the estoppel provision was meant to prevent.  Like reexamination proceedings, IPRs could risk becoming “another forum” for deciding some of the invalidity disputes that are likely to arise in a case.

When the America Invents Act (“AIA”) first went into effect, it was widely believed by practitioners that the scope of the estoppel provisions under 35 U.S.C. § 315(e) was very broad.  Essentially, an IPR petitioner whose petition resulted in a final written determination would be estopped from arguing in district court any §§ 102 and/or 103 challenge based on prior art patents or publications.  This belief was argued to courts in motions to stay pending resolution of inter partes review proceedings, and district court litigations were routinely stayed based on this broad interpretation of the IPR estoppel provision.  See, e.g., Evolutionary Intelligence, LLC v. Facebook, Inc, No. C 13-4202 SI, 2014 WL 261837, at *2 (N.D. Cal. Jan. 23, 2014); Norman IP Holdings, LLC v. TP-Link Techs., Co., No. 6:13-CV-384-JDL, 2014 WL 5035718, at *3 (E.D. Tex. Oct. 8, 2014); Princeton Digital Image Corp. v. Konami Digital Entm’t Inc., No. CV 12-1461-LPS-CJB, 2014 WL 3819458, at *2 (D. Del. Jan. 15, 2014).

In the last year, it has become clear that the scope of IPR estoppel is likely not as broad as once believed.  On March 23, 2016, in Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293 (Fed. Cir. 2016), the Federal Circuit concluded that IPR estoppel generally applies only to grounds on which an IPR is instituted.  The Court reasoned that an IPR does not begin until it is instituted, and thus, any ground raised in a petition on which institution is denied was not raised—nor could it have been reasonably raised—during the IPR.  Id. at *1300.

Ever since, district courts, practitioners and other Federal Circuit panels (the panel in Shaw consisted of Judges Moore, Reyna and Wallach) have been revisiting the once seemingly clear estoppel provision of § 315(e).

Below is an overview of the current state of the law on the issue of IPR estoppel.

The plain language of the IPR estoppel provision states:

Estoppel.—

(1)Proceedings before the office.—

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), or the real party in interest or privy of the petitioner, 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.

(2)Civil actions and other proceedings.—

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), or the real party in interest or privy of the petitioner, may not assert either in a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

Importantly, both § 315(e)(1) and (2) contain the language “in a patent under this chapter that results in a final written decision under section 318(a)” and “may not [request or maintain a proceeding before this Office…/assert either in a civil action…] on any ground that the petitioner raised or reasonably could have raised during that inter partes review.”  This is important because one of the potentially most instructive opinions regarding the scope of the IPR estoppel provisions is Apotex Inc. v. Petitioner, IPR2015-00873, 2015 WL 5523393 (Sept. 16, 2015), a PTAB opinion interpreting § 315(e)(1) that determined back in 2015—pre-Shaw—that estoppel does not apply to a ground raised in a petition but on which IPR was not instituted because of redundancy, but estoppel does apply to a ground not raised in a petition.  Id. at *3-5.

Five months after Apotex, the Federal Circuit decided Synopsys, Inc. v Mentor Graphics, Corp., 814 F.3d 1309 (Fed. Cir. 2016).  Synopsys was not an IPR estoppel case—it was a case concerning whether the PTAB’s final decision in an IPR was required to address every claim raised in a petition.  And the Federal Circuit majority (Judges Dyk and Wallach) determined that 35 U.S.C. § 318(a) only requires the Board to address claims as to which review was granted.  Id. at *1316-17.  Judge Newman’s dissent, however, made the connection between this ruling and the IPR estoppel provision.  In her dissent, Judge Newman pointed out that “the estoppel provision … is undermined by partial decision [to institute IPR], for estoppel is effective only when validity is resolved by the PTAB.”  Id. at *1337.  In other words, so long as the PTAB can issue partial institution decisions and address only some of the grounds raised in a petition in a final written decision, then the rest of the grounds raised in the petition—for which institution was denied—would be preserved for re-argument (either in subsequent IPRs or in civil litigation).  .

The following month, on March 23, 2016, the Federal Circuit (Judges Moore, Reyna and Wallach) issued the Shaw opinion.  817 F.3d at 1300.  Therein, arguably in dicta, the PTO’s argument that estoppel does not apply to a ground raised in a petition but on which IPR was not instituted because of redundancy was adopted.  Shaw, 817 F.3d at 1300 (“Shaw raised its Payne-based ground in its petition for IPR.  [T]he PTO denied the petition as to that ground, thus no IPR was instituted on that ground.  The IPR does not begin until it is instituted.  Thus, Shaw did not raise—nor could it have reasonably raised—the Payne-based ground during the IPR.”) (internal citation omitted).  This was the same outcome as Apotex on similar facts.

On April 5, 2016, three different Federal Circuit Judges (Judges Lourie, Schall and Hughes) issued an opinion in HP Inc. v. MPHJ Technology Investments, LLC, affirming the PTAB’s determination and finding that the PTAB fulfilled its APA obligations even though it did not address all of the grounds in the petition in its final decision.  817 F.3d 1339, 1346-47 (Fed. Cir. 2016).  In dicta, the Court addressed HP’s policy argument that, notwithstanding the Board’s failure to address all of the grounds in its petition in the final decision, HP would be estopped from challenging claim 13 in a future proceeding.  Id. at 1347.  It explained: “[T]he noninstituted grounds do not become part of the IPR.  Accordingly, the noninstituted grounds were not raised and, as review was denied, could not be raised in the IPR.  Therefore, the estoppel provisions of § 315(e) do not apply.”  Id. (citing Shaw, 817 F.3d at 1299-1300).

On June 10, 2016, Judges Newman, Chen and Stoll issued opinions in SAS Institute, Inc. v. ComplementSoft, LLC, 825 F.3d 1341 (Fed. Cir. 2016).  The majority (Judges Chen and Stoll) again found that the Board did not need to address non-instituted claims in its final written decision.  825 F.3d at 1343.  Judge Newman wrote a separate opinion, dissenting on that issue for the same reasons she set forth in her dissenting opinion in Shaw.  SAS Institute, Inc., 825 F.3d at 1356-1359.  Judge Newman walked through the legislative history of the America Invents Act, explaining how it purportedly supports her view that final written decisions must address all of the claims in a petition because otherwise the estoppel provision does not carry out its intended purpose—which was to “completely substitute” the same issues in litigation.  Id. at 1358 (“The ‘complete substitution’ for section 102 and 103 issues cannot occur unless all the claims challenged in the petition are included when post-grant review is accepted.  Challengers may choose between the IPR proceeding and district court litigation on the same issues, but Congress restricted the repetitive validity proceedings of the past.”).

Since the four aforementioned Federal Circuit opinions, at least two district courts (Delaware and the Northern District of California) have issued opinions regarding the scope of the IPR estoppel provisions.  Two of these opinions have come out of the same District of Delaware case, Intellectual Ventures I LLC v. Toshiba Corp. et al., No. 13-453, 2016 WL 7341713 (D. Del. Dec. 19, 2016) and 2017 WL 107980 (D. Del. Jan. 11, 2017) (Judge Robinson).  In Intellectual Ventures, Judge Robinson called Intellectual Ventures’ position that Toshiba should be estopped from asserting in litigation invalidity grounds that were raised in its IPR petition but were not instituted “perfectly plausible.”  Intellectual Ventures, 2016 WL 7341713 at *13.  Nevertheless, she concluded that, based on the Federal Circuit’s decision in Shaw which she was bound to follow (“the court cannot divine a reasoned way around the Federal Circuit’s interpretation in Shaw”), Toshiba was not estopped from raising these grounds.  Id.  In the same opinion, but without any reasoning, Judge Robinson ruled that Toshiba was not estopped from litigating grounds that were never raised in an IPR petition.  Id.  In a subsequent opinion, Judge Robinson revisited the second part of her decision in Intellectual Ventures (estoppel of invalidity grounds not in an IPR petition).  While ultimately Judge Robinson did not change her decision on this issue from her first opinion, this time around Judge Robinson stated that there are competing policy considerations at play and it is “not [her] place to make policy decisions”; thus, she “hopes that an appeal may clarify the issue for future judges and future cases.”  Id. at *2.  The two competing policy considerations identified by Judge Robinson are: estoppel should apply to grounds not raised in IPR petitions because the PTAB is meant to be the patentability arbiter of first resort vs. estoppel should not apply to grounds not raised in IPR petitions because otherwise companies can play games between the PTAB and the courts, asserting some references in connection with the IPR but leaving some for litigation.  Id.

A Northern District of California case, Verinata Health, Inc. v. Ariosa Diagnostics, Inc., No. 12-5501, 2017 WL 235048 (N.D. Cal. Jan. 19, 2017), is also on point.  This case, like the Federal Circuit opinions, addressed the issue of estoppel as it relates to unpatentability grounds that were raised in an IPR petition but denied institution because of redundancy.  Id. at *2-3.  However, here the Court reached a different result.  The N.D. Cal. court distinguished Shaw and concluded that under the present facts—because the PTAB’s institution decision explained that the denied grounds were redundant because they were a subset of the instituted grounds—estoppel did apply.  Id.at *3 (“Ariosa is estopped, however, from raising the obviousness combination of Dhallan and Binladen.  Because the PTAB did not institute on this exact ground, instead finding it redundant in light of the instituted grounds of Shoemaker, Dhallan, and Binlader, the question is whether defendants “raised reasonably could have raised” obviousness over Dhallan and Binladen during the IPR proceedings.  The Court finds that the defendants raised, or could have raised, these grounds in the IPR proceedings, as the combination is Dhallan and Binladen is simply a subset of the instituted grounds.”).

A Northern District of Illinois case, Clearlamp, LLC v. LKQ Corp., No. 12 C 2533, 2016 WL 4734389 (N.D. Ill. Mar. 18, 2016), is also relevant.  Here the court considered the scope of the “could have raised” estoppel vis-à-vis grounds that were never raised in an IPR petition.  In particular, LKQ had brought an IPR that successfully challenged some but not all of the claims of the patent-in suit.  Id. at *2.  In litigation, with regard to the claims that remained at issue, LKQ asserted a new secondary reference which it obtained in discovery and argued was unavailable to it when it filed the IPR.  Clearlamp contended “that unavailable prior art that is cumulative of available prior art is estopped by § 315(e)(2)….”  Id. at *8.  The court disagreed, relying in part on the PTAB’s decision in Apotex (discussed above).  Id.  The court found that the new reference could be used “only if it could not have been found by a skilled searcher performing a diligent search.”  Id. at *9.  Further, the court found that the party asserting estoppel has the burden of establishing that a diligent search would have found the reference.  Id.  One way to do so, the court said, would be “(1) to identify the search string and search source that would identify the allegedly unavailable prior art and (2) present evidence, likely expert testimony, why such a criterion would be part of a skilled searcher’s diligent search.”  Id.  Because Clearlamp had not met this burden, the court allowed the new reference to be used.  Id.

In a subsequent post, we will analyze possible outcomes of the IPR estoppel issue and the practical effects of those outcomes vis-à-vis co-pending district court litigations.

In Covidien LP v. University of Florida Research Foundation, Inc., No. IPR2016-01274, Paper No. 21 (P.T.A.B. January 25, 2017), the PTAB held that sovereign immunity prevents would-be petitioners from using IPR’s to challenge the patentability of patents owned by states. Noting that the 11th Amendment confers to the states a broad grant of immunity to federal judicial authority, both in the federal courts and in administrative adjudications, the PTAB found no “unequivocal, express intent by Congress in the AIA to abrogate immunity for the purposes of inter partes review.” Id. at 26. In the absence of such express intent, the PTAB held that the states had not been divested of sovereign immunity, and that the University of Florida Research Foundation (UFRF) could not be forced to defend its patents in an IPR. Id. at 27.

In reaching this conclusion, the PTAB rejected a number of theories offered by Covidien. The PTAB was unpersuaded by Covidien’s argument that patents—as public rights that would not exist but for federal law—must logically be reviewable under federal law, noting that Covidien offered no legal authority for the proposition that there was a public rights exception to 11th Amendment’s grant of immunity. Id. at 10-11. The PTAB similarly rejected Covidien’s argument that IPR’s are directed to the patent itself rather than to the patent owner, observing that “the term inter partes means between the parties, which in itself captures the notion that the proceeding is directed to both parties.” Id. at 13.

The procedural posture of this case may cabin its reach, at least for the time-being. UFRF had originally brought suit in state court, alleging breach of a license contract involving the patent at issue. Id. at 3. Covidien successfully removed to federal district court, seeking a declaratory judgment that it did not infringe. Id. At this time, Covidien separately filed three IPR petitions before the PTAB, giving rise to the instant decision. Id. at 4. UFRF subsequently raised the issue of sovereign immunity in the district court litigation, persuading the court to remand the matter back to state court. Id.

The case therefore originated as a state breach of contract action, and at the time of the PTAB’s decision, there was no federal district court action. The PTAB raised, but declined to decide, whether the existence of a related federal district court patent infringement (or declaratory judgment of validity) case brought by the Patent Owner “would effect a waiver of sovereign immunity.” Id. at 26, n. 4.  This potential wrinkle in the absolute application of immunity to sovereign entity patent owners in IPRs will, no doubt, be addressed by the PTAB in the future as other sovereigns seek to take advantage of the PTAB’s decision in Covidien to defend their patents in IPR proceedings.

At least within the confines of its decision, however, the PTAB was clear—sovereign entities cannot be forced to defend patents in IPR’s. Because IPR’s are often the preferred vehicle for defending patent infringement actions, this holding is a potential boon to the value of patents owned by sovereign entities. This decision should also be a consideration in licensing negotiations. Absent a license agreement, a patent owner’s primary recourse is filing a patent infringement claim in the federal courts. It is yet unknown whether a sovereign entity’s filing an infringement action would expose the asserted patent(s) to challenge in an IPR.

 

In In re Aqua Products, Inc., No. 2015-1177, the Federal Circuit is revisiting en banc its prior precedent upholding the Patent Trial and Appeal Board’s approach of allocating to the patentee the burden of showing that a proposed amended claim in an IPR would overcome the art of record.[i]

The PTO has promulgated regulations allowing the Board to deny a motion to amend if it expands claim scope or “does not respond to a ground of patentability involved in the trial,”[ii] and placing the burden for any motion on the movant.[iii] In Idle Free Systems, Inc. v. Bergstrom, Inc., the Board interpreted the regulations to place the burden on the patentee to show that the proposed amendments would make the claims patentable over the known prior art.[iv]

In In re Aqua Products, Inc., Aqua, the patentee, argues that the Board’s burden allocation for amended claims is improper. Aqua relies on 35 U.S.C. § 316(e), which provides, “EVIDENTIARY STANDARDS.–In an inter partes review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.”[v] Aqua also cites § 316(d), which does not require the patent owner to prove the patentability of the amended claim, only that the amendment “not enlarge the scope of the claims of the patent or introduce new matter.” [vi] Also relevant is § 316(a)(9), which provides: “REGULATIONS.–The Director shall prescribe regulations—…(9) setting forth standards and procedures for allowing the patent owner to move to amend the patent under subsection (d).[vii]

Aqua argues that § 316(e) unambiguously states that the petitioner, not the patentee, bears the burden of proving unpatentability, and because the statute does not distinguish between original and amended claims, § 316(e) applies equally to both. Aqua thus argues that the Board’s requirement that the patent owner prove patentability is entitled to no Chevron deference. Aqua also argues that the Board’s burden allocation finds no support in § 316(a)(9), which does not impose a burden of proof, or PTO Rule 42.121(a)(2)(i), which requires that a motion to amend “respond to a ground of unpatentability involved in the trial.”

Aqua further argues that other PTO regulations may be entitled to Chevron deference but the Board’s Idle Free decision is nonbinding and reviewed under § 706 of the APA. Aqua further argues that Idle Free in any case must be rejected because it conflicts with § 316(e) and finds no support in either (1) § 316(a)(9), which does not impose a burden of proof; or (2) Rule 42.121(a)(2)(i), because it only requires that a motion to amend “respond to a ground a patentability involved in the trial;” or (3) Rule 42.20(c), which imposes upon the movant the burden to establish entitlement to relief because the only relief requested is have the substitute claims be added to the IPR and the only requirement for such relief is compliance with § 316(d)(3).

Aqua also argues that an IPR is a trial, not examination, and therefor the Board may never raise patentability challenges on its own, but rather is limited to arguments made by the petitioner. If a petitioner inadequately challenges an amended claim that otherwise complies with § 316(d), the Board should include the amended claim in the published certificate. Aqua Products argues that this is fair because an amended claim is simply a narrower version of a claim the PTO previously examined and granted. Aqua adds that challenges to the claim can be made by other parties in subsequent proceedings, or by the Director in an ex parte reexamination.

The PTO takes a contrary position. The PTO’s primary argument is that its interpretation and application of Rules 42.121 and 42.20 is a valid exercise of its regulatory authority. The PTO argues that § 316(a)(9) expressly authorizes it to set forth standards and regulations for amendment practice. The PTO further argues that its practice is in accord with the established practice that a movant generally bears the burden of persuasion. Finally, the PTO argues that from a policy perspective the patentee is in the best position to understand the prior art and how it relates to the amended claims, and a contrary rule would allow patentees to obtain claims in issued patents that may have not been rigorously tested, for example, where the petitioner settled with the patentee and did not oppose the amendment.

There were also a substantial number of amicus briefs. Six amici agreed with Aqua that § 316(e) unambiguously places the burden of persuasion on the petitioner to prove amended claims are unpatentable. (IPO, AIPLA, Houston-IPLA, BIO, PhRMA, and Case Western). However, the amici did not agree on the patent owner’s burden of production (as compared to the ultimate burden of persuasion), or how to handle an amended claim that the petitioner does not challenge. Additionally, another group of twelve amici from the computer industry agreed with the PTO on both questions.

At oral argument, most judges seemed to side with Aqua. Judges Moore, Reyna, and Dyk questioned whether Idle Free is entitled to Chevron deference and we expect the court will address the important issue of deference to precedential Board decisions under either Chevron or the APA. Judges O’Malley and Taranto also both drew a distinction between the patent owner’s burden to show that the amended claim should be added to the IPR and petitioner’s burden to show that the amended claim, if added, is unpatentable. Judge Chen was the most sympathetic to the PTO’s position that § 316(e) does not apply but sought clarification regarding the regulatory support for Idle Free.

The Federal Circuit appears poised to lower the patent owner’s burden for amending claims and to place the burden of proving unpatentability of amended claims on the Petitioner. What is less clear, however, is whether the Board will be able to raise its own patentability challenges sua sponte when the petitioner does not challenge the amended claims. That latter question has major implications for patent owners as it could significantly influence the decision whether to settle with Petitioner after institution but before a final decision. Stay tuned for further analysis after the Federal Circuit issues its opinion.

[i] Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292, 1307-08 (Fed. Cir. 2015); Prilotec, Inc. v. ScentAir Techs., Inc., 807 F.3d 1353, 1363 (Fed. Cir. 2015); Nike, Inc. v. Adidas AG, 812 F3d 1326, 1333-34 (Fed. Cir. 2016).

[ii] 37 C.F.R. § 41.121.

[iii] 37 C.F.R. § 42.20(c).

[iv] Idle Free Sys., Inc. v. Bergstrom, Inc., IPR2012-00027, 2013 Pat. App. LEXIS 6302 (PTAB June 11, 2013).

[v] 35 U.S.C. § 316(e) provides: “EVIDENTIARY STANDARDS.–In an inter partes review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.”

[vi] 35 U.S.C. § 316(d) provides: “AMENDMENT OF THE PATENT.–

(1) IN GENERAL.–During an inter partes review instituted under this chapter, the patent owner may file 1 motion to amend the patent in 1 or more of the following ways:

(A) Cancel any challenged patent claim.

(B) For each challenged claim, propose a reasonable number of substitute claims.

(2) ADDITIONAL MOTIONS.–Additional motions to amend may be permitted upon the joint request of the petitioner and the patent owner to materially advance the settlement of a proceeding under section 317, or as permitted by regulations prescribed by the Director.

(3) SCOPE OF CLAIMS.–An amendment under this subsection may not enlarge the scope of the claims of the patent or introduce new matter.”

[vii] 35 U.S.C. § 316(a)(9) provides: “REGULATIONS.–The Director shall prescribe regulations—…(9) setting forth standards and procedures for allowing the patent owner to move to amend the patent under subsection (d) to cancel a challenged claim or propose a reasonable number of substitute claims, and ensuring that any information submitted by the patent owner in support of any amendment entered under subsection (d) is made available to the public as part of the prosecution history of the patent….”

A new § 101 decision provides a little more insight into subject-matter eligibility. In Apple, Inv. v. Ameranth, Inc., Case Nos. 2015-1703, and -1704, the Federal Circuit reviewed decisions in CBM2014-00013, -00015, and -00016 (decision dated November 29, 2016). The CBMs involved subject matter eligibility challenges against the claims of U.S. Patent Nos. 6,384,850; 6,871,325; and 6,982,733.  The claims generally relate to an information management and synchronous communications system for generating and transmitting menus.  The system includes, inter alia, “a first menu … displayable in a window of said graphical user interface in a hierarchical tree format;” and “application software for generating a second menu from said first menu and transmitting said second menu to a wireless handheld computing device or Web page,” where the generation is facilitated “by allowing selection of [categories] and items from the first menu … using the graphical user interface.” (See ’850 claim 1.)

The Board’s decisions had found some claims (including all independent claims) ineligible under § 101. However, the Board found that petitioners failed to meet their burden as to some dependent claims. The Federal Circuit affirmed the Board where it found claims ineligible, but reversed where it had found claims not ineligible—that is, all claims at issue were held to recite ineligible subject matter by the Court.

The Court’s decision, at Alice step one, turned on the fact that what may be broadly referred to as functional claims (“claims directed to certain functionality”) may require programming detail as to how the function is achieved, to pass muster at Alice step one. According to the Court:

“The patents claim systems including menus with particular features. They do not claim a particular way of programming or designing the software to create menus that have these features, but instead merely claim the resulting systems. Essentially, the claims are directed to certain functionality—here, the ability to generate menus with certain features. Alternatively, the claims are not directed to a specific improvement in the way computers operate.” (Slip op. at 19.)

Cf. Amdocs (Isreal) Ltd. v. Openet Telecom, Inc. (Fed. Cir. Nov. 1, 2016) (Reyna, J., dissenting) (“For example, a claim is ‘directed to’ an abstract goal if the claim fails to describe how—whether by particular process or structure—the goal is accomplished.”).

The Court also agreed with the Board that there was nothing more in the claims. For example, the Court approvingly observed that “the Board noted that menus were commonly printed on paper, and that it was known to use pens in the hospitality industry.” (Slip op. at 20.) The Court noted that “[t]he patents can readily be understood as adding conventional computer components to well-known business practices.” (Slip op. at 22.) It did not help the patent owner that “the specifications describe the hardware elements of the invention as ‘typical’ and the software programming needed as ‘commonly known.’” (Slip op. at 21.)

The Court also addressed the claims where the Board had found the petitioners to have not met their burden of showing ineligibility. Some of these claims “call[] for the desired result of associating a customer’s order with said customer, and do[] not attempt to claim any method for achieving that result.” (Slip op. at 24.) This the Court says is improper, quoting Internet Patents Corp. v. Active Network, 790 F.3d 1343, 1348 (Fed. Cir. 2015), which had held that merely describing an “effect or result dissociated from any method by which [it] is accomplished” does not give rise to patent-eligible subject matter. (Id.) For the other claims not held ineligible by the Board, the Court noted that those claims were similar to Content Extraction, where the Court had previously said that use of “existing scanning and processing technology to recognize and store data from specific data fields such as amounts, addresses, and dates” did not amount to significantly more than the “abstract idea of recognizing and storing information from hard copy documents using a scanner and a computer.” (Slip op. at 26-27.) Likewise, the present claims also involved preexisting technology. The Court said: “[a]ppending these preexisting technologies onto those independent claims does not make them patentable.” (Id.)

Going forward, it appears that some of the reasoning found in Judge Reyna’s dissent in Amdocs (Isreal) Ltd. v. Openet Telecom, Inc. (Fed. Cir. Nov. 1, 2016) is finding its way into the Federal Circuit’s subject-matter eligibility jurisprudence.  Admittedly, this same reasoning is found in other cases, but Practitioners would be well advised to take that into account when drafting and defending patent claims against subject-matter eligibility challenges.

In In re Nuvasive, Inc. (Fed. Cir. Nov. 9, 2016) (Judges Moore, Wallach, and Taranto), the Federal Circuit considered two Board decisions with respect to U.S. Patent No. 8,187,334 (“the ’334 patent”).  The Federal Circuit affirmed the Board’s final written decision in IPR2013-507 (“IPR507”), which invalidated all but one challenged claim, and vacated the Board’s decision in IPR2013-508 (“IPR508”) and remanded for further proceedings regarding two claims that were not at issue in IPR507.  The Decision was based on the Administrative Procedure Act (“APA”).  See id. at 7-10.  The Federal Circuit found sufficient notice and opportunity to respond in IPR507 and insufficient notice and insufficient opportunity to respond in IPR508.  See id. at 10-13.

NuVasive, Inc. owns the ’334 patent, which relates to implants for spinal fusion surgery.  Slip op. at 1.  The claims require, inter alia, that (1) “said implant has a longitudinal length greater than 40 mm” and (2) “said longitudinal length is at least two and half times greater than said maximum lateral width.”  Id. at col. 12, lines 44-54.  See also slip op. at 3-4.  The Board relied on the embodiment shown in Fig. 18 of U.S. Patent No. 5,860,973 to Michelson (“Michelson”) as disclosing a spinal fusion implant having the length and width claim elements.  Id. at 2 & 9.  See also Michelson at col. 10, lines 48-55.

Medtronic, Inc. filed the petitions for inter partes review (“IPR”) but withdrew from the appeals after settling with NuVasive.  Slip op. at 2.  In the IPR petitions, Medtronic did not rely on Michelson as disclosing both the length and width claim elements.  Id. at 4-5.  Instead, the petitions only relied on Michelson as a secondary reference to show that it would have been obvious to modify the implant of a primary reference to have a length greater than 40 mm.  Id.  In the IPR508 petition, Medtronic included neither assertions about nor citations to the embodiment of Fig. 18 of Michelson.  Id. at 5.  In contrast, in the IPR507 petition, Medtronic generally cited the embodiments of Figs. 16-20 of Michelson, but Medtronic did not specifically assert that Michelson discloses the claim limitation requiring the length to be at least two and half times greater than the width.  Slip op. at 4 & 11.  See also Michelson at col. 10, line 6-col. 11, line 15.

In its patent owner responses, NuVasive “argued that no single reference taught an implant that was both longer than 40 mm and had a length at least 2.5 times its width” and addressed some embodiments of Michelson.  Slip op. at 5-6.  However, NuVasive did not specifically address the Fig. 18 embodiment of Michelson on which the Board later relied.  See id.

In its reply, Medtronic specifically relied on the Fig. 18 embodiment of Michelson and “argued that it disclosed an implant whose length was greater than 40 mm and at least 2.5 times its width.”  Slip op. at 6.  NuVasive objected to Medtronic’s Fig. 18 argument as “a new ground of invalidity asserted for the first time on reply.”  Id.  The Board denied NuVasive’s requests for leave to file motions to strike or to file surreplies.  Id.  Further, at oral argument, the Board refused to allow NuVasive to respond substantively to Medtronic’s assertions about Fig. 18.  Id.  When NuVasive objected to Medtronic’s arguments about Fig. 18 of Michelson during Medtronic’s rebuttal, “the Board assured NuVasive that it understood NuVasive’s position and would consider the propriety of Medtronic’s arguments when making a final decision.”  Id.

In its final written decisions, the Board held that all of the challenged claims except claim 18 would have been obvious and, to do so, “relied heavily on its findings that Michelson, by itself, discloses both disputed dimensional limitations in a single implant—one whose length is both greater than 40 mm and at least 2.5 times its width.”  Slip op. at 6-7.  “On appeal, NuVasive contends that it did not receive adequate notice of or opportunity to address that reading of Michelson and its consequences for the overall obviousness analysis.”  Id. at 2.

According to the court, “’[a] patent owner in [NuVasive’s] position is undoubtedly entitled to notice of and a fair opportunity to meet the grounds of rejection,’ based on due-process and APA guarantees.”  Slip op. at 8 (quoting Belden Inc. v. Berk-Tek LLC, 805 F.3d 1064, 1080 (Fed. Cir. 2015)).  The court noted that the Board “relied on Michelson’s Figure 18 and nothing else for a prior-art disclosure of an implant having a length that is greater than 40 mm and at least 2.5 times its width.”  Slip op. at 9.  The court found that, “[u]nder the APA’s standards, NuVasive was entitled to an adequate opportunity to respond to this asserted fact about Michelson” and that this “entitlement was not lessened in this case by virtue of the opportunity NuVasive had to respond to other factual assertions about Michelson.”  Id. at 10 (citing Dell Inc. v. Acceleron, LLC, 818 F.3d 1293, 1301 (Fed. Cir. 2016) & In re Leithem, 661 F.3d 1316, 1319 (Fed. Cir. 2011)).

On appeal, on one hand, the court found that, in the IPR508 proceeding, the opportunity to file the patent owner response “did not provide the required opportunity to address the factual assertion about Figure 18 on which the Board ultimately relied” because the IPR508 petition did not include citations or assertions about the Fig. 18 alternative embodiment of Michelson, and “there was no notice of the Figure 18 point before NuVasive filed its Patent Owner Response.”  Slip op. at 11.  According to the court:

Not until Medtronic’s Reply, after NuVasive’s Patent Owner Response, was NuVasive given fair notice in IPR508 of the Figure 18 factual assertion on which the Board eventually relied.  But at no point after the Reply did the Board give NuVasive the required opportunity to respond to that point.  Despite requests from NuVasive, the Board refused to permit NuVasive to file a surreply or even to address the matter during oral argument.

Slip op. at 12.  The court also found that the opportunity to file observations did not provide the required opportunity to respond because the court does not view observations “as a substitute for the opportunity to present arguments and evidence,” and “the permitted content and format of observations are tightly circumscribed.”  Id. at 12-13.

On the other hand, the court found that, in the IPR507 proceeding, NuVasive did have the opportunity to respond because the notice provided by the IPR507 petition “was at least minimally sufficient.”  Id. at 10.  According to the court:

In IPR507, Medtronic’s petition cited the Michelson text that specifically discusses Figure 18 in addition to nearby figures in Michelson.  The petition did so in asserting that the text shows “longer than wide” implants. J.A. 172. The only limitation in the ’334 patent addressing a comparison of length to width is the one requiring length at least 2.5 times width.  It is true that Medtronic did not make a clear or direct reference to that limitation or a clear or direct assertion that the 2.5 ratio is shown in Michelson, in Figure 18 or elsewhere.  But we think that the citation of the text discussing Figure 18, plus the reference to “longer than wide” implants, should have put NuVasive on notice that it was obliged to use its Patent Owner Response to address Figure 18 and its relationship to the length/width ratio claim limitation.

Slip op. at 10-11.  Finding no procedural violation in IPR507, the court then considered NuVasive’s arguments against the Board’s obviousness ruling and rejected them.  Id. at 13-15.  Accordingly, the court “affirm[ed] the Board’s final written decision in IPR2013-507, invalidating claims 1–5, 10, 11, 14, 15, and 19–28 and upholding claim 18.”

With respect to IPR508, the court found that the procedural violation did not support reversal but instead warranted a remand for further proceedings regarding claims 16 and 17, which were only at issue in IPR508.  Slip op. at 2 & 15-16.

Based on these cases, a patent owner would be wise to carefully consider all citations to the prior art in the petitioner’s petition and respond to any citation that is relevant to any claim limitation.  Likewise, a petitioner should make sure all citations relevant to the claims are included in its petition.  The Board expects all arguments and responses to be brought out early in a post-grant proceeding.  Given the speed with which these proceedings are conducted, the Board has little tolerance for late-developed arguments or responses.

In the recent opinion in Unwired Planet, LLC v. Google Inc., the Federal Circuit has limited the reach of covered business method (CBM) reviews.  The Board had framed its CBM eligibility standard as asking “whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.”  While the Federal Circuit had endorsed the “financial in nature” portion of the Board’s standard earlier this year in Blue Calypso, LLC v. Groupon, Inc., in Unwired Planet the court rejected the “incidental” and “complementary” prongs of the same standard, finding the board’s expansive interpretation of CBM eligibility to be inconsistent with congressional intent.  In doing so, the Court vacated the Board’s decision that had found a patent claiming “a system and method for restricting access to a wireless device’s location information” to be eligible for CBM review.

The Federal Circuit emphasized that the Board’s standard had no logical limiting principle, noting that “[a]ll patents, at some level, relate to potential sale of a good or service.”  It therefore “cannot be the case that a patent covering a method and corresponding apparatuses becomes a CBM patent because its practice could involve a potential sale of a good or service.”  The Court noted that “[t]he patent for a novel lightbulb that is found to work particularly well in bank vaults does not become a CBM patent because of its incidental or complementary use in banks,” and “an apparatus for digging ditches” does not become eligible for CBM review due to “the sale of the dirt that results” from its use.

This holding is likely to focus the CBM eligibility analysis on what is actually claimed in a given patent.  Previously, a petitioner could argue in favor of instituting CBM review by pointing to disclosed but unclaimed applications relating to financial activities, and submitting that the claimed invention was “incidental” or “complementary” to those activities.  The Court’s holding in Unwired Planet should curtail such arguments, bringing greater clarity and consistency to the CBM eligibility analysis.