Activision Blizzard, Inc. v. Acceleration Bay, Inc. presents an interesting situation emphasizing the limited scope of IPR proceedings and the interplay between PTAB practice and co-pending litigation.  In Activision Blizzard., the Petitioners challenged claims of U.S. Patent 6,920,497, a patent directed to “a method of connecting a seeking computer through a portal computer to a network.”  IPR2016-00724, Paper 11 at 2-3 (Sept. 7, 2016).  Of particular note was the challenge to claims 9 and 16.  Claim 9 is an independent claim and reads:

  1. A component in a computer system for locating a call-in port of a portal computer, comprising:

means for identifying the portal computer, the portal computer having a dynamically selected call-in port for communicating with other computers;

means for identifying the call-in port of the identified portal computer by repeatedly trying to establish a connection with the identified portal computer through contacting a communications port or communications ports until a connection is successfully established;

means for selecting the call-in port of the identified portal computer using a port ordering algorithm; and

means for re-ordering the communications ports selected by the port ordering algorithm.  [Id. at 5.]

The PTAB began its discussion of claim 9 by agreeing with the Petitioner that the limitation “means for identifying the portal computer” should be construed under 35 U.S.C. § 112, sixth paragraph.  Id. at 7.  While contending the recited function is “’identifying the portal computer,’” the Petitioner asserted that “the Specification does not disclose [corresponding] structure for this limitation because it does not disclose an algorithm for carrying out the recited function.”  Id. (citing the Pet. at 6, 8).  However, for purposes of the IPR, the Petitioner “contend[ed] the structure for performing the recited function is a software routine that identifies the first portal computer on a list.”  Id. (citing Pet. at 8).  The Patent Owner did not provide an interpretation for any of the terms in the challenged claims.  Id.

The PTAB agreed with the Petitioner regarding the meaning of the claimed function and that “the corresponding structure is software with no sufficiently described algorithm for the software.  Id. at 8.  However, at this point in its analysis, the PTAB parted company with the Petitioner, noting that (1) “’[s]imply reciting “software” without providing some detail about the means to accomplish the function is not enough,’” id. (citing Finisar Corp. v. DirecTV Grp., Inc., 523 F.3d 1323, 1340-41 (Fed. Cir. 2009), and (2) neither is it enough that “a hypothetical person of ordinary skill in the art would know how to design software for identifying a portal computer.”  Id. (citing Blackboard, Inc. v. Desire2Learn, 574 F.3d 1371, 1382 (Fed. Cir. 2009)).  Thus, the PTAB concluded that “[s]ome type of algorithm would be required to complete the function of identifying the portal computer, but neither party has identified such an algorithm in the Specification.”  Id. at 8-9.  Because of this shortcoming, the PTAB could not construe claim 9 or 16 (which depends on claim 9).  Id. at 9 (citing In re Aoyama, 656 F.3d 1293, 1298 (Fed. Cir. 2011).  Given IPR is not available to challenge claims, except based on 35 U.S.C. §§ 102 and 103, the PTAB refused to grant the petition with respect to claims 9 and 16.  Id.

The PTAB’s Institution Decision on claims 9 and 16 raises many questions.  Given the limited scope of review during an IPR and the lack of any Final Written Decision on the patentability of claims 9 and 16, how will the PTAB’s determination of these claims’ indefiniteness be viewed by the district court(s) in the ongoing corresponding litigation?  Will the court(s) agree with the PTAB’s analysis of Federal Circuit law?  Will Patent Owners that continue to assert claims that the PTAB has held indefinite be subject to a greater risk of attorneys’ fees under § 285?  Given that the PTAB’s indefiniteness determination will not be part of a Final Written Decision, the Patent Owner will not be able to appeal the determination under U.S.C. § 319, nor will the PTAB be able to certify that claims 9 and 16 are unpatentable under 35 U.S.C. § 318(b).  As such, the Petitioners and Patent Owner are effectively left with an advisory opinion from the PTAB concerning the patentability (and arguably validity) of claims 9 and 16.  This advisory opinion is not unique to the Activision proceeding—a number of other IPRs have resulted in similar decisions by the PTAB regarding indefiniteness.  As the numbers increase, it will be interesting to see how district courts view these advisory opinions and how it affects litigants’ strategies both in front of the PTAB and in district court.

Praxair filed a first petition for inter partes review of claims 1-19 of U.S. Patent 8,846,112.  The PTAB instituted review based on the first petition and concluded that all claims, except claim 9, were unpatentable.  In doing so, the PTAB determined that the “providing information” step in claim 1, and “similarly-worded claims steps in other claims, constituted printed matter and, therefore, accorded the term no patentable weight with respect to claims 1-8 and 10-19.”  Praxair Distribution, Inc. v. iNO Therapeutics LLC, IPR2016-00781, Paper 10, slip op. at 6 (Aug. 25, 2016) (discussing its earlier decision in Praxair Distribution v. Malllinckrodt Hospital Prods. IP Ltd., IPR2015-00529, Paper 53, slip op. at 15-21 (July 7, 2016)).

Apparently concerned the Federal Circuit might not agree with the PTAB regarding its “no patentable weight” determination and reverse the PTAB, Praxair filed a second petition with two new textbook references that allegedly disclosed the “providing information” limitation.  Id.  In its Preliminary Response, the Patent Owner argued that Praxair was estopped from requesting or maintaining the IPR under § 315(e)(1) and, further that the PTAB should exercise its discretion to deny the second Petition under § 325(d).  The PTAB agreed with both arguments.  Id. at 2.

The PTAB began its analysis of the estoppel issue by turning to the language in 35 U.S.C. § 315(e)(1):

The petitioner in an inter partes review of a claim in a patent … 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 [emphasis added].

The PTAB then turned to the legislative history of the AIA for a description of grounds that “reasonably could have been raised” and determined that it “encompass[ed] ‘prior art which a skilled searcher conducting a diligent search reasonably could have been expected to discover.’  157 Cong. Rec. S1375 (daily ed. Mar. 8, 2011) (statement of Sen. Kyl)”.  Id. at 7.  While Praxair argued that it had conducted “diligent searches” and presented an “Exemplary List of Search Results from Cardinal Intellectual Property, Inc.” to support its argument, the PTAB found “scant evidence that Praxair engaged ‘a skilled searcher conducting a diligent search’ as contemplated by the legislative history.”  Id. at 9.  The PTAB also relied on the testimony of Praxair’s technical expert as evidence that “the newly-asserted references are not obscure texts unlikely to be discovered upon a reasonably diligent search of the relevant prior art.”  Id. at 9.

With respect to § 325(d), the PTAB concluded that Praxair’s underlying argument was “essentially the same” as that previously raised in the first IPR.  Id. at 12-13.  Thus, in addition to concluding Praxair was estopped under § 315(e)(1) from making arguments that it could have made in the first IPR, it exercised its discretion under § 325(d) to deny the second petition.  Id. at 13.

While the PTAB’s decision provides some indication of when and how the “reasonably could have been raised” estoppel will be applied when “new” prior art is relied on in a subsequent IPR, there remains substantial uncertainty about what evidence is sufficient to establish when that prior art is or is not “prior art which a skilled searcher conducting a diligent search reasonably could have been expected to discover.”  We will have to stay tuned to see how the PTAB further defines the contours of the “readily identified” standard that it applied to the new prior art relied on in this case and how it assesses evidence of “diligence in searching” in future IPRs.

The question of whether PTAB trials are litigation-like or examination-like (or some hybrid of the two) has been implicated on several occasions.  The most recent one is in the In re Aqua en banc hearing Order.  No. 2015-1177 (Fed. Cir. Aug. 12, 2012).  While the PTAB has repeatedly stated it does not examine proposed amended claims, it may be required to do so if the Federal Circuit places the burden of establishing their unpatentability on the PTO.  See id. at 2-3 (asking where the burdens of persuasion, or production, regarding patentability of the amended claims rest).  This would present a dilemma for the PTO, as it would require administrative patent judges (“APJs”) to take off their robes and delve into the “stacks” of information that may defeat the patentability of proposed amended claims.

The same question – litigation-like or examination-like –was implicated in Cuozzo v. Lee, 579 U.S. ___ (2016).  There one issue was whether the PTAB should continue to apply the broadest reasonable interpretation (“BRI”) when construing the claims during an AIA trial – just as is done during initial examination or reexamination – or apply a Phillips-type construction as is done by district courts.  Slip op. at 12-17.  One argument offered in favor of applying the BRI standard was that the patent owner has an opportunity to amend its claims during an AIA trial, just as it does during examination or reexamination.  Id. at 18-19.  The Supreme Court did not weigh in on the merits of the different claim construction approaches but rather held that what the PTO had done by regulation, i.e., adopting BRI, was “reasonable.”  Id. at 19-20.

Notably, AIA trials are not conducted by an examiner but rather APJs.  While many APJs may be capable of examining claims for their patentability, that is not their role and doing so during an AIA trial would detract from proceedings that are intended to be court-like, with two or more parties making their case and the APJs serving as judges.  Having the APJs participate in an adversarial manner with respect to amendments while at the same time serving as a neutral adjudicator with respect to other issues of patentability would no doubt raise questions regarding alleged bias against Patent Owners in PTAB trials.

There is a solution to the potential dilemma facing the PTO.  Rather than getting into examination during PTAB trials, the PTO could propose amendments to the AIA to eliminate claim amendments.  Specifically, the PTO could propose amendments to the AIA to (1) remove the possibility of amendments during an AIA trial; (2) apply a Phillips-type claim construction (which in practice it is already doing on many occasions); and (3) give the claims –previously issued by the PTO – a presumption of validity.  By getting off the “litigation/examination fence,” the PTO could have its APJs adjudicate, and attempt to mirror district court proceedings as to questions like claim interpretation and the presumption of validity.  By doing so, the PTAB trials would provide a true alternative to district court litigation, rather than a “second bite at the apple” under different legal standards.  After all, wasn’t that the primary goal of the new reviews?

Cases remanded to the PTAB by the Federal Circuit are beginning to resurface.[1]   The PTAB decided two such cases this month.   See  Dell, Inc. v. Acceleron, LLC, Nos. 2015-1513, -1514 (Fed. Cir. March 15, 2016), on remand, IPR2013-00440, Paper 49 (PTAB Aug. 22, 2016) and Ariosa Diagnostics v. Verinata Health, Inc., 805 F.3d 1359 (Nov. 15, 2015), on remand, IPR2013-00277, Paper 62 (PTAB Aug. 15, 2016).  While the PTAB maintained its original position in the Ariosa case, it modified its position in the Dell case, determining that two claims it previously held anticipated, and thus unpatentable, were not unpatentable based on “the guidance from the Federal Circuit.”  Dell Decision on Remand at 3.

In Dell, among other things, the PTAB originally concluded the Petitioner had established that claims 3 and 20 (directed to a “computer network appliance”) were unpatentable.  Remand op. at 2.  With respect to these two claims, the Federal Circuit vacated the PTAB’s decision and remanded for their reconsideration.  Id. at 3.  With respect to claim 3, the Federal Circuit determined that the PTAB “improperly considered arguments presented by the Petitioner for the first time at oral hearing.”  Id. at 6.  That determination was based on the fact that the Petitioner for the first time argued at oral hearing that one reference – Hipp –disclosed certain information not previously identified by the Petitioner.  While not entirely clear, it appears the Petitioner had also raised the issue in its Reply.  See id. at 7-9.  However, just as it could not raise a new argument at oral argument, it was not proper to do so in its Reply.  Id.

With respect to claim 20, the Federal Circuit determined that a limitation in claim 20 required “a microcontroller module configured for remote polling.”  Id. at 11.  According to the PTAB, Petitioner applied a construction of “polling” in its Reply and Remand Briefing different than it had applied in its Petition without providing a “sufficient reason” for doing so.  Id. at 12.  Applying the original construction, the PTAB determined that Hipp did not expressly disclose the subject limitation and that the Petitioner did not argue inherency.  Id. at 13. Thus, the PTAB concluded that Petitioner had failed to establish that Hipp anticipates claim 20.

While the Federal Circuit has remanded very few of the PTAB cases it has reviewed, Dell and Ariosa reflect careful consideration by the Federal Circuit on appeal and by the PTAB on remand.  Given that AIA reviews are still relatively new and that not much guidance has been provided through case law,[2] decisions such as Dell and Ariosa are helpful for both the PTAB and the user community.

[1] Cases in which the Federal Circuit has reversed the PTAB, such as Straight Path IP Group v. Sipnet EU SRO, 806 F.3d 1356 (Nov. 25, 2015) (IPR2013-00246) are not addressed here.  The question whether the PTAB must follow such a reversal is left for another day.

[2] At this time, we have one Supreme Court case (Cuozzo v. Lee) and approximately 55 Federal Circuit opinions (other than Rule 36 opinions).

Dickinson v. Zurko, 527 U.S. 150 (1999) requires the Federal Circuit to review the USPTO’s fact-findings under an Administrative Procedures Act (“APA”) standard rather than for clear error, the standard it previously applied to such fact-findings.  Id. at 154-65.  The Federal Circuit later determined that the correct APA standard was the “substantial evidence” standard.  In re Gartside, 203 F.3d 1305, 1316 (Fed. Cir. 2000).  Application of the APA standard of review gave the USPTO more deference for its fact-findings but also placed certain requirements on the agency to “provide an administrative record showing the evidence on which the findings are based, accompanied by the agency’s reasoning in reaching its conclusion.”  In re Lee, 227 F.3d 1338, 1342 (Fed. Cir. 2002).  Recently, the Federal Circuit reminded the PTAB of that obligation in In re Warsaw Orthopedic, Inc., Nos. 2015-1050, -1058 (Fed. Cir. Aug. 9, 2016) (appeal in IPR2013-00206 and IPR2013-00208).  See also Arendi S.A.R.L., v. Apple Inc., No. 2015-2073 (Fed. Cir. Aug. 10, 2016) (discussed in D. McCallum, “Limits on Use of Common Sense,” (published Aug. 15, 2016 at www.ptablaw.com)).

In Warsaw Orthopedic, Warsaw appealed the PTAB’s unpatentability determinations of claims 1-8 and 17-23 under 35 U.S.C. § 103.  The claims on appeal were directed to spinal surgery that inserts an artificial implant between two adjacent vertebrae from a patient’s side.  Slip op. at 4.  While the PTAB’s analysis of the unpatentability of independent claim 1 withstood review, slip op. at 5-12, the PTAB failed to provide an adequate analysis of its unpatentability determination of independent claim 17.  Slip op. at 12-14.  Claim 17 contained an additional limitation not found in claim 1:  “In relevant part, claim 17 requires the positioning of a surgical instrument with ‘elongated portions’ so that at least part of one elongated portion ‘is over one of the two adjacent vertebrae and at least part of another … elongated portion[] is over the other of the two adjacent vertebrae.’”  Slip op. at 12.  Warsaw made several arguments why the PTAB erred in finding this limitation in the prior art.  Id.  The PTAB responded that “Warsaw did ‘not provide sufficient evidence of specific differences’” between the claimed invention and the prior art reference, Jacobson.  Slip op. at 12-13.

Based on the record before it, the Federal Circuit was unable to determine whether the PTAB properly rejected Warsaw’s argument, given the PTAB’s failure to provide a “reasoned explanation needed to support its conclusion.”  Slip op. at 13.  The court noted that the “PTAB’s affirmative narration in support of its finding that Jacobson discloses the subject limitation in claim 17 consists of a single sentence:  ‘Jacobson appears to disclose anchor wires (i.e., “elongated portions”) that are positioned over adjacent vertebrae’  Nu Vasive II, 2014 WL 3422008, at *13 (citing Jacobson fig. 5).”  Id.  That single sentence was not sufficient to support the PTAB’s holding that clam 17 was unpatentable. The Federal Circuit explained:  “The PTAB’s conclusory assertion that Figure 5 of Jacobson ‘appears to’ support its finding does not equate to the reasoned explanation needed to support its conclusion.  See Synopsis, 814 F.3d at 1322; see also Lee, 277 F.3d at 1345 (‘The [PTAB] cannot rely on conclusory statements when dealing with … prior art and specific claims, but must set forth the rationale on which it relies.’).”

The Federal Circuit, however, did not take a position as to whether Jacobson discloses the additional limitation in claim 17 but instead remanded the case for the PTAB to make that determination in the first instance.  Of course, the PTAB had already made the determination.  Thus, on remand, it seems likely the PTAB will continue to hold claim 17 unpatentable, but will provide a more thorough analysis.

The Federal Circuit’s precedential opinion in Arendi S.A.R.L. v. Apple Inc., et al., Case No. 2015-2016 (Aug. 10, 2016) is instructive on the limits of “common sense” in an obviousness analysis. The opinion is also an example of what appears to be a growing trend of the Federal Circuit reminding the Board that it must support its findings with a full and reasoned analysis. See also “PTAB Reminded of Its Obligations Under the Administrative Procedures Act” (published Aug. 15, 2016 at www.ptablaw.com).

At issue on appeal was the Board’s determination in an IPR proceeding that certain claims in Arendi’s patent, U.S. Patent No. 7,917,843, were unpatentable as obvious based on a single reference. Specifically, the question was whether the Board erred by relying on “common sense” to supply a missing claim limitation as part of its single-reference obviousness analysis.

The court began with a tutorial on the appropriate use of “common sense.” First, it explained that “common sense” is usually limited to providing a motivation to combine references, rather than to supply a missing limitation. Second, when “common sense” is used to supply a limitation, that limitation should be “unusually simple.” Slip op. at 10. Third, the court warned that “common sense” “cannot be used as a wholesale substitute for reasoned analysis and evidentiary support.” Id. at 11. Based on its prior precedent, the Federal Circuit concluded:

[W]hile ‘common sense’ can be invoked, even potentially to supply a limitation missing from the prior art, it must still be supported by evidence and a reasoned explanation. In cases in which ‘common sense’ is used to supply a missing limitation, as distinct from a motivation to combine, moreover, our search for a reasoned basis for resort to common sense must be searching. And, this is particularly true where the missing limitation goes to the heart of an invention.

Id. at 12-13.

Applying these principles, the court concluded that the Board erred by resorting to “common sense” in this case. The court explained that the record contained only “conclusory statements and unspecific expert testimony,” which was “particularly problematic” as a “key limitation” was missing from the prior art. Id. at 19. Rather than remanding the case for further Board analysis, the court reversed the Board’s decision, noting “there is nothing in the record to support the Board’s conclusion that supplying the missing limitation would be obvious”. Id. at 20.

While Arendi will likely limit the use of “common sense” in future Board opinions, it may have a greater impact as another example of the Federal Circuit emphasizing the need for the Board to provide a reasoned analysis supported by the record evidence.

On August 12, 2016, the Federal Circuit agreed to rehear en banc In re Aqua Products, Inc., No. 2015-1177 (Fed. Cir. May 25, 2016) and to stay a petition for rehearing en banc in Prolitec, Inc., v. Scentair Techs, Inc., 807 F.3d 1353 (Fed. Cir. 2015).  In both these cases, the Board denied the patent owner’s request to file a motion to amend having concluded the patent owner had not met its burden to establish patentability.

The issues the Federal Circuit will address are:

(1) “When a patent owner moves to amend claims under 35 U.S.C. § 316(d), may the PTO require [it] to bear the burden of persuasion, or … production, regarding patentability … as a condition to allowing them” under 35 U.S.C. § 316(d)?; and

(2) “When the petitioner does not challenge the patentability of a proposed amended claim, or the Board thinks the challenge is inadequate, may the Board sua sponte raise patentability challenges to such a claim?  If so, where would the burden of persuasion, or a burden of production lie?”

The outcome of this rehearing could provide patent owners with a meaningful opportunity to obtain amended claims and thus have a significant impact on AIA proceedings.

The PTAB has been reluctant to find that an unnamed party is a real party-in-interest in an AIA review or in privity with the named party.  Usually a patent owner attempting to establish that a real party-in-interest has not been named has had to establish that the unnamed party exerted control or could have exerted control over the petition.   See, e.g., Unified Patents v. Qurio Holdings, IPR2015-01940 (PTAB Apr. 13, 2016); Sipnet EU S.R.O. v. Innovative Communictions Techs., IPR2013-00246 (PTAB May 23, 2016); AMX, LLC v. Chrimar Holding Co., IPRs2016-00569, -00572 (PTAB May 19, 2016).  The fact that a third party has indemnified the petitioner has not been sufficient to render the third party a real party-in-interest or a privy unless the indemnification agreement indicated control over the petition.  See, e.g., AMC, LLC, IPRs2016-00569, -00572.  Merely a financial interest in the review has been held not sufficient.  E.g., Enovate Medical, LLC v InterMetro Indus., IPR2015-00301 (PTAB May 11, 2016).

So, why has the PTAB seldom found that an unnamed party is a real party-in-interest or a privy?  Recently, the PTAB has shed light on the answer to this question in Petition for Inter Partes Review by The United States Department of Justice, IPR2016-00497 (PTAB July 25, 2016, Order).  In its Order, the PTAB stated:  “[W]hile Patent Owner’s argument that the United States ‘directed and controlled the allegedly infringing activity’ is not without  relevance, it does not bear directly on the categories identified by the Supreme Court” in Taylor v. Sturgell, 553 U.S. 880 (2008).  According to the PTAB, the “Board has applied [the Taylor categories] in considering whether third parties are real parties in interest ….”

Taylor v. Sturgell is not a patent case and does not discuss real party in interest or privy issues.  Rather it is a case about the dismissal of a FOIA suit based on claim preclusion due to an earlier suit by a friend.   The Supreme Court reversed the court of appeals’ dismissal of the suit criticizing the lower court’s application of the doctrine of preclusion by “virtual representation.”  According to the Court, the general rule is that “’one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.’”  Id. at 893.  The Court then continues:  “the rule against nonparty preclusion is subject to exceptions.”  Id.  It then “groups” those exceptions into “six categories.”  Id.  Those exceptions are:

  • When a nonparty agrees to be bound by the determination in an action;
  • When there are pre-existing substantive legal relationships, such as assignee and assignor, “sometimes referred to as ‘privity’” (a term the Court expressly states it is not using in the opinion);
  • In “limited circumstances,” when a nonparty “was ‘adequately represented by someone with the same interests who [was] a party’ to the suit’;
  • If the nonparty “’assume[d] control’ over the litigation in which … judgment was rendered”;
  • “[W]hen a person who did not participate in a litigation later brings suit as the designated representative of a person who was a party to the prior adjudication”; and
  • In “certain circumstances a special statutory scheme may ‘expressly foreclose[e] successive litigation by nonlitigants … if the scheme is otherwise consistent with due process.’” at 893-95.

While one might question the applicability of Taylor to PTAB real party-in-interest determinations, in light of the PTAB’s consideration of these six categories, those determinations begin to make sense.   While other exceptions may apply in a given case, exception (4) is the one the PTAB has routinely referenced.  The PTAB also has referenced exception (2) but has struggled with what “pre-existing legal relationships” are sufficient to apply this exception.  A vendor-reseller relationship is not sufficient, even when the nonparty pays counsel fees and participates in the trial.  See Sipnet, IPR2013-00246.  Likewise, a majority owner of the petitioner was found not to be a real party-in-interest because the patent owner had not demonstrated the majority owner had a legal interest in the review and a financial interest by itself was not sufficient.  Enovate Medical, IPR2015-00301, at 12.  It is predicted that few patent owners will be able to establish that a nonparty is a real party-in-interest, given the PTAB’s present approach.

 

On July 25, 2016, in In re Magnum Oil Tools Int’l, Ltd., Case No. 2015-1300, the Federal Circuit clarified the respective burdens carried by both the petitioner and the patentee in an inter partes review proceeding. The court reversed the Board’s decision that the challenged claims of U.S. Patent No. 8,079,413, directed to oil drilling through the use of hydraulic fracturing (“fracking”), would have been obvious, holding that neither the Board nor the petitioner had established a prima facie case of obviousness, and that the Board had improperly shifted the burden of proving nonobviousness to the patent owner following the Board’s institution decision.

The patent owner argued that neither the patent challenger nor the Board had ever established a prima facie case for the rejection.  The PTO took the position that, upon institution of the IPR, the petitioner had demonstrated a “reasonable likelihood of success,” reasoning that this finding by the Board operated to ultimately shift the burden of producing evidence of nonobviousness to the patentee. The court found that this argument by the PTO incorrectly implied that “the Board’s conclusion on obviousness in an IPR can be based on less than a preponderance of the evidence if the patent holder does not affirmatively disprove the grounds upon which the IPR was initiated.” Id. at 14.

In its discussion, the court explained the two distinct burdens of proof: a burden of persuasion and a burden of production. The burden of persuasion “is the ultimate burden assigned to a party who must prove something to a specified degree of certainty, such as by a preponderance of the evidence or by clear and convincing evidence.” Id. (citing Dynamic Drinkware, LLC v. Nat’l Graphics, Inc., 800 F.3d 1375, 1378 (Fed. Cir. 2015)). The court clarified that, while shifting of the burden of persuasion may make sense in a prosecution context, allocating the burdens of going forward as between examiner and applicant, “[i]n an inter partes review, the burden of persuasion is on the petitioner to prove ‘unpatentability by a preponderance of the evidence,’ 35 U.S.C. § 316(e), and that burden never shifts to the patentee.” Id. (citing Dynamic Drinkware, 800 F.3d at 1378).

Conversely, the burden of production may entail “producing additional evidence and presenting persuasive argument based on new evidence or evidence already of record.” Id. (citing Tech. Licensing Corp. v. Videotek, Inc., 545 F.3d 1316, 1327 (Fed. Cir. 2008)). The Federal Circuit went on to explain that the burden of production may shift from the patent challenger to the patentee, but only in certain circumstances, such as in the context of establishing conception and reduction to practice, or in asserting an affirmative defense to a rejection based on establishing an earlier date of priority than the allegedly anticipatory reference. In either case, the patentee affirmatively seeks to establish a proposition not relied upon by the patent challenger, and thus a shifting of the burden of production is proper. In the context of obviousness, however, burden-shifting is unwarranted because “the patentee’s position is that the patent challenger failed to meet its burden of proving obviousness.” Id. at 16.

The Federal Circuit relied on the “adjudicatory context of an IPR” in explaining that the burden-shifting framework used in prosecution is not appropriate for PTAB proceedings. Id. at 15.  The Federal Circuit’s characterization of IPR proceedings as “adjudicatory” to support the decision in In Re Magnum Oil presents an interesting contrast with the Supreme Court’s characterization of IPR proceedings in Cuozzo Speed Technologies, LLC v. Lee, No. 15-446, 579 U.S.___ (2016).  In Cuozzo, the Supreme Court detailed at length the “examinatory” aspects of an IPR proceeding as a basis for determining that “broadest reasonable interpretation” is the proper standard for claim construction at the PTAB.  It will be interesting to see how both courts reconcile their differing characterizations of IPRs in future cases and how that may affect the way in which the Board, the Federal Circuit and the Supreme Court ultimately rule on those issues yet to be addressed.

 

Daicel Corporation v. Celanese Int’l Corp., No. IPR2015-00171, Paper No. 86 (P.T.A.B. June 23, 2016) sheds important insight on how the Board applies the broadest reasonable interpretation (BRI) standard for claim construction, and the application of intrinsic and extrinsic evidence.  In that case, the Board instituted an IPR based on both § 102(b) and § 103 grounds.  After considering the intrinsic and extrinsic evidence, the Board concluded that the proper construction under BRI was narrower than the literal claim language, and it upheld the patentability of the challenged claims.

The patent at issue (“the ’507 patent”) relates “to the production of acetic acid using a low water process with an iodide salt as a catalyst stabilizer.”  The ’507 patent discloses and claims a process whereby dimethyl ether (DME) is used to inhibit the production of carbonyl compounds, recognized in the prior art to complicate the synthesis of acetic acid.  The disputed claim language included the phrase “overhead stream comprising dimethyl ether.”  Prior art cited by Petitioner discloses a similar production process for acetic acid that Petitioner established would inherently produce some level of DME via side reactions.  Thus, whether the claims of the ’507 patent are anticipated by or would have been obvious in light of the prior art depended on whether the claim language of the ’507 patent includes any amount of DME.

The Board recognized that under the broadest reading of the plain language of the claim, a stream containing any amount of DME would fall within the claim scope.  Daicel Corp., No. IPR2015-00171 at 39.  However, the Board also recognized that the claim must be construed as interpreted by one of skill in the art.  Id. at 28.  Emphasizing the “reasonable” portion of the BRI standard, the Board agreed with the Patent Owner that the intrinsic and extrinsic evidence supported a claim construction requiring an effective amount of DME to inhibit carbonyl production.  Id. at 42.  First, the Board concluded that the specification and prosecution history both suggested the inventor recognized that the addition of DME (beyond the insubstantial amount produced in prior art reactions) remedied the carbonyl problem recognized in the prior art.  Second, the Board relied on expert testimony to establish the state of the art.  Id. at 36-39, 42.  Patent Owner’s expert testified that one of ordinary skill in the art would only consider a species to be present if it had an “effect” on the stream.  Expressly relying on that extrinsic evidence, the Board concluded that one of ordinary skill in the art would have understood the presence of DME in the system described to be referring only to “effective” amounts.  Id. at 42 (“Based on our analysis of the intrinsic and extrinsic evidence, we agree with Patent Owner that a person of ordinary skill in the art would understand the ’507 patent to speak in terms of effects, not molecules.”).

This decision highlights the importance of the “reasonableness” aspect of the BRI standard. While the decision does not deemphasize the importance and weight given to the intrinsic evidence—and indeed relies expressly upon it—it also illustrates the importance that expert testimony can have in claim construction.  Patent owners would be well-advised in the future to establish the ordinary and customary understanding of industry standards and practices through expert testimony in support of their claim construction positions.