INTER PARTES REVIEW PROCEEDINGS: A FOURTH ANNIVERSARY REPORT
AN IN-DEPTH LOOK AT FACTORS AFFECTING YOUR IPR STRATEGY
CONTENTS INTER PARTES REVIEW PROCEEDINGS: A FOURTH ANNIVERSARY REPORT OCTOBER 2016
3 > Introduction
24 > Real-Parties-in-Interest: Proceed With Caution
38 > District Court Stays Pending IPR/CBM Review: A Review of the Past 12 Months
4 > IPR by the Numbers: Trends in Institution Decisions, PTAB Discovery and Rehearing Requests
30 > Deceptively Simple: Managing Estoppel Risks Under 35 U.S.C. ยง 315(e)
44 > Motion for Joinder and Sequential Petitions: Can a Second Bite at the Apple Save the Case?
18 > Selecting the Best Invalidity Ground: ยง 102, ยง 103 or Both?
36 > Precedential Decisions of the PTAB
50 > The Revised IPR Rules
INTRODUCTION PERKINS COIE IS MARKING THE FOURTH ANNIVERSARY OF INTER PARTES REVIEW (IPR) with a report focused on the changes and progress of IPR proceedings, particularly since September 2015. As IPR proceedings have become more familiar during the past four years, growing
clarity on many issues has resulted from decisions by the U.S. Court of Appeals for the Federal Circuit and U.S. Supreme Court. In this report, we examine several recent cases and outcomes as well as trends and new developments, considering them through a practical lens filled with tips for practitioners. From new provisions allowing patent owners to submit pre-institution evidentiary testimony to the most stay-friendly jurisdictions and judges, we offer original analysis and address the critical IPR issues in-house counsel face today. Perkins Coie is one of the most experienced full-service law firms handling post-grant proceedings in the nation. Since the America Invents Act’s enactment, our attorneys have assisted in more than 200 post-grant proceedings before the U.S. Patent and Trademark Office for industry-leading technology companies. The roots of Perkins Coie’s post-grant practice run deep: extensive patent litigation experience, a deep bench in post-issuance procedures and appeals before the USPTO, and strong technology knowledge across a wide range of industries. In creating this report, we filtered through many IPR developments to identify the key factors that affect a smart IPR strategy. It is our pleasure to present them, and we welcome your thoughts, reactions and questions.
AMY SIMPSON
BING AI
PARTNER
PARTNER
Co-Chair, Post-Grant
Co-Chair, Post-Grant Practice
Practice
JONATHAN (JON) M. JAMES PARTNER Co-Chair, Intellectual Property Practice
PAUL T. PARKER PARTNER Co-Chair, Intellectual Property Practice
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IPR BY THE NUMBERS: TRENDS IN INSTITUTION DECISIONS, PTAB DISCOVERY AND REHEARING REQUESTS
40% OF PATENT OWNERS HAVE SUBMITTED EXPERT DECLARATIONS WITH THEIR PRELIMINARY RESPONSES SINCE MAY 2016
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ANALYSIS SHOWS A STEADY DECREASE IN INSTITUTION RATES
In the four years since the AIA was enacted, inter partes review (IPR) has become an in-demand method for challenging patents, and filings continue in strong numbers. We used the past four years of data to analyze trends in filing, institution rates, motion practice and discovery procedures, viewing the results through the lens of practitioners representing patent holders and challengers alike.
Trends in 2015-2016 Continued Popularity of IPRs. In the four years since its inception, the Patent Trial and Appeal Board has rapidly established itself as the “go-to� jurisdiction for invalidity challenges. From September 16, 2012 through July 2016, about 25% of district court cases involved a patent that was (or is) the subject of an IPR. IPR filing rates leaped upward for the first three years but now appear to be leveling off somewhat. Current projections show IPR filings down slightly in 2016. This dip in the number of IPR filings may be due to prospective petitioners holding off until the U.S. Supreme Court issued a decision in Cuozzo Speed Technologies v. Lee, which eventually upheld use of the broadest reasonable interpretation standard to interpret claims and determined that a decision of whether to institute an IPR was non-appealable.[1] Regardless of this slight downward trend, 2016 is forecast to be the third year in a row with at least 1,500 IPR filings. With the Supreme Court possibly reenergizing non-practicing entities (NPEs) by making it easier for them to obtain treble damages for willful infringement, defendants have every incentive to challenge NPE-owned patents by filing IPRs.[2] Digging in a bit deeper, we note that between 2014 and the second quarter of 2016, the average number of IPR filings per quarter is about 390. Quarterly IPR filings generally fluctuate cyclically, although they have maintained fairly high levels since the second quarter of 2014.
IPR FILINGS BY YEAR 1,655
1,558
1,500
902 701
96
2012
2013
2014
2015
2016
2016
(through July 29)
(projected)
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IPR FILINGS BY QUARTER 466
457
458
419
395
395
416 375 335
266 205
190 151
137 79
93
17 Q3
Q4
2012
Q1
Q2
Q3
Q4
2013
Q1
Q2
Q3
Q4
Q1
2014
Q2
Q3
2015
Q4
Q1
Q2
Q3
2016 (through July 29)
Top Filers of IPRs. IPR proceedings continue to be an efficient and valuable tool for defendants involved in patent litigation. The most prolific IPR petitioners from previous years, who were all frequent litigation targets, maintained their spots at the top. Apple filed 90 new IPR petitions in the last year alone, and Samsung filed 80. LG, Microsoft and Google have more modest increases but still remain in the top five.
IPR PETITIONS FILED
236
Apple Inc. 193
Samsung LG Electronics, Inc.
105
Microso Corporation
102
Google Inc.
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What Are the High-Risk Technology Sectors? We examined the technology subject matter for IPRs, as classified both by the U.S. Patent and Trademark Office (USPTO) Technology Center[3] and by WIPO (called the International Patent Code or IPC). The following graphs reflect the general technology areas where most IPRs were filed.
TOP TECHNOLOGY IN IPRs (Based on USPTO Tech Center) 947
Communications Semiconductors, Electrical and Optical Systems and Components
806
Computer Architecture, SoÂ?ware, and Information Security
581
Transportation, Construction, Electronic Commerce, Agriculture, National Security and License & Review
546
Mechanical Engineering, Manufacturing, Products
533 460
Biotechnology and Organic Chemistry Computer Networks, Multiplex Communication, Video Distribution, and Security
438
Chemical and Materials Engineering
316
(Outdated Tech Center) Communications and Information Processing
66
Designs
26
Other
14
TOP TECHNOLOGY IN IPRs (Based on IPC Codes) 2,070
Electrical and Communications
580
Medical Device / Medical
245
Transmissions / Vehicles
229
Semiconductor
187
Chemical / Biological
153
Television
132
Image Processing
105
Optical Materials Science
99
Data Processing
89
Navigation
79
Games / Educational
62
Mechanical
57
Lighting
42
Oil and Gas
38
Construction / Housing
36
Consumer Goods
26
Design
25
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Data from both the USPTO and WIPO reveal agreement that communications and electrical patents receive the most challenges. The USPTO data reflects a slightly more nuanced breakdown: between communications and semiconductors, communications was the subject matter for slightly over half of the IPRs filed, while semiconductors/electrical and optical systems accounted for approximately 35%. Computer and information security technologies landed in third place, at approximately 20%. In an era where communications-based inventions and infrastructure are prolific, the predominance of litigation and challenges to communications and supporting hardware patents is no surprise.
Institution Decisions Institution rates were initially very high but have recently been declining. In this section, we examine factors that could affect institution rates, including preliminary responses and early settlement.
INSTITUTION TRENDS BY FILING YEAR 7
87
2012
101
492
2013
281
350
881
933
2014
Instituted
2015
18
28
2016 (YTD)
Denied
Declining Institution Rates. Although the number of petitions filed is increasing, so are the number (and proportion of the number) of denials.[4] For petitions filed in 2012, when IPRs were first launched, over 92% of IPR petitions were instituted. But for petitions filed in 2013, and despite the PTAB being referred to in the interim as the patent “death squad,� the rate of institution dropped drastically, to only 83%. Since then, the rate at which IPR petitions are granted has steadily decreased to 76% for petitions filed in 2014, 73% for petitions filed in 2015 and 60% for petitions filed in the first half of 2016. One possible explanation for this decrease in institution rate is the overwhelming popularity of IPRs. A lower rate of institution allows the PTAB to control its workload to meet the 18-month statutory deadline for issuance of final written decisions.[5] Another explanation for this decrease may be seen in the rates of pre-institution resolutions, shown in the pie charts below. While the column charts above exclude pre-institution resolutions, the pie charts below summarize the fates of all petitions up to and including institution, including cases that settled or were procedurally dismissed. For petitions filed in 2012, only 2% of IPRs were resolved before the issuing of an institution decision. For petitions filed in 2013, 16% were resolved prior to an institution decision (either by a patent owner disclaiming the petitioned claims, procedural dismissal or settlement). The rate of pre-institution resolutions continued to increase to 22% for petitions filed in 2014 and held steady at 23% for petitions filed in 2015.
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The most prominent component of pre-institution resolution is early settlement. For petitions filed in 2013, one year after IPRs became available and when the rates of institution took form, only 9% of cases were resolved by settlement. For petitions filed in 2014 and 2015, 16% and 15% of cases, respectively, were resolved by settlement. The first half of 2016 appears to be following the same trend: while only half of the petitions filed in 2016 have been tabulated at the time of publication, already 7% of petitions filed so far in 2016 have been resolved by settlement. Patent owners may be assessing the strength of the petitions and settling the IPRs with petitions that are relatively strong[6] to avoid having an adverse institution decision. The remaining (and presumptively weaker) IPR petitions would therefore result in a lower institution rate and a lower final decision invalidation rate.
INSTITUTION RATES
2012
2013
2014
2%
1%
7%
9%
16%
6% <1%
6%
14%
19%
59%
70% 91%
2015
2016 (YTD) 2% <1%
2% 7% 4%
15% <1%
Instituted Denied
6%
Patent owner disclaimed pre-institution Settled pre-institution
>1%
56%
Procedurally dismissed
21%
Pending pre-institution 56%
How Effective Are Preliminary Responses? Very effective, according to our data. Patent owners file preliminary responses in the vast majority of cases. Over 3,000 IPR petitions have resulted in an institution decision; of these, patent owners filed a response in nearly 85% of those cases (2,685 cases out of 3,178 institution decisions).[7]
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Filing a preliminary response appears to be a wise move. There is a strong statistical correlation between the filing of a preliminary response and the institution rate. When patent owners do not file a preliminary response, 91% of IPRs are instituted (wholly granted or partially granted). When patent owners do file a preliminary response, only 73% of IPRs are instituted, a reduction of nearly 20%.
IPRs WITH NO PRELIMINARY RESPONSES FILED
Instituted Denied
%
493
IPRs WITH PRELIMINARY RESPONSES FILED
91%
451
9%
42
%
2,685
Instituted
73%
1,970
Denied
27%
715
9% 27%
73% 91%
Instituted
Denied
On April 1, 2016, the USPTO announced a rule change to allow patent owners to submit testimonial evidence, including expert testimony, in support of preliminary responses. Commentators welcomed the rule change, asserting that it levels the playing field between parties, encourages full disclosure of rebuttal evidence by patent owners and provides the USPTO with the best information to decide whether to institute a trial. Since the rule change went into effect on May 2, 2016, 40% of patent owners have submitted expert declarations in support of their preliminary responses. The low number of expert declarations in May is likely due to the short turnaround time following the change for patent owners to identify and recruit experts. While it is still early, our initial analysis shows a steady increase in the number of preliminary responses that have included expert declarations.
MONTH
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NUMBER OF PRELIMINARY RESPONSES ACCOMPANIED BY EXPERT DECLARATIONS
NUMBER OF PRELIMINARY RESPONSES WITHOUT EXPERT DECLARATIONS
PERCENTAGE OF PRELIMINARY RESPONSES ACCOMPANIED BY EXPERT DECLARATIONS
May
11
33
25.00%
June
44
59
42.72%
July
36
47
43.37%
August
35
44
44.30%
INTER PARTES REVIEW PROCEEDINGS October 2016
Discovery in the PTAB: Factors for Success The PTAB is a stringent gatekeeper when it comes to allowing additional discovery. A party seeking additional discovery must first ask the PTAB for permission to file a motion for additional discovery and can make such a request by means of a conference call with the PTAB and the non-moving party. This first hurdle is relatively easy to pass, as the PTAB has thus far granted 77% of requests for authorization to file a motion for additional discovery. Next, the movant must convince the PTAB that routine discovery is insufficient. IPRs are designed to be a quick and cost-effective alternative to district court litigation, and the PTAB therefore takes a conservative approach to granting additional discovery.[8] Routine discovery under the USPTO’s Patent Trial Practice Guide for post-grant proceedings, which is available without PTAB authorization, is limited to: (1) production of any exhibit cited in a paper or testimony; (2) the cross-examination of the other side’s declarants; and (3) relevant information that is inconsistent with a position advanced during the proceeding.[9] The parties can agree to additional discovery, or either party can move for additional discovery.[10] The moving party bears the burden to show that additional discovery is in the “interests of justice.”
SUCCESS RATES: MOTIONS FOR LEAVE TO FILE MOTION FOR ADDITIONAL DISCOVERY >1% <1%
21% Granted Denied Denied as moot Denied in part, granted in part 77%
The PTAB analyzes these five Garmin factors to determine whether additional discovery is in the interests of justice: 1. The moving party must demonstrate beyond speculation that something useful will be uncovered; that is, the mere allegation that something useful will be found is insufficient to show that the additional discovery is necessary in the interests of justice; 2. Asking for the other party’s litigation positions and the underlying bases for those positions is not necessary in the interests of justice; 3. Information that can be figured out or assembled by the requesting party is not necessary in the interests of justice; 4. Requests must be easily understandable and allow the responder to answer efficiently, accurately and confidently; and 5. Requests must not be overly burdensome to answer.[11]
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The PTAB weighs each factor in favor of or against allowing additional discovery, with neither factor being dispositive. Our assessment of over 200 motions for additional discovery filed to date revealed that the PTAB rarely permits additional discovery. Approximately 57% of discovery motions are completely denied and 24% are denied in part. Only 15% of motions for additional discovery are granted in their entirety.
SUCCESS RATES: MOTIONS FOR ADDITIONAL DISCOVERY
24%
15% Granted Denied
4%
Denied as moot Denied in part, granted in part 57%
We took a closer look at the type of discovery requests filed before the PTAB and found that success rates differ. Requests for additional written discovery are granted more frequently than depositions, likely because under the five-factor analysis, requests for depositions can be characterized as speculative because it is not known what the witness may testify about, thereby failing the first Garmin factor. The PTAB has also denied requests for depositions where it thinks written discovery will suffice, because it necessarily means that the movantâ&#x20AC;&#x2122;s request is therefore not narrowly tailored to what the moving party needs.[12] Routine discovery, moreover, allows cross-examination of individuals who submit declarations, obviating the need for additional depositions. When a party proffers witness testimony in the form of a declaration, the witness must be made available for cross-examination or the PTAB will strike the witnessâ&#x20AC;&#x2122;s declaration.[13] Parties must keep this in mind when relying on third parties, former inventors and those outside the United States to provide declarations.
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MOTIONS FOR ADDITIONAL DISCOVERY (Breakdown by Type of Discovery)
Key Tip
200 180 160 140
111
>> Successful motions for additional discovery address all five Garmin factors.
120 100 80 60
3 49
40 20
50
0 Written Discovery
Granted
3
3 3 7
2 5
27 Deposition
Use of District Court Evidence
Denied in part, granted in part
4 2
11 Privilege Log
Denied as moot
Denied
A party seeking additional discovery should expect an uphill battle at the PTAB. Successful motions for additional discovery are narrowly tailored and ask for only what the movant needs. To maximize its chance of success, the moving party must include a thorough analysis of each of the five Garmin factors the PTAB relies upon to determine whether a motion for additional discovery has any merit.
Requests for Rehearing: Worth the Effort and Expense? Under 37 C.F.R. ยง 42.71, a request for rehearing may be filed by any party within 14 days of a non-final decision or a decision to institute a trial, or within 30 days of a final decision or a decision not to institute a trial. The PTAB aims to decide such requests within one month,[14] although there is no mandated period in which the PTAB must decide and thus it can take much longer. A delay at the PTAB in deciding a request for rehearing may be favorable for district court cases that have been stayed, but less so if they are not. A decision to institute or not institute trial and a rehearing decision affirming institution or noninstitution are not appealable.[15]
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Overall Outcomes. We examined nearly 800 requests for rehearing, which reflected the following outcomes.
REQUESTS FOR REHEARINGÂâ&#x20AC;&#x201C; OVERALL OUTCOMES (IPRs)
9%
4% Granted Granted in part, denied in part Denied
87%
This reflects all requests for rehearing from 2012-present and is nearly identical to the cumulative results from one year ago. The PTAB appears to be holding firm with a denial rate in the high 80s. Subject Matter of Rehearing Requests. Of the requests we examined, the subject matter involved institution decisions 75% of the time and final written decisions 10% of the time. A full breakdown of the subject matters follows.
SUBJECT MATTER OF REHEARING REQUESTS (IPRs) 1% 2%
2%
5% Institution decision
4%
Final written decision
10%
Motion for discovery/additional discovery Motion to file supplemental information Motion to exclude/expunge Deposition 76%
Other
Of these, the success rates varied depending on the subject of the rehearing request, with motions for discovery granted approximately a quarter of the time. Motions to file supplemental information and motions to exclude or expunge were granted half the time. Most practitioners are likely to be most interested in decisions to institute, which have a low rehearing rate.
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SUBJECT OF THE REHEARING REQUEST
GRANTED
GRANTED IN PART, DENIED IN PART
DENIED
Institution Decision
3%
3%
93%
Final Written Decision
1%
6%
93%
Motion for Discovery/Additional Discovery
26%
6%
68%
Motion to File Supplemental Information
53%
0%
47%
Motion to Exclude/Expunge
50%
0%
50%
Deposition
92%
0%
8%
Other
54%
9%
37%
Grand Total
9.5%
3.6%
86.9%
A request for rehearing must specifically identify all matters the party believes the board misapprehended or overlooked and the place where each matter was previously addressed in the briefings. 37 C.F.R. § 42.71(d). The PTAB reviews these requests for rehearing for an abuse of discretion. Taken together, the standard of review for a rehearing is a high bar, which discourages both rehashing old arguments and raising new arguments or evidence.[16] Indeed, the PTAB has stated that “[t]he panel could not have overlooked or misapprehended evidence that was not presented in the Petition.”[17] The USPTO has suggested that a showing of “good cause” can provide the admission of additional evidence,[18] but this standard appears difficult to meet. Nonetheless, petitioners for rehearing are not entirely without guidance. The PTAB has stated that there is an abuse of discretion, which merits rehearing, “if a decision is based on an erroneous interpretation of law, if a factual finding is not supported by substantial evidence, or if an unreasonable judgment is made in weighing relevant factors.”[19] In Daicel Corp., the petitioner successfully requested rehearing by specifically referencing portions of its IPR petition that provided the basis for its contention that the PTAB made factual findings not supported by substantial evidence and made unreasonable judgments. Thus, errors in law or fact can support rehearing.
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ENDNOTES [1] See Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016). [2] See Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1936 (2016). [3] See Office of the Deputy Commissioner for Patent Operations, United States Patent and Trademark Office, https://www.uspto.gov/ about-us/organizational-offices/office-commissioner-patents/office-deputy-commissioner-patent (last visited Aug. 14, 2016) (describing different technology centers within the USPTO). [4] There is a 6+ month time between a petition’s filing and its institution decision. The 2016 data cover only the limited number of institution decisions for IPRs filed in 2016 and that have so far been issued as of July 7, 2016. [5] The AIA requires the PTAB to issue a final written decision within 12 months of institution, extendable to 18 months if the Director is able to show cause for extension. 35 U.S.C. § 316(a)(11). [6] “Relatively strong” refers to the strength of the invalidity arguments in a petition relative to the strength of the likely counter-arguments for validity, and does not refer to the quality of the petition. [7] This statistic is calculated based on all institution decisions issued between September 2012 and July 7, 2016 and is not limited to institution decisions having a final written decision. [8] 1964 Ears, LLC, v. Jerry Harvey Audio Holdings, LLC, IPR2016-00494, Paper 19 at 3 (PTAB May 20, 2016). [9] 37 C.F.R. § 42.51(b)(1). [10] 37 C.F.R. § 42.51(b)(2). [11] Garmin Int’l v. Cuozzo Speed Techs. LLC, IPR2012-00001, Paper No. 26 at 6–7 (PTAB Mar. 5, 2013). [12] 1964 Ears, LLC, v. Jerry Harvey Audio Holdings, LLC, IPR2016-00494, Paper 19 at 10 (P.T.A.B. May 20, 2016). [13] HTC Corporation v. NFC Technology, LLC, IPR2014-01198, Paper 41 at 6 (PTAB Nov. 6, 2015). [14] Office Patent Trial Practice Guide, 77 Fed. Reg. 48768 (Aug. 14, 2012) (hereinafter “Trial Practice Guide”). [15] 35 U.S.C. §§ 314(d), 324(e); Dominion Dealer Solutions, LLC v. Lee, No. 3:13-cv-699, 2014 WL1572061 (E.D. Va. Apr. 18, 2014), aff’d 749 F.3d 1379 (Fed. Cir. 2014). [16] Coalition for Affordable Drugs (Adroca) LLC v. Acorda Therapeutics, Inc., IPR2015-00720, Paper 21 at 3 (PTAB Apr. 8, 2016) (“Petitioner essentially reargues, or attempts to bolster with new arguments, the same assertions, citing the same [documents], that we already considered and expressly addressed in our Decision”). [17] First Data Corp. v. Cardsoft (Assignment for the Benefit of Creditors), LLC, IPR2014-00715, Paper 12 at 4–5 (PTAB Dec. 8, 2014). [18] Trial Practice Guide at 48,756, 48,768. [19] Daicel Corp. v. Celanese International Corp., IPR2015-00173, Paper 15 at 2 (PTAB June 26, 2015) (citing Star Fruits S.N.C. v. U.S., 393 F.3d 1277, 1281 (Fed. Cir. 2005).
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SELECTING THE BEST INVALIDITY GROUND: ยง 102, ยง 103 OR BOTH?
The choice between selecting invalidity positions based on ยง 102 or ยง 103 largely depends on the quality of the prior art reference.
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INTER PARTES REVIEW PROCEEDINGS October 2016
A successful petition for inter partes review reflects a variety of considerations, including but not limited to claim construction, selection of prior art and whether to use an expert declaration. This article focuses on a key
Key Tip
consideration in preparing a petition—whether the grounds for invalidity challenge should be based on 35 U.S.C. § 102 or § 103, or a combination of both.
§ 102 Grounds Considerations In patent litigation, a § 102 reference is the preferred invalidity challenge. However, this does not always hold true for IPRs. Indeed, over the past four years, the PTAB’s scrutiny of a § 102 reference has increased, thus resulting in fewer § 102 grounds being instituted. The issues below should be considered when evaluating whether to present a § 102 ground in an IPR petition.
>> Be wary of the increased cost of finding a single prior art reference.
Finding a Solid §102 Reference. As an initial matter, the quality of prior art search results will determine whether a single reference can arguably be used as a basis for an invalidity challenge under § 102. Typical prior art searches for litigation can yield dozens of references, each with particular drawbacks. Prior art searches targeted for an IPR need to focus on returning a smaller set of higherquality references that disclose most, if not all, limitations of the challenged claims. An ideal prior art reference: • • • •
addresses the same problem as the challenged claim, uses similar terminology, has express, detailed disclosure of each claim element and is a close technical match to the technology of the challenged claim.
Practitioners working with third-party prior art searchers should establish these factors as requirements for prior art search results. Practitioners also need to proactively analyze interim prior art search results with these factors in mind. Given these requirements, trying to find a single reference to challenge validity under § 102 is likely to increase the overall costs of the search. Additionally, it is not enough that all of the limitations are simply present in the reference. “[T]he prior art reference—in order to anticipate under 35 U.S.C. § 102—must not only disclose all elements of the claim within the four corners of the document, but must also disclose those elements ‘arranged as in the claim.’”[1] Thus, the prior art search should also consider whether all of the limitations are disclosed in the same embodiment in the prior art reference. Risks of Inherency Argument. When a reference comes close to qualifying under § 102, there is a temptation to rely on inherency or a favorable claim construction to address weaknesses in the reference. Both strategies come with significant risks. Inherency “may not be established by probabilities
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Key Tips
>> Beware claim construction is a moving target and is not truly finalized until the Final Written Decision. >> A single strong § 102 ground is preferable to presenting several grounds.
or possibilities. The mere fact that a certain thing may result from a given set of circumstances is not sufficient.” In re Robertson, 169 F.3d 743, 745 (Fed. Cir. 1999). Relying on inherency requires that the petitioner must prove the limitation is inherent, and it is far from guaranteed that a PTAB panel will accept the argument. Claim Construction Risks. Proposing an incorrect claim construction may result in a denial of the petition. Moreover, even if a favorable claim construction is adopted in the institution decision, the panel is free to change it in the final written decision, which could result in a finding of validity over the prior art in the petition. If the construction of a term is in doubt, it would be better to present § 102 grounds relying on prior art that discloses alternatives covering all possible claim constructions, or to present the same reference in a § 103 ground. Multiple § 102 Grounds. Petitioners have considered presenting multiple § 102 grounds in the same petition, each with its own strengths and weaknesses, as a substitute for presenting a single strong § 102 ground. This may not be a solution at all, because the panel may decide to institute trial on the first ground and refuse to institute a trial on the remaining grounds, citing efficiency reasons. Thus, the order in which a petitioner presents the grounds is important. If all of the foregoing issues can be addressed, there are many advantages to using a single reference in a § 102 ground. For example, arguments that the prior art teaches away from the invention or is not recognized as solving the problem solved by the claimed invention are not relevant to analysis of a proposed rejection under § 102. A ground based on § 102 avoids a lengthy explanation of motivation to combine two or more references, saving word count and allowing the petition to focus on the teachings of the reference itself.
§ 103 Grounds Considerations Relying on a single prior art reference, or a combination of more than two references, to formulate an obviousness position can be a winning recipe that bypasses some of the above-described issues associated with anticipation grounds of invalidity. However, obviousness positions have their own pitfalls. As a starter, some practitioners believe that presenting an obviousness position based on a single prior art reference is inherently weak because it is an admission that the relied-upon reference is not perfect. While this assumption may hold true for litigation proceedings that involve a jury (or a judge that may not be experienced in handling patent cases), it is rarely an issue at patent office proceedings, which involve experienced patent examiners and judges. In fact, as most seasoned patent prosecutors would attest, it is much harder to argue against obviousness rejections (based on a single reference or multiple references) than anticipation rejections during the original prosecution of most patents. Nonetheless, it is important for a petitioner not to overlook the shortcomings of the reference(s) used for an obviousness position. In several decisions, the PTAB has highlighted this need by advocating for an obviousness analysis under Graham v. John Deere Co., 383 U.S. 1 (1966). See, e.g., CBM2012-00002, Paper 66; IPR2012-00005, Paper 68; IPR2013-00418, Paper 38; IPR2015-01586, Paper 7; IPR2016-00322, Paper 11. The four Graham factors for an obviousness inquiry are: 1. the scope and content of the prior art; 2. any differences between the claimed subject matter and the prior art;
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3. the level of skill in the art; and 4. the evidence of the so-called secondary considerations. KSR Intern. Co. v. Teleflex Inc., 550 U.S. 398, 421 (2007). While most IPR petitions adequately cover the first and third factors, they often fail to address directly the differences between the prior art and the claim feature(s) at issue under the third Graham factor. This places the petitioner in a precarious position if the petition also promulgates an anticipation position based on the same reference. However, in order to increase the chances of institution (or favorable final decision) for an obviousness position, we have found through our own practice before the PTAB that a petitioner is best advised to explain the plausible differences between the claim limitations and the teachings of the prior art, and explain why those differences would be obvious to a person of ordinary skill in the art (POSITA). Multiple References. When multiple references are used, the petition must also articulate how the missing elements of one reference are cured by the other references, how to carry out such a combination and the motivation for a POSITA to make the combination. Craft these explanations carefully and artfully so that while providing sufficient details to convince the PTAB, they do not appear overly simplified or overly complicated. The extent and type of explanations can also differ based on the technology at issue. For example, mechanical arts often require a higher bar of showing how the actual mechanical components fit together to read on the challenged claims. For this reason, it is beneficial to provide drawings to illustrate the intermediate steps involved in making the final proposed combination. This bar, however, is somewhat lower in electronic arts, where combining system-level components is considered a routine task.
Key Tips
>> For a successful § 103 ground, focus on explaining differences between prior art and claim limitations. >> A strong expert declaration can do some heavy lifting in an obviousness position.
Expert Declarations. The need for detailed explanations in an obviousness ground further highlights the importance of an accompanying expert declaration. While a declaration that merely mimics the positions in the petition has a limited value,[2] a robust and detailed declaration can bolster the petition and provide credibility for the position. A well-written expert declaration is a valuable companion to an IPR petition and further expands the petitionerâ&#x20AC;&#x2122;s ability to fill in some of the missing details omitted or presented in a condensed form in the petition.[3] Inconsistencies. Another important step in formulating a successful obviousness position is to fully analyze the inconsistencies or contrary teachings in the references to ensure that they do not contradict or teach away from the proposed combination. A savvy patent owner can exploit any such contrary teachings to rebut the petitionerâ&#x20AC;&#x2122;s obviousness position.[4] Secondary Considerations. Finally, many IPR petitions often omit the fourth Graham factor in addressing the secondary considerations[5] because the board decisions, up to this point, have largely ignored this factor at the institution stage. In cases where secondary indicia of non-obviousness have been raised in a prior or concurrent proceeding, it is important for the petitioners to address those issues. The analysis of secondary considerations becomes even more critical if the patent owner has been successful in rebutting obviousness positions in the prior proceedings.[6]
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§ 102 and § 103 Combined Strategy Key Tip
>> Presenting § 102 and § 103 grounds with overlapping references can carry more drawbacks than benefits.
Petitioners often consider presenting § 102 and § 103 grounds in the same petition to increase the likelihood of institution. If the § 103 ground relies on the same prior art as in the § 102 ground, the § 103 ground may serve to highlight the weaknesses in the § 102 ground prior art. Moreover, the panel may choose to institute a trial on only one of the two grounds, resulting in a trial on the weaker of the presented grounds. Presenting multiple grounds with overlapping references may put further pressure on meeting the word-count limitation of the petition. If the petitioner insists on presenting overlapping references in § 102 and § 103 grounds, it may be preferable to present the grounds in separate petitions.
Conclusion: Quality Prior Art Is Key The choice between selecting invalidity positions based on § 102 or § 103 largely depends on the quality of the prior art reference. A perfect prior art reference, which discloses each claim limitation in the recited order and avoids risky inherency arguments, can produce a convincing anticipation ground while avoiding lengthy explanations in both the petition and the expert declaration. Finding such prior art, however, may not always be possible and usually comes with greater cost and time investments. Obviousness grounds, based on a single prior art reference, are a bona fide alternative to anticipation and allow more flexibility in crafting arguments to account for any differences between the prior art teaching and the claim limitations. Combining additional references to present an obviousness ground is another option that can be equally powerful if accompanied by a detailed and persuasive explanation of motivations to combine, analysis of Graham factors and a helpful expert declaration.
ENDNOTES [1] Net Moneyin v. Verisign, 545 F.3d 1359, 1369 (Fed. Cir. 2008). [2] See 37 C.F.R. § 42.65 (“Expert testimony that does not disclose the underlying facts or data on which the opinion is based is entitled to little or no weight.”); see also, IPR2015-01356, Paper 7; IPR2015-00323, Paper 13. [3] While there are no page or word limits for an expert declaration, an IPR petition is limited to 14,000 words and CBM and PGR petitions are each limited to 18,700 words. [4] See Takeda Chem. Indus., Ltd. v. Alphapharm Pty., Ltd., 492 F.3d 1350, 83 USPQ2d 1169 (Fed. Cir. 2007). [5] Secondary considerations may include any of the following: long-felt but unsolved needs, failure of others, unexpected results, commercial success, copying, licensing, and praise. See Graham, 383 U.S. at 17; Leapfrog Enters., Inc. v. Fisher–Price, Inc., 485 F.3d 1157, 1162 (Fed. Cir. 2007). [6} See IPR2015-01279, Paper 11; IPR2015-00405, Paper 13; IPR2013-00265, Paper 13.
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REAL-PARTIES-IN-INTEREST: PROCEED WITH CAUTION
Patent owners should consider challenging the real-partiesin-interest identified in petitions as insufficient, especially when a petition is filed near the one-year bar deadline. On the flip side, petitioners should exercise extreme care in identifying and designating RPIs.
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Since the adoption of the America Invents Act (AIA) and the institution of the inter partes review proceeding, the question of how a “real-party-in-interest” (RPI) to an IPR is defined has presented challenges and uncertainties for would-be petitioners. Four years in, there is some case law addressing the intricacies of the RPI definition, but it is murky and oftentimes inconsistent, leaving petitioners at risk of making mistakes that can be outcome-dispositive. The RPI analysis is critical for both petitioners and patent owners. Failure to identify an RPI to a petition may result in an inter partes review petition being denied institution, with the petitioner time-barred from filing a corrected petition. Similarly, RPI mistakes may result in severe estoppel consequences for a petitioner (and its RPIs) in a parallel district court or International Trade Commission (ITC) litigation. These dire consequences mean that patent owners should consider challenging the RPIs identified in petitions as insufficient, especially when a petition is filed near the one-year bar deadline. In short, to avoid unintended (and potentially outcome-dispositive) consequences, (1) petitioners of an IPR should exercise extreme care in determining whom to identify as RPIs, and (2) patentees should carefully evaluate whether such designations have been made properly.
Introduction to RPIs in AIA Proceedings The AIA identifies three entities who may be involved with the filing of an IPR petition: (1) the petitioner itself, (2) other RPIs and (3) privies of the petitioner.[1] The AIA generally defines the petitioner to be “a person who is not the owner of a patent,”[2] but is silent as to the definition of an RPI and a privy. The PTAB, like the courts, then relies on the common law to supply these definitions.[3] The AIA imposes different rules and procedures for each of these three categories. For example, only a petitioner can file an AIA petition and participate in the requested AIA proceeding before the Patent Trial and Appeal Board (PTAB); an RPI or a privy not identified as the petitioner can take no formal active role in AIA trials before the PTAB.[4] To take another example, a privy of the petitioner may file a declaratory judgment action to invalidate a patent without creating a bar to a subsequent AIA petition on the same patent before the PTAB, whereas the petitioner or other RPIs cannot.[5] In other instances, the same rules apply for the petitioner, other RPIs and privies of the petitioner. For example, the one-year time limit for filing an IPR, after the service of an infringement complaint, applies to all three categories.[6] The PTAB requires that parties to an IPR identify all privies or RPIs for the petition. The function of this requirement is twofold: (1) to assist in identifying conflicts for the board and (2) to assure proper application of statutory estoppel provisions. A petitioner’s failure to identify all RPIs in the initial petition as required by statute can be fatal to the petition if not timely cured. The PTAB has terminated AIA proceedings due to this defect at and after the institution stage, including at AIA trials near the oral hearing stage. Therefore, it is critical for both petitioners and patent owners in AIA proceedings to understand what constitutes a real-party-in-interest and privy of a petitioner.
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Whether a party should be named as an RPI to an IPR is a highly fact-dependent question, typically handled on a case-by-case basis. Recently the PTAB defined RPI as the “party that desires review of the patent.”[7] This could be the petitioner or a party at whose behest the petition has been filed. A key factor in the RPI analysis is determining whether the “non-party exercised or could have exercised control over a party’s participation in a proceeding.”[8] The rules, however, do not enumerate a single dispositive test, factor or definition under the statute. Indeed, varying PTAB panel interpretations of the relevant standards often lead to unpredictable results. Many PTAB decisions considering the question of whether a party is a privy of the petitioner rely on the multifactor test set forth by the United States Supreme Court in Taylor v. Sturgell.[18] In Taylor, the Court—although acknowledging that it was not establishing a “definitive taxonomy” to show whether a third party is a privy—identified the following factors as relevant: (1) whether the third party agrees to be bound by the determination of issues in the proceeding; (2) whether a pre-existing substantive legal relationship with the party named in the proceeding justifies binding the third party; (3) “in certain limited circumstances,” whether the third party is adequately represented by someone with the same interests; (4) whether the third party exercised or could have exercised control over the proceeding; (5) whether the third party is bound by a prior decision and is attempting to rehear the matter through a proxy; and (6) whether a statutory scheme forecloses successive hearing by third parties. The PTAB has frequently focused on the fourth factor (control) as all but dispositive, but “[c]ourts and commentators agree. . .that there is no bright-line test for determining the necessary quantity or degree of participation to qualify as a ‘real party-in-interest’ . . . based on the control concept.”[9]
The RPI Standard PTAB case law to date has applied the RPI standard in four categories of situations—namely, in circumstances where: 1. one co-defendant in a patent litigation is alleged to be an RPI to an IPR petition filed by one of its other co-defendants; 2. corporate affiliates or passive investors are alleged to be RPIs to an IPR petitioner; 3. members of patent “clubs” and similar patent membership organizations are alleged to be RPIs to IPR petitions filed by the club itself; and 4. parties in a customer/supplier or indemnitor/indemnitee relationship are alleged to be RPIs when one or the other, but not both, file IPR petitions. Unfortunately, despite the importance and potentially determinative effect of the RPI issue, the case law is often contradictory, making it difficult to discern the result the PTAB will reach in all but the easiest cases. Co-Defendants. One issue that the PTAB is consistent and clear about is that the mere fact that two parties are named as co-defendants in the same litigation does not create an RPI relationship. This is true even in situations where district courts require co-defendants to agree to a form of “forced estoppel” to get a stay of district court litigation. Additionally, participation in a joint defense group does not make a company an RPI for IPR purposes. Corporate Affiliates. There is some inconsistency in the way corporate affiliates have been treated by the PTAB. Passive investors are generally not found to be RPIs. And a corporation that owns or is
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affiliated with a petitioner is not automatically a privy, either. This is true even for parent companies whose affiliates’ financials are rolled-up with their own. But it is less clear where, beyond that, the line is crossed to render a corporate affiliate an RPI. Where there is evidence of control by the corporate affiliate, it is likely that the PTAB will find the corporate affiliate to be an RPI of the petitioner. The bar for control seems to be fairly low in some cases, with the PTAB finding an RPI based on whether the alleged privy had the “power—whether exercised or not—to call the shots.”[10] The more evidence of control there is, the more likely the PTAB is to find the affiliate to be an RPI, but the mixed case law renders it hard to discern a bright-line rule here. For example, in Paramount, the patent owner argued that a corporate affiliate of petitioner should have been identified in the petition as an RPI. The affiliate had brought a declaratory judgment action on the patent at issue and shared the same counsel that represented the petitioner in the IPR.[11] The PTAB dismissed the petition for failure to name the affiliate as an RPI, noting that there was no evidence that the petitioner took any action independent from its affiliate. By contrast, in Petroleum Geo-Services, a panel of the PTAB rejected RPI arguments as “speculative,” where a petitioner and its corporate affiliate shared in-house counsel who prepared the petition, and there was an allegation that the affiliate actually controlled the petition.[12] These divergent opinions demonstrate just how difficult it can be to predict how the PTAB will decide this issue. Patent Clubs. Often, “patent clubs” or similar patent membership groups bring an IPR after one or more of its members have been sued in the district court under a particular patent. When a patent club files an IPR, it is possible that its members could be considered RPIs. The results have been inconsistent, however, with some panels holding that members are not RPIs because they do not control the club.[13] Notably, PTAB trial decisions involving patent clubs often involve requests from the patent owner for discovery, which are often granted. Customers and Indemnitees. Privity will not be found based solely on a supplier/reseller relationship. Moreover, mere allegations of the existence of an indemnification agreement are insufficient to establish an RPI relationship. Even when an indemnity relationship is admitted, not every indemnification agreement is sufficient to make the indemnitor an RPI, particularly where there is no requirement that the indemnitor be able to control the IPR. Where, however, a party is indemnifying another party for the litigation, paying for the IPR and controlling IPR, that party is likely to be found to be an RPI.[14] This is the case even if the party makes subsequent attempts to redefine the relationship to shift the control back to the customer.[15] The law is murky, however, and often the results are not predictable. For example, in Broadcom,[16] Ericsson argued that it should receive additional discovery from Broadcom regarding Broadcom’s relationship with the defendants in another case, the “D-Link defendants.” The D-Link defendants had been served with a complaint more than one year prior to the filing of the petition and, if the D-Link defendants were in privity with Broadcom, Broadcom’s petition would be time-barred. Ericsson presented the court with evidence of indemnification agreements between Broadcom and D-Link as well as other evidence, such as Broadcom’s filing of an amicus appeal brief in the D-Link litigation, communications with D-Link defendants, use of an expert report from the D-Link litigation and email
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correspondence regarding indemnity. The PTAB was not persuaded. It found that this evidence did not show that Broadcom had control over the D-Link litigation, noting that indemnity payments and what it characterized as the petitioner’s “minor participation” in the litigation were insufficient. The PTAB concluded that the discovery Ericsson sought did not show more than a “mere possibility” that the petitioner and the D-Link defendants were in privity. Accordingly, the motion was denied.[17] In short, even in the face of persuasive evidence of an indemnity relationship and control, at least one PTAB panel refused even discovery into the RPI issue.
District Court Cases Relating to RPI / Privity Issues Under 35 U.S.C. § 315(e)(2), the petitioner in an IPR and its RPIs or privies are estopped from asserting any invalidity ground it raised or could have raised in the IPR in the district court litigation. But, to date, there is almost no federal district court case law grappling with the merits of RPI determinations. At most, as mentioned above, there is a line of cases where district courts effectively impose a “voluntary” estoppel on parties in exchange for an order staying those cases. RPI issues have also arisen in the context of district court litigation when parties have fought about the propriety of Rule 45 subpoenas to non-parties relating to RPI questions. The case law so far indicates that a patent owner may seek discovery in the district court to determine who is an RPI of a petitioner in an IPR.[18] But there is limited authority on this point and, naturally, defendants in the underlying case frequently resist such discovery. As the law develops and the initial waves of IPRs are completed, it is all but certain that RPI district court case law will develop to better delineate exactly how far estoppels will extend. Opportunities abound for patent owners to push for discovery regarding typically behind-the-scenes relationships between defendants, corporate affiliates, membership organizations and customer/suppliers.
ENDNOTES [1] [2] [3] [4]
See, e.g., 35 U.S.C. §§ 315, 325. 35 U.S.C. §§ 311(a), 321(a). Trial Practice Guide at 48759. See, e.g., 35 U.S.C. §§ 311(b), 321(b) (conduct of IPR, PGR or CBM); 35 U.S.C. §§ 317(a), 327(a) (settlement of IPR, PGR or CBM); 35 U.S.C. §§ 319, 329 (appeal to the Federal Circuit from a final written decision in an IPR, PGR or CBM trial). [5] 35 U.S.C. §§ 315(a), 325(a). [6] 35 U.S.C. § 315(b). [7] Id. [8] Id. [9] Trial Practice Guide at 48,759 (citing Gonzalez v. Banco Cent. Corp., 27 F.3d 751, 759 (1st Cir. 1994)). [10] Galderma S.A. & Q-Med Ab, IPR2014-01422, 2015 WL 1022410, at *5 (Mar. 5, 2015) (emphasis in original). [11] Paramount Home Entm’t Inc., Twentieth Century Fox Home Entm’t LLC, & Universal Studios Home Entm’t LLC, IPR2014-00961, 2014 WL 7398905, at *3 (Dec. 29, 2014). [12] Petroleum Geo-Servs. Inc., IPR2014-00689, 2014 WL 7187163, at *11 (Dec. 15, 2014). [13] Unified Patents Inc., IPR2014-01252, 2015 WL 632391, at *7 (Feb. 12, 2015). [14] First Data Corp., IPR2014-00715, 2014 WL 5361602, at *1 (Oct. 17, 2014) (denying petition for failure to identify RPI). [15] Id. (finding an RPI even though parties executed addendum two days prior to filing of petition that gave control to petitioner). [16] IPR2013-00601, Paper 23 at 2 (Jan. 24, 2014). [17] Id. [18] VirnetX, Inc. v. Apple, Inc., 2014 WL 6979427, *3-4 (N.D. Cal. Mar. 21, 2014). [19] Taylor v. Sturgell, 553 U.S. 880
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PRACTICE TAKEAWAYS: Real-Parties-in-Interest Issues >> Naming the proper RPIs in an IPR petition
is critical to both preventing dismissal of the petition and for the estoppel effects it may have on related district court litigation.
>> Perhaps the most important factor to the
PTAB is the level of control exercised by the alleged RPI over the IPR process. The PTABâ&#x20AC;&#x2122;s determination on this factor is not always consistent, however, and different panels faced with similar facts may draw different conclusions. Before filing a petition, carefully evaluate the relationships with other parties and any control they may exert over the IPR process.
>> Parties involved in cases where there are IPRs (whether or not they are filing the petition) should prepare for all possible outcomes of the RPI decision.
Take Note
>> To minimize the impact of an adverse RPI
decision, petitioners should file the petition early to allow time for amendment if the PTAB determines there is an RPI who should have been identified. Filing early also helps reduce the risk that the petition will be deemed time-barred if another party (with an earlier one-year deadline) is found to be an RPI.
>> Non-petitioning co-defendants should develop
an early strategy in the event that they are found to be RPIs by the PTAB or district court, including identification of alternative defenses and nonestopped prior art. These preparations will help prevent an unexpected RPI decision from derailing a defense.
>> Patent owners should investigate RPI and privity issues, especially if the petition is filed close to the one-year deadline. If the patent owner can prove that the identified RPI is incorrect, the patent owner may defeat the petition, leaving the petitioner with no chance for correction.
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DECEPTIVELY SIMPLE: MANAGING ESTOPPEL RISKS UNDER 35 U.S.C. § 315(E)
A petitioner has strong motivation to be thorough in prior art searches when preparing a first IPR petition because estoppel will apply in later proceedings for any prior art references of which the petitioner knew or reasonably could have been expected to discover.
The biggest risk for IPR petitioners is estoppel under 35 U.S.C. § 315(e) because the petitioner could be precluded from subsequent validity challenges before the U.S. Patent and Trademark Office, district court or U.S. International Trade Commission (ITC) based on “any ground that the petitioner raised or reasonably could have raised during” the IPR.[1] A superficial reading of § 315(e) might leave the impression that IPR-related estoppel is relatively simple. In practice, however, the issue is quite complex and the body of case law addressing this issue is still developing. Before filing an IPR, one must consider the effects estoppel may have on a subsequent proceeding or future litigation strategy. Below is an in-depth look at various estoppel scenarios the courts have already addressed and important takeaways for practitioners and in-house counsel.
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When Estoppel Does and Does Not Apply When does estoppel apply? The table below charts out several estoppel outcomes and answers frequently asked questions, drawing from decisions by the PTAB and district courts. In each scenario, there is a first IPR proceeding, followed by a second proceeding with a validity challenge in the USPTO (PTO), district court (court) or ITC against the same claims or a subset of the claims challenged in the first IPR. Estoppel does not apply to claims whose validity was not previously challenged in the first IPR. Details of the following estoppel scenarios are below.
FIRST IPR
SECOND PROCEEDING
ESTOPPEL?
Trial instituted for a ground of unpatentability but IPR is unsuccessful. Final written decision finds challenged claims valid. (1)
Same ground advanced in second proceeding in PTO, court or ITC.
Estoppel in PTO, court or ITC.
Petition proposes multiple grounds of unpatentability. Ground 1 instituted for trial, Ground 2 NOT instituted because of redundancy. (2)
Ground 2 advanced in second proceeding in PTO, court or ITC.
No estoppel in PTO, court or ITC.
Petition proposes multiple grounds of unpatentability. Ground 1 instituted for trial, Ground 2 NOT instituted on merits. (3)
Ground 2 advanced in second proceeding in PTO, court or ITC.
No estoppel expected in PTO, court or ITC.
Trial is instituted for ground of unpatentability, but IPR is unsuccessful and final written decision finds challenged claims valid. (4 & 5)
A different ground is advanced in a second proceeding in PTO, court or ITC, but ground is based on prior art references which challenger knew of or could have discovered.
Estoppel in PTO, court or ITC.
A validity challenge is advanced in court or the ITC based on prior art other than patents or printed publications factually related to prior art patents or publications advanced in IPR.
No estoppel if prior art has more extensive disclosure on challenged claims, compared to prior art patents or publications in IPR. No decisions yet address scenario if prior art does NOT have more extensive disclosure.
Does Estoppel Apply To: (1) A Ground That Was Subject of a Final Written Decision in IPR? A ground of unpatentability that was the subject of a final written decision in an IPR falls squarely within the text of ยง 315(e). Such a ground is estopped and cannot be raised in a subsequent proceeding in the PTO, district court or ITC.
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(2) A Ground Proposed in an IPR Petition but Rejected as Redundant? Two 2016 decisions from the U.S. Court of Appeals for the Federal Circuit ruled that a ground proposed in an IPR petition but denied institution on the basis of redundancy is not estopped and can be raised in a later proceeding. Shaw Industries Group, Inc. v. Automated Creel Systems, Inc.,[2] was an appeal from an IPR in which the PTAB denied institution of a ground (the Payne-based ground) as redundant but held a trial and issued a final written decision on other grounds. On appeal, the petitioner raised the question of whether the noninstituted Payne-based ground would be estopped in a later proceeding under § 315(e). The Federal Circuit ruled that the noninstituted Payne-based ground was rejected before the IPR was instituted and conducted, so it could not have been raised “during” the IPR, as required by §§ 315(e)(1) and (2).[3] In HP Inc. v. MPHJ Technology Investments, LLC.,[4] the Federal Circuit cited Shaw and reaffirmed the finding that noninstituted grounds are not part of an IPR and therefore would not be estopped from subsequent review under § 315(e)(1). While the Shaw and HP decisions dealt with noninstituted grounds due to redundancy, both decisions used broad language and reasoning that were not necessarily limited to the context of redundancy, raising the following merits-based question. (3) A Ground Proposed in an IPR Petition but Rejected on Merits? Two PTAB decisions shed light on this scenario. In the precedential decision made in Westlake Services, LLC v. Credit Acceptance Corp., a Covered Business Method (CBM) review with a first petition asserted unpatentability under 35 U.S.C. § 101. The PTAB instituted trial for some challenged claims on this ground, but it denied institution on the merits for other claims.[5] The PTAB later found the instituted claims to be unpatentable under § 101.[6] In light of the U.S. Supreme Court’s Alice decision, the petitioner filed a second CBM review petition to challenge the claims for which trial was not instituted in the earlier CBM review. The patent owner moved to terminate the second CBM review, asserting estoppel. The PTAB determined, in a precedential decision, that previously noninstituted claims were not part of the final written decision of the first CBM review, and therefore “estoppel does not apply to those claims.”[7] A more recent IPR decision, Ariosa Diagnostics v. Verinata Health, Inc., saw the board state broadly in dictum, “The Federal Circuit has held . . . that ‘noninstituted grounds do not become a part of the IPR’ and, thus, estoppel does not apply to those grounds in a subsequent court or Board proceeding,” citing the Shaw and HP decisions.[8] (4) A Ground Not Proposed in Prior IPR Petition but Is Based on Prior Art, Which Petitioner Knew of or Reasonably Could Have Been Expected to Discover? Absent a showing of actual knowledge of prior art, the PTAB has found a ground to be estopped where a petitioner reasonably could have been expected to discover prior art at the time of a prior IPR. In Dell Inc. v. Electronics & Telecommunications Research Institute,[9] the petitioner challenged the validity of a patent in multiple IPRs. In a prior IPR, the petition proposed several grounds, the board instituted on
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one ground (denying the others on the merits), and the final written decision found the challenged claims not to be unpatentable. The petitioner later filed another petition that proposed a ground based on new combinations of prior art references previously asserted in the first petition. The PTAB, which later designated its Dell decision as representative, held that the petitioner was estopped from asserting the new combinations, stating, “once a Petitioner has obtained a final written decision, that Petitioner may not request or maintain subsequent proceedings on a ground that it ‘could have raised’ during the prior proceeding.”[10] The board noted remarks from the legislative history that a “ground that the petitioner reasonably could have raised” includes “prior art which a skilled searcher conducting a diligent search reasonably could have been expected to discover.”[11] In Dell, the estopped grounds of unpatentability were based on prior art references that were relied on in the earlier proceeding and indisputably known to the petitioner. In Ford Motor Company v. Paice LLC & The Abell Foundation, Inc., the PTAB terminated an IPR because of estoppel, where the prior art reference had been cited during the prosecution of the challenged patent.[12] Similarly, in International Business Machines Corp. v. Intellectual Ventures II LLC, the PTAB found estoppel to apply based on a finding that a skilled searcher would likely have searched a well-known database (the IEEE Xplore Digital Library) and found the prior art reference in question.[13] While Dell addressed the situation where there is no question that the prior art was known during the IPR, a recent district court decision in Clearlamp, LLC v. LKQ Corp. involved a scenario where it was not clear whether the prior art was known during the IPR. Clearlamp analyzed estoppel under § 315(e)(2) in a manner that was consistent with the foregoing decisions.[14] Defendant LKQ pursued an IPR that resulted in the cancellation of some but not all claims, and LKQ tried to invalidate the surviving claims in district court litigation. LKQ urged obviousness based on a prior art combination that included references on which LKQ had relied in the IPR and a product datasheet publication. Plaintiff Clearlamp argued that LKQ was estopped from presenting such a defense. The court found no estoppel because Clearlamp had failed to prove that a skilled searcher performing a diligent search would have found the datasheet, stating, “It is the proponent of an estoppel argument that bears the burden.”[15] (5) A Ground Advanced in District Court Based on Prior Art Other Than Patents or Printed Publications? One limitation of IPRs is that validity challenges are based only on prior art in the form of patents or printed publications.[16] In litigation, an accused infringer can bring to bear other forms of prior art, such as prior public use, sale or other public knowledge. A prior art patent or printed publication sometimes describes something, such as a device, that can be a separate form of prior art. In such situations, an important question is whether a previous IPR involving a prior art patent or publication estops the petitioner from asserting invalidity based on a different form of prior art—for example, system prior art—that is related to the patent or printed publication that was asserted in the IPR. In Star Envirotech, Inc. v. Redline Detection, LLC,[17] a district court addressed such a scenario. Redline had pursued an unsuccessful IPR in which the challenged claims were found not to be unpatentable. In court, Redline advanced an invalidity defense based in part on a prior art device called the LeakMaster smoke machine. Redline asserted that the LeakMaster device, when combined with other disputed prior
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PRACTICE TAKEAWAYS: Ways to Manage Estoppel Take Note
FOR PETITIONERS
FOR PATENT OWNERS
>> Conduct Thorough Prior Art Searches. A
>> Show Prior Art Was Known. Patent owners who
petitioner has strong motivation to be thorough in prior art searches when preparing a first IPR petition because estoppel will apply in later proceedings for any prior art references of which the petitioner knew or reasonably could have been expected to discover.
>> Consider Multiple Meritorious Grounds. When
multiple meritorious grounds on unpatentability are available, a petitioner should consider proposing multiple grounds in a first IPR. Meritorious grounds that are proposed but not instituted, for redundancy reasons or on the merits, are not estopped and may be presented in later proceedings. However, a petitioner faces estoppel for grounds that were not proposed in a first IPR petition but advanced in a later proceeding and based on prior art of which the petitioner knew or reasonably could have been expected to discover.
>> Manage IPR, Parallel Litigation and Prior Art.
In situations involving a first IPR and a parallel litigation, a petitioner (accused infringer) should try to find prior art in a form other than patents and printed publications for use in the litigation. Where the non-patent, non-publication prior art presented in the litigation is factually related to the prior art presented in the first IPR, the petitioner should try to show how the non-patent, nonpublication prior art has more extensive disclosure with respect to the challenged claims than the first IPRâ&#x20AC;&#x2122;s prior art patents or publications.
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want to assert that a ground of unpatentability or invalidity is estopped because of a previous IPR should try to show that the prior art in question are references that the petitioner knew or reasonably could have been expected to discover.
>> Bear Burden of Proof. Patent owners should
keep in mind they bear the burden of proof on this issue and make a thorough showing that a skilled searcher conducting a diligent search reasonably could have been expected to discover the prior art in question.
>> Use Uncertainty Advantage. In situations
involving litigation in which the accused infringer relies on non-patent, non-publication prior art and has pursued a previous IPR, a patent owner should take advantage of uncertainty in the law. If possible, the patent owner should try to show that the non-patent, non-publication prior art presented in the litigation is factually related to the prior art patents or publications advanced in the IPR, with no disclosure beyond that of the prior art presented in the IPR.
art references that were raised or could have been raised in the IPR, created new grounds of invalidity that could not have been presented in the IPR. Plaintiff Star Envirotech moved to strike this defense, asserting that Redline could have relied on the LeakMaster owner’s manual as a printed publication in the IPR, and, therefore, Redline’s invalidity defense should be estopped. The court ruled that this invalidity defense was not estopped under § 315(e)(2), noting the LeakMaster “physical machine itself discloses features in the ’808 Patent that are not included in the instruction manual, and it is therefore a superior and separate reference.”[18] The Star Envirotech decision left several questions unanswered—such as whether Redline would have been permitted to rely on the owner’s manual if the physical device were not available—for future courts to hopefully address.
ENDNOTES [1]
35 U.S.C. § 315(e) reads: (e)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. [2] 817 F.3d 1293 (Fed. Cir. Mar. 23, 2016). [3] Id. at 1300. [4] 817 F.3d 1339 (Fed. Cir. Apr. 5, 2016). [5] CBM2014-00008, Paper 30 (PTAB Mar. 31, 2014). [6] CBM2014-00008, Paper 66 (PTAB Mar. 24, 2015). [7] CBM2014-00176, Paper 28 (PTAB May 14, 2015) at 5 (precedential). Although this was not an IPR, the board considered estoppel under the statute and rules for CBM reviews that have the same operative language as the estoppel provisions for IPRs in § 315(e). [8] IPR2013-00276, Paper 63 (PTAB May 24, 2016) at 8 n.17. [9] IPR2015-00549, Paper 10 (PTAB March 26, 2015) (representative). [10] Id. at 4. [11] Id. at 4-5; 157 Cong. Rec. 1375 (daily ed. Mar. 8, 2011); see also Apotex Inc. v. Wyeth LLC, IPR2015-00873, Paper 8 (PTAB Sept. 16, 2015); Kofax, Inc. v. Uniloc USA, Inc., IPR2015-01207, Paper 22 (PTAB June 2, 2016). [12] IPR2014-00884, Paper 38 (PTAB Dec. 10, 2015) at 14-15 (“Here, we need not speculate about what reasonably could have been discovered and proffered, because the record demonstrates that [Petitioner] must have known of [the relevant prior art references] at the time of the [earlier-filed IPR] Petitions, and if not, such knowledge should be imputed to it.”). [13] IPR2014-01465, Paper 32 (PTAB Nov. 6, 2015) at 5-6. [14] Case No. 1:12-cv-02533 (N.D. Illinois, Mar. 18, 2016) at 13-19. [15] Id. (citation omitted). [16] 35 U.S.C. § 311(b). [17] Case No. SACV 12–01861 JGB (DFMx), 2015 WL 4744394 (C.D. Cal., Jan. 29, 2015). [18] Id.
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PRECEDENTIAL DECISIONS OF THE PTAB
Of the eight PTAB decisions designated as precedential to date, all are almost completely procedural in nature.
In the four years of PTAB proceedings—and of thousands of opinions—a mere eight have been designated “precedential” under Standard Operating Procedure 2 (SOP 2). These decisions are almost entirely procedural in nature and give little guidance for what substantive arguments will win the day. Of the eight opinions, five are IPR decisions and three are CBM decisions. Summaries of the eight PTAB precedential decisions to date are below. SecureBuy LLC v. CardinalCommerce Corp., CBM2014-00035 (PTAB Apr. 25, 2014) PTAB may not institute a post-grant review or covered business method patent review of a challenged patent if the petitioner files a civil action challenging the validity of a claim of the patent before the date on which the petition for review is filed. This decision highlights that post-grant review and covered business method patent review are to be alternatives to (generally more expensive) declaratory judgment proceedings in district court. Westlake Servs., LLC v. Credit Acceptance Corp., CBM2014-00176 (PTAB May 14, 2015) USPTO interpreted §§ 328(a) and 325(e) to apply on a claim-by-claim basis and, thus, estoppel does not apply to claims not instituted on, nor addressed, in the final written decision. Although this opinion was issued in a covered business method patent proceeding, it likely also applies to IPR proceedings under 35 U.S.C. §§ 315(e)(1) and 318(a).
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INTER PARTES REVIEW PROCEEDINGS October 2016
LG Elecs., Inc. v. Mondis Tech. Ltd., IPR2015-00937 (PTAB Sept. 17, 2015)[1] The statute prohibits institution of an IPR if the petition is filed more than one year after the date a petitioner is served with “a” complaint, regardless of whether any subsequent complaint is also served on the petitioner. Garmin Int’l v. Cuozzo Speed Techs. LLC, IPR2012-00001 (PTAB Mar. 5, 2013) Over the past four years, the PTAB has scrutinized requests that seek additional discovery beyond what is considered routine by the statute. This decision highlights the five factors the PTAB considers in assessing motions for additional discover, including: (1) the mere possibility or allegation of finding something useful is insufficient to justify a request for additional discovery; (2) seeking a party’s litigation position does not satisfy the “in the interest of justice” requirement for granting additional IPR discovery; (3) information a party can access or figure out does not warrant additional discovery; (4) requests for additional discovery should be narrowly tailored and easy to understand; and (5) discovery requests cannot be overly burdensome to answer. Bloomberg, Inc. v. Markets-Alert Pty, Ltd., CBM2013-00005 (PTAB May 29, 2013) The PTAB analyzes the five factors (above) for “good cause” when determining whether to grant a motion for additional discovery in a CBM proceeding. While an “interests-of-justice” standard is used to evaluate additional discovery requests in IPRs, a good-cause standard is applied in post-grant reviews and covered business method patent reviews. On balance, the interests-of-justice standard is a slightly higher standard than the good-cause standard to reflect that the scope of issues that could be raised by a petitioner in an IPR is limited to grounds based on patents or printed publications. Oracle Corp. v. Click-to-Call Techs, LP, IPR2013-00312 (PTAB Oct. 30, 2013) The dismissal of an infringement suit brought by the patent owner nullifies the effect of the service of the complaint and, as a consequence, does not bar petitioners from pursuing an inter partes review of the patent in a later filed suit against the same party. MasterImage 3D, Inc. v. RealD Inc., IPR2015-00040 (PTAB July 15, 2015) In a motion to amend the claims, the burden is not on the petitioner to show unpatentability but on the patent owner to show patentable distinction over the prior art of record and also prior art known to the patent owner. Lumentum Holdings, Inc. v. Capella Photonics, Inc., IPR2015-00739 (PTAB Mar. 4, 2016) The board’s rules make clear that jurisdiction is not “lost” the moment a petition no longer identifies “all real-parties-in-interest.” A petitioner has 21 days from the board’s insitution decision to file an updated mandatory notice of the real-parties in interest. The board has exercised its discretion to authorize late filings, especially when the patent owner fails to challenge the petitioner’s RPI disclosure.
ENDNOTE [1] A discussion of Oracle Corp. v. Click-to-Call Techs, LP, which also addressed the interpretation of being “served with a complaint” under § 315(b), is included below.
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DISTRICT COURT STAYS PENDING IPR/CBM REVIEW: A REVIEW OF THE PAST 12 MONTHS
CONTESTED REQUESTS TO STAY PENDING IPR/CBM REVIEW
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FILED BEFORE INSTITUTION GRANTED
FILED AFTER INSTITUTION GRANTED
48%
75%
INTER PARTES REVIEW PROCEEDINGS October 2016
After inter partes review (IPR) and covered business method (CBM) proceedings launched in September 2012, parties have regularly requested district courts to invoke the court’s power to stay its proceedings pending the conclusion of IPR/CBM proceedings before the Patent Trial and Appeal Board (PTAB). In the first three years after the AIA went into effect, 57% of overall contested requests to stay were granted. For the fourth year, the trend is identical. Moreover, the overall success rate for contested requests to stay, pending IPR and CBM combined, filed after institution jumped from 70% to 75%. There are several issues that impact the overall likelihood of success. We offer an in-depth look at these areas of influence and the practice implications for in-house patent counsel.
Factors Impacting Stay Decisions District courts generally weigh the following three factors in determining whether to stay litigation pending IPR or CBM review: 1. Whether a stay is likely to simplify the issues in question in the litigation. Under consideration are the number of challenged claims and patents at issue in the litigation, the likelihood of asserted claims being canceled and whether potential discovery issues relating to prior art can be resolved by the U.S. Patent and Trademark Office (USPTO); 2. Whether the proceedings are at an advanced stage. This includes whether discovery is still open, if claim construction is complete and if a trial date has been set; and 3. Whether a stay would unduly prejudice the non-moving party. At play here is an evaluation of the timing of the stay request, the timing of the IPR proceedings and the relationship of the parties.[1] Additional factors that influence the outcome and resolution of requests to stay include: the timing of the request, such as pre-institution or post-institution, and if the request is made early or late in the case; jurisdiction and judge; and the parties in the case, e.g., NPE, competitor versus competitor, etc.
2016 Stay Statistics Of the 298 total orders on requests for stay since September 1, 2015, 74% of the requests—220 in total—were granted. But of the 220 granted, over half (115) were stipulated. Not surprisingly, stipulated requests for a stay had a 97% success rate in the last year. Taking those stipulated requests out of the mix, 54% of the contested motions for stay pending IPR were granted and 89% of contested motions for stay pending CBM review were granted. Thus, stipulating to a stay remains the surest way to ensure one is granted. As in prior years, the timing of the motion to stay relative to whether trial has yet been instituted has a big impact on the likelihood of success.
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Timing Matters Key Tip
>> While filing after institution significantly raises stay chances, petitioners who like nearly 50-50 success rates might file before institution.
From the time of filing the petition for review, the PTAB must issue a decision within six months on whether to institute a trial.[2] The “majority rule”[3]—to postpone or deny stay requests filed prior to institution of a trial—continues to be in effect and has become even more pronounced over the past year. During that time, 48% of contested requests to stay pending IPR/CBM review filed before institution were granted. In contrast, 75% of contested requests to stay pending IPR/CBM review filed after institution were granted. It is also important to consider the timing of the filing of the petition for review and how that might impact a stay request. A petition must be filed within one year after the date on which the petitioner, real-party-in-interest or privy of the petitioner is served with the complaint alleging infringement of the patent.[4] But courts may, and do, deny stay requests because the movant “unjustifiably delayed” in filing its petition for IPR/CBM review, as the longer a party waits to file its petition, the more likely it is that discovery, claim construction and dispositive motion practice will be underway in the district court, cautioning against a stay.[5] Therefore, a petition should be filed as early as possible and the petitioner should inform the court as early as possible that a petition has been or will soon be filed, and that a motion for a stay will be forthcoming, so that the court may take these events into account in scheduling.
Location Matters, But the Judge Matters More in Some Districts Several districts stand out as favorable to motions to stay pending IPR review, while a handful of others are generally anti-stay.
FAVORABLE JURISDICTIONS FOR STAYS PENDING IPR CONTESTED STAYS SUCCESS RATE
TOTAL STAY REQUESTS
STIPULATED REQUESTS
Western District of Washington
7
1
5
83%
Southern District of Texas
9
3
5
83%
Northern District of Illinois
13
4
6
67%
Northern District of California
24
8
10
63%
Massachusetts District Court
10
0
6
60%
DISTRICT COURT
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CONTESTED STAYS GRANTED
INTER PARTES REVIEW PROCEEDINGS October 2016
UNFAVORABLE JURISDICTIONS FOR STAYS PENDING IPR
CONTESTED STAYS GRANTED
CONTESTED STAYS SUCCESS RATE
TOTAL STAY REQUESTS
STIPULATED REQUESTS
CONTESTED STAYS DENIED
Central District of California
19
6
7
6
46%
Eastern District of Texas
29
10
11
8
42%
Minnesota District Court
12
7
3
2
40%
Delaware District Court
45
20
15
10
40%
Eastern District of Michigan
12
5
5
2
29%
DISTRICT COURT
Key Tip
>> Learn the judges’ records on granting stays; they vary greatly across jurisdictions.
Looking at the stay decisions of selected judges in districts known for carrying a heavy load of patent cases since the AIA went into effect in September 2012 reveals that the judge may matter more than the jurisdiction.[6] Let’s look at the judges of the U.S. District Court for the Northern District of California. For example, they granted contested motions to stay pending IPR, as a group, 65% of the time since September 2012. However, several individual judges in the group veer far from that number. The success rate in front of Judge Freeman is only 43%, and Judge Alsup has never granted in full a stay request pending IPR. This sharply contrasts with Judges Hamilton and Illston, in front of whom the success rate on contested motions to stay pending IPR is 100% and 63%, respectively. In the U.S. District Court for the Eastern District of Texas, moving to stay pending IPR is an uphill battle regardless of the judge. Only 42% of contested motions saw success this past year. But success is nearly impossible in front of Judge Gilstrap, who only granted in full one (out of seven) contested requests, for a success rate of just 14%. In front of Judge Payne, however, contested motions to stay pending IPR saw a 40% success rate since September 2012. And in the U.S. District Court for the District of Delaware, the success rate on contested motions to stay pending IPR was 50% over the period beginning September 2012, but the statistic hides the extremes. Judge Sleet has granted stays in 89% of contested motions to stay pending IPR, while the success rate in front of Judges Andrews and Stark is only 22% and 35%, respectively.
Relationship of the Parties—Competitors versus Trolls Finally, the competitive relationship of the parties is often a factor in determining whether a stay issues. As a general matter, the fact that parties are direct competitors weighs against granting a stay, because the harm that results when competitors battle it out for market share is difficult to calculate and issuing a stay amid the battle can hurt the patent owner who is wanting the competitor to stop immediately. However, without some evidence, an ipse dixit argument that undue prejudice will befall the non-moving party will not carry the day; some evidence of undue prejudice must be shown.[7]
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On the other hand, the fact that the non-moving party is a non-practicing entity does not guarantee a stay. For example, in a recent case in the Eastern District of Texas, the court found that the fact that the NPE did not directly compete with the defendant did not mean it would not experience prejudice from a stay, noting that even an NPE was interested in a timely enforcement of its rights.[8,9]
BREAKDOWN ON REQUESTS TO STAY: SEPTEMBER 1, 2015 – AUGUST 31, 2016
DISTRICT COURT ORDERS
REQUESTS TO STAY PENDING IPR
REQUESTS TO STAY PENDING CBM REVIEW
TOTAL
270
28
Stays Granted
194
26
Granted Before Decision on Institution
116* 49 contested 66 stipulated
11
77** 34 contested 39 stipulated
15
Granted After Decision on Institution
Stays Denied
76
Denied Before Decision on Institution
59
7 contested 4 stipulated 9 contested 6 stipulated 2 2 2 contested 0 stipulated
58 contested 1 stipulated Denied After Decision on Institution
0
17
0 contested 0 stipulated
14 contested 3 stipulated
Automatic Stay Under § 315(a)(2) *Includes one sua sponte decision by the district court. **Includes four sua sponte decisions by the district court.
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INTER PARTES REVIEW PROCEEDINGS October 2016
1
0
ENDNOTES [1] See, e.g., Chrimar Sys., Inc. v. Adtran, Inc., No. 6:15-CV-618-JRG-JDL, 2016 WL 4080802, *1 (E.D. Tex. Aug. 1, 2016) (Love, M.J.); Finjan, Inc. v. Symantec Corp., 139 F. Supp. 3d 1032, 1035 (N.D. Cal. 2015) (Gilliam, Jr., J.). [2] Trial Practice Guide at 48757. [3] Trover Grp., Inc. v. Dedicated Micros USA, No. 2:13-cv-1047-WCB, 2015 WL 1069179, *5 (E.D. Tex. Mar. 11, 2015) (Bryson, J.). [4] 35 U.S.C. § 315(b). [5] See, e.g., Chrimar, 2016 WL 4080802, at *3 (finding that movant had, without explanation, “waited between seven and eleven months to file all of its IPR petitions, and further waited another two months from the filing of the last-filed IPR petition to file the current motion [to stay], demonstrating a lack of diligence” and that “[g]iven that this case has proceeded through claim construction and nearly completed discovery, . . .” “this factor weighs against a stay.”). [6] In order to present a more reliable sample size for analyzing judge-specific tendencies, the data presented regarding individual judge’s decisions on motions to stay pending IPR includes decisions from September 16, 2012 through August 31, 2016. [7] See, e.g., Finjan, 139 F. Supp. 3d at 1037-38 (“courts in [the Northern District of California] require evidence to substantiate an argument that direct competition will result in prejudice to the non-moving party”) (quotation omitted). [8] Chrimar, 2016 WL 4080802, at *2 (“The mere fact that [plaintiff] is not currently practicing the patents does not mean that, as a matter of law, it is not prejudiced by a substantial delay of an imminent trial date.”) (citing Rembrandt Wireless Techs., LP v. Samsung Elecs. Co., No. 2:13-cv-213, 2015 WL 627887-JRG-RSP, at *2 (E.D. Tex. Jan. 29, 2015)). [9] Id. However, another issue animating the prejudice analysis in Chrimar was that ten defendants had not filed petitions for IPR and, therefore, the case against those defendants would proceed even if a stay were granted as to the two defendants who had filed petitions and “would effectively bifurcate th[e] action, causing duplicative resources to be expended by the Court and the parties.” Id.
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MOTION FOR JOINDER AND SEQUENTIAL PETITIONS: CAN A SECOND BITE AT THE APPLE SAVE THE CASE?
What is the likelihood of success for a Motion for Joinder and/ or filing a subsequent petition with the PTAB? This analysis reveals that these are generally long shot remedial attempts that are rarely reliable approaches to remedying missed opportunities or errors in initial filings.
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INTER PARTES REVIEW PROCEEDINGS October 2016
The PTAB rules for post-grant procedures give petitioners a single chance to make their case. Savvy practitioners recognize the value in spending the time and effort to make their petitions as complete and compelling as possible, because the rules provide virtually no automatic procedures to correct even minor administrative mistakes. Sometimes, however, not all goes according to plan. Filing mistakes can happen, or the patent owner may raise an argument that, if a do-over was possible, requires further examination of prior art or expert testimony. In other situations, an interested party may be time barred from filing their own petition but still want to be part of an ongoing IPR trial for strategic reasons (e.g. to obtain a stay while someone else challenges validity). In these situations, is all lost or is there anything to do to bolster the case? The following analysis looks at the likelihood of success for a Motion for Joinder and/or filing a subsequent petition with the PTAB. The statistics reveal these are generally long-shot remedial attempts that are rarely reliable approaches to remedying missed opportunities in initial filings.
Joining One’s Own Prior IPR One avenue for adding arguments or prior art to a petition is to file a second petition and seek to have it joined to your own previously instituted trial. 35 U.S.C. § 315 gives the Director discretion to join as a party “any person who properly files a petition” provided the petition is filed within one month of institution. 37 C.F.R. 42.122. Be aware that despite the broad language of the statute, there is a split among the PTAB itself on whether a party can join its own previously instituted IPR (so called issue joinder) or whether joinder is limited to joining an instituted trial to which the petitioner is not a party (so called party joinder). Mixed Results. For example, in Target v. Destination Maternity, an expanded panel ruled that it was allowable for a party to join its own prior IPR trial.[1] However, a different panel in SkyHawke Tech. v. L & H Concepts disagreed and ruled that only parties who were not already a party to an instituted IPR trial can petition to join.[2] Yet another expanded panel in Zhongshan v. Nidec Motor Corp. backed the Target panel.[3] Since none of these decisions are precedential, the ability to join your own previously granted trial will likely depend on the makeup of the particular panel. In Zhongshan, the petitioner failed to submit an affidavit attesting to the proper translation of its prior art reference, as required by the rules. Despite numerous attempts to get the board to accept a translation, the board refused because the petitioner had not proved it was simply a clerical mistake. After the expiration of a one-year time bar, Zhongshan filed a second IPR petition with the proper affidavit and sought to have the new trial joined with the previously instituted trial. The board granted the petition,
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finding that there was no prejudice to the patent owner because the patent owner was aware of the foreign reference. Thus, the joinder tactic saved the day. Typical Denial Scenarios. Compare that with the more usual result of LG Electronics v. ATI Tech.[4] In this case, the petitioner had sought to add/join a new obviousness argument against a claim after the board declined to institute a trial against that particular claim. The board explained that, “A decision to institute review on some claims should not act as an entry ticket, and a how-to guide… to challenge those claims which [the petitioner] unsuccessfully challenged in the first petition” citing ZTE Corp. v ContentGuard Holdings, Inc.[5] The board further explained its concerns with the filing of inadequate petitions and the strain on its resources that would occur if a high volume of motions for joinder succeed. The following graphic shows the number of times since 2013 that the board has granted or denied motions to join a party’s own previously instituted trial. It illustrates the low (27%) likelihood of a panel granting a motion to add arguments or prior art to their own previously instituted IPR.
JOINDER MOTION OUTCOMES: ISSUE
27% Granted Denied 73%
Joining Someone Else’s IPR Even if a client is time barred from filing its own IPR, there may be a chance to join an IPR of another party. In Oracle v. Crossroads Systems, Inc., Oracle was barred from filing a second IPR petition, but the board allowed it to join a previously instituted IPR filed by Cisco Systems.[6] The factors that the board considers in allowing a party to join include: 1. Whether the prior art in the joinder petition is the same as the prior art in the instituted IPR. This includes not only the references but also the declarations. In the Oracle case, Oracle was able to get substantially the same declaration from the same witness to support their petition. Thus, the board wouldn’t have to consider any additional evidence as a result of Oracle joining. 2. Whether or not the patent owner and the original petitioner oppose the new party joining their IPR trial. 3. Whether the joining party agrees to play an “understudy” role with no substantive participation in the proceedings unless the original petitioner drops out of the case.
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INTER PARTES REVIEW PROCEEDINGS October 2016
The Downside of Joinder. Note that the board does not typically grant additional time at oral argument for a joining party to present its case. All petitioners have to split their time as they choose, and an original petitioner may not want to give up its valuable oral argument time. In addition, by joining an IPR, the joining party will be subject to the same estoppel provisions as the original petitioner. Without the ability to participate in a meaningful way, a joining party puts its fate in the hands of another. Finally, any motion for joinder must be filed within one month after the first trial is instituted. Therefore, counsel has to be watching for trials on patents that impact their clients. The chart below illustrates how the PTAB has allowed a petitioner to join someone else’s IPR just 38% of the time. The tally indicates that the board seems more inclined to join parties in ongoing trials than to joining issues in ongoing trials.
JOINDER MOTION OUTCOMES: PARTY
38% 62%
Granted Denied
Filing Sequential Petitions If a petitioner files early enough after receiving a complaint for patent infringement, it is possible that the board may decide whether to institute a trial with enough time to allow a petitioner to file a subsequent petition and not be time barred. For example, a subsequent petition may address shortcomings that the board found in the first petition or may include new prior art or arguments not addressed in the first petition. The board, however, does not generally look upon sequential petitions with favor. Common Reasons for Denying Sequential Petitions. Great West Casualty v. Intellectual Ventures II LLC is typical of how the board views sequential petitions.[7] In this case, Great West submitted a petition addressing an issue that may have arisen depending on how the board interpreted the patent owner’s claims. In denying the petition, the board recited a number of factors used in considering sequential petitions from its decision in NVIDIA Corp. v. Samsung Elec. Co.[8] These factors include: 1. the resources of the board; 2. the requirement under 35 USC § 316(a)(11) to issue a final determination no later than one year after the date on which the director notices institution of review; 3. whether the same petitioner already filed a petition directed to the same claims of the same patent;
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4. whether at the time of filing of the first petition, the petitioner knew of the prior art asserted in the second petition or should have known about it; 5. whether at the time of filing of the second petition, the petitioner already received the patent owner’s preliminary response on the first petition or received the board’s decision on whether to institute review in the first petitions; 6. the length of time that elapsed between the time the petitioner learned of the prior art asserted in the second petition and filing of the second petition; and 7. whether the petitioner provides adequate explanation for the time elapsed between the filings of multiple petitions directed to the same claims of the same patent. The most common of the above reasons the PTAB cites in denials of subsequent petitions are items 3–5. In reviewing the factors, it seems the board does take into account the occurrence of petitioners harassing patent owners with sequentially filed petitions that use the board’s guidance to fine-tune their invalidity arguments. Perceived Shift at PTAB. Recent data shows that the board is becoming more generous. A recent board decision indicated that there is no per se rule against using the roadmap of a previously denied petition to deny a petitioner a second bite at the apple. According to the board, it was unrealistic to assume that a second petition would not attempt to address the deficiencies of an earlier petition. The fact that a petitioner failed to locate the references that disclose the claimed features, or failed to argue them successfully in its first petition, does not immunize a patent owner from challenges raised in a second properly filed petition. We analyze the underlying statistics for sequential petitions filed since 2013. The research focused on cases where the petitioner filed two or more petitions on the same patent on different dates, wherein an institution decision was released for the first filing.
SECOND BITE AT THE APPLE PETITIONS - OUTCOME BY YEAR 120 100 59
80 60
27
40 43
20 11 0 2013
45
5
8 2014 Instituted
2015
2016
Denied
As the numbers show, at least in 2015, the board granted second-filed petitions—a mixture of both new petitions and motions for joinder—more often that it denied such petitions.
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INTER PARTES REVIEW PROCEEDINGS October 2016
PRACTICE TAKEAWAY: A Second Shot Might Hit the Mark >> As these statistics and cases show, relying on the board to accept anything but a first filed petition is
Take Note
still a relative long shot, but it is not without hope. Should the need to make a correction or address an argument arise after losing on a first petition, a rock solid second attempt that addresses any gaps and convinces the board that a patent is invalid may be worth the effort.
ENDNOTES [1] [2] [3] [4] [5] [6] [7] [8]
IPR2014-00508, Paper 28. IPR2014-01485, Paper 13. IPR 2015-00762, Paper 16. IPR2015-01620, Paper 10. IPR2013-00454, Paper 12. IPR2015-00852, Paper 14. IPR 2016-00453, Paper 12. IPR2016-00134, Paper 9.
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THE REVISED IPR RULES
A significant revision now allows a patent owner to use testimonial evidence in support of a preliminary response. This addresses long-expressed concerns that patent owners were disadvantaged by their inability to submit pre-institution evidence to rebut arguments in an IPR petition.
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INTER PARTES REVIEW PROCEEDINGS October 2016
The revised rules governing IPRs and other PTAB proceedings took effect on May 2, 2016 and make significant changes that all IPR parties should keep in mind. 81 Fed. Reg. 18750 et seq. (Apr. 1, 2016) (codified at 37 C.F.R. pt. 42).
Key Tip
Changes include the following: • Allowing patent owners to use new testimonial evidence, including depositions to support their preliminary responses; • Replacing page limits for papers with word-count limits; • Permitting Phillips-type claim construction when a challenged patent will expire during an IPR; and • Requiring parties to make a “Rule 11-like” certification that all papers filed with the PTAB comply with the USPTO’s duty of candor.
>> Statistics show that filing a preliminary response reduces the chances of institution.
Highlighted below are details of the major revisions.
Patent Owners May File New Testimonial Evidence to Support Preliminary Responses Perhaps the most significant change is a revision of 37 C.F.R. § 42.108(c) that allows a patent owner to use testimonial evidence in support of a preliminary response. This change addressed long-expressed concerns that patent owners were disadvantaged by their inability to submit pre-institution evidence to rebut arguments set forth in an IPR petition. The revised rule also allows a petitioner, upon a showing of good cause, to file a reply to the patent owner’s preliminary response.[1] A few practical implications of the revised rule follow. Effect of Patent Owner Preliminary Responses on Institution. Patent owners regularly use preliminary responses to rebut grounds set forth in IPR petitions, often leading to grounds being denied institution. Preliminary responses are used to point out deficiencies in the petitioners’ asserted grounds of unpatentability. For example, responses are used to identify shortcomings in the disclosures of the cited prior art, to attack the appropriateness of combining prior art cited in obviousness grounds, and to challenge the legal status of asserted prior art, e.g., for lack of authenticity or lack of public availability. Statistics show that filing a preliminary response reduces the chances of institution. In our review of over 3,000 IPR petitions filed since 2012, in cases where the patent owner did not file a preliminary response, 91% of IPRs were instituted in whole or in part. However, when the patent owner filed a preliminary response, 73% of IPRs were instituted in whole or in part—a significant reduction in the institution rate. This rule is expected to lead to a further decline in institution rates now that patent owners can use experts to rebut arguments in the petition. Strategic Considerations for Pre-Institution Rebuttal Testimony. There are a handful of considerations in this area we have identified: Expert Testimony to Rebut Obviousness. New testimonial evidence is well-suited to help patent owners rebut obviousness grounds proposed in a petition. An expert declaration filed with a patent owner’s
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Key Tips
>> Allowing expert declarations to support a patent owner’s preliminary response is both a major change and a new opportunity. >> Be sure to assess the risk posed by submitting testimonial evidence at the preliminary response stage.
preliminary response will counterbalance a petitioner’s expert declaration on multiple issues—including (1) the state of the art; (2) the teaching, suggestion and motivation to combine the cited prior art (or lack thereof); or (3) errors on the part of petitioner’s expert—in a way that shows that the asserted prior art references should not be combined for purposes of an obviousness analysis. The PTAB often scrutinizes the appropriateness of combining the prior art references that comprise an obviousness ground, and it has denied institution on the merits when the petitioner’s showing came up short in this regard. A patent owner’s expert declaration can be well suited to calling into question the petitioner’s rationale for combining references, which can provide strong support for the patent owner’s argument not to institute trial. Similarly, an expert declaration can help the patent owner address objective indicia of nonobviousness. Rebuttal Expert Testimony Reveals Additional Information to Counter Petition Grounds but Carries Risk for Patent Owners. The prospect of using expert rebuttal testimony to thwart institution and nip an IPR in the bud will be attractive to patent owners but also may be a double-edged sword. In many instances, a rebuttal expert declaration will provide the petitioner with an early and fuller view of the patent owner’s case than it otherwise would have had. The petitioner might be able to use such information to its advantage in the IPR and/or in co-pending PTAB proceedings or litigation. Such information might also provide additional time to investigate the patent owner’s expert and to develop counterarguments and responsive evidence for possible use post-institution and/or in other proceedings. Furthermore, a declarant who provides testimonial evidence will be subject to cross-examination if the IPR is instituted. The patent owner’s limited window of time to prepare and file a preliminary response, much less find an expert and develop a declaration, could result in a hastily prepared declaration with incomplete supporting information. As a result, a rebuttal declaration could provide the petitioner with good fodder for cross-examination and for undermining the expert’s credibility. Genuine Issues of Material Fact. Revised § 42.108(c) requires that “a genuine issue of material fact created by such testimonial evidence will be viewed in the light most favorable to the petitioner solely for purposes of deciding whether to institute an [IPR].” We note, however, that the mere difference of expert opinions does not necessarily give rise to a genuine issue of material fact. When faced with conflicting expert testimony, the Federal Circuit has examined the record in detail to determine whether a genuine issue of material fact exists.[2] Patent owners should consider this presumption in favor of the petitioner when assessing whether an expert declaration is sufficiently strong to overcome the presumption and outweigh the costs and risks associated with submitting rebuttal testimonial evidence. In this regard, patent owners should also keep in mind that the Patent Office draws no negative inference from the patent owner’s choice not to submit expert testimony. Rebuttal Testimony Can Counter Prior Art and Arguments Previously Before USPTO. Under 35 U.S.C. § 325(d), the PTAB may decline to institute an IPR trial where a petition presents the same, or substantially the same, prior art or arguments that were previously presented to the USPTO (e.g., in prosecution). However, the PTAB has instituted trial in numerous cases despite the patent owner urging the PTAB to deny institution under § 325(d). In cases where the patent owner feels it has a strong
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argument that an IPR trial should not be instituted under § 325(d), rebuttal expert testimony might help show that the prior art and/or grounds are not substantially different from the prior art and/or arguments previously presented to the USPTO. Petitioner May Still Get the Last Word. Revised § 42.108(c) states, “[a] petitioner may seek leave to file a reply to the preliminary response,” and “[a]ny such request must make a showing of good cause.” The USPTO’s comments to this revision state in relevant part: The Office believes that although submission of patent owner testimonial evidence at the preliminary stage may warrant granting petitioner a reply to such evidence, the decision concerning whether petitioner will be afforded a reply and the appropriate scope of such a reply rests best with the panel deciding the proceeding to take into account the specific facts of the particular case.[3]
Key Tips
>> Remember that presumption favors the petitioner when considering the strength of an expert declaration.
Thus, patent owners who file a preliminary response supported by rebuttal testimonial evidence run the risk of providing justification for the petitioner to file a pre-institution reply, which would give the petitioner the final say before the PTAB decides whether to institute. A petitioner considering a pre-institution reply should assess whether the points to be made in a reply were previously addressed in the petition, and, if not, whether the petitioner reasonably could have been expected to make the points in the petition. If filed, the reply should be narrowly tailored to address specific issues raised in the patent owner’s preliminary response, and nothing more.
>> Use rebuttal testimonial evidence with caution; it might give the petitioner final say.
Word-Count Limits Replace Page Limits for PTAB Papers The original rules for PTAB proceedings had page limits for major papers. For IPRs, the rules limited the petition to 60 pages, the patent owner’s preliminary response and post-institution response to 60 pages, and the petitioner’s reply to 15 pages. In addition, the PTAB prohibited practices that it perceived were attempts to circumvent these strict page limits. For example, the PTAB prohibited parties from putting argument in claim charts because it was viewed as an end run around the page limits. The PTAB’s approach to enforcing the page limits led to many papers being rejected for noncompliance. As revised, 37 C.F.R. § 42.24 substitutes the following word limits for page limits and notes these other length factors: • An IPR petition is limited to 14,000 words. • A patent owner’s preliminary response or response is limited to 14,000 words, and a reply to a patent owner’s response to petition is limited to 5,600 words. • Importantly, the word count “does not include a table of contents, a table of authorities, mandatory notices under § 42.8, a certificate of service or word count, or appendix of exhibits or claim listing” or “a listing of facts which are admitted, denied or cannot be admitted or denied.” • The revised rule also allows a party to file a motion to waive the word counts. Concurrent with these revisions, the PTAB stated, “petitions will no longer be reviewed to determine if any claim charts contain argument, thereby streamlining administrative review of petitions and reducing the number of non-compliant petitions that require correction.”[4]
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Key Tips
On a substantive and practical level, these changes allow “the parties to structure arguments in briefing in any way that the party deems best for presenting its case to the [USPTO], including using analysis and arguments in claim charts.”[5] Parties now have more flexibility in tailoring their papers to present their positions in the clearest and most meaningful way possible.
Phillips-Type Claim Construction for Expiring Patents >> Note new word limits for papers filed in PTAB proceedings.
Under the original IPR rules, the PTAB applied a broadest reasonable interpretation (BRI) for claims of unexpired patents.[6] In decisions, the PTAB has applied Phillips-type claim construction to expired patents.[7] The PTAB explained that using the BRI standard “is consistent with the [USPTO]’s longstanding practice in post-issuance proceedings” and “promotes consistency across all reexaminations, reissues, and AIA proceedings involving the same patent families.”[8] In addition, the BRI makes sense when the patent holder has the “ability to clarify claim scope” by amending claims.[9] The U.S. Supreme Court recently affirmed the PTAB’s use of the BRI in IPRs.[10] Revised 37 C.F.R. § 42.100(b) reads in relevant part: A claim in an unexpired patent that will not expire before a final written decision is issued shall be given its broadest reasonable construction in light of the specification of the patent in which it appears. A party may request a district court-type claim construction approach to be applied if a party certifies that the involved patent will expire within 18 months from the entry of the Notice of Filing Date Accorded to Petition. The revised rule allows any party to request a Phillips-type claim construction if a patent expires during the IPR proceedings.[11] “The request, accompanied by a party’s certification, must be made in the form of a motion under § 42.20, within 30 days from the filing of the petition.”[12] “In many cases, the claim construction will be the same under the Phillips and BRI standards.”[13] However, in cases where the different claim construction approaches might yield different outcomes, the patent owner could benefit in an IPR by requesting a Phillips-type claim construction and advocating a claim construction that is narrower than the BRI (and therefore more likely to avoid prior art). In contrast, the petitioner is likely to argue that the claim construction should be the same under both approaches, or that any difference in claim construction does not change the disclosure of the claim element by the prior art. Strategically, a party should move for Phillips-type claim construction when it believes that the weight of extrinsic evidence will yield a different, more favorable result than BRI construction.
Parties Must Certify Their Compliance With the Duty of Candor Finally, the revised rules include a “Rule 11-type” certification requirement for PTAB papers that is similar to the requirements of Federal Rule of Civil Procedure 11. Specifically, 37 C.F.R. § 42.11 now requires that “every petition, response, written motion, and other paper filed in a proceeding must comply with the signature requirements set forth in § 11.18(a) of this chapter.” This revision was intended to provide “greater detail on the [USPTO]’s expectations for counsel and parties participating in post grant proceedings and also [to provide] a procedure for sanctions motions
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that does not appear in the current rule.”[14] A party must now make the following representations from 37 C.F.R. § 11.18(b)(2) when presenting a paper to the USPTO: “(i) The paper is not being presented for any improper purpose, such as to harass someone or to cause unnecessary delay or needless increase in the cost of any proceeding before the Office;
Key Tips
(ii) The other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification or reversal of existing law or the establishment of new law; (iii) The allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and (iv) The denials of factual contentions are warranted on the evidence, or if specifically so identified, are reasonably based on a lack of information or belief.” While these revisions do not change the substantive obligations of IPR parties under the duty of candor and good faith, the PTAB revised § 42.11 because “the deterrent effect of having such a rule has been recognized.”[15] Thus, the PTAB has put parties on notice that it is paying attention to this issue, and parties should make every effort to ensure that their IPR filings comply with this duty of candor.
>> Use the Phillips standard if a patent is set to expire during the IPR proceeding. >> New duty of candor certification requirements include sanctions for violations.
ENDNOTES [1] 37 C.F.R. § 42.108(c); 81 Fed. Reg. 18766. [2] See In re Gabapentin Patent Litigation, 503 F.3d 1254, 84 U.S.P.Q.2d 1651 (2007) (noting a difference in expert opinions and thoroughly examining the evidence to determine whether a genuine issue of material fact existed). [3] 81 Fed. Reg. 18757. [4] 81 Fed. Reg. 18761-62. [5] 80 Fed. Reg. 50743. [6] 37 C.F.R. § 42.100(b); 77 Fed. Reg. 48727. [7] E.g., Amksor Technology, Inc. v. Tessera, Inc., IPR2013-00242, Paper 117, Apr. 14, 2014; Toyota Motor Corp. v. Leroy G. Hagenbuch, IPR2013-00483, Paper 21, Apr. 16, 2014. [8] 81 Fed. Reg. 18752. [9] Id. [10] Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2144-45 (2016). [11] 37 C.F.R. § 42.100(b); 81 Fed. Reg. 18752. [12] Id. [13] In re CSB-System International, Inc., — F.3d —, No. 15-1832, Doc. 29-2, at 9 (Fed. Cir. Aug. 9, 2016). [14] 81 Fed. Reg. 18760. [15] Id.
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