By Matthew L. Cutler, Principal
Originally Published in IP Law360
A look back on 2013 reveals that one reform enacted under the America Invents Act – Patent Office Litigation – has perhaps had the most immediate and dramatic impact. While many predicted that Inter Partes Review (IPR) proceedings would change the face of patent litigation, few could have predicted the intense momentum and wide-spread acceptance these proceedings have gained in such a short time. Indeed, as of December 5, 2013, 723 IPR petitions have been filed, averaging more than 20 petitions/week.
IPR proceedings have, of course, maintained many of the advantages over district court litigation that were found in reexamination proceedings, such as lower cost (often by an order of magnitude), lower burden of proof (preponderance of the evidence versus clear and convincing evidence), and a potentially broader claim construction (broadest reasonable interpretation versus ordinary and customary meaning). This article focuses on the advantages, both expected and unexpected, that are unique to Inter Partes Review practice (and likely will to Post Grant Review (PGR) practice). Overall, patent challengers are flocking to these proceedings because of the great advantages provided by them to challenge the patentability of US patents. Discussed below are the six (6) key reasons why IPR proceedings have become so popular:
Greater Control Over Prior Art
IPR and PGR proceedings give patent challengers more comfort that Patent Owners will not be able to mislead the Patent Office via, for example, infirm evidence. To that end, patent challengers no longer are forced to sit idly by as patent owners submit expert declarations seeking to uphold patentability, or otherwise offer evidence that cannot be assailed. For example, the rules governing IPR and PGR proceedings allow for evidentiary challenges (pursuant to the Federal Rules of Evidence) as well as depositions of declarants.
In addition, patent challengers are afforded an opportunity to address the Patent Trial and Appeal Board at an oral hearing near the end of the trial. To date, most such hearings have allowed each party one hour of argument (orders granting such oral hearings have ranged from ½ hour to 2 hours per side). While the vast majority of a patent challenger’s case is fully set forth in the petition and accompanying exhibits, the oral hearing gives patent challengers a chance to address questions raised by the Board, as well as to summarize the extensive briefing that has occurred up to the hearing. Such hearings are helpful mechanisms under the new Patent Office litigation procedures to encourage patent challengers to forego district court litigation and place their best prior art before the Patent Office.
Shorter Timelines and More Litigation Stays
Unless an IPR proceeding is an exceptional case, IPRs are supposed to be concluded within 18 months from filing the petition request grant thereof. Comparing that to the median time to trial period of 30 months for district court litigation clearly makes the IPR option attractive based on timelines alone. Add to that the apparent willingness of district judges to stay concurrent litigation in view of a corresponding IPR and you have a powerful opportunity. In general, the fact that the estoppel that is imposed upon patent challengers (any grounds that were raised or could have been raised) arises at a date certain, no more than 18 months after a petition has been filed, provides district court judges with strong rationale for staying litigation. To that end, judges have often cited the reasonable length of time that a litigation could be stayed, as well as the fact that the IPR will simplify issues in the litigation as appropriate grounds for a stay. Essentially, either the patent claims will be rendered unpatentable, effectively ending the litigation, or the patentability of the claims will be affirmed (including by way of amendment) and validity issues at the district court will be significantly streamlined by virtue of the estoppel placed on defendant.
One particularly telling example of the district court’s willingness to grant stays in view of IPR comes from a district court judge from the District of Delaware in a case involving Kyocera (defendant/patent challenger) and Softview LLC (plaintiff/patent owner). Kyocera Corp. v. Softview, LLC, (IPR2013-00004). During the district court litigation, Kyocera filed a petition seeking reexamination of the Softview patent. Despite that reexamination petition being granted, the district court judge decided not to stay the co-pending litigation. Later, after IPR became available, Kyocera filed a petition seeking inter partes review of the same patent. A later motion to stay was accepted by the same Court, this time finding that speed of IPR, versus reexamination, and the ability to narrow issues for trial favored a stay.
Limited Opportunity for Patent Owners to Amend Challenged Claims
Another downside to reexamination practice that limited its acceptance by potential patent challengers, was the opportunity for patent owners to counter any reexamination filing with dozens, if not hundreds, of amended patent claims. This concern was initially set forth in the America Invents Act itself, wherein Congress directed the Patent Office to draft regulations that allowed a patent owner to “propose a reasonable number of substitute claims.” 35 USC § 316(a)(9). This directive was, indeed, set forth in the regulations implementing IPR and PGR, but taken to a whole new level with the now ubiquitous decision of Idle Free Sys. V. Bergstrom, IPR2012-00027 (Paper 26). In the Idle Free decision, as colored by subsequent Board decisions, a proposed substitute claim must distinguish over: 1) the prior art known to patent owner (not just the art of record in the proceeding), 2) any other substitute claim proposed for the same original claim, and 3) any other substitute claim proposed for an original claim that, for the same reasons as the other substitute claim, is presented as patentable over the prior art (i.e., a second amendment to a dependent claim, wherein the substitute claim also contains a first amendment that is the same as presented in another substitute claim).
In addition, any proposed amendments must be accompanied by specific citations to the original patent disclosure, explaining how the claimed subject matter as a whole is found, claim construction of new claim terms, and expert testimony confirming the above, among other technical details. In short, far from the extensive amendment practice that had become endemic in reexamination practice, motion to amend practice in IPR and PGR proceedings will be much more limited. Through one year of IPR proceedings, patent owners proposed only six (6) amended claims per proceeding on average.
It is worth noting a few other key Motion to Amend cases that have been handed down by the Board, as well: Nichia Corp. v. Emcore Corp., IPR 2012-00005, Paper 27 (regarding the burden of identifying written description support for proposed substitute claims); ZTE Corp. v. ContentGuard Holdings, Inc., IPR2013-00136, Paper 31 (burden of patentably distinguishing over prior art), for example.
Limited Opportunity for Parties to Take Discovery
The statute and rules contemplate three types of discovery: Mandatory Initial Disclosures (37 CFR §42.51(a)); Routine Discovery ((37 CFR §42.51(b)(1)); and Additional Discovery (37 CFR §42.51(b)(2)).
Mandatory Initial Disclosures is a misnomer, because these disclosures are not mandatory at all, but only occur if there is an agreement of the parties, which must be submitted no later than the filing of the Patent Owner’s Preliminary Response. 37 CFR §42.51(a)(1)). Thus, a party can avoid Mandatory Initial Disclosures simply by refusing to agree to it. As a result, Mandatory Initial Disclosures have occurred in only a few of the Inter Partes Reviews filed. See, Microsoft Corp. v. SurfCast, Inc., IPR2013-00292, Paper 17 (August 26, 2013); Microsoft Corp. v. SurfCast, Inc., IPR2013-00293, Paper 12 (August 26, 2013); Microsoft Corp. v. SurfCast, Inc., IPR2013-00294, Paper 13 (August 26, 2013); Microsoft Corp. v. SurfCast, Inc., IPR2013-00295, Paper 12 (August 26, 2013); Oracle Corporation v. Click-to-Call Technologies LP, IPR2013-00312, Paper 12 (August 23. 2016).
Routine Discovery is cross-examination of any affidavit testimony. (37 CFR §42.51(b)(1)(ii)). This discovery can proceed without requiring specific authorization from the Board. Unless otherwise agreed by the parties, a party must serve copies of any exhibits cited in a paper or in testimony 37 CFR §42.51(b)(1)(i)) as well as relevant information that is inconsistent with a position advanced by the party during the proceeding (37 CFR §42.51(b)(1)(iii)).
Additional Discovery is any other discovery that a party might want to take. In the absence of agreement, the party seeking additional discovery must file a motion with the Board demonstrating that the additional discovery is in the interests of justice. 37 CFR §42.51(b)(1)(iii). In Garmin Int’l Inc. v. Cuozzo Speed Technologies, LLC, IPR2012-00001, Paper 26 (March 5, 2013), the Board identified five factors it considers in deciding whether to grant additional discovery:
1. More Than A Possibility And Mere Allegation — The mere possibility of finding something useful, and mere allegation that something useful will be found, are insufficient to demonstrate that the requested discovery is necessary in the interest of justice. The party requesting discovery should already be in possession of evidence tending to show beyond speculation that in fact something useful will be uncovered.
2. Litigation Positions And Underlying Basis — Asking for the other party’s litigation positions and the underlying basis for those positions is not necessary in the interest of justice. The Board has established rules for the presentation of arguments and evidence. There is a proper time and place for each party to make its presentation. A party may not attempt to alter the Board’s trial procedures under the pretext of discovery.
3. Ability To Generate Equivalent Information By Other Means – Information a party can reasonably figure out or assemble without a discovery request would not be in the interest of justice to have produced by the other party. In that connection, the Board would want to know the ability of the requesting party to generate the requested information without need of discovery.
4. Easily Understandable Instructions — The questions should be easily understandable. For example, ten pages of complex instructions for answering questions is prima facie unclear. Such instructions are counter-productive and tend to undermine the responder’s ability to answer efficiently, accurately, and confidently.
5. Requests Not Overly Burdensome To Answer — The requests must not be overly burdensome to answer, given the expedited nature of Inter Partes Review. The burden includes financial burden, burden on human resources, and burden on meeting the time schedule of Inter Partes Review. Requests should be sensible and responsibly tailored according to a genuine need.
Applying these factors, the Board has denied all but a few requests for additional discovery. The Board has explained that the limited discovery available in IPRs is “significantly different from the scope of discovery generally available under the Federal Rules of Civil Procedure” and “restricts additional discovery to particular limited situations, such as minor discovery that PTO finds to be routinely useful, or to discovery that is justified by the special circumstances of the case.” The “interests of justice” standard is a high standard, that, to date, has been rarely satisfied, so additional discovery in an IPR is the exception, not the rule. This bodes well for even broader acceptance of the IPR option going forward, because it is often the extremely wide latitude on the amount of discovery allowed and the easily extended deadlines available under district court litigation that prolongs the litigation and raises the cost.
Detailed Claim Construction Analysis Provided By Board at Decision to Initiate Stage
Early predictions that inter partes review proceedings may function as a mini-claim construction phase are proving to be prophetic. Many of the Board’s decisions to initiate an IPR trial (or deny a petition), have resulted in detailed, comprehensive claim construction analyses that will ripple through any co-pending or future patent litigation. 37 CFR 42.104(b)(3) requires a petition to identify how a challenged claim is to be construed. While a Petitioner is entitled to generically articulate the “broadest reasonable interpretation” standard to satisfy this requirement, Petitioners are cautioned to think carefully about this approach. The Board has rejected petitions for failing to identify a proposed claim construction for key claim terms and, for petitions that survive an initial review, the Board has criticized petitioners for failing to identify specific claim construction positions. See, e.g., Avaya, Inc. v. Network-1 Security Solutions, IPR2013-00071, Paper 18 (agreeing that a key term should have been addressed in the petition, but not rejecting the petition on that ground because the failure was harmless, given that Patent Owner did not articulate a reason why the failure was material).
Also interesting regarding the Board’s claim construction analyses are both its adherence to the same type of claim construction analysis as that performed by the federal courts, but its willingness to give no weight to prior claim construction rulings, including from the Federal Circuit. Google, Inc. v. Whitserve LLC, IPR2013-00249, Paper 11.
In the end, by providing thoughtful and detailed claim construction analyses in inter partes review proceedings, the Board has given patent challengers an avenue to a streamlined and inexpensive first look at the claim construction of patent claims. Because this efficient claim construction analysis may impact litigation positions, including later Markman proceedings, this is another impactful feature of IPR proceedings that have made them popular over the past year.
Reconsideration of Old Arguments Made During Examination or Prior Reexamination
The standard for declaring an Inter Partes Review is clear: the petitioner must establish “a reasonable likelihood that the petitioner would prevail with respect to at least one challenged claim” before an IPR will be declared. Gone is the requirement that the challenger present a substantial new question of patentability. Thus, whereas roughly 65% of the petitions filed to date have relied on at least some previously cited prior art; only about 35% of the petitions filed relied entirely on newly cited prior art. Less than 1% of all petitions filed to date have relied exclusively on previously cited prior art.
Although 35 U.S.C. §325(d) provides that the Board “may take into account whether the same or substantially same prior art or arguments previously were presented to the [Patent and Trademark] Office,” the fact that the prior art was previously submitted to or even considered by the Patent and Trademark Office has not stopped the Board from initiating a trial.
In Macauto U.S.A. v. BOS GmbH & KG, IPR2012-00004, Paper 18 (Jan. 24, 2013), the patent owner argued that inter partes review was improper because the same prior art and the same arguments were raised in a prior reexamination. The Board said that “we are not required by statute to reject a Petition based upon the fact that certain arguments or art were previously considered by the Office,” although the Board did go out of its way to point out that the record before it was not the same as previously before the Office.
In Bitmax Advanced Biofuels LLC v GEVO, Inc., IPR 2013-00214, Paper 11 (September 30,2013), the Board again rejected a patent owners argument that same prior art and substantially the same arguments were considered by the Examiner during the prosecution of the patent. The Board found that petitioner’s arguments with respect to the asserted prior art “have merit,” and that petitioner “has demonstrated a reasonable likelihood that the prior art references render the challenged claims unpatentable.”
In K-40 Electronics v. Escort, Inc., IPR2013-00203, Paper 6 (August 29, 2013), the Board found that the declaration antedating references accepted by the Examiner during prosecution was deficient, and instituted trial based upon art that the Examiner determined was not prior art.
It is clear that where the petitioner shows a reasonable likelihood of success, the Board will likely grant a trial even if the prior art or the arguments had been previously considered.
Provided the US Patent Office is able to retain and hire enough Patent Trial and Appeal Board judges to keep up with well qualified demand and still meet the attractive 18 month from petition filing timeline, for at least the reasons highlighted above, IPRs and soon too PGRs could very well become the norm rather than the exception for patentability and validity challenges going forward.
—By Robert M. Siminski, Matthew L. Cutler and Bryan K. Wheelock