Petitioners that Rely on Deposition Testimony to Establish that a Publication Qualifies as Prior Art should be Prepared to Produce the Deponent for Cross

Routine discovery in review proceedings authorizes cross examination of affidavit testimony.  37 C.F.R. § 42.51(b)(1).  If a petitioner submits affidavit testimony to prove that a publication qualifies as prior art, the patent owner can depose the affiant.  But what happens if rather than submitting an affidavit, a petitioner submits deposition testimony to establish that a publication qualifies as prior art?  The routine discovery rule doesn’t specifically allow for the patent owner to cross examine the deponent from an earlier action. 

This issue recently came before the PTAB in a rather complicated fact pattern in CBM2015-00179.  There, the petitioner is relying on deposition testimony of Atsushi Kawashima taken over a decade ago during litigation between patent owner and a third party to establish that a Japanese publication is prior art.  Patent owner sought to depose Mr. Kawashima.  In response, the petitioner argued that cross examination is not permitted under the routine discovery rule.  Further, petitioner represented to the PTAB that Mr. Kawashima is unavailable.  Patent owner also sought a ruling from the PTAB indicating who is responsible for securing the availability of Mr. Kawashima. 

The PTAB’s order did not directly address what falls within the scope of routine discovery.  However, looking to the facts before it, the PTAB noted that the Kawashima testimony is a pivotal part of petitioner’s challenge—petitioner relies solely on that testimony to establish that a reference is prior art.  The PTAB determined that here it is the petitioner’s responsibility to secure the availability of Mr. Kawashima for deposition and that patent owner is authorized to cross examine him.  If the petitioner is unable to produce Mr. Kawashima for deposition, the PTAB noted that it will consider his unavailability when weighing his testimony.  It remains to be seen whether unavailability could disqualify the reference as prior art. 

One take away from this order is that petitioners should consider what evidence they choose to present to establish that a publication qualifies as prior art.  If possible, submitting a new affidavit from a witness capable of establishing that a reference qualifies as prior art may add a minor cost up front in comparison to relying on prior deposition testimony, but being able to produce the witness for cross examination could save the reference from being disqualified. 


New Rules of Practice for Trials before the PTAB

A final rule has been published with amendments to the rules of practice before the PTAB.  The amendments are effective May 2 and apply to both petitions filed on or after May 2 as well as ongoing AIA preliminary preceding or trial before the office.  The rules make several changes, the most notable being:

  • Allowing patent owners to submit expert declarations with their preliminary responses
  • Requiring a Fed. R. Civ. P. 11-type certification for papers filed in a preceding and procedures for sanctions if the certification has been violated
  • Allowing a party to request district court-type claim constructions for a patent if the party certifies that it will expire within 18 months of the Notice of Filing Date Accorded
  • Replacing page limits with word count limits for several documents

While it will take time for the impact of these rules on PTAB practice to become clear, we expect patent owners to immediately start submitting expert rebuttal declarations with their preliminary responses.  The PTAB’s statistics as of February 29, 2016 show that currently about 38% of IPR petitions are denied.  But if an IPR is instituted, then patent owners only have a 13% chance of having no instituted claims found unpatentable.  These numbers show that a patent owner should do what they can to avoid institution, and in many cases that will likely include taking advantage of this new opportunity to file expert declarations with their preliminary responses.

Does the ability of patent owners to submit expert testimony pre-institution mean that the institution rate will significantly drop? It will likely have an effect, but I wouldn’t expect a sea-change.  For one thing, amended rule § 42.108 provides that “a genuine issue of material fact created by [the patent owner’s] testimonial evidence will be viewed in the light most favorable to the petitioner solely for purposes of deciding whether to institute an inter partes review.”  See also § 42.208(c) (CBM/PGR counterpart).  While a patent owner’s expert declaration may prevent institution in some instances, it seems likely that more often than not a thorough declaration from a petitioner’s expert, even when contrasted with a rebuttal declaration, would at least create a genuine fact issue supporting institution.  Further, statistics show that patent owners face an up-hill battle post-institution even with the opportunity to submit expert testimony.  It follows that the ability to submit rebuttal expert testimony, whether pre- or post-institution, may have limited effect on the ultimate outcome.


Fed. Cir. Decision Reiterates The Importance Of Raising All Bases For Invalidity In An IPR Petition

On Tuesday, the Federal Circuit vacated the PTAB’s final rejection of a claim, finding that the rejection was procedurally improper because the PTAB relied on a basis raised for the first time during the oral argument. That decision highlights the importance of petitioners thoroughly developing all potential invalidity bases in the initial petition.

Specifically, Dell v. Acceleron (Fed. Cir. Mar. 15, 2016) involved a patent for a computer-network appliance containing hot-swappable components. Relevant to the issue of whether Dell disclosed the relevant basis for rejection in the petition, claim 3 recites “wherein the chassis comprises caddies providing air flow from the front to the rear of the chassis.”  In its petition, Dell argued that articulating door 262 in Fig. 12 of the Hipp reference performs the same function as the caddies in claim 3.  Dell’s reply after the patent owner response, however, argued that the caddies required by claim 3 are also found in Hipp’s power-supply mounting mechanism 278.  Acceleron requested a conference call with the PTAB to address invalidity arguments newly addressed in Dell’s reply, but the PTAB refused to hold a conference call.

FIG. 12 (HIPP)

At the oral argument, Dell maintained that Hipp’s articulating door 262 and power supply mounting mechanism 278 disclose the “caddies” limitation, but Dell also added a new argument. Dell then argued that Fig. 12 of Hipp shows unlabeled “slides” located below the power supplies 280 and that such slides also constitute caddies.  Acceleron disagreed on the merits and again objected on procedural grounds.  The PTAB ultimately found that Hipp anticipated claim 3, relying exclusively on Dell’s contention that Fig. 12 shows “slides.”  It concluded that Dell had pointed to that structure in its reply, and therefore rejected Acceleron’s argument that the contention was improperly raised for the first time at oral argument.

On appeal, the CAFC found that the “slides” structure was first identified as meeting the “caddies” limitation during the oral argument. The CAFC went on to analyze the requirements the Administrative Procedures Act imposes on the PTO for formal adjudication.  The CAFC ultimately vacated the PTAB’s ruling, holding that the PTAB denied Acceleron notice and a fair opportunity to respond to the “slides” basis of cancellation.  Given its finding that the “slides” basis was first identified at oral argument, the CAFC declined to address under what circumstances a cancellation may rely on a key factual assertion made for the first time in a petitioner’s reply.

This holding reiterates the importance of a thorough petition. Petitioners should not take the “kitchen sink” approach of citing to every possible alternative at the expense of developing complete and detailed arguments.  Petitioners, however, are well served to rigorously analyze prior art references before the petition and fully disclose all aspects of the prior art that they may need to rely on to prove invalidity.

The CAFC Rules That It Lacks Jurisdiction To Review PTAB’s Denial Of Institution On “Redundant” Grounds

The Federal Circuit’s Harmonic Inc. v. Avid Tech decision last week is the latest in a string of decisions from the CAFC ruling that it lacks jurisdiction to review various aspects of PTAB institution decisions.  In this case, the CAFC ruled that it lacks jurisdiction to review the PTAB’s decision not to institute an IPR on grounds for unpatentability that it found to be “redundant” to the grounds of unpatentability on which it initiated IPR.

As background, Harmonic filed an IPR petition to review the patentability of Avid’s patent.  For claims 1-16, the PTAB instituted review on an obviousness ground based on two references, Haskell and Rossmere.  The PTAB denied institution based on four other grounds, calling them “redundant” of the instituted grounds.  Ultimately, the PTAB’s final written decision concluded that claims 1-10 were unpatentable in view of the Haskell/Rossmere combination, but ruled that claims 11-16 were patentable over the combination.  Harmonic appealed, arguing 1) that the PTAB should have ruled claims 11-16 unpatentable in its final written decision and 2) in light of the PTAB’s conclusion in its final written decision, it was compelled to revisit the grounds it previously deemed redundant.

Looking at the second issue, the CAFC recognized that it must first consider whether it has jurisdiction to review the question.  The CAFC first looked to 35 U.S.C. § 314(d), which prescribes that a “determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”  It then went through a brief history of its application of the statute (and its CBM counterpart).  See St. Jude v. Volcano (CAFC lacks jurisdiction to review decision not to institute IPR); In re Dominion Dealer Sols. (denying mandamus petition seeking review of PTAB decision not to institute IPR); In re Cuozzo Speed (CAFC lacks jurisdiction to review institution decision even after a final decision); Versata v. SAP (CAFC has jurisdiction to review whether a patent is a “covered business method patent”); Achates v. Apple (CAFC lacks jurisdiction to review whether petition was time barred); Synopsys v. Mentor Graphics (declining to review merits of PTAB decision to institute on some grounds but not others, but finding no statutory requirement that the Board address every claim raised in an IPR petition).  The CAFC ultimately found that a decision to institute on some grounds, but not on other “redundant” grounds is simply a combination of a decision to institute IPR on some grounds and a decision to deny IPR on others, both of which are non-appealable under its Cuozzo and St. Jude decisions.  Accordingly, the CAFC found that it lacks jurisdiction to review the PTAB’s decision not to institute review on “redundant” grounds.

For now, it seems settled that PTAB decisions to institute or not to institute on various grounds are nonappealable no matter how you slice it.  We’ll see how long it stays settled once the Supreme Court reviews whether the PTAB’s decision to institute an IPR proceeding in Cuozzo is judicially unreviewable.

Can Disclaimer Be Used To Avoid PGR Institution?

The PTAB recently instituted post-grant review in Core Survival, Inc. v. S & S Precision, LLC (PGR2015-00022, paper 8).  While the patent owner did not argue that that the patent was eligible for post-grant review, the facts raise the question of whether disclaimer could be used by patent owners to avoid PGR institution. 

Only patents subject to the first-inventor-to-file provisions of the AIA are eligible for post-grant review.  See AIA § 6(f)(2)(A).  The first-inventor-to-file provisions apply to any application for patent, and to any patent issuing thereon, that contains or contained at any time a claim to a claimed invention that has an effective filing date on or after March 16, 2013.  See AIA § 3(n)(1).  In this case, the patent at issue was filed after March 16, 2013, but was a continuation-in-part of an application filed before that date.  The application was originally filed with a claim 22 that petitioner asserted related to new matter added in the continuation-in-part.  Petitioner further asserted that claim 22 was canceled to maintain priority.  Patent owner did not dispute that the patent is eligible for PGR and conceded that original claim 22 was based on new matter added to the application.  Accordingly, the PTAB found that the patent is subject to the first-inventor-to-file provisions and available for post-grant review. 

It is interesting to consider whether PGR could have been avoided had claim 22 issued and been disclaimed by the patentee instead of being canceled during prosecution.  While the end result for patent coverage is the same—the patent has no claim 22—the consequences for PGR availability could mean other claims are saved.  The PTAB has repeatedly found in the context of CBM institution decisions that it must treat statutorily disclaimed claims as if they had never existed.  See CBM2015-00171, paper 10 (citing Guinn v. Kopf, 96 F.3d 1419, 1422 (Fed. Cir. 1996) (“A statutory disclaimer under 35 U.S.C. § 253 has the effect of canceling the claims from the patent and the patent is viewed as though the disclaimed claims had never existed in the patent.”)).  Thus, while canceling the claim during prosecution to maintain a priority claim to before March 16, 2013 did not allow the patent owner to avoid post-grant review, if claim 22 issued the patent owner may have been able to avoid post-grant review by disclaiming it. 

This decision underscores the importance of strategic prosecution and portfolio development.  Had the patent owner filed a continuation to pursue claims that did not relate to the new mater and a separate continuation-in-part application to pursue the new matter, then the claims deserving priority to any pre-AIA application would be ineligible for PGR. 


Using Disclaimer To Avoid Institution Of CBM Review

CBM reviews, if instituted, almost always result in invalidated claims.  In the PTAB’s latest statistics, only 4% of final written decisions in CBM reviews found no instituted claims unpatentable.  Those same statistics, however, show that close to 50% of CBM petitions have not resulted in institution.  These statistics underscore the importance of patent owners doing what they can to avoid CBM review institution.

The PTAB’s institution decision in (CBM2015-00171) confirms that statutory disclaimers can be strategically used to avoid institution in some cases.  In that case, the petitioner challenged claims 1-20.  With its preliminary response, however, IV filed a statutory disclaimer of claims 1-10 under 37 C.F.R. § 1.321(a).  Because a patent needs only one claim directed to a covered business method to be eligible for review, the question before the PTAB was whether IV’s disclaimer of those claims could allow it to avoid review. 

The PTAB decided that because of the statutory disclaimer, it must “treat claims 1-10 as never having existed.”  The PTAB acknowledged that other panels have found that statutorily disclaimed dependent claims may not avoid CBM review because the still-pending independent claim may encompass finance-related subject matter.  It further observed that such logic could be extended to impute independent claims from which finance related dependent claims do not depend—but found that not the case here.  The PTAB went on to find that petitioner failed to show sufficiently that claims 11-20 are finance-related and, accordingly, denied trial institution.

This decision confirms that statutory disclaimers are one of the tools patent owners should consider when trying to avoid CBM review.  Here IV risked having all claims invalidated on § 101 grounds in a CBM review, but by giving up half of the claims it avoided having review instituted for the other half.  This decision also exemplifies the benefits during prosecution to claim differentiation in independent claim sets—having at least one non-financial claim set may provide an avenue for avoiding CBM review. 


PTAB Decision Highlights The Importance Of Petitioners Filing Within 1 Year Of The Earliest Possible Date Of Service

It is well known that an Inter Partes Review (IPR) may not be instituted if the petitioner was served with a complaint alleging infringement more than 1 year prior to the filing of the petition.  35 U.S.C. § 315(b).  Recent Patent Trial and Appeal Board (PTAB) precedent is proof that this seemingly straight-forward rule can be complicated when applied to the facts of a district court litigation. 

The PTAB in Lannett Company, Inc. v. AstraZeneca AB, IPR2015-01629 (P.T.A.B., Jan. 27, 2016) denied institution of an IPR because the petition was filed one day late, despite arguments that service was not effective at the district court.  The Patent Owner filed two separate district court infringement suits against Petitioner within the span of 5 days.  Both suits asserted the same patent, but the second suit included a new plaintiff that may have owned certain rights in the patent.  The petition for IPR was filed 1 year plus one business day after service of the Complaint in the first suit, but within 1 year from service of the second suit.  The timeliness of the petition turned on 1) whether service was effective in the first suit, and 2) whether the district court had subject matter jurisdiction over the first suit. 

As to the first issue, Petitioner acknowledged that service in the first suit was made upon its registered agent more than 1 year prior to the filing of the Petition.  However, Petitioner argued that service was not effective because it was not delivered “personally to any manager” of the registered agent, as Petitioner claimed was required by state law.  The Proof of Service showed that the registered agent, not an individual, accepted service.  The PTAB was not persuaded by Petitioner’s argument.  The PTAB found that the state statute relied on by Petitioner was not controlling because on its face it applied to “limited liability companies”; Petitioner was incorporated. 

As to the second issue, Petitioner argued that the district court did not have jurisdiction over the first suit because the Complaint in second suit was an admission that at least one co-owner of the asserted patent was not a party to the first suit.  The PTAB again was not persuaded by Petitioner’s argument.  The PTAB acknowledged that jurisdictionally-deficient actions generally will not trigger the § 315(b) time bar, and that the failure to name the co-owner of a patent constitutes a jurisdictional deficiency in an infringement action.  But the PTAB noted that the Patent Office assignment record of the relevant patent listed Patent Owner as the assignee.  The PTAB also noted that the district court consolidated the two suits, such that the first suit was effectively still pending and had not been dismissed.

This case highlights the importance for petitioners in making a conservative calculation of when a complaint in a district court litigation could first be interpreted as being properly served.  Conversely, patent owners would be wise to use this case to challenge, when possible, the timeliness of a filed petition.


The Supreme Court Will Review Inter Partes Review Standards

CUOZZO SPEED TECHNOLOGIES, LLC, PETITIONER v. MICHELLE K. LEE, UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR, PATENT AND TRADEMARK OFFICE, the Court of Appeals for the Federal Circuit held that (1),  in Inter Partes Review (IPR) proceedings, the broadest reasonable interpretation (BRI) standard is appropriate for  an issued patent (as opposed to plain and ordinary meaning)  and (2) that, the Patent Trial and Appeal Board’s decision whether to institute an IPR proceeding is judicially unreviewable. Cuozzo’s petition for en banc rehearing by the Federal Circuit was denied. However, the Supreme Court has granted certiorari and will review both holdings.

Both application of the BRI standard and the inability to appeal a decision to institute trial are key elements in the high rate of claim invalidation of IPRs to date. A change in either of these practices would likely significantly reduce the effectiveness of the reviews for invalidating claims. This case has garnered tremendous attention including nine briefs amici filed at the petitions stage, including briefs from the IPO, and AIPLA.


The CAFC Reverses And Remands The PTAB’s IPR Decision Canceling All Claims Based On Erroneous Claim Construction

For the third time in November, the CAFC found legal error in a PTAB final written decision—this time based on an erroneous claim construction.  In Straight Path v. Sipnet (Fed. Cir. Nov. 25, 2015), the PTAB instituted an IPR for claims 1-7 and 32-42 of a patent directed to establishing real-time communications between computers over a network.  The PTAB ultimately cancelled all challenged claims, based in part on its construction of the claim phrase “a query as to whether the second process is connected to a computer network.”   Specifically, the PTAB adopted Sipnet’s view that, under the broadest reasonable construction based on the specification, “‘connected to the computer network’ encompasses a processing unit that is ‘active and on-line at registration.’”

On appeal, Straight Path challenged the Board’s construction, which the CAFC reviews de novo because it did not involve subsidiary factual findings.  The dispute related to the temporal aspect of the construction—whether, on the one hand, the claims just require that the second process was connected to a computer network at the time of registration or, on the other, the claims require that the process is connected at the time when the system checks for the connection.  The Court found that the use of the present tense “is” in the claims “plainly says that the query transmitted to the server seeks to determine whether the second unit is connected at that time, i.e., connected at the time that the query is sent,” and faulted the Board for looking to the specification over the plain meaning of the word “is.”  The Court went on to analyze the specification and conclude that it provides no basis for adopting a construction that contradicts the plain meaning of the claim language.  Thus, the Court construed “is connected to the computer network” to mean “is connected to the computer network at the time that the query is transmitted to the server” and remanded to the Board to further consider the prior art in view of that construction.

Concurring-in-part and dissenting-in-part, Judge Dyk dissented from the majority’s construction’s requirement of “absolute currency in a real-time assessment of connectivity.”  Judge Dyk opined that the majority’s view fails to take into account the common usage of the word “is” and, more importantly, failed to give sufficient weight to the specification.

This decision illustrates the difficulty judges—both at the PTAB and the CAFC—face in construing claim terms.  Reasonable minds can often differ as to the plain meaning of a simple word, such as “is.”  Because the CAFC reviews claim construction de novo (but subsidiary factual findings, if any, for clear error), parties should be careful to preserve all rights to appeal adverse claim constructions before the PTAB and consider adverse constructions as potential grounds for appeal.

Two Recent CAFC Opinions Closely Scrutinize PTAB IPR Decisions Upholding Claim Validity For Legal Error

Two opinions that came down this month illustrate the CAFC’s close scrutiny of potential legal errors in PTAB Final Written Decisions.  These decisions underline the benefits of appellants focusing their arguments on legal errors—or even legal ambiguities—in PTAB decisions.

Belden v. Berk-Tek (Fed. Cir. Nov. 5, 2015) involved a patent directed to a method for making a communications cable.  The PTAB instituted an IPR for claims 1-6, but ultimately invalidated only claims 1-4.  For claims 5 and 6, the Board faulted Berk-Tek for giving no apparent reason to combine known elements of two references.  On appeal, Berk-Tek argued that a person of ordinary skill in the art seeking to manufacture cables disclosed in the first references—with four insulated twisted pairs and a separator—would have been motivated to use the method of the second reference.  The CAFC noted that it owes deference to the PTAB’s factual findings, but found that the PTAB’s upholding the validity of claims 5 and 6 “rests on legal errors.”  The CAFC analyzed the evidence and found that the “evidence points clearly toward a motivation of skilled artisan to arrive at the method claims 5 and 6 based on” the two references.  The CAFC then walked through the PTAB’s reasons for finding otherwise and found that none “withstands scrutiny through the lens of governing law.”  As a result, the CAFC reversed the Board’s determination that claims 5 and 6 would not have been obvious.

Ariosa Diagnostics v. Verinata Health (Fed. Cir. Nov. 16, 2015) involved a patent directed to methods of noninvasive prenatal testing for the presence of fetal chromosomal abnormalities. The PTAB instituted a pair of IPRs challenging claims 1-18 and 19-30, respectively, of the patent.  After a complete record was developed, however, the PTAB determined that Ariosa failed to prove that the claims were obvious.  Ariosa argued on appeal that it was legal error for the PTAB to decline to consider Exhibit 1010.  Exhibit 1010 was attached to a declaration submitted with Ariosa’s petition, but it was relied on only to show the knowledge in the art and not as the basis for an obviousness combination.  The CAFC first analyzed the legal issue and determined that, given “references in the Petitions and supporting declarations, Exhibit 1010 had to be considered by the Board even though it was not one of the three pieces of prior art presented as the basis for obviousness.”  The CAFC then analyzed the PTAB’s less-than-clear treatment of Exhibit 1010 in its decision.  On the one hand, the CAFC agreed with Ariosa that “the language of the Board regarding Exhibit 1010 is readily susceptible of being read to rest on an incorrect legal proposition.”  On the other hand, the “Board might have been saying only that the development of the argument invoking Exhibit 1010 in the Petition was not adequate.”  Given the potential legal error and ambiguity in the decision, the CAFC vacated the decision and, because the matter is not purely legal, remanded to the Board.

One takeaway from these two decisions is that practitioners are well advised to analyze PTAB decisions for legal errors when determining issues to argue on appeal.  While the CAFC will give some deference to the PTAB’s factual findings under the substantial-evidence standard of review, it has shown a willingness to scrutinize the details of PTAB decisions and reverse or remand where it finds potential legal error.

These two decisions also provide important procedural guidance—Belden on the permissible scope of rebuttal evidence submitted with a Petitioner’s reply and Ariosa on the how the PTAB should handle the remand.