PTAB Says: Abuse of Process and Improper Use Discovery is Moot in Denial of IPR Petition

In a recent decision on yet another inter parties review petition brought by billionaire hedge-fund manager Kyle Bass through one of his Coalition for Affordable Drugs entities, the PTAB denied institution of an IPR against Biogen International GmbH (IPR2015-01086 at Paper 18, October 27, 2015). The Board found that the Petitioner failed to establish a reasonable likelihood of prevailing on its invalidity claims and also dismissed a pending motion for additional discovery submitted by Biogen as moot given the dismissal of the action.

Interestingly, the pending motion for additional discovery was related to abuse of process and improper use of proceedings claims by Biogen. The motion sought discovery of two offering documents for the Hayman Credes Master Fund, L.P. and the Hayman Orange Fund SPC-Portfolio A, two of the real parties-in-interest who financed the petition. Biogen asserted that the two documents “will show the hedge funds’ mandates, and therefore will give more detailed information about their purpose, which is to take short positions on companies in the pharmaceutical sector, such as Biogen.” (Paper 9 at p. 4). Biogen argued that this information would support the abuse of process and improper use claims by showing “that the IPRs are being used in an attempt to secure some collateral advantage not properly included in IPR proceedings.” (Id.). As a result of the Board’s dismissal of the motion as moot, Biogen appears to have been precluded from pursuing these claims as a result of the dismissal of the petition.

In its decision, the Board failed to address whether sanctions would be appropriate against the Petitioner although dismissal of the action is one of a number of sanctions available under 37 C.F.R. § 42.12, which also includes attorneys’ fees as a possible sanction. In another recent decision, issued after Biogen’s motion, with respect to sanctions for abuse of process in a number of IPRs involving Bass and Celgene Corporation, the Board concluded that “[t]he purpose of the AIA was not limited to just providing a less costly alternative to litigation” and that “[t]he AIA was designed to encourage the filing of meritorious patentability challenges.” (IPR2015-01092 at Paper 18). The Board also declined to address the motivation for bringing the IPR, stating “[w]e take no position on the merits of short-selling as an investment strategy other than it is legal, and regulated.” (Id.). However, the Board did not foreclose the possibility of sanctions for non-meritorious challenges brought via IPR, pointing out “Patent Owner does not allege that Petitioner filed a non-meritorious patentability challenge.” (Id.). Continue Reading

Is One APJ Enough For Post Grant Institution Decisions?

A pilot program proposed by the U.S. Patent and Trademark Office would have a single Administrative Patent Judge (APJ), as opposed to a panel of three, decide whether to institute trial in a post grant patent proceeding, such as an inter partes review.  The full panel would adjudicate the trial if it is instituted. The pilot would last 3-6 months. The USPTO is requesting comments on the proposed pilot program.

While this procedure, if permanently adopted, could reduce the overall work-load on the APJs, it would reduce the resources available for determining if trial is to be instituted. Combined with proposed rules which allow the patent owner to present testimonial evidence in the Patent Owner’s Response, and thus increase the volume and complexity of the record, this would seem to place a great burden on a single APJ deciding whether to institute trial.  If adopted, more than ever, Petitioner’s would have to present a clear and concise rationale for instituting a trial.

Insurance Policy Covering Patent Assertions

Historically, insurance covering patent infringement has been cost prohibitive. However, Reed Smith has worked with our client, the Association of National Advertisers (ANA), to develop a focused insurance product that can change the entire dynamic of a patent assertion in favor of the accused. The insurance product is exclusive to ANA members.

In the advertising space, Patent Assertion Entities (PAEs) have been increasingly in the news by claiming ownership of many common digital advertising practices, including using QR codes to direct a mobile device user to web content, putting a store locator on a website, superimposing a facial image on an animated body image, placing static ads in a video stream, and embedding a URL in a text message to direct a mobile device to web content. As a result, marketers and/or their agencies could be faced with demands to pay large fees to PAEs that have not provided any direct services or technology to an advertising campaign.

To address this issue, the insurance product provides focused patent infringement defense insurance protection for marketing and advertising activities. The insurance will permit the insured party to challenge the validity of the patent, or otherwise defend against the assertion, with greatly reduced out-of-pocket expense, and at a very low premium. This rebalances a patent assertion negotiation in favor of the targeted party. For more details, see the ANA Press Release.

Federal Circuit Reverses Post-Grant Review Decision for the First Time

For the very first time, the Court of Appeals for the Federal Circuit (CAFC) has reversed a decision by the Patent Trial and Appeal Board (PTAB) in an AIA trial. In inter partes review numbers 2012-00026 and 2013-001091, the PTAB held that only one claim, claim 24, of U.S. Patent 6,757,717 owned by Proxyconn, Inc. was patentable. The claims of the patent are directed to increasing the speed of data access in a packet-switched network, through use of “digital digests” that serve as digital fingerprints for the corresponding documents.

In deciding that only claim 24 was patentable, the PTAB construed the claimed “gateway… between at least two other computers” to be a gateway between any computers connected to a network, including the claimed “caching computer.” Based on this construction, the PTAB held that claims 6, 7, and 9 were anticipated by the prior art.

Continue Reading

Senate Judiciary Committee Approves Significant Revisions to Claim Construction Standards in Inter-Partes Review and Post-Grant Review

On June 4, the Senate Judiciary Committee approved the Protecting American Talent and Entrepreneurship (“PATENT”) Act, incorporating two amendments introduced during a mark-up session prior to the vote, as well as a series of changes introduced in a Manager’s Amendment on June 2.

The Manager’s Amendment, which was introduced by Sen. Leahy (D-Vt.) and other co-sponsors of the PATENT Act, proposes a number of revisions to the original PATENT Act specifically targeted to Inter-Partes Review (IPR) and Post-Grant Review (PGR) proceedings. These include:

Continue Reading

The Patent Bar Talked, and the USPTO Listened: Changes Now and More to Come for AIA Trial Practice

A recent blog post by USPTO Director Michelle Lee has garnered the attention of the patent bar – and rightfully so.1 Under Lee’s leadership, the USPTO is showing a genuine willingness to change and adapt the rules governing America Invents Act (“AIA”) trials before the Patent Trial and Appeal Board (“PTAB”). In the span of less than one year, the USPTO is implementing changes and proposing others based on written comments by stakeholders, including patentees, industry and special interest groups, law firms and individuals.2 Only 37 comments were submitted; however, this process has initiated a variety of potential changes.3

The changes and potential changes discussed by Director Lee are broken down into three groups.

1. The “quick fix” package. Effective immediately via scheduling orders issued by PTAB judges, the page limit for (1) motions to amend claims, and (2) petitioner’s reply briefs will be increased from 15 to 25. Additionally, claims in a motion to amend may now be placed in an appendix, freeing up additional pages within the brief.

2. The “proposed rule” package. “Later this summer,” the USPTO will propose a set of rules and seek additional feedback before finalizing.  Director Lee’s blog post provides little detail on most of the proposed changes, except for one – amendments to claims.  This change would “more noticeably limit the burden on the patent owner” by only requiring the patent owner to show patentability over prior art of record when proposing a claim amendment.4 Continue Reading

PTAB Says: Privity Under § 315(b) is not Limited to the Time of Service

The Patent Trial and Appeal Board (PTAB) recently denied three Petitions for Inter Partes Review filed by VMWare because it acquired AirWatch LLC, which was sued over the subject patents more than one year before VMWare’s petitions. (e.g., IPR2015-00027 Decision.) At the time of filing and service of the suit against AirWatch, VMWare had not yet acquired the company and had no other relationship that would establish privity.

35 U.S.C. § 315(b) of the America Invents Act requires inter partes reviews to be filed within one year of when the Petitioner, or a party in privity with the Petitioner, was served with a complaint for infringement. The patent owner sued AirWatch over the patents in November 2012. VMWare acquired AirWatch for $1.5 billion in February 2014. VMWare filed inter partes review petitions challenging the validity of the challenged patents in October 2014.

The parties did not dispute that, except for the acquisition, there was no evidence of privity between VMWare and AirWatch. Further, VMWare acknowledged that, as a result of the acquisition, it became a privy of AirWatch. Noting that the analysis under §315(b) is a highly fact-dependent question, the PTAB held that the relationship forming a basis for privity, the acquisition in this case, can involve events after the complaint was served.

… we do not conclude that privity under § 315(b) is determined only at the time of service of a complaint alleging infringement of the challenged patent. Because AirWatch, a privy of Petitioner, was served with the Complaint alleging infringement of the ’386 patent more than a year before the Petition challenging the ’386 patent was filed, we are persuaded on this record that the Petition is not timely under § 315(b).

This decision telegraphs that the PTAB is more than willing to take a very broad view of the concept of privity and use it to deny institution of trials. Practitioners should be aware of this and take the same into account when advising clients on post grant challenges as well as in conducting due diligence for a transaction or acquisition. It is very likely that VMWare had no reason to believe that they were waving rights to challenge the patents in suit when they acquired AirWatch. Any previous, current, or potential future relationships with parties should be evaluated for potential issues under § 315(b).

The cases are VMWare Inc. v. Good Technology Software Inc., case numbers IPR2015-00027, IPR2015-00030 and IPR2015-00031, before the Patent Trial and Appeal Board.

STRONG Patents Act of 2015

Yesterday Senators Coons, Durbin, and Hirono introduced the Support Technology and Research for Our Nation’s Growth (“STRONG”) Patents Act of 2015. As Sen. Coons explained in an op-ed, the STRONG Patents Act focuses on ensuring balance in post-grant proceedings at the PTO. To accomplish this, the legislation proposes taking several steps to revise post-grant challenges in favor of patentees. For example, the legislation would require petitioners in an IPR to prove invalidity by a higher, “clear and convincing evidence” standard. The legislation would also limit standing to file for an IPR to those “sued for infringement of the patent” or “charged with infringement under the patent,” and their privies and real parties in interest – much like the current standing requirement for CBM petitioners. The STRONG Patents Act comes less than a month after House Judiciary Committee Chairman Goodlatte reintroduced the Innovation Act. Only time will tell whether this proposed legislation will create gridlock or serve as a negotiating tool as proposed patent legislation moves forward.

More details to come as we analyze the proposed legislation.

 

Federal Circuit Preserves Broadest Reasonable Interpretation Standard in IPR Proceedings

In In re. Cuozzo Speed Technologies, LLC, the Court of Appeals for the Federal Circuit addressed for the first time the standards for Inter Partes Review proceedings resulting from the Leahy Smith America Invents Act (“AIA”).1 This decision will not only have a significant impact on Inter Partes Review proceedings brought before the Patent Trial and Appeal Board (“PTAB”), but also on strategic considerations for parties involved in active patent disputes and litigation.

The AIA replaced the prior Inter Partes Reexamination proceedings with the current Inter Partes Review proceedings. While many provisions of both proceedings are similar, other provisions differ.

Inter Partes Reexamination proceedings became available in 1999.2 Such proceedings provided potential benefits to challengers, such as a less expensive route than District Court litigation for challenging the validity of one or more claims of an asserted patent. The extent, and resultant cost, of the inter partes reexamination, was limited to patentability issues based on patents or other published prior art.3 In these proceedings, the challenged claims were construed under the “broadest reasonable interpretation” standard, rather than their “ordinary and customary meaning” standard used in District Court litigation, in which prosecution history estoppel and other factors could be used to assert a narrower scope of the claims.4 The broader claim scope is perceived to allow prior art to be more easily read on the claims, thus reducing the burden of invalidating those claims.5

Continue Reading

Will the USPTO’s Abstract Idea Examples Change Post-Grant Practice?

With the rise in popularity of post-grant challenges, the ability to survive such challenges has become critical for patent owners. While not an issue in inter partes reviews (IPRs), a patent can be challenged on § 101 grounds in post-grant reviews (PGRs) and covered business method reviews (CBMs). Since Alice, many CBMs have been instituted on § 101 grounds. There remains some uncertainty as to the limits of patent eligibly, particularly for computer-related claims. As post-Alice cases work their way through the courts, the line between patent-ineligible ideas and patent-eligible applications of those ideas will likely be clarified. In an attempt to provide some immediate clarity to examiners and applicants, last week the USPTO released a set of example claims to be used in conjunction with its eligibility guidance documentation to help illustrate examples of patent-eligible and patent-ineligible claims directed to computer-related inventions. These examples provide a window into the USPTO’s view of the state of the law in the wake of Alice and its progeny. What remains to be seen is how these examples will affect practice before the USPTO, both before and after issuance.

What lessons can be taken from these examples? For one thing, all of the examples analyze the specification and the underlying subject matter – not just the claims. This seems to show the USPTO is taking to heart the Supreme Court’s mandate in the Mayo and Alice decisions against making patent eligibility a “draftsman’s art.” While the claims are at the heart of the two-step eligibility analysis, the claims have to be read in context. There is no silver bullet – no magic words can be added to the claims to make all computer-related inventions patent eligibility.

Continue Reading

LexBlog