Transcript Orrick, Herrington & Sutcliffe LLP

Patent Trial and Appeal Board- Inter Partes Review
Los Angeles Intellectual Property Association
Spring Seminar 2014
Orrick, Herrington & Sutcliffe LLP
Mark Wine
June 6, 2014
What kinds of proceedings are these?
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AGENDA
• Distinctions over District Court litigation
• USPTO Trial Proceedings
• Interaction between New AIA proceedings and District Court
litigation
• Pitfalls in Filing Petitions
• Discovery limitations
• Joinder Issues
• Amending Claims
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KEY DISTINCTIVE FEATURES OVER LITIGATION
• Limited Duration
• Reduced Cost
• Addresses invalidity only
• Narrow, Focused Discovery
• Early, Favorable Settlement Opportunities
• Broader claim construction
• Lower burden of proof
• Limited number of decisions on the merits and no appellate
decisions to provide guidance
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USPTO TRIAL PROCEEDING NOTIONAL TIMELINE
Recent trend is to
reduce discovery period
to 2 or 2 ½ months
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Who Decides these Proceedings?
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USPTO TRIAL PROCEEDINGS REVIEW
• Quasi-litigation process for challenging claims of issued patent
• Before three ALJs at PTAB; not Examiners
• Decisions can be appealed to Federal Circuit and/or Request
Rehearing
• IPR not available more than one year after service of
infringement complaint or if petitioner previously filed DJ action
challenging validity
• Burden of Proof is preponderance of the evidence
• Estoppel: After final IPR decision, inter partes petitioner may not
raise or maintain invalidity arguments in litigation, ITC or at the
USPTO that could have been asserted during inter partes
review
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INTER PARTES REVIEW VS. EX PARTE REEXAMINATION
Inter Partes Review
Ex Parte Reexaminations
Handled by Patent Trial & Appeal Board
Handled by reexamination examiners
Appeal directly to Fed. Cir.
Appeal to Patent Trial & Appeal
Board
One year time limit on decision
No time limit on decision
Estoppel provision
No estoppel provisions
Cannot be filed more than one year after
being sued for infringement
No deadline for filing
May terminate by settlement
No provision for settlement
Limited discovery permitted
No discovery
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INTER PARTES REVIEW VS. CBM REVIEW
Inter Partes Review
Covered Business Method Patent
Review
Threshold for initiating review is “reasonable
likelihood of success” of finding at least one
claim unpatentable
Threshold for initiation is “more likely than not
that at least 1 of the claims challenged in the
petition is unpatentable” or to resolve novel or
unsettled legal question.
Not limited to any particular types of patents
Limited to patents which claim “activities that
are financial in nature, incidental to a financial
activity or complementary to a financial
activity.”
No required co-pending litigation
Petitioner must be the real party in interest that
has been sued or charged with infringement
Estoppel provisions limited to 102/103
arguments raised or reasonably could have
been raised
Estoppel in court actions limited to those
issues actually raised during review. Estoppel
in PTO same as IPR estoppel.
Discretionary stay provisions for District Court
litigation.
More favorable stay provisions for District
Court litigation.
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INTER PARTES REVIEW VS. POST GRANT REVIEW
Inter Partes Review
Post-Grant Review
Threshold for initiating review is “reasonable
likelihood of success” of finding at least one
claim unpatentable
Threshold for initiation is “more likely than not
that at least 1 of the claims challenged in the
petition is unpatentable” or to resolve novel or
unsettled legal question.
Basis: 102 and/or 103 based on patents and
printed publications
Basis: 101, 102, 103 and 112 (not limited to
patents and printed publications)
Petition must be filed: (1) within 1 year of
service of complaint; (2) Before filing DJ; (3)
For First-to-File (F-T-F) after 9 months from
grant/ F-T-I anytime after granted; (4) If PGR
initiated; after date of termination of PGR
(1) Before filing DJ action; and (2) within 9
months from patent grant/reissue for F-T-F
patents. First to Invent (F-T-I) patents not
eligible for post-grant review.
Estoppel provisions limited to 102/103
arguments raised or reasonably could have
been raised
Estoppel provision broader: includes 101 and
112 arguments raised or reasonably could
have been raised
Standard for additional discovery – “In the
interests of justice”
Standard for additional discovery “good cause”
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USPTO TRIAL PROCEEDINGS– ANALYSIS
Pros for Petitioner
• Consideration of complex technical arguments by PTAB, not
lay jury
• Burden of proof is lower than in litigation
• Puts patent validity at issue early in the case
• Little to no discovery permitted
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USPTO TRIAL PROCEEDINGS– ANALYSIS
Cons for Petitioner
• Estoppel provision will likely limit invalidity case in court
• Claim amendments permitted but difficult to obtain
• Costs are front-loaded
• Institution on Limited Claims
• Institution on Limited Grounds
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INSTITUTION ON LIMITED CLAIMS
• If IPR granted on fewer than all claims challenged, then IPR
may not resolve all the claims raised in litigation
• Courts are less likely to stay litigation if IPR will not resolve all
claims in the litigation
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INSTITUTION ON LIMITED GROUNDS
• PTAB tends to institute trial only on selected grounds, not all
grounds presented
• Estoppel provisions prevent Petitioner from litigating validity
based on any grounds raised or that reasonably could have
been raised
• Any grounds not adopted by the PTAB may be estopped
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Statistics and Observations
AIA Progress (as of May 29, 2014)
 AIA Monthly Filings
Total 1,426
IPR 1,240
CBM 180
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AIA Progress (as of May 29, 2014)
 AIA Petition Technology Breakdown
0.6%
5.0%
8.3%
Electrical/Computer (1,012)
Mechanical (215)
15.1%
Chemical (119)
Bio/Pharma (72)
71.0%
Design (8)
AIA Progress (as of May 29, 2014)
 Cumulative Patent Owner Preliminary
Responses
IPR
CBM
Filed
655
101
Waived
204
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AIA Progress (as of May 29, 2014)
 AIA Petition Dispositions
IPR
Trials
Instituted
Joinders
Percent
Instituted
Denials
Total No.
of
Decisions
on
Institution
FY13
167
10+
87%
26
203
FY14
346
3+
79%
91
440
FY13
14
82%
3
17
FY14
52
79%
14
67
CBM
1+
AIA Progress (as of May 29, 2014)
 AIA Final Dispositions
Settlements
Adverse
Judgments
Final Written
Decisions
FY13
38
2
0
FY14
103
26
64
FY13
3
0
1
FY14
13
0
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IPR
CBM
DECISION TO INSTITUTE
• High grant rate (82%) looks promising for petitioners
• However…only granted on 50% of grounds raised on average
and 60% of claims challenged
» Grounds often held redundant or cumulative
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OBSERVATIONS ON PROCEEDINGS TO DATE
• PTAB expects the use of expert declaration with the petition
• Petitions should include all evidence to be relied on
• Preliminary responses:
» Effective in narrowing the grounds for trial
» Don’t typically lead to outright denial
• Obviousness Grounds have been successful
» 19 Final Decisions (11 IPR/8 CBM)
» Combinations up to five references accepted
• Only limited number of decisions denied for not being a financial
activity or service or being a technical invention
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ORAL HEARING EXPERIENCE
• Orrick participated in one of the first IPR hearings
• Approximately 2 hours
» 40 minutes each for initial argument
» 20 minutes each for rebuttal
• Hearing focused on claim construction analysis
• Hearing was similar to Summary Judgment or Markman with
an active judge, but more technical
• Same framework is used for CBM, with additional discussion
of §101, §112 issues
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FIRST IPR DECISION (NOV. 13, 2013)
• Garmin International, Inc. v. Cuozzo Speed Technology
LLC (IPR2012-00001)
• PTAB initiated review of 3 of 17 claims, but denied review for
remaining 14 claims
• Held that these 3 claims unpatentable for obviousness
• Petitioner filed a second IPR as to the remaining 14 claims, which
was instituted for 11 of the 14 (IPR2013-00373)
• Patentee pursued the litigation with a focus on the 14 remaining
claims, but then settled the case
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FIRST CBM DECISION
• June 11, 2013 (SAP America, Inc. et al. v. Versata
Development Group, Inc., CBM2012-00001)
• Issued after expedited trial and oral arguments
• Held that claims of a US patent covering business methods
were invalid under 35 U.S.C. § 101
• Seven additional final decisions
» 2 cancelled claims on §101 grounds
» 5 cancelled claims on §103 grounds
» No cases cancelled claims on §102 or §112 grounds
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COVERED BUSINESS REVIEW ISSUES
• Allows petitioners to rely on prior art under section 102(a) as
it existed before the passage of the AIA, and then creates
another category of prior art in place of sections (b) through
(g).
• New category is essentially 102(b)
• PTAB has concluded that this new category excludes
references that are prior art under § 102(e)
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INTERACTION BETWEEN USPTO PROCEEDINGS
AND DISTRICT COURT LITIGATION
• Stays
• Estoppel provisions
• Real Parties in Interest Issues
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PERCENT OF STAYS GRANTED AND DENIED (IPR/CBM)
Issued Decisions
Note: 91% of PostInstitution Stays
granted
Deferred
6%
As of 6/04/2014
Denied
23%
Granted
66%
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REASONS FOR STAYS DENIED
• Premature (prior to PTAB institution decision)
• Will not provide complete resolution of issues (Trial not
instituted for all patents or all claims asserted in district court
litigation)
• Relationship of the parties (i.e., direct competitors)
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USPTO TRIAL PROCEEDINGS ESTOPPEL PROVISIONS
• A “final written decision” in an IPR/PGR/CBM will limit the
invalidity arguments that can be raised by certain entities in
subsequent litigation.
» Petitioner
» Real Party in Interest
» Privy
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PARTIES BOUND BY RESULTS OF PTO PROCEEDING:
REAL PARTIES IN INTEREST
Who is a “real party in interest” (“RPI”) in a PTO proceeding?
» “At a general level, the RPI is the party that desires review of the
patent.” Trial Practice Guide, 77 Fed. Reg. at 48759
» A non-party to the proceeding that “funds and directs and controls
an IPR … petition or proceeding” is a RPI. Id. at 48760
» Indemnity obligation alone does not result in RPI
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PARTIES BOUND BY RESULTS OF PTO PROCEEDING:
PARTIES IN PRIVITY WITH PETITIONER
What entities are in “privity” with a petitioner?
» Standard applied is similar to privy standard for res judicata and
collateral estoppel
» Determination will be made by a district court subsequent to the
conclusion of the PTO proceedings in a pending or subsequentlyfiled litigation
» Thus, a party will not know with certainty if it will be estopped,
until after estoppel attaches
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PITFALLS IN USPTO TRIAL PETITIONS
• Filing Petition without expert declaration
• Filing too many grounds of unpatentability leads to
redundancy
» Not enough pages to effectively present case
» Risk of preferred grounds being rejected as redundant
• Failure to provide a construction of key terms may
result in the Board construing it in a way unfavorable
to your case
• Failure to strictly follow PTAB formatting instructions
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DISCOVERY LIMITATIONS
Three types of Discovery
• “Mandatory” Initial Disclosures
» By Agreement; no one agrees
» By Motion; nobody has attempted this yet
• Limited – “Routine Discovery”
» Production of cited exhibits
» Cross examination of declarants
» Production of information known to the parties to be inconsistent with a
position taken in the IPR – Narrowly Construed
• Limited – “Additional Discovery”
» By agreement OR
» By motion
» “In the interests of justice” (IPR) or “Good Cause” (PGR/CBM)
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SCOPE OF ADDITIONAL DISCOVERY
Garmin v. Cuzzo, Case IPR2012-0001, Paper No. 26, (PTAB Mar.
5, 2013).
• Limited discovery is “significantly different from the scope of [district court]
discovery,” and “restricts additional discovery to particular limited situations”
• Five additional discovery factors:
1. “More Than A Possibility And Mere Allegation”
– “the requestor of the information should already be in possession of a
threshold amount of evidence or reasoning tending to show beyond
speculation that something useful will be uncovered.”
2. “Litigation Positions and Underlying Basis” – Not allowed
3. “Ability to Generate Equivalent Information by Other Means” - If so, no discovery
4. “Easily Understandable Instructions”
5. “Requests Not Overly Burdensome To Answer”
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JOINDER
• Mechanism where a later petitioner can join an
existing trial
• One-year bar does not apply to joinder (35 USC §
315(c))
• Take-aways:
» If you want just a seat at the IPR table without making
substantive decisions, the PTAB has been lenient in
allowing joinder
» If joining will complicate or delay the case, joinder is not
likely to be granted
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APPLICATION OF THE IPR FILING BARS
• IPR Filing barred if petitioner files an invalidity DJ
» Counterclaim of invalidity is not a bar
» Civil Action for DJ Dismissed Without Prejudice Does Not Trigger Bar IPR2013-00438
» Civil Action for DJ Dismissed With Prejudice Does Trigger Bar IPR2013-00114
• IPR Barred if filed more than 1 year after infringement
complaint served
» Prior infringement action does not bar subsequent IPR, if prior action
was dismissed without prejudice (IPR2012-00004)
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AMENDING CLAIMS
• Amending claims is difficult
• Burden is on Patentee
» Not enough to argue over cited art
» Must explain the background of the prior art
» Must either identify which claim elements were not known, in any
context, or explain why it would not be obvious to combine known
elements
• Expert declaration is crucial here
• Only one petition has successfully amended claims to date
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REDUNDANT GROUNDS
• PTAB often denies grounds as redundant or cumulative
(>50% of grounds in granted petitions denied)
• Board will pick the grounds it likes best unless Petitioner
makes clear the strengths and weaknesses of each ground
(Liberty Mutual, (CBM2012-0003)
• Redundant grounds interfere with “the just, speedy, and
inexpensive resolution of every proceeding” as required under
37 C.F.R. § 42.1(b)
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Appellate Review of PTAB Decisions
Federal Circuit – Exclusive Appellate Jurisdiction
• “A party dissatisfied with the final
written decision of the Patent Trial
and Appeal Board” following inter
partes review or post-grant review
“may appeal the decision” to the U.S.
Court of Appeals for the Federal
Circuit.
• “Any party to the . . . review shall
have the right to be a party to the
appeal.”
(35 U.S.C. §§ 319, 329)
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…and Many Appeals are on the Way
A “tsunami” of
patent appeals
is “heading up
the Potomac.”
-Chief Judge
Rader
• About 400 final
written decisions
in contested cases
are expected from
PTAB’s first year
• The rate of IPR
filings continues to
increase
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Review of BPAI Decisions May Give Some Sense of
What PTAB Appeals Will Look Like
• The Federal Circuit engaged in deferential review of Board of
Patent Appeals and Interferences decisions.
• The AIA did not change the appellate standard of review.
• Factual issues are reviewed for substantial evidence.
− The court will uphold the Board’s factual determination if “a
reasonable fact finder could have arrived at the agency’s
decision,” even if the record would also have supported
“another plausible alternative.”
• Legal issues are reviewed de novo.
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Most Core Merits Determinations Will be
Reviewed for “Substantial Evidence”
Factual Questions
(substantial evidence review)
Legal Issues
(de novo review)
Findings underlying obviousness”
determination (e.g., scope and
content of prior art)
Ultimate “obviousness”
determination
Findings underlying “enablement”
determination*
Ultimate “enablement”
determination*
Anticipation
Lack of utility*
Written description requirement*
*Issues raised only in post-grant review, not in inter partes review
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So it is Better to Win at the Board than to Have
to Win on Appeal
Federal Circuit Disposition of All BPAI Patent Cases, 1999-2009
(n=264)
Reversed
14%
Affirmed
86%
Source: Samuels & Samuels, The Impact of Dickinson v. Zurko on Federal Circuit Review of USPTO Board Decisions, 20 Fed.
Cir. Bar J. 665, 677 (2011). Sample includes both ex parte and inter partes proceedings.
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Certain Questions of Law Concerning the AIA
Should Be Reviewed De Novo, e.g.:
Estoppel
• What qualifies as “during that inter partes [or
post-grant] review”?
• What arguments “reasonably could have been
raised”?
• When is a party a “privy”?
Stays
Claim
Amendment
• When if ever is a litigation stay proper pending
PTAB review?
• How much leeway should patentees have to
amend claims during inter partes review?
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And, There are Reasons to Think Reversal
Rates Could be Higher in PTAB Appeals
• PTAB plays a different role than
BPAI did
• PTAB sits as a factfinder,
whereas BPAI sat as an
appellate body with respect
to examinations
• Possibly more detailed
factual findings
• One level of agency review,
vs. two before
• Possibly more opportunity for
the Federal Circuit to find
error?
• But more detailed findings
may make it harder to say
there was no “substantial
evidence” supporting the
Board’s decision
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And, There are Reasons to Think Reversal
Rates Could be Higher in PTAB Appeals
• In the near term, the PTAB will
be interpreting new provisions
of the AIA in the first instance
• More opportunity for the
Federal Circuit to find legal
error on questions of first
impression
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Also, in Recent Appeals from Inter Partes
Re-examinations, there have Been Notable Reversals
Grounds for reversal of BPAI inter partes reexaminations
• In finding claims nonobvious, Board applied improper test and
ignored relevant evidence (Randall Manufacturing v. Rea,
2013)
• Board’s claim construction was erroneous (Leo
Pharmaceutical Products v. Rea, 2013)
• Board’s finding of anticipation was not supported by
substantial evidence (Rambus v. Rea, 2013)
• Board wrongly found claims nonobvious by relying “only on
minor distinctions between the prior art and the claimed
invention” (PlaSmart v. Kappos, 2012)
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Federal Circuit Review Will be a Critical Stage in
the Process
• Whether defending a Board decision or fighting to reverse one,
effective appellate advocacy will be essential to the outcome
• It will be necessary to build a record before the PTAB that can
support a compelling narrative on appeal, e.g., about novelty or
inventorship
• As always, telling a good story to the Federal Circuit is key
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Thank You
Mark Wine
Co-Leader of Orrick Patent Practice Group
Office Leader Orange County Office
[email protected]
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