Mark P. Wine - LAIPLA - The Los Angeles Intellectual

Transcript Mark P. Wine - LAIPLA - The Los Angeles Intellectual

Inter Partes

Review —What Have We Learned in 18 Months?

Los Angeles Intellectual Property Association Spring Seminar 2014

Mark P. Wine Orrick, Herrington & Sutcliffe LLP June 6, 2014

What kinds of proceedings are these?

A

GENDA • 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 4

K

D

ISTINCTIVE

F

EATURES OVER

L

ITIGATION • 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 5

USPTO T

RIAL

P

ROCEEDING

N

OTIONAL

T

IMELINE

Recent trend is to reduce discovery period to 2 or 2 ½ months

USPTO T

RIAL

P

ROCEEDINGS

R

EVIEW • 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 7

I NTER P ARTES

R

EVIEW VS

.

E X P ARTE

R

EEXAMINATION

Inter Partes Review

Handled by Patent Trial & Appeal Board Appeal directly to Fed. Cir.

One year (extendable to 18 mo.) time limit on decision Estoppel provision Cannot be filed more than one year after being sued for infringement May terminate by settlement Limited discovery permitted

Ex Parte Reexaminations

Handled by reexamination examiners Appeal to Patent Trial & Appeal Board No time limit on decision No “estoppel” provision No deadline for filing No provision for settlement No discovery 8

I NTER P ARTES

R

EVIEW VS

. CBM R

EVIEW

Inter Partes Review

Threshold for initiating review is “reasonable likelihood of success” of finding at least one claim unpatentable Not limited to any particular types of patents No required co-pending litigation Estoppel provisions limited to 102/103 arguments raised or reasonably could have been raised Discretionary stay provisions for District Court litigation.

Covered Business Method Patent Review

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.

Limited to patents which claim “activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.” Petitioner must be the real party in interest that has been sued or charged with infringement Estoppel in court actions limited to those issues

actually raised

during review. Estoppel in PTO same as IPR estoppel.

More favorable stay provisions for District Court litigation.

I NTER P ARTES

R

EVIEW VS

. P

OST

G

RANT

R

EVIEW

Inter Partes Review

Threshold for initiating review is “reasonable likelihood of success” of finding at least one claim unpatentable Basis: 102 and/or 103 based on 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 Estoppel provisions limited to 102/103 arguments raised or reasonably could have been raised Standard for additional discovery – “In the interests of justice”

Post-Grant Review

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: 101, 102, 103 and 112 (not limited to patents and printed publications) (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 provision broader: includes 101 and 112 arguments raised or reasonably could have been raised Standard for additional discovery “good cause” 10

USPTO T

RIAL

P

ROCEEDINGS

– A

NALYSIS

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 permitte d 11

USPTO T

RIAL

P

ROCEEDINGS

– A

NALYSIS

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 12

I

NSTITUTION ON

L

IMITED

C

LAIMS • 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 pending if IPR will not resolve all claims in the litigation 13

I

NSTITUTION ON

L

IMITED

G

ROUNDS • 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 14

Statistics and Observations

Total 1,392 IPR 1,209 CBM 177 DER 6

AIA Progress

(as of May 22, 2014) 

AIA Monthly Filings

AIA Progress

(as of May 22, 2014) 

AIA Petition Technology Breakdown

0.6% 5.0% 8.5% 15.2% 70.7% Electrical/Computer (984) Mechanical (212) Chemical (118) Bio/Pharma (70) Design (8)

AIA Progress

(as of May 22, 2014) 

Cumulative Patent Owner Preliminary Responses

IPR CBM Filed

645 96

Waived

200 11

AIA Progress

(as of May 22, 2014) 

AIA Petition Dispositions

IPR CBM

FY13 FY14 FY13 FY14

Trials Instituted Joinders

14 167 10 + 334 3 + 52 1 +

Percent Instituted

87%

Denials Total No. of Decisions on Institution

26 203 79% 82% 79% 87 3 14 424 17 67

AIA Progress

(as of May 22, 2014) 

AIA Final Dispositions

IPR CBM

FY13 FY14 FY13 FY14

Settlements

38 103 3 13

Adverse Judgments

2 26 0 0

Final Written Decisions

0 62 1 10

O

UTCOMES OF

F

ILINGS

IPR Institute Trials

331

CBM

Denials

72 6

Joinders

11 0

Settlements

Final Written Decision (Contested/Uncontested)

26 (11/15) 11 8 (8/0) IPR Grant Rate: 82% C ONTESTED C ASES

All Instituted Claims Cancelled IPR

CBM

6 CBM Grant Rate: 85%

Some Cancelled, Some Confirmed

2 2 As of 2/20/2014

All Claims Affirmed

0 0 22

D

ECISION TO

I

NSTITUTE • High grant rate (82%) looks promising for petitioners • However…only granted on 50% of grounds raised on average » Grounds often held redundant or cumulative 23

O

BSERVATIONS ON

P

ROCEEDINGS TO

D

ATE • 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) » 16 with Success for Obviousness provisions » Combinations up to five references accepted • For CBM petitions, no petition has yet been denied for either lack of financial activity; two petitions denied as technological inventions 24

H

EARING

E

XPERIENCE • 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 25

F

IRST

IPR D

ECISION

(N

. 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 recently settled the case 26

F

IRST

CBM D

ECISION • 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 27

C

OVERED

B

USINESS

R

EVIEW

I

SSUES • 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) 28

I

NTERACTION

B

ETWEEN

USPTO P

ROCEEDINGS AND

D

ISTRICT

C

OURT LITIGATION • Stays • Estoppel provisions • Real Parties in Interest Issues 29

P ERCENT OF S TAYS G RANTED AND D ENIED (IPR/CBM) Note: 98% of Post Institution Stays granted Deferred 4% Issued Decisions Denied 25% Granted 71% Parties agree 45% No reason given 17% No reason given 14% Balancing 38% B alancing 33% As of 2/26/2014 Premature 53% Reasons for Grant Reasons for Denial 30

R

EASONS FOR

S

TAYS

D

ENIED • 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 ) 31

USPTO T

RIAL

P

ROCEEDINGS

E

STOPPEL

P

ROVISIONS • 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 32

P

ARTIES

R

EAL

P B

OUND BY ARTIES IN

R

ESULTS OF

I

NTEREST

PTO P

ROCEEDING

:

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 33

P

ARTIES

P B

ARTIES IN OUND BY

R

ESULTS OF

P

RIVITY WITH

P PTO P

ETITIONER ROCEEDING

:

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 subsequently filed litigation » Thus, a party will not know with certainty if it will be estopped, until after estoppel attaches 34

P

ITFALLS IN

USPTO T

RIAL

P

ETITIONS

• 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

D

ISCOVERY

L

IMITATIONS § 42.51 – 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) 36

D

ISCOVERY

L

IMITATIONS

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.” “Litigation Positions and Underlying Basis” – Not allowed “Ability to Generate Equivalent Information by Other Means” - If so, no discovery “Easily Understandable Instructions” “Requests Not Overly Burdensome To Answer” 37

J

OINDER

• 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 38

A

PPLICATION OF THE

IPR F

ILING

B

ARS • IPR Filing barred if petitioner files an invalidity DJ » » Counterclaim of invalidity is not a bar 35 U.S.C.

§ 315(a) • IPR Barred if filed more than 1 year after infringement complaint served » 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 • Prior infringement action does not bar subsequent IPR, if prior action was dismissed without prejudice (IPR2012-00004) 39

A

MENDING

C

LAIMS • 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 40

R

EDUNDANT

G

ROUNDS • 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) 41

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) 43

…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 44

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

Most Core Merits Determinations Will be Reviewed for “Substantial Evidence”

Factual Questions (substantial evidence review)

Findings underlying obviousness” determination (e.g., scope and content of prior art) Findings underlying “enablement” determination* Anticipation Lack of utility* Written description requirement*

Legal Issues (de novo review)

Ultimate “obviousness” determination Ultimate “enablement” determination* *Issues raised only in post-grant review, not in

inter partes

review 46

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.

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

• When if ever is a litigation stay proper pending PTAB review?

Claim Amendment

• How much leeway should patentees have to amend claims during inter partes review?

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 49

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 50

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) 51

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 52

Q

UESTIONS

?

Thank You!

Mark P. Wine

Co-Leader of Orrick Patent Practice Group [email protected]

F

S

TRUCTURE

Inter Partes

Review Post-Grant Review and Covered Business Method Review

Ex Parte

Reexamination

Current Fees

$23,000 + claim fees $30,000 + claim fees $12,000 54