New USPTO Rules for Post-Grant Trials

Initially, the rate of institution by the PTAB for petitions for post-grant Inter Partes Review (IPR) proceedings was quite high. However, because denial of institution of a post-grant trial is a final, non-appealable decision and, significantly, as observers noted, in excess of 95% of patent claims at issue were being at least partially invalidated in the course of the IPR proceedings, patent owners have increased their focus on the early pre-institution filings in an effort to have the PTAB decide to decline the institution of the IPR proceeding.

This early proceeding focus has resulted in a declining institution rate by the USPTO.

Due to the increased importance of achieving a successful outcome in the early pre-institution filings, patent owners historically had been frustrated by rule prohibitions against the submission of testimonial evidence with their preliminary responses. Patent owners felt hamstrung in that decisions on institution were often based on unrebutted expert testimony in favor of the petitioners. Practically all petitioners submitted at least some testimonial evidence from a technical expert to support the grounds they raise in the petition. Thus, under the old rules, when the Board was deciding if the petitioner has met its burden and trial is warranted, the PTAB could consider expert testimony from only the petitioner.

The rule changes now permit patent owners to submit testimonial evidence, including expert testimony, in patent owner preliminary responses so that such evidence may be considered by the PTAB when deciding whether to institute a trial. Arguably, this rule change will encourage full disclosure of rebuttal evidence by patent owners and provide the PTAB with the best available information in deciding whether or not to institute a trial.

Ah, but this is the USPTO and nothing comes without a twist.

To address concerns that a petition might be denied based on testimony that supports a finding of fact in favor of the patent owner, even though the petitioner has not had an opportunity to cross-examine the declarant, under the new rules, a PTAB panel will be empowered to resolve any genuine issue of fact created by the patent owner's testimonial evidence in favor of the petitioner, solely for purposes of institution.

The new rules also allow the PTAB panels to discretionarily order limited discovery, including cross-examination of witnesses, prior to institution of an IPR. The twist here is that any genuine issue of fact created by the patent owner's declaration is resolved in favor of the petitioner, which runs contrary to the norm in American jurisprudence in that a party seeking some sort of relief from a court typically has the burden of persuasion. Normally, American courts view facts in the light most favorable to the non-moving party (i.e., in an IPR proceeding, that would be the patent owner not the petitioner).

Under these new rules, it becomes best practice for a patent owner to retain an expert and, if the evidence to be presented is compelling, to provide a submission of an expert declaration with the preliminary response in order to best position a patent owner to avoid or limit institution of trial.

Additionally, with the ability to file testimonial evidence pre-institution, the new rule allows for the introduction of testimonial evidence directly rebutting the petitioner's substantive anticipation (novelty) and obviousness (inventive step) grounds as well as secondary considerations to show non-obviousness, e.g., commercial success, industry praise or unexpected results, in response to obviousness challenges raised by the petitioner.

Patent owners must keep in mind, however, that the rules may have some potential negative consequences to the patent owner. Under these rules, the petitioner is afforded the opportunity to reply to the patent owner's testimonial evidences. Patent owners may want to balance the benefits of introducing testimonial evidence early in the proceeding with what may amount to petitioner's ability to file a “second” petition. Additionally, the patent owner will have to weigh the potential strength of the submitted expert's testimonial evidence during the course of the IPR proceeding after that evidence had been previously considered and found unpersuasive by the PTAB panel solely for purposes of institution.

Broadest Reasonable Interpretation Standard

One of the most controversial elements of the American Invents Act (AIA) are the applicable claim construction standards that were adopted by the USPTO for use by the PTAB in an IPR proceeding. Under the new rules, the PTAB reaffirms the use of the broadest reasonable interpretation (BRI) standard in construing the claims, with one small exception. The proposed rules clarify that the BRI standard will apply to all claims in patents that will not expire before the PTAB will reach a final decision in the proceeding. The exception to this rule drives a different standard in that the “plain and ordinary meaning” standard, which is the standard that is applicable in U.S. district courts during patent litigation, will apply to all claims in patents that will expire before the PTAB will reach a final decision.

The BRI standard is generally broader than the “plain and ordinary” meaning that U.S. district courts use when interpreting claims during litigation, which allows for identical prior art to have a more deleterious adverse effect on claims that are adjudicated under the BRI standard.

As provided under the AIA, the USPTO has authorized the PTAB to apply the BRI standard to claims under review in patents that would not expire before the Board reached a final decision. The USPTO's central justification, provided in the comments to these proposed rules, for the continued use of the BRI standard in post-grant trials, such as IPRs, is the ability provided under the AIA for patent owners to amend the claims to resolve disputes in claim interpretation and overcome prior art.

However, in practice, due to structural and procedural impediments in the regulations governing post-grant proceedings, there is little opportunity for patent owners to make amendments during the post-grant proceedings.

For example, in an IPR proceeding, and in contrast with typical prosecution examination proceedings, a patent owner does not have the right to freely amend as part of an iterative back-and-forth with the examiner, and is limited to one motion to amend that is presumptively limited to substituting one amended claim for each challenged claim. Because of these limitations, less than 10 motions to amend the claims have been approved by a PTAB board in the thousands of IPR cases that have been prosecuted to date.

When assessing patentability, the USPTO historically uses the BRI standard, consistent with the specification, in prosecutorial venues in which the patent owner has the ability to freely amend the proposed claims set during the course of the proceedings in the selected venue, such as conventional prosecution before the USPTO, reissue applications and reexaminations.

It is not surprising that the new rules promulgated by the USPTO do not change the fundamental use of the BRI claims standard in an IPR proceeding, as the USPTO is currently defending the use of the BRI standard in IPR proceedings in the pending Cuozzo Speed Technologies v. Lee, 15-446, litigation, in which oral arguments were heard at the Supreme Court on April 25, 2016.'

Ah, the exception: The USPTO defends its application of the plain and ordinary meaning standard used by the courts because a patent owner cannot amend an expired claim. This exception under the new rules permits either party to request, within 30 days of the filing of the petition, a plain and ordinary meaning claim construction standard if the party certifies that the patent will expire within 18 months of the entry of the Notice of Filing Date Accorded to Petition.

Other Changes

In practice, this new rule once again shifts more focus and energy into the pre-institution phase of AIA trials as a party seeking application of a plain and ordinary meaning standard construction must act quickly, and patent owners will be well-served to resolve this issue as early as possible. The PTAB will consider the request and whether additional briefing on the issue is required prior to the patent owner's preliminary response or decision on institution.

Another noteworthy change is the addition of a “Rule 11-type” certification for papers filed with the PTAB, going above and beyond the standard “duty of candor” owed to the USPTO. This rule change predominantly affects petitioners, as the amended rule allows for sanctions to be imposed if a petitioner failed to conduct adequate pre-filing investigation before filing its petition. The final notable changes include some procedural fixes.

For instance, the new rules replace the current page limit for major briefings with a word count limit and require a certification of the word count. Accordingly, petitions will no longer be reviewed to determine if the page limit has been thwarted through the use of claim charts containing arguments, thus streamlining administrative review and reducing the number of noncompliant petitions requiring correction.

The USPTO characterizes these new rules as providing “more involved” changes to AIA practice. Practitioners might characterize the new rule changes using a different noun, especially because these new rules reaffirmed and did not substantively change the use of the controversial BRI claim construction standards for post-grant proceedings. Thus, in the near term, practitioners on both sides of AIA practice will be focused on the Supreme Court's decision in Cuozzo. An adverse decision against the use of the BRI standard would cause the USPTO to significantly alter the rules of AIA post-grant practice.

Conversely, if the Court supports the USPTO's BRI standard, practitioners can expect the USPTO to only make ministerial changes thereafter for the foreseeable future after the implementation of these latest rule changes.

Kean J. DeCarlo is a partner at Taylor English Duma LLP in Atlanta, GA. A registered patent attorney, DeCarlo has extensive experience in domestic and international patent and trademark prosecution, counseling, portfolio and competitor analysis, and licensing and commercial transactional matters for clients ranging from startup companies to international conglomerates. He may be reached at 678-336-7288 or at [email protected].