The PTAB's New Claim Construction Standard: Will the Real Impact Please Stand Up

Beginning on Nov. 13, 2018, the U.S. Patent and Trademark Office (USPTO) will cease to apply the broadest reasonable interpretation (BRI) standard for newly-filed IPR, PGR, and CBM trials under the America Invents Act (AIA). Instead, the USPTO will begin "using the same claim construction standard that would be used to construe the claim in a civil action[,] … including construing the claim in accordance with the ordinary and customary meaning of such claim … and the prosecution history pertaining to the patent." 37 C.F.R. §42.100. The new rules also state that the USPTO will consider "[a]ny prior claim construction determination concerning a term of the claim in a civil action, or a proceeding before the International Trade Commission, that is timely made of record." 37 C.F.R. §42.100.

The USPTO has long applied the BRI standard in proceedings involving issued patents, including reexaminations, reissues, and AIA trials. Federal courts, however, use the "narrower" Phillips standard. While maintaining the BRI standard for reissues and reexaminations, the USPTO has chosen to break with tradition for new AIA trials in order to "[m]inimiz[e] differences between claim construction standards used in the various fora [to provide] greater uniformity and predictability of the patent grant, [as well as] help increase judicial efficiency overall." 83 Fed. Reg. 51,342 (Oct. 11, 2018).

Effect on Rulings

One significant question arising from this change concerns the effect that a "narrower" claim construction standard will have on the patentability rulings. A less obvious question considers the effect that using the identical standard will have on the interplay between AIA trials and parallel actions in district courts.

As to the first question, the Phillips standard mandates that claim terms be given their ordinary meaning in the eyes of a person of ordinary skill in the art. Phillips v. AWH Corp., 415 F.3d 1303, 1313 ("the meaning that the term would have to a person of ordinary skill in the art in question at the time of the invention."). Yet, even under the BRI standard "words of the claim must be given their plain meaning, … [which] means the ordinary and customary meaning given to the term by those of ordinary skill in the art." MPEP §2111.01. Given the similarity between the two standards, existing case law acknowledges that "[t]he broadest reasonable interpretation of a claim term may be the same as … the construction of a term under the Phillips standard. But it cannot be narrower." Facebook, Inc. v. Pragmatus AV, LLC, 582 Fed. Appx. 864, 869 (Fed. Cir. 2014); In re: CSB-System International, Inc., 832 F. 3d 1335, 1341-42 (Fed. Cir. 2016) (finding that the claim construction under the Phillips standard no different than the construction under the BRI). The USPTO's own commentary telegraphs the expectation that the new standard could result in the same claim construction in "many cases." 83 Fed. Reg. 51,348 (Oct. 11, 2018).

History of Claim Given More Weight

The text of the rule itself indicates that the most significant differences include putting more weight on "the prosecution history pertaining to the patent" and "[a]ny prior claim construction determination" in a federal court. 37 C.F.R. §42.100. These considerations, along with others, will result in narrower constructions in some instances. But a narrower construction alone need not be result determinative. A narrower construction may only affect the ultimate determination of patentability in an inter partes review (IPR) if the narrower construction renders the claimed subject matter patentability distinct from the prior art in a way that a somewhat broader construction would not. See, e.g., Cisco Systems, Inc. v. AIP Acquisition, LLC, IPR2014-00247 (2014), paper 20, at 3 (finding the difference in standard not to be result determinative); Sipnet EU S.R.O. v. Straight Path IP Group, Inc., IPR2013-00246, Paper No. 73, pp. 2-3, 5 (P.T.A.B. May 23, 2016) (adopting the Phillips standard on remand and reversing the earlier finding of unpatentability reached based on application of the BRI standard).

On this point, patent owners should be careful not to expect that the USPTO will fully embrace the Phillips standard's oft-cited doctrine that claims be construed in a manner that preserves validity. The USPTO's commentary states that "[t]he doctrine of construing claims to preserve their validity has been limited to cases in which 'the court concludes, after applying all the available tools of claim construction, that the claim is still ambiguous.' [Phillips, 415 F.3d at 1327] (quoting Liebel-Flarsheim Co. v. Medrad, Inc., 358 F.3d 898, 911 (Fed. Cir. 2004))." 83 Fed. Reg. 51,343 (Oct. 11, 2018). In fact, the commentary suggests that this doctrine would be applied in "rare circumstances." 83 Fed. Reg. 51,343; 51,353 ("extremely rare cases in which the courts applied the doctrine").

Consequently, the new rules likely will not cause radically different claim constructions or final determinations. Nevertheless, tempered expectations should not breed complacency. The more significant impact may derive from the second issue — the interplay between constructions decided by the Patent Trial and Appeal Board (PTAB) and federal courts. While the USPTO's comments on the new rules downplay the effect on the actual constructions, they also take aim at the issue of different claim construction arguments being offered by the same party in different fora. The USPTO gave weight to public commentary that described "the possibility of differing constructions for the same claim term [as] troubling, especially when claim construction takes place at the same time in parallel district court proceedings and USPTO proceedings." 83 Fed. Reg. 51,342 (Oct. 11, 2018). For that reason, the stated purpose of the new rules is, in part, to "help achieve the goal of increasing judicial efficiency and eliminate arguments relating to different standards across fora." Id., at 51,346.

Indeed, the PTAB will now take into account the "prior claim construction determination" from federal courts. 37 C.F.R. 42.100. Simultaneously, the USPTO expressed the hope that adoption of the new standard will "increase[] the likelihood that courts may consider the PTAB's construction for a given patent." 83 Fed. Reg. 51,349 (Oct. 11, 2018). Yet, the USPTO stopped short of suggesting a preclusive effect of a claim construction in one forum on the construction in another, even rebuffing "suggestions that the PTAB must necessarily defer to prior claim constructions." Id., at 51,355. The USPTO indicated only that it would give such prior decisions proper weight, considering factors such as "whether the prior claim construction is final or interlocutory." Id., at 51,355. Nevertheless, the USPTO acknowledged more binding implications of using the same standard as the district courts, noting that "[i]ssue preclusion, collateral estoppel, and res judicata must each be premised on, among other things, a final court judgment." Id., at 51,355.

The U.S. Supreme Court has already addressed the topic of issue preclusion arising from an agency decision. See, B&B Hardware, Inc. v. Hargis Industries, Inc., 135 S. Ct. 1293 (2015). In that case, the Court held that a decision by the USPTO's Trademark Trial and Appeal Board can lead to issue preclusion in a district court. For such estoppel to attach, the decision must be final, between the same parties, and essential to the judgment. B&B Hardware, at 1302-03. The Court reasoned that because both the agency and the district court used the same "standard," issue preclusion would attach, even if the exact factors considered were not identical. B&B Hardware, at 1306-07. The ruling clearly puts estoppel concerns front and center for AIA trials, given that many AIA trials have parallel district court actions involving the same parties.

As to when a decision becomes final for purposes of issue preclusion, circuit courts have generally agreed that the ultimate decision of a tribunal triggers estoppel, such that issue preclusion attaches during any appeal. See, Pharmacia & Upjohn Co. v. Mylan Pharms., Inc., 170 F.3d 1373, 1381-82 (Fed. Cir. 1999) (articulating that most circuits agree that an appeal's pendency does not affect the finality of the holding of the trial court). Interestingly, at least one PTAB decision has declined to apply issue preclusion where appeal rights "have not been exhausted." SDI Technologies, Inc., v. Bose Corp., IPR2014-00343, Paper 32, at p. 8 (P.T.A.B. June 11, 2015).

Conclusion

With a uniform claim construction standard for both AIA trials and federal court cases, the most significant development of the new rules may prove to be the weight arguments and decisions in one forum have in another. This development warrants careful coordination of arguments among fora. Until now, practitioners have found it rather easy to present different positions on claim construction with the safety net of "different standards" to protect cross-contamination. Now, inconsistent arguments will garner more attention, and we may see a race to a "final" decision on construction in one forum.

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Justin Oliver is partner at Venable Fitzpatrick (formerly of Fitzpatrick, Cella, Harper & Scinto). Justin frequently lectures on the subject of AIA proceedings and has been counsel in over 70 such proceedings.