Proposed PTAB Rules Provide Incremental Change

By Jason Lohr and Stephen Shaw

On August 20, 2015, the United States Patent and Trademark Office (USPTO) published proposed amendments to current rules governing trial practice before the Patent Trial and Appeal Board (PTAB) under the America Invents Act (AIA). According to a blog post from USPTO Director Michelle Lee, the proposed rules are designed to “reflect developments in practice before the Office concerning how the Office handles additional discovery, live testimony, and confidential information” in inter partes review (IPR), post-grant review (PGR), the transitional program for covered business method patents (CBM), and derivation proceedings.

The proposed amendments are the second set of changes to PTAB AIA trials released this year. The USPTO released an initial set in May 2015 that were characterized as “quick fixes” by Director Lee. Those changes included relatively minor modifications, such as increasing page limits for motions to amend the claims and for subsequent reply briefs.

The new proposals contain more substantive changes than the May package, such as a new ethical certification for filings, clarification regarding claim construction standards, confirmation of issues related to motions to amend, and allowance of new testimonial evidence with patent owner preliminary responses, among other changes. While all parties will appreciate the USPTO clarifying various issues in the proposed rules, many patent owners may be underwhelmed with the real-world impact of the proposals, especially the portion dealing with motions to amend claims during AIA trials.

No Substantive Changes to Amendment Practice

The USPTO spent eleven pages of the proposed rules document addressing “a spectrum of comments” to the question, “[w]hat modifications, if any, should be made to the Board’s practice regarding motions to amend?” [1] The answer appears to be, “virtually none.”

Many patent owners criticize the AIA trial procedure regarding motions to amend as disproportionally benefitting patent challengers, and as support for their contention, point to the fact that only four motions to amend have been granted so far in IPR proceedings. [2] In an apparent rebuke of the criticism, the proposed rules explicitly did not adopt a comment that “motions to amend should be liberally allowed,” while implicitly holding that while a “right to file a motion to amend is statutorily mandated,” an actual right to the amendments is not. [3]

Most of the eleven pages clarify current rules and practices. For example, the USPTO cites the Idle Free System [4] and MasterImage [5] cases to confirm that the burden of proof is on a patent owner to show patentability of proposed amendments to claims, and what prior art the patent owner must overcome in arguing for patentability of the proposed amendments.

The PTAB held in Idle Free System, and the proposed rules confirm, that “[t]he burden is not on the petitioner to show unpatentability, but on the patent owner to show patentable distinction over the prior art of record and also prior art known to the patent owner.” [6] The proposed rules then cite MasterImage to clarify that the terms “prior art of record” and “prior art known to the patent owner” mean “the prior art of record, including any art provided in light of a patent owner’s duty of candor, and any other prior art or arguments supplied by the petitioner.” [7]

New Testimonial Evidence Allowed with Patent Owner Preliminary Response

Current PTAB practice limits testimonial evidence that may be submitted with patent owner preliminary responses to already-existing evidence; for example, declarations entered during prosecution of the patent at issue. The USPTO acknowledged this inherent imbalance, pointing out that “[s]everal commenters suggested that the patent owner should be allowed to rely on new testimonial evidence in its preliminary response to the petition given that the petitioner may rely upon such evidence in its petition, and that the current practice of not allowing a patent owner to rely on such evidence is unfair.” [8]

The USPTO proposals allow such new testimonial evidence, but in what may be considered by patent owners to be a “two steps forward, one step back” maneuver, the USPTO included a provision that “any factual dispute that is material to the institution decision will be resolved in favor of the petitioner” for purposes of determining whether to institute an AIA proceeding. [9] As a result, it remains to be seen whether the ability for patent owners to include new testimonial evidence with their preliminary response provides any real benefit to the patent owners, who may decide that they are better off reserving the submission of such material in case a review is actually initiated.

The USPTO addressed other matters relating to patent owner preliminary responses. For example, the USPTO declined to require a patent owner to file a preliminary response in various circumstances, pointing out that 35 U.S.C. Section 313 expressly provides a patent owner a right to file a preliminary response, not a requirement. [10] Also, the USPTO declined to adopt a proposal allowing a petitioner to file a reply brief to a patent owner preliminary response as a matter of right, instead changing the rules to provide that a petitioner may seek leave to file a reply to a preliminary response including new testimonial evidence. [11] The USPTO couched this change as responsive to the allowance for new testimonial evidence, but it may serve to convince patent owners that the value of submitting new testimonial evidence is limited.

Rule 11-Type Certification for PTAB Filings

Although the USPTO states that their authority to impose sanctions on parties for misconduct is “robust,” there is a perception that some practitioners are taking advantage of the nascent trial procedures, and that the USPTO is either helpless in the face of misconduct or unwilling to adequately police parties. Perhaps as a response to comments wondering when the USPTO would assert this apparent authority, the proposed rules include a Rule 11-type certification for all papers filed with the Board, with a possible sanctions for noncompliance, including referring possible misconduct to the Office of Enrollment and Discipline. [12]

It is unclear why the USPTO believes such a certification would deter misconduct, especially if the USPTO already has such robust authority to sanction parties. As with the allowance of new testimonial evidence in preliminary responses, this appears to be reactive change that serves to address public perception and give an appearance of a maturation of the process, rather than substantively changing practice before the PTAB.

Remaining Changes and Conclusion

The remainder of the proposed rules address a variety of additional comments from the public. For example, while claims of a non-expired patent currently are construed under the broadest reasonable interpretation (BRI) standard, the PTAB construes expired patent claims using the Phillips standard. The proposed rules extend the Phillips standard in cases where the patent(s) at issue have yet to expire, but will expire prior to a final decision. [13]

The majority of the other proposals primarily deal with procedural issues, such as using word counts instead of page limits in certain filings, permitting a patent owner to raise a challenge regarding a real party-in-interest or privity at any time during a proceeding, handling requests for additional discovery, and conducting oral hearings.

It is clear that the USPTO understands the need for PTAB proceedings to mature quickly. In her blog post, Director Lee revealed that the number of AIA petitions to date is “around three times more” than their initial estimates. This filing volume puts the USPTO in a quandary: processing so many filings exposes the rough edges of what is still an emergent process, but having so many parties relying on the process makes rapid and/or substantive change ill-advised. As a result, it is unsurprising that the proposed changes fail to contain significant modifications, and it is apparent that further changes to the trial procedures similarly will be incremental in nature.

Jason Lohr is a partner in Hogan Lovells’ Intellectual Property Technology & Media practice and has over 15 years of experience in many areas of intellectual property law including portfolio management and analysis, due diligence investigations, post-grant proceedings including IPR and PGR before the Patent Trial and Appeal Board (PTAB), patent interference proceedings, pre-litigation analysis, comprehensive strategic client counseling, opinion work, and licensing, among other areas.

Stephen Shaw is a member of Hogan Lovells’ Intellectual Property Technology & Media practice group and has extensive experience in intellectual property matters including preparing and prosecuting patent and trademark applications, patent portfolio management, patent monetization, patent and trademark litigation, conducting prior art searches and clearance investigations, and preparing patentability, validity, and infringement opinions.

[1] Proposed Rules, p. 12.

[2] See IPR2013-00124; IPR2013-00402; IPR2013-00403; and IPR2014-0192.

[3] See Proposed Rules, pp. 13, 16-17.

[4] Idle Free System, Inc. v. Bergstrom, Inc., Case IPR2012-00027 (PTAB June 11, 2013) (Paper 26) (informative).

[5] MasterImage 3D, Inc. v. RealD Inc, Case IPR2015- 00040, slip op. at 1–3 (PTAB July 15, 2015) (Paper 42).

[6] See Idle Free System, at 7.

[7] Proposed Rules, pp. 12-13.

[8] Proposed Rules, pp. 23-24.

[9] Proposed Rules, p. 25.

[10] Proposed Rules, pp. 89-90.

[11] Proposed Rules, pp. 25-26, 75.

[12] Proposed Rules, pp. 87, 106-108.

[13] Proposed Rules, pp. 10-11.