Patent office issues needed inter partes review guidance

2017 IN REVIEW

Inter partes review turned five years old this year, and the process has been widely adopted as a complement to patent litigation. Yet not everyone has been pleased. A well-functioning inter partes review system is fair, predictable and consistent. But patent owners have argued that inter partes review was unfairly stacked against them. This has resulted in an inter partes review system, patent owners often claim, that is out of balance. To hear patent owners tell it, they own valid patent rights that face repeated assaults on several fronts. And despite a procedure to amend and fix claims in an inter partes review, amendments are almost always denied. To be sure, an unbalanced and unpredictable system benefits no one. The U.S. Patent and Trademark Office has issued new guidance this year that may address some such complaints, specifically directed to: (1) duplicative inter partes review challenges; and (2) inter partes review claim amendments. This guidance could help patent owners in inter partes review proceedings going forward. And at the very least, it could aid the patent community by adding a degree of clarity and predictability to the inter partes review process.

While affording anyone the opportunity to challenge a patent, the America Invents Act also includes some procedural safeguards. 35 U.S.C. Section 314(a) gives the Patent Trial and Appeal Board substantial discretion on whether to institute or deny inter partes review. Section 325(d) gives the Patent Office discretion to reject inter partes review petitions that repeat arguments previously considered by the examiner during prosecution, or previously considered by the board. And Section 316(d), provides that "the patent owner may file 1 motion to amend the patent," which may give the patent owner a chance to "fix" a challenged claim by replacing it with one that is more narrowly tailored. Guidance issued by the Patent Office this year either formalizes or alters how the board will apply these statutes to its inter partes review proceedings going forward. In each case, the Patent Office's guidance has the ability to strengthen patent owner safeguards.

Over the first five years, these statutory provisions were not always effectively employed to safeguard patent owners. One extreme example of a patent owner facing multiple attacks is Zond LLC. In 2014, Zond faced 125 inter partes review petitions filed against 10 of its patents. Perhaps unsurprisingly, not a single claim survived these 125 challenges. Also, 118 motions to amend had been decided from 2012 to April 2016. Only two were granted and four granted-in-part. It has been suggested that an amendment process resulting in a 95 percent denial rate did not adequately provide the patent owner with safeguards envisioned by the America Invents Act.

One method by which the Patent Office issues guidance is by designating "precedential" or "informative" decisions. A precedential opinion is "binding authority in subsequent matters involving similar facts or issues." An informative opinion, on the other hand, is not considered binding on subsequent panels, but is intended to provide: "norms on recurring issues," "guidance on issues of first impression," or "guidance on Board rules and practices." See, e.g., PTO SOP no. 2. The intent is to provide guidance to both the board judges and the public on how the Patent Office will deal with important issues. Such decisions have been designated to address duplicative inter partes review challenges.

"Duplicative" challenges may arise in at least two different ways. First, a challenger can raise a duplicative attack by filling multiple inter partes review petitions, often in a serial fashion, on the same patent. Second, a challenger can raise a duplicative attack by raising the same, or substantially the same, arguments previously considered by the examiner during prosecution of the patent.

Regarding multiple serial attacks on a single patent, the board designated General Plastic Industrial Co., Ltd. v. Canon Kabushiki Kaisha, IPR2016-01357, Paper 19, as "precedential" and set out a multi-factor test to apply when exercising its 314(a) discretion to deny inter partes review petitions. Here, a petitioner had an initial round of inter partes review petitions denied on the merits. Nine months later, petitioner attempted to remedy deficiencies noted by the board with a second round of petitions. The board "recognize[d] the potential for abuse of the review process by repeated attacks on patents." The board set out seven factors to consider when exercising its discretion to deny institution. In essence, the factors place a burden on the petitioner to substantively justify why follow-on petitions should go forward. Applying these factors, the board declined to institute the follow-on challenges and held that "multiple, staggered petition filings, such as those here, are an inefficient use of the inter partes review process and the Board's resources."

The board in Hospira, Inc. v. Genentech, Inc., IPR2017-00739, Paper 16, similarly set out the "competing interests" to consider when exercising its discretion under Section 325(d) to deny the same or substantially the same arguments from prosecution. "On the one hand, there are the interests in conserving the resources of the Office and granting patent owners repose on issues and prior art that have been considered previously. On the other hand, there are the interests of giving petitioners the opportunity to be heard and correcting any errors by the Office in allowing a patent -- in the case of an inter partes review -- over prior art patents and printed publications." This case, and two others, Cultec, Inc. v. Stormtech, LLC, IPR2017-00777, Paper 7, and Unified Patents v. John L. Berman, IPR2016-01571, Paper 10, were designated as "informative" and each rejected petitions based on arguments previously considered during examination. Taken together, these three opinions indicate that the board may look skeptically upon prosecution-recycled arguments. In exercising its discretion, "the Board [will] weigh petitioners' desires to be heard against the interests of patent owners, who seek to avoid harassment and enjoy quiet title to their rights."

The other major guidance issued this year is on claim amendments. In Aqua Products, Inc. v. Matal, 2017-1177, the U.S. Court of Appeals for the Federal Circuit addressed the Patent Office's practice of placing the burden of proof for inter partes review claim amendments on patent owners. The Aqua Products decision was contentious, resulting in five separate opinions, spanning 158 pages. Fundamentally, a majority of the Federal Circuit held that the burden of persuasion on inter partes review claim amendments cannot be placed on the patent owner. But the views of the court on several closely related issues were far from clear.

After Aqua Products, the Patent Office issued guidance on inter partes review claim amendments. The guidance generally tracks the few apparently agreed holdings in Aqua Products. Specifically, "a motion to amend must set forth written description support and support for the benefit of a filing date in relation to each substitute claim, and respond to grounds of unpatentability involved in the trial," but "the Board will not place the burden of persuasion on a patent owner with respect to the patentability of substitute claims presented in a motion to amend." Instead, "if a patent owner files a motion to amend (or has one pending) and that motion meets the requirements of 35 U.S.C § 316(d) (i.e., proposes a reasonable number of substitute claims, and the substitute claims do not enlarge scope of the original claims of the patent or introduce new matter), the Board will proceed to determine whether the substitute claims are unpatentable by a preponderance of the evidence based on the entirety of the record, including any opposition made by the petitioner." Other than these changes, the board has not yet made any further substantive alteration to amendment practice. And it seems likely, especially in view of such a fractured Federal Circuit decision, that courts may weigh in further. It remains to be seen how effective the Patent Office's guidance will be, and if further changes, e.g., via formal rulemaking, will be necessary.

It is always helpful when the Patent Office issues clear guidance to the patent community. Whether it be with precedential and informative decisions, or with formal or informal guidance, clarity in the rules ensures consistency and predictability. Moreover, the guidance issued in 2017 might help to address one of the major concerns frequently raised against inter partes review: fairness to patent holders. The inter partes review system must strive to strike the proper balance of improving patent quality while at the same time promoting innovation. As we begin the sixth year of the processes, the patent community would be further served by additional guidance from the Patent Office. Regardless of how inter partes review proceedings evolve, the key is clarity in its rules and procedures.

The views expressed in this article are those of the author only, and do not reflect the views of Irell & Manella LLP, or any of its clients.