New rules and ruling may give patent owners new tools

Patent owners may have finally caught a break with the U.S. Patent and Trademark Office's recent rules announcement that would change the often-criticized policy of using the "broadest reasonable interpretation" standard for construing unexpired and proposed amended patent claims in inter partes review proceedings. Instead, the Patent Trial and Appeal Board will be required to apply the "ordinary meaning" standard for construing claims as set forth in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) [ruling attached below].

The change should harmonize claim construction standards in post-grant inter partes review challenges with those used by Article III federal courts and in International Trade Commission proceedings. In theory, the change should make it unlikely that the PTAB will construe claims broader than or in conflict with co-pending or prior litigation. The news presents a welcome relief to patent owners facing challenges before the PTAB.

However, the impact of the rule change on patent litigation is amplified in light of the recent decision of the U.S. Supreme Court in SAS Institute, Inc. v. Iancu, 2018 DJDAR 3619 (April 24, 2018). The court in a 5-4 decision held that "[w]hen the Patent Office institutes an inter partes review, it must decide the patentability of all of the claims the petitioner has challenged." In coming to its decision, the Supreme Court relied in large part on the plaint text of the statute providing that: "If an inter partes review is instituted and not dismissed under this chapter, the [PTAB] shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner." 35 U.S.C. Section 318(a) (emphasis supplied). The court considered the application of 35 U.S.C. Section 314(a) as simply requiring the PTAB (on behalf of the director) "to decide whether the petition is likely to succeed on at least 1 claim," and that "a reasonable prospect of success on a single claim justifies review of all."

In short, in deciding whether to institute proceedings, the Patent Office is only entitled to determine whether to institute review, not what claims the review will encompass.

The PTAB previously enjoyed unfettered discretion over its choice of which claims to review. As a result, before SAS, if the Patent Office determined not to institute proceedings on certain challenged claims, the petitioner was free to simply repeat its challenge in a concurrent or subsequent civil case and patent owners were denied the benefit of binding petitioners to a validity determination on claims that were not subject to the inter partes review. As a result, the patent owner would end up relitigating the issue of validity after already having disclosed its position and arguments in the inter partes review. The PTAB's refusal to institute review had no preclusive effect allowing the petitioner to assert and argue invalidity on the same or other grounds in district court.

After SAS, however, it is all or nothing for the petitioner since the Patent Office must now decide whether to institute on all claims requested in the petition. The obvious and immediate effect is that petitioners no longer have the luxury of simply petitioning on all claims asserted against them to see what sticks. When the new claim construction standards are factored in, the petitioner must now be more circumspect over what claims to bring to the Patent Office, particularly since the PTAB will be looking at the claims in a different light.

Going forward, patent owners should be more strategic in bringing cases so as to take advantage of this all-or-nothing requirement and the rule requiring ordinary meaning for claim construction. It all starts with the filing of the complaint in the district court. Patent owners may now want to consider asserting as many applicable claims as possible. This would force a potential infringer to make the choice of what claims (if any) to petition for inter partes review. With PTAB word limits in play, a petitioner is forced to limit arguments or file multiple (expensive) petitions to cover all of the claims asserted. If the PTAB decides not to institute review on some of the asserted claims, it may be game over for obviousness and anticipation arguments back in district court. A petitioner may find that she painted herself into a corner if validity determinations cannot now be re-litigated in district court.

Therefore, if a defendant does not petition the PTAB on all of the claims asserted in co-pending litigation, the patent owner is presented with a choice to wait out the inter partes review or dismiss the petitioned claims and move forward on the non-petitioned claims after the one-year time bar (which starts from service of a complaint alleging patent infringement). Increasing the number of claims asserted in litigation may increase the difficulty for defendants to traverse inter partes review proceedings.

This makes timing of an inter partes review more critical than ever. Though it remains to be seen, the PTAB will likely consider and follow a district court's claim constructions since the claim construction standards as between the PTAB and the district court are now essentially the same. This may be particularly troublesome for defendants, as defendants (petitioners) who wait until the end of the one-year deadline to file an inter partes review may be stuck with claim constructions already made by a district court judge in co-pending (or perhaps even prior) litigation. Patent owners that have already obtained a favorable claim construction may now use that to their advantage in inter partes reviews.

With the Supreme Court's holding in SAS and the new rules at the Patent Office set to kick in, patent owners may have some new procedural tools to help them successfully navigate PTAB proceedings.