March 30, 2023

Issue 40: PTAB Trial Tracker

Precedential Opinion Addresses Conclusory Expert Declarations 

In a precedential opinion in Xerox Corp. v. Bytemark, Inc., IPR2022-00624, Paper 9 (P.T.A.B. Aug. 24, 2022), the Board denied institution of an inter partes review challenging certain claims of U.S. Patent No. 10,360,567.  In its decision, the Board noted that it gave “little weight” to Petitioner’s expert declaration because “[the declaration] merely repeats, verbatim, the conclusory assertion for which it is offered to support” and the expert “does not cite to any additional supporting evidence or provide any technical reasoning to support his statement.”  Id. at 15.  The Board explained that verbatim recitations of the assertions in the petition without additional technical support “is particularly problematic in cases where, like here, expert testimony is offered not simply to provide a motivation to combine prior-art teachings, but rather to supply a limitation missing from the prior art.”  Id. at 16 (citing KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 421 (2007)).  The Board noted that verbatim recitations “might be permissible when ‘the limitation in question [is] unusually simple and the technology particularly straightforward.’”  Id. at 16 (quoting Arendi S.A.R.L. v. Apply, Inc., 832 F.3d 1355, 1362 (Fed. Cir. 2016)) (alteration in original).

Takeaway: The PTAB is unlikely to find expert declarations without supporting evidence and/or technical reasoning that form the basis for the expert’s opinion persuasive when offered to supply a claim limitation missing from prior art.  An expert merely repeating arguments verbatim from the Petition or reply papers will typically not suffice. 

Allegation of Ethical or Due Process Violations by APJs Must Be Well-Founded

In Palo Alto Networks, Inc. v. Centripetal Networks, LLC, IPR2022-00182, Paper 55 (P.T.A.B. Feb. 3, 2023), Patent Owner filed a Motion for Recusal and Vacatur, as well as, a Request for Rehearing.  Patent Owner argued that conflicts related to APJ McNamara’s ownership of Cisco stock and receipt of payments from Foley & Lardner LLP warranted recusal from the proceeding based on executive branch ethics rules and the requirements of due process.  Id. at 6.

The Board rejected Patent Owner’s arguments relating to the Cisco stock ownership, reasoning that “the value of the holdings falls well below the $25,000 threshold that § 2640.202(b) applies to matters affecting nonparties” including executive branch employees such as APJs. Id. at 11 & n.8. The Board also rejected the argument relating to payments from Foley, concluding that there was nothing in the record to suggest that APJ McNamara had the requisite knowledge or awareness under 5 C.F.R. § 2635.402, nor evidence of direct effect on financial interest under 5 C.F.R. § 2635.402(b)(1)(i).  Id. at 12.  The Board went on to state that Patent Owner’s allegations of violations of “executive-branch ethics regulations” were “frivolous” and warned that “further baseless arguments directed at the Board, its members, or its process may be met with sanctions.”  Id. at 13–14.

The Board next rejected Patent Owner’s alleged due process violations because “the ‘remote’ and ‘inconsequential’ interests falling within the ‘de minimis exemptions’ of Section 2640.202 are not ‘substantial’ interests that would give rise to the types of due process concerns raised in the Recusal Motion.”  Id. at 16.  Furthermore, the Board denied Patent Owner’s allegation of actual bias because “APJ McNamara’s presence on panels that instituted IPRs on Patent Owner’s patents, or found claims of Patent Owner’s patents unpatentable, does not itself show bias against Patent Owner.”  Id. at 18.

Takeaway: Parties should rely on significant evidence in allegations of ethical or due process violations directed to an APJ’s financial interests.  A party making a frivolous allegation of such violations may be subject to sanctions.   

Impact of Fintiv Remains in Flux

In CommScope Techs. LLC v. Dali Wireless, Inc., IPR2022-01242, Paper 23  (P.T.A.B. Feb. 27, 2023), Director Vidal vacated the Board’s decision granting institution and remands for further proceeding.  The decision holds that when determining whether to institute an AIA proceeding where there is parallel district court litigation, Board panels should first assess Fintiv factors 1-5. Id. at 4.  If that analysis favors discretionary denial, the Board should then engage the compelling merits question.  Id. Director Vidal clarified her June 2022 Guidance, stating, “[a]lthough I now recognize that [the June 2022 Guidance] could be read to allow for a compelling merits determination as a substitute for a Fintiv analysis, that was not my intent.  By that instruction, I intended for PTAB panels to only consider compelling merits if they first determined that Fintiv factors 1-5 favored a discretionary denial.” Id.  The decision instructed that in assessing compelling merits, “the Board must provide reasoning sufficient to allow the parties to challenge that finding and sufficient to allow for review of the Board’s decision.”  Id. at 5.  In the decision, Director Vidal also stated that a compelling merits standard is higher than the likelihood of success standard required by the Patent Act for PTAB challenges.  Id. at 3. 

The outcome of this remand, however, is unclear.  The criteria for denying institution of inter partes review may be subject to change as a result of the Federal Circuit’s recent decision in an action brought against the Director in district court under the Administrative Procedure Act (APA), 5 U.S.C. §§ 701–06. Apple Inc. v. Vidal,  No. 2022-1249, 2023 WL 2469635 (Fed. Cir. Mar. 13, 2023).  The action challenged Director Vidal’s June 2022 guidance issued to the Board to inform it how to exercise discretion as to whether to institute a requested IPR. Id. at *1.  The district court granted the government’s motion to dismiss, finding that the Director’s actions were not reviewable. Id.  The Federal Circuit reversed, holding that plaintiffs’ challenge arguing that the Director’s instructions had improperly been issued without notice-and-comment rulemaking as required under 5 U.S.C. § 553 was reviewable under the APA.  Id.

Takeaway: As the guidance currently stands, Director Vidal’s guidance allowing the PTAB to institute inter partes review even if the Fintiv factors favor denial does not mean that the Fintiv analysis becomes moot.  Notably, Director Vidal’s comments confirm that the standard is high to overcome the other Fintiv factors based on the merits.  These standards may change if the parties are successful in challenging the application of Fintiv without formal rulemaking.

USPTO Director Not Tied to IPR Deadlines 

In CyWee Grp. Ltd. v. Google LLC, 59 F.4th 1263 (Fed. Cir. 2023), the Federal Circuit affirmed the PTO’s decision to deny CyWee’s request that the Director rehear two IPR proceedings that invalidated two motion sensor patents.  CyWee argued to the Federal Circuit that the Director must perform reviews of final written decisions and institution decisions within the statutory deadlines applicable to those decisions. Id. at 1267.  The court rejected CyWee’s untimeliness arguments on grounds that the statutory provisions for final written decisions and institution decisions do not provide guidance on deadlines for any further Director review of those decisions.  Id.  The Board also rejected CyWee’s argument that the Director must perform a review of final written decisions and institution decisions, stating that an agency head may delegate her authority to subordinates.  Id. at 1268.

Takeaway: Parties should keep in mind that the Director is not bound to the statutory deadlines for institution decisions and final written decisions and should factor in potential additional time when considering strategy. 

It is the Parties’ Responsibility to Make the Arguments, Not the Panel

In Cloudfare, Inc. v. Sable Networks, Inc., IPR2021-00909, Paper 16 (P.T.A.B. Nov. 19, 2021), the Board granted institution.  In its decision the Board noted a discrepancy between Grounds 1 and 2 and informed Petitioners of a possible “typographical error” in failing to cite a reference for its obviousness combinations related to certain dependent claims. Id. at 39.  Petitioners referred to the error as typographical repeatedly throughout their subsequent briefing, arguing that the petition “includes every argument necessary” to show the challenged claims are obvious over a combination including the reference the Board noted was missing.  Paper 33 at 28 (June 6, 2022).

In its Final Written Decision, the Board declined to fill in the gaps and make the argument for petitioners, finding that it was clear from the petition’s substantive discussion and organization that the apparent discrepancy was not a mistake, but rather an affirmative decision.  Paper 42 at 35–36 (Oct. 18, 2022).  The Board denied a request for rehearing, stating that it may advise Petitioners that they have made a mistake in their petition grounds, Paper 46 at 3 (Jan. 9, 2023), but that it will not correct the petition itself and will not create new grounds if the Petitioner fails to take action to correct the mistake, id. at 6.

Takeaway:  The Board will decline to allow a petitioner to correct an error in failing to cite a prior art reference with respect to obviousness of certain dependent claims in a petition when the petition evinces that this was not a typographical error but instead a deliberate decision not to rely on that reference for those claims.   Even if a petition includes the art to support a finding of invalidity, the Board is not obligated to “put the pieces together on Petitioner’s behalf” in its Final Written Decision.