Alert December 27, 2017

Issue Ten: PTAB Trial Tracker

Board Curtails Use of Sovereign Immunity Defense to Avoid IPR 

In Ericsson, Inc. v. Regents of the University of Minnesota, an expanded panel denied Patent Owner Regents of the University of Minnesota’s motions to dismiss several IPRs based on a claim of sovereign immunity under the 11th Amendment. The Board held that while sovereign immunity can be invoked in an IPR, here the Regents had waived its immunity by filing an action in federal court alleging infringement of the patents at issue in the IPRs. The Board noted that just as a state as plaintiff is deemed to have consented to the defendant’s filing of compulsory counterclaims, it is reasonable to view a state that files a patent infringement suit as having consented to the filing of an IPR.  The Board further found that allowing a patent owner to selectively assert its 11th Amendment immunity to prevent a petitioner from obtaining the benefits of an IPR would result in substantial unfairness and inconsistency. Administrative Patent Judge Bisk filed a concurrence, noting that allowing a state to secure monopoly rights from the Patent Office, while simultaneously foreclosing Patent Office reappraisal of that decision via IPR, “would thwart ‘the important public interest in permitting full and free competition in the use of ideas which are in reality a part of the public domain.’” (IPR2017-01186, Paper 14, PTAB Dec. 19, 2017, concurrence at 3 (quoting Lear, Inc. v. Adkins, 395 U.S. 653, 670 (1969).)

Takeaway:  This decision may serve to dampen enthusiasm for deals designed to shield patents from PTAB review by taking advantage of a party’s sovereign immunity. Succeeding Board panels are likely to follow the rationale set out by this expanded panel, and find that sovereign entities such as states and Native American tribes that have asserted a patent in a court are not immune to patent review by the PTAB. 

Board Institutes IPR on a “Serial Petition,” Differentiating Facts From General Plastic

Just a few weeks after the Board issued a precedential decision regarding factors for evaluating institution of “serial petitions” (see PTAB Trial Tracker Issue 9, discussing General Plastic Indus. Co. v. Canon Kabushiki Kaisha, IPR2016-01357), the Board instituted review of a petition on two patent claims, despite having denied review of those same claims in an earlier petition filed by the same petitioner. In the first IPR, the Board denied institution because petitioner failed to establish the printed publication status of its cited prior art, despite having submitted a declaration that attempted to qualify the reference as a printed publication. In the second IPR, petitioner relied on a different combination of prior art. The Board noted that in the first petition, petitioner’s reliance on the prior art was “not unreasonable,” especially in light of petitioner’s attempt to support its argument with a declaration. The Board further found that because it had not construed the claims or analyzed the merits of the obviousness challenge in the first petition, the petitioner did not rely on the Board’s analysis as a “roadmap” to improve its second petition. (Panduit Corp. v. CCS Tech., Inc., IPR2017-01323, Paper 8, PTAB Nov. 8, 2017.)

Takeaway:  This case demonstrates one scenario in which a petitioner may be able to successfully bring a second challenge to a single patent. Here, one key to institution was that the second petition did not rely in any way on any filings from the first IPR. While this case may prove to be an outlier, it illustrates that petitioners may have a shot at having a second petition instituted, so long as the second petition is sufficiently distinct from the first.

Board Issues Guidance on Motions to Amend and New Standard Operating Procedure for Remanded Cases

On November 21, 2017, following the Federal Circuit’s en banc decision in Aqua Products, Inc. v. Matal, the Board issued its Guidance on Motions to Amend in view of Aqua Products.  As acknowledged in the Guidance, the Federal Circuit’s decision reversed the Board’s practice of placing the burden of persuasion with respect to showing patentability of proposed amended claims on the patent owner.  (Guidance at 1-2; see also PTAB Trial Tracker Issue 9.) The Guidance illustrates the Board’s intention to no longer place the burden on patent owner, but rather 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.” (Guidance at p. 2.) The Guidance states that otherwise, “practice and procedure” before the Board will generally not change. (Id.)  The Guidance indicates that patent owners must still meet the applicable requirements for motions to amend, including setting forth written description support, support for the benefit of the asserted filing date, and responding to the grounds of unpatentability involved in the trial.
The Board also recently disseminated its Standard Operating Procedure 9, which describes the procedures to be followed when the Federal Circuit remands a case to the PTAB. The SOP sets forth a goal to issue decisions on remanded cases within six months of the Federal Circuit’s mandate. The SOP provides guidance to the parties on what to do in the event of remand and what issues to be prepared to raise with the Board.  In deciding whether to authorize additional briefing, the Board will consider whether the parties already had an adequate opportunity to address the issues raised by the remand. The SOP indicates that a change in the law or new or revised claim construction not previously considered may lead to additional briefing. It further indicates that in most cases, it will not be necessary to re-open the evidentiary record to new testimony or documents, and an additional oral hearing will not be authorized. The SOP provides default procedures for common remand scenarios.

Takeaway:  Although the Board acknowledged that Aqua Products changed allocation of the burden of proof, the Board has not otherwise changed its practices and procedures on motions to amend. Thus it remains to be seen whether Aqua Products will have any appreciable impact on the motion to amend practice. As for the remand SOP, the document sets out the Board’s expectations regarding timing, additional briefing, and acceptance of additional evidence under a variety of common scenarios, which should provide parties with some predictability regarding how the Board will handle remanded cases.

Use an Employee as an Expert Witness at Your Own Risk

In Campbell Soup Company v. Gamon Plus, IPR2017-00087, the Board granted Petitioner’s motion to enter a protective order that differed from the default protective order by preventing Patent Owner’s expert declarant, who was also Patent Owner’s CEO, from accessing the confidential materials. (Paper 50, PTAB Dec. 13, 2017.)  The Board stated that Patent Owner’s reliance on a party witness put “Patent Owner in a difficult position because documents that otherwise might have been accessible by a neutral expert” are not accessible to Patent Owner’s CEO. (Paper 50 at p. 3.)  The Board explained that “Patent Owner chose to rely upon a party witness and, thus, under these circumstances, must bear the consequences of that decision.” (Id.) The Board’s decision to not allow Patent Owner’s expert to access the confidential materials also impacted Patent Owner’s request to submit testimonial evidence in an authorized sur-reply, because the expert “has not seen the documents and any potential assistance he might provide is tenuous at best.” (Id. at p. 4.) 

Takeaway:  This case illustrates a danger associated with using an employee as an expert witness. Even where an employee is required as a fact witness, parties should consider using a different witness as an expert.

Board Refuses to Terminate IPR Following Parties’ Settlement; Issues Final Written Decision 

In Rubicon Communications, LP v. Lego A/S, IPR2016-01187, the parties filed a joint motion to terminate after the oral hearing and just a few days before the statutory deadline for the final written decision. As to timing of the motion, the parties explained that they were only able to settle after an extended mediation session with a U.S. Magistrate Judge in the parallel district court litigation, which occurred the day prior to filing their motion. The Board denied the motion to terminate, and indicated that it would issue the Final Written Decision. The Board explained that at this juncture in the proceeding, the “public’s interest in the status of the challenged claims of each patent is at its peak.” (Paper 100 at p.2, PTAB Dec. 15, 2017.)  It also indicated that it had already deliberated and decided the merits of the proceeding before the parties filed their motion. (Id. at p. 3.)

TakeawayDuring the recent Supreme Court oral argument in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, counsel for Oil States said that she was aware of only four instances where the PTAB has proceeded to a final written decision after the parties had settled. (No. 16-712, Transcript at p. 8.) This case raises that count to five. As we’ve discussed previously (see PTAB Trial Tracker Issue 7) and as this case illustrates, it is good practice to settle as early in an IPR as possible to avoid the possibility that the Board continues to a final written decision despite the parties’ settlement. This case also demonstrates that if parties plan to participate in mediation in a parallel litigation, they should be mindful of scheduling the mediation well in advance of final written decision deadline.

District Court Proceedings Terminated After Federal Circuit Affirms PTAB Unpatentability Rulings

Two different district courts recently dismissed infringement litigation following Federal Circuit affirmances of PTAB Final Written Decisions finding claims unpatentable, but based on different rationales. In B.E. Tech. LLC v. Facebook, Inc., No. 12-02769-JPM-tmp (W.D. Tenn. Dec. 20, 2017), defendant sought judgment on the pleadings and dismissal of the case with prejudice. Instead, the district court dismissed the case as moot, noting that a party whose patent claim is invalidated in a Board proceeding no longer has a viable cause of action in lawsuits that party brought before the claim was invalidated. The court noted that collateral estoppel did not apply, because the PTAB and district court use different burdens of proof for determining invalidity and different standards of claim construction.  

In another case, C-Cation Techs. LLC v. Time Warner Cable, Inc., No. 14-00059-JRG-RSP (E.D. Tex. Dec. 19, 2017), defendants argued that plaintiff/patent owner was collaterally estopped from pursuing its claims in district court based on either the PTAB’s final written decision or the Federal Circuit’s affirmance of that decision. Magistrate Payne found these arguments reasonable, and noted that plaintiff did not dispute whether collateral estoppel applied. Accordingly, Magistrate Payne lifted the stay and recommended that the action be dismissed with prejudice.

Takeaway:  These cases demonstrate the value to patent challengers of pursuing parallel proceedings in the PTAB. In both cases, the patent challenger was able to terminate an infringement suit after obtaining a Federal Circuit decision affirming the PTAB’s cancellation of the asserted patents.