Issue 30: PTAB Trial Tracker

Director Iancu Clarifies Scope of Use of Admissions Within a Patent in IPR Proceedings

On August 18, 2020, the USPTO published a memorandum from Director Iancu to the members of the PTAB outlining how admissions on prior art from within a challenged patent, known as “applicant admitted prior art” or “AAPA,” may be used during IPR proceedings.  Andre Iancu, Treatment of Statements of the Applicant in the Challenged Patent in Inter Partes Reviews Under § 311, Memorandum to Members of the Patent Trial and Appeal Board (August 18, 2020) available here. 

Director Iancu first noted that IPRs may be instituted only “on the basis of prior art consistent of patents or printed publications” (quoting 35 U.S.C. § 311(b)) but that different Board panels had been treating AAPA differently.  Some panels permitted AAPA to be used as a prior art reference in conjunction with other prior art patents and printed publications.  Other panels rejected the use of AAPA altogether or for grounds based on the AAPA alone.  See, e.g., Solaredge Techs. Ltd. v. SMA Solar Tech. AG, IPR2020-00021, Paper 8 (PTAB April 10, 2020) (analyzing case law and IPR decisions regarding use of AAPA and holding AAPA can be used to challenge claims in IPR).

In view of the language of § 311(b), Director Iancu clarified that AAPA cannot be used as the “basis” for instituting an IPR under § 102 or § 103.  AAPA can be used, however, to “evidence the general knowledge possessed by someone of ordinary skill in the art” and that such evidence could be used to support an obviousness argument.  Citing KSR Int’l Co. v. Teleflex, Inc., 50 U.S. 398,401 (2007) and Koninklijke Philips v. Google, 948 F.3d 1330, 1337, 39 (Fed. Cir. 2020)).  Relying on the Koninklijke Philips decision, Director Iancu wrote that the “[p]ermissible uses of general knowledge of one having ordinary skill under § 103 include (1) supplying missing claim limitations that were generally known in the art prior to the invention (for pre-AIA patents) or the effective filing date of the claimed invention (for post-AIA patents); (2) supporting a motivation to combine particular disclosures; or (3) demonstrating the knowledge of the ordinarily-skilled artisan at the time of the invention (for pre-AIA patents) or the effective filing date of the claimed invention (for post-AIA patents) for any other purpose related to patentability.”

Takeaway: A Petition may rely on AAPA to support an expert opinion regarding the knowledge of a POSA.  AAPA cannot be used, however, as prior art or as the basis for filing an IPR.  Additionally, Petitioners must support any arguments relying on AAPA with expert testimony.

Panel Conclusions In One Proceeding Not Binding in Other Proceedings

In Ayla Pharma, LLC v. Novartis AG, IPR2020-00295, Petitioner Alya Pharma relied on the motivation to combine references set forth in a previous IPR institution decision on a related patent, without further elaborating on the reasoning.  Paper 1 at 17, citing Argentum Pharma. LLC v. Alcon Research, Ltd., IPR2016-00544, Paper 8 (PTAB Jul. 18, 2016).  In its decision denying institution in Ayla, the Board determined that Alya had attempted to incorporate the prior decision by reference, which is expressly prohibited by 37 C.F.R. § 42.6(a)(3). Paper 12 at 9-10.  As such, the Board found that Alya had done nothing other than recite series of elements, which was insufficient to support institution.  Id.  

Takeaway:  Ordinarily, Board decisions are not binding on other panels, but often are incorporated as persuasive authority.  Reliance on former decisions, however, does not replace the requirement that Petitions set forth the basis of the challenge.  Administrative Patent Judge Kaiser authored the decisions in both Alya and Argentum, suggesting that overlapping panel members does not impact the decision on whether a party has impermissibly incorporated content by reference.

Decisions on Validity May Apply to Amended and Reissued Claims

In Chrimar Systems, Inc. d/b/a CMS Technologies et al v. Ruckus Wireless Inc., 3-16-cv-00186 (NDCA July 31, 2020), the district court granted a motion for summary judgment, finding Patent Owner was precluded from re-litigating the validity of a patent claim where other claims of the patent were found unpatentable in an IPR.  In a prior IPR proceeding, the Board found the challenged claims unpatentable, and the Board’s findings were affirmed by the Federal Circuit.  While the IPR was pending, a third party filed an ex parte reexamination directed to the same patent, and Patent Owner amended claims in that proceeding.  Patent Owner later asserted the amended claims, and the accused infringer argued that Patent Owner was precluded from asserting the amended claims.  The court found that the IPR decision affirmed by the Federal Circuit precluded assertion of the amended claim, stating that “[the Federal Circuit] does not limit [issue preclusion/] collateral estoppel to patent claims that are identical. Rather, it is the identity of the issues that were litigated that determines whether collateral estoppel should apply.”

In Cisco Systems, Inc. v. Capella Photonics, Inc., 3-20-cv-01858 (NDCA August 21, 2020), the district court granted plaintiff’s motion for judgment on the pleadings that defendant cannot seek damages for alleged infringement that took place prior to the reissue of the relevant patents.  Prior to this litigation, Cisco filed IPR petitions challenging the patents at issue.  The Board found the challenged claims unpatentable, and the decisions were confirmed on appeal.  After the appellate decisions, Cappella sought reissue proceedings for the challenged patents, and the patents were reissued with amended claims.  Cisco filed a complaint seeking a declaratory judgment of non-infringement, and Capella counterclaimed for infringement of the reissued claims and sought damages dating back before the claims reissued.  Cisco sought a judgment on the pleadings that Cisco was not entitled to pre-reissue damages because either (1) the reissue claims are not substantially identical to the original claims, or (2) if the claims are substantive identical, Cappella is collaterally estopped from asserting them in light of the successful IPR petitions.  The court agreed, finding that “if the scope of the reissue claims is substantially identical to the scope of the original claim, those claims would be invalid under principles of collateral estoppel.” 

Takeaway: Parties should be aware that an IPR decision may be given preclusive effect even if patent owner later obtains amended patent claims in a reissue or reexamination proceeding.  

Apple, Cisco, Google, and Intel Challenge PTAB’s Use of the “NHK-Fintiv Rule”

Apple, Cisco, Google, and Intel recently filed a challenge to what they called “the NHK-Fintiv rule” under the Administrative Procedure Act (“APA”).  As discussed in more detail in Issue 27 and Issue 28, Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB March 20, 2020) (precedential) interpreted the Board’s analysis of NHK Spring Co. v. Intri-Plex Techs., IPR2018-00752, Paper 8 (Sept. 12, 2018) (precedential) and outlined six factors that the Board analyzes in determining whether to apply its discretion under 35 U.S.C. § 314(a) to deny institution in light of a parallel, co-pending litigation.

In its complaint, the technology companies contended: (1) the NHK-Fintiv rule exceeds the Director’s authority and violates the AIA; (2) the NHK-Fintiv rule is arbitrary and capricious; and; (3) the NHK-Fintiv rule was not promulgated through APA notice-and-comment rulemaking, and therefore is procedurally defective.

Regarding the policy and text of the AIA, the technology companies argued that Congress made clear when drafting the AIA that “IPR can and should proceed even where related litigation is pending.”  The complaint states: “[Congress] carefully calibrated § 315(b)’s one-year limit to ensure that IPR is not used for purposes of delay while also giving infringement defendants an adequate opportunity to investigate the claims asserted against them in litigation.” The companies contended, “[b]y authorizing the board to deny institution of IPR based on the pendency of a parallel proceeding, the NHK-Fintiv rule overrides the congressional judgments.”  

The technology companies further asserted that NHK-Fintiv rule violates the APA because it is arbitrary and capricious, as the rule’s “vague factors lead to speculative, unpredictable, and unfair outcomes.” The complaint states: “The NHK-Fintiv rule thus promotes uncertainty and unpredictability—not administrative efficiency—in the IPR process. The rule also forces infringement defendants to file IPR petitions earlier in litigation, when there is less clarity regarding the patent claims at issue and their scope—further undermining an efficient IPR process.”
Regarding the alleged procedural defect, the technology companies contended that because the “rule” did not go through a notice-and comment period, it is invalid under the APA. 

Takeaway:  Since the Apple v. Fintiv precedential order, parties have increasingly asked the Board to consider the impact of parallel proceedings on the application of the Board’s discretion to deny a petition.  The court’s analysis in this challenge may shed light on how far the Board can go when implementing these types of factor-based analyses.  

Sun Sets on Covered Business Method Challenges

A powerful, albeit rarely utilized, post-grant proceeding at the USPTO recently expired: Covered Business Method Patent (“CBM”) challenges.  When the American Invents Act (“AIA”) was introduced, CBM challenges were always intended to be a “transitional program” and as set forth in 37 C.F.R § 42.300(d), “The rules [relating to CBM reviews] in this subpart are applicable until September 15, 2020, except that the rules shall continue to apply to any petition for a covered business method patent review filed before the date of repeal.”

CBMs are “patent[s] that claim a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.”  37 CFR § 42.301(a).  Unlike the more commonly used inter partes review (“IPR”), CBM challenges can raise invalidity challenges under 35 U.S.C §§ 101, 102, 103, 112 or double-patenting allegations.  In contrast to post grant review (“PGR”) challenges, CBM challenges are not required to be filed within nine months of patent grant or reissue.  However, a petitioner must be sued for infringement before filing a CBM challenge.  37 C.F.R § 42.302(a).  In the nearly eight years that CBMs have existed under the AIA only about 600 have been filed.  While rare when compared to the over 11,000 IPRs filed, CBM challenges were filed approximately twice as often as PGRs.