Director’s Time-Bar Determinations under § 315(b) are not Exempt from Judicial Review

In Wi-Fi One, LLC v. Broadcom Corp., [2015-1945, 2015-1946](January 8, 2018) the Federal Circuit, en banc, held that the bar on judicial review of institution decisions in 35 U.S.C. §314(d) does not apply to timebar determinations made under § 315(b), overruling Achates
Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652, 658 (Fed. Cir. 2015).

Wi-Fi argued that the Director lacked authority to institute IPRs under
§315(b) because petitioner Broadcom was in privity the defendants that the prior owner of the patents (Ericsson) served with an infringement complaint more than a year before Broadcom filed the IPRs.  The Board nonetheless instituted the IPRs, finding that Wi-Fi Wi-Fi had not shown that Broadcom was in privity with the defendants in the prior litigation.  In its Final Written Decision, the challenged claims were found unpatentable.

Wi-Fi appealed the Final Written Decisions, asking the Federal Circuit to reverse or vacate the Board’s time-bar determinations, but a panel of the Federal Circuit found the §315(b) time-bar rulings nonappealable under Achates.  Wi-Fi petitioned for rehearing en banc, asking the Federal Circuit to consider whether Achates should be overruled, and hold that the Director’s § 315(b) time-bar determinations are subject to judicial review.

The majority started its analysis with the the “strong presumption”
favoring judicial review of administrative actions, including the Director’s IPR institution decisions.  In view of this strong presumption, the Federal Circuit said it would abdicate judicial review only when Congress provides a “clear and convincing” indication that it intends to prohibit review.  The Federal Circuit found no clear and convincing indication in the specific statutory language in the AIA, the specific legislative
history of the AIA, or the statutory scheme as a whole that demonstrates Congress’s intent to bar judicial review of § 315(b) time-bar determinations.

The Federal Circuit said that §315(b), which controls the Director’s authority to institute IPR that is unrelated to the Director’s preliminary  patentability assessment or the Director’s discretion not to initiate an IPR even if the threshold “reasonable likelihood” is present.  Because §314(a) does not mention the timer bar, the PTO’s position that the time-bar determination is unreviewable runs counter to the principle, as reflected in Cuozzo, that favors reading the statute to comport with, not depart from, familiar approaches to comparable issues.  The majority found this reading was consistent with the overall statutory scheme as understood through the lens of Cuozzo’s directive to examine the statutory scheme in terms of what is “closely related” to the § 314(a) determination.

The Federal Circuit concluded that whether a petitioner has complied with §315(b) has nothing to do with the patentability merits or discretion not to institute.  Thus, the majority said that the statutory scheme as a whole demonstrates that § 315 is not “closely related” to the institution decision addressed in § 314(a), and it therefore is not subject to §314(d)’s bar on judicial review.

Moreover the Federal Circuit observed that timely filing of a petition under § 315(b) is a condition precedent to the Director’s authority to act, and said that enforcing statutory limits on an agency’s authority to
act is precisely the type of issue that courts have historically reviewed.

The Federal Circuit said that the Supreme Court in Cuozzo instructed that the “strong presumption” favoring judicial review “may be overcome by ‘“clear and convincing”’ indications, drawn from ‘specific language,’ ‘specific legislative history,’ and ‘inferences of intent drawn from the statutory scheme as a whole,’ that Congress intended to bar review.” However, finding no such clear and convincing indications, the Federal Circuit held that the Director’s time-bar determinations under §315(b) are not exempt from judicial review, and overruled Achates’s contrary conclusion.

The Board Says that IPRs are Adjudicatory Proceedings — What will the Supreme Court Say?

In Ericsson Inc. v. Regents of the University of Minnesota, [IPR2017-01186, IPR2017-01197, IPR2017-01200, IPR2017-01213, IPR2017-01214, IPR2017-01219 (December 19, 2017), Chief Administrative Patent Judge Ruschke, writing for an expanded panel of the PTAB, held that 11th Amendment immunity is available to States as a defense in an inter partes review.  The 11th Amendment states;

The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

So in holding that the 11th Amendment applies, the Board is conceding that it is exercising the “Judicial power” of the United States.  This was the issue in Oil States energy Services, LLC v. Greene’s Energy Group, LLC where Petitioner struggled to establish that inter partes reviews are adjudicatory in nature.  In Ericsson, the Board conceded the point, stating “IPR is an adjudicatory proceeding of a federal agency from which state entities are immune.”

Ultimately the Board found that Minnesota waived its immunity by enforcing the patents in court.

To the extent that the Supreme Court in Oil States needs to decide whether IPR’s are adjudicatory proceedings involving judicial power, it has the USPTO’s admission in Ericsson.

Aqua Holds Water; Board’s Denial of Motion to Amend Vacated Because Board Improperly Put Burden on Patent Owner

In Bosch Automotive Service Solutions, LLC v. Matal, [2015-1928] (December 22, 2017), the Federal Circuit affirmed the Board’s finding of unpatentability of claims 1, 4–15, and 20–22, of U.S. Patent No. 6,904,796, on a remote tire monitoring system, but vacated and remanded the denial of Bosch’s motion to amend as to proposed substitute claims 23–38.

On appeal Bosch primary argued lack of motivation to combine, but the Federal Circuit was bit persuaded, noting that the prior art must be considered for everything it teaches by way of technology and is not limited to the particular invention it is describing and attempting to protect.”  Bosch also argued commercial success, but the Federal Circuit found that Bosch failed to prove commercial success with a nexus to the claims.  In particular the Federal Circuit agreed that a declarant’s “understanding” that the products are covered by the patent was an insufficient foundation.

As to Bosch’s Motion to Amend, the Board rejected Boesch’s proposed amended claims 23–35 as indefinite under 35 U.S.C. § 112, ¶ 2, and Bosch’s proposed amended claims 36–38 as unpatentable over the
prior art.   Among other arguments, Bosch challenged the Board’s rejection of both sets of proposed amended claims on the grounds that the Board impermissibly placed the burden on Bosch to establish patentability.

As to claims 23-35, the Federal Circuit found that the Board impermissibly assigned the burden of proof to Bosch, and vacated the Board’s denial of Bosch’s motion to amend with respect to proposed claims 23–35 and remand for the Board to evaluate the patentability of the proposed amended claims consistent with Aqua Products.  Similarly with respect to claims 36-38, the Federal Circuit found the Board improperly placed the burden of proving patentability over the prior art on Bosch, and vacated and remanded the motion to amend these claims as well.


Federal Circuit Affirms Board on Claim Construction, No Anticipation, and Nonobviousness

In HTC Corp. v. Cellular Communications Equipment, LLC [2016-1880] (December 18, 2017), the Federal Circuit affirmed the PTAB’s Final Written Decision, finding no error in the Board’s claim construction, and that substantial evidence supported the Board’s determination that the challenged claims were not invalid.

The IPR involved U.S. Patent No. 7,941,174, which is directed to
methods and apparatuses for a radio communications system where a subscriber station, i.e., a mobile device, is assigned a plurality of codes for transmitting messages.

The Board did not expressly construe the term “message,” nor did HTC did not seek construction of the term.  However, the Federal Circuit found that Board findings establishing the scope of the patented subject matter may fall within the ambit of claim construction, reviewable on appeal.  However the Federal Circuit found HTC’s arguments unpersuasive and inconsistent.

On the asserted anticipation grounds, the Federal Circuit found that substantial evidence supported the Board’s conclusion, and rejected arguments presented by HTC for the first time on appeal.  On the asserted obviousness grounds, the Federal Circuit agreed with the Board’s reading of the prior art, and found that HTC did not point to any evidence in the record that would undermine the Board’s findings on the scope and content of the prior art.


Ungrammatical Language Not Ambiguous in View of Specification as a Whole

In Organik Kimya AS v. Rohm and Haas Co., [2015-1983, 2015-2001] (October 11, 2017), the Federal Circuit  affirmed the PTAB decisions in IPR2014-00185 and IPR2014-00350, sustaining the patentability of the challenged claims of U.S Patent Nos. 6,020,435 and 6,252,004, respectively.

The patents are directed to processes for preparing certain emulsion polymers having improved opacity.  In the claimed processes a base swelling agent and excess monomer are introduced into an aqueous emulsion of the polymer, under conditions in which there is no
substantial polymerization.  At issue was was the meaning of “swelling agent” which the PTAB construed as not merely as being capable of permeating a shell and swelling the core of a multistage emulsion
polymer in the abstract, but specifically under the conditions of the specific process for which the agent is to be used.  Organik argued that this improperly limited the term “swelling agent” in a manner that inappropriately distinguished the prior art.

Organik argued that the specification was ambiguous in describing the swelling agent:

Suitable swelling agents include, are those which, in the presence of the multistage emulsion polymer and monomer, are capable of permeating the shell and swelling the core. Swelling agents may be aqueous or gaseous, volatile or fixed bases or combinations thereof.

and that the PTAB improperly adopted the narrower construction.  The Federal Circuit noted that the Board did not find the language ambiguous, and agreed with the Board.  Even under the broadest reasonable interpretation, the Board’s construction cannot be divorced from the specification and the record evidence, and must be consistent with the one
that those skilled in the art would reach.

The Board found that the prior art asserted by Organik lacked the swelling agent as that term was used in the claims.  Organik argued the one example in a reference, inherently showed a swelling agent, but Rohm and Haas provided experimental evidence through expert testimony  that it did not.  While Organik contested this evidence, the Board noted that Organik neither provided its own evidence, or showed how different experiments would have yielded different data.

The Federal Circuit found that Board concluded that neither Toda nor Touda discloses or suggests a “swelling agent” as required by the
’435 and ’004 Patents, and that the Board’s decisions are in accordance
with law and supported by substantial evidence in the record, and are affirmed.

The Board Misses the BRI with a Construction that was too Narrow

In Owens Corning v. Fast Felt Corp., [2016-2613] (October 11, 2017), the Federal Circuit reversed the PTAB decision that the challenged claims of U.S. Patent No. 8,137,757, which describes and claims methods for printing nail tabs or reinforcement strips on roofing or building cover material, were not obvious.

On appeal Owens Corning argued that the Board effectively treated
the “roofing or building cover material” in the claims as limited to material that either has been or would be coated or saturated with asphalt or asphalt mix, and that this limited construction was incorrect under the broadest reasonable interpretation standard.

The Federal Circuit noted that that the Board construed the claim term “roofing or building cover material” to mean “base substrate materials such as dry felt, fiberglass mat, and/or polyester mat, before coating or saturation with asphalt or asphalt mix, and asphalt coated or saturated substrates such as tar paper and saturated felt.” While the Board correctly noted that this construction “does not require an asphalt-coated substrate,” when evaluating Owens Corning’s arguments regarding
motivation to combine and reasonable expectation of success, the Board made clear its understanding of its construction, and hence of the claims, as requiring materials that would eventually be coated with asphalt even if
they had not already been coated before printing.

After reviewing the Board’s rationale, the Federal Circuit concluded that the Board simply did not address roofing or building cover materials that would never be coated in asphalt, and this was a mistake.  The Federal Circuit concluded that the correct broadest reasonable construction of “roofing or building cover material” would include materials that neither have been nor are to be coated or saturated with asphalt or asphalt mix.

The Federal Circuit found that it was not necessary or appropriate to remand the case, however.  On the evidence and arguments presented to the Board, there is only one possible evidence-supported finding: the Board’s rejection of Owens Corning’s challenge, when the correct construction is employed, is not supported by substantial evidence.  Moreover, Fastfelt did not argue for remand.  The Federal Circuit reviewed the record and concluded that the challenged claims were unpatentable for obviousness.


Response Arguments Do Not Have to Be Preemptively Addressed in the Petition or Institution Decision

In Idemitsu Kosan Co., Ltd. v. SFC Co. Ltd., [2016-2721](September 15, 2017), affirmed the PTAB decision that claims of U.S. Patent No. 8,334,648 were invalid for obviousness.

On appeal Idemitsu argued that the Board erred in finding that prior art taught combining the particular compounds for the purpose of creating a light emitting layer in an electroluminescent device.  The Federal Circuit found that what Idemitsu characterizes as an argument raised “too late” was simply the by-product of one party necessarily getting the last word.
Idemitsu argued that the prior art teaches away from combinations, and SFC simply countered, as it was entitled to do. The Federal Circuit found that to the extent Idemitsu suggests that the Board could not reach a counterargument because it was not preemptively addressed by the petition or institution decision, Idemitsu is plainly mistaken. The Federal Circuit noted that there is no requirement, either in the Board’s  regulations, in the APA, or as a matter of due process, for the institution decision to anticipate and set forth every legal or factual issue that might arise in the course of the trial.


Follow-on IPR Petitions are Unfair to Patent Owners and an Inefficient Use of the Process

In General Plastic Industrial Co., Ltd. v. Canon Kabushiki Kaisha,  IPR2016-01357,  Paper 19, (September 6, 2017), and IPR2016-01358, IPR2016-01359, IPR2016-01360, and IPR2016-01361, an expanded panel of the PTAB denied reconsideration of the Decision Denying Institution.

Petitioner filed a first set of petitions seeking inter partes review of U.S. Patent No. 9,046,820 and U.S. Patent No. 8,909,094, which were denied based upon the merits. Nine months after the filing of the first set of petitions, Petitioner filed five follow-on petitions, two against the ‘820 patent, and three against the ‘094 patent, all of which were denied pursuant to 35 U.S.C. § 314(a) and 37 C.F.R. § 42.108(a).

In exercising its discretion to deny each of the follow-on petitions, the Board considered the seven NVIDIA factors:

  1. Whether the same petitioner previously filed a petition directed to the same claims of the same patent;
  2. Whether at the time of filing of the first petition the petitioner knew of the prior art asserted in the second petition or should have known of it;
  3. Whether at the time of filing of the second petition the petitioner
    already received the patent owner’s preliminary response to the first petition or received the Board’s decision on whether to institute
    review in the first petition;
  4. The length of time that elapsed between the time the petitioner learned of the prior art asserted in the second petition and the filing of the second petition;
  5. Whether the petitioner provides adequate explanation for the time
    elapsed between the filings of multiple petitions directed to the same claims of the same patent;
  6. The finite resources of the Board; and
  7. The requirement under 35 U.S.C. § 316(a)(11) to issue a final
    determination not later than 1 year after the date on which the Director notices institution of review

Applying these factors to the follow-on petitions, the Board concluded that the circumstances did not warrant institution of inter partes reviews.  As to Factor 1, the Board noted that the same claims of the same patent were at issue in the follow-on petitions as in the denied petitions.  As to Factors 2 and 3, the follow-on petitions were all filed nine months
after the filing of the first-filed petitions, and after Patent Owner had filed its Preliminary Responses to the first-filed petitions, and after the Board had denied institution, without any meaningful explanation for the delay. With respect to Factors 4 and 5, Petitioner provided no explanation of any unexpected circumstances that prompted the new prior art searches, or for the delay in doing so.  With respect to Factor 6, the Board found that its resources would be more fairly expended on initial petitions, rather than follow-on petitions.

In addition the Board found that that Petitioner had modified its challenges in the follow-on petitions in an attempt to cure the deficiencies that the Board identified in its first-filed petitions, and that this shift tin Petitioner’s challenges was not the consequence of a position that Patent Owner surprisingly advanced or the Board surprisingly adopted.  The Board found that the filing of sequential attacks against the same claims, with the opportunity to morph positions along the way, imposes inequities on Patent Owner.

On rehearing the expanded Board rejected the arguments raised by petitioner.   The expanded board agreed that there is no per se rule precluding the filing of follow-on petitions, and noted that it has consistently considered a number of factors.  The Board recognized that an objective of the AIA is to provide an effective and efficient alternative to district court litigation, but also recognized the potential for abuse of the review process by repeated attacks on patents.  The Board said that multiple, staggered petitions challenging the same patent and same claims raise the potential for abuse. The absence of any restrictions on follow-on petitions would allow petitioners the opportunity to strategically stage their prior art and arguments in multiple petitions, using our decisions as a roadmap, until a ground is found that results in the grant of review.  This is unfair to patent owners and is an inefficient use of the inter partes review process and other postgrant review processes.

The Board recognized that there may be circumstances where multiple petitions by the same petitioner against the same claims of a patent should be permitted, said that the factors it uses represents a formulation of relevant considerations, and while there may be additional factors, the identified factors are a good baseline.  The Board reiterated that institution is committed the this discretion of the Commission, acting through the Board.  Reweighing the factors on rehearing, the Board found that six of the seven factors weigh against institution.




Federal Circuit’s Amicus Brief in Oil States

Although the Federal Circuit already passed on the constitutionality of inter partes reviews, considering some of its recent decisions, it appears that the Federal Circuit questions the competence of the PTAB to conduct adjudicative proceedings.

In Nidec Motor Corporation discussed here, Judges Dyk and Wallach questioned the Patent Office’s court packing to achieve a desired outcome.  A few days later in Ultratec discussed here, the Federal Circuit questioned the Patent Office’s conduct of a proceeding, stating that a “reasonable adjudicator” would have wanted to review this evidence, and implying that the Patent Office was not a reasonable adjudicator.

Even if it turns out to be constitutional for the USPTO to conduct IPR and PGR proceedings, it appears that at least the Federal Circuit has lost confidence that they should.  Is it sending a signal to the Supreme Court?

“A Reasonable Adjudicator Would have Wanted to Review this Evidence.”

In Ultratec, Inc. v. Captioncall, LLC., [2016-1706, 2016-1707, 2016-1708, 2016-1709, 2016-1710, 2016-1712, 2016-1713, 2016-1715, 2016-2366] (August 28, 2017), the Federal Circuit vacated and remanded Board decisions invalidating Ultratec’s patents relating to systems for assisting deaf or hard-of-hearing users to make phone calls, in a group of IPRs, finding that the Board failed to consider material evidence and failed to explain its decisions to exclude the evidence.

Caption call submitted the testimony of an expert, Benedict Occhiogrosso, in the IPR’s.  Ultratec attempted to introduce conflicting trial testimony Occhiogrosso.  Ultratec moved to supplement the record with the conflicting Occhiogrosso trial testimony, but because Ultratec did not first request authorization to file the motion, the Board expunged the motion from the record.

Within a week of the jury trial in which Occhiogrosso testified, Ultratec requested authorization to file a motion to submit portions of Mr. Occhiogrosso’s trial testimony to the Board. Ultratec alleged that Mr. Occhiogrosso’s trial testimony addressing a prior art reference was inconsistent with his IPR declarations.  The Board held a conference call to consider Ultratec’s request for authorization to file a motion to supplement the IPR record with Mr. Occhiogrosso’s trial testimony, but did not review the testimony when deciding whether it could be admitted. The Board denied the request, promising a written order that was never provided.

After refusing to admit Occhiogrosso’s trial testimony, the  oard issued final written decisions, holding that every challenged claim was either anticipated or would have been obvious, relying heavily on the Board’s belief that Occhiogrosso was a credible witness, citing his declaration more than thirty times, at least once as to each of the eight patents.

Under the PTO’s regulations, a party seeking to submit supplemental information more than one month after the date an IPR is instituted must request authorization to file a motion to submit the information.  37 C.F.R. § 42.123(b). The request to submit new
information must show: (1) why the supplemental information reasonably could not have been obtained earlier, and (2) that consideration of the supplemental information would be in the interests of justice.  The PTO considers the interests of justice as slightly higher than good cause:

Good cause and interests-of-justice are closely related standards, but the interests-of-justice standard is slightly higher than good cause.  While a good cause standard requires a party to show a specific factual reason to justify the needed discovery, under the interests-of-justice standard, the Board would look at all relevant factors.  Specifically, to show good cause, a party would be required to make a particular and specific demonstration of fact. Under the interests-of-justice standard, the moving party would also be required to show that it was fully diligent in seeking discovery and that there is no undue prejudice to the non-moving party.

The Federal Circuit said that the ercord affords but one reasonable conclusion: Ultratec satisfied both of § 42.123(b)’s requirements for allowing Ultratec to file a motion to
admit Mr. Occhiogrosso’s trial testimony. First, the evidence could not have been obtained earlier. Ultratec emailed the Board requesting authorization to file a motion to supplement the record the week after the jury trial concluded. This is not evidence that could have been located earlier through a more diligent or exhaustive search; it did not exist during the IPR discovery period.

The Federal Circuit said that the fact that Ultratec could have, but did not, depose and obtain inconsistent testimony from Mr. Occhiogrosso during the IPR itself is not a basis for concluding otherwise. Ultratec argues that during cross examination at trial in front of the jury Mr. Occhiogrosso offered testimony that is inconsistent with his IPR testimony. That inconsistent testimony did not exist sooner and thus could not have been proffered to the Board sooner.

The Federal Circuit said that:

The Board offers no reasoned basis why it would not be in the interest of justice to consider sworn inconsistent testimony on the identical issue. Ultratec sought to offer
recent sworn testimony of the same expert addressing the same patents, references, and limitations at issue in the IPRs.  A reasonable adjudicator would have wanted to
review this evidence.

The Federal Circuit noted that conflicting testimony by Mr. Occhiogrosso would be highly relevant to both the Board’s analysis of the specific issues on which he gave inconsistent testimony and to the Board’s overall view of his credibility. His testimony was critical to the Board’s fact findings, and under such circumstances, no reasonable fact finder would refuse to consider evidence of inconsistent sworn testimony.  The Federal Circuit further noted that admitting and reviewing Mr. Occhiogrosso’s trial testimony would have placed minimal additional burden on the Board.

A number of problems with the Board’s procedures contributed to its errors in this case. First, the Board lacked the information necessary to make a reasoned decision.  Second, the Board’s procedures allowed it to make significant evidentiary decisions without providing an explanation or a reasoned basis for its decisions.  Third, the Board’s procedures impede meaningful appellate review of the agency decision-making.

The Federal Circuit noted a significant difference between court proceedings and proceedings before the Board:

In district court litigation, a party dissatisfied with a ruling excluding evidence is allowed to make an offer of proof to preserve error. Fed. R. Evid. 103. Parties in IPRs are not
given similar protections.

The Federal Circuit concluded that the Board abused its discretion when it refused to admit and consider Mr. Occhiogrosso’s trial testimony and when it refused to explain its decision.