Adidas and Nike Race Back to PTAB to Address Non-Instituted Grounds

In Adidas AG v. Nike, Inc., [2018-1180, 2018-1181] (July 2, 2018), the Federal Circuit granted Adidas’ motion to remand the appeal back to the PTAB to consider the non-instituted grounds in Adidas’ Petitions for inter partes review against Nike’s U.S. Patent Nos. 7,814,598 and  8,266,749.

The PTAB’s final written decision found that Nike’s patent were not unpatentable on the instituted grounds, but did not reach a second, non-instituted grounds.  After the Supreme Court’s decision in SAS, Adidas promptly moved to remand for the Board to consider the non-instituted ground.  The Federal Circuit agreed, as it had in several other cases, that remand was appropriate without first deciding the appeal of the claims and grounds already before it.

No-Harm, No-Foul: Board Denies Sanctions Where Patent Owner Suffered No Harm from Alleged Cross Examination Overreach

In Apple Inc. v. California Institute of Technology, IPR2017-00297, Paper 66, (June 29, 2018), the PTAB, en route to finding claims 19-21 of U.S. Patent No. 7,916,781 invalid, also denied the Patent Owner’s Motion for Sanctions.  Patent Owner’s Motion (Paper 40) complained that “[d][uring cross-examination of Caltech’s witnesses, Dr.
Mitzenmacher and Dr. Divsalar, Petitioner repeatedly failed to stay within the
proper scope” which “violated numerous Board rules and orders, and was an abuse of the discovery process.” The Patent Owner noted that the cross examination of Dr. Divsalar’s 16-page declaration generated over 280 pages, and a wide range of topics.  In sign of excellent witness preparation, “Dr. Divsalar reminded counsel over 100 times that questions were being directed to subject matter not discussed in his declaration.”  Patent Owner had similar, but not as extensive complaints about the cross examination of Dr. Mitzenmacher, who was Patent Owner’s primary witness and submitted four declarations.

The Board during a conference call, indicated that “a typical remedy is to give no weight to such improperly elicited testimony,” but Patent Owner correctly pointed out in its motion that without further sanctions, “future parties will not be deterred from flouting the Board’s rules when the only risk is not gaining an advantage.”

In its Final Written Decision, the Board found that sanctions were not warranted because petitioner’s attempts to elicit testimony “while inartful” did not rise to the level of sanctionable conduct because they were reasonably related to the direct testimony. Ultimately, the Board adopted a no-harm, no-foul policy, finding sanctions unwarranted because patent owner suffered no harm.


Inter Partes Review — If We’re Going to Have Them Then It’s All or Nothing

In SAS Institute Inc. v. Iancu, the Supreme Court held that the when USPTO institutes inter partes review, it must all the grounds in the Petition, and cannot choose to limit its review to only some of the grounds.

The opinion was written by Justice Gorsuch, who if he had his druthers in Oils States (issued the same day) would have thrown out inter partes review altogether.  SAS petitioned for review of ComplementSoft’s software patent, but the USPTO, relying upon 37 CFR §42.108(a) only instituted inter partes review as to some of the challenged claims.  SAS unsuccessfully argued before the Federal Circuit that 35 USC §318(a), required the Board to decide the patentability of every claim.

Justice Gorsuch found that 35 USC §318(a) “provides a ready answer.”  He points out that §318(a) directs that if an inter partes review is instituted and not dismissed under this chapter, the Board “shall issue a final written decision with respect to the
patentability of any patent claim challenged by the petitioner. . ..”  He said “[t]his directive is both mandatory and comprehensive.”  After a brief analysis of the grammar, he concludes:

when §318(a) says the Board’s final written decision “shall” resolve the patentability of “any patent claim challenged by the petitioner,” it means the Board must address every claim the petitioner has challenged.

Judge Gorsuch said it would seem to be an easy case,

Where a statute’s language carries a plain meaning, the duty of an administrative agency is to follow its commands as written, not to supplant those commands with others it may prefer.

The USPTO Director’s argued that while every claim instituted must be decided, not every claim has to be instituted.  However, Justice Gorsuch dismissed this  because “partial institution” power appears nowhere in the text of §318, or anywhere else in the statute, and what can be found in the statutory text and context strongly counsels against the Director’s argument.

Justice Gorsuch examined the statutory scheme for inter partes review, noting that it it a petitioner-driven process, not a PTO drive process.  Moreover while the Director is given discretion whether to institute, nothing suggests the Director enjoys a license to depart from the petition and institute a different inter partes review of his own design.  While §314 gives the Director discretion to institute if there is a reasonable likelihood the petitioner will prevail on at least one of the claims challenged in the petition, Judge Gorsuch explained that rather than contemplate claim-by-claim institution, this language anticipates a regime where a reasonable prospect of success on a single claim justifies review of all.

Justice Gorsuch also pointed that that §318’s requirement that the Final Written Decision address “any patent claim challenged by the petitioner.” and rejected that any grammatical discrepancy between §314’s reference to claims found in the petition, and §318’s reference to claims challenged by the petitioner, makes any difference.

Justice Gorsuch also rejected the Director’s argument for efficiency, finding each side offers plausible reasons why its approach might make for the more efficient policy, but ultimately pointing out that policy arguments are properly addressed to Congress, not the Supreme Court.

Justice Gorsuch also rejected the Director’s argument for Chevron deference, which if still valid, only applies where the Court is unable to discern’s the Congress’ meaning.  Justice Gorsuch had no uncertainty about the statutes’ “unmistakable commands.”

The final issue raised by the Director was whether partial institution was even reviewable, given the unappealability of institution decisions.  He pointed out that after Cuozzo, if a party believes the Patent Office has engaged in “shenanigans” by exceeding its statutory bounds, judicial review remains available consistent with the Administrative Procedure Act, which directs courts to set aside agency action “not in
accordance with law” or “in excess of statutory jurisdiction, authority, or limitations.”  Justice Gorsuch said that was precisely the sort of question before the court.

Because everything in the statute before it confirmed that SAS is entitled to a final written decision addressing all of the claims it has challenged, and nothing suggested the Court lacks the power to do so, the Supreme Court reversed the judgment of the Federal Circuit, and remanded the case for further proceedings consistent with this opinion.

Overall a banner day for the Federal Circuit — its a rare day that they bat .500 at 1 First St NE.


What the PTO Giveth, the PTO Can Taketh Away. IPRs are Constitutional. Get Back to Work.

The Supreme Court has finally issued its opinion in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, holding that inter partes review does not violate the Constitution.  The majority opinion written by Justice Thomas states that reconsideration of the Government’s decision to grant a public franchise “falls squarely within the public rights doctrine, and Congress has “permissably reserved the the PTO’s authority to conduct that reconsideration,” and thus the PTO can do so without violating Article III of the Constitution.

The Opinion goes on to explain that the courts have long recognized that the grant of a patent is a matter involving public rights.  The Opinion notes that the determination of patentability is exercising an executive function, and need not be adjudicated in an Article III Court, and because inter partes review involves the same basic matter as the grant of a patent, it too falls on the public-rights side of the line.

Justice Thomas points out that the only difference between Inter partes review and the initial grant of a patent is that Inter partes review occurs after the issuance, but said that distinction doe snot make a difference.

On the issue of whether patents are private property, Justice Thomas agrees that they are, and are entitled to the same protection as any other property right that consists of a franchise.  Adding that as a franchise the patent can confer only the rights that the statute prescribes, and that statute provides for inter partes review.

Justice Thomas went on to dismiss the arguments based upon the historic role of courts in deciding patent matters, citing non-judicial validity determination by the the privy Council under English Law.  He also dismissed cases that appear to suggest that courts were the only authority to set a patent aside, noting that under the statutes at the time, this were true statements, but they do not address Congress’ authority to establish a different scheme.

Justice Thomas rejected the the argument that inter partes review was a judicial proceeding exercising judicial authority, noting that the Court has never adopted a “looks like” test, and stating that the fact that an agency uses court-like procedures does not necessarily mean that it is exercising judicial power.

Justice Thomas was careful to emphasize the narrowness of the holding.  He pointed out that Oil States did not challenge the retroactive application of inter partes review, nor did it raise a due process challenge. Finally, Justice Thomas cautioned that the decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.

In closing, Justice Thomas noted that the disposition of the Article III issue, disposed of the Seventh Amendment issue, and concluded that because inter partes review does not violate Article III or the Seventh Amendment, the judgment of the Court of Appeals was confirmed.

Justice Gorsuch penned an interesting dissent joined by Chief Justice Roberts, but in the end what matters is inter partes reviews don’t violate Article III. So get back to work.







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Presenting IPR Arguments Too Late is . . . Well Too Late

In Dell Inc. v. Acceleron, LLC, [2017-1101](March 19, 2018), the Federal Circuit affirmed the Board’s decision on remand not to consider Dell’s late-presented arguments, rather than giving Acceleron the opportunity to address them.

In the previous appearance of this IPR before the Federal Circuit, Acceleron persuaded the Federal Circuit that the Board had improperly relied upon late-presented arguments by Dell made for the first time during the oral argument to which Acceleron did not have the opportunity to respond.  The Federal Circuit remanded the case, and on remand the the Board decided the proper course was to ignore the arguments made by Dell because they were no and not responsive to Acceleron’s arguments.

The Federal Circuit said that the Board was obligated to dismiss Dell’s
untimely argument given that the untimely argument in this case was raised for the first time during oral argument.  Dell argued that ignoring evidence of unpatentability was against public policy because it will not improve patent quality, but the Federal Circuit found that due process and preserving the Board’s discretion outweigh any negative effects of not invalidating a patent claim, especially since other parties remained free to challenge the validity of the claims.


Collateral Estoppel Applies in IPRs Where the Issues are the Same

In Nestle USA, Inc. v. Steuben Foods, Inc., [2017-1193] (March 13, 2018), the Federal Circuit vacated the Board’s construction of “aseptic” in U.S. Patent No. 6,481,468 because of collateral estoppel considerations, and remanded for further proceedings.

The Federal Circuit noted that Nestle had previously appealed the construction of “aseptic” in another IPR involving a related patent (U.S. Patent No. 6,945,013), and in that case, the Federal Circuit vacated the
Board’s construction, relying on binding lexicography in the specification for “aseptic” to construe the term to mean the “FDA level of aseptic.”

The Federal Circuit explained that collateral estoppel protects a party from having to litigate issues that have been fully and fairly tried in a previous action and adversely resolved against a party opponent, and that it is well established that collateral estoppel applies in the administrative
context.  The Federal Circuit said that it was undisputed that the claims at issue in the two appeals use the term “aseptic” (or its related variation
“aseptically disinfecting”) in a similar fashion.  More critically, the Federal Circuit said, the two patents also provide identical lexicography
for the term “aseptic” in their specifications.

The Federal Circuit concluded that collateral estoppel protects Nestlé and obviates the need to revisit an issue that was already resolved against Steuben Foods. The Federal Circuit said that collateral estoppel is not
limited “to patent claims that are identical; it is the identity of the issues that were litigated that determines whether collateral estoppel should apply.

Second and Third Bites at the Apple; Subsequent IPR Losses undo IPR Win

In Maxlinear, Inc. v. CF Crespe LLC, [2017-1039] (January 25, 2018), the Federal Circuit we vacated and remanded the PTAB’s determination that dependent claims were not unpatentable  in view of the Federal Circuit’s intervening affirmance of a second IPR that claims 1 and 17 unpatentable.

The case involved U.S. Patent No. 7,075,585 on a broadband television signal
receiver for receiving multi-standard analog television signals, digital television signals and data channels.  The Board found the only two independent claims 1 and 17 were not shown to be unpatentable, and thus did not reach the patentability of the dependent claims.

The Federal Circuit held that the two IPR’s that found claims 1 and 17 unpatentable, were binding “as a matter of collateral estoppel” in this case.  The fact that the other IPR’s became final while this case was pending on appeal is irrelevant.  The preclusive effect of the prior adjudications, and subsequent affirmations, has finally resolved the issue of the unpatentability of independent claims 1 and 17 and dependent claim 20 in this proceeding. Thus, the sole
remaining question at issue is whether the dependent claims 4, 6-9, and 21, not addressed in the earlier IPRs, are unpatentable.

Since the patentability of claims 1 and 17 was the sole basis for the Board’s decision in this IPR, and the Board had not separately addressed the dependent claims, the Federal Circuit set aside the decision as to the dependent claims and remanded for further consideration.


Drag things out? Disclaimer creates estoppel.

In Arthrex, Inc. v. Smith & Nephew, Inc., [2017-1239] (January 24, 2018), the Federal Circuit affirmed the Board’s entry of an adverse judgment pursuant to 37 C.F.R. § 42.73(b) in an IPR, after patent owner Arthrex disclaimed all claims that were the subject of the petition, despite Arthrex’s express request that no adverse judgment be entered.

After first considering and concluding that the adverse judgment was appealable, the Federal Circuit then considered whether the entry of adverse judgment was proper.  Although Arthrex specifically stated that it was not requesting an adverse judgment, the Federal Circuit found that the application of the rule on its face does not turn on the patentee’s characterization of its own request.  The rule gives the Board authority to construe a patent owner’s actions as a request for an adverse judgment, suggesting the Board’s characterization of the action rather than the patent owner’s characterization is

The Federal Circuit held that 37 C.F.R. § 42.73(b) permits the Board to enter an adverse judgment when a patent owner cancels all claims at issue after an IPR petition has been filed, but before an institution decision.

How this affects Arthrex remains to be seen.  The Federal Circuit noted that at  the time of the adverse judgment, Arthrex had two pending continuation
patent applications that the estoppel provision would impact, and that those two applications have since issued as patents. However, Arthrex recently filed another continuation application, which remains in prosecution and therefore is
affected by the adverse judgment.  The Federal Circuit is indicating that the current prosecution is complicated by the adverse judgment, although it did not comment on the effect on the patents that issued from the applications that were pending at the time of the adverse judgment.

The estoppel provisions prevent a patentee “from taking action inconsistent
with the adverse judgment, including obtaining in any patent . . . [a] claim that is not patentably distinct from a finally refused or canceled claim.”  The estoppel provision prevents a patent owner from obtaining a patent on a pending application, but does it also prevent a patent owner from defending a claim an issued patent?  If not, then Arthrex erred by doing the right thing and disclaiming unpatentable claims; instead it should have dragged out the proceedings while rushing to get its pending applications to issue.


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.