A Look Back At The PTAB's Busy Two Weeks Of Precedents
By Matthew Bultman
Law360 (March 20, 2019, 8:56 PM EDT) -- A wave of new precedents coming out of the Patent Trial and Appeal Board over the past two weeks has touched on everything from live testimony to motions to amend. Here is a rundown of the decisions to bring you up to speed.
Since March 7, five PTAB decisions have been labeled as precedential, a designation that makes them binding on all panels at the board. They include the first-ever ruling from the Precedential Opinion Panel, or POP. One additional decision was made informative.
"I suspect it's not over," Doug Robinson, a principal at Harness Dickey & Pierce PLC, said earlier this week. "I think there will be a flurry of precedent coming up, and maybe this is going to be a mechanism by which the PTAB seeks to give people what it views as concrete guidance on how these issues should proceed."
Here is a look at what the board had to say.
Proppant Express Investments LLC v. Oren Technologies LLC
This case, which involved an Oren patent on a storage container for delivering a material used in hydraulic fracturing, was the first to go in front of the POP. The panel was created in September to decide issues of "exceptional importance" and set precedent for the PTAB.
The question was whether a company can join its own earlier-filed inter partes review petition and whether new issues can be added to an existing review through joinder. The issue has split PTAB judges, who have come to different conclusions about what is allowed.
"We saw with the previous administration at the PTAB, under Chief [Judge David] Ruschke, the board was already trying to grapple with this phenomena of having different panels of the PTAB come to diametrically opposite conclusions on what the statute requires," said Pauline Pelletier, a director at Sterne Kessler Goldstein & Fox PLLC. "This was sort of a very classic example of that."
In a March 13 decision, the POP ruled that a challenger is able to join its own petition. The panel, which included the PTAB's new chief judge, Scott Boalick, and U.S. Patent and Trademark Office Director Andrei Iancu, also held that new issues can be joined in an existing proceeding.
The POP emphasized, however, that joinder would be allowed "only in limited circumstances." One factor panels may consider is the IPR time bar, which gives accused infringers a one-year window to challenge a patent in IPR. The PTAB can also take into account attempts to "game the system."
The POP used the example of a patent owner adding new claims late in a district court proceeding, after the one-year window had closed, as a time when joinder may be appropriate. In contrast, the panel suggested joinder won't be permitted when a challenger is simply looking to correct previous mistakes or improve its invalidity arguments.
"I think the buzzword in this decision is 'gamesmanship,' which is a term that seems to encompass the concept of one party trying to gain an unfair tactical advantage," Pelletier said.
Lectrosonics Inc. v. Zaxcom Inc.
With this order, handed down in IPRs involving Zaxcom patents related to audio recording, the PTAB laid out general guidance on motions to amend. Among other matters, it presented information about the burden of persuasion, the scope of the proposed claims and rules for page limits.
The order, issued in late February, was designated precedential on March 7, just ahead of the USPTO launching a new pilot program for motions to amend. The program gives patent owners new options in the amendment process. "The Lectrosonics decision, coupled with the board's recent announcement of a motion to amend patent pilot program, shows that the board is looking for a fresh start on motions to amend," said Michelle Armond, co-chair of the patent office litigation practice group at Knobbe Martens Olson & Bear LLP.
The Lectrosonics order didn't break much new ground. One apparent change from previous guidance, several attorneys said, was that it clarified that petitioners can submit additional evidence when opposing a motion to amend, and patent owners can do the same with their reply.
But what the decision does is walk through the various procedural aspects of a motion to amend, putting the standards neatly into one decision, attorneys said. And because it is precedential, litigants should know what to expect, regardless of what PTAB judges hear their case.
"I think it takes out that potential variable of panel dependency, which you don't want in these cases," said Brent Babcock, head of the PTAB trials practice group at Womble Bond Dickinson.
Amazon.com Inc. v. Uniloc Luxembourg SA
Keeping with the motion to amend theme, the PTAB on Monday designated as precedential a January ruling in which the board refused to reconsider its earlier decision not to allow Uniloc to amend a patent on media distribution technology.
When challenging a patent in IPR, petitioners are limited to arguing that the claims are anticipated or obvious. Uniloc contended the same should be true for motions to amend, and the PTAB should not be able to consider whether proposed substitute claims cover patent-eligible material.
Rejecting this argument, the PTAB said the law distinguishes between a patent's original claims and substitute claims that are introduced by the patent owner. The Federal Circuit recognized this distinction in its ruling in Aqua Products v. Matal, which also dealt with motions to amend, the board said.
"The statutory provision providing a right to a motion to amend ... does not prevent us from considering unpatentability under sections other than [anticipation and obviousness] with respect to substitute claims," the board wrote.
This includes Section 101 of the Patent Act, which outlines which types of inventions are eligible for patent protection. The PTAB had rejected Uniloc's proposed claims on the ground that they were directed to nothing more than an abstract idea.
Section 112, which includes requirements for written description and definiteness, is also fair game.
The decision "makes clear that when you do file a motion to amend, you're opening up your substitute claims for additional challenges, including 101," said Graham Phero, counsel at Sterne Kessler.
K-40 Electronics LLC v. Escort Inc., DePuy Synthes Products Inc. v. MedIdea LLC
These two decisions were issued almost five years apart, but each was designated precedential on Monday. They involve requests from a patent owner that the PTAB allow the inventor to testify in front of the board during the oral hearing in an IPR.
In the first case, the PTAB allowed the inventor of Escort's radar detection patent to testify. But the board emphasized that this was the exception rather than the rule, saying live testimony wouldn't be necessary in many arguments, and panels would approach such requests on a case-by-case basis.
"They're not opening up Pandora's box with this decision," said Paul Hastings LLP partner Joseph Palys. "You still have to have good cause to present live testimony. You have to show that to the board."
One of the factors the PTAB said it would consider is the importance of the testimony. In Escort's case, the board said the review could turn on what the inventor, Steven Orr, had to say. The board also noted that Orr was a fact witness, as opposed to an expert witness.
"The board may occasionally require live testimony where the board considers the demeanor of a witness critical to assessing credibility," the PTAB wrote in its 2014 decision, adding that the "credibility of experts often turns less on demeanor and more on the plausibility of their theories."
The board's January 2019 decision in MedIdea's case was much more succinct. In a one-page order denying a request for live testimony, the board said the inventor of MedIdea's patent, which covers a part used in knee replacements, hadn't provided any declaration evidence in the proceeding.
"Accordingly, any testimony that Dr. [Michael] Masini provides at the oral hearing would be new evidence and forbidden under our Trial Practice Guide," the PTAB wrote.
Ex Parte Smith
In this decision, the PTAB applied the USPTO's new patent eligibility framework and reversed an examiner's rejection of an application from the Chicago Board Options Exchange for a patent on a hybrid trading system, where trades are made both electronically and on a trading floor.
The decision was designated as informative on Tuesday. A step below precedential, informative decisions are not binding on other panels of judges but provide the board's "general consensus on recurring issues."
In rejecting Chicago Board's application, the examiner found, in part, that the claims were directed only to the abstract idea of "trading derivatives in a hybrid exchange system" and were ineligible for a patent under Section 101.
The USPTO's guidance on Section 101, which took effect in January, outlines three categories of inventions that constitute an abstract idea: mathematical concepts, methods of organizing human activity and mental processes.
The PTAB found Chicago Board's claims fell into the second bucket, which includes fundamental economic practices. The board said the concept of trading derivatives "is a fundamental economic practice long prevalent in our system of commerce."
But that wasn't the end of the analysis. Under the USPTO's guidance, when a claim falls into one of the three categories, it must be considered whether the abstract idea is "integrated into a practical application." Only when the idea is not integrated in that way is the invention ineligible.
Deciding the claims were patent eligible, the PTAB highlighted elements of Chicago Board's application that it said focused on solving problems in the context of a hybrid trading system. They included timing mechanisms and temporary restraints on the execution of trades.
"We conclude that these limitations integrate the recited judicial exception of derivative trading into a practical application," the board wrote.
--Editing by Jill Coffey and Alanna Weissman.
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Pauline M. Pelletier
Graham C. Phero
PTAB Litigation