Patent Office amends PTAB Trial Practice Rules

uspto_main-campus-1Last week, on Friday, April 1, 2016, the United States Patent and Trademark Office published a final rules in the Federal Register. These newly minted final rules, which become effective on May 2, 2016, amend the existing PTAB trial practice rules pertaining to inter partes review (IPR), post-grant review (PGR), covered business method (CBM) review, and derivation proceedings brought into being by provisions of the America Invents Act (AIA). In a nutshell, these new rules change existing practice by allowing new testimonial evidence to be submitted with a patent owner’s preliminary response, adding a Rule 11-type certification for papers filed in a proceeding, allowing a claim construction approach that emulates the approach used by a district court following Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) for claims of patents that will expire before entry of a final written decision, and replacing the current page limit with a word count limit for major briefing.

These final rules are the culmination of a process started two years ago. The Office first conducted what they referred to as a nationwide listening tour during April and May of 2014. Then in June 2014, the Office published a Federal Register Notice asking for public feedback about the AIA trial proceedings. The Office reviewed the comments and issued a first, final rule, which was published on May 19, 2015. That first final rules package addressed issues of a more minor scope that the Office believed could be immediately undertaken. That first final rules package related in part to changes to the patent owner’s motion to amend and the petitioner’s reply brief that involved ministerial changes. For example, the first final rules provided ten additional pages for a patent owner’s motion to amend, allowed a claims appendix for a motion to amend, and provided ten additional pages for a petitioner’s reply brief. There were also other ministerial changes to conform the rules to the Office’s established practices in handling AIA proceedings.

Subsequently, on August 20, 2015, the Office published a proposed rule change that included changes to the claim construction standard for patents that would expire before a final written decision, and the Office also asked for comments regarding possible changes to the practice surrounding motions to amend. Other issues addressed in the August 20, 2015, USPTO proposed rules included, but were not limited to: (1) The intent of the Office to continue use of the Garmin factors on a case by case basis for additional discovery requests; (2) The Office amending the rules to allow the patent owner to file new testimonial evidence with its preliminary response; (3) The Office declining to adopt a mandatory rule regarding additional discovery of secondary considerations, but will continue to entertain the need for such discovery on a case-by-case basis; (4) The Office permitting a patent owner to raise a challenge regarding a real party-in-interest or privity at any time during a trial proceeding; (5) The Office will continue its present practice of considering requests for oral hearings on a case-by-case basis; (6) The Office declining a proposal that would allow a petitioner’s reply as of right in the pre-institution phase of an AIA review; (7) The Office denying to provide for small entity and micro-entity filing fee reduction for reviews under AIA due to a lack of statutory authority to grant such reduced filing fees; and (8) The Office proposal to amend § 42.11, which prescribes the duty of candor owed to the Office, to include a Rule 11-type certification for all papers filed with the Board with a provision for sanctions for noncompliance. See Overview of USPTO Proposed Changes to Practice Before the PTAB.



Claim Construction Standard

In the proposed rules, the Office noted that the application of a Phillips-type claim construction for claims of a patent that will expire prior to the issuance of a final written decision is appropriate. For these patents, the Office proposed to apply a Phillips-type standard during the proceeding. The Office asked a series of questions to elicit comments concerning when to apply a Phillips-type construction.

After considering the comments the Office determined to permit either party to request by motion a Phillips-type construction if a party certifies that the patent will expire within eighteen months from the entry of the Notice of Filing Date Accorded to a Petition. A request by either party for a Phillips-type construction must be done by motion, triggering a conference call with the panel to discuss the request to resolve whether such a motion is appropriate under the circumstances and whether any other briefing is necessary for each party to be able to address adequately the appropriate construction standard. For instance, petitioner may be afforded an opportunity to address a Phillips-type construction analysis before the patent owner is required to file its preliminary response.


Patent Owner’s Motions To Amend

In the Notice of Proposed Rulemaking, the Office explained the impractical nature of having the Board do a patent search to consider substitute claims given the statutory structure of AIA proceedings, which must take place with special dispatch. Given that substitute claims become part of an issued patent without any further examination by the Office, the Office has set forth rules for motions to amend that account for the absence of an independent examination by the Office where a prior art search is performed as would be done during prosecution of a patent application, reexamination, or reissue.

The Office stated in Idle Free Systems, Inc. v. Bergstrom, Inc., Case IPR2012– 00027 (PTAB June 11, 2013), that in a motion to amend, ‘‘[t]he burden is not on the petitioner to show unpatentability, but on the patent owner to show patentable distinction over the prior art of record and also prior art known to the patent owner.’’ The Office subsequently clarified this statement, and specifically, addressed the meaning of the terms ‘‘prior art of record’’ and ‘‘prior art known to the patent owner,’’ and how the burden of production shifts to the petitioner once the patent owner has made its prima facie case for patentability of the amendment. See MasterImage 3D, Inc. v. RealD Inc., Case IPR2015–00040, slip op. at 1–3 (PTAB July 15, 2015).

Therefore, a patent owner must argue for the patentability of the proposed substitute claims over the prior art of record, which includes the following:

  • Any material art in the prosecution history of the patent;
  • any material art of record in the current proceeding, including art asserted in grounds on which the Board did not institute review; and
  • any material art of record in any other proceeding before the Office involving the patent.

The Patent Owner must also distinguish over any art provided in light of a patent owner’s duty of candor, and any other prior art or arguments supplied by the petitioner, in conjunction with the requirement that the proposed substitute claims be narrower than the claims that are being replaced. Although not mentioned in the Federal Register Notice, it is worth remembering that the Federal Circuit recently ruled that a patent owner has no duty to submit prior art not of record and the failure to submit prior art not of record alone is insufficient to show a breach of the duty of candor. See Nike v. Adidas: Federal Circuit refines PTAB motion to amend practice.

In addition, the decision in MasterImage clarified how the burden of production shifts between the parties with regard to a motion to amend. ‘‘With respect to a motion to amend, once Patent Owner has set forth a prima facie case of patentability of narrower substitute claims over the prior art of record, the burden of production shifts to Petitioner. In its opposition, Petitioner may explain why Patent Owner did not make out a prima facie case of patentability, or attempt to rebut that prima facie case, by addressing Patent Owner’s evidence and arguments and/or by identifying and applying additional prior art against proposed substitute claims. Patent Owner has an opportunity to respond in its reply. The ultimate burden of persuasion remains with Patent Owner, the movant, to demonstrate the patentability of the amended claims.’’ MasterImage, slip op. at 3 (citing Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292, 1307 (Fed. Cir. 2015)).

The Office did not see any reason to depart from Idle Free or MasterImage. Notwithstanding, the Office did observe that depending on the amendment, it is possible that a petitioner may not have an interest in challenging patentability of any substitute claims. Therefore, to ensure patent quality and to protect the public interest, the Patent Office says the burden of persuasion remaining on the patent owner remains most appropriate in order to ensure that there is a clear demonstration on the record that the proposed substitute claims are patentable, given that there is no opportunity for separate examination of these newly proposed substitute claims in these adjudicatory-style AIA proceedings.



Additional Discovery

In the Notice of Proposed Rulemaking, the Office stated that it will continue to apply several factors on a case-by-case basis when considering whether additional discovery in an inter partes review is necessary in the interest of justice. These factors come from Garmin Int’l, Inc. v. Cuozzo Speed Techs. LLC, Case IPR2012–00001 (PTAB Mar. 5, 2013), with similar factors being applied in post-grant reviews and covered business method patent reviews when deciding whether to grant additional discovery.

The Office also noted that as discovery disputes are highly fact dependent, the Office decides each issue on a case-by-case basis, taking account of the specific facts of the proceeding. See, e.g., Bloomberg, Case CBM2013–00005, slip op. at 6–7 (granting a specific and narrowly tailored request seeking information considered by an expert witness in connection with the preparation of his declaration filed in the proceeding). Also, parties are encouraged to raise discovery issues, and confer with each other regarding such issues, as soon as they arise in a proceeding.

At this time the Office sees no reason to depart from the Garmin factors, which they view as a flexible and representative framework for providing helpful guidance to the parties, and assisting the Office to decide whether additional discovery requested in an inter partes review is necessary in the interest of justice.


Multiple Proceedings

The Office asked a series of questions in the proposed rules relating to how multiple proceedings, such as an AIA trial, reexamination, or reissue proceeding, before the Office involving the same patent should be coordinated, including whether one proceeding should be stayed, transferred, consolidated, or terminated in favor of another. Although the Office proposed no new rules involving multiple proceedings, it indicated plans to add further discussion on what factors the Office considers when determining whether to stay, transfer, consolidate, or terminate a proceeding in the Office Patent Trial Practice Guide.


Extension of One Year Period To Issue a Final Determination

In the Notice of Proposed Rulemaking, the Office stated that it will continue to strive to meet the one-year statutory time period for trial, and that it does not propose to change the rules pertaining to the one-year pendency from institution-to-decision to provide for specific circumstances under which ‘‘good cause’’ may be shown. The Office proposed, however, to revise the Office Patent Trial Practice Guide to provide an exemplary list of instances in which an extension of the one-year statutory period may be warranted. Generally, commenters agreed with the Office’s approach to handling of the one-year period to issue a final determination, but one comment suggested the Office prepare examples of good cause for an extension, such as when one of the parties is prejudiced by circumstances that are unforeseeable and outside of its control or when the case is complex involving multiple proceedings. The Office said it would consider these suggestions in revising the Office Patent Trial Practice Guide.


Rule 11-Type Certification

In the Notice of Proposed Rulemaking, the Office proposed to amend section 42.11, which prescribes the duty of candor owed to the Office, to include a Rule 11-type certification for papers filed with the Board with a provision for sanctions for noncompliance. The Office has elected to implement a Rule-11 type certification in the final rule.

Currently, Rule 42.11 simply reads: “Parties and individuals involved in the proceeding have a duty of candor and good faith to the Office during the course of a proceeding.”

Once the new rules become effective new Rule 42.11 will read:

(a) Duty of candor. Parties and individuals involved in the proceeding have a duty of candor and good faith to the Office during the course of a proceeding.

(b) Signature. Every petition, response, written motion, and other paper filed in a proceeding must comply with the signature requirements set forth in § 11.18(a) of this chapter. The Board may expunge any unsigned submission unless the omission is promptly corrected after being called to the counsel’s or party’s attention.

(c) Representations to the Board. By presenting to the Board a petition, response, written motion, or other paper—whether by signing, filing, submitting, or later advocating it—an attorney, registered practitioner, or unrepresented party attests to compliance with the certification requirements under § 11.18(b)(2) of this chapter.

(d) Sanctions—(1) In general. If, after notice and a reasonable opportunity to respond, the Board determines that paragraph (c) of this section has been violated, the Board may impose an appropriate sanction on any attorney, registered practitioner, or party that violated the rule or is responsible for the violation.

(2) Motion for sanctions. A motion for sanctions must be made separately from any other motion and must describe the specific conduct that allegedly violates paragraph (c) of this section. The motion must be authorized by the Board under § 42.20 prior to filing the motion. At least 21 days prior to seeking authorization to file a motion for sanctions, the moving party must serve the other party with the proposed motion. A motion for sanctions must not be filed or be presented to the Board if the challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service of such motion or within another time the Board sets. If warranted, the Board may award to the prevailing party the reasonable expenses, including attorney’s fees, incurred for the motion.

(3) On the Board’s initiative. On its own, the Board may order an attorney, registered practitioner, or party to show cause why conduct specifically described in the order has not violated paragraph (c) of this section and why a specific sanction authorized by the Board should not be imposed.

(4) Nature of a sanction. A sanction imposed under this rule must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated and should be consistent with § 42.12.

(5) Requirements for an order. An order imposing a sanction must describe the sanctioned conduct and explain the basis for the sanction.


Will Continue to Review and Revise

The Office says that it anticipates that it will continue to refine the rules governing AIA trials moving forward in order to continue to ensure fairness and efficiency. Thus, the Office continues to encourage comments concerning how the rules may be refined to achieve this goal.

Given the unabashedly deleterious impact of the PTAB on patent property rights that are supposed to be presumed valid once issued, many will no doubt be skeptical of the benefit of offering comments to the Office despite the Office’s stated desire to continue to attempt to ensure fairness and efficiency. While there are certainly volumes of data to suggest the PTAB is an inhospitable, even procedurally unfair venue for patent owners, the Office did announce a change of heart with respect to one particular PTAB proposal.

On August 25, 2015, the Office announced they were exploring the possibility of a pilot program whereby a single Administrative Patent Judge would make institution decision. The Office says they received eighteen comments, which seems exceptionally low, but no doubt evidences the industry belief that the Office is going to do whatever they like relative to the PTAB. In this case the Office relented. The majority of the comments received opposed the proposed pilot program, and those in support suggested modifications. That being the case, the Office decided not to go forward with the proposed pilot at this time. Perhaps there is some hope after all.


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Join the Discussion

8 comments so far.

  • [Avatar for Stephan Curry]
    Stephan Curry
    April 11, 2016 09:43 pm

    the “Champions” of the post grant proceedings

  • [Avatar for Anon]
    April 9, 2016 01:39 pm

    Comment 10 (page 18761) makes clear (applies to pre-institution actions) that the scope of the rules pertains both to the patent holder and to the patent challenger.

  • [Avatar for Anon]
    April 9, 2016 10:50 am

    As noted by Prof. Hricik on the other blog, it is not just Rule 11 that is implicated – with implications for ALL parties.

    See and

  • [Avatar for Night Writer]
    Night Writer
    April 9, 2016 10:26 am

    @3: Not sure of the scope of the Rule 11. But, yes to your question.

  • [Avatar for IPdude]
    April 8, 2016 07:23 pm

    Hopefully the Supremes see through this. Checks and balances!

  • [Avatar for angry dude]
    angry dude
    April 8, 2016 10:32 am

    Am I reading this right ?

    The Rule 11 is going to be applied to challengers of valid patents if that challenge is determined to have no merit (e.g. false or irrelevant prior art cited to the USPTO)?

  • [Avatar for Valuationguy]
    April 8, 2016 10:10 am

    Since the PTO has taken the stance that BECAUSE patent owners can amend their claims…the use of an Article I ‘court’ is not per se unconstitutional… is totally unsurprising that they ‘facially’ improved the path by which patent claims can be amended. The reality is that the litigation/infringement postures of the patent owner precludes most amendments in the first place.

  • [Avatar for Night Writer]
    Night Writer
    April 8, 2016 09:38 am

    Sounds like they are trying to add something about claim amendments to add some worm hole for the justices to slither through.