New PTAB Rules Level the Playing Field for Patent Owners in IPR

fair-compassAfter much public comment and debate, new changes to rules for post-grant administrative trials before the Patent Trial and Appeal Board (PTAB) go into effect on May 2, 2016. These final rule changes, which are the second set of changes since the America Invents Act (AIA) went into effect, are the culmination of a series of PTAB listening tours and public comments to the rule change proposals published in August 2015. Among other things, the new PTAB rules are intended to address concerns that patent owners were at a disadvantage in responding to patent challenges, particularly during the pre-institution stage of a PTAB proceeding. The rule changes also introduce certification requirements for documents filed with the PTAB, confirm the broadest reasonable interpretation (BRI) standard, as well as exceptions to the BRI standard for expiring patents, and adopt an appellate-style word count limit for major briefs.

New PTAB Rules Allow Owners to Submit Testimonial Evidence

To date, the PTAB has received over 4,600 petitions, which by the USPTO’s own account is more than three times the number of petitions expected at the outset of the program. Initially, the rate of institution for petitions for post-grant administrative trials was quite high. As the practice has evolved, the parties have increased their focus on the early pre-institution filings. Petitioners submit thorough expert declarations in support of their petitions and patent owners submit carefully crafted preliminary responses in an attempt to avoid institution, or at least limit institution to only certain claims and prior art references. Recently, patent owners are proving more successful in avoiding or limiting institution, as shown by a declining institution rate.

Many practitioners, however, have expressed frustration at the imbalance of allowable pre-institution evidence. In particular, until now, patent owners have not been permitted to submit testimonial evidence with their preliminary responses, meaning that decisions on institution are often based on unrebutted expert testimony in favor of the petitioners.

Based on this feedback, the USPTO has changed the trial rules to permit patent owners to submit testimonial evidence, including expert testimony, in patent owner preliminary responses so that such evidence may be considered by the PTAB when deciding whether to institute a trial. Proponents of the rule change assert that this is not only more fair to patent owners, but will encourage full disclosure of rebuttal evidence by patent owners and provide the PTAB with the best available information in deciding whether or not to institute a trial.

In response, some commenters expressed concern that a petition might be denied based on testimony that supports a finding of fact in favor of the patent owner, even though the petitioner has not had an opportunity to cross-examine the declarant. To address this, a PTAB panel will resolve any genuine issue of fact created by the patent owner’s testimonial evidence in favor of the petitioner, solely for purposes of institution. Because denial of institution of a post-grant trial is a final, non-appealable decision, the USPTO believes deciding disputed factual issues in favor of the petitioner is appropriate. The USPTO has also stated that a PTAB panel may, in its discretion, order limited discovery, including cross-examination of witnesses, prior to institution. Finally, the rules are amended to provide that a petitioner may seek leave to file a reply to the preliminary response, but any such request must make a showing of good cause.

This rule change, perhaps the most significant to date, means that petitioners and patent owners alike will invest increased efforts and resources into the pre-institution stage, including briefing, expert declarations, and potential pre-trial discovery. Under the old rules, counsel for patent owners were well-advised to retain experts for AIA trials before filing a preliminary patent owner response to aid in preparation of the preliminary response and ensure consistency of arguments if trial was instituted. Under the new rules, however, retention of an expert and submission of an expert declaration with the preliminary response will be necessary to best position a patent owner to avoid or limit institution of trial.

Rule 11-Type Certifications and Sanctions

Although requests for sanctions have been infrequent in AIA trial proceedings, a certification rule has been added in what is largely viewed as a preventive measure that provides detailed guidance regarding the USPTO’s expectations for counsel. The new rule is similar to and modeled after the requirement of Rule 11 of the Federal Rules of Civil Procedure. The rule explicitly incorporates the signature and certificate requirements of 37 C.F.R. 11.18, and sets forth the process and conditions under which the PTAB will impose sanctions for violation of the requirement.

Under the new rules, a party may seek sanctions against another party for violating its obligations under Section 11.18. Similar to the FRCP, however, the party seeking sanctions must first offer a “safe harbor” and is required to serve a proposed motion on the other side at least 21 days prior to seeking authorization to file a motion for sanctions. During this 21-day period, the nonmoving party has the opportunity to withdraw or correct the challenged paper, claim, or defense. The PTAB itself may also order a practitioner or party to show cause why certain conduct has not violated the certification requirement. The nature of the imposable sanctions must be limited to what suffices to deter repetition of the conduct or comparable conduct by others, and must be consistent with 37 C.F.R. 42.12. The sanctions listed in Section 42.12 include entry of an order holding facts to have been established, precluding a party from filing a paper or contesting an issue, exclusion of evidence, payment of attorney fees, and even judgment in the trial or dismissal of the petition.

Applicable Claim Construction Standards

The new rules also address one of the most controversial elements of the relatively new PTAB procedures – the applicable claim construction standards. Under the existing rules, the PTAB applies the broadest reasonable interpretation standard in construing the claims, unless the patent being challenged is expired. The new rules, however, permit either party to request a Phillips-type claim construction standard if the party certifies that the patent will expire within 18 months of the entry of the Notice of Filing Date Accorded to Petition. The request must be madewithin 30 days of the filing of the petition. In practice, this means that a party seeking application of a Phillips-type construction must act quickly, and patent owners will be well-served to resolve this issue as early as possible. The PTAB will consider the request and whether additional briefing on the issue is required prior to the patent owner preliminary response or decision on institution. This new rule once again shifts more focus and energy into the pre-institution phase of AIA trials.

Of course, the continued use of the broadest reasonable construction means that all eyes will be on the Supreme Court’s decision in Cuozzo Speed Technologies v. Lee, which takes on the issue of whether the use of the BRI standard in AIA post-grant proceedings is appropriate. Oral argument in Cuozzo is set for April 25, 2016.

Other Rules Changes and Updates to the Trial Practice Guide

The rules changes also include some procedural fixes. For instance, the new rules replace the current page limit for major briefings with a word count limit and require a certification of the word count. Accordingly, petitions will no longer be reviewed to determine if the page limit has been thwarted through the use of claim charts containing arguments, thus streamlining administrative review and reducing the number of noncompliant petitions requiring correction. The new rules also require earlier service of demonstrative exhibits for oral hearings.

All of the rules changes will be added to the Office Patent Trial and Practice Guide so that practitioners can find the applicable rules in a single source. The Office Patent Trial Practice Guide will also be amended to include developments in PTAB trial practice regarding motions to amend, additional discovery, real party-in-interest and privity issues, and confidential information, which should provide guidance to practitioners on those issues.

Finally, after receiving negative feedback during the public comment period, the USPTO has decided not to initiate a proposed pilot program that would have allowed a single judge to make decisions on institution of post-grant administrative trials.


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Join the Discussion

8 comments so far.

  • [Avatar for Stephan Curry]
    Stephan Curry
    April 20, 2016 11:48 pm

    let us all read again the great comments of Curious.

    Curious March 1, 2016 4:39 pm
    Night, do you not have a problem with the whole concept that anyone, at any time and for any reason can [haul] you into the PTO and put you to great expense so they can make a buck off your falling stock price, or pursue some self-appointed public policy agenda where you are just a whipping boy?
    Welcome to the new era. Inventors are evil and infringers are the Robin Hood — taking from the rich and giving to the poor (oh wait, the most egregious Robin Hood’s these days are taking from the poor inventors and enriching themselves to the tune of billions of dollars).

    The patent system wasn’t broke — it was working as intended. Does the healthy working of a patent system sometime involve huge sums in damages? Well, yes. Did certain individuals abuse the system by employing information/negotiating asymmetry? Undoubtedly. However, there were mechanisms already in place to police such activities. Unfortunately (for inventors) and fortunately (for infringers), that abuse was used as an excuse by both the Courts and Congress to drastically reduce the usefulness and value of patents — for both the good actors and bad actors.

    The system is currently set up so that if you are a small inventor going up against a larger inventor, you have little hope in succeeding. Between IPR death squads and District Courts using 35 USC 101 to clear their dockets of patent cases, there is little hope for the little guy. The subject of this article involves the twist where the same tactics being used to knock out the patents of the little guy are also being used against the big guy’s pharma patents, which as a group, are likely the more valuable than any other type of patent.

    Personally, if the system is put in place for people to short stocks and then bring an IPR to drive down the stock price, I don’t blame these people. If there is blame to be had, it should be directed to the people who set up the system in the first place.

    did you all notice that in view of the strong comments against the pro-infringer lobby driven patent reform developments and bad effects on the economy that we are observing, that woman has become quiet. We would guess that the mystery patent attorneys who trained her in patents are all annoyed at her to the Maximum.

  • [Avatar for Stephan Curry]
    Stephan Curry
    April 20, 2016 07:51 pm

    pro-infringer Lobby driven patent reform advocates from a common mother Law firm in the Bay Area.

  • [Avatar for Stephan Curry]
    Stephan Curry
    April 20, 2016 08:29 am

    [email protected]

    Benny October 1, 2014 1:59 am
    The EPO does more to discourage foolish patent applications from clogging up the offices’ backlog by charging maintenance fees before examination. The USPTO should be acting in the interest of genuine inventors and actively discourage frivolous applications which are holding back everyone else. Instead, they write 19 page rejection letters to crackpots who attempt to patent time machines (US20090234788 file wrapper). Could the examiners’ time be better spent ? You don’t see this sort of comedy in the EP register. Your analogy to the sports car is inaccurate – you should ask, should the sports car owner be allowed to block traffic with his toy?

    Benny, I looked you up, man.
    You seem like a patent reform apologist and have the same basic core views of a couple folks who erroneously claim (intentional or not) that the USPTO can be made almost perfect. The Office can not be made almost perfect, and in fact, some of the perceived flaws of the Office are actually beneficial to innovation and foolish patents do encourage innovation.

    Benny, you even sound like some infamous folks who initiated the call for patent reform by citing big patent damage awards that are against companies wherein the companies are actually competitors of these infamous patent reforms folks. If there has been at least five damage awards topping $500 million since 1990, then why did these companies not speak up and why does Google have to do the yelling for these companies (why can’t these companies speak for themselves)? Also, it is now 2016, and so 5 big damage awards since 1990 is statistically insignificant.

    Benny, if you are educated in economic theory, one late Scandinavian scholar argued that driving key to innovation is the free market flow of information. The USPTO serves as an information flow driver. So if the USPTO grants a “foolish patent”, this foolish patent aids in driving innovation. I am not convinced by those so-called patent reformers in northern Virginia, los angeles, san diego, and the valley.

    Benny, this call for patent reform is being used as a Pretext to lessen patent owner rights even more and shape the US patent bar to be more like the current status in Europe, and I know the call’s beginnings. This call for patent reform also encourages less patent application filings and so this so-called patent reform will Discourage innovation in the long run (case in point, look at the EPO patent system and the weak innovation in Europe).

  • [Avatar for Stephan Curry]
    Stephan Curry
    April 20, 2016 07:49 am

    [email protected]

    your comments support the economic principles I am pointing to.
    you don’t know the specifics about some of the folks determined to eradicate the patent trolls, but this intel layoff announcement is a wakeup call to one or more of them. So don’t be so conclusory, Benny. I predicted in 2007 that our current patent system problems are gonna occur. Wait and watch.

  • [Avatar for Benny]
    April 20, 2016 05:16 am

    Ignoring for the moment the inappropriateness of your theological argument, Intels’ expected 11% layoffs punishes those engineers and managers whose livelihood, families and financial stability will be affected, while at the same time is a boon for other corporations seeking to hire talented people to improve their productivity. (Gene et. al, apologies for feeding the troll)

  • [Avatar for Stephan Curry]
    Stephan Curry
    April 20, 2016 12:48 am

    Hey IPdude,

    Intel is gonna have massive massive layoffs soon.

    It looks like God Almighty is gonna indirectly punish that person who is rallying and who is the inspiration of the Infringement/Anti-Troll Lobby.

  • [Avatar for Anon]
    April 19, 2016 05:45 pm

    Not only that, the changes hardly level out the playing field.

  • [Avatar for IPdude]
    April 19, 2016 02:41 pm

    Obvious that M. Lee is trying to butter up the Supremes prior to Cuozzo (after she gets caught with her hand in the cookie jar).