Posts Tagged: "CBM"

After 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 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.

Versata presented four questions to the Supreme Court, some very specific to CBM proceedings. In its amicus brief, Broadband iTV more generally asks the Supreme Court to revisit its patent-eligibility precedents, and clarify how computer-implemented claims can be found patent-eligible under Alice to correct the ongoing misapplication of Alice in the lower courts and by the PTAB. Since Alice, more than 100 patents and thousands of claims have been declared invalid under 35 U.S.C. § 101 by the lower courts or PTAB using an overly broad interpretation of Alice. Thus, it is important for this Court to take up the issue of patent-eligibility once again and right the course.

Not only does the Patent Office handsomely charge for the acquisition and maintenance of a patent, they also handsomely charges for the right to challenge those patents after issue. On its face this creates a perverted incentive. The arms dealer nature of how the AIA has transformed the Patent Office is not lost on many within the industry. Add in the insecurity of the USPTO budget and the fact that the Patent Trial and Appeal board (PTAB) directly reports to the Director, thereby not enjoying any true judicial autonomy (at least on paper) and you would be hard pressed to have come up with a more conflicted structure or system.

On Friday, March 18, 2016, in a one paragraph Order that for some reason is not available on the Court’s website, the United States Court of Appeals for the Federal Circuit denied that mandamus petition. The Court took the position that Trading Technologies simply has to go through the entire exercise of defending the ‘304 patent during a CBM review and then at the end they will circle back and determine whether the CBM should have been instituted in the first place. As if spending $1 million or more to defend a patent from a bogus challenge that never should have been instituted in a tribunal that clearly doesn’t have jurisdiction is no big deal. It just makes the Judges seem out of touch with the financial realities facing patent owners.

Seeking to push this issue to a head sooner rather than later, Technology Trading International, the owner of the ‘304 patent, has recently filed a Petition for Writ of Mandamus with the United States Court of Appeals for the Federal Circuit. As the mandamus petition explains, the ‘304 patent has been the subject of serial CBM petitions. They are challenging the institution of this CBM because the ‘304 patent is clearly not a business method patent.

In CBM2015-00161, the Patent Trial and Appeal Board (PTAB) at the United States Patent & Trademark Office (USPTO) recently instituted a Covered Business Method (CBM) review on a non-business method patent with a clear and unambiguous technological aspect. This institution decision is in direct contravention of the statute, which is by its express terms prevents CBM review from anything with a technical aspect. In short, only covered business methods, which are financial related business method patents without a technological aspect, are supposed to be subject to this special form of post grant review. Even more troubling, the patent in question has been found to be directed to technological improvements by both the European Patent Office and the United States Federal District Court for the Northern District of Illinois. Nevertheless, the PTAB still instituted a CBM.

One major takeaway from this PTAB trends report is that, despite claims of high rates of patent invalidation, the reality is that many patents escape the PTAB petitioning process unscathed. To be fair, 18 percent of all PTAB trials lead to an invalidation of every claim challenged in the patent, but one-fifth of all trials are terminated because the petitioning party is denied institution. Thus, the most common result of an inter partes (IPR) or covered business method (CBM) review is that the petitioner is told that they did not make a good enough case for the challenge to progress beyond a hearing before a panel of administrative patent judges (APJs).

USPTO proposed rule changes would amend the existing rules relating to trial practice for inter partes review (IPR), post-grant review (PGR), the transitional program for covered business method patents (CBM), and derivation proceedings. By in large, the Office decided to stick with BRI, but not when the challenged patent will soon expire. The USPTO also adopted the comments from those who expressed satisfaction with the Board’s current rules and practices for motions to amend, which means there will be a right to file a motion to amend but no right to amend if these proposed rules go final.

Very few thought that the IPR procedure would be used by creative hedge fund managers to reap benefits for the price drop of pharmaceutical companies’ stock that have had their important drugs challenged in an IPR. Most would not have thought that small patent owners would be swamped by serial petitions to invalidate their patents. Others were very surprised at the limited manner in which the USPTO permitted the patent owner to amend her claims during the process. And many did not expect the USPTO to interpret statutory language of the AIA to include so much subject matter in what was intended to be a limited-scope CBM program.

In this issue of the Federal Circuit Review: (1) Personal Jurisdiction Remains Unchanged – Federal Circuit Declines “Stream-of-Commerce” Theory; (2) Court Denies Fee Award Under Octane But Recognizes “Troll”-Like Behavior is Relevant Consideration; (3) 35 U.S.C. § 324(e) Does Not Bar Judicial Review of Initial USPTO Determination That Patent is for a “Covered Business Method” (Versata I); and (4) 35 U.S.C. § 324(e) Bars District Court Review of USPTO Decision to Institute CBM Review (Versata II).

Dissent among members of Congress on the nature of the Innovation Act was evident from the opening remarks of the committee’s two ranking members. Congressman Bob Goodlatte (R-VA), the House Judiciary Committee Chairman and the Innovation Act’s major sponsor, stated that the Innovation Act would “ensure that the patent system lives up to its constitutional underpinnings” while targeting the abusive patent litigation which has been central to the debate on patent trolls. The ranking Democratic member of the committee, Congressman John Conyers (D-MI), said the bill was overly broad and yet it didn’t adequately address issues significant to this debate, including abusive demand letters and the ending of fee diversions from the U.S. Patent and Trademark Office’s budget.

One of the issues that took up a significant amount of time during the first half of the hearing was the proposed extension of the transitional program covered business method review. The amendment submitted by Congressman Issa (R-CA) sought to extend CBM by pushing back the sunset period until December 31, 2026. The Issa amendment to extend CBM was defeated by a vote of 18-13.

the study determined that 73.5% of the challenged claims did not survive review in IPR proceedings that reached a final decision on the merits. The report also shows that, in final decisions from the PTAB, 37.5% of the claims initially challenged were found unpatentable under 35 U.S.C. § 102 (anticipation), while 57.6% of the claims were found unpatentable under 35 U.S.C. § 103 (obviousness). (Some claims were found unpatentable under both grounds.) In a recent study of patent decisions in district court cases, the district courts invalidated claims under Section 102 at a rate of 31.1% and under Section 103 at a rate of 27.8%.

Time and time again throughout the legislative history post grant proceedings were explained as being a faster, low-cost alternative to litigating validity disputes in Federal District Court. That being the case, it would seem extremely odd that any petitioner could bring a post grant challenge to a patent when that petitioner would not have standing to sue to invalidate the patent in Federal District Court. However, the statute does say that a person other than the patent owner can file a petition to institute an inter partes review.

The issue of proper due process is critical, according to Johnson, because “the PTAB is now both deciding on the institution of and the conduct of these IPRs and PGRs, and of course, they’re issuing the final decisions.” There is no doubt that given their outsized authority, the way the PTAB has evolved is reminiscent of a tribunal that acts as judge, jury, and executioner. At times I am also reminded of the old Westerns where a particularly vile villain would be apprehended. The crowd would scream for him to be hanged and some law abiding Sheriff would appear and say something like: “No! We are going to give this man a fair trial and then we are going to hang him!”