Issue 42: PTAB Trial Tracker

Standing in PTAB Proceedings: What is Required, What Counts, and What Might Change if the PREVAIL Act is Passed

In BASF Corp. v. Ingevity S.C., LLC, the Federal Circuit held that challenger-appellant BASF had standing to appeal from a post-grant review (PGR) proceeding wherein the patent-at-issue was not the subject of a parallel infringement action. No. 2022-1129, 2023 WL 4115908, at *3 (Fed. Cir. 2023). The Federal Circuit found that standing arose from a prior suit alleging infringement of another patent owned by Ingevity, which overlapped with the patent-at-issue in subject matter and inventorship, and which served as the basis for BASF’s obviousness challenge in the present appeal and the PGR below. Id.

It is not clear whether the related infringement suit would have been a sufficient basis for standing on its own. See id. Here, the Federal Circuit found additional support for standing from a “likely infringing act”: an already-developed, ready to be manufactured, and in-demand product designed specifically for (but not yet sold to) the American market. Id. This may be a critical point for a challenger seeking to appeal a decision of the PTAB on a patent that has not been asserted in federal litigation. Though standing is required to bring a claim before the Federal Circuit, the Board has no such requirement. As recently as this year, the Board unequivocally reaffirmed that requiring standing would go against precedent. Pat. Quality Assurance, LLC v. VLSI Tech. LLC, IPR2021-01229, Paper 129, at 31 (P.T.A.B. Jun. 13, 2023).

However, change may be on the legislative horizon. The recently introduced PREVAIL Act proposes to impose a standing requirement to bring inter partes review (IPR) petitions before the Board. Interestingly, the proposed Act does not seek to impose a standing requirement for PGR petitions. The proposed Act’s supporters believe requiring standing for IPR but not PGR proceedings will encourage patent validity challenges to be brought early while protecting small businesses and individual inventors from the burden of repeated challenges.

Takeaway: While Article III standing is not presently required to initiate a proceeding before the Board, standing is required to appeal the Board’s decisions. Standing may arise from a parallel infringement suit, but it may also arise from a combination of other circumstances in the absence of a parallel suit. Stay tuned for new developments relating to standing that may arise as a result of the pending PREVAIL Act.

Director Vidal Rejects Board’s Holding that Apple and Samsung were Real Parties in Interest in IPR Proceeding of Third Party Unified Patents

In Unified Pats., LLC v. MemoryWeb, LLC, IPR2021-01413, Paper 76 (P.T.A.B. May 22, 2023), USPTO Director Kathi Vidal overturned the Board’s finding that Apple and Samsung were real parties in interest (RPIs) to a petition for inter partes review (IPR) filed by Unified Patents and vacated the Board’s RPI Order (Paper 56) and RPI discussion at pages 3–5 in the Final Written Decision.

Unified Patents requested Director Review of the Board’s decision that Apple and Samsung were RPIs to its petition for inter partes review of U.S. Patent No. 10,621,228 (the ’228 patent). Id. at 2. In its Institution Decision, the Board declined to consider if Apple and Samsung were RPIs, despite briefing and arguments by the parties on the issue, because there was no allegation of a time bar or 35 U.S.C. § 315 estoppel issue relating to an unnamed RPI at that time. Id. at 2–3. Only after Apple and Samsung filed separate IPR petitions challenging claims of the ’228 patent did the Board issue an order identifying Apple and Samsung as RPIs with United Patents. Id. at 3–4. The Board stated that it was appropriate to make this determination because the question of estoppel under § 315(e) arose in view of Apple’s and Samsung’s IPR petitions. Id.

Director Vidal disagreed, stating that “[t]he Board can and should make a determination of the real parties in interest or privity in any proceeding in which that determination may impact the underlying proceeding, for example, but not limited to, a time bar under 35 U.S.C. § 315(b) or an estoppel under 35 U.S.C. § 315(e) that might apply.” Id. at 5. Here, however, it was inappropriate for the Board to determine whether Apple and Samsung were RPIs because it was not necessary to resolve Unified Patents’ IPR, filed prior to Apple’s and Samsung’s separate IPR petitions. Id.

Takeaway: The Board can determine whether a third party is an RPI when it affects that particular proceeding. In view of Director Vidal’s decision, the Board is not in a position to determine whether a third party is an RPI where such determination would have no effect on the specific underlying proceeding. Under those circumstances, the Board’s determination would be akin to an advisory decision and is thus unwarranted.

Board Likely to Deny Motion to Exclude Potentially Relevant Evidence Directed to a Substantive Issue in Dispute

In Pelican BioThermal, LLC v. va-Q-tec AG, PGR2021-00085, Paper 35 (P.T.A.B. Jun. 16, 2023), Patent Owner moved to exclude evidence relating to their own products as prior art. Id. at 3. Petitioner opposed the motion. Id. The Board denied the Motion to Exclude, finding that such a motion is not an appropriate procedure for challenging the prior art status of a reference, also finding it moot because the alleged prior art products were not included in the grounds asserted against the amended claims submitted by Patent Owner. Id. at 4.

The Board noted several reasons why the motion to exclude was inappropriate in this case. The Board found that a product’s status as prior art is a substantive issue, rather than an evidentiary one, such that there was no legitimate basis to exclude evidence relevant to the issue. Id. at 29. Further, the Board noted that a motion to exclude is not the proper mechanism for challenging evidentiary sufficiency. Id. at 29 (citing Flir Sys., Inc. v. Leak Survs., Inc., IPR2014-00411, Paper 113, 4, 8–9 (P.T.A.B. Sept. 3, 2015)). Rather, the Board “is well-positioned to determine and assign appropriate weight to evidence presented.” Id. at 30.

Finally, the Board noted that there is a strong public policy interest in making all information filed in its proceedings available to the public, explaining that, “[r]ather than excluding evidence that is allegedly hearsay, confusing, misleading, untimely, and/or irrelevant, we will simply not rely on it or give it little or no probative weight, as appropriate, in our analysis.” Id. at 31.

Takeaway: A motion to exclude should not be used as a mechanism to argue that certain evidence is not prior art. The Board is well situated to properly weigh evidence and also seeks to ensure availability of information to the public and a complete record. Parties considering a motion to exclude should look to these guiding principles in developing their strategies.

Patent Owner’s Burden of Production when Arguing that Prior Art is Antedated Requires Pointing to Evidence with Specificity

In Parus Holdings, Inc., v. Google LLC, 70 F.4th 1365 (Fed. Cir. 2023), Parus appealed from decisions of the Board finding the challenged claims of two of its patents unpatentable as obvious. Parus argued (1) the Board erred in finding a reference qualified as prior art because the Board improperly declined to consider Parus’s arguments and evidence, which included 40 exhibits totaling 1,300 pages, in addition to claim charts exceeding 100 pages, regarding antedating; and (2) that the Board erred in holding the challenged claims lacked written description support and were not entitled to their earlier priority date. Id. at 1370.

As to the first issue, the Federal Circuit noted that Parus did not dispute that it had incorporated arguments by reference in violation of 37 C.F.R. 42.6(a)(3), and for that reason alone, the Board’s disregarding of Parus’s arguments cannot be an abuse of discretion. Id. at 1370–71. The Federal Circuit further rejected Parus’s argument that the Board erred in declining to consider its evidence of antedating—notwithstanding its antedating argument being incorporated by reference—explaining that while patent owners are not required to respond to petitions, Parus chose to take on an affirmative burden to show it was the first to make its claimed inventions. Id. Once it assumed that burden, it bore the responsibilities that come with it, including submitting a response that complied with the USPTO’s rules and regulations. Id. at 1371–72.

The Federal Circuit further rejected Parus’s argument that the Board had improperly shifted the burden to Parus, explaining that when a patent owner attempts to antedate an asserted prior art reference, the patent owner assumes a burden of production. That burden may not be met by “throwing mountains of evidence at the Board without explanation or identification of the relevant portions” as the Board cannot be reasonably expected to “sift through hundreds of documents, thousands of pages, to find the relevant facts.” Id. In response to Parus’s argument that the APA requires the Board to review “the entirety of the record,” the Federal Circuit explained that “Aqua Products stands for the principle that the Board must decide all issues properly before it, even if they are contrary to its result,” but the Board need not “review evidence and issues introduced by a party in violation of its rules or not introduced at all.” Id. at 1372 (citing Aqua Prods. v. Matal, 872 F.3d 1290, 1325 (Fed. Cir. 2017)). The burden of production cannot be met without “some combination of citing the relevant record evidence with specificity and explaining the significance of the produced materials in briefs.” Id. The Federal Circuit noted that Parus was not without recourse given that it had 3,000 unused words in its Patent Owner Response, and further, could have sought leave to exceed its word count. Id.

As to written description, Parus first argued that the Board had exceeded its statutory authority under 35 U.S.C. § 311(b), but the Federal Circuit found that argument was both waived for Parus’s failure to raise it in its Response, and was meritless. Id. at 1373. The Federal Circuit explained that Arthrex dictates the grounds of an IPR petition, but not “the issues that the Board may consider to resolve those grounds.” Id. In particular, Parus had asserted that a reference was not prior art only by claiming priority from the application from which it stems, which required the Board to determine whether the challenged claims satisfied the written description requirement. Id.

Takeaway: When attempting to antedate prior art, patent owners assume a burden of production that requires them to make their arguments with sufficient specificity—neither the Board nor petitioner is required to piece together the arguments from the record. Further, parties should be cognizant of applicable rules and procedures; in particular, the Board is not required to consider arguments incorporated by reference in violation of 37 C.F.R. 42.6(a)(3).

Material Factual Information Must be Disclosed in Accordance with Duties of Candor and Good Faith

In Spectrum Sols. LLC v. Longhorn Vaccines & Diagnostics, IPR2021-00847, Paper 107 (P.T.A.B. May 3, 2023), the Board held that Patent Owner violated its duties of candor and good faith through its counsel’s failure to disclose material information concerning testing that it had conducted. As a result, the Board entered sanctions including adverse judgment as to all challenged claims and denial of revised motions to amend.

The duty of candor applies to all proceedings before the Board, requiring disclosure of any information that would reasonably be considered relevant. Id. at 32, 55 (citing 37 C.F.R. § 42.11). Here, Patent Owner “conducted, and relied on, biological testing in an attempt to distinguish” a prior art reference, “but selectively and improperly withheld material results that were inconsistent with its arguments and the patentability of both original and proposed substitute claims.” Id. at 2. Patent Owner did not disclose these results even to its own expert witness, instead providing him only with a subset of results that were “misleading at best.” Id. at 35–36.

The Board made clear that the attorney work product doctrine did not apply to the undisclosed testing as the doctrine does not “shield factual information from discovery that is inconsistent with positions taken by a party before the Board.” Id. at 13 (citing 37 C.F.R. § 42.51(b)(1)(iii)). The information discovered by the testing was not attorney work product, as it was not an attorney thought or opinion, but was instead factual information pertinent to patentability, which may not be hidden behind the work product doctrine. Id. at 44 (citing Natta v. Hogan, 392 F.2d 686, 693 (10th Cir. 1968)).

Takeaway: Any factual data in Patent Owner’s possession potentially related to patentability must be disclosed in compliance with a party’s duty of candor and good faith. Such data is not shielded by attorney work product doctrine.

USPTO Expands Director Review Over Decisions by the Patent Trial & Appeal Board

Against a backdrop of controversy and abuse of proceedings before the Patent Trial & Appeal Board, and in the wake of the Supreme Court’s decision in United States v. Arthrex, Inc., 141 S. Ct. 1970 (2021), the USPTO has announced an expansion of Director Review of Board decisions.

The Office is presently operating under an interim process while the USPTO is considering comments from stakeholders on proposed rules for Director review. Effective July 24, 2023, the interim process has been changed to include the following:

1. In addition to being able to request Director Review of a Board’s final written decision or decision to grant rehearing, parties can now request Director Review of the Board decisions to institute review in inter partes proceedings.

If the Director determines that an issue does not rise to the level of Director review but still warrants further consideration, the Director may delegate a Board decision to the newly established Delegated Rehearing Panel.

A party submitting a request for Director Review of the Board’s decision to institute proceedings will need to show that the decision presents either an abuse of discretion or an important issue of law or policy. A party submitting a request for Director Review of a Board’s final written decision will need to show that the decision presents either an abuse of discretion, an important issue of law or policy, or an erroneous conclusion of law.

2. The new Appeals Review Panel (ARP) will review Board decisions in ex parte appeals, re-examination appeals, and reissue appeals solely at the request of the Director.

The ARP replaces the Precedential Opinion Panel (POP), established in 2018 by Director Iancu. The POP will complete consideration of recommendations for POP review filed before or on July 24, 2023, but no new recommendations will be considered. The ARP is made up of the Director, the Commissioner of Patents, and the Chief Judge of the Board.

3. To request Director Review, the requesting party must email the Director, following specific requirements as to content and form.

In addition to submitting a Request for Rehearing by the Director via P-TACTS, parties requesting Director Review must send a notification email to Director_PTABDecision_Review@uspto.gov, copying counsel for all parties and containing the following:

• a priority-ranked list of issues for review, if there is more than one
• express identification of the alleged abuse of discretion, important issue of law or policy, erroneous finding of material fact, and/or erroneous conclusion of law (as appropriate)
• a brief explanation of the issues and a brief explanation of the rationale for the priority ranking (“brief” meaning no more than a few sentences)
• express identification of any issue which the requesting party believes is an issue of first impression

Notably, while Director Review decisions of Final Written Decisions in AIA trial proceedings are appealable to the Federal Circuit, Director Review decisions of Board decisions on institution are not appealable. See 35 U.S.C. § 314(d).

These interim procedures will remain in place until they are updated or until the USPTO announces it has formalized its procedures. Currently, the USPTO is sorting through over 14,000 public comments on its Advanced Notice of Proposed Rulemaking, which Director Vidal has described as, in part, an effort to collect data from stakeholders. See July 26, 2023 Testimony of Director Vidal before the Senate Subcommittee on Intellectual Property.

 

A special thanks goes to Sloane Forbush, Caleb Paasche, and Darlene Staines for their assistance with this issue.