SUPREME COURT HOLDS THAT AIA ON-SALE BAR APPLIED TO SECRET SALES

By Reza Mollaaghababa
In an inter-partes review proceeding (IPR), a challenger can rely only on patents and printed publications to challenge the validity of a patent claim. In contrast, in a post grant review (PGR) proceeding, a challenger can rely on any ground related to patentability, including prior sale, to challenge a patent claim.  In particular, 35 U.S.C. §102(a)(1) bars a person from receiving a patent on an invention that was “in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.”

Recently, in Helsinn Healthcare S.A. v. Teva pharmaceuticals USA, Inc., et al.,  the U.S. Supreme Court held that the on-sale bar under AIA applies to a sale that was publicly disclosed even though the details of the invention embodied in the sold item was not.  This decision can expand the options available to a challenger in a PGR proceeding.  Moreover, this decision may have implications on IPR proceedings as well when the patentee files a motion to amend.

Helsinn Healthcare S.A. (Helsinn) makes a treatment for chemotherapy-induced nausea and vomiting using the chemical palonosetron.  In 2013, nearly two years after Helsinn had entered into an agreement with MGI Pharma, Inc. (MGI) for distributing, promoting, marketing, and selling a 0.25 mg dose of palonosetron in the United States, Helsinn filed a provisional patent application covering a 0.25 mg dose of palonosetron.  Over the following ten years, Helsinn filed four patent applications claiming priority to the 2013 filing. The fourth application in this series was filed in 2013 and hence is covered by AIA. This application, which claims a fixed dose of 0.25 mg of palonosetron in a 5 ml solution, was issued as U.S. Patent No. 8,598,219 (“the ‘219 Patent”).

In 2011, Teva sought approval to market a generic 0.25 mg palonosetron. Helsinn sued Teva for infringing its patents including the ‘219 Patent. Teva argued that the ‘219 Patent was invalid under  the “on sale” provision of the AIA.  The District Court, however, held that the “on sale” provision of AIA did not apply in this case because the agreements between Helsinn and MGI did not disclose the 0.25 mg dosage of palonosetron.  The Federal Circuit disagreed and held that “if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale” to fall within the AIA’s on-sale bar.

The Supreme Court affirmed the judgement of the Federal Circuit. The  Supreme Court reasoned that its precedents make clear that an “offer for sale could cause an inventor to lose the right to a patent, without regard to whether the offer discloses each detail of the invention.”  The Court further indicated that the Federal Circuit, following the Court’s precedents, has long held that “secret sale” can invalidate a patent.

Notwithstanding such precedents, the Court still had to consider whether the Congress had intended to change the meaning of the “on-sale” bar under AIA. The Court concluded that the Congress intended to adopt the earlier judicial construction of the on-sale bar. In particular, the Court noted that the new statute retained the same language used in the previous statute and added only a new catchall phrase (“or otherwise available to the public”).  The Court held that “Given that the phrase “on sale” had acquired a well-settled meaning when the AIA was enacted, we decline to read the addition of a broad catchall phrase to upset the body of precedent.” Continue reading

Posted in Amendments before the PTAB, America Invents Act, Appeals, Court of Appeals Fed Circuit, Covered Business Methods, Federal Circuit, Inter Partes Review, Lack of Written Description, On-Sale BAR, One-year Statutory Bar, Patent Eligible Subject Matter, Post Grant Review, Printed Matter Doctrine, PTAB Procedure, PTAB Trial Practice Guide, Supreme Court, Trial Tactics, USPTO | Tagged , , , , , ,

YEAR IN REVIEW: CHANGES IN PTAB PRACTICE IN 2018

By Tom Engellenner
A number of significant changes occurred in 2018 at the U.S. Patent and Trademark Office (USPTO). To begin with, in February 2018, a new USPTO Director took office.  Director Andrew Iancu, a former patent litigator with law firm experience, appears to have brought a different perspective than that of his corporate predecessors – Michel Lee (Google) and David Kappos (IBM) – to the job at the helm of the USPTO.  In his Senate confirmation hearings, Iancu made it clear that he felt that better balance was needed in the administrative review of issued patents by the USPTO under the America Invents Act (AIA).   He pledged to assess “improvements in the AIA trial standards and processes.”  Iancu identified “institution decisions, claim construction, the amendment process, and the conduct of hearings” as areas that warranted study.  In fact, Director Iancu did a lot more than study these aspects of practice before the Patent Trial and Appeal Board (PTAB) in 2018.

Claim Construction Rule Change

On May 8, 2018, the USPTO announced a change to its policy of using the so-called Broadest Reasonable Interpretation (BRI) standard for construing unexpired patents and proposed amended patent claims in PTAB proceedings under the AIA. In the final rule published in the Federal Register on October 11, 2018, the U.S. Patent and Trademark Office (USPTO) took the remarkable step of acknowledging unfairness in the way its Patent Trial and Appeal Board (PTAB) has been conducting trials for the past six years.  The rule change would apply to all administrative patent challenge proceedings – inter partes reviews (IPRs), covered business method patent reviews (CBMs), and post-grant reviews (PGRs) – based on petitions filed on or after November 13, 2018.

The PTAB standard is now the “Phillips standard,” named for the Federal Circuit’s 2005 ruling in Phillips v. AWH Corp. 415 F.3d 1303, 1313 (Fed. Cir. 2005).  Under the Phillips standard, claims are given their “ordinary and customary meaning” – not their broadest meaning.  This is the standard applied by all federal district courts and the International Trade Commission when hearing patent cases.  The rule-making comments noted  that “the scope of an issued patent should not depend on the happenstance of which court or governmental agency interprets it, at least as far as the objective rules go. ”

Out with the Old Guard

On August 15, 2018, the USPTO announced that David Ruschke would step down from his post as Chief PTAB Judge. Out with Chief judge Ruschke appears to be his controversial practice dubbed “panel stacking” – a habit of enlarging PTAB panels in controversial cases by adding himself and/or his deputies to the normal three judge panels assigned to each proceeding.  (One of the more notorious instances of which was his addition of himself and three deputy chief judges to a panel that would decide a sovereign immunity claim in Mylan Pharma Inc. v. Saint Regis Mohawk Tribe, IPR2016-01127.)

On September 20, 2018 the USPTO also took steps to formalize Iancu’s control over the more than 200 administrative patent judges and their policy-making. While not criticizing Ruschke’s “panel stacking” practice directly, the announcement indicated a need to focus upon “increasing transparency, predictability, and reliability across the USPTO.”  In lieu of ad-hoc additions of judges to panels, the USPTO appears to have created something akin to a PTAB appellate review board comprising Iancu, the Commissioner of Patents, and the PTAB’s chief judge (or their designees) with authority to make PTAB panel decisions precedential, or to reconsider panel decisions and issue their own precedential opinions.

Trial Practice Guide Update

On September 26, 2018, the USPTO issued its first update to its Trial Practice Guide (TPG). The guide, considered by many judges and counsel alike to be the definitive handbook for IPR, CBM and PGR proceedings, was first promulgated in 2012.  The TPG update provides additional guidance on expert testimony, the distinction between motions to exclude and motions to strike evidence, and procedures for oral arguments.  The update also changed the “balance” between and Petitioners and Patent Owners in at least one significant way.

Right to Sur-reply

The TPG update addresses a persistent criticism raised by Patent Owners in AIA proceedings, namely that the petitioners almost always have had the last word. The original rules governing IPRs, CBMs, and PGRs provided for a Patent Owner Answer to the Petition – and a Petitioner Reply to the Patent Owner’s Answer.  Even when the Petitioner introduced additional expert testimony as part of its Reply, the Patent Owner’s only option was to submit “Observations on Cross-Examination Testimony,” a very constrained citation to portions of a deposition transcript of a reply expert’s testimony.  The TPG update provides that, henceforth, scheduling orders will specifically provide for Patent Owner Sur-Replies as a matter of right and such sur-replies can be used to respond to arguments in the Petitioner’s Reply Brief, comment on reply expert testimony and explain the significance of any reply expert admissions, concessions or contradictions during cross-examination.

In an acknowledgement of what’s good for the goose should also be good for the gander, the TPG update also provides that the Petitioner should have the last word on any amendments proposed by the Patent Owner.   Since a Patent Owner that proposes amendments is essentially the moving party and has the opportunity to present the principal brief, the update likewise provides that the Petitioner should be entitled to both an initial Answer to the Motion to Amend and a Sur-Reply to the Patent Owner’s Amendment Reply Brief.

Encouraging News for Amendments

During the first six years of the AIA administrative reviews of patents, the likelihood was dismal that a Patent Owner could overcome a challenge by amending the claims at issue – even though the AIA statute clearly provided this option for rehabilitating a patent. In the first 5000 review proceedings, less than a dozen motions to amend had been granted.  On October 29, 2018, the USPTO published a request for comments on revising the way amendments are considered in IPRs, CBMs, and PGRs.  The Federal Register notice acknowledged that the proposed changes were in response to the “grant rate” of claim amendments in AIA trial proceedings.

The October 2018 proposal on PTAB amendment practice includes a proposed “pilot program” for amendments. Under this new regime, following a Patent Owner Motion to Amend (MTA) and any opposition by the Petitioner, a preliminary (non-binding) decision would be rendered by the PTAB panel.  The Patent Owner would then have an opportunity to reply or to submit a revised MTA.  The proposal also seeks input on whether the burden of persuasion regarding patentability of substitute claims should lie with the Petitioner as set forth in Western Digital Corp. v. SPEX Techs., Inc., Case IPR2018-00082.

In all likelihood, the USPTO will move quickly in 2019 to finalize this new amendment practice for all AIA trials. The tenor of the October proposal suggests the PTAB will be more receptive to amendments going forward.

Posted in Amendments before the PTAB, Broadest Reasonable Interpretation, Enlarged PTAB Panels, Inter Partes Review, Phillips standard, Post Grant Review, PTAB Procedure, PTAB Trial Practice Guide, Sovereign Immunity, Trial Tactics, USPTO | Tagged , , , , , , , , , , , , ,

PTAB Abandons its Practice of Broadly Interpreting Claims of Challenged Patents in favor of Phillips Standard of “Ordinary and Customary Meaning”

By Tom Engellenner
In a final rule published in the Federal Register on October 11, 2018, the U.S. Patent and Trademark Office (USPTO) took a remarkable step of acknowledging unfairness in the way its Patent Trial and Appeal Board (PTAB) has been conducting trials for the past six years. The rule change will apply to all of the new administrative patent challenge proceedings (inter partes reviews, covered business method patent reviews, and post-grant reviews) established by the 2011 America Invents Act (AIA).  The new claim construction rule will be applied to all AIA petitions filed on or after November 13, 2018.

The comments accompanying the USPTO’s Federal Register notice of rule change state:

[R]ecent studies . . . support the concerns expressed by stakeholders regarding the unfairness of using a different claim construction standard in AIA proceedings than that used by the district courts.

At issue is how claims are interpreted when new prior art references are cited by petitioners seeking to invalidate issued U.S. Patents. If a claim term is broadly interpreted, it is more likely that the prior art will be considered anticipatory or render the claim obvious.  (Novelty and non-obviousness are fundamental requirements for patent validity.)

From the very beginning, when inter partes review (IPR) proceedings under the AIA began in 2012, the USPTO adopted a claim construction rule known as broadest reasonable interpretation, i.e., claim terms are given their broadest reasonable interpretation in view of the specification to one having ordinary skill in the art at the time of the invention without importing limitations into the claims from the specification. This so-called BRI standard had long been the standard applied by the USPTO during pre-issuance examination of patent applications.

While BRI standard may be appropriate when patent applications are undergoing examination – where the applicant can amend the claims if the examiner adopt too broad an interpretation – getting the PTAB judges to consider claim amendments in AIA proceedings has proven to be extraordinarily difficult.

The new standard to be applied going forward (for petitions filed on or after November 13, 2018) is the “Phillips standard,” named for the the Federal Circuit’s 2005 ruling in Phillips v. AWH Corp. 415 F.3d 1303, 1313 (Fed. Cir. 2005). Under the Phillips standard, claims are to be given their “ordinary and customary meaning” – not their broadest meaning.  This is the standard applied by all federal district courts and the International Trade Commission when hearing patent cases.  The rule-making comments note  that “the scope of an issued patent should not depend on the happenstance of which court or governmental agency interprets it, at least as far as the objective rules go ” and further notes:

Employing the same standard for AIA proceedings and district courts improves uniformity and predictability as it allows the different fora to use the same standards in interpreting claims.

The new rule further states that any prior claim construction decision in a civil action “will be considered if that determination is timely filed in the record” at the PTAB.

While the PTAB judges are not explicitly required to accept prior claim constructions from federal district courts, the new rule certainly does appear to encourage conformity in interpreting patent claims.

Posted in BRI Standard, Broadest Reasonable Interpretation, Claim Construction, Covered Business Methods, Inter Partes Review, Phillips standard, Post Grant Review, Trial Tactics, USPTO | Tagged , , , , , , , , , ,

Attorney General’s Office May Weigh In on Constitutionality of IPRs involving Pre-AIA Patents

By Tom Engellenner
The 2011 America Invents Act (AIA) provided a variety of new ways to administratively challenge patents, including the now widely used inter partes review (“IPR”) procedure.  In two recent appeals of IPR decisions, Genentech has challenged the constitutionality of IPR proceedings when applied to patents that were already issued as of the date that the AIA was enacted.

Genentech has filed two appeals to the Court of Appeals for the Federal Circuit (“Federal Circuit”) involving decisions by the U. S. Patent Office’s Patent Trial and Appeal Board (“PTAB”) invalidating certain patent rights issued to Genentech on immunotherapy biologics. (Federal Circuit Docket Nos. 18-1933 and 18-1959.)  These patents have been asserted against a number of competitors seeking to market biosimilar products to Genentech’s Avastin® and Herceptin® antibody therapeutics.

The appeals stem from two IPR Petitions filed by Hospira, IPR2016-01771 and IPR2016-01837, that challenged claims of U.S. Patent Nos. 7,622,115 and 7,807,799, respectively. The ’115 Patent issued in November 2009 and the ’799 Patent issued in October, 2010 – both issuance dates being well before the 2011 enactment of the AIA.  The PTAB initiated trials on both patents and ultimately found all of the challenged claims to be invalid over the prior art presented by Hospira.

Genentech’s briefs assert “the retroactive application of inter partes review to a patent issued before that procedure existed is unconstitutional, a taking without just compensation and a denial of due process,” in violation of the Constitution’s Fifth Amendment.

The Federal Circuit has now certified Genentech’s constitutional challenges to the U.S. Attorney General, who has been directed to inform the Court whether the United States intends to intervene in the appeals within 30 days.

Genentech’s position may seem like a “Hail Mary pass” effort to save its patents, especially in light of the U.S. Supreme Court’s decision earlier this year in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712, 138 S. Ct. 1365 (2018) (“Oil States”), where the Court rejected the patent owner’s argument that revoking patent claims as a result of an IPR proceeding is unconstitutional under Article III and the Seventh Amendment.

In the Oil States case, the Court held that the decision to grant a patent is a matter involving public rights and, hence, a challenge to a patent’s validity need not be heard exclusively in an Article III federal court and does not require a jury trial.  (For our detailed analysis of the Oil States decision, click here.)

However, Genentech’s arguments are based on the Fifth Amendment’s prohibition on taking private property for public use without just compensation by a process that did not exist when the property rights were granted. The author of the Oil States decision, Justice Clarence Thomas, emphasized the narrowness of the holding in the Oil States case and made it clear that the case addresses “only the precise constitutional challenges . . . raised here.” Oil States at 1369. Continue reading

Posted in Appeals, Attorney General, Constitutionality, Court of Appeals Fed Circuit, Federal Circuit, Fifth Amendment, Final PTAB Decision, Supreme Court, Takings Clause, USPTO | Tagged , , , , , , , , , , , , ,

CAFC Reverses PTAB on §315(b) Petition Time Bar Interpretation

By Reza Mollaaghababa
Section 315(b) of the America Invents Act (AIA) provides that an inter partes review (IPR) proceeding “may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”

Recently, in Click-to-Call Technologies, LP v. Ingenio, Inc., Yellowpages.com, LLC, the CAFC reversed the Board’s interpretation of §315(b) in an IPR filed against U.S. Patent No. 5,818,836 that the voluntary dismissal of a civil action related to this patent, which has been served on the defendants more than one year prior to the filing of the IPR, negated the one-year bar instituted by §315(b) because such a voluntary dismissal nullified the effect of the service.  In reaching this conclusion, the Board emphasized that “the Federal Circuit consistently has interpreted the effect of such dismissals as leaving the parties as though the action had never been brought.”

The CAFC did not agree and held that “the statute does not contain any exceptions or exemptions for complaints served in civil actions that are subsequently dismissed, with or without prejudice.  Nor does it contain any indication that the application of § 315(b) is subject to any subsequent act or ruling.  Instead, the provision unambiguously precludes the Director from instituting an IPR if the petition seeking institution is filed more than one year after the petitioner, real party in interest, or privy of the petitioner ‘is served with a complaint’ alleging patent infringement.  Simply put, § 315(b)’s time bar is implicated once a party receives notice through official delivery of a complaint in a civil action, irrespective of subsequent events.”

The CAFC noted that this reading of §315(b) is confirmed by its en banc decision in Wi-Fi One, in which the CAFC had held that the provision sets forth a “condition precedent to the Director’s authority to act,” based on “timely filing of a petition.”

In the present case, the Petitioners also argued that a reexamination of the patent at issue, which was conducted after the date of the service and before the filing of the IPR, had resulted in the issuance of significantly different claims relative to the original claims of the ‘836 patent, and hence had resulted in a different patent for the purposes of §315(b).  The CAFC was not, however, persuaded by this argument. The CAFC emphasized that “Unlike reissue, reexamination does not result in the surrender of the original patent and the issuance of a new patent.”

Finally, Petitioners argued that certain of the petitioners were not subject to the time bar of §315(b) because they were not in privity with the patent owner at the time of service of the civil action.  The CAFC rejected this argument and emphasized that §315(b) applies “petition-by-petition, not petitioner-by-petitioner, with the collection of petitioners on a single petition treated as a unit indistinguishable from each member of that collection.”

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