By Tom Engellenner
The USPTO has gone ahead and finalized new rules for post-grant proceedings under the America Invents Act (AIA) – despite heavy criticism that the rules do little to alter the lopsided nature of these proceedings. The new rules were published at 81 FR 18750 on April 1, 2016 and go into effect on May 2, 2016.
Technically this “final rulemaking” amends various portions of 37 C.F.R. 42, the rules that govern post-grant proceedings under the AIA, including inter partes review (IPR), covered business method review (CBM), and post-grant review (PGR).
Perhaps the most significant change is that under the new rules the patent owner will be able to submit testimonial evidence, such as an expert declaration, as part of a patent owner’s preliminary response to a patent challenge before the Patent Trial and Appeal Board (PTAB) decides to institute an IPR, CBM, or PGR trial. (Under the existing rules, the Patent Owner usually cannot present testimonial evidence until after the institution decision and the PTAB makes its decision to institute trial after hearing only one side of the story, e.g., from the petitioner’s expert.)
However, 37 CFR 42.108(c) has been revised such that if the patent owner presents testimonial evidence as part of a preliminary response, any “genuine issue of material fact created by such testimonial evidence will be viewed in the light most favorable to the petitioner solely for purposes of deciding whether to institute an inter partes review.” An analogous new rule in 37 CFR 42.208(c) for a post grant review has also been finalized. Under the new rules petitioners may also seek leave to file a reply to any preliminary response filed by the patent owner.
These changes beg the questions: what do the patent owners have left to say after institution if their experts’ opinions have already been considered and found unpersuasive, and will the PTAB judges ever change their minds during trials when the petitioner’s evidence is not viewed in its most favorable light?
It has also been suggested that this new scheme runs contrary to the norm in American jurisprudence in that a party seeking some sort of relief from a court typically has the burden of persuasion. Normally, American courts view facts in the light most favorable to the non-moving party (i.e., in AIA proceedings, that would be the patent owner not the petitioner). Instead of leveling the playing field, the new rules may lead to even higher trial institution rates and higher rates of patent invalidity.
According to the USPTO’s own acknowledged statistics, if a patent owner does not get a petition dismissed before trial and doesn’t settle with the petitioner before a final written decision, the patent will be (at least partially) invalidated 96% of the time.
Several other aspects of the rule changes address things that practitioners have not even identified as real problems. For example, the new rules modify the limits on the length of briefs that the parties can file from a “page count” to a “word count.” Rule 42.24 will be amended so that a “14,000 word” limit replaces the current 60-page limit for IPR petitions. Similar changes from page limits to word limits will be applied to patent owner responses and petitioner replies.
Another new rule change purportedly will ensure that practitioners do not pursue frivolous petitions or responses. Rule 42.11 will be amended to require that registered patent attorneys, who file papers in IPR, CBM, or PGR proceedings sign certifications akin to the statements require in federal district court proceedings (under Fed. R. Civ. Proc. Rule 11). Specifically, counsel signing any paper in an AIA proceeding must certify that
(i) the paper is not being presented for any improper purpose, such as to harass someone or to cause unnecessary delay or needless increase in the cost of any proceeding before the Office; (ii) the other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law; (iii) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and (iv) the denials of factual contentions are warranted on the evidence, or if specifically so identified, are reasonably based on a lack of information or belief.”
Apparently, the USPTO considered this to be a very important rule change to adopt despite its inability to identify a single instance of frivolous papers filed in the nearly 10,000 petitions, responses and replies filed in AIA proceedings to date. The USPTO commentary accompanying the new rules describes the new certification requirement as “preventive in nature.”
The new rules also drop a measure advocated by patent owners, namely that the judges who make the institution decision be different than those who render the final written decision after trial. The draft rules had proposed a “pilot program” where a single judge could render the institution decision and then two additional judges would be added to form a three-member panel to hear the trial. According to the commentary published with the new final rules, the USPTO “has decided not to go forward with proposed pilot program at this time.”