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.

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