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.

USPTO Proposes Change In Claim Construction Standard For Post-Grant Proceedings

By Reza Mollaaghababa
On May 9, 2018, U.S. Patent and Trademark Office (PTO) issued a notice of proposed rule for changing the standard for construing claims in unexpired patents in inter partes review (IPR), post-grant review (PGR), and transitional covered business method (CBM) proceedings from current broadest reasonable interpretation (BRI) to the same claim construction standard that is utilized in the federal courts, i.e., the so-called Phillips standard.

Under the Phillips standard, the words of a claim are generally given their ordinary and customary meaning. In contrast, in post-grant review proceedings, the more expansive BRI standard is employed, which expands the scope of prior art that can be applied to invalidate the challenged claims.  The BRI standard  has been in fact outcome determinative in many of the proceedings.

The notice of proposed rule indicates that the U.S. Supreme Court has endorsed the PTO’s ability to choose an approach to claim construction for AIA proceedings. It also indicates that the proposed change in the claim construction standard could lead to greater uniformity and predictability between the claim constructions adopted by the PTAB and the federal courts.  This change will also harmonize the standard used for patentability and infringement, which could otherwise lead to unfair results.  For example, under BRI, it is possible for a patent claim to be invalidated based on a prior art reference although the construction of the same claim in an issued patent under the Phillips standard would not lead to a conclusion of infringement.  Moreover, there have been cases of a patent being found valid and infringed in a district court action but subsequently being found invalid by the PTO under the BRI standard.

The proposed change applies not only to the claims of an unexpired patent but also to claims presented in a motion to amend. “Under the proposed approach, the PTAB would construe patent claims based on the record of the IPR, PGR, or CBM proceeding taking into account the claim language itself, specification, and prosecution history pertaining to the patent.”  Further, consistent with the Phillips standard, extrinsic evidence, such as expert testimony and dictionaries, may be useful in determining what a person of ordinary skill would understand the claim terms to mean; however, extrinsic evidence is viewed as less reliable than intrinsic evidence.

Further, consistent with the Phillips standard, “the doctrine of construing claims to preserve their validity would apply to AIA trials.”  The notice, however, cautions that the doctrine of construing claims to preserve their validity has been limited to cases in which “the court concludes, after applying all the available tools of claim construction, that the claim in ambiguous.”  Further, the Federal Circuit “repeatedly and consistently has recognized that the courts may not redraft claims, whether to make them operable or to sustain their validity.”

The PTO intends that any proposed rule changes adopted in a final rule would be applied to all pending IPR, PGR, and CBM proceedings before the PTAB. The Office is presently soliciting comments on the proposed change, where written comments must be received by July 9, 2018 to ensure consideration.

PTAB Issues Guidelines for Motions to Amend

By Reza Mollaaghababa
An en banc panel of the Court of Appeals for the Federal Circuit (CAFC) in the case of Aqua Products, Inc. v. Matal recently held that in an inter-partes (IPR) proceeding, the burden of persuasion rests with the challenger to persuade the PATB that substitute claims proposed by a patent owner in a motion to amend are unpatentable.  This is a significant shift from the Board’s practice that had required the patent owner to demonstrate that proposed substitute claims are patentable over the art cited by the challenger and the art known to the patent owner.

The PTAB has issued guidelines regarding motions to amend in light of the Aqua Products decision. The guidelines indicate that consistent with the Aqua Products decision, the Board will not place the burden of persuasion on the patent owner with regard to the patentability of substitute claims presented in a motion to amend.  If the patent owner presents a reasonable number of substitute claims that do not enlarge the scope of the original claims and do not introduce new matter, “the Board will proceed to determine whether the substitute claims are unpatentable by a preponderance of the evidence based on the entirety of the record, including any opposition made by the petitioner.”  In particular, “if the entirety of the evidence of record before the Board is in equipoise as to the unpatentability of one or more substitute claims, the Board will grant the motion to amend with respect to such claims, and the Office will issue a certificate incorporating those claims into the patent at issue.”

The guidelines, however, indicate that a motion to amend must still set forth “written description” support and support for the benefit of a filing date in relation to each substitute claim, and respond to grounds of unpatentability involved in the trial.” The guidelines further emphasize that all parties have a duty of candor and in particular the patent owner has a duty “to disclose to the Board information that the patent owner is aware of that is material to the patentability of substitute claims, if such information is not already of record in the case.”  The rules regarding the types, timing and page limits of briefs remain unchanged.  Further, the patent owner must still confer with the Board before filing a motion to amend.

The recognition that the burden for proving unpatentability rests with the challenger even when the patent owner presents substitute claims can potentially result in more motions to amend to be granted. Nonetheless, a patent owner seeking to amend challenged claims may still consider other venues for presenting such amendments. For example, such a patent owner can present amended claims in an ex-parte reexamination or a reissue proceeding. One advantage of such alternative venues for presenting claims amendments is that, unlike in an IPR proceeding, a third party cannot argue against amendments presented in an ex-parte reexamination or a reissue proceeding initiated by a patent owner.