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

Once The Federal Circuit Affirms A PTAB Finding Of Invalidity, Collateral Estoppel Prevents Patent Owner From Asserting The Claims In Any Further Proceeding

By Reza Mollaaghababa
On May 23, 2018, in XY, LLC v. Trans Ova Genetics, L.C., CAFC held that its affirmance of PTAB’s invalidity decision regarding certain claims of a patent owned by XY in a separate appeal involving a different defendant must be given “immediate issue preclusive effect” with respect to the same claims in the present case even though XY and Trans Ova had not raised the collateral estoppel issue.

XY owns patents that relate to methods of sorting mammalian sperms into X- and Y-chromosome-bearing populations based on their DNA content. In 2004, Trans Ova, which provides services related to embryo transfer and in-vitro fertilization for cattle, entered into a five-year licensing agreement with XY for the use of the technology embodied in the XY’s patents. The licensing agreement was subject to automatic renewal in 2009. In 2007, XY sent a letter to Trans Ova to terminate the licensing agreement alleging certain breaches by Trans Ova.  Although the parties negotiated over the next several years, they failed to resolve their dispute.  In 2012, XY sued Trans Ova for patent infringement of a number of its patents, one of which (U.S. Patent No. 7,820,425) relates to a method of freezing separated sperm cells.

The jury found that none of the asserted patent claims was invalid and that Trans Ova willfully infringed those claims. CAFC held that as a threshold matter, it did not need to address Trans Ova’s invalidity arguments as to the ‘425 patent in view of its affirmance in a separate appeal invalidating those same claims, “which collaterally estops XY from asserting the patent in any further proceedings.”  CAFC indicated that “in this separate case appealed to us and argued on the same day as the instant appeal, the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office (Board) held that these claims are unpatentable in a final written decision from an inter partes review proceeding … [and] [i]n a separate order issued today, we affirm the Board’s decision.”

In support of its decision, the CAFC reasoned that a patentee, having been afforded the opportunity to exhaust his remedy of appeal from a holding of invalidity has had his “day in court,” and a defendant should not have to continue defending a suit for infringement of an adjudged invalid patent.

Judge Newman dissented and indicated that this holding of “estoppel is based on a PTAB ruling in a separate case involving non-mutual parties, and contravenes not only the America Invents Act’s estoppel provision, but also the general law of collateral estoppel.” Judge Newman emphasized that “collateral estoppel was not pleaded and was not argued, yet is imposed on appeal without opportunity for response – contrary to precedent requiring that the precluded party ‘had a full and fair opportunity to present its arguments’ concerning estoppel.”

The majority responded that “[a]s to the Dissent’s concern of applying estoppel without briefing, both precedent and the parties’ positions allow application of collateral estoppel sua sponte here.  A remand for briefing is not a requirement to applying estoppel when there is no indication from the Patent Owner that ‘it did not have a full and fair opportunity to litigate the validity’ of its patent in the parallel case.”

SAS Institute Decision Causes Turmoil At The PTAB

By Tom Engellenner
The U.S. Supreme Court’s decision this week in SAS Institute v. Iancu has upended a major provision of the U.S. Patent and Trademark Office (PTO) regulations for inter partes and post grant review proceedings conducted by its Patent Trial and Appeal Board (PTAB).  By concluding in a 5-4 decision that the agency lacks the authority to render partial judgments on petitions that challenge issued patents, the PTO may be forced to overhaul its rules and regulations for implementing a key component of the 2011 patent reforms. (See, SAS Institute v. Iancu No. 16-969, Sup. Ct. April 24, 2018.)

The PTO’s initial reaction has been to issue a Memorandum on April 26, 2018, acknowledging that, going forward, “the PTAB will institute as to all claims or none.” For trials in progress, the memorandum suggests that the PTAB panels may issue supplemental orders and will expect the parties to “work cooperatively amongst themselves to resolve disputes and propose reasonable modifications to trial schedules.”  The memo further commits the PTAB to address all challenged claims in its final written decisions.

The 2011 America Invents Act (AIA) created several new administrative procedures to challenge or revise U.S. patents after they have been issued. The most commonly used procedure, Inter Partes Review (IPR) can be brought against any patent issued for more than nine months.  The AIA requires the USPTO to conduct IPR proceedings with “dispatch” and, absent extraordinary reasons, a final decision must be rendered within one year of the institution of an IPR.  Nearly two thousand IPR decisions have been rendered on patents so far – with nearly a thousand more trials in progress and roughly a thousand more petitions awaiting an initial decision on whether a trial should be instituted.

The SAS Institute case involved an IPR proceeding brought by SAS against a patent issued to one of its competitors, ComplementSoft.  SAS sought review of all 16 claims of the patent.  Applying the PTO’s existing rules for IPR proceedings, the agency’s Patent Trial and Appeal Board reviewed the petition and concluded that SAS had met the threshold requirement of presenting arguments reasonably likely to succeed as to claims 1 and 3–10 and instituted a trial as to only these claims and declined to review the rest. SAS was ultimately successful in invalidating almost all of the subset of claims on which the trial was conducted but SAS maintained throughout the proceedings that the PTAB had a responsibility to rule on all of the challenged claims, not just the ones that were the subject of the trial.

SAS appealed to the Federal Circuit but the appeals court rejected that SAS’s challenge to the PTAB procedures, setting the stage for Supreme Court Review. In the 5-4 decision handed down this week, the majority opinion written by Justice Gorsuch criticized the PTO for taking liberties when implementing the AIA authorized patent reviews, writing that “whatever its virtues or vices, Congress’ prescribed policy here is clear.”

We find that the plain text of §318(a) supplies a ready answer. It directs that “[i]f an inter partes review is instituted and not dismissed under this chapter, the [Board] shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner . . . .” §318(a) (emphasis added). This directive is both mandatory and comprehensive. The word “shall” generally imposes a nondiscretionary duty.

For the Gorsuch majority, the requirement that the final written decision address “any patent claim challenged by the petitioner” clearly meant the decision must address every claim challenged by the petition whether or not it was initially excluded from the trial.

As often the case, the Court split on partisan lines with the four judges appointed by Democratic Presidents dissenting. Justice Ginsburg’s dissenting opinion, joined by Justices Breyer, Sotomayor and Kagan, characterized the majority opinion as a “wooden reading” of the statute. In a second dissenting opinion by Justice Breyer (and also joined by the other dissenters), he concluded that the PTAB’s practice of initiating partial trials was a reasonable exercise of rulemaking authority.

Nonetheless, the majority opinion is now the law of the land and the PTAB has acknowledged that it will abide by it. How the PTAB judges do so, however, remains to be seen. The one-page guidance issued this week offers little in the way of specifics, apart from noting that new trials will be instituted on all claims whether or not the petitioner has met the burden of demonstrating a reasonable likelihood of success as to some of the challenged claims. (One such trial initiation decision was issued yesterday in IPR2018-00082, where a PTAB panel initiated a trial on all claims even though it was not convinced that petitioner, Western Digital, was likely to succeed in its challenge to most of the claims in a patent owned by Spex Technologies.)

If institution as to all challenged claims is inevitable whenever a trial is granted, it is not clear whether the PTAB trial institution decisions will continue to be as comprehensive as is currently the practice with explanations of why some claim challenges fail to pass muster. Moreover, it is also not clear whether there will be more petitions denied in the PTAB’s discretion. As the dissenters in the SAS noted, the Court has previously held that the PTO has essentially unfettered discretion in accepting IPR and PGR petitions and could find some of the claim challenges to be unsupportable and simply reject the entire petition. This could force petitioners to refile (assuming they are not time-barred) with challenges to fewer claims.

With regard to PTAB trials currently underway, it is also not clear whether the Petitioner will have leeway to introduce new evidence or arguments as to the claims that were originally excluded from the proceeding because the PTAB found the petitioner failed to meet the threshold requirement of demonstrating a reasonable likelihood of success. One thing that does appear to be certain, however, is that the petitioner will get a chance to appeal to the Federal Circuit on all claims, not just those that had originally been designated for review at the time the trial commenced.

Finally, the new regime may change the likelihood of federal district court judges granting stays in underlying patent infringement suits. At present, some judges in infringement actions are unwilling to grant a stay pending the outcome of an IPR proceeding if any of the claims asserted in the infringement suit are culled by the PTAB from its review. Since partial review by the PTAB is no longer an option, district courts may be more willing to stay their proceedings until all the dust settles at the PTAB.