Federal Circuit Slams PTAB Amendment Policy

By Tom Engellenner
On October 4, 2017, the Court of Appeals for the Federal Circuit, sitting en banc, overruled an earlier panel decision and found that the Patent Trial and Appeal Board (PTAB) had been impermissibly placing the burden of proving the patentability of amended claims on the Patent Owner, rather than the Petitioner.   See, Aqua Products v. Matel, 2015-1177.

In four separate opinions spanning 148 pages, the eleven judges expressed their views on the PTAB amendment practice. Despite differing rationales, it is clear that a majority of the Federal Circuit judges were exasperated by the way the U.S. Patent and Trademark Office (USPTO) has been considering claim amendments in the new administrative trial procedures provided by the America Invents Act (AIA).

As Judge O’Malley noted in the plurality opinion, the PTAB had granted only 6 amendments in inter partes review (IPR) proceedings as of February, 2017 – a period of almost five years since the inauguration of IPR proceedings during which over 6500 petitions were filed.

A great deal of the Aqua Products opinion was devoted to the so-called Chevron standard of review.  Under Chevron and Aura v. Robbins, 519 U.S. 452 (1997), a court reviewing a federal agency’s construction of a statute must first determine whether the statute is at all ambiguous.  If the statute is not ambiguous, the agency’s interpretation is entitled to no weight.  On the other hand, if the statute is ambiguous, the agency’s interpretation is reviewed under a “clearly erroneous” standard.  To complicate things further, the Chevron standard of review is only applicable if the agency has reached its interpretation via a formal rule-making process, i.e. by notice in the Federal Register and taking public comments into account.

Judge O’Malley, joined by four other judges, concluded that the pertinent sections of the AIA (35 U.S.C. 316(d) and 316(e)) were not ambiguous and Congress clearly intended to give Patent Owners a right to amend their claims in AIA proceedings and that the burden of proving invalidity of the amended claims lay with the Petitioner. Judges Reyna and Dyk concluded that the statute was ambiguous on this point but the USPTO had not engaged in formal rule-making and, hence, no Chevron deference was warranted and the most reasonable interpretation of the statute was that Congress intended that the Petitioner should have the burden of proving amended claims were not patentable.  The remaining four judges would have given the USPTO Chevron deference and upheld the PTAB policy of placing the burden of persuasion on the patentability of amended claims with the Patent Owner.

For some patent owners (e.g., plaintiffs in patent infringement suits), the Aqua Products decision may not be of strategic importance.  Roughly 85 percent of IPR petitions are filed by defendants who have been sued for patent infringement.  Since amending claims in a post-grant review proceeding can extinguish a plaintiff’s right to past infringement damages in an underlying federal court litigation, many patent owners may still be reluctant to amend their claims.

However for other patent owners, Aqua Products may change the calculus of how a patent owner responds to a challenge to its patent.  One thing for sure, the ability to amend a patent should put to the test the USPTO oft-repeated position that the PTAB’s use of the broadest reasonable interpretation almost never affects the outcome of an AIA proceeding.  Patent owners faced with what they consider to be an unreasonably broad interpretation of a claim element will now have an ability to correct the record – and defend their patents on their own terms.

Federal Circuit Requires Standing To Appeal An IPR Decision

By Reza Mollaaghababa
In the case of Phygenix, Inc. v. ImmunoGen, Inc., the Court of Appeals for the Federal Circuit (CAFC) held that the petitioner (Phygenix) that had unsuccessfully challenged certain claims of ImmunoGen’s U.S. Patent No. 8,337,856 (“the ‘856 patent”) in an inter partes review (IPR) lacked standing to appeal a Patent Trial and Appeal Board (PTAB) decision that affirmed the validity of the challenged claims because Phigenix had “not offered sufficient proof establishing that it has suffered an injury in fact…”  Although the Federal Circuit has required appellants to demonstrate standing in other proceedings, the Phygenix case is the first time this doctrine has been applied to bar an appeal of a final written decision in an IPR proceeding.

ImmunoGen owns the ‘856 patent, which is directed to an antibody-maytansinoid conjugate that is purportedly useful in combating a variety of cancers. Genentech has a worldwide exclusive license to the ‘856 patent for producing the drug Kadcyla®. Phigenix in turn owns U.S. Patent No. 8,080,534 (“the ‘534 patent”). Phigenix alleged that the ‘534 patent covers Genentech’s activities relating to Kadcyla and hence the subject matter claimed in the ‘856 patent.

The America Invents Act (AIA) provides that “a person who is not the owner of a patent may file with the Office a petition to institute an inter partes review of the patent.” 35 U.S.C. 311(a). The AIA does not impose a standing requirement for a challenger to request the institution of an inter partes review (IPR) of a patent.  However, the patent appellate court recently held that an IPR petitioner must have standing in order seek the appellate review of a PTAB’s final decision.

Phigenix sought inter partes review of the claims of the ‘856 patent based on an obviousness challenge.  The PTAB initiated a trial but ultimately found the challenged claims to be nonobvious.  Following the final written decision, Phigenix appealed the PTAB’s decision to the CAFC.  In response, ImmunoGen filed a motion to dismiss arguing that Phigenix lacked standing to appeal the PTAB’s decision.  A single judge of the CAFC denied ImmunoGen’s motion but requested that the parties file briefs addressing the standing issue. 

Phigenix provided declarations in support of its standing to appeal the PTAB’s decision and argued that ImmunoGen’s ‘856 patent increases competition between itself and ImmunoGen and increased competition represents a cognizable injury.  In particular, Phigenix argued that “[t]he existence of ImmunoGen’s ‘856 patent has … encumber[ed] Phigenix’s licensing efforts while ImmunoGen receives millions of dollars in licensing revenue.” Phigenix did not, however, contend that it faced the risk of infringing the ‘856 patent, or that it was an actual or prospective licensee of the ‘856 patent, or that it planned to take any action that would implicate the ‘856 patent.

The CAFC emphasized that a party’s standing to sue is a doctrine that is rooted in the case or controversy requirement of Article III of the U.S. constitution. In particular, in order to have standing, an appellant “must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the [appellee], (3) that is likely to be redressed by a favorable judicial decision.”  Further, the CAFC stressed that although Article III standing is not necessarily a requirement to appear before an administrative agency, “an appellant must nonetheless supply the requisite proof of an injury in fact when it seeks review of an agency’s final action in a federal court.”  Continue reading “Federal Circuit Requires Standing To Appeal An IPR Decision”

Estoppel Does Not Attach When Petitioner’s Grounds Are Denied As Redundant

By Reza Mollaaghababa
Under 35 U.S.C. 315(e)(1), a petitioner in an inter partes review of a claim in a patent that has resulted in a final written decision by the Board may not request or maintain a proceeding before the Patent Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review. Nor can such a petitioner raise that ground against that claim in a civil action or in a proceeding before the International Trade Commission. 35 U.S.C. 315(e)(2). In Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., the Court of Appeals for the Federal Circuit (CAFC) recently held that the estoppel provisions of 315(e) do not apply to any ground in an IPR petition that the Board deems as redundant to other ground(s) and thus for which no trial is instituted.

In February 2012, ACS sued Shaw for the infringement of its U.S. Patent No. 7,806,360. Within one year of the service of the complaint, Shaw filed an IPR petition challenging claims 1-20 of the ‘360 patent in which it raised multiple grounds of invalidity. The Board instituted a trial on all challenged claims except for claim 4. With respect to the claims on which a trial was instituted, the Board found certain grounds as redundant relative to others and hence refused to consider those grounds. Subsequently, Shaw filed another IPR petition to challenge claim 4 of the patent based on six new obviousness grounds. The Board instituted a trial based on two of the six grounds and denied the other grounds as redundant. The Board consolidated the two IPRs and issued one final written decision.

In appealing the Board’s decision, Shaw requested that CAFC review the Board’s decision to deny certain grounds as redundant and argued that CAFC had jurisdiction to do so. In particular, Shaw argued that Section 314(d), which indicates that the Board lacks jurisdiction to review the Board’s institution or denial decisions, is not applicable because Shaw was not seeking review of the Board’s institution decision. Rather, it was asking the court “to review the Board’s authority, and correctness in exercising the same, in deeming a subset of asserted grounds redundant of instituted grounds.”

The CAFC disagreed and emphasized that the PTO had the right to exercise its authority in instituting IPR on only some of the grounds. The court explained that there is benefit in the “PTO having the ability to institute IPR on only some of the claims and only some of the proposed grounds, particularly given the Board’s statutory obligation to complete proceedings in a timely and efficient manner.”

The CAFC next addressed Shaw’s request that it issue a writ of mandamus instructing the PTO to reevaluate its redundancy decision and to institute IPR on the redundant grounds. In support of its request for the writ of mandamus, Shaw argued that it may be estopped from raising the redundant grounds in future proceedings.

The CAFC was not persuaded and held that Shaw was not estopped from raising the redundant grounds either in the USPTO or in the courts. The CAFC explained that an “IPR does not begin until it is instituted.” As such, the arguments regarding the redundant claims were not raised during the IPR proceeding and hence are not subject to the estoppel provisions of Section 315 (e).