I was recently contacted by Law360 to comment on the first-ever instituted derivation proceeding at the USPTO Patent Trial and Appeal Board (Andersen Corp. v. GED Integrated Solutions Inc., case number DER2017-00007). It took five years for the PTAB to institute the first one—the review of a window patent challenged by Andersen Corp. The case illustrates what it takes to successfully petition for a derivation; however, the facts of the case were perfectly teed up for the statute. So we remain unclear on the true breadth of circumstances which could lead to an instituted derivation proceeding. Here is a link to the Law360 article. For more information about derivation proceedings, see my earlier post here.
Over the past few years, the United States Patent and Trademark Office Patent Trial and Appeal Board (PTAB) has implemented the use of expanded panels in a number of cases, causing many to question the method of selection and objective of these panels. Critics have accused the USPTO of “panel stacking,” that is, hand selecting certain Administrative Patent Judges for expanded panels to ensure the final decision is aligned with the Director’s intentions.
Perhaps in response to this criticism, the Chief Judge of the Patent Trial and Appeal Board, David Ruschke, addressed the purpose and application of expanded panels during recent Patent Public Advisory Committee meetings. He highlighted that the Chief Judge has the discretion to expand a panel when deemed necessary with respect to four specific reasons detailed in the PTAB Standard Operating Procedure 1 (SOP1). Judge Ruschke noted that the first two reasons provided were of particular importance. These reasons relate to cases involving an issue of exceptional importance, or cases where an expanded panel is necessary in order to maintain uniformity of Board decisions. In a possible attempt to ease concerns and promote transparency regarding the intent of the expanded panel, the Chief Judge said they are now providing the reason for the expansion of the panel in the opinion.
The Chief Judge also demonstrated an adherence to the SOP’s guidelines by approving an expansion in ony four cases for fiscal year 2017. The low number of cases approved for expansion follows the intent of the SOP to minimize the use of expanded panels, and closer inspection of the particular cases also reveals that the stated reasons appear to be in line with the purposes for which expansions were intended. In each of these four cases, a unanimous three-panel decision resulted in a unanimous five or seven-panel decision. These results support the Chief Judge’s contention that expanded panels are being used to emphasize the importance of the case or to show where the jurisprudence is going.
The Chief Judge further implied that “panel stacking” has not been the intended use of expanded panels by emphasizing that the underlying result has only changed in two lines of cases. However, in 2015 an attorney for the USPTO made an admission during oral arguments in Yissum Research Development Co. v. Sony Corp. that acknowledged the practice of panel stacking was used, as well as expressing the belief it was legally permitted under the holding of In re Alappat. More recently, during oral arguments for Oil States Energy Service, LLC, v. Greene’s Energy Group, LLC, et al. when Chief Justice Roberts asked whether “panel stacking” comported with due process, the Deputy Solicitor General, Malcolm L. Stewart, stated that panels had been expanded in only three occasions and that he did not think it was illegal. Many were upset that the Federal Circuit did not provide a substantive opinion regarding the practice of “panel stacking” in the Yissum case due to a Rule 36 affirmance; perhaps the Oil States opinion from the Supreme Court will offer more clarity.
Recently, the USPTO published their statistics for ex parte appeals, which were discussed during the February 1st Patent Public Advisory Committee (PPAC) quarterly meeting. The average time it takes for the Patent Trial and Appeal Board to issue a decision for an ex parte appeal continues to decrease. This is good news for patent applicants, who in past years had to wait two to three years for a decision. The current average of approximately fifteen and a half months, though still long, will help make timing less of a consideration in deciding whether or not to appeal examiner rejections.
In November of 2017, the USPTO Patent Trial and Appeal Board (PTAB) published Standard Operating Procedure 9 (SOP 9), which addresses how the board will handle cases remanded from the Federal Circuit Court of Appeals to the PTAB. SOP 9 “creates internal norms for the administration” of the PTAB, while “provid[ing] guidance to the parties, the public, and the [PTAB.]” According to SOP 9, PTAB plans to issue “decisions on remanded cases within six months of the PTAB’s receipt of the Federal Circuit’s” order remanding the case.
In order to facilitate this six-month goal, once PTAB is notified the case is being remanded, the Chief Administrative Patent Judge and the Deputy Chief Administrative Patent Judge discuss each remanded case with a panel. Within 30 days of the PTAB receiving the mandate, which releases jurisdiction to the Board, the panel, the Chief Judge, and/or Deputy Chief Judge will meet to discuss the Federal Circuit decision issues and establish procedures for preparing a remand decision (such as timelines, additional briefing, etc.).
Appendix 1 of SOP 9 provides guidance for panels for their remand meetings with the Chief Judge and/or the Deputy Chief Judge. The topics to be discussed during that meeting depend on the facts and circumstances of the case. The meeting participants may provide a short summary of issues to discuss in the meeting, such as procedural history, issues on remand, case briefing, related appeals, procedural instructions from the Federal Circuit, substantive issues the panel may need to address, remand proceeding procedures, the issue of whether to expand the panel based on SOP 1, policy considerations, and whether any decision by the panel could be considered precedential.
Appendix 2 of SOP 9, provides guidance to parties on remand procedural issues. The Appendix states, “procedure and pace of a remand following a Federal Circuit decision will vary, depending on the type of case, legal and factual issues involved, the specific instructions from the Federal Circuit, the recommendations of the parties, and any other particularities of the case.”
For remanded litigation cases, parties must contact the PTAB within ten business days after the Federal Circuit mandate to arrange a panel teleconference. Prior to the teleconference, parties are expected to meet and make a good faith attempt to propose a procedure on remand. For example, is additional briefing necessary? If additional briefing is necessary, other details should also be proposed such as whether filings should be concurrent, which party will open if filings are not concurrent, subject matter limitations, length, briefing schedule, etc. Parties are also expected to meet and confer as to potential evidentiary issues, such as whether parties should be able to supplement the evidentiary record, limitations on the type of additional evidence, additional evidence submission schedule, and any other procedural issues. Although the parties propose procedures, the panel ultimately will decide the procedures for remand based on the scope determined from the Federal Circuit’s reasoning and instructions.
Keep in mind, there is not a statutory time limit for completion of a reopened proceeding. The panel will consider the time and expense involved. For example—in regard to additional briefing—the panel may decide to allow extra briefing due to a change in the law, or a new/revised claim construction not previously considered. However, if parties have had adequate opportunity to address issues raised by remand, then additional briefing may be denied. If a party wishes to re-open the evidentiary record, they “must demonstrate why evidence before the PTAB is inadequate, and good cause as to why additional evidence is necessary.” Again, in keeping with the PTAB’s six-month response goal, the panel will consider how much time will be necessary for additional briefing and additions to the evidentiary record. If new evidence is allowed in, there may also be a need for an additional oral hearing. The additional briefing, evidence, and oral hearings will likely take more time than the six-month goal. SOP 9 includes Default Trial Procedures for Common Remand Scenarios as guidance for practitioners (see image above). This guide indicates the likelihood of the PTAB granting additional briefing, evidence, or oral argument based on the issue addressed on remand.
The PTAB also has Remand procedure considerations which guide ex parte and re-examination appeals. Either the PTAB or the Examiner will take the remanded cases as directed by the Federal Circuit if “outstanding rejections can be addressed by the [PTAB] with further explanation of a finding of fact/conclusion of law; [there is] a new ground of rejection based on further findings of fact or the current record; and/or if the reversal requires a need for further prior art searching by Examiner and/or issuance of a patent or reexamination certificate.” If a matter of law or fact is raised by the Federal Circuit, there may be a request by the PTAB for further briefing. However, this should be a rare occurrence.
Though SOP 9 is helpful in understanding the USPTO’s goal for efficiency, is the PTAB’s goal of a six-month decision turn-around serving the Federal Circuit’s purpose of each remand? Or is it merely serving the purpose of moving the docket?
You may be aware that the USPTO has a “Subject Matter Eligibility” webpage with links to resources regarding how patent examiners are to evaluate claims for patent subject matter eligibility under 35 U.S.C. § 101. This month, the USPTO updated their “Quick Reference” sheet of Federal Circuit and Supreme Court “decisions holding claims eligible and identifying abstract ideas,” as well as their chart of subject matter eligibility court decisions (downloadable from the main Subject Matter Eligibility webpage), which was previously referred to as “Appendix 3.”
The Reference sheet organizes the cases by “type” of abstract idea as well as summarizing cases by whether the claims were found to be eligible in Step 2A (i.e., the claim was not directed to a judicial exception) or found eligible in Step 2B (i.e., the claim as a whole amounts to “significantly more” than the judicial exception). The chart provides a concise summary of cases, citations, patent numbers, claim types, judicial conclusion, and whether the case is precedential or not.
Both the reference sheet and the chart can be helpful in arguing Section 101 rejections during patent application prosecution.
On Tuesday, January 16, 2018, the newest round of USPTO fee changes goes into effect from the final rule published in the Federal Register back in November. The USPTO has published a table that makes it easy to see the changes to fees. Notably, nonprovisional patent application filing-search-examination fees go up a total of $120, excess claim fees increase $20 for each claim in excess of 20 and $40 for each independent claim in excess of 3, design patent application examination fees are going up by $140, the design patent issue fee increases by $140, forwarding a Notice of Appeal increases by $240, a first request for continued examination increases by $100, a subsequent request for continued examination increases by $200, and the inter partes review request fee goes up $6,500 (all costs for large entities).
Recently, the USPTO Patent Trial and Appeal Board (PTAB) designated two more decisions as Informative. Both involve 35 U.S.C. § 315(b) regarding the time bar to filing petitions for inter partes reviews. The following is a description of the decisions from the USPTO:
In this decision, the Board denied institution after determining that the Petition was not timely filed under 35 U.S.C. § 315(b), because payment was not received by the Office until after the date the Petition was filed. The Board also denied Petitioner’s motion to assign an earlier filing date to the Petition after determining that Petitioner failed to show good cause for waiving the fee requirement.
In this decision, the Board determined that the Petitioner was timely filed under 35 U.S.C. § 315(b) because filing a motion to amend the complaint in district court, with an amended complaint attached, does not constitute service.
The Board also designated another decision as Precedential – Facebook, Inc. v. Skky, LLC, CBM2016-00091 (PTAB Sept. 28, 2017) (Paper 12), Section II.B.2. As described by the USPTO, “This expanded panel decision explains that covered business method patent review eligibility is determined based on the claims of the patent as they exist at the time of the decision to institute, and claims that a patent owner statutorily disclaims prior to institution will be treated as if they never existed for purposes of institution.”
After their initial shock, lawmakers are fighting back against pharmaceutical company Allergan’s novel plan to protect the validity of its patents by bypassing the Patent Trial and Appeal Board’s (“PTAB”) scrutiny. In September, Allergan transferred the rights to six key patents on the dry-eye drug Restasis to the Saint Regis Mohawk Native American Indian tribe in an effort to use tribal sovereign immunity to shield the Restasis patents from inter partes review (“IPR”) proceedings at the PTAB.
Under the terms of the deal, Allergan transferred ownership of the key Restasis patents to the Saint Regis Tribe, which licensed them back to Allergan. The Tribe then sought to dismiss pending IPR challenges. In return, the Tribe received an upfront payment of $13.75 million and $15 million in additional potential annual royalties.
The defense of sovereign immunity as a shield against IPRs is not new. In May, the PTAB dismissed an IPR based on a state university’s assertion of 11th Amendment sovereign immunity.1 The decision reiterated2 that state agencies (e.g., state universities, medical schools, and research centers) enjoy sovereign immunity, which bars IPR challenges to patents they own. Although tribes are subject to sovereign immunity through congressional action, not the 11th Amendment, tribal sovereign immunity generally follows state sovereign immunity. However, Allergan’s efforts represent the first time that an entity that possesses immunity proactively approached patent owners and proposed to take ownership of their patents. If the Allergan-Saint Regis deal works, it could allow Allergan to extend its monopoly on Restasis, thereby maintaining its billion-dollar-plus annual revenue from the drug.
A key question in determining the legitimacy of Allergan’s deal is whether the agreement is a “sham.” For the transaction to legally be a sham, it would have to be unlawful or illusory in order to serve as a tax shelter or another deceptive device. The answer to this question lies in the transfer of the bundle of patent rights—and, more specifically, whether the Saint Regis Tribe has enough rights to actually be considered the owner of the patents in question. If Saint Regis is not completely free to use the patents in any way that it wishes, the issue becomes whether the restrictions on Saint Regis are enough to argue that Allergan continues to exercise de facto control over the patents and, therefore, that sovereign immunity should not apply.
Additionally, because tribes are subject to sovereign immunity through congressional action, Congress can equally act to remove tribal immunity. In a letter to the Senate Judiciary Committee, four senators called for Senators Chuck Grassley and Dianne Feinstein of the judiciary committee to investigate Allergan's “anti-competitive attempt to shield its patents from review and keep drug prices high." Senator Claire McCaskill also weighed in, calling the arrangement a "brazen loophole" that should be illegal and submitting a bill in the Senate to prohibit transfers to Native American tribes that are structured to take advantage of tribal sovereign immunity.
News of the Allergan-Saint Regis deal has sparked interest in Native American tribes pursuing similar arrangements. If they follow Saint Regis’s footsteps, Native American tribes could become significant players in the IP value creation market. However, there are still major outstanding questions. If Allergan retains de facto control over the patents, does sovereign immunity still apply to those patents? Are tribes allowed to rent out their sovereign immunity? Will Congress act to limit the application of sovereign immunity in IPR challenges? Until these questions are answered, other tribes and companies may be deterred from making similar patent transfers.
1 NeoChord, Inc. v. Univ. of Md., Baltimore, Case No. IPR2016-00208, Paper 28 (PTAB, May 23, 2017).
2 See also Covidien LP v. University of Florida Research Foundation Inc., IPR 2016-01274; -01275, and -01276 (PTAB January 25, 2017).
The Allergan logo shown above is a registered trademark of Allergan, Inc.
The three informative decisions address different aspects of how PTAB addresses whether to institute an IPR under 35 U.S.C. § 325(d) based on whether the same or substantially the same prior art or arguments previously were presented to the Office. As summarized by the USPTO in its October 24 bulletin, the informative decisions address the following:
In Unified Patents, Inc. v. Berman, Case IPR2016-01571 (PTAB Dec. 14, 2016) (Paper 10), “the Board denied institution of one ground under § 325(d) because the petitioner asserted an obviousness combination that included a reference the examiner considered during prosecution and a second reference that was cumulative of prior art that the examiner considered. The Board also declined to exercise discretion under § 325(d) with respect to a second asserted obviousness combination, where the examiner did not consider the asserted references during prosecution, and the references were not cumulative of the prior art the examiner considered during prosecution.”
In Hospira, Inc. v. Genentech, Inc., Case IPR2017-00739 (PTAB July 27, 2017) (Paper 16)“the Board denied institution under § 325(d) because the examiner considered during prosecution, and found persuasive, the same arguments the petitioner raised regarding the patent owner’s claim to priority. The Board concluded that the examiner’s previous priority determination was dispositive as to each of the asserted grounds of unpatentability.”
And, in Cultec, Inc. v. Stormtech LLC, Case IPR2017-00777 (PTAB Aug. 22, 2017) (Paper 7), “the Board denied institution under § 325(d) because (i) the examiner previously considered two of the asserted references—one reference was raised in a third-party submission that the examiner discussed in rejecting the claims and the other reference the examiner cited and applied throughout prosecution; and (ii) the two additional references upon which the petitioner relied were cumulative of prior art the examiner considered during prosecution.”
Copies of decisions designated as informative and precedential can be found on the PTAB's Informative Opinions Page and the PTAB’s Precedential Opinions Page of the USPTO website. Additionally, during PTAB’s "Chat with the Chief" webinar on October 24th, the Patent Office announced plans to streamline the Opinions page for easier access to decisions.