1. Orrick, Herrington & Sutcliffe LLP Mark Wine June 6, 2014
Patent Trial and Appeal Board- Inter Partes Review Los Angeles Intellectual Property Association Spring Seminar 2014
Orrick, Herrington & Sutcliffe LLP
Mark Wine
June 6, 2014

2. What kinds of proceedings are these?

3. Agenda Distinctions over District Court litigation
USPTO Trial Proceedings
Interaction between New AIA proceedings and District Court litigation
Pitfalls in Filing Petitions
Discovery limitations
Joinder Issues
Amending Claims

4. Key Distinctive Features over Litigation
Limited Duration
Reduced Cost
Addresses invalidity only
Narrow, Focused Discovery
Early, Favorable Settlement Opportunities
Broader claim construction
Lower burden of proof
Limited number of decisions on the merits and no appellate decisions to provide guidance

5. USPTO Trial Proceeding Notional Timeline
Recent trend is to reduce discovery period to 2 or 2 ½ months

6. Who Decides these Proceedings?

7. USPTO Trial Proceedings Review
Quasi-litigation process for challenging claims of issued patent
Before three ALJs at PTAB; not Examiners
Decisions can be appealed to Federal Circuit and/or Request Rehearing
IPR not available more than one year after service of infringement complaint or if petitioner previously filed DJ action challenging validity
Burden of Proof is preponderance of the evidence
Estoppel: After final IPR decision, inter partes petitioner may not raise or maintain invalidity arguments in litigation, ITC or at the USPTO that could have been asserted during inter partes review

8. Inter Partes Review vs. Ex Parte Reexamination
Ex Parte Reexaminations
Handled by Patent Trial & Appeal Board
Handled by reexamination examiners
Appeal directly to Fed. Cir.
Appeal to Patent Trial & Appeal
Board
One year time limit on decision
No time limit on decision
Estoppel provision
No estoppel provisions
Cannot be filed more than one year after being sued for infringement
No deadline for filing
May terminate by settlement
No provision for settlement
Limited discovery permitted
No discovery

9. Inter Partes Review vs. CBM Review
Covered Business Method Patent Review
Threshold for initiating review is “reasonable likelihood of success” of finding at least one claim unpatentable
Threshold for initiation is “more likely than not that at least 1 of the claims challenged in the petition is unpatentable” or to resolve novel or unsettled legal question.
Not limited to any particular types of patents
Limited to patents which claim “activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.”
No required co-pending litigation
Petitioner must be the real party in interest that has been sued or charged with infringement
Estoppel provisions limited to 102/103 arguments raised or reasonably could have been raised
Estoppel in court actions limited to those issues actually raised during review. Estoppel in PTO same as IPR estoppel.
Discretionary stay provisions for District Court litigation.
More favorable stay provisions for District Court litigation.

10. Inter Partes Review vs. Post Grant Review
Threshold for initiating review is “reasonable likelihood of success” of finding at least one claim unpatentable
Threshold for initiation is “more likely than not that at least 1 of the claims challenged in the petition is unpatentable” or to resolve novel or unsettled legal question.
Basis: 102 and/or 103 based on patents and printed publications
Basis: 101, 102, 103 and 112 (not limited to patents and printed publications)
Petition must be filed: (1) within 1 year of service of complaint; (2) Before filing DJ; (3) For First-to-File (F-T-F) after 9 months from grant/ F-T-I anytime after granted; (4) If PGR initiated; after date of termination of PGR
(1) Before filing DJ action; and (2) within 9 months from patent grant/reissue for F-T-F patents. First to Invent (F-T-I) patents not eligible for post-grant review.
Estoppel provisions limited to 102/103 arguments raised or reasonably could have been raised
Estoppel provision broader: includes 101 and 112 arguments raised or reasonably could have been raised
Standard for additional discovery – “In the interests of justice”
Standard for additional discovery “good cause”

11. USPTO Trial Proceedings– Analysis
Pros for Petitioner
Consideration of complex technical arguments by PTAB, not lay jury
Burden of proof is lower than in litigation
Puts patent validity at issue early in the case
Little to no discovery permitted

12. USPTO Trial Proceedings– Analysis
Cons for Petitioner
Estoppel provision will likely limit invalidity case in court
Claim amendments permitted but difficult to obtain
Costs are front-loaded
Institution on Limited Claims
Institution on Limited Grounds

13. Institution on Limited Claims
If IPR granted on fewer than all claims challenged, then IPR may not resolve all the claims raised in litigation
Courts are less likely to stay litigation if IPR will not resolve all claims in the litigation

14. Institution on Limited Grounds
PTAB tends to institute trial only on selected grounds, not all grounds presented
Estoppel provisions prevent Petitioner from litigating validity based on any grounds raised or that reasonably could have been raised
Any grounds not adopted by the PTAB may be estopped

15. Statistics and Observations

16. AIA Progress (as of May 29, 2014)
AIA Monthly Filings
Total 1,426
IPR 1,240
CBM 180
DER 6

17. AIA Progress (as of May 29, 2014)
AIA Petition Technology Breakdown
0.6%
5.0%
8.3%
Electrical/Computer (1,012)
Mechanical (215)
Chemical (119)
Bio/Pharma (72)
Design (8)
15.1%
71.0%

18. AIA Progress (as of May 29, 2014)
Cumulative Patent Owner Preliminary
Responses
Filed
Waived
IPR
655
204
CBM
101 15

19. Total No. of Decisions on Institution
AIA Progress (as of May 29, 2014)
AIA Petition Dispositions
Trials Instituted
Joinders
Percent Instituted
Denials
Total No. of Decisions on Institution
IPR
FY13
167
10+
87% 26
203
FY14
346 3+
79% 91
440
CBM 14
82% 3 17 52 1+ 67

20. Final Written Decisions
AIA Progress (as of May 29, 2014)
AIA Final Dispositions
Settlements
Adverse Judgments
Final Written Decisions
IPR
FY13 38 2
FY14
103 26 64
CBM 3 1 13 10

21. Decision to Institute
High grant rate (82%) looks promising for petitioners
However…only granted on 50% of grounds raised on average and 60% of claims challenged
Grounds often held redundant or cumulative

22. Observations on Proceedings to Date
PTAB expects the use of expert declaration with the petition
Petitions should include all evidence to be relied on
Preliminary responses:
Effective in narrowing the grounds for trial
Don’t typically lead to outright denial
Obviousness Grounds have been successful
19 Final Decisions (11 IPR/8 CBM)
Combinations up to five references accepted
Only limited number of decisions denied for not being a financial activity or service or being a technical invention

23. Oral Hearing Experience
Orrick participated in one of the first IPR hearings
Approximately 2 hours
40 minutes each for initial argument
20 minutes each for rebuttal
Hearing focused on claim construction analysis
Hearing was similar to Summary Judgment or Markman with an active judge, but more technical
Same framework is used for CBM, with additional discussion of §101, §112 issues

24. First IPR Decision (Nov. 13, 2013)
Garmin International, Inc. v. Cuozzo Speed Technology LLC (IPR )
PTAB initiated review of 3 of 17 claims, but denied review for remaining 14 claims
Held that these 3 claims unpatentable for obviousness
Petitioner filed a second IPR as to the remaining 14 claims, which was instituted for 11 of the 14 (IPR )
Patentee pursued the litigation with a focus on the 14 remaining claims, but then settled the case

25. First CBM Decision
June 11, 2013 (SAP America, Inc. et al. v. Versata Development Group, Inc., CBM )
Issued after expedited trial and oral arguments
Held that claims of a US patent covering business methods were invalid under 35 U.S.C. § 101
Seven additional final decisions
2 cancelled claims on §101 grounds
5 cancelled claims on §103 grounds
No cases cancelled claims on §102 or §112 grounds

26. Covered Business Review Issues
Allows petitioners to rely on prior art under section 102(a) as it existed before the passage of the AIA, and then creates another category of prior art in place of sections (b) through (g).
New category is essentially 102(b)
PTAB has concluded that this new category excludes references that are prior art under § 102(e)

27. Interaction Between USPTO Proceedings and District Court litigation
Stays
Estoppel provisions
Real Parties in Interest Issues 27

28. Percent of Stays Granted and Denied (IPR/CBM)
Issued Decisions
As of 6/04/2014
Note: 91% of Post-Institution Stays granted

29. Reasons for Stays Denied
Premature (prior to PTAB institution decision)
Will not provide complete resolution of issues (Trial not instituted for all patents or all claims asserted in district court litigation)
Relationship of the parties (i.e., direct competitors)

30. USPTO Trial Proceedings Estoppel Provisions
A “final written decision” in an IPR/PGR/CBM will limit the invalidity arguments that can be raised by certain entities in subsequent litigation.
Petitioner
Real Party in Interest
Privy

31. Parties Bound by Results of PTO Proceeding: Real Parties in Interest
Who is a “real party in interest” (“RPI”) in a PTO proceeding?
“At a general level, the RPI is the party that desires review of the patent.” Trial Practice Guide, 77 Fed. Reg. at 48759
A non-party to the proceeding that “funds and directs and controls an IPR … petition or proceeding” is a RPI. Id. at 48760
Indemnity obligation alone does not result in RPI

32. Parties Bound by Results of PTO Proceeding: Parties in Privity with Petitioner
What entities are in “privity” with a petitioner?
Standard applied is similar to privy standard for res judicata and collateral estoppel
Determination will be made by a district court subsequent to the conclusion of the PTO proceedings in a pending or subsequently- filed litigation
Thus, a party will not know with certainty if it will be estopped, until after estoppel attaches

33. Pitfalls in USPTO Trial Petitions
Filing Petition without expert declaration
Filing too many grounds of unpatentability leads to redundancy
Not enough pages to effectively present case
Risk of preferred grounds being rejected as redundant
Failure to provide a construction of key terms may result in the Board construing it in a way unfavorable to your case
Failure to strictly follow PTAB formatting instructions

34. Discovery Limitations
Three types of Discovery
“Mandatory” Initial Disclosures
By Agreement; no one agrees
By Motion; nobody has attempted this yet
Limited – “Routine Discovery”
Production of cited exhibits
Cross examination of declarants
Production of information known to the parties to be inconsistent with a position taken in the IPR – Narrowly Construed
Limited – “Additional Discovery”
By agreement OR
By motion
“In the interests of justice” (IPR) or “Good Cause” (PGR/CBM)

35. Scope of Additional Discovery
Garmin v. Cuzzo, Case IPR , Paper No. 26, (PTAB Mar. 5, 2013).
Limited discovery is “significantly different from the scope of [district court] discovery,” and “restricts additional discovery to particular limited situations”
Five additional discovery factors:
“More Than A Possibility And Mere Allegation”
“the requestor of the information should already be in possession of a threshold amount of evidence or reasoning tending to show beyond speculation that something useful will be uncovered.”
“Litigation Positions and Underlying Basis” – Not allowed
“Ability to Generate Equivalent Information by Other Means” - If so, no discovery
“Easily Understandable Instructions”
“Requests Not Overly Burdensome To Answer”

36. Mechanism where a later petitioner can join an existing trial
Joinder
Mechanism where a later petitioner can join an existing trial
One-year bar does not apply to joinder (35 USC § 315(c))
Take-aways:
If you want just a seat at the IPR table without making substantive decisions, the PTAB has been lenient in allowing joinder
If joining will complicate or delay the case, joinder is not likely to be granted

37. Application of the IPR Filing Bars
IPR Filing barred if petitioner files an invalidity DJ
Counterclaim of invalidity is not a bar
Civil Action for DJ Dismissed Without Prejudice Does Not Trigger Bar - IPR
Civil Action for DJ Dismissed With Prejudice Does Trigger Bar - IPR
IPR Barred if filed more than 1 year after infringement complaint served
Prior infringement action does not bar subsequent IPR, if prior action was dismissed without prejudice (IPR )

38. Amending Claims Amending claims is difficult Burden is on Patentee
Not enough to argue over cited art
Must explain the background of the prior art
Must either identify which claim elements were not known, in any context, or explain why it would not be obvious to combine known elements
Expert declaration is crucial here
Only one petition has successfully amended claims to date

39. Redundant Grounds
PTAB often denies grounds as redundant or cumulative (>50% of grounds in granted petitions denied)
Board will pick the grounds it likes best unless Petitioner makes clear the strengths and weaknesses of each ground (Liberty Mutual, (CBM )
Redundant grounds interfere with “the just, speedy, and inexpensive resolution of every proceeding” as required under 37 C.F.R. § 42.1(b)

40. Appellate Review of PTAB Decisions

41. Federal Circuit – Exclusive Appellate Jurisdiction
“A party dissatisfied with the final written decision of the Patent Trial and Appeal Board” following inter partes review or post-grant review “may appeal the decision” to the U.S. Court of Appeals for the Federal Circuit.
“Any party to the . . . review shall have the right to be a party to the appeal.”
(35 U.S.C. §§ 319, 329)

42. …and Many Appeals are on the Way
About 400 final written decisions in contested cases are expected from PTAB’s first year
The rate of IPR filings continues to increase
A “tsunami” of patent appeals is “heading up the Potomac.”
-Chief Judge
Rader

43. Review of BPAI Decisions May Give Some Sense of What PTAB Appeals Will Look Like
The Federal Circuit engaged in deferential review of Board of Patent Appeals and Interferences decisions.
The AIA did not change the appellate standard of review.
Factual issues are reviewed for substantial evidence.
The court will uphold the Board’s factual determination if “a reasonable fact finder could have arrived at the agency’s decision,” even if the record would also have supported “another plausible alternative.”
Legal issues are reviewed de novo.

44. Most Core Merits Determinations Will be Reviewed for “Substantial Evidence”
Factual Questions
(substantial evidence review)
Legal Issues
(de novo review)
Findings underlying obviousness” determination (e.g., scope and content of prior art)
Ultimate “obviousness” determination
Findings underlying “enablement” determination*
Ultimate “enablement” determination*
Anticipation
Lack of utility*
Written description requirement*
*Issues raised only in post-grant review, not in inter partes review

45. So it is Better to Win at the Board than to Have to Win on Appeal
Federal Circuit Disposition of All BPAI Patent Cases,
(n=264)
Source: Samuels & Samuels, The Impact of Dickinson v. Zurko on Federal Circuit Review of USPTO Board Decisions, 20 Fed. Cir. Bar J. 665, 677 (2011). Sample includes both ex parte and inter partes proceedings.

46. Certain Questions of Law Concerning the AIA Should Be Reviewed De Novo, e.g.:
What qualifies as “during that inter partes [or post-grant] review”?
What arguments “reasonably could have been raised”?
When is a party a “privy”?
When if ever is a litigation stay proper pending PTAB review?
How much leeway should patentees have to amend claims during inter partes review?
Estoppel
Stays
Claim
Amendment

47. And, There are Reasons to Think Reversal Rates Could be Higher in PTAB Appeals
PTAB plays a different role than BPAI did
PTAB sits as a factfinder, whereas BPAI sat as an appellate body with respect to examinations
Possibly more detailed factual findings
One level of agency review, vs. two before
Possibly more opportunity for the Federal Circuit to find error?
But more detailed findings may make it harder to say there was no “substantial evidence” supporting the Board’s decision

48. And, There are Reasons to Think Reversal Rates Could be Higher in PTAB Appeals
In the near term, the PTAB will be interpreting new provisions of the AIA in the first instance
More opportunity for the Federal Circuit to find legal error on questions of first impression

49. Also, in Recent Appeals from Inter Partes Re-examinations, there have Been Notable Reversals
Grounds for reversal of BPAI inter partes reexaminations
In finding claims nonobvious, Board applied improper test and ignored relevant evidence (Randall Manufacturing v. Rea, 2013)
Board’s claim construction was erroneous (Leo Pharmaceutical Products v. Rea, 2013)
Board’s finding of anticipation was not supported by substantial evidence (Rambus v. Rea, 2013)
Board wrongly found claims nonobvious by relying “only on minor distinctions between the prior art and the claimed invention” (PlaSmart v. Kappos, 2012)

50. Federal Circuit Review Will be a Critical Stage in the Process
Whether defending a Board decision or fighting to reverse one, effective appellate advocacy will be essential to the outcome
It will be necessary to build a record before the PTAB that can support a compelling narrative on appeal, e.g., about novelty or inventorship
As always, telling a good story to the Federal Circuit is key

51. Thank You Mark Wine Co-Leader of Orrick Patent Practice Group
Office Leader Orange County Office