In Ticketnetwork, Inc. v. Ceats, LLC, CBM2018-00004 (PTAB 2018) (Final Written Decision), the Patent Trial and Appeal Board (“the Board”) held that Ticketnetwork failed to establish standing under 37 C.F.R. § 42.302, and accordingly did not institute a covered business method (“CBM”) review of U.S. Patent No. 8,229,774 (the “’744 Patent”).
In 2010, Ceats sued Ticketmaster and others for infringement of a patent related to the ‘744 Patent. While the case ultimately resulted in the Federal Circuit affirming invalidation of the related patent, the parties to the instant CBM settled – Ticketmaster was granted a license to certain Ceats patents including the ‘744 Patent, wherein Ticketmaster was to pay a royalty to Ceats. (Decision, pages 6-7).
About a year and a half after the Federal Circuit affirmance, Ticketmaster sent a letter to Ceats purporting to terminate the license agreement. Ceats responded in a July 2015 letter and noted that they “have determined that [Ticketmaster is] . . . infringing on CEATS’ patent rights, including. . . [the ‘744 Patent]” . . . “. (Id., page 7).
Ticketmaster subsequently filed a declaratory judgment action against Ceats, arguing that: (1) the license agreement was unenforceable; (2) Ticketmaster does not infringe any of the patents referenced in Ceats ‘ letter; and (3) that the patents referenced in Ceats’ letter were invalid. (Id., page 7).
In June 2017, Ticketmaster moved to voluntarily dismiss the claims regarding non-infringement and invalidity. ((Id., pages 8-9).
Finally, in November 2017, Ticketnetwork filed a petition to instate CBM review on all eight claims of the ‘744 Patent. (Id., page 9).
Under § 42.302, only parties who “have been sued or charged with infringement . . . are permitted to file a petition seeking a CBM  review”. The Board defines “charged with infringement as ”a real and substantial controversy regarding infringement . . .[,] such that the petitioner would have standing to bring a declaratory judgment action in Federal court”. (Id., pages 4-5).
In support of their standing position, Ticketnetwork argued that at the time of filing the CBM petition (November 2017), Ceats’ July 2015 letter, coupled with Ceats’ statements in a summary judgment hearing for claims related to the licensing dispute, show that, under the totality of the circumstances, Ticketmaster was “charged with infringement” of the ‘744 Patent by Ceats. (Decision, pages 9-10).
Ceats on the other hand argued that “the letter and the statement at the summary judgment hearing [(wherein Ceats conceded that if the agreement was held unenforceable, Ticketnetwork would infringe]) are together or apart, not specific enough to meet the “charged for infringement” prong for CBM standing.” (Id., page 10).
Regarding Ceats July 2015, letter the Board held that since nearly 28 months had passed since Ceats sent the letter and when Ticketmaster filed the instant CBM petition, “whatever weight in favor of standing the July 2015 Letter had . . . has been considerably diminished”. The Board also gave little weight to the letter since the letter didn’t assert infringement of specific patent. (Id., page 14; see id., page 12; see also, Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1362 (Fed. Cir. 2009)).
As to Ceats statements at the Summary Judgment hearing, the Board explained that although Ceats indicated that it could sue for infringement if the agreement was terminated, Ceats never indicated that it actually planned to sue if the agreement was terminated. (Decision, page 15).
The Board also briefly touched upon a covenant not to sue provided by Ceats after the filing of the petition. Without reaching the issue of whether post petition filing conduct is relevant to the standing issue, the Board noted in apparent dicta that it does “not believe offering of a covenant not to sue weighs in favor of standing.” (Id., page 14).
Thus, the Board held that under the totality of the circumstances, Ticketnetwork had failed to demonstrate a “real” and “substantial” controversy sufficient to bring a declaratory judgment action or in this case, to file a CBM review petition.
In Campbell Soup Company, et al. v. Gamon Plus, Inc., IPR2017-00087, Paper 75 (PTAB 2018) (Final Written Decision), the Patent Trial and Appeal Board (“PTAB”) found that “an appreciable amount of Campbell’s increased commercial success of soup” was attributable to Gamon’s product covered by the claims and, thus, found claim 27 of U.S. Patent 8,827,111 B2 (“’111 patent”) patentable in view of this commercial success.
Campbell purchased from Gamon approximately $31 million of its iQ Maximizer gravity feed display racks over a seven-year period. The parties agreed that these display racks fell within the scope of at least claim 27 of the ‘111 patent, of which Gamon was the owner. During this seven-year period, Campbell noted a year-over-year positive sales lift in its condensed-soup brand by maintaining the same level of productivity while reducing inventory in stores of the products by 15%, thereby cutting costs to the stores. In a 2005 report to its investors, Campbell touted the benefits of the iQ Maximizer, reporting increased sales of soup by 8% by using gravity-feed shelving systems such as the iQ Maximizer. Campbell’s investor reports in subsequent years showed further sales increases and attributed these sales increases, at least partially, on gravity feed shelving display racks.
In an attempt to invalidate the claims of the patent, Campbell set forth several grounds of unpatentability, alleging the claims were invalid under 35 U.S.C. § 103(a). Ultimately, the Board relied on the Graham factors, in particular the commercial success factor, in determining that the claims were not obvious over the combination of references set forth by Campbell.
In asserting that the claims were nonobvious based on commercial success, Gamon relied on both its sales of the iQ Maximizer gravity feed display racks and Campbell’s increased sale of soup that was displayed using the iQ Maximizer racks. Campbell argued, however, that Gamon was required to show a nexus “directly attributable” to one or more limitations of claim 27 that were allegedly novel to succeed on its commercial success argument. The Board did not find Campbell’s argument persuasive, citing the Federal Circuit’s holding in WBIP, LLC v. Kohler Co. that “there is a presumption of nexus for objective considerations when the patentee shows that the asserted objective evidence is tied to a specific product and that product ‘is the invention disclosed and claimed in the patent.’” 829 F.3d 1317, 1329 (Fed. Cir. 2016). The Board found that Gamon tied the objective evidence to a specific product, i.e., the iQ Maximizer gravity feed display racks, and Campbell failed to rebut the presumption of a nexus.
Notably, the Board relied on Campbell’s expert that at least some of the increased soup sales were attributable to the iQ Maximizer gravity feed display racks. While it agreed that other factors impacted the commercial sales of the soup, the Board found that Gamon’s sales of the iQ Maximizer gravity feed display racks to Campbell and Campbell’s attribution of some increased soup sales to these gravity feed display racks provided a strong showing of commercial success, thereby finding claim 27 of the ‘111 nonobvious.
In view of the Board’s decision, it is clear that the commercial success is not limited to commercial success of the product within the scope of the claim at issue. Rather, if a patent owner can show that increased sales of another product are attributable to the product within the scope of the claim at issue, this may be sufficient to show commercial success of the product. Further, to rebut a patent owner’s “nexus” argument, a petitioner must show that the objective considerations are not tied to the entire product, not certain limitations within the claim(s) at issue.
OBJECTIVE EVIDENCE OF NON-OBVIOUSNESS OUTWEIGHS WEAK MOTIVATION TO COMBINE
Author: Hui Wauters
In Fox Factory Holding Corp. v. SRAM, LLC, Case No. IPR2016-01876 (April 2, 2018), the Patent Trial and Appeal Board (PTAB) found that Patent Owner’s extremely strong overall showing of objective indicia of non-obviousness overcomes Petitioner’s, at best, weak motivation to combine the references. Patent Owner has made a strong overall showing of objective indicia of non-obviousness, including industry praise, skepticism, and long felt need for all challenged claims 7–12 and 20–26, and a strong showing on commercial success for claims 11, 12, 25 and 26. Weighing all four Graham factors, the PTAB found that Petitioner has not shown, by a preponderance of the evidence, that the challenged claims would have been obvious over the combination of Hattan (US 3,375,022) and JP-Shimano (JP S56-442489).
The subject U.S. Patent No. 9,182,027 relates to a solitary chainring for use with a conventional chain in a bicycle drivetrain system that includes a bicycle crank.
Combining/Modifying Prior Art Elements
Petitioner argued that a person of ordinary skill in the art “would have known that it is critical to the operation of a bicycle for a bicycle chain to remain engaged with the bicycle chainring.” Petitioner contended that a person of ordinary skill in the art would have modified the offset-teeth sprocket wheel/deflector of Hattan, to include the alternating narrow and wide teeth of JP-Shimano, in order to “improve chain engagement and retention to the maximum extent possible, particularly for a solitary front chainring such as in Hattan.” Decision p. 14.
Patent Owner argued that Petitioner’s rationale does not make sense, because Hattan already purports to solve completely the problem of chain retention for all operating conditions and that the combination of Hattan and JP-Shimano would have rendered Hattan unsatisfactory for its intended purpose. Decision pp. 15-16.
The PTAB were not persuaded that modifying Hattan in view of JP-Shimano would render Hattan unsuitable for its intended use, but the PTAB did find that the potential for problems in the operation of Hattan resulting from such combination weighs against the combination. The PTAB determined that Petitioner has only shown, at best, that the evidence weighs slightly in favor of making the above modification of Hattan in view of JP-Shimano. Decision p. 22.
Patent Owner puts forth evidence (including articles, photographs and experts’ Declarations, etc.) of commercial success, licensing, copying, praise by others, and long-felt, unresolved need.
To be accorded substantial weight, there must be a nexus between the merits of the claimed invention and the evidence of secondary considerations. There is a “presumption of a nexus” when a product is “coextensive” with a patent claim. Decision p. 23.
In this regard, Petitioner argued that the patent owner’s chainring is not coextensive with the claimed invention because the Patent Owner’s chainring includes “hundreds of features” not claimed in the ’027 patent, many of which are instead claimed by other Patent Owner’s patents. Decision pp. 24-25.
However, according to the PTAB, “Unclaimed features do not prevent the presumption of a nexus, but they may be the basis for rebutting the presumption. To do so, a person challenging patent validity must show that the commercial success, or other objective evidence of non-obviousness, was due to ‘extraneous factors’ including ‘additional unclaimed features.’ ” Decision p. 25.
Having reviewed Patent Owner’s evidence, the PTAB found that the patent owner’s evidence supporting secondary considerations of non-obviousness had sufficient nexus to the challenged claims. Decision p. 34.
As to commercial success, the PTAB found that Patent Owner has presented extensive evidence that its chainrings have achieved significant sales volumes, have achieved large sales growth, have grown to a majority of their chainring sales, and have allowed them to grow from a small share to a significant share of the single chainring market. Decision pp. 35-36.
As to industry praise and skepticism, the PTAB found that Patent Owner has presented extensive evidence of industry praise and awards that its chainring products have received and that Patent Owner has made a significant showing of skepticism within the industry towards the effectiveness of the chainring regarding chain retention as provided by the challenged claims. Decision pp. 40-41.
As to long-felt need, the PTAB found that Patent Owner has shown strong evidence that a long-felt need existed in the bicycle industry for improved chain retention that did not increase the known problems of complexity, weight, and/or drivetrain friction. Decision p. 44.
As to licensing, the PTAB found that licenses explicitly mentioning the ‘027 patent and not entered into to settle litigation are entitled to some weight. Decision p. 47.
As to copying, the PTAB found that Patent Owner has shown some copying of its chainring product, which is covered by the ’027 patent, and thus this evidence of copying overall is entitled to some weight. Decision p. 51.
In conclusion, the PTAB found that the case of obviousness here is easily outweighed by the strong objective evidence of non-obviousness. Decision p. 52.
Hui Chen Wauters
Mrs. Wauters is a member of firm’s chemical/pharmaceutical practice group. Her experience includes client counseling, and preparation and prosecution of patent applications pertaining to chemical matters, materials science, pharmaceuticals and medical devices. Hui is fluent in Mandarin Chinese.
To view her full bio, click here.
PTAB Holds that a Merger Completed After the filing of Petition Can Create a Real Party-in-Interest Relationship
In Cisco Systems v. Hewlett Packard Enterprise Company, IPR2017-01933, Paper 9 (PTAB 2018) (Decision Denying Institution of Review), the Patent Trial and Appeal Board (“the Board”) held that a merger between Cisco and another company called Springboard that was completed after Cisco filed a petition for inter partes review (IPR) created a real party in interest relationship, and subsequently denied institution of the IPR.
On September 15, 2015, Hewlett Packard (HP) served Springpath with a complaint for patent infringement. On September 14, 2016, one day before the statutory deadline set forth in 35 U.S.C. § 315(b), Springpath filed a petition for IPR.
Cisco Systems filed a petition for IPR against HP on August 11, 2017, after Springpath had already filed for IPR. Subsequently, Cisco announced its intent to acquire Springpath on August 21, 2017, and completed the acquisition of Springpath on September 22, 2017, more than one month after Cisco’s petition had been filed.
The Board found that Springpath was a real party in interest, and that Cisco was merely acting as a proxy for Springpath. The PTAB then denied institution of the IPR for the following reasons. First, Cisco never disclosed the ongoing merger with Springpath in its petition or via updated mandatory disclosures. Although the merger was not yet complete at the time Cisco’s petition was filed, the Board found that Cisco should have advised the Board of the ongoing acquisition as well as the completion of the acquisition.
Second, the Board also found that Cisco could not provide any specific reasons why Cisco wanted to file for IPR independently of Springpath. Although Cisco stated that it filed the petition “for its own reasons,” the Board found this argument to be conclusory and unpersuasive. Also, since Cisco was not a party to the district court litigation, Cisco had no clear reason to file for IPR. Thus the Board concluded that Cisco was merely acting as a proxy for Springpath, which was barred under §315(b) from filing for IPR.
Cisco Systems v. Hewlett Packard Enterprise Company departs from previous Board decisions in two ways. First, prior Board decisions have heavily relied on the control factor to determine who is or is not a real party in interest. The control factor asks the question: does the party alleged to be a real party in interest have control over the petitioner, for the purpose of the IPR? In Cisco Systems, the petitioner was Cisco, a large publically-traded company, and the alleged real party in interest was Springpath, a much smaller company that Cisco acquired for $320 million. Presumably, Springpath was not exercising any control over Cisco. Instead, the Board’s decision hinged on whether Cisco was acting as a proxy for Springpath, regardless of the level of control Springpath had over Cisco.
Secondly, the Board’s decision in Cisco Systems might be construed as being inconsistent with the Board’s prior case of Synopsys v. Mentor Graphics Corp, IPR2012-00042, Paper 60 (PTAB 2014). In Synopsys, the Board held that it is “only privity relationships up until the time a petition is filed that matter; any later-acquired privies are irrelevant.” Paper 60 at 12.
In Synopsys v. Mentor, the patent owner Mentor Graphics had previously settled a patent infringement lawsuit with a company called EVE in 2006. Id. at 11-16. The petitioner Synopsys filed a petition on September 26, 2012, and subsequently Synopsys entered into an agreement to acquire EVE on September 27, 2012, one day after the petition was filed. Id. at 11-16. The Board held that the petition was not barred because there was neither a real party in interest relationship nor a privity relationship between Synopsys and EVE at the time the petition was filed, citing to 37 C.F.R. § 42.101(b). Id. at 11-16.
Accordingly, if the holding from Synopsys had been applied to the case of Cisco Systems, the result in Cisco Systems might have been quite different, because Cisco’s merger with Springpath was completed after Cisco filed a petition for IPR.
However, in Synopsys, Synopsys had an ongoing patent licensing dispute with Mentor Graphics prior to filing the IPR, and Synopsys therefore had a clear reason to file the IPR before acquiring EVE. See Mentor Graphics Corp. v. EVE-USA, 851 F.3d 1275, 1280-81 (Fed. Cir. 2017). In contrast, in Cisco Systems, Cisco could not explain why it had filed the IPR, and therefore the Board seemed to infer that Cisco’s reason for filing the IPR was to act as a proxy for Springpath, thus indicating that the real party in interest was Springpath, not Cisco.
Arun A. Shome
Email: firstname.lastname@example.orgArun Shome is an associate in the firm’s Electrical/Mechanical Group. He practices in all areas of patent law, including the preparation and prosecution of patent applications. He has experience across a broad range of technologies, such as implantable medical devices, automotive braking systems, valves, electronic cigarettes, manufacturing systems, and electrical motors.
Mr. Shome previously served as a Patent Examiner at the United States Patent and Trademark Office, where he examined medical device patent applications. He also has experience conducting prior art searches for patentability, invalidity, and freedom to operate purposes.
Two decisions regarding whether the same or substantially the same prior art or arguments have already been considered by the USPTO have been designated as “Informative”
Becton, Dickinson and Co. v. B. Braun Melsungen AG, IPR2017-01586, Paper 8 (PTAB Dec. 15, 2017) (Decision, Institution of Inter Partes Review) (Informative).
Kayak Software Corp. v. IBM Corp., CBM2016-00075, Paper 16 (PTAB Dec. 15, 2016) (Decision, Declining to Institute Covered Business Method Patent Review) (Informational).
In two decisions, designated as informative on March 21, 2018, the Board has offered guidance on when the Board will exercise its discretion, under 35 U.S.C. § 325(d), to deny institution of a post-grant proceeding because the USPTO has already considered the same or substantially the same prior art or arguments. “Informative” decisions provide the Board’s guidance on an issue but are not binding authority.
In Becton, Dickinson and Co., the Board identified six factors commonly considered when evaluating whether to deny institution under § 325(d):
(a) the similarities and material differences between the asserted art and the prior art involved during examination;
(b) the cumulative nature of the asserted art and the prior art evaluated during examination;
(c) the extent to which the asserted art was evaluated during examination, including whether the prior art was the basis for rejection;
(d) the extent of the overlap between the arguments made during examination and the manner in which Petitioner relies on the prior art or Patent Owner distinguishes the prior art;
(e) whether Petitioner has pointed out sufficiently how the Examiner erred in its evaluation of the asserted prior art; and
(f) the extent to which additional evidence and facts presented in the Petition warrant reconsideration of the prior art or arguments.
Becton at 17-18.
The Board was careful to note this list is “non-exclusive” and merely a list of commonly considered factors. Becton at 17 (emphasis in original).
In applying the factors, the Board gave little weight to the Petitioner’s use of a new reference, finding the new reference was mostly cumulative. The Board also gave little weight to the Petitioner’s submission of an expert declaration because the declaration did not: why the new reference would not be cumulative; explain how the Patent Owner’s previous arguments, made during prosecution, were in error; or offer sufficient underlying facts or data to support its position. Becton at 25, 27, 28. Accordingly, the Board found the factors weighed in the Patent Owner’s favor and denied institution on that ground. Becton at 28.
In Kayak Software Corp., the Board considered the effect of at patent’s prosecution history on determinations under 35 U.S.C. § 325(d). The patent at issue was filed over 12 years before it was issued which led to an extensive prosecution history including seven Office Actions and two decisions by the Board, both of which entered new grounds for rejection. See Kayak at 6-7; see also U.S. Patent No. 7,072,849.
The Petition was based on various combinations of four prior art references. However, three of these references had been thoroughly considered during the patent’s prosecution by both the Examiner and the Board. Kayak at 8. The prosecution history contained dozens of pages devoted to each reference. Kayak at 9. As such, the Board was unconvinced that any combination of these three references, regardless of whether or not that exact combination had been used in a rejection, could be the basis for institution in light of § 325(d). Kayak at 9. The Board found the fourth reference to be cumulative in part because the Petitioner relied on one of the three references to teach the same subject matter in another part of the Petition. Kayak at 10. The Board noted this was at least circumstantial evidence that the fourth reference was substantially similar. Kayak at 10.
Additionally, in dicta, the Board offered several possible scenarios in which similar prior art could still lead to institution, such as: clear error in the original prosecution; when the prior art was only cursorily considered; or raising an issue the USPTO was unaware of, like evidence of priority dates. Kayak at 11.
Brendan Seth O'Shea
Email: email@example.comBrendan O’Shea is an associate in the firm’s Electrical and Mechanical Patent Prosecution practice group, where he prosecutes patent applications for domestic and international clients.
Mr. O’Shea’s patent prosecution experience spans a wide range of technologies, including software and Internet-based applications, business methods, telecommunications, biomedical devices, and mechanical arts.
Claim Validity Upheld Based on Showing of Lack of Motivation to Combine References
Author: James A. Gromada
In Resmed Limited et al. v. Fisher & Paykel Healthcare Limited, Case No. IPR2016-01724, the Patent Trial and Appeal Board (PTAB) was presented with a question as to whether several claims of U.S. Patent No. 8,453,641 B2 (hereinafter “the ‘641 patent”) are unpatentable under 35 U.S.C. §103 as obvious over a combination of three references. The ‘641 patent is entitled “Apparatus for Measuring Properties of Gases Supplied to a Patient” and, as provided at column 2, lines 57-62 of the ‘641 patent, its stated purpose is “to measure various properties, for example temperature or humidity, at the end of a gas delivery tube or conduit using sensors mounted on a wire, such as a wire used for heating the gases flow[ing] through the tube or conduit, where the wire resides within the delivery tube or conduit.”
When a combination of prior art references is cited for the purpose of determining that a claim is unpatentable under 35 U.S.C. §103, a showing that a skilled artisan would have been motivated to combine the references in order to achieve the claimed combination is required. The Supreme Court has stated that “a patent composed of several elements is not proved obvious merely by demonstrating that each of its elements was, independently, known in the prior art.” KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 418-19 (2007). Instead, “a range of real-world facts to determine ‘whether there was an apparent reason to combine the known elements in the fashion claimed by the patent at issue'” must be considered. Intercontinental Great Brands LLC v. Kellogg N. Am. Co., 869 F.d 1336, 1344 (Fed. Cir. 2017) (quoting KSR, 550 U.S. at 418).
The critical feature of the challenged claims of the ‘641 patent is the use of a heater wire for heating the conduit and also for carrying electrical signals from measuring sensors. The Petitioner, Resmed, relied on one cited reference, Edirisuriya, as teaching that “the heater wire itself could be used to carry electrical signals from measuring sensors,” although Edirisuriya does not explain how the heater wire can be used to carry electrical signals from a sensor. In response, the Patent Owner argued that a skilled artisan would not have been motivated to combine Edirisuriya with the other two cited references, MR810 and Gradon, because the use of the heater wire to carry electrical signals would have increased complexity and rendered the MR810-Gradon system inoperable. In particular, the Patent Owner argued that a temperature sensor cannot simply be added in series with a heater wire, because the heater wire requires a relatively high electrical current and power dissipation, whereas the temperature sensor requires a relatively low electrical current and power dissipation, and therefore, a simple substitution would lead to self heating.
In its analysis, the PTAB stated that “[w]ith respect to each of the proposed circuit designs that Petitioner contends a skilled artisan would have been aware of to implement the combined teachings, a skilled artisan would have been faced with the real-world fact that there was uncertainty as to the operability of the design,” because the proposed circuit designs “are not based on disclosure in the prior art” – Petitioner’s expert “confirms that he did not locate any prior art references disclosing a circuit design in which the heater wire is utilized to carry electrical signals from measuring sensors” – and because Petitioner did not provide sufficient evidence that any of the proposed circuit designs would be operable in any device.
Conversely, Patent Owner argued that “all three proposed circuit designs would have been inoperable.” In particular, Patent Owner’s expert stated that if the proposed Vishay thermistor was combined with the MR810 apparatus, the power dissipated would exceed the maximum rating of the Vishay thermistor, thereby destroying it, and further, that the Vishay thermistor is not typically used for temperature measurement. Petitioner’s expert agreed that “he would not use the proposed Vishay thermistor in combination with the MR810 heating wire because it would exceed the Vishay thermistor’s power dissipation specification, and that the heater wire and the supply voltage would need to be changed.”
Based on the above, the PTAB found “that the complexity of the proposed circuit designs and the lack of evidence provided by Petitioner describing additional circuitry and control logic that would be necessary to implement such circuitry in the proposed modified designs, which Patent Owner establishes are non-trivial, weigh against a finding of motivation to combine.” As a result, the PTAB held that “the motivation to eliminate an additional or external wire and reduced the number of contacts would have been outweighed by the countervailing real-world reasons not to combine the references,” and that “Petitioner’s challenges rest on impermissible hindsight reconstruction of the disclosure in the ‘641 patent.”
This case illustrates that a challenge to the validity of a patent claim can be effectively countered by the testimony of Patent Owner’s expert that there is no motivation to combine references. In particular, a convincing demonstration that there is uncertainty as to the operability of the proposed combination and/or a showing that practical, real-world considerations tend to weigh against combining the references may be decisive.
Mr. Gromada practices in all areas of patent law, including: patent preparation and prosection; patent litigation; patent reexamination (ex parte and inter partes); and counseling clients on intellectual property matters. He also engages in patent infringement and validity opinion practice and counseling, freedom-to-operate analysis, and due diligence work.
His experience includes a wide range of electrical and mechanical technologies, including radio frequent (RF) communcations technologies and equipment, cellular networks, medical devices, computer and Internet-related technologies, televisions and image display devices, computer gaming applications, and financial systems. Mr. Gromada was previously employed with Science Applications International Corporation (SAIC) as a research engineer in the defense intelligence industry.
See his full biography here.
On February 23, 2018, the Patent Trial and Appeal Board (PTAB) issued two decisions regarding an inter partes review (IPR) of patents covering Allergan’s Restasis© (Cyclosporine ophthalmic emulsion) filed by Akorn Pharmaceuticals, Mylan Pharmaceuticals, and Teva Pharmaceuticals. The first opinion denied the Saint Regis Mohawk Tribe’s Motion to Terminate the Proceedings, while the second denied Allergan’s Motion to Withdraw from the IPR, even though it purported to assign its patent rights to the Tribe. Mylan Pharmaceuticals Inc. v. Allergan, Inc., IPR2016-01127, -01128, -01129, -01130,, 01131, -01132, Paper Nos. 129 and 131 (Feb. 23, 2018 PTAB)
The two decisions were issued just months after an Eastern District of Texas decision finding that the Restasis patents were invalid as obvious (currently pending appeal at the United States Court of Appeals for the Federal Circuit). Just prior to the district court decision, Allergan attempted to assign its patent rights to the Saint Regis Mohawk Tribe, who granted Allergan an exclusive license to the Restasis© patents. The Tribe then filed a motion to terminate the IPRs based on the doctrine of tribal sovereign immunity. Shortly thereafter, Allergan filed a motion to withdraw from the proceedings, stating Allergan was no longer the patent holder. The PTAB denied both motions.
The PTAB provided two reasons for denying the Tribe’s Motion to Terminate. First, the PTAB held that the Tribe failed to establish that it was entitled to assert its tribal immunity in inter partes review proceedings. Citing the Supreme Court, the Board noted that the Tribe’s sovereignty “is of a unique and limited character…[existing] only at the sufferance of Congress and is subject to complete defeasance.” United States v. Wheeler, 435 U.S. 313, 323 (1978). The PTAB’s analysis relied on the premise that “general Acts of Congress apply to Indians…in the absence of a clear expression to the contrary.” IPR2016-01127, Paper no. 129 at 11. The Act of Congress here provides that “any patent (regardless of ownership) is ‘subject to the conditions and requirements of [the Patent Act].’” Id. Because patents are, by law, inherently subject to IPRs, the Board made clear that any sovereign immunity enjoyed by the Tribe did not eliminate the PTAB’s right to conduct an inter partes review.
Second, the Board held that the proceedings may continue with Allergan as the patent owner, and that the Tribe was not an indispensable party to the proceedings. According to the terms of the patent assignment, Allergan retained substantially all of its rights in the patents, leaving the Tribe with nothing more than “an illusory or superficial right to sue for infringement of the challenged patents.” See Paper no. 131 at 22. Furthermore, Allergan’s rights as the exclusive licensee gave Allergan “at least an identical – if not more of an interest of the effective patent owner…in defending the challenged patents.” Paper no. 131 at 37. Therefore, the PTAB found that the assignment did warrant granting the Tribe’s Motion to Terminate the IPRs.
Disclaimer: Sughrue Mion represented Akorn Pharmaceuticals in the District Court Litigation and is currently representing Akorn in the Appeal and IPR proceedings.
Benjamin M. Cappel
Email: firstname.lastname@example.orgBenjamin Cappel is an associate in the Litigation group and concentrates his practice on pharmaceutical patent litigation under the Hatch-Waxman Act. Mr. Cappel has experience litigating cases before the International Trade Commission and federal district courts. He has also assisted in contested case proceedings before the Patent Trial and Appeal Board (PTAB) including IPR and CBM reviews.
Not a member of the DC Bar. Supervised by members of the DC Bar.
Sughrue is pleased to announce the publication of THE ESSENTIAL CASE LAW GUIDE TO PTAB TRIALS, collectively authored by Sughrue partners and associates. The Guide is the first comprehensive text on decisions of the U.S. Patent Office regarding the newest form of administrative law practice before that agency. Through analysis and summary of the PTAB’s decisions, the text identifies boundaries of the PTAB’s rules, providing guidance when handling these highly specialized matters before the U.S. Patent Office. Partners John Bird, Jay Lytle, Susan Pan and Raja Saliba are The Guide’s lead authors. The Guide is published by the American Bar Association, Section on Intellectual Property Law, and will be available March 15, 2018 at https://shop.americanbar.org/ebus/
Wi-Fi One, LLC v. Broadcom Corp. (Fed. Cir. 2018)
By David Emery
In an en banc decision, the Federal Circuit reigned in the scope of 35 U.S.C. § 314(d) by deciding that time-bar determinations under § 315(b) are appealable. While § 314(d) states that a determination whether to institute is nonappealable, the Court limited this prohibition to those issues “closely tied to the application and interpretation of statutes related to the institution decision” of § 314. That is, issues “closely related” to the substantive “reasonable likelihood” decision.
Overruling the Court’s prior interpretation of § 314(d), which was used to prohibit a prior appeal of a time-barred determination under § 315(b), the decision emphasized the intervening Supreme Court decision in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016). In Cuozzo, the Supreme Court recognized the “strong presumption” in favor of judicial review. In that decision they emphasized “clear and convincing” indications derived from specific language, legislative history and the statutory scheme were required to defeat this presumption. While Cuozzo ultimately decided against review of the certain determinations by the Director, this Court interpreted that holding as leaving the door open review of certain determinations.
In its analysis, the Court found no “clear and convincing” evidence of Congress’s intent to bar judicial review. Referring to the language of § 314(d), which limits the application to “this section”, the Court found those issues relating to the threshold determination whether to institute nonappealable. This determination, outlined in § 314(a), are limited to whether a petitioner shows a reasonable likelihood of success of prevailing with respect to at least 1 claim. No other issues relevant to determining whether to institute are defined in this section.
In contrast to the decision with respect to § 315(b), the Court noted that sections 311-13 are preliminary procedural requirements that are more closely related to the determination of § 314(a) by the Director. On the other hand, §315(b) was distinguished from these sections because it is not related to that determination and has no relation to patentability merits. The decision also noted that § 315 is a limit on statutory authority – issues that have traditionally been reviewed.
Mr. Emery practices in all areas of patent law including: patent preparation and prosecution; patent litigation; patent reexamination (ex parte and inter partes); and counseling clients on intellectual property matters. He also engages in patent infringement and validity opinion practice and counseling, freedom to operate analysis, and due diligence and product clearance work.
His experience includes a wide range of electrical and mechanical technologies, including medical devices, heating and cooling systems, hydraulic applications, semiconductor design and manufacture, telecommunications equipment, automotive technologies, electrical power generation equipment, electrical transmission components, electric vehicles, welding equipment, image display devices, fiber optic distribution, and various computer and printer related technologies.
On November 27, 2017, the Supreme Court Justices posed many interesting questions to attorneys representing the parties involved in two underlying Inter Partes Reviews (IPRs) and the federal respondents in these two cases, which will impact the future of IPRs significantly. Of the two cases, Oil States Energy Services v. Greene’s Energy Group (16-612) has received the most commentary by far. This is not surprising since Oil States will answer the question of whether IPRs violate the Seventh Amendment right to jury by allowing the Patent Trial and Appeal Board (PTAB), a non-Article III tribunal, to extinguish patent claims. In other words, must questions of unpatentability be reserved for an Article III court? The second case, SAS Institute v. Matal (16-969) focuses on a narrower issue of whether the PTAB must issue final written decisions for every claim challenged by Petitioner, or whether the PTAB may properly issue final written decisions only for claims instituted for an IPR proceeding, a question of the proper interpretation of IPR statute 35 U.S.C. 318(a).
In both cases, Justice Ginsburg’s questioning highlighted a common and fundamental issue: Is an IPR a means to give the USPTO a second look at a patent to correct agency error? In Oil States, the patent owner’s early acknowledgment of the USPTO’s reexamination power seemed to undercut the general notion that allowing the PTAB to decide unpatentability of issued patent claims is unconstitutional. In SAS, the power for the USPTO to reexamine a patent also gives it the ability to shape the contours of which claims that it will reconsider.
The issues involved in Oil States and SAS take on several complex dimensions. A brief observation on the hearings will follow.
In the Oil States hearing, the question of whether the USPTO has reexamination authority, to consider prior art overlooked during the original patent examination arose early, and was quickly answered in the affirmative — even when the reexamination involved third parties. From there, many questions, originating from Justices Kagan, Sotomayor and Ginsburg, related to aspects of the IPR process itself. In particular, what sets an IPR apart from an examinational process that unpatentability must be decided by an Article III court? On this point, the Justices touched upon the “private right” vs. “public right” distinction that has been highlighted as a pivotal factor in the case. Justice Sotomayor noted that even when both parties agreed to settle the IPR, the USPTO may still continue with the IPR action, decide the question of patentability and participate in appeals, suggesting the nature of a government, or public interest, in the rights in question. Justice Kennedy posed questions in terms of hypotheticals, including one by which Congress conditioned the grant of a patent subject to the IPR constraints, and one by which Congress truncated the life of patents by ten years and whether those would be permissible. On the latter question, patent owner agreed that truncating the life of the patent would be permissible, but that Congress could not create a right that conflicted with Article III. Justice Kennedy responded that if patent owners take a patent subject to Congress’ ability to truncate the patent term, or scope, then doesn’t that effectively limit patent owners’ expectation on the patent right? Justice Kennedy further queried patent owner on the best case law to limit Congress’ power to establish the IPR proceeding, noting that the rights in Crowell v. Benson and Stern v. Marshall were each distinguishable from the patent right, which is created by statute. Patent owner responded that the Northern Pipeline case would best support its position.
Chief Justice Roberts asked how due process and the takings clause related to patent owner’s Constitutional position, noting that if the government can restrict use of real property, then why can it not place a restriction on patents? Patent owner cited to the centuries-old history of adjudicating patent rights in courts, and that withdrawal of those cases to a non-Article III tribunal impacts the individual rights guarantee, such as a guarantee of litigants to impartial decision makers. Whereupon, Justice Ginsburg again noted that the role of the non-Article III PTAB was for limited purposes as a form of reexamination. Justice Gorsuch questioned whether McCormick, an 1898 Supreme Court case that indicated that patent validity must be decided by the courts, was decided as a statutory matter or a Constitutional one. On this point, patent owner stated that the McCormick case was decided as a Constitutional matter, but seemed to suggest that the Court need not adopt a position as strongly stated in McCormick to decide the Oil States case in patent owner’s favor. Justice Sotomayor suggested that McCormick was decided as a statutory construction case, and patent owner conceded that McCormick did not mention Article III.
Justice Breyer posed a broader question relating to agency adjudication between private parties that occur commonly and widely, and why IPR’s are different from such agency adjudications. The determinations made in other executive agencies were also raised during questioning of the patent owner on rebuttal, where Justice Breyer discussed the license revocation by the Federal Communications Commission and Justice Kagan discussed adjudications of the National Labor Relations Board. It is not clear that patent owner was able to provide a complete answer to Judge Breyer’s question. It is possible that in order to provide a full response, patent owner would call into question a wider array of non-Article III tribunals that commonly decide disputes between private parties. This perhaps also explains the patent owner’s equivocal response to Justice Gorsuch’s question on why the patent owner would not simply firmly plant its position in the broader notion that all patent claims, as a private right, must be decided by an Article III court. To this observer, this suggests that the deliberations on the IPR processes are not relevant, if the power is not even there for a non-Article III court to decide invalidity. The latter determination would implicate patent validity made by other non-Article III tribunals, such as the International Trade Commission.
Justice Alito raised a historical view of patents, inquiring whether back in 1789, could Congress grant patent monopolies subject to limitations of an IPR system. Patent owner responded that a grant of the patent could be conditioned, but that condition could not violate the Constitution whether under Article III or the takings clause. Delving further into the historical aspects of patent revoking authority, Justice Sotomayor questioned whether patent revocations by the English Privy Council provided basis for a non-common law court to decide patent revocations. Patent owner noted that the then existing statute of monopolies (1624) indicated that validity would be determined by juries. Justice Ginsburg closed initial questioning of patent owner by asking about the mechanism of patent correction in the event the crown made an error, to which the patent owner did acknowledge that the Privy Council, as opposed to the courts of common law, were known to revoke patents pursuant to certain proceedings.
Justices Breyer and Gorsuch and Chief Justice Roberts led the questioning of the IPR petitioner. The opening questions related to 1) possible vested interests that a patent owner accrues after significant financial investment in its patents over a long period of time, e.g. ten years, and 2) the possibility of shifting PTAB panel members so that the PTAB decisions can be viewed as politically motivated, so-called panel-packing, such that the USPTO is able to obtain the outcome it desires. On the latter point, the IPR petitioner cited to the protections of the Administrative Procedure Act, which would protect the patent owner’s right to due process. On the former point, the IPR petitioner responded that patentees take patents subject to statutory requirements of patentability, and those rights do not necessarily vest into private rights over time or due to financial investment. Whereupon, Chief Justice Roberts indicated that the IPR petitioner was advancing the position that the patentee must take the “bitter with the sweet,” which he questioned as being inconsistent with the Court’s precedent, citing to public employment cases. The IPR petitioner responded that the PTAB did not act with unfettered discretion and that the process was subject to review by the federal appeals court. Justice Gorsuch stated that the judicial review did not materialize unless a party actually appealed the PTAB decision, but that otherwise the decision of the PTAB was self-executing. IPR petitioner noted that this was a similar situation as the original examination, a power not in question.
IPR petitioner noted that the Court’s older precedents determining that validity was to be decided by the courts were matters of statutory construction, not Constitutional decisions.
Justice Ginsburg noted that the line of questions posed by Justices Gorsuch and suggested by Justice Breyer’s hypothetical of vested rights by lapse of time and financial investment, cast the patent right as a private right, not subject to even reexamination. Justice Ginsburg restated that patent owner had already conceded that the USPTO has the power of reexamination, and thus the main question posed was whether the IPR process was judicial in nature. The IPR petitioner cited to the Court’s more recent decision on an IPR proceeding in Cuozzo, that IPR’s are not adjudicative but rather are a form of reexamination.
The Justices next questioned the Deputy Solicitor General, representing the federal respondent. This questioning started with similar concerns about the vesting of a property interest over time, and the dangers of panel-packing that Justice Gorsuch and Chief Justice Roberts raised when questioning the IPR petitioner. The federal respondent also noted the availability of reexamination and district court to invalidate a patent, suggesting a limitation on a patentee’s right in holding the patent. Chief Justice Roberts queried about the change to a new (IPR) process, which was not available at the time that the patent in dispute issued. In a roundabout way, the federal respondent fully analogized the IPR process to the process for termination of a federal employee for cause, the example of a property right (the bitter with the sweet) raised by Chief Justice Roberts in the questioning of the IPR petitioner. The federal respondent noted that agencies terminate federal employees for cause and may due so as long as they comply with due process. Such firings, which are terminations of a property right, are done by non-Article III agencies regularly. If the federal government found a more efficient way to monitor employee performance and better ways to detect whether an employee should be terminated for cause, then it would seem unlikely that the agency would not be able to use those new mechanisms on employees who obtained employment tenure prior to the time those new mechanisms were devised. The federal respondent relied on fairness of the processes, and that if an individual were not treated with due process, then that would be another matter. Judge Breyer commented that his hypothetical regarding the large investment did not arise in the current case, indicating that such a situation would best be addressed under the due process or the takings clause.
With regard to the Justices’ concerns on panel-packing, the federal respondent noted three instances of variations occurring in a PTAB panel. Each occurred during the institution phase of a proceeding, not the decision phase, where unpatentability was actually determined.
Chief Justice Roberts requested comment on the Schor test, used to assess whether something qualifies as a public right. The federal respondent distinguished cases such as Schor, Northern Pipeline and Stern v. Marshall as being inapplicable to the IPR process in that all those cases concerned a situation where the adjudicator had to determine whether one party was liable to another party for a violation of law. Each case also involved money damages. These cases involved more classic judicial functions. Of those cases, sometimes the adjudication could be made by a non-Article III tribunal, and sometimes not. It is noted, that an IPR process does not determine liabilities and in that sense is even further afield from Northern Pipeline, the case that patent owner had cited as its best support of its Article III position.
Justice Ginsburg questioned the federal respondent on limitations on the timing of an IPR, with or without, the patent owner filing an infringement suit. The Justices also had additional questions regarding the PTAB’s ability to hear an infringement suit. The federal respondent replied that infringement determinations were outside the traditional role of the USPTO.
To this observer, the patent owner adhered, as it must, to its private right position for Article III adjudication. Based on the hearing transcript, it appears that patent owner faced some difficulties in firmly planting this stake. The old precedents discussed appear to be distinguishable, or rely on statutory rather than Constitutional foundations. U.S. patents stem from statute rather than a common law right and have long been subject to reexamination, a view that patent owner readily concedes. IPR’s have been characterized as a form of reexamination, and regardless of whether the IPR is labeled as an adjudication or not, the questioning seemed more concerned with processes associated with the IPR rather than authority of the USPTO to conduct the proceeding.
A subsequent post will discuss the SAS hearing.
Susan P. Pan
Email: email@example.comMs. Pan specializes in patent portfolio building for large and small companies, including patent preparation, prosecution and appeals. Ms. Pan’s legal expertise also extends to multi-party complex patent litigation before several U.S. federal district courts, the U.S. International Trade Commission, and the U.S. Federal Trade Commission. Ms. Pan counsels clients in patent licensing and valuation, taking into account probabilities of infringement and invalidity.