When a Final Written Decision has been received in an America Invents Act (AIA) patent office trial, the Petitioner is estopped from “request[ing] or maintain[ing] another proceeding before the Office on any ground that the petitioner raised or reasonably could have raised” during the proceeding. This estoppel also applies to real parties in interest and privies of the Petitioner. See 35 U.S.C. §§ 315(e)(1) and 325(e)(1).
In recent decisions and orders, the PTAB has applied this estoppel to Petitioners involved in later filed patent office trials in different ways. The estoppel does not prohibit the PTAB from reaching a Final Written Decision in a subsequent patent office trial. The PTAB has the discretion to (1) allow the subsequent trial to proceed without the Petitioner’s participation, (2) terminate the subsequent trial, or (3) terminate certain claims from the subsequent trial when appropriate.
The Federal Circuit (Judge Lourie, Chief Judge Prost, Judge Linn) in Achates Reference Publishing, Inc. v. Apple Inc. (2014-1767, September 30, 2015), held that it did not have jurisdiction to review a Patent Trial and Appeal Board’s ( the “PTAB”) decision whether Inter Partes Review(IPR) is time-barred.
In the Final Written Decision Medtronic, Inc. et al. v. Lifeport Sciences LLC., IPR2014-00288 (Paper 34, April 21, 2015), the Patent Trial and Appeal PTAB (PTAB) reversed its position and determined that the claims of the Lifeport’s patent involved in the inter partes review (IPR) were not unpatentable.
In a recent Order, the Board authorized patent owner, Motion Games, LLC, to file a motion to terminate the proceedings because petitioner, Nintendo of America, Inc, allegedly failed to list all real parties-in-interest in three inter partes review (“IPR”) petitions.
35 USC 312(a)(2) requires a petitioner to identify all real parties-in-interest (“RPIs”) in an inter partes review proceeding. In Nintendo of America, Inc. v. Motion Games LLC. (IPR2014-00164-66), Nintendo filed three IPRs against three different patents on November 19, 2013. The three patents are concurrently being asserted against Nintendo in a district court litigation in the Eastern District of Texas, in Motion Games, LLC v. Nintendo Co., LTD; Nintendo of America Inc.; Retro Studios, Inc.; Rent-A-Center, Inc.; and Gamestop Corp. (Case No. 6:12-cv-878) (E.D. TX). In the district court litigation, Nintendo of America, Inc., along with Nintendo Co., LTD, Retro Studios, Inc., Rent-A-Center, Inc., and Gamestop Corp. are named defendants. In the IPRs, Nintendo Co., Ltd. and Nintendo of America Inc. are the only named real parties-in-interest.
On January 24, 2014, the USPTO published proposed rules for patent assignment recordation that would require applicants to also include attributable owner information. The proposal would include a “ultimate parent entity” that owns 50 % or more of the titleholder. See Federal Register at 79 FR 4105 (2014). While discussion of the proposal continues, there would be potential concerns if the proposed attributable ownership rules were applied to findings of privity in an Inter Partes Review (IPR) proceeding.
On November 20, 2013, the House Judiciary Committee passed an anti-patent troll bill (Innovation Act of 2013, H.R. 3309). As discussed in our previous post, most of the provisions are directed towards discouraging patent trolls from filing federal district court infringement actions. However, there are a few provisions that would affect inter partes review (IPR) and post grant review (PGR).
Are some patents exempt from post-grant attack under the America Invents Act? The USPTO comments on post-grant trials suggest that the Office may “exercise its discretion” to refuse to review a patent on the simple basis that it would be too much work in too little time for the Patent Trial and Appeal Board.
The Patent Trial Practice Guide describes this position:
For example, the Board may decline to institute a proceeding where the Board determines that it could not complete the proceeding timely. Specifically, the Board could exercise its discretion to decline to institute a petition that seeks review of several hundred claims based upon a thousand references and the patent owner demonstrates that a determination of patentability would require testimony of dozens of nonparty controlled witnesses in foreign countries for which the testimony would need to be compelled.
It would be rare indeed that a petitioner would be able to challenge several hundred claims based upon a thousand references in an 80-page petition, and rarer still that a patent owner would require the testimony of dozens of foreign witnesses outside the control of either party. Apart from such dramatic circumstances, the USPTO comment more generally asserts that the Office has the “discretion” to refuse to institute a patent trial if it considers that the Board would be unable to complete review in the period imposed by the statute.
One possibility raised by this comment is that patentees may be able to multiply patent claims and avoid post-grant scrutiny altogether. For example, in Hyatt v. Dudas the Board considered rejections of approximately 2,400 claims in twelve related patent applications in areas including microcomputers, computer memories and displays, and global positioning systems. A petitioner seeking to invalidate a substantial number of these claims in 12 issued patents could face an insuperable burden, if the Board declines to institute a post-grant trial. Furthermore, the costs of presenting 2,400 dependent claims for examination would be about $144,000, whereas the costs of challenging the issued claims in inter partes review would be a staggering $1,440,000 at $600 per claim, and $1,920,000 in post-grant review, with no refund if a patent trial is not initiated. Such enormous filing fees could provide a measure of insurance against review for patent owners, apart from the question of whether the Board would decline to institute a post-grant trial.
Apart from these nightmares, the USPTO comment raises fundamental questions about the discretion of the Board to “streamline” post-grant trials by selecting only some claims or some issues for review, even if others are properly raised by a petitioner.
The key issue from the parties’ standpoint is the estoppel effect of a partial Board decision on subsequent court and Office proceedings.
The statute imposes claim-by-claim estoppel, and if the Office does not institute a proceeding and issue a final written decision on the patentability of a claim, there should be no estoppel against a later proceeding involving that claim. The statute does not address issue-by-issue estoppel if the Board declines to consider some of the grounds raised in a petition with respect to a claim, and the USPTO’s position on this issue is not clear. For example, if a petition for post-grant review properly raises anticipation of a claim, obviousness, written description issues, nonenablement and double patenting, and the Board limits its review and final decision to the novelty issue, is the petitioner estopped from asserting invalidity on the other asserted grounds in another proceeding? The statute may impose an estoppel, because the petitioner “raised” the other issues with respect to “a claim” in the petition, even though the Board declined to address these grounds in a final written decision. The injustice of this result is apparent, and in interferences the Federal Circuit has precluded estoppel on any ground that a party attempted to raise by motion, even if the Board exercised its discretion to decline to consider that ground.
If the Board has discretion to decline review of certain claims or issues, does it also have discretion to add claims to a review that are not directly challenged in a petition? For example, if the petitioner only asserts anticipation of a dependent claim, and the Board finds the claim invalid, what happens to the independent and intermediate dependent claims that are a fortiori also anticipated? The petitioner’s costs in the Hyatt hypothetical could be greatly reduced by challenging only certain dependent claims, provided that estoppel is limited to the selected claims. This strategy could provide critical estoppel advantages, if the petitioner is free to contest the invalidity of independent claims in litigation or subsequent USPTO proceedings. For example, if a patent contains a chain of dependent claims (1, 2/1, 3/2), and only an intermediate claim in the chain (2/1) is asserted in an infringement action, the defendant could initiate a post-grant trial challenging the noninfringed claim (3/2). If that claim is anticipated, the defendant would be able to prove invalidity of the broader claims in a subsequent USPTO patent trial, in district court, or on appeal from a district court decision.
The extent of the Board’s discretion to refuse to consider claims or issues in post-grant trials, or to consider claims not raised in a petition, will have significant strategic consequences both for patent owners in prosecution and claiming, and for challengers in selecting the claims and grounds raised in post-grant petitions.
Under the America Invents Act, any person who is not the owner of a patent may seek inter partes review or post-grant review in the USPTO, avoiding the jurisdictional case-or-controversy requirement that has limited district court declaratory judgment actions seeking to invalidate patents.
The post-grant opposition provisions will transform U.S. patent litigation, by providing an expert administrative forum for expeditiously challenging patent validity to parties who would otherwise be barred from district court for lack of standing. The post-grant review statutes contain no requirement that the petitioner have an actual, adverse, commercial interest in the subject matter, or that there be any prospect of eventual patent enforcement.
In contrast, the standing required to maintain a district court declaratory judgment action challenging the validity of a patent has generally barred actions in the absence of a substantial commercial interest in the patented subject matter. The constitutional case or controversy requirement was limited by MedImmune, but a declaratory judgment plaintiff must still show that the dispute is definite and concrete, touching the interests of parties having adverse legal interests, that is real and substantial and admits of specific relief through a decree of conclusive character. The case or controversy requirement raises a substantial barrier to declaratory judgment actions seeking advisory opinions on hypothetical states of fact.
The USPTO considers that there is a “standing” requirement to petition for a post-grant proceeding, but this requirement is far different from “standing” to maintain a district court action challenging a patent. Standing in a USPTO opposition is based on specific statutory time limitations and estoppel provisions that bar a party or its privies from requesting or maintaining a proceeding before the Office after a final decision in another post-grant review or inter partes review.
Proposed Rule § 42.104 requires that a petition for inter-partes review must set forth:
(a) Grounds for standing. The petitioner must certify that the patent for which review is sought is available for inter partes review and that the petitioner is not barred or estopped from requesting an inter partes review of the patent.
A patent is “available for inter partes review” under § 311(c) after the date that is 9 months after the grant of a patent or after termination of post-grant review, unless it is barred by the petitioner’s prior declaratory judgment action under § 315(a)(1) or the patent owner’s infringement action filed more than a year before the petition under § 315(b). These requirements are incorporated in proposed Rules 42.101 and 102(a).
Proposed Rule 42.204(a) similarly requires that a petition for post grant review set forth “grounds for standing.” A patent is “available for post-grant review” up to 9 months after the date of the grant of the patent under § 321(c), unless it is barred by the petitioner’s prior declaratory judgment action under § 325(a)(1), or is a non-broadening reissue patent filed more than 9 months after the grant of the original patent under § 325(f). These requirements are incorporated in proposed Rule 42.201 and 202(a).
With respect to estoppel, a petitioner in a USPTO review of a claim in a patent that results in a final written decision, or the real party in interest or privy of the petitioner, may not request or maintain another inter partes review under § 315(e)(1), or another post-grant review under § 325(e)(1) “on any ground that the petitioner raised or reasonably could have raised” during the first post-grant proceeding to end in a final written decision.
A determination of the scope of estoppel from a first USPTO post-grant proceeding thus depends on the challenged claims subject to a first final Board decision, any ground that the petitioner reasonably could have raised in the first proceeding, the identity of the real party in interest and its privies in the first proceeding, and the identity of the real party in interest in the later proceeding. Proposed Rule 42.8(b)(1) requires that the petitioner identify the real parties in interest in a post-grant proceeding, but not their “privies.”
In many cases, the determination of real parties in interest and their relationship to earlier privies will require detailed factual investigation and legal analysis, particularly if there is a change in the identity of a former real party in interest or privy as the result of corporate reorganization, acquisition or divestiture of patents, or an earlier petition was filed by a consortium or pursuant to a joint defense agreement in the course of litigation in which the issue of estoppel is raised. As the USPTO commentary explains,
in inter partes and post-grant review proceedings before the Office, the petitioner (including any real party-in interest or privy of the petitioner) is estopped from relitigating any ground that was or reasonably could have been raised. … What constitutes a real party-in-interest or privy is a highly fact-dependent question. … While many factors can lead to a determination that a petitioner was a real party-in-interest or privy in a previous proceeding, actual control or the opportunity to control the previous proceeding is an important clue that such a relationship existed. … Factors for determining actual control or the opportunity to control include existence of a controlling interest in the petitioner.
The identification of privies of an earlier real party in interest could be complex, in the absence of a requirement that a petitioner identify both real parties in interest and their privies. Where the issue is disputed, the commentary on the proposed rules indicates that the Board may grant the patent owner “additional” discovery based on sufficient concerns regarding the petitioner’s standing, that may ultimately be resolved by a district court ruling on a motion to dismiss defenses based on statutory estoppel. The scope of a potential estoppel underscores the importance of a thorough investigation before filing a petition, since the mandatory disclosure of real parties in interest must be filed by the petitioner as part of the petition under proposed Rule 42.8(a)(1).
The USPTO’s consideration of “standing” to file a petition for post grant review thus concerns the statutory time limits for filing, and the estoppel bar against relitigating issues that were raised, or could reasonably have been raised by the petitioner in an earlier post-grant proceeding. Neither the proposed rules nor the USPTO commentary indicates that the Office contemplates any other restriction on the ability of any person to petition for inter partes review or post-grant review.
Under the post-grant statutes and the USPTO’s proposed rules, standing to maintain an opposition does not require that a petitioner establish that a patent dispute is definite and concrete, or that touches the interests of parties having specific existing adverse legal interests. This conclusion rests on the fundamental assumption that the courts will not engraft a nonstatutory requirement of adverse potential commercial interest as a requirement for pursuing a post-grant opposition or appeal. As the D.C. Circuit has explained, federal agencies are not Article III courts, and are not bound to follow the law of standing derived from the “case or controversy” requirement. Judicially-devised prudential standing requirements are also inapplicable to an administrative agency acting within the jurisdiction Congress assigned to it, and the post-grant opposition statutes are broadly drafted to permit any person to seek invalidation of a patent in the USPTO.
The post-grant opposition proceedings created by the America Invents Act, used in parallel with ANDA litigation, will alter the strategies of ¶ IV practice under the Hatch-Waxman Act. The use of USPTO post-grant proceedings in conjunction with ¶ IV certifications may provide collateral benefits to the ANDA applicant, apart from a direct challenge to patentability of claims covering an approved drug or method. If the same grounds of unpatentability asserted in a ¶ IV certification are presented to the USPTO, and the Office institutes a post-grant opposition, the ANDA applicant may secure a number of advantages even if the claims are not ultimately held invalid in the USPTO and canceled from the patent.
Generic drug makers who file ANDAs are required to make a certification with respect to each patent listed in the Orange Book by the NDA holder that allegedly covers the approved drug. The generic may maintain under ¶ IV that the listed patent is invalid, unenforceable, or not infringed by the proposed generic drug described in the ANDA. An ANDA applicant who contemplates filing a ¶ IV certification will be able to raise many potential litigation defenses in a post-grant proceeding before filing the ANDA, and can time its request with the USPTO to obtain an initial administrative determination on issues of patentability prior to the ANDA filing date. A final opposition decision should normally issue in the USPTO within one year, although this time may be extended to 18 months in exceptional cases.
One important consequence of the institution of post-grant oppositions will be their effect on the issue of potential sanctions for filing a frivolous ¶ IV certification of invalidity. The question of sufficiency of ¶ IV notices has been increasingly raised by patentees in ANDA litigation. The Federal Circuit affirmed an award of $16.8M in attorney fees to the patentee in Takeda v. Mylan, based on its conclusion that the theory of invalidity set forth in a ¶ IV notice, but later abandoned in litigation, was “completely baseless” and failed to raise even a prima facie case of invalidity. The institution of a post-grant review proceeding by the USPTO should provide a measure of insurance against Takeda-type sanctions, particularly in view of the burden of the petitioner to establish the likely invalidity of the challenged claims.
In order to institute post-grant review, under § 324 the petitioner must show that “the information presented in the petition filed under section 321, if such information is not rebutted, would demonstrate that it is more likely than not that at least 1 of the claims challenged in the petition is unpatentable.” The corresponding burden in inter partes review under § 314 is to show that “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” The petitioner’s burden to institute a post-grant opposition is a critical factor, because it closely approaches its ultimate burden of proving unpatentability by a preponderance of the evidence under §§ 316(e) and 326(e). Although the USPTO will clarify the showing that is required in a petition by regulation and Board decisions, it seems likely that the petitioner will be required to initially demonstrate prima facie unpatentability of a challenged claim by a preponderance of the evidence.
If the USPTO concludes that a petition demonstrates that a claim is likely to be held invalid, and institutes a post-grant opposition, it seems unlikely that a court would later determine that the same assertion in a ¶ IV certification is “completely baseless,” applying the opposition preponderance of the evidence standard.
Conversely, if the USPTO declines to institute a post-grant opposition, the petitioner may reconsider its decision to assert the same grounds of invalidity in a ¶ IV notice, decide to assert other grounds of invalidity, or elect to file a ¶ III certification. The ANDA applicant could also decide to proceed with a proposed defense in district court, based on additional discovery or evidence not presented in an opposition petition. A final USPTO decision confirming the validity of a claim in reexamination does not preclude a court from invalidating the claim in litigation.
Apart from the sufficiency of ¶ IV invalidity assertions, the institution of post-grant review should influence a branded manufacturer’s response to an ANDA applicant who makes a showing of presumed unpatentability under the preponderance standard applied in the USPTO. Sanctions can be awarded to an ANDA applicant if a patent owner pursues an objectively baseless infringement action, and the grant of a petition to institute an opposition proceeding, prior to the filing of an ANDA infringement action, could be a significant issue if the USPTO later cancels the claims asserted in litigation. Attorney fees were awarded Dr. Reddy’s where the court concluded that AstraZeneca pursued “unreasonable, frivolous, anti-competitive, anti-consumer litigation” in the absence of evidence of infringement by generic omeprazole.
Based on experience with current inter partes reexaminations, it appears likely that courts will be more inclined to stay infringement litigation for the relatively short time that will be required for administrative resolution of invalidity issues. Even if a USPTO decision is appealed to the Federal Circuit, the administrative determination could influence a district court in continuing or lifting a stay, and scheduling and considering early summary judgment motions. A court might have limited interest in advancing a trial on invalidity under the clear and convincing standard, when the issue might finally be resolved in the USPTO under a less-stringent preponderance standard, based on essentially the same evidence of invalidity.
A final USPTO decision confirming the validity of challenged claims may also simplify litigation, because an opponent will be estopped from raising any ground of invalidity in district court that was raised or could reasonably have been raised in inter partes review under § 315(e) or in post-grant review under § 325(e). A broad scope of estoppel could reduce many patent cases to trials on infringement alone, depending on the date on which an estoppel arises from an adverse USPTO decision and the specific defenses that would be precluded. Issues of estoppel may raise the stakes of an ANDA applicant who elects to pursue a post-grant opposition, but are balanced by the lower burden of proof and the ability to develop a full evidentiary record in the USPTO in the new proceedings.
With respect to the likelihood that the USPTO will institute a post-grant opposition, it is noteworthy that the Office has historically granted 95% of all petitions for inter-partes reexamination, and that 71% of the petitions concerned patents involved in litigation. It is not clear whether post-grant oppositions will be instituted less frequently, because the showing of invalidity required to institute inter partes review or post-grant review is significantly higher than the former inter partes reexamination standard of a “substantial new question of patentability.”
The advantages of obtaining an initial administrative determination that claims are likely to be held invalid and canceled from an Orange-Book listed patent, prior to filing a ¶ IV certification, will often justify the initial costs of preparing a petition for post-grant opposition. Post-grant oppositions will be front-loaded, and will often require testimony from fact and expert witnesses to accompany the initial petition. The schedule for USPTO decision will be rapid and unrelenting, with few opportunities for either party to correct errors.
A critical factor in the decision to initiate a post-grant review or inter partes review proceeding in the USPTO will be the estoppel consequences of a decision confirming the patentability of challenged claims. Following the general model of current inter partes reexamination, both new statutes provide that if a “final written decision” is issued by the USPTO, the petitioner may not assert in a patent action in district court or the ITC that the claim is invalid “on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” §§ 315, 325.
The scope of estoppel in post-grant oppositions
The scope of estoppel resulting from an unsuccessful opposition will differ in inter partes review and post-grant review, because of the vastly different grounds of invalidity that can be asserted by a challenger. Inter partes review can be based “only on a ground that could be raised under section 102 or 103 and only on the basis of prior art consisting of patents or printed publications.” A petitioner should not be estopped from asserting invalidity in district court litigation on any other ground, including anticipation based on prior use or sale, or other statutory defenses. However, if the petitioner unsuccessfully asserts that a claim is anticipated by a published reference, the resulting estoppel would extend, for example, to obviousness in view of any other published reference, provided that the additional reference could reasonably have been raised during inter partes review.
In sharp contrast, post-grant review may assert “any ground that could be raised under paragraph (2) or (3) of section 282(b) (relating to invalidity of the patent or any claim).” In post-grant review, the opposer may maintain that a claim is invalid for lack of novelty on the basis of public use or sale, for obviousness, for lack of written description or enablement, lack of utility, or patent-ineligible subject matter. The breadth of subject matter that can be raised in post-grant review dictates a similarly broad scope of estoppel, which in many cases could result in forfeiture of most if not all potential litigation defenses, if the petitioner is unsuccessful on any of these grounds raised in the opposition. A notable exception is unenforceability of the patent, including inequitable conduct, which is not a ground that could be raised under the specified paragraphs of § 282(b).
These potentially severe consequences of an unsuccessful post-grant opposition are mitigated by two important factors. Estoppel results only from review that “results in a final written decision” of the Board, and most significantly, in distinction to current inter partes reexamination, an opposition will not necessarily result in a final USPTO decision. Instead, the parties to an opposition have the power to terminate the proceeding by a settlement agreement, and the statutes provide that if a settlement is reached, “no estoppel shall attach” on the basis of the institution of the opposition. §§ 317, 327. Interferences frequently end in settlement agreements that effectively share the market in the patented invention between the parties, and a serious patentability challenge that can be withdrawn by settlement provides significant leverage in negotiating a license.
When does estoppel arise? –the Federal Circuit’s decision in Bettcher v. Bunzl
Even if the Patent Trial and Appeal Board issues a final written decision confirming the patentability of challenged claims, a critical issue remains—when does the estoppel arise? If an adverse USPTO decision is appealed to the Federal Circuit during the course of concurrent district court litigation, is the defendant estopped from asserting other defenses that could have been raised in the opposition, when the appeal is pending?
This extremely important question was recently addressed by the Federal Circuit in the context of inter partes reexamination in
Bettcher v. Bunzl. After Bettcher filed suit, Bunzl requested inter partes reexamination and during the course of litigation, the examiner declined to find the claims unpatentable and issued a Right of Appeal Notice. The district court considered that the examiner had issued a “final determination” in the reexamination proceedings, and precluded Bunzl from relying on certain prior art references. Bunzl maintained that the reexamination decision was not “final” until the Federal Circuit decided the appeal from the USPTO action, and that no estoppel resulted in the copending district court action.
Considering this question of first impression, the Federal Circuit concluded that the estoppel provision of section 315 is triggered “not when examination is completed but only after all appeal rights have been exhausted.” This required the court to decide the meaning of “finally determined” in § 315(c) in the context of the statute, the related regulations and the legislative history. This estoppel provision states that an inter partes reexamination requester “is estopped from asserting at a later time, in any civil [patent] action, the invalidity of any claim finally determined to be valid and patentable, on any ground which the third-party requester raised or could have raised during the inter partes reexamination proceedings.”
Relying principally on the right of both parties to appeal the decision of the examiner or the Board, the court considered that “this implies that estoppel requires exhaustion of all appeal rights, including appeals to this court.” It thus concluded that § 316 “defines a determination of patentability to occur only after all appeals have terminated” and a reexamination certificate is issued. The Federal Circuit accordingly vacated the denial of Bunzl’s motion for a new trial on invalidity based on the excluded references, and remanded the case to the district court.
As illustrated by Bettcher, a defendant will not necessarily be estopped from raising additional defenses in an infringement action after an adverse USPTO decision in inter partes reexamination, until the Federal Circuit finally resolves the questions of patentability raised in that post-grant proceeding. If the defendant proves that the asserted claims are invalid on a ground that was not raised in the USPTO, prior to the issuance of a reexamination certificate, it appears that the claims could properly be held invalid by the district court in the absence of estoppel.
Whether the same reasoning will be applied to estoppel resulting from a Board decision in inter partes review or post grant review is not certain, but the 2011 Act similarly refers to a “final written decision” issued by the Board as the basis for a certificate issued by the USPTO when the time for appeal has expired or any appeal has terminated. §§ 318, 328. It would be anomalous to conclude that an immediate estoppel arises from the “final” decision of the Board in the new post-grant oppositions, prior to the ultimate resolution of the issue by the Federal Circuit.
Based on the court’s reasoning in Bettcher, the possibility of estoppel from an unsuccessful opposition challenge during concurrent litigation may not present an insurmountable obstacle to the assertion of additional defenses, even if those defenses could reasonably have been raised in post-grant review. This possibility will affect not just the decision whether to challenge claims in the USPTO during litigation, but also the timing of a post-grant opposition and the specific grounds of invalidity that are raised in each proceeding.