The Trial Rules proposed by the USPTO to implement post-grant oppositions under the America Invents Act would create a new duty of disclosure for parties, that is not limited to the materiality standard for inequitable conduct under Therasense. A violation of the proposed rules could result in sanctions including adverse judgment for the failure to disclose information that is not material, without a showing of specific intent to deceive the Office.
The Duty to Disclose “Inconsistent” Information
The proposed rules would require mandatory, affirmative disclosure of “noncumulative information that is inconsistent with a position advanced by the patent owner or petitioner during the proceeding.” 37 CFR § 42.51(b)(3). This information must be filed “as soon as practicable in a motion identifying supplemental information or as part of a petition, motion, opposition, reply, preliminary patent owner response to petition, or patent owner response to petition.”
There is little explanation of the scope of this routine “discovery” requirement, except for the comment that it “may differ from the proposed changes to § 1.56.” The requirement to disclose “inconsistent information” is derived from current Rule 56(b)(2), which defines “material” information to include noncumulative information that “refutes, or is inconsistent with, a position the applicant takes in: (i) opposing an argument of unpatentability relied on by the Office, or (ii) asserting an argument of patentability.”
This standard for materiality was rejected by the Federal Circuit in Therasense, which imposed a stricter “but for” standard for materiality of nondisclosed information in determining inequitable conduct. The USPTO has proposed to revise Rule 56(b) to conform the duty of disclosure to Therasense, by providing that information is material to patentability if “(1) The Office would not allow a claim if it were aware of the information, applying the preponderance of the evidence standard and giving the claim its broadest reasonable construction; or (2) The applicant engages in affirmative egregious misconduct before the Office as to the information.”
The difference between “inconsistency” and “materiality” is illustrated by Therasense, where the alleged material information was a prior statement in a European opposition concerning the disclosure of a reference. Under the Therasense standard, the patent owner’s statement would only be material if the USPTO would not have allowed the claims to issue “but for” the failure to disclose the information. The inconsistency of the prior statement was clear to the court, and would appear to satisfy proposed Rule 42.51(b)(3) without any further showing.
The proposed duty of disclosure is broader than the duty of disclosure under current Rule 56(b), because it requires not merely disclosure of the inconsistent information, but also an explanation of its relevance including where the information is presented in a document and how it is pertinent to the claims. Rule 42.51(b)(3). A mischaracterization of the relevance of the inconsistent information, or its pertinence to the claims, could independently constitute “material” information as an affirmative “egregious” misstatement to the USPTO during the post-grant proceeding under proposed Rule 56(b)(2).
Sanctions for Failure to Disclose Inconsistent Information
The proposed Trial Rules indicate that sanctions under Rule 41.12(b) could be imposed for misconduct including the failure to comply with an applicable rule, and state that “an example of a failure to comply with an applicable rule includes failure to disclose a prior relevant inconsistent statement.” Sanctions authorized by the proposed rule include adverse judgment of unpatentability and an award of attorney fees. In interferences, APJs have been reluctant to consider issues of inequitable conduct, but have granted judgment for intentional violation of the duty of disclosure.
There is no express requirement that sanctions for failure to comply with the proposed rule would require a showing of intent to conceal withheld information, or to deceive the Office, as required for inequitable conduct. The commentary on the proposed rules does not discuss the factors that will be considered in distinguishing the range of sanctions provided by proposed Rule 41.12(b), but the discretion of the Board should be limited by equitable considerations applied to sanctions in district court.
Practical Effect of the Proposed Disclosure Requirement
The burden of complying with the duty to disclose inconsistent information will generally fall more heavily on the patent owner, who may possess information such as prior art, arguments, declarations or amendments in related applications, inventors’ publications, or statements or evidence submitted in corresponding foreign applications that could be characterized as inconsistent with an argument in support of patentability. The petitioner’s risk is probably more limited, for example, to issues of estoppel and its characterization of the real party in interest.
The standard of “inconsistency” is not defined, and is so amorphous as to preclude definition. Few patent owners will conclude that prior statements or other information are “inconsistent” with arguments made in a post-grant proceeding, while many opponents may well discover dramatically inconsistent information in the possession, or presumed possession, of the patent owner.
If a party does admit that it is aware of information that is “inconsistent”’ with a position it advocates, the result plainly will not be to avoid discovery, as the proposed Rules contemplate. The result will be immediate motions for additional discovery, to determine how the disclosing party discovered the information and concluded that it was “inconsistent” with a position which it advances. It is almost inconceivable that the proposed requirement will avoid motions for additional discovery, and very likely that it will precipitate disputes not only over additional discovery, but also time-consuming motions concerning protective orders, attorney-client privilege and work product, as the USPTO commentary seems to recognize.
If a post-grant opposition is instituted during district court litigation, the patent owner might be required by the proposed rule to disclose any “inconsistent” information identified by the petitioner-defendant. Whether or not the patent owner’s disclosure is considered to be a binding admission of “inconsistency,” the required explanation of its relevance, including where the information is presented in a document and how it is pertinent to the claims, could provide a harvest of admissions against interest. If the Board agrees with the petitioner that the “inconsistent” information requires cancelation of a challenged claim, “but for” materiality might be established during the course of the opposition. The proposed disclosure rule would provide an additional parallel path of attack for defendants in district court litigation.
This preliminary review of the post-grant opposition procedures is based on the comments and rules provided in the Practice Guide, Proposed Trial Rules, and proposed Inter partes Rules. It is intended to provide only a general overview of issues affecting the parties’ respective burdens during the preliminary and trial phases, and is not a commentary on specific rules, procedures, costs or statutory requirements. The information and analysis may be incorrect or incomplete, and these comments do not necessarily represent my own views as to the correct or desirable interpretation of the statute or rules.
The post-grant provisions of the America Invents Act were intended to provide new avenues of attack on issued patents, and these “anti-trolling” measures effectively establish a more general Anti-Patent Act. The proposed inter-partes review and post-grant review trial rules contain a number of substantive and procedural provisions that will disadvantage patent owners, apart from the significant costs of defending patent validity in one or more oppositions.
A central issue concerning the new opposition proceedings is whether the patent owner’s preliminary response to a petition will be effective in avoiding institution of inter partes review or post-grant review. The procedures proposed by the USPTO will limit the effectiveness of a preliminary response, as shown by the USPTO’s own estimates based on existing inter partes reexamination statistics, described in the proposed inter partes rules. Inter partes reexamination prior to the Act required only a showing of a substantial new question of patentability, whereas the standard for instituting inter-partes review is whether there is a reasonable likelihood that at least one claim is unpatentable. Despite the higher threshold imposed by the Act, the USPTO projects that 90% of petitions for inter partes review will be granted, as compared with 93% of petitions for inter partes reexamination under the prior standard.
A number of factors support this conclusion, the most important of which are severe limitations on the evidence that can be presented by the patent owner prior to the initial decision on the petition by the USPTO and the short period provided for the patent owner to prepare its initial response in the preliminary phase of inter partes review.
“Preliminary proceedings” in inter partes review begin with the filing of a petition, followed in 2 months by the patent owner’s initial response, and end with a decision on the petition 3 months later, when the administrative “trial” begins. This compressed schedule provides the patent owner with 2 months to prepare not only its initial arguments against unpatentability, but also to provide mandatory notices and discovery that it may be required to provide to the petitioner.
The patent owner will need to retain counsel immediately after service of the petition, to comply with the mandatory notice and disclosure requirements. In the view of the USPTO, the skills necessary to prepare a petition for review and to participate in a post-grant trial would be similar to those needed to prepare a request for inter-partes reexamination, and to represent a party in an interference proceeding. The proposed post-grant procedures are closely based on existing interferences, which are the “contested cases” referred to in the USPTO’s comments. Interference proceedings impose exacting standards of compliance with rules, Board precedent, the scheduling order and standing order, under an abbreviated schedule with nonextendable deadlines, and involve an elaborate motions practice requiring prior approval by the APJ of every substantive action taken by the parties. In the 2 months following service of a petition, there will be little time to learn inter partes procedure. Interference experience will be valuable if not essential in conducting opposition proceedings.
The Petitioner’s Advantage
A challenger has the opportunity to prepare a petition over an extended period, and to support prior art references with expert declarations and other evidence including fact declarations and experiments. Petitions for inter partes review may present detailed legal arguments concerning the disclosure of an unlimited number of prior art references, including:
• a detailed, claim-by-claim analysis of anticipation and obviousness based on different combinations of references;
• testimony concerning inherent disclosure and its meaning to a person skilled in the art;
• claim construction supported by legal and factual analysis of the prosecution history, extrinsic evidence including the patent owner’s prior statements;
• the patent’s lack of benefit of prior U.S. or foreign applications, based on written description, nonenablement, or lack of utility, supported by expert testimony and laboratory test evidence;
• argument and testimony concerning the effective dates of prior art references; and
• possibly a preemptive attack on secondary indicia of nonobviousness supported by fact or expert witness declarations.
The petition is required to include all arguments and evidence necessary to carry the petitioner’s burden of showing that there is a reasonable likelihood that at least one challenged claim is unpatentable. In practice, this showing is likely to require a prima facie showing that at least one claim is unpatentable, under the ultimate preponderance of the evidence standard, in the absence of rebuttal by the patent owner, under Rule 42.108(c).
Petitioners will be encouraged to assert all potential bases for invalidity, because of the estoppel consequences of inter-partes review, and the necessity of preserving issues for appeal in the event of an adverse decision by the Board.
The Patent Owner’s Initial Response
Under proposed Rule 42.107, the patent owner’s preliminary response will be so limited as to preclude effective preliminary rebuttal of a strong prima facie case of invalidity based on evidence including expert declarations.
The patent owner’s preliminary response to the petition will be due 2 months after the petition is accorded a filing date, and the proposed rules make it clear that the patent owner will not be permitted to present any testimonial evidence, including the declarations of expert or fact witnesses, in support of the response. Under proposed Rule 42.107(c), the patent owner may not present “new testimony evidence” beyond that of record, and its initial response is limited to “evidence other than testimonial evidence to demonstrate that no review should be instituted.” In many cases the petitioner’s expert evidence cannot be rebutted or effectively challenged, without opposing expert testimony or cross-examination prior to a decision on the petition.
The prohibition against declaration evidence is severe, because under Rule 41.61(c) the patent owner will not be able to rely on data or other technical evidence in the patent specification, without first submitting an additional affidavit of an individual having first-hand knowledge of how the data was generated (i.e., the individual who performed an experiment reported as an example in the specification). Proposed Rule 42.65 requires an affidavit describing any technical test or data from such a test on which a party relies, in order to provide the opponent with the opportunity to cross-examine the declarant, even when the data was earlier presented in a declaration filed during patent prosecution. In the absence of declaration rebuttal evidence, it will often be difficult to respond to a prima facie case of obviousness or anticipation supported by the petitioner’s expert declarations. According to the Practice Guide, cross-examination of the petitioner’s experts will be afforded only after inter partes reexamination is commenced.
The petitioner will thus have a significant evidentiary advantage prior to the decision whether to institute inter partes review. It would be difficult to alter the proposed rules to provide both parties with the opportunity to present expert and fact declarations, and to conduct discovery that could be submitted and considered by the Board in deciding whether to institute a proceeding, within 3 months of the patent owner’s preliminary response.
The Practice Guide envisions preliminary responses as being limited in scope, describing potential responses as including the following grounds:
• The petitioner is statutorily barred from pursuing a review.
• The references asserted to establish that the claims are unpatentable are not in fact prior art.
• The prior art lacks a material limitation in all of the independent claims.
• The prior art teaches or suggests away from a combination that the petitioner is advocating.
• The petitioner’s claim interpretation for the challenged claims is unreasonable.
Apart from issues of standing and claim construction, these rebuttal arguments, along with any secondary indicia of nonobviousness, will often require declaration evidence. A narrowing claim construction is generally precluded by Rule 42.100(b), requiring that a claim shall be given its broadest reasonable construction in light of the specification in inter partes review.
The short period provided for the initial response, and limitations on rebuttal evidence, support the USPTO’s estimate that most well-prepared petitions will be granted.
Mandatory Notices and Discovery from the Patent Owner
There will not be much idle time for the patent owner in the 2 months after a petition is served, after retaining counsel familiar with inter-partes proceedings, analyzing issues of patentability and benefit, including any expert testimony submitted by the petitioner, considering claim construction questions and their effect on existing or potential district court litigation, and preparing the preliminary response, unless it is waived to “expedite the proceeding.”
The proposed rules generally follow interference procedure in requiring early notification of lead and backup counsel, the real party in interest, and related judicial and administrative proceedings that would afffect or be affected by a decision.
In inter partes proceedings in the USPTO, the term “discovery” is used to describe information that must routinely be provided by a party, including exhibits and cross-examination of declarants at the expense of the party relying on the evidence.
“Routine discovery” under proposed Rule 42.51(b) includes the requirement that a party affirmatively disclose “noncumulative information that is inconsistent with a position advanced by the patent owner or petitioner during the proceeding.” This information must be filed “as soon as practicable in a motion identifying supplemental information or as part of a petition, motion, opposition, reply, preliminary patent owner response to petition, or patent owner response to petition.” The party disclosing such inconsistent information “must specify the relevance of the information, including where the information is presented in a document and, where applicable, how the information is pertinent to the claims.”
In the preliminary proceeding phase, the burden of complying with the duty to disclose inconsistent information will generally fall more heavily on the patent owner, who may possess information such as prior art, arguments, declarations or amendments in related applications, inventors’ publications, or statements or evidence submitted in corresponding foreign applications that could be characterized as inconsistent with an argument in support of patentability. The burden of complying with the mandatory disclosure rules, prior to filing a preliminary response to the petition, may be significant, particularly in view of the amorphous scope of the requirement to disclose information that is merely “inconsistent” rather than “material” under Rule 56.
The patent owner will also have to consider carefully the consequences outside the context of inter partes review of identifying information that is “inconsistent” with patentability, because any statement relating to such information is likely to invite scrutiny in district court discovery, if the patent is litigated.
The requirement to disclose “inconsistent” information raises serious issues, since the failure to provide the required disclosure may result in sanctions including attorney fees and judgment in the proceeding. The proposed Rules of Practice indicate that sanctions under Rule 41.12(a) could be imposed for misconduct including the failure to comply with an applicable rule, and state that “an example of a failure to comply with an applicable rule includes failure to disclose a prior relevant inconsistent statement.”
The patent owner may theoretically seek “additional discovery” during the initial 2-month period, with the USPTO’s suggestion that the petitioner’s standing could be a suitable issue. “Additional discovery” requires prior authorization by the Board, based on a showing that it is in the “interests of justice” and in interferences generally requires a motion, opposition, and reply to establish the necessity for extraordinary relief. As the USPTO observes, it is expected to be rarely granted, which has been the Board’s practice in interferences.
Petitioner’s Reply and Supplemental Information
After the patent owner’s initial response to the petition, the petitioner will be permitted to file a reply prior to consideration of the petition. Although the petitioner can move to submit supplemental information relevant to a ground for which the trial has been instituted, this supplemental evidence must be submitted within one month after the date the trial is instituted.
The patent owner’s first opportunity to cross-examine the petitioner’s witnesses and to present its own testimonial evidence will be after the petition is granted and inter partes review commences. The statute requires the presentation, through affidavits or declarations, of any additional factual evidence and expert opinions on which the patent owner relies in support of the response.
If post-grant review is instituted, the patent owner will have 2 months (the default time of Rule 42.120(b)) or 4 months (according to the Practice Guide Scheduling Order) to prepare its response, and a single amendment to substitute one claim for each original claim that is challenged. The response will be the patent owner’s first and possibly its last opportunity to present testimonial evidence to rebut the petitioner’s initial showing.
The patent owner normally will thus have 9 months to prepare its response after service of the petition, but it will not be able to cross-examine the petitioner’s expert and fact witnesses until after the petition is granted, according to the Practice Guide. The limitation on discovery could be an important factor in preparing the patent owner’s responses, including rebuttal testimony of its own expert witnesses. The proposed rules limit the periods for “sequenced” discovery, including the requirement that cross-examination commence after “supplemental” evidence is filed.
The proposed rules also contemplate an initial scheduling conference, and an exchange of the parties’ proposed motions lists, within a month of the decision initiating inter partes review. The initial exchange of motions lists, termed “notices of basis for relief,” has been a central event in interferences. Interference parties have been required to describe each proposed motion and each unpatentabilty contention in sufficient detail to permit the APJ to decide whether to authorize the filing of the motion. It has been notoriously difficult to amend the initial motions list to seek additional relief, in the absence of extraordinary circumstances.
Because the initial identification of a party’s motions in its notice of basis for relief cannot later be expanded or corrected unless the correction would satisfy the stringent “interests of justice” standard, a party’s last opportunity to present its opposition strategy and defenses is likely to be in its notice of basis for relief under Rule 42.21. A party will be limited to filing motions consistent with its notice, and if the notice fails to state a sufficient basis for relief, the relief requested may be denied under Rule 42.21(c). The Practice Guide states that the Board expects to initiate a conference call within about one month from the date of institution of the trial to discuss the scheduling order and any motions that the parties anticipate filing during the trial, based on an accurate motions list filed before the conference.
For this reason, it will be essential in inter partes review for the parties to have fully-developed strategies prior to exchange of the initial motions lists, well prior to the patent owner’s response. A patent owner should be prepared no later than one month after the initiation of inter partes review, to describe its proposed response to the petition, including any proposed amendment of the patent, any additional discovery that it may seek from the petitioner, and any other motion for relief, including consolidation or severance of other USPTO proceedings, motions to file supplemental information, motions for judgment based on supplemental information, motions for observations on cross-examination, motions to dismiss for lack of standing, motions for protective orders, motions to seal, motions to expunge, motions to disclose “inconsistent information,” and motions for judgment for violation of the duty of disclosure.
The Patent Owner’s Single Motion to Amend the Patent
Proposed Rule 42.121 states that the patent owner may file one motion to amend a patent, but only after conferring with the Board. The commentary explains that this does not grant the right to have any proposed amendment entered. A motion to substitute claims may be contested by the petitioner, and may be granted in whole or in part, or denied, in the discretion of the APJ as an “interlocutory” decision subject to review by the Board under an abuse of discretion standard. The statute provides that the patent owner may move to amend the patent by (1) canceling any challenged claim or (2) for each challenged claim, proposing a reasonable number of substitute claims. The Practice Guide makes it clear that the USPTO considers that a “reasonable number” of substitute claims will ordinarily be one claim for each challenged claim. The statute does not refer to amendment or addition of claims, and it is unclear whether the Board will require a patent owner to cancel, or offer to cancel, an original patent claim for each proposed “substitute” claim.
The petitioner will be entitled to “fully respond” to a patent owner’s amendment, including the opportunity to present additional evidence and expert testimony on the patentability of substitute claims.
Although the proposed rules provide for the possibility of a motion seeking leave to make a subsequent amendment, it is unclear how a second amendment can be accommodated in the limited trial schedule, because the petitioner will be entitled to a response and to cross-examine the patent owner’s witnesses in support of the patentability of the newly-amended claims.
The limited period for preparation of the patent owner’s opposition, and the effective restriction of the response to a single amendment, will be significant, particularly in inter partes review proceedings brought during litigation. The cancellation of original claims might result in intervening rights, eliminating past damages for infringement of a substituted claim.
The USPTO estimates that the average cost for preparing a petition for inter partes review will be $46,000, based on 135 hours of attorney time at $340/hour, in addition to the proposed fee starting at $27,200. Because the initial petition is required to present all of the arguments and evidence required to show that it is reasonably likely that at least one challenged claim is unpatentable, any additional costs of making a threshold showing to initiate post-grant review should be limited.
Despite the limitations on the substantive scope of the responsive evidence, the USPTO estimates that the patent owner’s costs of preparing a preliminary response to a petition will be $34,000, based on 100 hours billed at $340.
If the petition is granted, the patentee faces the prospect of losing the challenged patent claims based on the petitioner’s prima facie showing, unless it rebuts the showing with additional evidence and argument not presented in the preliminary response, which was deemed insufficient to avoid institution of inter partes review. The USPTO estimates the cost of an inter partes review to be about $193,000 to each party. If a patent is involved in more than one inter partes review, or in inter partes review and another post-grant proceeding, the additional costs to the patent owner will be substantial.
On the date inter partes review is instituted, the petitioner in theory can rely on its initial petition to carry its ultimate burden, and limit its costs during the trial, at least until it receives the patent owner’s response and evidence. In contrast, the patent owner faces the principal costs of preparing its defense, including expert and fact witness declarations explaining data in the patent and rebuttal declarations, as well as its fees for cross-examining the petitioner’s witnesses and for filing and opposing motions. If the USPTO’s estimate is correct, the patent owner’s costs of opposing the petition after initiation of inter partes review will be about $160,000.
This initial allocation of costs at the commencement of the trial effectively reverses the familiar practice in which “trolling” patentees are able to file infringement complaints, with the expectation of being able to settle for less than the costs of defending the action.
In view of the expected costs for defending the patent in administrative litigation, patentees may elect to settle post-grant oppositions rather than contest validity on an accelerated schedule, under an unfavorable preponderance of the evidence standard, which may well be satisfied if the proceeding is instituted. The parties to an inter partes review are entitled to settle the action, and to maintain the terms of the settlement in confidentiality. The costs of interferences have been a significant factor encouraging settlement, frequently involving a license to the prevailing party’s patent. Post-grant oppositions will similarly encourage licensing of challenged patents.
This preliminary review of the inter partes review procedures is based on the comments and rules provided in the Practice Guide, Proposed Trial Rules, and proposed Inter partes Rules. It is intended to provide only a general overview of issues affecting the parties’ respective burdens during the preliminary and trial phases, and is not a commentary on specific rules, procedures, costs or statutory requirements. The information and analysis may be incorrect or incomplete, and these comments do not necessarily represent my own views as to the correct or desirable interpretation of the statute or rules.
The USPTO has issued proposed general rules governing the conduct of post-grant proceedings, including a Practice Guide for Proposed Trial Rules, and a more detailed proposed Rules of Practice for Trials before the new Patent Trial and Appeal Board. The proposed rules incorporate many requirements and procedures from the current interference rules, including mandatory initial disclosures and motions lists, cross-examination of declarants and “additional” discovery, and expanded sanctions for misconduct, including the failure to follow the applicable rules. The rules governing the new proceedings will include not only the formal rules set forth in new 37 CFR Part 42, but also the Scheduling Order issued by an Administrative Patent Judge and any Standing Order setting forth additional procedural requirements. Interference practitioners will be familiar with many of the procedures and requirements imposed by the proposed rules, including an elaborate motions practice and sequenced discovery of an opponent’s case. The Practice Guide provides a succinct and clear overview of the proposed trial rules, and a useful summary of the policies underlying the new procedures.
The opposition “trial”
The “trial” envisioned by the rules bears little relationship to a court trial proceeding. Under proposed 37 CFR § 42.2 a post-grant opposition trial is the contested case commencing with the decision instituting a post-grant proceeding, including the patent owner’s single response or motion to amend claims, the petitioner’s response and opposition to the amendment, the patent owner’s reply, motions by both parties, and extensive discovery including cross-examination of both parties’ expert witnesses. The decision of the Board will ordinarily be based on a paper record, and evidence under 37 CFR § 42.63 consists of affidavits, deposition transcripts, documents and things. The Practice Guide explains that “The Board expects that most petitions and motions will rely upon affidavits of experts” including initial expert declarations supporting the petition, and the patent owner’s expert testimony responding to the decision instituting the proceeding. Although cross-examination may be required to take place in the presence of an APJ when the Board considers the demeanor of a witness to be critical to assessing credibility, the proposed rules do not contemplate presentation of live witness testimony at the final oral hearing before a 3-APJ panel.
A representative timeline for completing the trial within the one-year statutory period is described in the Practice Guide by the following figure:
The Practice Guide explains this timeline as follows:
Generally, the proceedings begin with the filing of a petition that identifies all of the claims challenged and the grounds and supporting evidence on a claim-by-claim basis. Within two months of notification of a filing date, the patent owner in an IPR, PGR, or CBM proceeding may file a preliminary response to the petition, including a simple statement that patent owner elects not to respond to the petition prior to the institution of a review. The Board will determine whether to institute the requested proceeding within three months of the date the patent owner’s preliminary response was due or was filed, whichever is first.
The Board will enter a Scheduling Order (Appendix A) concurrent with the decision to institute the proceeding. The Scheduling Order will set due dates for the proceeding taking into account the complexity of the proceeding but ensuring that the trial is completed within one year of institution. For example, a Scheduling Order for an IPR might provide a four month deadline for patent owner discovery and for filing a patent owner response and motion to amend. Once the patent owner’s response and motion to amend have been filed, the Scheduling Order might provide the petitioner with two months for discovery and for filing a petitioner’s reply to the response and the petitioner’s opposition to the amendment. The Scheduling Order might then provide the patent owner with one month for discovery and for filing a patent owner reply to petitioner’s opposition to a patent owner amendment.
In addition to these principal events, the proposed rules require initial mandatory disclosure of information including the real parties in interest. 37 CFR §42.8. Although an identification of the real parties in interest has been required in interferences to avoid potential conflicts of interest, in inter partes review and post-grant review the identification of the real party in interest by the petitioner will also affect the scope of estoppel that arises from the opposition proceeding in later USPTO and district court proceedings.
Identification and limitation of issues considered
A noteworthy aspect of the proposed rules is the extent to which proceedings will be actively managed and restricted by the APJ. The proposed rules require an early disclosure of the parties’ intended strategies, including all proposed motions and bases for relief. 37 CFR §§ 42.20-21. The Practice Guide explains that “in instituting a trial, the Board will narrow the issues for final decision by authorizing the trial to proceed only on the challenged claims for which the threshold requirements for the proceeding have been met. Further, the Board will identify which of the grounds the trial will proceed upon on a claim-by-claim basis. Any claim or issue not included in the authorization for review is not part of the trial.”
A petitioner therefore may not be entitled to raise all potential bases of unpatentability in post-grant review or inter partes review, even if they are alleged in the initial petition. As in interferences, the proposed rules provide for an initial “notice of basis for relief” which requires the parties to specify the relief that is requested and each basis for its entitlement to relief. 37 CFR § 42.21. Since any relief must be requested in the form of a motion (§ 42.20), the required notice is similar to the motions list in an interference. In interferences, a party may raise any ground of unpatentability or unenforceability of an opponent’s claims, but the party is required to specify each proposed motion in a notice of basis for relief, which must be authorized by the APJ. If the requirement of prior authorization is similarly applied in post-grant oppositions, the APJ, and not the parties, will determine the scope of the proceeding, and may decline to consider some grounds of unpatentability advanced in the initial petition.
Because the initial identification of a party’s motions in its notice of basis for relief cannot later be expanded or corrected unless the correction would satisfy the stringent “interests of justice” standard, a party’s last opportunity to present its opposition strategy and defenses is likely to be in its notice of basis for relief. 37 CFR §42.21(d). A party will be limited to filing motions consistent with its notice, and if the notice fails to state a sufficient basis for relief, the relief requested may be denied under § 42.21(c). The Practice Guide states that the Board expects to initiate a conference call within about one month from the date of institution of the trial to discuss the scheduling order and any motions that the parties anticipate filing during the trial, based on an accurate motions list filed before the conference.
For this reason, it will be essential for the parties to fully consider and determine their strategies and defenses prior to submission of the notice of basis of relief and initial conference call. A patent owner who fails to identify a proposed motion to amend its claims might be precluded from subsequently filing an amendment responsive to the grounds of invalidity set forth in the petition or decision initiating the opposition. The limitations on motions imposed by the initial notice and authorization of motions by the APJ have been strictly applied in interferences.
Discovery under the proposed rules is extremely limited in comparison with the liberal discovery of an opponent’s case afforded in federal district court. As in interferences, “discovery” in post-grant proceedings under 37 CFR § 42.51 consists of “routine” discovery including the production of exhibits and cross-examination of an opponent’s declarant; “additional discovery” of evidence that is uniquely in the possession of an opponent and that relates to an issue raised by the opponent; and compelled testimony pursuant to a subpoena. Additional discovery must be approved in advance by an APJ, based on a motion showing that the grant of such discovery is in the interests of justice in inter partes review, or that by a showing of good cause in post-grant review. In interferences, additional discovery is rarely granted except for evidence relating to inequitable conduct, inventorship, or derivation, which is directly related to a contested issue and is solely in the possession of the opponent.
In a departure from interference procedure, the proposed rules would require mandatory initial disclosure of “noncumulative information that is inconsistent with a position advanced by the patent owner or petitioner during the proceeding.” 37 CFR § 42.51(b)(3). Furthermore, the party submitting the information must specify its relevance, including where the information is presented in a document and how it is pertinent to the claims. There is little explanation of the scope of this routine “discovery” requirement, except that it is intended to avoid the practice of requests for additional discovery and that it “may differ from the proposed changes to § 1.56.” The proposed Rules of Practice indicate that sanctions under § 41.12(a) could be imposed for misconduct including the failure to comply with an applicable rule, and state that “an example of a failure to comply with an applicable rule includes failure to disclose a prior relevant inconsistent statement.”
The proposed trial rules expand the sanctions that can be imposed on a party for misconduct, to include attorney fees, as well as a broad range of penalties including an order precluding a party from filing a paper or presenting or contesting an issue, an order barring discovery or excluding evidence, an order requiring a terminal disclaimer or the ultimate sanction of adverse judgment in the trial or dismissal of the petition. 37 CFR § 42.12. Misconduct includes misrepresentation of a fact, advancing a misleading or frivolous argument, abuse of discovery and abuse of process, but extends more broadly to encompass “failure to comply with an applicable rule or order in the proceeding” and engaging in “dilatory tactics.” Id. Misconduct may include “actions that harass or cause unnecessary delay or an unnecessary increase in the cost of the proceeding.”
The proposed rules evidently do not limit misconduct to willful misbehavior, if the simple failure to comply with a rule or order in the proceeding can be a basis for imposition of sanctions. Because of the limited period imposed by the statute for completion of a post-grant trial, sanctions for engaging in dilatory tactics, or actions that cause unnecessary delay in the proceedings, may result from actions that would not be exceptional in district court proceedings.
Sanctions have been infrequent in interferences, but under the proposed rules, misconduct that results in a severe sanction such as an award of judgment could also result in a substantial award of an opponent’s attorney fees.