Highlights from the PTAB Forum 2016

Managing IP held the inaugural PTAB Forum 2016 at the Convene Times Square in New York in May.

The keynote speech was by Nathan Kelley, then-acting PTAB chief judge. He discussed the Board's record on motions to amend (you can read our reporting on that here).

Below are some of interesting quotes, statistics and tidbits from each of the panel discussions at the forum. This is not intended as a comprehensive report of the sessions but rather to give a flavour of the discussions.  

Sterne Kessler’s Eldora Ellison revealed people are starting to use post-grant reviews (PGRs), with 23 filed by the day of the event (as of the end of May, 28 PGRs had been filed). Half of those have been in the life sciences space.

The institution rate for PGRs is much higher than it is for IPRs, at around 90% for cases and just under 90% for claims. “So they are getting good traction so far,” said Ellison. She added the recent Shaw Industries v Automated Creel Systems case at the Federal Circuit may make challengers more willing to bring PGRs because it suggested the scope of estoppel may not be as large as feared.

Sterne Kessler’s Lori Gordon said of the recent PTAB rule changes that “one of the big concerns among practitioners is how the declaration rule is going to play out in front of the PTAB and when and how often the PTAB is going to authorise replies.”

Gordon said that in the covered business method (CBM) area an interesting case was Blue Calypso v Groupon, which addressed what makes a patent eligible for CBM and what are “technological inventions” in the context of CBM patent reviews. “CBM eligibility is in front of the Federal Circuit a lot so I expect we’ll see a lot of refinement of that over the next year,” said Gordon.

Judge Scott Boalick provided some tips for going before PTAB judges. ”It is surprising when you see briefs that use up the page counts or word limit seemingly just because they can put that many words in – they feel a need to put that many words in and it clutters up what could be otherwise a clear argument or lack of focus,” he said.  He added it helps to focus on fewer grounds but do a more thorough job of explaining why the ground are meritorious rather a scattershot approach.

Brian Biddinger of Ropes & Gray gave an overview of the biggest changes to the PTAB rules. These are: testimonial evidence with preliminary response; Phillips claim construction for expiring patents; page limits replaced by word counts for key papers; and Rule 11-type certification.

On adding testimony with the preliminary response, Biddinger said: “I’m not sure it changes a whole lot. We have always said you need to put a lot of care and attention into it because it is your whole case. I’m not sure that the fact the patent owner can come back with some testimonial evidence in their preliminary response will have much impact.”

The change to word counts received a lot of attention. PTAB Judge Rama Elluru said lawyers are very creative so the Board was getting some very cleverly formatted papers under the previous page limits. “There were some times when the formatting didn’t look like Times Roman. We also had paralegals looking for argument in claim charts, because that would mean you are getting away with more pages than allowed. That was a lot of resources going toward making sure page limits were being enforced.”

With the shift to word counts, the question of what happens to words in pictures comes up because word processing programmes don’t count them. “It shouldn’t be a problem, assuming that parties don’t take pictures of images with big blocks of arguments underneath and put that in paper. If parties do abuse the rule, I think we will be policing that,” Elluru said.

Biddinger commented: “The word count is supposed to be comparable to the pages. We think there is actually a slight reduction from the word count in terms of available volume now.” But he added that being able to put arguments in claim charts is a big help and greater use of figures will help lay out arguments more clearly.  

Then-acting PTAB Chief Judge NathanKelley (he has since returned to his position as deputy general counsel of IP law and solicitor in the USPTO’s Office of the Solicitor following David Ruschke taking over as PTAB chief judge) noted the Federal Circuit had twice said the PTAB must adequately explain its own reasoning for a decision. “The reason I’ve struggled with that a little bit is our decisions are subject to a kind of scrutiny I don’t see district court decisions getting subjected to. I see the Federal Circuit saying, ‘Why did the Board say that, what were they thinking, what was in the minds of those judges?’ When the Federal Circuit challenges a district court ruling they say things like, ‘Where did you put that in the record?’”

Kelley continued: “They are really treating us like an administrative body, and they really want to know what we think, not necessarily what the arguments were that were presented to us.”

Scott McKeown of Oblon McClelland Maier & Neustadt noted that the decisions heading to the Federal Circuit now are not as high quality as the first few decisions, which addressed “some of the lowest hanging fruit” and on which the Board spent a lot of time. “They had some of the best judges at that time, not to imply that the judges have fallen off in quality, but there is a bigger pool now. Necessarily when there is a bigger pool the quality will vary and necessarily there is only so much time in a day so the decisions heading up to the Federal Circuit don’t have the same amount of polish maybe as some of the earlier ones.”

As a result, McKeown expects the Federal Circuit to issue a lower percentage of one sentence Rule 36 affirmances of PTAB decisions. “The real story at the Federal Circuit at least for this year is a little bit of a roll back of the Rule 36 practice, just by nature of the amount of workflow coming up and the amount of time the agency has to put into these decisions – they [the PTAB] simply had more time a year or two back.” McKeown noted January’s Cutsforth v Motivepower decision in which the Federal Circuit said “the Board did not adequately describe its reasoning for finding the claims obvious.” He said: “It is not necessarily that the judges were wrong, but what has become the trend from what I’ve seen is that Motivepower is cited in every case. But ultimately will it be a winner when you get remanded? Maybe not.”

Justin Oliver of Fitzpatrick Cella Harper & Scinto revealed that rate of denial of IPR petitions is rising over time – 13.5% in fiscal year 2013, 25.8% in fiscal year 2014 and 34.7% in fiscal year 2015.

Oliver revealed the statistics at the end of 2015: 59.5 of IPR challenged claims were found unpatentable/cancelled and 40.5% upheld; 85.3% of IPR instituted claims were unpatentable/cancelled and 14.7% were upheld.

Darryl Towell of Docket Navigator noted that institution rate for claims challenged under Section 102 was 52%, for Section 103 was 57%, and for Section 101 was 67%.

Final written decisions outcomes for claims challenged under 101 in CBMs is a near death sentence, with 96% found unpatentable, 0.6% found patentable and the rest cancelled by the patent owner. (This compares with 67% of 101 challenges being favorable or partially favorable to patent challenger in district court.)

Towell noted a 20% institution rate for claims challenged under Section 112.

Charles Macedo of Amster Rothstein & Ebenstein asked whether judges are happier for three separate petitions to be filed if required or if everything is filed in one petition. PTAB Judge Rama Elluru responded: “What is easiest if it is a well-argued petition, so if it is one or three doesn’t matter.”

Elluru noted that initial conference calls were no longer needed, with the PTAB having four years of experience to draw on now. However, she added: “With the new rules I suspect we will have some initial conference calls again.”

Macedo said that considerations in patent owner responses are: address points raised in the petition and institution decision; use the concessions of the declarant; offer own your declarant; make clear the explanation of position; include potential demonstratives; and that arguments not raised in the patent owner response are deemed waived.

 

David Steffes of Mastercard extolled the virtues of IPRs.“I’m a fan of IPR – it is just another arrow in quiver in terms of being able to protect your client. If an IPR is available to me, I’m going to try to work one up and file one, and I’m going to try to get a stay.” Steffes said one situation where it might not seek an IPR is if litigation is “in a fast jurisdiction with a decent non-infringement position. This is a situation where the data can be very helpful. We look at the jurisdiction and the judge.”

Dori Hines of Finnegan gave an overview of the Clearlamp v LKQ case in the Northern District of Illinois in March, which found the defendant/IPR petitioner not estopped under 35 USC § 315(e)(2) from raising in the district court litigation prior art that the court found was not reasonably available during the prior IPR proceeding. “It is really quite an interesting decision,” she said. “It will be interesting to see if the Federal Circuit has a chance to rule on it.”

David Steffes noted that an earlier panelist had seemed a “nervous Nelly about estoppel”. “I’m not,” he said. “I think it is quite manageable. Where I do become a nervous Nelly is on the PGR front, because I’m not sure what a “diligent searcher” is. Not too many PGRs have been filed at this point.”

Elizabeth Ferrill of Finnegan gave data on instituted claims survival rate by tech center. The rate for “biotech and org chem” is 44.5% – much higher than the second-placed “communications” with 19.9%. “Biotechs were a little late to the party,” she said, adding: “The survival rate is massive.”

Esther Hong of Stifel gave an overview of investor perspectives of bio/pharma IPRs. She noted that the first IPR filed by the Coalition for Affordable Drugs in February last year caused a 9.7% drop in Acorda’s share price and when it was instituted a 7.8% drop. In contrast, an IPR filed in September last year caused a 3.0% rise in Jazz’s share price and when it was instituted excluding key claims the share price rose 5.5%.

Hong concluded: “Investors are reading the petitions and filings and have a better grasp of what is substantive. Investors have become savvier with IPRs and are no longer overreacting. Investors are paying attention.”

Atabak Royaee at Boehringer Ingelheim Pharmaceuticals said “IPR seems like a coin toss at this point”. He noted that they are not as quick or cheap as they seem, saying they cost $400,000-$1.5 million for the proceeding and after appeal the bill is more like $500,0000-$2 million. “You are also talking about three years. It is a good thing for us because it is becoming more predictable.”

Royaee noted that “a nice trend is only 10% of IPRs filed against pharmaceutical companies are ones that challenge active ingredient drugs. That’s good news for us.” He said it means companies can concentrate on patent families, and can improve prosecution and make sure it is consistent. “It is becoming more and more important that US and Europe prosecution is combined,” he said.

Stephen Maebius of Foley & Lardner was asked whether the Rule 11 change in the new PTAB rules would have an effect on third parties trying to profit from IPRs. He pointed to the Board refusing to sanction Kyle Bass. “The Board has said there is nothing sanctionable about somebody trying to profit from IPRs,” he said.

Cases discussed by Gene Lee and Colin Sandercock of Perkins Coie included Cuozzo v Lee. The first question presented to the Supreme Court in the case is whether claim construction at the PTAB should be the broadest reasonable interpretation rather than their plain and ordinary meaning. The session discussed Microsoft v Proxyconn at the Federal Circuit in June last year, which said even under the BRI, “[t]he PTO should also consult the patent’s prosecution history in proceedings in which the patent has been brought back to the agency for a second review.”

The second question presented in Cuozzo is whether the decision to institute an IPR proceeding is judicially unreviewable. The session pointed to the Synopsys v Mentor Graphics decision at the Federal Circuit that said IPR institution, non-institution, and partial-institution decisions are unreviewable, and Versata v SAP which decided whether a CBM patent is reviewable.

David Killough of Microsoft questioned the perception that the PTAB’s invalidation rates are high. “High compared to what? It has substantial invalidation rates but that’s because it’s self-selecting.” He noted that in the UK, for example, the survival rate is about 40%. “I would argue [the PTAB invalidation rate] is not high at all but really in line with what you see in rest of industrialized world.