On December 3 the Federal Circuit will hear oral arguments in two companion appeals of Patent Trial and Appeal Board (PTAB) decisions involving Versata. This follows the Federal Circuit last month hearing oral arguments in the appeal of the first final written decision of an inter partes review (IPR), In re Cuozzo Speed Technologies.
More than 100 PTAB decisions have been appealed. More than half of those have come in the past six months. The USPTO has intervened in about 20 of these. The USPTO steps in to argue in cases where the patent owner and petitioner have settled or where there are cross appeals because some claims have been cancelled while some have been confirmed.
The merits of a final decision finding claims patentable or unpatentable can certainly be appealed. But PTAB practitioners will be closely watching how the Federal Circuit treats these cases because it is not clear at the moment what exactly what else can be appealed.
“There are a lot of other issues that we are interested in finding out whether they can be appealed,” Kathleen Daley, a partner at Finnegan who has experience arguing appeals before the Federal Circuit, told Managing IP. “A lot of them stem from the decision to institute the IPR. The statute says the decision of whether to institute is final and not appealable. The question is can aspects of that institution decision be appealed once you have a final written decision on the merits. That’s where a lot of these questions are coming in connection with the appeals we are seeing.”
These questions include issues such as whether the Federal Circuit can review the PTAB’s decision to institute proceedings in the first place, whether it can review grounds that were not instituted, can it look at whether something is a covered business method or not, can it assess whether something is barred under the 315(b) deadline of filing an IPR within a year of being accused of infringement of a patent, and what the correct standard for claims construction should be.
Lessons from the first IPR appeal hearing
The oral arguments for the first IPR last month had several points of interest.
The USPTO intervened in In re Cuozzo because the patent owner and petitioner settled their dispute. The Office argued that the institution decision is unappealable and unreviewable even where it has been instituted on grounds that were not in the petition. It suggested this issue had already been settled by the Federal Circuit. However, Judge Timothy Dyk pointed out that the Federal Circuit’s previous opinions had involved review of the decision by the PTAB not to institute a trial and not a review of a decision to go ahead with a trial.
This particular appeal addressed whether the PTAB had the authority to institute an IPR for five claims on grounds of unpatentability based on prior art references that had not been raised in the petition for those claims but rather for a different claim.
“A lesson is to at least try to push the grounds of what you can appeal in terms of these institution decisions,” said Daley. “In that case they had argued the USPTO cannot institute on grounds that are not in the petition and that the USPTO had in fact instituted on grounds that were not in the petition. So again that was a question of whether that is an issue the Federal Circuit can even hear.”
One big topic was whether the broadest reasonable interpretation standard used by the PTAB is the correct standard to use for claim construction. “The USPTO says it is, patentees like to say it is not,” said Daley. “That is something the Federal Circuit is going to have to decide. They may not need to decide in any of these upcoming cases but they are going to need to decide it at some point in time.”
The USPTO said that the broadest reasonable interpretation standard is consistent with legislative history and Federal Circuit case law. It is the standard used in patent prosecution and was also used under the old system of inter partes reexamination. However, both of these had adequate opportunity to amend claims, something that has not been the case in PTAB proceedings. The USPTO defended the fact that it has denied all but one of the motions to amend at the oral hearing.
The issues in the first CBM oral hearing
The appeals being heard on December 3 – Versata Development Group v Lee and Versata Development Group v SAP America – challenge the PTAB declaring the 6,553,350 patent invalid in its first final written decision of a covered business method (CBM) review.
Versata is arguing the PTAB lacks jurisdiction to decide the CBM petition, did not have authority to rely on Section 101 as a grounds of invalidity, and improperly ignored the district court’s claim construction and incorrectly employed the broadest reasonable interpretation standard.
Daley at Finnegan, which is representing SAP, noted that a big issue in the appeal is that of waiver and whether petitioners or patent holders have preserved issues raised. This is one of a number of PTAB appeals in which a party has raised an argument in their petition or their preliminary response but did not raise it later in the proceeding.
“The USPTO has taken the position that if you want to preserve an issue you have to raise it after institution,” said Daley. “So the patent owner has to raise it in their preliminary response and the petitioner has to raise it in their response to that. So there is an issue in SAP v Versata where the patent owner didn’t put it in its response after institution and the USPTO has taken the position that that is a waiver.
“The lesson is to remember to make your case at the USPTO in terms of preserving these issues and advancing these arguments towards the ground work for appeal of these different type of arguments other than just the merits.”
The high number of PTAB appeals heading for the Federal Circuit will keep it busy. But Daley is confident the Federal Circuit will be able to cope with the workload, even if the numbers increase.
“I don’t think it will seriously impact the Federal Circuit’s ability to decide these cases,” she said. “I’m not aware of anyone that is really concerned that it is going to put too much of a burden on the Federal Circuit. Perhaps the overall level won’t change because there will be a few less cases from the district courts because they have been stayed. So it may end up evening out somewhat or being a slight increase that the Federal Circuit can handle.”
The Federal Circuit’s influence on stays
It is not only the outcome of PTAB trial that the Federal Circuit will influence. It has also ruled on appeals of denials of motions to stay pending PTAB trials. Last month, the Federal Circuit overturned a Delaware district court denial of a stay pending a covered business method review at the PTAB. The Versata Software v Callidus Software decision was the second reversal of a district court denial of a stay pending a CBM review.
“While we typically review district court decisions on motions to stay for abuse of discretion, the AIA also provides this court authority ‘to conduct more searching review of decisions to stay pending CBM review’… Even under the traditional abuse of discretion standard, the district court’s order denying a stay pending the PTAB’s review must be reversed,” ’ said the Federal Circuit in its decision, from Judges Raymond Chen, Haldine Mayer and Richard Linn.
This follows the Federal Circuit in July ruling the Eastern District of Texas was wrong not to grant a stay pending the conclusion of a CBM review in VirtualAgility v Salesforce.
