Federal Circuit falling behind as PTAB appeals stack up

At the AIPLA annual meeting last week, Erika Arner of Finnegan Henderson Farabow Garrett & Dunner gave an overview of PTAB appeals at the Federal Circuit. She said that appeals from the USPTO take an average of 10-11 months from the date of docketing to disposition. This may be creeping up, however.

“I understand the court has a little bit of a backlog right now,” she said. “We have some cases that have been ready for calendar for several months that have not been calendared yet. I don’t know if it is true or not, but the word on the street that I have heard at least is they are a little bit behind schedule. Usually it is pretty quick to your argument and then a few months usually for an opinion. We have had a couple take more than a year after argument but typically a year is a good rule of thumb for an appeal at the Federal Circuit.”

Appeal statistics as of October 2016

Approximate number of Federal Circuit decisions on FWDs: 124 Affirmances: 99 (80%)  - Rule 36 Affirmances: 70/99 (70% of Affirmances) Changed outcomes: 20 (16%)  - 13 Remands (full remand, remand-in-part)  - 3 Reversals (2.6% vs. 16% for district court cases)  - 4 Mixed (affirmed-in-part, reversed-in-part) Source: Finnegan

Arner gave statistics for PTAB appeals. As of October, there had been 124 Federal Circuit rulings on appeals of final written decisions, with an "affirmance rate that is a bit better than it used to be," of 80%. The Board has changed outcomes in 20 cases – 16% of the total number of Federal Circuit decisions – with 13 remands, three reversals and four mixed outcomes.

“I’ve heard that some of the judges when the AIA was being signed into law said, ‘Well that’s going to be the rest of my career on the bench!’ For some of them that is probably turning out to be true.”

Of the 99 affirmances, Rule 36 affirmances have been given in 70 – or 70% – of them.

“If you are on the winning side that is awesome – it is a quick, certain win for your client,” says Arner. “It is tough to be on the losing side of that one, to have invested the time in the briefing and the argument and then not even have the court explain.”

In an interview with Managing IP, Arner said it is unfortunate that so many appeals are being handled with Rule 36s.

“These trials are new and many of these cases involve issues that are unsettled in the law, so for the court to affirm them without any reasoning makes it a little bit hard to clarify places that maybe need it,” she says. “The Rule 36s are a little bit unfortunate but I don’t think that will change, given the court’s work load and the number of trials that are at the PTAB.”

One recent Rule 36 decision involved covered business method (CBM) patents that were specifically cited during the debate in Congress about the America Invents Act (AIA). Arner represented Fidelity Nation in DataTreasury v Fidelity National Information Services. Christian Hurt of Nix Patterson & Roach represented DataTreasury.  

“What is interesting about the case is that these are the patents that Congress called out by name and number when they wrote the covered business method provision of the AIA,” says Arner. “The DataTreasury patents are what Congress called the most notorious business method patents. So it’s significant that Congress saw this problem, they addressed it with the CBM provision, and the Patent Office and now the Federal Circuit carried out Congress’s intent to cancel those patents.”

Senator Charles Schumer in particular targeted the patents for criticism.

Arner says the patents “single themselves out”. She adds: “In their brief at the Federal Circuit they tout that they have been in force against dozens and dozens of banks and other financial services companies, that they extracted hundreds of millions of dollars in licensing and damages, that they have licensed the vast majority of the top 25 banks in the US under these patents because they were so broad and sweeping, and they held the whole industry hostage and the patent owner has bragged about that.”

Oral arguments in DataTreasury v Fidelity National Information Services took place on October 5. A Rule 36 affirmance was issued on October 13, with the Federal Circuit issuing three other opinions in related appeals that it said were “moot in light of our order” in DataTreasury v Fidelity.

The two patents invalidated by the PTAB were US Patent Numbers 6,032,137 and 5910988, both titled “Remote image capture with centralized processing and storage”.

The CBM transitional programme targeted patents like the DataTreasury ones written at a broad, general level. Congress was particularly worried about patents that were issued after the State Street Bank case in 1998.

This is becoming less of an issue, however. CBM petition filing has dropped this year. Only seven CBM petitions were filed in the third quarter, down greatly on the 36 in the second quarter and the lowest figure since the second quarter of 2013.

“They are still happening but CBMs have always been a small percentage of the overall PTAB workload,” says Arner. “By design, they are very specific subset of patents. Not only do they have to be a certain type of patent to meet the definition of being a CBM but they also have to have been asserted. The law requires the petitioner be charged with infringing them, so it was a targeted area that Congress was carving out for CBMs. So it makes sense it was a smaller percentage.”

In her AIPLA presentation, Arner discussed some important appeals, including the Supreme Court's Cuozzo v Lee decision. The Supreme Court backed the USPTO's use of the broadest reasonable interpretation in claim construction in that case. But it also touched upon motion to amend practice in the decision.

Some Federal Circuit cases of interest

Claim construction: Cuozzo Speed Technologies v Lee Prohibition on adopting new grounds: In re Magnum Oil Tools Constitutional challenge: MCM Portfolio v Hewlett-Packard Co Scope of estoppel: Shaw Indus Group v Automated Creel Sys Motions to amend: In re Aqua Products and Prolitec v ScentAir

“The court sort of skirted that issue, it wasn’t particularly raised in that way,” said Arner. “So it was maybe a guidepost to a future case, and I think now we may have that case already working its way up.”

Arner was referring to the In re Aqua Products appeal. Two questions have been presented in the case regarding the burden of persuasion or production and whether the Board can sua sponte raise patentability challenges. The panel decision in the case affirmed the Board's denial of Aqua's motion to substitute three claims of a patent related to automated swimming pool cleaners. The panel concluded "the Board did not abuse its discretion by denying Aqua's motion to amend.

Arner said: “One of the cases the panel had relied on at the time was Prolitec v ScentAir. An en banc petition for that was stayed. So sometime next year we may have some more guidance from the en banc court on motions to amend practice which could change things significantly.”

Some other recent appeal decisions of note are: In re Magnum Oil Tools, which addressed the prohibition on adopting new grounds; MCM Portfolio v Hewlett-Packard, which addressed constitutional challenges; and Shaw Industry v Automated Creel, which addressed the scope of estoppel.