Patent owners have long called for the change proposed by the USPTO last week for the Patent Trial and Appeal Board (PTAB) to use the Phillips standard for claim construction. But it is questionable they would benefit much from it.
The USPTO announced proposed rulemaking to change from the PTAB using the broadest reasonable interpretation (BRI) standard for construing unexpired and proposed amended patent claims to the Phillips standard applied in Article III courts and International Trade Commission (ITC) proceedings.
The USPTO also proposed to amend the rules for PTAB trials to add that the USPTO will consider any prior claim construction determination concerning a term of the claim in a civil action, or an ITC proceeding, that is timely made of record in an inter partes review, post-grant review or covered business method proceeding.
Be careful what you wish for
Scott McKeown, partner and head of the PTAB group at Ropes & Gray at Washington DC, believes the proposed claim construction change is not a win for patent owners. “The Phillips change was initially held up as this great thing for patent owners, but I am not sure it is,” said McKeown at the Managing IP PTAB Forum in Palo Alto on May 8.
The proposal came shortly after the Supreme Court’s SAS Institute decision stipulated that the PTAB must institute all or none of the claims challenged in a petition, halting the PTAB’s practice of partial institution in some cases. These two developments will make it harder for patent owners to argue against a stay in district court pending a PTAB proceeding.
Previously, the fact the PTAB was using a different claim construction standard and not all the claims in dispute may be assessed by the PTAB meant a district court judge would have been more tempted to press on with the case.
“You could say, first of all a motion should probably not come in until the institution decision, the reason being we may have some claims that are shaking out and no matter what happens we have to go to trial on them,” said McKeown. “Well, we won’t have that in a lot of circumstances any more. Then you are left standing in front of district court saying, ‘All of my claims are in [PTAB] trial and by the way this proceeding now uses Phillips but we should keep going here anyway.’ That doesn’t make any sense.”
This means district courts are more likely to grant stays and the PTAB will be construing claims within six months of a petition being filed. In effect this means the Markman claim construction hearing will come earlier in disputes.
McKeown warns the claim construction assessment at the PTAB also may not be in patent owners' favour.
“The hope is, ‘If I get a Phillips construction at the PTAB it will be this nuanced construction I am accustomed to in the district court.’ I don’t think you’ll see that either,” said McKeown. “If the PTAB is your entire Markman and they are not giving you the nuanced constructions that you get in district court, ultimately what you are left with is that the only people this will help are those patent owners that already have a Markman decision that they can leverage at the PTAB, and the Board is left to either adopt it or argue why they shouldn’t adopt it.
"It may be one of those things where you should ultimately be careful what you wish for because it makes the system all the more attractive to say we are just going to wait to see what happens there.”
The UPTO said its goal is to implement a fair and balanced approach, providing greater predictability and certainty in the patent system. It noted a study finding that 86.8% of patents at issue in AIA trial proceedings also have been the subject of litigation in the federal courts.
Many PTAB petitioners are not happy about the proposed change. At the Managing IP PTAB Forum, Kim Schmitt, managing counsel in the litigation group at Intel, said her company has been against changing to the Phillips standard. Intel is a frequent petitioner at the PTAB.
“We think BRI is appropriate. Because the patent owner can always amend, and that may become even easier, so if you don’t like the breadth of construction you can fix it.”
Schmitt added: “The interesting thing about the proposed rule is that it builds in a presumption of validity, which is extremely unusual. So what we see here is a situation where the PTO will be taking on a presumption of validity, basically construing the claims to preserve validity, which comes out of the district court Phillips standard. It is actually going further than Cuozzo would have done if it had come out the other way.”
The USPTO is accepting written comments on the proposed rulemaking up to July 9. Schmitt urged the audience to read it closely and provide comments. On the same panel, PTAB lead administrative patent judge Matt Clements agreed. “In its current form, the rule doesn’t say one way or another whether it will apply retroactively. So stakeholders should come forth with a view in comments,” he said.
On a different panel at the Managing IP event, lead administrative patent judge Kevin Turner, commented: “I am assuming it would apply, and this is my personal opinion, to all pending cases. There might be certain cases where it might not, maybe post final written decision it would be bound by whatever claim construction there is and there may be other certain circumstances.”
In the vast majority of cases the Phillips construction would not have led to a different outcome than BRI did. Turner said the PTAB now does not take the district court’s claim construction standard as advisory because it is applying a different standard, but that could change with the harmonisation of standards. “On the flip side, does it mean district courts are going to be looking at the claim construction that is done in the trials and be bound by them? Knowing district court judges, they are probably not going to feel bound by that but maybe they will.”
Chris Douglas, partner at Alston & Bird, said that the change would mean patent owners should harmonise their arguments at the PTAB and in district courts. “If the rule goes through, as a patent owner you are going to want to make the same arguments, develop the same record in the PTAB as you did in the district court and hope they go the way you want,” he said.
In addition, the change may add to the increasing popularity of ITC filings.
“If you are looking to monetise any of your patents I think more folks will be driven to the ITC because there you have a race to Markman,” said McKeown at Ropes & Gray. “If you can get the Markman at the ITC, and it is that nuanced Markman you are accustomed to, you could then go and take that to PTAB and leverage it. The ITC isn’t typically staying cases for the PTAB. So for me these changes are shifting the litigation burden over to the ITC, or at least should be.”
