The new inter partes review and covered business method patent review procedures have been widely (even wildly) accepted. As the first wave of these new proceedings comes to completion within the statutorily prescribed period and the inevitable appeals ensue, what will this activity mean for the Federal Circuit and those who practice before it? It means the tsunami sirens are sounding, and the wave will come ashore in the near future.
If only half of the IPRs and CBMs instituted to date that have not settled go to appeal, that will be over 250 new cases for the Federal Circuit over the next year. How will the judges of the Federal Circuit (including those having taken senior status) and their support teams handle this surge in volume? How will Federal Circuit judges keep pace with 74 well-staffed Patent Trial and Appeal Board judges? It seems an almost insurmountable task.
First, the statistics. On April 15, 2014, at the first of eight PTAB roundtables hosted by the U.S. Patent and Trademark Office throughout the country, Vice Chief Judge Boalick presented data on PTAB proceedings through April 2, 2014. Those statistics (as updated on Oct. 2) are eye-opening: 1,852 IPR petitions and 234 CBM petitions have been filed. Of the petitions acted upon to date, the PTAB instituted 87 percent of the IPRs in fiscal year 2013 and 75 percent of the IPRs in fiscal year 2014 and 82 percent of the CBMs in fiscal year 2013 and 75 percent in fiscal year 2014 (including joinders). That is 815 instituted trials (with 58 cases involved in joinder).
In terms of technology breakdown for the petitions, 71.2 percent fall in the electrical/computer area, 15.3 percent mechanical, 7.3 percent chemical, 5.8 percent biotechnology/pharmaceutical, and 0.4 percent design. Over the last year, petitions have been filed at an average rate of two to six per day and are currently trending at about five per day.
Anticipating this uptick in activity and keenly aware of the mandate to conclude trials within one year of institution, the PTAB expanded to 183 judges as of April 15, 2014, and hoped to add 52 more by October of 2014. As of mid-August, 74 PTAB judges were devoted to America Invents Act proceedings.
The success of the IPR and CBM procedures, however, may spell trouble at the Federal Circuit. A party not satisfied with the outcome of an IPR or CBM may appeal to the Federal Circuit. Civil actions, such as those offered under 35 U.S.C. § 146 following interferences, are not available for IPRs and CBMs. Put differently, the Federal Circuit is the exclusive route for an aggrieved party following an IPR or CBM.
One outcome is that pendency at the Federal Circuit will likely increase — for all who appear before it. In fiscal year 2013, the median disposition time for all cases from docketing was 10.6 months and 10.1 months for cases resulting from patent office proceedings. Notably, patent office proceedings accounted for only 11 percent of the Federal Circuit’s intellectual property appeals (including 2 percent for trademarks), 36 percent from district courts, and 1 percent from the U.S. International Trade Commission. As of Aug. 1, 2014, there were 156 patent office proceedings pending at the Federal Circuit. Adding 250 new IPR/CBM cases will almost triple the Federal Circuit’s number of patent office proceedings.
Another outcome may be that the Federal Circuit will be forced to combat this increase in volume by relying more heavily on Federal Circuit Rule 36 — the infamous (to practitioners who want to understand the basis for decision) “Per Curiam” decision. Rule 36 permits the court to enter judgment of affirmance without opinion “when it determines that any of the following conditions exist and an opinion would have no precedential value: ... (c) the record supports ... judgment on the pleadings; (d) the decision of an administrative agency warrants affirmance under the standard of review in the statute authorizing the petition for review; or (e) a judgment or decision has been entered without an error of law.”
Due to the volume of PTO appeals the Federal Circuit may soon be facing and its ability to call upon Rule 36, parties to IPRs and CBMs may want to keep in mind the following:
Things To Be Aware Of During the PTAB Proceeding
1. Realize the Federal Rules of Evidence generally apply in IPRs and CBMs.
Care about those rules. Pay close attention to issues such as foundation, authentication and hearsay. Should your opponent object to your evidence (and be very aware of the deadlines for objecting and serving supplemental evidence), be honest with your team about whether you should supplement your evidence. When you reach the Federal Circuit, the record will be closed, and you will not have a second chance to enter evidence you could have made part of the record while before the PTAB.
2. Provide sufficient evidence to support your case.
This sounds obvious, but many practitioners fail to support each and every assertion with actual evidence, as opposed to mere attorney argument. Do not be conclusory. Have your experts address each issue and support their conclusions in a detailed and meticulous way.
3. Be precise and complete with your evidence citations.
Getting a PTAB pleading 90 percent done is not too painful, but going from 90 percent to 100 percent is — especially due to page limits. On several occasions, the PTAB’s precursor noted that “[j]udges are not like pigs, hunting for truffles buried in briefs.” See, e.g., Anderson v. Eppstein, 59 U.S.P.Q.2d 1280, 1287 (B.P.A.I. 2001) (citing United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991)). Give the PTAB a detailed and complete roadmap to reach the result you desire.
4. Periodically review Federal Circuit Rule 36 and make sure the record you are creating satisfies at least one of those categories for affirmance.
Make sure you keep your eye on the standard of review and the details of the law upon which you rely.
5. Do not hold back.
Unlike in civil actions pursuant to 35 U.S.C. § 145 following an ex parte appeal, an appeal from an IPR or CBM will be based upon the record before the PTAB. In view of that, as well as the uncertainty associated with estoppel, parties should present all of their evidence.
If You or Your Adversary Appeal To the Federal Circuit
1. If claim construction is a key issue, highlight “reasonable” and the latter portion of the controlling language.
The current standard is that a “claim in an unexpired patent shall be given its broadest reasonable construction in light of the specification of the patent in which it appears.” 37 C.F.R. §§ 42.100(b), 42.300(b). These aspects of claim construction before the PTAB may have a great impact on the case.
2. Focus on the PTAB’s standard and the standard of review.
The default evidentiary standard to be used by the PTAB is a preponderance of the evidence. 37 C.F.R. § 42.1(d). Obviousness (in play for both IPRs and CBMs) and enablement (in play for only CBMs) are legal conclusions based upon underlying findings of fact. See, e.g., In re Kao, 639 F.3d 1057, 1065 (Fed. Cir. 2011); In re Morsa, 713 F.3d 104, 109 (Fed. Cir. 2013). Anticipation (in play for both IPRs and CBMs) and written description (in play for only CBMs) are questions of fact. See, e.g., In re Rambus, 694 F.3d 42, 46 (Fed. Cir. 2012); In re Bimeda Research & Dev. Ltd., 724 F.3d 1320, 1323 (Fed. Cir. 2013). Eligibility under 35 U.S.C. § 101 (at play only in CBMs) is a question of law and is reviewed de novo. See, e.g., In re Bilski, 545 F.3d 943, 951 (Fed. Cir. 2008).
The Federal Circuit will review the PTAB’s ultimate legal conclusions without deference, and its underlying factual determinations for substantial evidence. Id. “Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” In re Kumar, 418 F.3d 1361, 1366-67 (Fed. Cir. 2005). Be aware that “where two different, inconsistent conclusions may reasonably be drawn from the evidence in [the] record, an agency’s decision to favor one conclusion over the other is the epitome of a decision that must be sustained upon review for substantial evidence.” In re Jolley, 308 F.3d 1317, 1329 (Fed. Cir. 2002). Again, focus on the “reasonable mind might accept” and “may reasonably be drawn” aspect of these standards and provide specific citations to evidence demonstrating the reasonableness (or lack thereof) of the PTAB’s findings.
3. Have a theme and prioritize your arguments.
The PTAB is charged with handling proceedings in a way that secures their just, speedy, and inexpensive resolution. See 37 C.F.R. § 42.1(b). In so doing, the PTAB often groups and pares issues and that approach may prove helpful during the appeal. If a given issue will prompt the outcome you seek, focus on that and give it the attention and explanation necessary.
Due to the popularity of IPRs and CBMs and the likelihood of appeal, it is important to realize while in an IPR or CBM that you are functionally fighting two battles — the one at hand and the one likely to follow. Be mindful of the record you create and be sure to pause and consider how your evidence will be reviewed.