Unfamiliar territory


Robert Greene Sterne examines how the new contested proceedings are redefining the patent landscape.

Petitioners started taking advantage of the new America Invents Act contested proceedings at midnight on September 16, 2012. Three new proceedings became available: inter partes review (IPR), covered business method proceedings (CBM), and supplemental examinations.

This new regime of testing issued US patents at the United States Patent & Trademark Office (USPTO) profoundly changes the patent enforcement, licensing, valuation, and monetization landscape in the US. One goal of the new regime is to allow the expert administrative tribunal – the USPTO – to evaluate the patentability of an issued patent before or while it is being enforced in the courts, ITC, or through arbitration/mediation. The idea is that the agency that issued the legal right is better suited for this determination than the enforcement tribunal. The statute does not require the enforcement tribunal to stay its proceeding. Discretion to stay is accorded the district court judge and the ITC administrative law judge (ALJ). District court judges are split over whether to stay based on the first wave of decisions. ITC ALJs have indicated recently that they will not stay based on the timeliness of their proceedings, but they have not yet addressed the issue in a Section 337 investigation.

Another attribute of the new contested proceedings is speed. By statute, the IPR, CBM, and PGR contested proceedings must be completed with a final written decision in 12 months (up to 18 months in exceptional circumstances) from when trial is ordered. The timeline for the contested proceeding is shown overleaf (Figure 1) in a chart published in the USPTO Trial Guide.

The USPTO predicted there would be approximately one new contested proceeding filed for each calendar day for the first year starting September 16, 2012. The statistics overleaf (Figure 2) show how the actual filings are tracking this prediction as of June 24, 2013:

Once the petition is filed, the patent owner is given the right to file a Patent Owner Preliminary Response (POPR) within about three months. After the POPR is filed or waived, the USPTO rules give the agency up to three months to decide whether to order trial on one or more of the patent claims challenged in the petition based on one or more proposed grounds of unpatentability. Of the 344 contested proceedings filed as of June 24, 2013, the PTAB has ordered:

• 105 trials,

• 93 IPRs, and

• 12 CBMs.

In 15 (13 IPRs, two CBMs) of the 105 trials, one or more challenged claims have not been ordered for trial. In 11 (eight IPRs, three CBMs), the PTAB declined to institute trial for any ground of unpatentability. This demonstrates that the PTAB is holding petitions under strict scrutiny and only allowing through proper challenges to granted patent claims. A final decision has been rendered invalidating a patent under § 101 in the first-filed CBM. The parties stipulated to a condensed schedule, and held oral hearings within a couple months of trial initiation on the single legal issue. Concurrently, the patent owner is challenging the use of § 101 in CBMs – whether it is constitutional under the statute – in an APA action against the USPTO in the District Court for the Eastern District of Virginia. The Court granted the USPTO motion to dismiss. This is one of two currently pending APA actions with the owner challenging the Office over initiation of trial; the other centers on standing and litigation bar issues. The first wave of contested proceedings is working its way through the PTAB trial process. The discovery and hearing framework being used is modeled after, but different from, the legacy patent interference model. Important factors are:

• very limited fact discovery,

• depositions (cross-examinations) of experts used for “testimony” in lieu of live testimony at the oral hearing,

• limited oral hearing of one to two hours akin to an appellate oral argument and not a trial on patentability, and

• no mandatory extensions of time in order to meet the statutory completion deadlines (although parties can stipulate to extensions of some phases).

Questions have been raised in many quarters about whether this very limited proceeding is fair and reasonable, and whether in some respects it violates due process considerations, given the valuable patent rights at stake. Of note, the new contested proceedings can be settled and the proceeding terminated if done early in the process. So far, seven IPRs, but no CBMs, have been settled. In all settled cases, the board has terminated the proceeding. But, the Board has warned that once the trial is ordered, the ability of the PTAB to terminate the trial based on settlement becomes limited. The reason is to protect the public interest since once trial is ordered, the PTAB has determined that one or more challenged claims should be tested for patentability. The question of whether the parties have to submit the settlement agreement to the PTAB has come up in at least two IPRs. Requiring such submission could chill settlements.

Once the PTAB issues its final written decision, which typically will occur 16-18 months after the petition is filed, the estoppels for the particular contested proceeding attach. For IPRs, which are limited to patent and printed publication prior art challenges, the estoppel is broad – “raised or reasonably could have raised.” CBMs have very limited estoppels that only encompass the actual grounds of unpatentability raised.

CBMs are a controversial proceeding because they apply only to patents that are business methods and not technological. However, indications suggest that CBM proceedings under PTAB interpretation may extend to many patents in the computer software arena. There is also discussion on whether to extend the CBM proceeding to all software patents. Thus, the ever changing legal landscape of patentable subject matter is a real threat to all software patents. Preparation and prosecution of these “controversial” inventions is even more critical to surviving a CBM or PGR. The grounds of unpatentability that can be raised in…TO CONTINUE READING THIS ARTICLE PLEASE CLICK HERE


Robert Greene Sterne, Editor-in-Chief, Patent Office Litigation (ThomsonReutersWest)

Patent Office Litigation is the first and definitive treatise on the new contested proceedings. This two volume set is published by ThomsonReutersWest, and is available in updated form electronically on WestLaw. Robert has over 35 years of experience as a practicing patent attorney having founded Sterne, Kessler, Goldstein & Fox P.L.L.C. at 26 years of age. He is recognized as a leading practitioner on the new contested proceedings, re-examination proceedings, patent litigation, and patent monetization. He can be reached at rsterne@skgf.com

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