Discovery and Fact Investigation: New Patent Office Procedures under America Invents Act

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1 2013 Korea-US IP Judicial Conference (IPJC) Seminar 1 Discovery and Fact Investigation: New Patent Office Procedures under America Invents Act Nicholas Groombridge

2 Discovery in District Court Litigations Federal Rule of Civil Procedure 26(b)(1) sets out scope of discovery: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense.... For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. Federal Rule of Civil Procedure 26(b)(2)(C) provides limits on discovery, including if judge determines that: the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues. As a practical matter, discovery in district court litigations is very extensive. 2

3 Discovery in District Court Litigations Expense of discovery has risen along with exponential increase in electronic data, including for example, vast quantities of . E-discovery recognized as driving unnecessary expense, creating issue that should be addressed. Chief Judge Rader of the Court of Appeals for the Federal Circuit at the Eastern District of Texas Judicial Conference in September 2011: State of patent litigation: NEEDS IMPROVEMENT! In the electronic age, discovery procedures designed for the 19 th and 20 th centuries just do not work for complex patent litigation. [L]ess than one document in ten thousand of those produced in patent litigations actually made their way onto the trial exhibit list[.] Introduced unofficial model e-discovery order developed with the Federal Circuit Advisory Council to control the cost and efficiency of electronic discovery. Several districts (including E.D. Tex. and D. Oregon) have adopted some variation of the model order, but discovery generally remains broad and expensive. 3

4 Discovery in International Trade Commission Investigations The wording of the ITC rules regarding the scope of discovery closely follow the Federal Rules. For example, Commission Rule (b) provides that: a party may obtain discovery regarding any matter, not privileged, that is relevant to... [t]he claim or defense of the party seeking discovery or to the claim or defense of any other party or that appears reasonably calculated to lead to the discovery of such evidence. The ITC is governed by its own Rules, however, and is not bound by interpretations of the Federal Rules. The Administrative Law Judges have often noted that the scope of discovery has been held to be broad. As a practical matter, for example, objections to discovery on relevance grounds are difficult to maintain, and will be ruled upon with an eye towards the public interest in ensuring a complete record in an investigation. (Unfair Competition and the ITC, 4:16) Typically compressed schedules also lead to broader discovery. 4

5 New Patent Office Procedures under the America Invents Act The America Invents Act of 2011 created new procedures in the USPTO, including: Post-grant review (PGR); Transitional post-grant review for covered business method patents (CBM); and Inter partes review (IPR). Provide new opportunities for third parties to challenge the validity of patents and designed to operate quickly (12-18 months). New procedures are designed to replace inter partes reexaminations in the USPTO. Heard by panels of three administrative patent judges from the Patent Trial and Appeals Board (PTAB), which replaces the BPAI Consistent with past USPTO procedure in inter partes reexaminations, discovery is limited in scope, especially when compared with discovery available in district court or the ITC. Limited discovery presents both risks and benefits to a potential patent challenger that must be considered. 5

6 Post-Grant Review Availability of Post-Grant Review: Patents with an effective filing date of March 16, 2013 or later Petitioner must file within first nine months after the issue date Can be based on any grounds of invalidity (except best mode), including novelty, nonobviousness, written description, and patentable subject matter eligibility. Real party in interest must be identified. Creates estoppel in subsequent district court litigation for any ground that was raised or reasonably could have been raised during the PGR. The transitional post-grant review program for covered business method patents is similar in procedure, including as to discovery limits, to post-grant review. Significant difference is that CBMs can be brought against any business method patent by any party that is sued or charged with infringement of that patent. 6

7 Inter Partes Review Availability of Inter Partes Review: Any patent that issued at least nine months before the request is filed Must be filed within one year of any complaint against the petitioner alleging infringement of that patent Invalidity can only be based on patents and printed publications. Creates estoppel in subsequent district court litigation for any ground that was raised or reasonably could have been raised during the IPR. 7

8 History of Discovery in the USPTO USPTO Rules of Practice regarding contested cases have been consistent prior to the AIA allowing only limited discovery. Rationale because the other party was typically in possession of any evidence on which it intended to rely in the proceeding and would serve such evidence on the patent applicant as part of its initial discovery obligations. (As opposed to district court litigation, where a case would typically be fully developed after it was filed, not before.) Two types of additional discovery were allowed: Discovery of documents and things learned of during cross-examination of an opposing party s witnesses or during that party s own period for rebuttal testimony. Discovery that was determined by the BPAI to be in the interest of justice in light of the facts of a given case. The BPAI would not order additional discovery unless the request was properly limited and contained an explanation of how the discovery sought was related to issues in the proceeding. 8

9 Discovery under AIA Procedures Discovery under the new procedures created by the AIA are similarly still quite limited, especially as compared to the other venues in which a patent may be challenged. General requirement is for specific requests narrowly tailored to obtain information actually relevant to the proceeding. Although the new procedures have not been around for long, there are already several decisions laying out the groundwork for discovery limits. Consistent with the statutory provisions and legislative intent of the AIA, there is a strong public policy to limit discovery in administrative trial proceedings, as opposed to the practice in district court patent litigations that have broad discovery. Bloomberg Inc. v. Markets-Alert Pty Ltd., CBM , Paper No. 32 at 2 (PTAB, May 29, 2013) 9

10 Differences in Discovery between Post Grant and Inter Partes Reviews Discovery between the new procedures are closely related, but there are some key differences driven by the differences in scope. Standards: Inter partes reviews continue to use an interest of justice standard. Post grant reviews, by statute, use the slightly lower good cause standard. Good cause requires a showing of a specific factual reason to justify the discovery. Under the interest of justice standard, the PTAB may also look at other factors, including whether the moving party was fully diligent in seeking discovery and whether there would be undue prejudice to the non-moving party. Limits: In post grant reviews, limited to evidence directly related to factual assertions advanced by either party in the proceeding. In inter partes reviews, limited to depositions of witnesses submitting affidavits or declarations and what is otherwise necessary in the interests of justice. 10

11 Important Case Regarding Discovery under AIA Garmin International v. Cuozzo Speed Technologies Garmin Int l Inc. v. Cuozzo Speed Techs. LLC, IPR , Paper No. 26 at 6-7 (PTAB, Mar. 5, 2013) represents a clear statement of the PTAB s analysis in determining when to grant additional discovery in an IPR. Five factors to consider (abridged from original): 1. More Than A Possibility And Mere Allegation The party requesting discovery should already be in possession of evidence tending to show beyond speculation that in fact something useful will be uncovered. 2. Litigation Positions And Underlying Basis The Board has established rules for the presentation of arguments and evidence. A party may not attempt to alter the Board s trial procedures under the pretext of discovery. 3. Ability To Generate Equivalent Information By Other Means Information a party can reasonably figure out or assemble without a discovery request would not be in the interest of justice to have produced by the other party. 4. Easily Understandable Instructions The questions should be easily understandable. 5. Requests Not Overly Burdensome To Answer Requests should be sensible and responsibly tailored according to a genuine need. 11

12 Important Case Regarding Discovery under AIA Garmin International v. Cuozzo Speed Technologies In Bloomberg Inc. v. Markets-Alert Pty Ltd., CBM , Paper No. 32 (PTAB, May 29, 2013), the PTAB again considered the Garmin factors, only in the context of the standard for additional discovery in a post grant review (and by extension, a covered business method review under the same standard). PTAB acknowledged the differences in terms of discovery between inter partes reviews and post grant reviews, including that good cause is a lower standard. Nonetheless, found the analysis in Garmin to be helpful. Adopted the five factors from Garmin with only minor modification, particularly as to the first factor, finding that a good cause showing requires the moving party to provide a specific factual reason for expecting reasonably that the discovery will be useful. 12

13 Benefits and Costs of AIA Procedures Benefits Obvious benefit is lower cost due to reduction in unnecessary discovery Also likely to obtain decision on validity much sooner than in district court Argue to experienced administrative patent law judges Costs Careful consideration of the effect of estoppel is required Particularly true with PGR, where the estoppel is much broader, potentially extending to all invalidity arguments There may be invalidity arguments that could be developed through the broad discovery allowed in district court, but that could not be developed through the more limited discovery allowed in a PGR 13

14 The full text of important cases regarding discovery under the AIA can be found at: 14