Inter Partes Review: A New Tool for Challenging Patent Validity. Dorothy Whelan and Karl Renner

Inter Partes Review: A New Tool for Challenging Patent Validity By Dorothy Whelan and Karl Renner Principals and Co-Chairs of Post-Grant Practice, Fish & Richardson Gwilym Attwell Principal, Fish & Richardson

I. Introduction The America Invents Act ( AIA ) introduced several new procedures for challenging patent validity in the United States Patent and Trademark Office ( USPTO ). One of those procedures is Inter Partes Review ( IPR ), which became available on September 16, 2012 and replaced Inter Partes Reexamination ( IPRx ). In this paper, we will discuss the basic features of IPR and contrast it with IPRx. We will also summarize salient features of the trial process associated with IPR. Finally, we will discuss applications of IPR in the life sciences and chemical fields. II. IPR Basics The relevant statutory provisions governing IPR are set forth in 35 U.S.C. 311-319. IPR is conducted by the Patent Trial and Appeal Board ( PTAB ), a newly created group of administrative judges that replaced the Board of Patent Appeals and Interferences ( BPAI ). The procedure is discussed below in Section III of this paper. 35 U.S.C. 316(a)(11) requires IPR to be completed no later than one year after the date on which IPR is ordered, with extensions of up to 6 months available for good cause. Once the PTAB issues its final decision, the losing party may appeal directly to the Federal Circuit. 35 U.S.C. 319. In contrast, IPRx was conducted by patent examiners in the Central Reexamination Unit ( CRU ) of the USPTO. The IPRx process was not time-limited and often took several years. In addition, the losing party had to appeal first to the BPAI and then, if necessary, to the Federal Circuit. Any person, other than the patent owner, may file a petition for IPR. In the case of patents examined under the first to invent rules (i.e., patents filed prior to March 16, 2013), the petition may be filed at any time after the patent issues. For patents examined under the first to file rules (i.e., patents filed on or after March 16, 2013), the petition may be filed at any time after 9 months from the issue date. This 9 month window corresponds to the eligibility period for post grant review. In contrast to IPRx, which was limited to patents filed on or after November 29, 1999, IPR is available for all patents, regardless of filing date. Although the category of patents eligible for IPR is expansive relative to IPRx, there are important limitations on the availability of IPR related to co-pending litigation involving the patent being reviewed. First, IPR is barred if, prior to filing the IPR petition, the petitioner has filed a declaratory judgment action challenging the validity of the patent. 35 U.S.C. 315(a)(1). In addition, the IPR petition must be filed within one year after the petitioner has been served with a complaint for patent infringement. 35 U.S.C. 315(b). However, a suit filed by a patent owner against a petitioner and then dismissed voluntarily without prejudice does not trigger the one year time period for filing an IPR petition. Macauto U.S.A. v. BOS GmbH & KG, slip op. IPR2012-00004 (PTAB Jan. 24, 2013). In addition, joinder of unchallenged claims may be permitted after the one year anniversary of service if an initial petition was filed prior to the one year anniversary. Microsoft Corp. v. Proxyconn, Inc., slip op. IPR 2013-00109 (PTAB Feb. 25, 2013). The grounds for challenging patent validity under IPR are limited to patents and printed publications, just as in IPRx. However, the standard for initiating IPR is different from IPRx. In IPR, the petitioner must demonstrate a reasonable likelihood that the petitioner will prevail with respect to at least 1 of the claims challenged in the petition. 35 U.S.C. 314(a). IPRx, in 1

contrast, required the requester to demonstrate the existence of a substantial new question of patentability (the SNQ standard). The PTAB s recent decision in Macauto U.S.A. v. BOS GmbH & KG, slip op. IPR2012-00004 (PTAB Jan. 24, 2013) illustrates the differences between the two standards. The IPR review petition in Macauto was based upon multiple references, three of which had formed the basis of an ex parte reexamination that the petitioner had previously filed against the same patent. Macauto at 17. In the ex parte reexamination, the CRU confirmed the patentability of all claims over the same three references that were used as a basis for challenging the patent in the IPR petition. Id. Seeking a different result through IPR, the petitioner argued that during the ex parte reexamination, the CRU panel of examiners gave undue weight to two declarations in confirming patentability of the claims. Id. The petitioner did not offer any expert declarations to support its arguments. Id. at 19. In evaluating whether the petitioner was reasonably likely to succeed, and thus whether to grant the IPR petition, the PTAB conducted an independent review of the ex parte examination record, and agreed with the petitioner that the CRU examiners had improperly relied upon declarations in confirming patentability (emphasis added): We have reviewed the declarations and agree with Petitioner that they should not have been given determinative weight by the Examiner. Turning first to the Hicks declaration, we disagree with the conclusion that Knowles is not relevant art to the 291 patent. We conclude that Knowles is analogous art because it is directed to a similar problem of retracting the wheels of a piece of luggage to make it more compact for storage. We further disagree with the Hicks analysis in that it attacks references individually when the rejection was based on the combination. Finally, we disagree with the Hicks approach of hypothesizing that a complete[] redesign of Cherng (a rationale that was adopted in part by the Examiner) would be required to add retractable wheels. The Zimmerman Declaration, which purports to demonstrate commercial success, is unpersuasive chiefly for its failure to establish a nexus between the alleged value to car makers or the commercial sales and the claimed invention. * * * In summary, we are not required by statute to reject a Petition based upon the fact that certain arguments or art were previously considered by the Office, and after reviewing the reexamination, we decline to do so in this case. See 35 U.S.C. 325(d) (quoted supra). The record before us is not the same as that previously before the Office, and we are in any event not persuaded by the declarations previously submitted in the reexamination that apparently determined the outcome. Id. at 17-19. The PTAB went on to scrutinize the petitioner s arguments for unpatentability and ultimately granted the petition on some, but not all, of the grounds that the petitioner proposed. The 2

grounds included one of the three references considered during the prior ex parte proceeding. See id. at 19-26. The PTAB s willingness to conduct a thorough de novo analysis of prior Patent Office proceedings reveals an important practical difference between the reasonable likelihood of success standard governing institution of IPR review and the SNQ standard governing institution of ex parte reexamination. Although the latter could be based upon previously considered references, it compelled challengers to produce evidence showing a new technological teaching or showing the references in a new light. The emphasis was on the newness of the grounds. If not new, examiners did not evaluate the prior record to determine whether or not the correct decision had been reached on the merits because those were not new questions. Moreover, under the SNQ standard, a request that failed to include new evidence in support of its positions, such as new expert declarations, was likely to be denied. The Macauto decision suggests that IPR may present additional opportunities for challenging validity in the Patent Office, particularly on the basis of references that the Office had previously considered. Another important provision, common to IPR and IPRx, is the estoppel that applies to a challenger who fails to satisfy its burden of proving unpatentability of a challenged patent claim. However, the particular features of the estoppel differ. In IPRx, estoppel applied to any ground that the requester raised or could have raised. It did not apply until a final decision of unpatentability had been rendered, which the USPTO has interpreted as meaning after all appeals had been exhausted. In addition, while the estoppel applied to district court actions, it did not apply to ITC actions. The estoppel also did not bar subsequent ex parte reexamination filings. The estoppel in IPR is different in several significant aspects. First, it is the final written decision from the PTAB, which comes within 1 year after the petition is granted, that triggers estoppel. 35 U.S.C. 318(a). Thus, the estoppel applies much more quickly than it did in IPRx. Second, estoppel applies to any ground that the petitioner raised or reasonably could have raised during IPR. At this stage, the meaning of reasonably could have raised is still unclear. It could well be that, in practice, there is no real difference between reasonably could have raised and could have raised. Nevertheless, its inclusion suggests that there might be exceptions available under IPR that were not available under IPRx. Another important difference between estoppel in the IPR and IPRx contexts is that, in the case of IPR, the estoppel ultimately precludes the petitioner from filing a subsequent IPR or ex parte reexamination request. 35 U.S.C. 315(e)(1). With respect to civil actions, the estoppel for IPR applies to both district court actions and to ITC actions, and further applies to both pending and prospective actions. 35 U.S.C. 315(e)(2). Finally, although not provided in the statute, the rules that the USPTO adopted governing IPR suggest that a patent owner who loses an IPR challenge may be subject to estoppel, perhaps in connection with pending continuation applications. 37 CFR 42.73(d)(3) provides: A patent applicant or owner is precluded from taking action inconsistent with the adverse judgment, including obtaining in any patent: (i) A claim that is not patentably distinct from a finally refused or canceled claim; or 3

(ii) An amendment of a specification or of a drawing that was denied during the trial proceeding but this provision does not apply to an application or patent that has a different written description. The estoppel in an IPR proceeding, like estoppel in IPRx, applies to the petitioner or the real party in interest or privy of the petitioner. 35 U.S.C. 315(e)(1). Neither the statute nor the rules defines real party in interest or privy. The USPTO s Trial Practice Guidelines state that control or the opportunity to control the proceeding is an important clue. However, the ultimate issue of whether an entity constitutes a real party in interest or privy remains to be decided. Fees for IPR are considerably higher than they were for IPRx and are set forth in 37 CFR 42.15(a)(1)-(4). There is a single fee structure for IPR: $9K: Inter partes review request fee - Up to 20 claims $14K: Inter partes review post-institution fee - Up to 15 claims $200/claim: Inter partes review request of each claim in excess of 20 $400/claim: Inter partes post-institution request of each claim in excess of 15. The post-institution fees represent fees that are paid upfront but are refunded in the event that the petitioner's request for IPR is denied. The following hypotheticals illustrate calculation of the fees: A. Petition includes 20 claims. Petition is granted as to all claims. Total fee: $9K (request fee) + $14K (post-institution fee) + $2K (5 x $400 post-institution request fee for claims in excess of 15) = $25K. B. Petition includes 25 claims. Petition is granted as to all claims. Total fee: $9K (request fee) + $14K (post-institution fee) + $4K (10 x $400 post-institution request fee for claims in excess of 15) + $1K (5 x $200 request fee for claims in excess of 20) = $28K. C. Petition includes 20 claims. Petition is completely denied. Total fee paid upfront = $25K, as calculated for hypothetical (1). Refund = $14K (post-institution fee) + $2K (5 x $400 post-institution request fee for claims in excess of 15) = $16K. Therefore, net total fee = $9K. D. Petition includes 25 claims. Petition is completely denied. Total fee paid upfront = $28K, as calculated for hypothetical (2). Refund = $14K (post-institution fee) + $4K (10 x $400 post-institution request for claims in excess of 15) = $18K. The $1K (5 x $200 request fee for claims in excess of 25) is not refunded. Therefore, net total fee = $10K. E. Petition includes 20 claims. Petition is granted as to 10 claims but denied as to 10 claims. Total fee paid upfront = $25K, as calculated for hypothetical (1). Refund = $2K (5 x $400 post-institution request fee for claims in excess of 15). Therefore, net total fee = $23K. F. Petition includes 25 claims. Petition is granted as to 10 claims but denied as to 15 claims. Total fee paid upfront = $28K, as calculated for hypothetical (2). Refund = $4K (10 x $400 post-institution request for claims in excess of 15) = $4K. The $1K (5 4

x $200 request fee for claims in excess of 25) is not refunded. Therefore, net total fee = $24K. In addition to filing fees, the overall cost of IPR is projected to be higher than IPRx, in part because of the availability of discovery (discussed below). Furthermore, the speed of the proceedings mean that the costs will be frontloaded for both petitioner and patent owner. It is possible to settle an IPR proceeding at any time before the PTAB issues it final written decision. 35 U.S.C. 317. If the parties settle, no estoppel attaches to the petitioner. Id. This is significantly different from IPRx, which proceeded even if the parties agreed to settle. III. Trial Before the PTAB As noted above, IPR is conducted before a tribunal of administrative judges who are members of the PTAB. The process is called a trial, although it differs significantly from a trial in a civil action. The following timeline summarizes the trial: We will breakdown the proceeding into three phases for purposes of our discussion: (A) Pre- Trial, (B) Trial, and (C) Post-Trial. A. Pre-Trial The Pre-Trial phase includes the preparation and filing of the IPR petition, followed by the Patent Owner s preliminary response. 1. The Petition The rules governing the content of the petition are set forth in 37 CFR 42.104. Important features to note are the fact that the petition must provide claim constructions and identify both the challenged claims and basis for challenging the claims. The petition must be double-spaced, in 14-point font or larger, except for the claim charts, which may be single-spaced. 37 CFR 5

42.6. There is a 60 page limit for the petition, exclusive of pages dedicated to the table of contents and table of authorities. Declarations and exhibits do not count towards the page limit. If a petitioner wishes to exceed the page limit, he must file a motion to waive the page limits. The standard for granting the motion is whether it is in the interests of justice. 37 CFR 42.24. In practice, this is a very difficult standard to satisfy. It is also possible to file multiple petitions to cover additional claims and/or grounds, thus affording more than 60 pages per challenged patent, if desired. A good rule of thumb in preparing the petition is to view it as a trial brief, rather than a set of invalidity contentions. The page and format limitations significantly restrict the number of claims and number of grounds that can be raised. As a result, petitioners generally are better off using the limited space to develop their best positions fully. Two PTAB decisions illustrate this point: Synopsys, Inc. v. Mentor Graphics Corp., slip op. IPR2012-00041 (PTAB Feb. 2, 2013) and Liberty Mutual Ins. Co. v. Progressive Casualty Ins. Co., slip op. CBM2012-00003 (PTAB Oct. 25, 2012). Synopsys represents the only instance to date where the PTAB denied an IPR petition in its entirety. In Synopsys, the petitioner declined to propose or offer evidence of specific constructions for any terms in the claims at issue, opting instead to urge that the claims be given their ordinary and customary meaning. Synopsys at 5. However, the PTAB deemed the meaning of one of the terms (the independent clock signal limitation ) to be critical in determining whether the prior art references disclosed the particular limitation. Id. at 5-6. The patent owner, in its patent owner s statement, argued for a meaning that distinguished the petitioner s prior art. Id. at 6. The PTAB performed its own claim construction analysis and agreed with the patent owner, finding that the patent owner s construction undermined the petitioner s arguments for unpatentability. See id. at 6-7. At this stage of the proceedings there was no mechanism available to the petitioner for establishing a competing construction. See id. at 7. Thus, by not proposing a construction for a key claim term in its initial petition along with argument and evidence supporting the construction, the petitioner left itself defenseless when the patent owner proposed a different construction. In addition, the PTAB considered the petitioner s substantive arguments for unpatentability and found them lacking. The petitioner raised grounds for unpatentability under both 102 and 103 based upon three different references. With respect to the 102 grounds, the PTAB criticized the petition on the ground that neither the text nor the claim charts explained how individual elements found in the prior art references were arranged as recited in the claims. Id. at 11-12. The PTAB also criticized the claim charts because they did not clearly map claim limitations to the prior art references. Id. at 15-17. As a result, the PTAB held that the petitioner had not established a reasonable likelihood that the claims were anticipated. Id. at 13, 16, and 17-18. The PTAB also dismissed the petitioner s arguments based on obviousness. In its petition, the petitioner offered obviousness as an alternative to anticipation. However, the only explanation of the obviousness grounds that the petitioner provided stated that to the extent not anticipated by the reference the claims would have been obvious and each challenged claim element would 6

have been obvious. Id. at 13-15, 16, and 18. The PTAB dismissed these conclusory statements as insufficient to demonstrate a reasonable likelihood that the claims were obvious. Id. at 14, 16, and 18. The PTAB s dismissal of the petitioner s substantive arguments demonstrates that the PTAB is closely scrutinizing arguments and supporting evidence for unpatentability and is holding petitioners to a high standard higher, perhaps, than the standards previously seen in the early stage of inter partes and ex parte reexamination. In particular, while it may be acceptable to include obviousness grounds as alternatives to anticipation grounds, petitioners should be prepared to present a full-blown obviousness analysis based on the Graham factors. Liberty Mutual involved a covered business method review, rather than IPR. However, the principles enunciated in the case apply equally to IPR regarding the contents of the petition. In Liberty Mutual, the PTAB set forth a framework by which it would limit the number of redundant grounds of rejection that may be sustained in patent trials. The decision is important because the PTAB declared its authority to eliminate redundant grounds of rejection from patent trials. Indeed, the PTAB declared redundant grounds unworthy of consideration. Liberty Mutual at 2. The petitioner in Liberty Mutual filed a petition for covered business method patent review of claims 1-20 of U.S. Patent No. 8,140,358. The petition included 422 total grounds of rejection based on 10 references. In evaluating the many grounds for rejection in this petition, the PTAB determined there existed numerous redundant grounds [that] would place a significant burden on the Patent Owner and the Board, and would cause unnecessary delays. Id. As a result, the PTAB took the opportunity to note that multiple grounds, which are presented in a redundant manner by a petitioner who makes no meaningful distinction between them, are contrary to the regulatory and statutory mandates, and therefore are not all entitled to consideration. Id. The PTAB identified two types of redundancy in the petition: (1) horizontal redundancy and (2) vertical redundancy. Horizontal redundancy exists where a plurality of prior art references are applied not in combination to complement each other but as distinct and separate alternatives. Vertical redundancy exists where the petition asserts an additional prior art reference to support another ground of unpatentability when a base ground already has been asserted against the same claim without the additional reference, and the petitioner has not explained what the relative strengths and weaknesses of each ground are. The PTAB articulated two methods for handling horizontal and vertical redundancies. If any one ground can be determined to be better from all perspectives, Petitioner should assert the stronger ground and not burden the Patent Owner and the Board with the other. Id. at 12. Alternatively, if the petitioner requires multiple grounds to be sustained with regard to the same claim, the petitioner must set forth a clear description in the petition explaining why the grounds are not redundant. 2. The Patent Owner s Preliminary Statement The Preliminary Statement is an opportunity for the patent owner to establish why the petition should not be granted. It is due within 3 months of the date on which the patent owner was 7

served with the IPR petition. See 37 CFR 42.107 for rules governing the Patent Owner s Preliminary Statement. Although testimonial evidence is generally not permitted, the patent owner nevertheless can raise both formal objections (e.g., statutory bars) and substantive objections. The Synopsys case, discussed above, illustrates the use of this Preliminary Statement to defeat a petition based upon claim construction grounds. The petitioner cannot reply to the Preliminary Statement as a matter of right, which can work to the patent owner s advantage. B. Trial The trial phase begins with a decision on the petition. The determination whether or not to institute IPR is final and nonappealable. 35 U.S.C. 314(d). Although either party can challenge the decision, the challenge is limited to requesting rehearing on grounds believed to have been misapprehended or over looked. 37 CFR 42.71(c). The standard of review applied to the request is abuse of discretion, which typically is difficult to satisfy. The petition decision, assuming it grants the petition at least in part, is accompanied by a Scheduling Order that sets forth key deadlines governing the trial. In addition, the patent owner may begin discovery as soon IPR is initiated. As shown in the timeline, discovery is sequenced, with each party provided with respective discovery periods. Discovery is limited in PTAB trials, particularly in contrast to discovery conducted in civil actions. 37 CFR. 42.51(b)(1) defines categories of routine discovery to which a party in an inter partes or post grant review proceeding is entitled to receive without receiving prior authorization from the PTAB. These categories are: (1) production of exhibits cited in a paper or testimony ( 42.51(b)(1)(i)); (2) cross-examination of opposing declarants ( 42.51(b)(1)(ii)); and (3) non-cumulative information that is inconsistent with a position advanced during the proceeding ( 42.51(b)(1)(iii)). According to the PTO s Patent Trial Practice Guide, [r]outine discovery places the parties on a level playing field and streamlines the proceeding. It represents the extent of discovery to which the parties are entitled in the absence of agreement between the parties or PTAB authorization. In Garmin International Inc. v. Cuozzo Speed Technologies LLC, slip op. IPR2012-00001 (PTAB Mar. 5, 2013), the PTAB clarified the metes and bounds of routine discovery permitted in patent trials before the PTAB, and set forth standards for determining when a party s request for additional discovery would be granted. The decision is important because it illustrates the limited nature of discovery available in patent trials, and highlights the differences between PTAB and district court proceedings. In Garmin, the patent owner proposed a number of interrogatories and document requests, as well as the deposition of a corporate representative similar to a 30(b)(6) deposition in district 8

court. Garmin at 2-4. The PTAB disagreed with the patent owner s attempts to characterize these requests as falling within the definition of routine discovery, and further denied the patent owner s motion for additional discovery based upon these requests. Under the guise of routine discovery pursuant to 37 C.F.R. 42.51(b)(1)(i), the patent owner sought production of not only the patent prior art references included in the petitioner s petition for inter partes review, but also the corresponding file histories for those patents. Id. at 3. The PTAB rejected the patent owner s request, holding that the rules only required production of the patents themselves because the petitioner did not rely upon the file histories in its petition. Id. The PTAB also noted the general availability of file histories, pointing out that the patent owner could have readily obtained the file histories on its own if it had wanted to review them. Id. The patent owner also attempted to categorize its requests for discovery, including the requests for file histories, as information relating to inconsistent positions under 42.51(b)(1)(iii). The PTAB rejected the patent owner s characterization, reasoning that the patent owner s requests encompassed more than information inconsistent with a position that the petitioner had advanced, and contrasting these requests with the narrow class of information contemplated under the rules: Routine discovery under 37 C.F.R. 41.51(b)(1)(iii) is narrowly directed to specific information known to the responding party to be inconsistent with a position advanced by that party in the proceeding, and not broadly directed to any subject area in general within which the requesting party hopes to discover such inconsistent information. Cuozzo s attempt to label very broad discovery requests as narrowly tailored routine discovery is misplaced. Id. at 4. The PTAB s statements clarify that routine discovery under 37 C.F.R. 41.51(b)(1)(iii) is not a broad license for a party to uncover information in the possession of the opposing party that may be inconsistent with a position that the opposing party has taken. Because the patent owner s discovery requests did not qualify as routine discovery, the PTAB turned to whether the patent owner nevertheless had demonstrated that it was entitled to the additional discovery. 35 U.S.C. 316(a)(5) and 37 CFR. 41.51(b)(2) allow a party to seek additional discovery, but further require the requesting party to demonstrate that the requested discovery requested is necessary in order to advance the interest of justice. In Garmin, the PTAB emphasized that in inter partes review, discovery is limited as compared to that available in district court litigation. Limited discovery lowers the cost, minimizes the complexity, and shortens the period required for dispute resolution. Id. at 5. The PTAB then defined five criteria for determining whether a request for additional discovery is in the interest of justice. The five criteria are: 1. More Than a Possibility and Mere Allegation The mere possibility of finding something useful, and mere allegation that something useful will be found, are insufficient to demonstrate that the requested discovery is necessary in the interest of justice. The party requesting discovery should already be in possession of evidence tending to show beyond speculation that in fact something useful will be uncovered. 9

2. Litigation Positions and Underlying Basis Asking for the other party s litigation positions and the underlying basis for those positions is not necessary in the interest of justice. The Board has established rules for the presentation of arguments and evidence. There is a proper time and place for each party to makes its presentation. 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. In that connection, the Board would want to know the ability of the requesting party to generate the information without need of discovery. 4. Easily Understandable Instructions The questions should be easily understandable. For example, ten pages of complex instructions for answering questions is prima facie unclear. Such instructions are counterproductive and tend to undermine the responder s ability to answer efficiently, accurately, and confidently. 5. Requests Not Overly Burdensome to Answer The requests must not be overly burdensome to answer, given the expedited nature of Inter Partes Review. The burden includes financial burden, burden on human resources, and burden on meeting the time schedule of Inter Partes Review. Requests should be sensible and responsibly tailored according to a genuine need. Id. at 6-7. After analyzing the patent owner s requests, the PTAB denied the patent owner s motion for additional discovery, primarily on the basis of Factor (1). Id. at 7 and 16-17. Factor (1) is the most significant of the five factors, and represents the greatest departure from the standards that apply in district court discovery. The PTAB explained the standard as follows, differentiating it from the standard for relevance in district court discovery: The essence of Factor (1) is unambiguously expressed by its language, i.e., the requester of information should already be in possession of a threshold amount of evidence or reasoning tending to show beyond speculation that something useful will be uncovered. Useful in that context does not mean merely relevant and/or admissible. In the context of Factor (1), useful means favorable in substantive value to a contention of the party moving for discovery. Id. at 7. Note the PTAB s requirement that the requester already be in possession of a threshold amount of evidence or reasoning tending to show beyond speculation that something useful will be uncovered. Judging from how the PTAB applied this requirement in Garmin, the interests of justice standard appears to establish a very high bar for motions seeking additional discovery. In Garmin, most of the patent owner s requests related to objective evidence of nonobviousness specifically, commercial success, long-felt need, failure of others, and copying. In several instances, the PTAB pointed out the patent owner s failure to demonstrate how its 10

discovery of information relating to these factors, if obtained, would be favorable to the patentability of its claims. For example, the PTAB noted that the patent owner, as part of its threshold showing, failed to demonstrate nexus between the alleged commercial success and the features of the claimed invention. Id. at 8-9. With respect to failure by others, the PTAB observed that the patent owner failed to provide evidence that others, besides the petitioner, had tried and failed, without which discovery of petitioner s failure would have little probative value. Id. at 9. As for copying, the patent owner submitted a declaration from the inventor describing a telephone call with one of the petitioner s lawyers after the inventor had discovered that petitioner was selling a device similar to its patented devices. Again, the PTAB held that this evidence fell short of the threshold showing: The above-quoted testimony establishes, at best, only that a Garmin lawyer had evaluated Cuozzo s patent and determined that Garmin s devices did not infringe. It does not even establish that Garmin was aware of Cuozzo s patent prior to making its navigation devices having a speed limit alert feature. Even assuming infringement of Cuozzo s claims under review by Garmin s devices that is not evidence of copying. Garmin might well have independently conceived of and developed the invention. Id. at 11-12. The PTAB s evaluation of the patent owner s evidence for purposes of a making a threshold showing more closely resembles the standards for evaluating relevance in the context of admissibility at trial, rather than the much lower standard required in district court litigation to support a discovery request. With the exception of Factor (4), the PTAB likewise held that the patent owner had failed to satisfy the remaining factors governing whether the additional discovery it sought was in the interest of justice. Id. at 13-16. Regarding Factor (3) Ability to Generate Equivalent Information By Other Means, the PTAB reasoned that the patent owner, on its own, could have obtained evidence of long-felt need and nexus by conducting its own market surveys or by obtaining opinions of its own experts. Thus, according to the PTAB, it was not necessary to obtain the additional discovery from the petitioner. Id. at 13-14. With respect to Factor (5) Not Overly Burdensome to Answer, the PTAB noted that the total cost estimate for the additional discovery ranged from approximately $50,000 to $80,000, an amount it regarded as unduly burdensome. Id. at 15. The PTAB s decision in Garmin should be viewed in the context of the PTAB s mandate to complete patent trials within one year of a decision on the petition. The PTAB, in fact, explicitly made this point in the Garmin decision: [I]n inter partes review, discovery is limited as compared to that available in district court litigation. Limited discovery lowers the cost, minimizes the complexity, and shortens the period required for dispute resolution. There is a one-year statutory deadline for completion of inter partes review, subject to limited exceptions. 35 U.S.C. 316(a)(11); see also 37 C.F.R. 42.100(c). What constitutes permissible discovery must be considered with that constraint in mind. Id. at 5-6. 11

Against this backdrop, parties should assume that in the absence of agreement between the parties, discovery largely will be limited to routine discovery, and even that will be narrow in scope relative to district court discovery. The discovery phases of the trial are conducted by way of motions and conference calls with the PTAB judges. All parties participate in the conference calls. With the exception of motions to seal and motions filed with petitions, prior authorization from the PTAB judge is required to file a motion. Requests for rehearing, motions to exclude evidence, and observations on crossexamination require prior authorization but are automatically granted. An important feature of IPR is the ability for both parties to protect confidential information via protective orders. 37 CFR 42.54. The parties may craft their own protective order or use the PTAB s default form. The patent owner may amend the claims during the trial. However, only one amendment is allowed as of right. 37 CFR 42.121. The amendment must respond to a ground of unpatentability involved in the trial, and cannot enlarge the claims or introduce new matter. Id. If the amendment proposes to introduce new claims, [t]he presumption is that only one substitute claim would be needed to replace each challenged claim. Id. The doctrine of intervening rights applies to amended and substitute claims. 37 CFR 42.73(d)(1). Once briefing is complete, either party may request an oral hearing. 37 CFR 42.70. Observations to date suggest that the hearing is more akin to hearings previously conducted before the BPAI in IPRx proceedings. Each side presents its arguments and is subjected to questioning from the presiding judges. No live testimony is expected. C. Post-Trial After the oral hearing, the PTAB issues a written decision on the petition. At that point, either party can appeal to the Federal Circuit. 35 U.S.C. 141 and 319. Alternatively, either party can request rehearing by the panel within 30 days of the written decision. 37 CFR 42.71. The written decision also triggers the estoppel provisions set forth in 35 U.S.C. 318. IV. IPR in the Life Sciences and Chemical Areas There are a number of potential uses for IPR in the context of the life sciences and chemical fields. One such use is in connection with patents related to diagnostics and medical devices, where a number of IPR petitions have already been filed. Representative cases include Nuvasive v. Warsaw Orthopedic, IPR2013-00206 and IPR2013-00208 (medical device) and Ariosa Diagnostics v. Isis Innovation Ltd., IPR2012-00022 (diagnostics). IPR may be particularly effective where the challenge is based upon obviousness. In a number of prior IPRx and EPRx proceedings, the USPTO has proven to be a hospitable forum for challenges based upon obviousness. Recent PTAB decisions on IPR petitions suggest that the PTAB is as well. In 12

addition, to the extent that a diagnostics patent is subject to attack under 35 U.S.C. 101, this ground would still be available in district court to challenge validity even if the IPR were unsuccessful because it is not a ground that the petitioner could have raised in IPR. Another potential application of IPR is in the pharmaceuticals area. When a generic drug manufacturer wishes to enter the market with a generic version of a branded drug product, it files an Abbreviated New Drug Application ( ANDA ). The ANDA includes a statement ( Paragraph IV certification ) that the patent or patents covering the drug and listed in the FDA s Orange Book are invalid, unenforceable, and/or not infringed. If the ANDA filer successfully challenges the patent(s) in district court, it receives a 180 day exclusivity period in which to market the drug. Subsequent filers, however, are not eligible for this exclusivity period. Consequently, they may have an interest in invalidating the branded drug company s patents quickly and at a lower cost than district court litigation. IPR may be attractive tool for these companies. Currently, there have been at least two IPR petitions filed by so-called second filers challenging the validity of patents held by branded drug manufacturers: (1) Apotex Inc. v. Alcon Pharmaceuticals Ltd., IPR2013-00012 and (2) Ranbaxy Laboratories Ltd. v. Vertex Pharmaceuticals Inc., IPR2013-00024. Both are pending and involve obviousness-based challenges. V. Conclusion IPR may be a useful tool, in appropriate circumstances, for patentability challenges in the life sciences and chemical tools. Patent owners must be alert to this possibility, understand the tool, and adjust prosecution and litigation strategy accordingly. VI. Resources The following resources available through Fish & Richardson are useful for practitioners who wish to understand IPR, as well as other USPTO-based tools for challenging patent validity: Fish & Richardson web sites: (1) Post-Grant for Practitioners: http://www.fr.com/post-grant-for-practitioners/ (2) General: http://www.fr.com/post-grant-practice/ (3) IPR: http://www.fr.com/reexam-services-post-grant-ipreview/ (4) PGR: http://www.fr.com/reexam-services-post-grant-pgreview/ (5) Rules governing post-grant: http://www.fr.com/post-grant-practice/ USPTO sites: (1) AIA Main:http://www.uspto.gov/aia_implementation/index.jsp 13

(2) Inter Partes: Inter Partes: http://www.uspto.gov/aia_implementation/bpai.jsp 14