How to Handle Complicated IPRs: Obviousness Requirements in Recent CAFC Cases and Use of Experimental Data OCTOBER 2017 nixonvan.com
District Court Lawsuit Statistics Number of New District Court Cases Per Year 11% increase 19% decrease 15% increase 22% decrease Lowest in 5 years! Rush to beat AIA s new joinder rules? Rush to beat Form 18 pleading requirements? 2
District Court Lawsuit Statistics Top District Court Venues Per Year 3
ITC Section 337 Investigation Statistics Number of New Section 337 Investigations Instituted at the ITC Per Year 4
CAFC Patent Decision Summary Number of Patent Opinions Issued By Source of Appeal 57.6% increase in total number of patent decisions issued since 2013. 222% increase in number of PTAB-related decisions issued since 2013. 57% increase in number of PTAB-related decisions issued from 2015-2016. 5
Post-Grant Proceedings Available Post-AIA: Ex Parte Reexamination Covered Business Method Patent Review (CBM) Supplemental Examination Post-Grant Review (PGR) Inter Partes Review (IPR) 6
AIA Petition Statistics AIA Petitions by Trial Type AIA Petitions in FY17 9/16/12 to 9/30/17 10/1/16 to 9/30/17 1897 AIA FY2015 Petitions 1683 AIA FY2016 Petitions 1489 FY2016 AIA Petitions * All data extracted from USPTO PTAB statistics. 7
AIA Post-Grant Outcomes Most Post-Grant Proceedings Are Instituted. * Extracted from USPTO PTAB statistics. As of September 30, 2017. Final Written Decisions Invalidate Most Claims in Most Areas. * Extracted from USPTO PTAB statistics. As of March 31, 2017. * USPTO no longer aggregating and reporting this data. 8
IPRs: The Basics Grounds for petitioning: Patents attackable under 102 or 103 based on patents and printed publications BRI claim construction standard (unless patent expired by time of FWD) 112 written description argument possible Means-plus-function, no algorithm, argument possible Petitioner must show a reasonable likelihood of prevailing on at least one challenged claim Petitioner bears the burden of proving invalidity by Preponderance of the Evidence No presumption of validity 9
Timeline of Example IPR Proceeding PETITIONER Files Petition PATENT OWNER Preliminary Response DECISION On Petition PATENT OWNER Response & Amend PETITIONER Reply To PO & Opposition To Amend PATENT OWNER Reply To Opposition TRIAL Oral Hearing Final Written DECISION FILE APPEAL with Federal Circuit 63 DAYS PATENT OWNER DISCOVERY PETITIONER DISCOVERY PATENT OWNER DISCOVERY HEARING SET ON REQUEST MOTIONS TO EXCLUDE NO MORE THAN 12 MONTHS NO MORE THAN 18 MONTHS 10
IPR Outcomes 29% of IPR Petitions denied (deceptive statistic) 65% of IPRs that reach the FWD stage invalidate all claims 81% of IPRs that reach the FWD stage invalidate at least one claim Is there a settlementencouraging effect? * Extracted from USPTO PTAB statistics. As of March 31, 2017. * USPTO no longer aggregating and reporting this data. 11
The PTAB Has A Lot Of Power... The Broadest Reasonable Interpretation standard of claim interpretation almost always will apply during most PTAB trials 75% overall affirmance of all IPR appeals to the CAFC in 2016 53% of IPR appeals at the CAFC in 2016 were affirmed using Rule 36 summary affirmances Results of remands to the PTAB have not often changed outcomes 12
... But the Supreme Court Is Skeptical The Court is considering this term whether IPRs are an unconstitutional mechanism for resolving patent validity disputes by extinguishing private property rights through a non-article III forum without a jury in other words, whether questions of patent validity must be tried to a jury in an Article III forum, not in an agency proceeding. Oil States v. Greene s Energy Group (cert. granted 2017) The Constitution ensures the separation of power among the branches of the federal government and guarantee that cases involving common-law private property rights are adjudicated by only Article III courts. United States v. Am. Bell Tel. Co., 128 U.S. 315, 365 (1888) The Constitution also preserves, through the Seventh Amendment, a party s right to a jury for suits at common law and thus entitles a party in these suits to the common law finder of fact a jury. Granfinanciera S.A. v. Nordberg, 492 U.S. 33, 42 (1989). 13
The Supreme Court is Skeptical By reserving the judicial Power of the United States to the Judicial Branch, Article III permits only courts to adjudicate cases involving common law, private property rights like patents. Specifically, the judicial power to decide a case that is the subject of a suit at the common law, or in equity, or admiralty can be exercised only by an Article III judge[] in [an] Article III court[], Stern, 564 U.S. at 484 (quoting). Stern v. Marshall, 564 U.S. 462, 484 (2011); and Murray s Lessee v. Hoboken Land & Improvement Co., 18 How. 272, 284 (1855) If you are a patent owner: Argue Unconstitutionality. 14
The CAFC Also Seems Increasingly Skeptical Failing to Explain Its Reasoning: Because we cannot reasonably discern the PTAB s reasoning as to motivation to combine,... judicial review cannot meaningfully [be] achieved[.]... Therefore, the PTAB s decision is vacated and the case remanded.... In re NuVasive, Inc., 842 F.3d 1376 (Fed. Cir. 2016) Changing Theories: What concerns us is not that the board adopted a construction in its final written decision, as the board is free to do, but that the board change[d] theories in midstream. SAS Institute, Inc. v. ComplementSoft, LLC, 825 F.3d 1341 (Fed. Cir. 2016) Adopting Unreasonably Broad Claim Interpretations: Construing claims by referencing the broadest definition in the dictionaries may result in the broadest definition, [but] it does not necessarily result in the broadest reasonable definition in light of the specification. PPC Broadband, Inc. v. Corning Optical Comm., 815 F.3d 734 (Fed. Cir. 2016) 15
The CAFC Also Seems Increasingly Skeptical Procedurally Erring: The Board denied [Patent Owner] its procedural rights by relying in its decision on a factual assertion introduced into the proceeding only at oral argument, after [Patent Owner] could meaningfully respond. Dell Inc. v. Acceleron, LLC, 818 F.3d 1293 (Fed. Cir. 2016) Not Providing an Opportunity to Respond: Under the APA s standards, [Patent Owner] was entitled to an adequate opportunity to respond to this asserted fact about [the prior art]. And under the APA s fact-specific standard, common sense, and this court s precedent, that entitlement was not lessened in this case by virtue of the opportunity [Patent Owner] had to respond to other factual assertions about [the prior art]. In re NuVasive, Inc., 842 F.3d 1376 (Fed. Cir. 2016) Improperly Shifting the Burden to the Patent Owner: [T]he burden of persuasion is on the petitioner to prove unpatentability by a preponderance of the evidence, and that burden never shifts to the patentee. In re Magnum Oil Tools Int l, Ltd., 829 F.3d 1364 (Fed. Cir. 2016) 16
Recent Example of PTAB Error PersonalWeb Technologies, LLC. v. Apple, Inc. (February 2017) CAFC, with sharp wording, vacated the PTAB s invalidity decision on a complicated patent involving cryptographic hashes: CAFC found that the PTAB failed to do the basic analysis required for an obviousness rejection [I]t is a prerequisite for the PTAB to demonstrate a clear, evidence-supported account of the contemplated workings of the combination. Personal Web Technologies, LLC v. Apple, Inc., 848 F.3d 987 (Fed. Cir. 2017) 17
Recent Example of PTAB Error PersonalWeb Technologies, LLC. v. Apple, Inc. (February 2017) The remand is not for explanation or clarification of what the Board meant in the decision we have under review now, or what it considered in reaching that decision. The remand is for the Board to reconsider the merits of the obviousness challenge. Personal Web Technologies, LLC v. Apple, Inc., 848 F.3d 987, 994 (Fed. Cir. 2017) In 2015, the CAFC affirmed 85% of PTAB decisions. That dropped to 72% in 2016. In comparison, the CAFC affirmed 65% of district court opinions in 2015 and 73% in 2016. 18
Recent Example of PTAB Error To establish obviousness, the PTAB in the IPR had to make findings, supported by evidence, on two points: (1) Find all elements of the claims in the prior art. (2) Find that one skilled in the art would have been motivated to combine the art in the way claimed with a reasonable expectation of success. Personal Web Technologies, LLC v. Apple, Inc., 848 F.3d 987, 991 (Fed. Cir. 2017) The PTAB did not sufficiently explain and support either (1) or (2) in this case. No rational explanation of compared to a plurality of values. Cited reference does not disclose this. No explained motivation for the alleged combination ( could be combined insufficient). Failure to provide a detailed full explanation of its findings and reasoning violates the Administrative Procedure Act (APA). Personal Web Technologies, LLC v. Apple, Inc., 848 F.3d 987, 992-94 (Fed. Cir. 2017) Google Inc. v. Intellectual Ventures II LLC, 2017 WL2924132, *4-*6 (Fed. Cir. 2017) (nonprecedential) 19
Recent Example of PTAB Error The Board nowhere clearly explained, or cited evidence showing, how the combination of the two references was supposed to work. (italics in original) Personal Web Technologies, LLC v. Apple, Inc., 848 F.3d 987, 994 (Fed. Cir. 2017) [S]uch a clear, evidence-supported account of the contemplated workings of the combination is a prerequisite to adequately explaining and supporting obviousness. Personal Web Technologies, LLC v. Apple, Inc., 848 F.3d 987, 994 (Fed. Cir. 2017) [T]he Boad did not explain why it dismissed Google s expert testimony and evidence... Google Inc. v. Intellectual Ventures II LLC, 2017 WL2924132, *4-*6 (Fed. Cir. 2017) (nonprecedential) 20
Recent Example of PTAB Error The amount of explanation needed... depends on context. Complex technology: detailed explanation, including explanation of how the combination is supposed to work, may be needed. Simple & clear technology: brief explanation may be sufficient. Personal Web Technologies, LLC v. Apple, Inc., 848 F.3d 987, 994 (Fed. Cir. 2017) 21
Summary for Petitioner in Complicated IPRs If you are a petitioner in an IPR involving complex technology: Address all claim limitations in your petition and declaration(s). If making an obviousness allegation, explain in technical detail how the alleged combination is supposed to work. Provide the PTAB with motivation as to why the alleged combination would have been made with a reasonable expectation of success. Personal Web Technologies, LLC v. Apple, Inc., 848 F.3d 987, 993-94 (Fed. Cir. 2017) 22
Summary for Patent Owner in Complicated IPRs If you are a patent owner in an IPR involving complex technology, if applicable: Argue that the petitioner did not provide a detailed technical explanation as to how the alleged combination is supposed to work. Argue that IPRs are unconstitutional. Argue that the petitioner has not provided any motivation as to why the alleged combination would have been made with a reasonable expectation of success (i.e., could be combined is insufficient). Argue that all claim limitations have not been addressed. Argue that the PTAB did not explain why it dismissed patent owner s expert testimony and evidence. 23
Experimental Data in IPRs Using Experimental Data in IPRs Experimental data for establishing that prior art does meet claim limitations E.g., Guardian Industries Corp. v. Pilkington Deutschland AG, IPR2016-01635 E.g., Corning Inc. v. DSM IP Assets B.V., IPR2013-00043 Experimental data for establishing that prior art does not meet claim limitations 24
Experimental Data in IPRs 37 C.F.R. 42.65 Expert testimony; tests and data. (a) Expert testimony that does not disclose the underlying facts or data on which the opinion is based is entitled to little or no weight. Testimony on United States patent law or patent examination practice will not be admitted. (b) If a party relies on a technical test or data from such a test, the party must provide an affidavit explaining: (1) Why the test or data is being used; (2) How the test was performed and the data was generated; (3) How the data is used to determine a value (4) How the test is regarded in the relevant art; and (5) Any other information necessary for the Board to evaluate the test and data. 25
Experimental Data in IPRs When introducing experimental data in an IPR, also be prepared to submit/produce: Expert declaration(s) regarding the experimental data Lab notebook(s) regarding the experimental data Outside vender test data regarding the experimental data In-house test data regarding the experimental data Raw data regarding the experimental data E.g., Guardian Industries Corp. v. Pilkington Deutschland AG, IPR2016-01635 E.g., Corning Inc. v. DSM IP Assets B.V., IPR2013-00043 26
Experimental Data in IPRs Experimental data can be an effective tool in proving you case in an IPR Submit background data/ information along with the experimental data for evidentiary purposes 27
OPEN DISCUSSION
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