Inter Partes Review: At the Intersection of the USPTO and ... · The PTAB has considered several...

© 2013 Foley Hoag LLP. All Rights Reserved. Inter Partes Review | 1

Inter Partes Review: At the Intersection of the USPTO

and District Court

Barbara A. FiaccoDuke Law Patent Institute May 14, 2013

Inter Partes Review | 2© 2013 Foley Hoag LLP. All Rights Reserved.

Overview

Background: IPR by the numbers

Standing/Privity

Admission pro hac vice/disqualification of counsel

Discovery


Post-Grant Filings: the numbers

Of the 234 petitions for IPR or CBM, 192 have identified pending or concluded litigation involving the challenged patent (81%).

– Bruce H. Stoner, Jr., Esq., PTAB Review Proceedings: Lessons Learned and Other Observations, May 2, 2013, 2013 AIPLA Spring Meeting.


Filings By Technology Center Subject Matter

Source: Bruce H. Stoner, Jr., Esq., PTAB Review Proceedings: Lessons Learned and Other Observations, May 2, 2013, 2013 AIPLA Spring Meeting.

*Includes 213 IPR filings and 21 Covered Business Method (CBM) filings.

Type General Chemical

(1700)

Biotech & Pharma(1600)

Computer Architecture,Software & Electronic Commerce (2100, 2400, 2600, part

3600)

GeneralElectrical

(2800)

Design, General

Mechanical (2900, part 3600, 3700)

Totals

CHEM 19 24 43

ELEC 82 41 123

MECH & DESIGNS

45 23 68

TOTALS 19 24 127 41 23 234


Standing to Petition for IPR

Under 35 U.S.C. § 315(a)(1), a party may not petition for inter partes review if that party has already filed a civil action challenging the validity of a claim of the patent:

(a) Infringer's civil action.(1) Inter partes review barred by civil action. An inter partes review may not be instituted if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.

However, a party’s counterclaim challenging validity does not trigger §315(a)(1)’s prohibition:

(3) Treatment of counterclaim. A counterclaim challenging the validity of a claim of a patent does not constitute a civil action challenging the validity of a claim of a patent for purposes of this subsection.


Standing to Petition for IPR: Ariosa

In Ariosa Diagnostics v. Isis Innovation Ltd., IPR2012-00022, Isis challenged Ariosa’s standing under § 315(a)(1) based on the following facts:

– In December of 2011, Ariosa filed an action for declaratory judgment of non-infringement against Isis Innovation’s exclusive licensee, Sequenom, of the challenged patent. Paper No. 18, p. 3.

– Sequenom counterclaimed for infringement. Id. at 4.

– In its reply to Sequenom’s counterclaim, Ariosa raised invalidity “under 35 U.S.C. §§ 101, 102, 103 and/or 112 and general principles of patent law” as an affirmative defense. Id.



Isis challenged Ariosa’s standing under §315(a)(1), arguing that:

– “A key directive of the IPR statute is that a party initiating patent-validity challenge must choose a single forum.” Id. at 5.

– “That Ariosa’s patent-validity challenge is in the form of an affirmative defense and does not appear in its complaint is of no moment. Section 315’s broad bar is not premised on the validity challenge being presented in the complaint; the statute does not mention ‘complaint.’ Instead, the statutory language is directed to a petitioner-initiated ‘civil action’—in other words the entire civil lawsuit—that challenged patent validity.” Id. at 6-7.

– “If a petitioner’s affirmative invalidity defense raised in response to a patent owner’s counterclaim of infringement does not bar IPR, a petitioner desiring to initiate multiple proceedings or harass a patent owner could simply follow the roadmap Ariosa seeks to establish in this case. A counterclaim of infringement is compulsory when a declaration of non-infringement is asserted. If it is not made, it is waived.” Id. at 7.



In considering Isis’ challenge, PTAB considered two issues:

(1) “[W]hether filing a Declaratory Judgment of non-infringement in District Court bars Ariosa from later filing a petition for Inter Partes Review under 35 U.S.C. §315(a)”; and

(2) “[W]hether express mention of a counterclaim of invalidity in 35 U.S.C. §315(a)(3) mandates interpreting the statute such that raising an affirmative defense of invalidity in response to a compulsory counterclaim of infringement deprives Ariosa of standing to file for inter partes review.” Paper No. 20, p. 5 (PTAB February 12, 2013).



Does Ariosa’s declaratory judgment action for non-infringement preclude IPR?

PTAB: No. Relying on Federal Rules of Civil Procedure 2— “[t]here is one form of action—the civil action” and 3–“[a] civil action is commenced by filing a complaint with court,” the PTAB rejected Isis’s contentions, concluding that “when the statute refers to filing a civil action, it refers to filing a complaint with court to commence the civil action.” Paper No. 20, p. 5.



Does 35 U.S.C. § 315(a)(3)’s counterclaim exception deprive Ariosa of standing to file for IPR?

PTAB: No. – “there is a fundamental difference between an affirmative defense of invalidity and a

counterclaim of invalidity . . . invalidity is tied to the claim of infringement, whereas a counterclaim of invalidity is independent from the claim of infringement, which survives a finding of noninfringement. Section 315(a)(3) makes clear that if a party is faced with a claim of infringement, it can bring the independent claim of invalidity as a counterclaim and still available itself of inter partes review.” Paper No. 20, pp. 5-6.

– Section 315(a) “clearly defines which civil action, when filed, bar a party from filing inter partes review—civil actions challenging the validity of a patent. A civil action for a declaratory judgment of non-infringement is not a civil action challenging the validity of a patent.” Id. at 7.

– “Section 315(a) was amended to allow petitioner to filed an inter partes review, and still have their choice of venue by allowing the petitioner to file a declaratory judgment action that same day.” Id. at 8.



On Isis’ request for rehearing, the PTAB affirmed its earlier ruling:

The language of the statute is clear. To be barred, a party must have “filed” a civil action challenging the validity of a claim. The statute does not read “or raising a challenge to the validity of a claim of the patent during the course of a civil action.” Here, Ariosa filed a civil action challenging infringement of a claim of the patent. As recognized by Isis’ however, after having filed its challenge to infringement, Ariosa “raised” an affirmative defense in response to an action taken by Isis’ exclusive licensee. Institution of inter partes review on these facts, is not precluded by 35 U.S.C. 315(a)(1).

Paper No. 22, p. 3 (PTAB March 12, 2013).


Privity in Petitioning for IPR: Mentor Graphics

March 2006: Mentor sued Emulation and Verification Engineering S.A. and EVE-USA Inc. (together “EVE”) for infringement of patent assigned to Mentor. Later in 2006: the case was dismissed pursuant to a settlement

agreement. September 26, 2012: Synopsys submitted to the USPTO an IPR petition

on certain claims of the ‘376 patent. October 4, 2012: Synopsys acquired EVE as a wholly-owned subsidiary. February 22, 2013: PTAB instituted IPR. April 29, 2013: Mentor Graphics sued Acting Under Secretary Teresa

Stanek Rea (C.A. No. 1:13-cv-518 (E.D. Va.)) for exceeding authority under 35 U.S.C.§315(b).


Privity in Petitioning for IPR: Mentor Graphics

Section 315(b) provides that “An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the . . . privy of the petitioner is served with a complaint alleging infringement of the patent. . . . ”

Mentor Graphics contends that “privy of petitioner” includes petitioner’s predecessor in interest and the privy relationship is determined at the time PTAB decides whether to institute IPR, not at the time the petition is filed or the district court complaint is served. Paper No. 16, p. 15.

The USPTO contends that the privy relationship must exist at time the complaint for infringement is served or (possibly) when the petition for IPR was filed. Id. at 16.


IPR: Admission Pro Hac Vice

Parties often want litigation counsel to represent them in IPR proceedings for consistency and efficiency reasons.

What if litigation counsel is not admitted to practice before the USPTO?

Motorola Mobility, LLC v. Michael Arnouse, IPR2013-00010, Paper No. 6 (PTAB Oct. 15, 2012): An expanded PTAB panel issued an order authorizing a motion for pro hac vice admission pursuant to 37 CFR §42.10 and set forth guidelines for timing and content of motion for pro hac vice admission.



Timing of Motion:– Must be filed within 21 days after service of the IPR petition. Paper No. 7, p. 2.– Opposition must be filed within 7 days. Id. at pp. 2-3.– Reply motions are not permitted. Id. at p. 3.



Content of Motion:– “Statement of facts showing there is good cause for the Board to recognize counsel pro hac

vice” Id.– Motion must be accompanied by an affidavit or declaration of counsel seeking to appear

attesting to:• Membership in good standing to the Bar of at least one state;• No suspensions or disbarments before any court or administrative body;• No application for admission before any court or administrative body ever denied;• No sanctions imposed by any court of administrative body;• Counsel seeking admission has read and will comply with USPTO Patent Trial Practice Guide and

PTAB’s Rule of Practice for Trials;• Counsel is subject to the USPTO Code of Professional Responsibility;• All other proceedings before the USPTO for which counsel had applied to appear pro hac vice within the

last three years; and • Familiarity with the subject matter at issue in the IPR. Id. at pp. 3-4.



The PTAB has considered several motions for admission pro hac vice and generally grants them:

– In Bloomberg Inc. v. Markets-Alert Pty. Ltd., CBM2013-00005, Paper No. 13, (PTAB November 26, 2012), the PTAB found good cause for granting Markets-Alert’s litigation counsel’s motion:

• Counsel attested to requirements set forth in Motorola Mobility; • Counsel represents Markets-Alert in six district court actions involving challenged patent;• Counsel has been practicing in the patent litigation field for over thirty years; and • Counsel has been lead counsel on several hundred patent cases, litigating many of them through trial

and appeal. Paper No. 13, pp. 2-4.

Counsel seeking admission pro hac vice is usually admitted for “good cause,” which is often satisfied due to the fact that counsel is involved in related district court litigation.

The PTAB has denied only one motion for admission pro hac vice, in SAP America, Inc. v. Versata Development Group, Inc. CBM2012-00001.



SAP America, Inc. v. Versata Development Group, Inc. CBM2012-00001: – During related litigation, Versata’s lead litigation counsel had access to highly

confidential and proprietary information about petitioner SAP and its products, use of which was governed by the protective order entered in that litigation. Paper No. 16, p. 5.

– SAP argued that the attorney’s participation in the related litigation and the IPR would put him in a position to affect the scope of the claim of the challenged patent, all the while knowing how SAP’s products operate beyond what is publicly known. Id. at pp. 5-6.

– In an Order provided to PTAB by SAP (but not Versata), the district court found that “Versata breached the plain language of the Protective Order through a pattern of violations involving several members of its litigation team and discovery vendor.” Paper No. 21, pp. 3-4.

– The PTAB was troubled by the fact that Versata did not address the violation in its motion for admission pro hac vice of its lead litigation counsel. Id. at p. 4.

– “Versata, as the party moving for pro hac vice admission, bears the burden of showing there is good cause for the Board to recognize counsel pro hac vice during the proceeding. Based upon the facts presented, the Board concludes that Versata has failed to meet its burden.” Id. at pp. 4-5.


IPR: Disqualification of Litigation Counsel?

In ScentAir Technologies, Inc. v. Prolitec, IPR2013-00179, PTAB denied authorization to file motion to disqualify counsel.Paper No. 9 (PTAB April 16, 2013).

– Petitioner ScentAir sought permission from the PTAB to file a motion to disqualify Prolitec’s lead counsel and backup counsel.

– A related district court litigation involves the same patent and parties, and the protective order (1) bars litigation counsel from using confidential information obtained in the litigation outside of that litigation and (2) a “prosecution bar” that prohibits litigation counsel from drafting or amending claims while prosecuting an application before the UPSTO. Id. at p. 2.


IPR: Disqualification of Litigation Counsel?

Grounds for denial:– The PTAB found it “key” that while the protective order specifically

mentioned prosecution activities, it did not mention litigation or trials before the PTAB. Id. at 4.

– An IPR “is not original examination, continued examination, or reexamination of the involved patent. Rather, it is a trial, adjudicatory in nature and constituting litigation.” Id.

– Counsel are subject to sanctions in E.D. Wis. for any violation of the protective order. Id.

– ScentAir can seek relief from E.D. Wis. if it wants an interpretation of the protective order on this issue or if it wants expansion of the protective order to expressly prevent Prolitec’s counsels’ participation in the IPR. Id.


IPR: Discovery

Discovery in a complex patent litigation case can range from $5 million to $ 10 million, but only reaches about 10% of those costs in a complex IPR.

– Gerald Murphy, Jr., Esq., Should You Use A Patent Practitioner or Litigator for IPR?, Law360, March 25, 2013.

Although an IPR’s limited subject matter is a factor, IPR’s limited discovery is an significant reason for these lower costs.

Discovery in IPR proceedings is limited to the following:– “Documents cited in papers, cross-examination of declaration testimony, and information

inconsistent with positions advanced during the proceeding. The parties may agree mutually to provide additional discovery or either party may file an authorized motion seeking additional discovery. 37 CFR §42.51(b)(1); 37 CFR§42.51(b)(2)).


IPR: Discovery

In the first IPR filed at the USPTO, the PTAB explained the limited nature of IPR discovery, noting that it is “significantly different from the scope of discovery generally available under the Federal Rules of Civil Procedure” and “restricts additional discovery to particular limited situations, such as minor discovery that the PTO finds to be routinely useful, or to discovery that is justified by the special circumstances of the case.” Garmin v. Cuozzo, IPR2012-00001, Paper No. 26, p. 5 (PTAB March 5, 2013).


IPR: Discovery

Five factors to consider when deciding whether additional discovery is “in the interest of justice”: 1. “More than a possibility and mere allegation”2. “Litigation positions and underlying basis”3. “Ability to generate equivalent information by other means”4. “Easily understandable instructions”5. “Requests not overly burdensome to answer”Id. at 6-7.


IPR: Secondary Considerations Discovery

How does request for discovery concerning secondary considerations of non-obviousness play out? Need evidence or sufficient reasoning beyond mere speculation that

– petitioner copied the patented invention. Knowledge of the patent is not enough.

– petitioner tried but failed to develop a device with the features of the claimed invention which, even if true, would be insufficient to establish “failure of others,” i.e. “widespread efforts of skilled workers having knowledge of the prior art had failed to find a solution to the problem.” Paper No. 26, at p. 9.

– petitioner achieved commercial success because of inventive feature recited in claims, accounting for the presence of other desirable features implemented on products with alleged commercial success.

– Petitioner recognized that there had been a long-felt but unresolved need with regard to the claimed invention.



How does request for discovery concerning secondary considerations of non-obviousness play out? Ability to generate equivalent information but other means can be a real

barrier to discovery: a party seeking discovery must look to its own resources before requesting information from another party. – “Cuozzo has not adequately explained why it needs Garmin’s views to

establish what Cuozzo believes had been a long-felt but unresolved need with regard to speed limit indicators. Cuozzo can rely on its own analysis of the state of the art or on the opinions of independent analysis.” Id. at p. 14.

– “With regard to the price differential between Garmin products with and without the “speed limit alert feature.” Cuozzo can conduct its own market survey and make its own comparison.” Id.


IPR: “Litigation-like” Discovery

Discovery should not be used to force a party to reveal prematurely its theory of the case:– “[A]sking for the other party’s litigation positions and the underlying

basis for those positions is not necessary in the interest of justice.” Id.at p. 13.

– “[T]he Board has established rules for the presentation of arguments and evidence and . . there is a proper time and place for each party to make its presentation . . . a party may not attempt to alter the Board’s trial procedures under the pretext of discovery.” Id.

– “[i]f and when Garmin present affidavit or declaration testimony to support any position it maintains, Cuozzo has an opportunity to cross-examine the affiant . . . Garmin is not obligated to keep Cuozzo informed of its positions on substantive issues before Garmin is ready to present them in this review.” Id.


IPR: “Litigation-like” Discovery Discovery requests should not be overly burdensome to answer.

“Requests should be sensible and responsibly tailored according to a genuine need.” The basis for this factor is the one-year statutory deadline for IPR. Id. at 14. – Burden includes (1) financial burden; (2) burden on human resources;

and (3) burden on meeting the IPR schedule. Id. Based on the following facts, the PTAB held that Cuozzo’s discovery

requests were overly burdensome: – Garmin had “millions of pages of engineering documents that

potentially [had] to be searched.”– Garmin estimated that it would require approximately 75-125 labor

hours and cost $22,500-37,5000 dollars to respond to Cuozzo’s document requests.

– Garmin estimated that responding to the interrogatories would require approximately 50-75 labor hours and cost $15,000-$22,500.

– Document request seeking “documents and things you considered in preparing your responses to patent owner’s interrogatories” is unduly broad.



In Microsoft Corp. v. Proxyconn, Inc., IPR2012-00026, -00019, Paper No. 32 (PTAB March 8, 2013), a PTAB panel denied the patent owner’s motion for “commercial success” discovery:

– “The interest of justice standard for granting additional discovery and its legislative history require that showing of relevance be made by the party seeking additional discovery before the request is granted . . . While we agree that a conclusive showing of nexus is not necessary at this stage, some showing of relevance is necessary. This is particularly so here, where [the patented invention] is itself not a product but one feature of a complex software product.”


Questions?

Thank you

Barbara FiaccoFoley Hoag LLP

[email protected]

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