The recent House Judiciary Subcommittee hearing on the Impact of Bad Patents on American Businesses addressed many of the points I made last week. But it also highlighted a few issues where there’s some dispute or simply a lack of understanding.
In particular, I think that the hearing’s focus on the (1) “broadest reasonable interpretation” standard of claim construction, (2) the role and use of amendments in inter partes review, and (3) the concept of an “off-ramp” in inter partes review all deserve attention. In addition, there was some confusion generated by Judge Michel’s insistence that the PTAB shouldn’t be making institution decisions. In part 4, I think I can resolve it.
(1) The Broadest Reasonable Interpretation Standard
At the outset, it’s important to understand that there have been two distinct standards for claim construction for quite a while. Everyone at the PTO, from the examiners to the PTAB to the Director, applies the “broadest reasonable interpretation” (BRI) of claim language.1 The courts apply the Phillips standard.
At the outset, I want to point out: this is exactly what was challenged in the Supreme Court’s in re Cuozzo case last year, and it is exactly what the Supreme Court approved.
Sometimes, this isn’t a big difference. The PTO has occasionally applied both to the same claims (for example, if a patent expires during a proceeding). In those instances, the PTO frequently found that there were no changes in construction required.
But sometimes, the difference does matter. In Cuozzo, the Supreme Court also said that “construing a patent claim according to its broadest reasonable construction helps to protect the public.” This is the critical reason for using BRI, but understanding why it’s necessary is a little complex.
Reasonable Minds Can Disagree
We know from experience that there can be more than one construction reasonably reached under the Phillips standard. In American Piledriving, the Federal Circuit noted that “[o]f the district courts that have considered those terms, no two have construed all three terms the same way.” There were seven different district courts. Each came up with a different answer.
There’s no reason to think that the PTAB would be immune from this when applying Phillips.
Below, I’ve illustrated the basic issue. A claim term might reasonably be construed under the Phillips standard in several different ways, each of which has some overlapping scope, and some non-overlapping scope. The broadest reasonable interpretation is effectively “any construction which could reasonably be possible under a Phillips approach.”
It’s easy to see that there are interpretations of the claim that all three Phillips constructions cover, interpretations only one or two cover, and even a few (literal) corner cases that are only within the claim language under the broadest reasonable interpretation.
If the Patent Office were to interpret a claim under Phillips 1 above, but the district court interprets it under Phillips 2, then it’s possible that a prior art reference that should invalidate under the district court construction will be dismissed by the Patent Office. And then, because the district court is using a different construction, something that works exactly like the dismissed prior art reference could be found to infringe. This disparity between the Patent Office’s review and the application of the patent is exactly what the Supreme Court referred to as protecting the public in Cuozzo.
Now, in district court, where infringement and invalidity are being discussed in the same place and at the same time, a patent owner is going to have a hard time arguing their claims cover something for infringement, but not for invalidity.
But in an IPR, the infringement case is irrelevant. (In my experience, the judges at PTAB absolutely do not consider the patent owner’s infringement arguments to be relevant information when deciding validity.) That additional corrective information which might prevent inconsistent standards isn’t present, raising the risk of inconsistent application.
There’s another danger in the PTAB upholding the validity of a patent under a Phillips construction. Because the PTAB’s constructions don’t bind district courts, the patent owner might be able to assert a different construction in court. This is exactly the kind of danger cases like Southwall v. Cardinal IG, which Judge Michel himself wrote, warn against.
Now, if there’s a formal construction at PTAB, then at least the patent owner would be on record regarding the construction. That record may bind their arguments and the interpretation of the patent in court. But this presumes a formal construction at PTAB. Often, terms don’t need to be construed for purposes of validity, because they’re assumed to be used in their ordinary fashion, but then become important during infringement, when the plaintiff attempts to expand them. Now, if you use the broadest reasonable interpretation of a term, then any attempts at expansion are more likely to fail, because any reasonable view of the term will have been considered. You wind up asserting that “infinite” and “finite” mean the same thing2, or that a “top surface” and “bottom surface” are the same thing.3
But if you use a Phillips approach at PTAB, then the PTAB could take one narrow but reasonable interpretation for validity purposes, while the courts might take a different narrow but reasonable interpretation for infringement purposes. The end result would be the defendant being barred from bringing up invalidity in district court because the PTAB upheld the patent, even if it was under a different interpretation. And because it was an informal understanding of meaning, there’s no record to highlight this issue. There’s just a silent disparity between the PTAB and the courts, leading to a patent being asserted in a way that should have invalidated it.
All this just shows exactly why the Board needs to use broadest reasonable interpretation, as they currently do. The Board has to take a broad view of the claims to ensure that patents that receive their imprimatur (and the resulting presumption of validity and estoppel effects) are truly valid under any reasonable construction. Forcing the PTAB to use a Phillips standard of claim construction, rather than BRI, will almost certainly result in situations in which patent owners argue their claims one way in front of PTAB to obtain allowance, and then another way in front of a jury to show infringement.
(2) Whole Lotta Amending Could Be Going On
Much was also said at the hearing about the PTAB rarely granting motions to amend patents. There were more than a few references, particularly from Judge Michel, to the traditional back and forth between the Patent Office and the applicant for a patent, where the PTO denies the claim, the applicant amends to narrow their claims, and the cycle repeats, and how that just doesn’t happen at PTAB.
What no one mentioned was why this “back and forth” doesn’t happen at the PTAB.
Every Motion Is Contingent
The back and forth doesn’t happen at PTAB not because the PTAB is unwilling to engage, but rather because patent owners file nearly all of their motions to amend on a “contingent” basis.
This means that patent owners aren’t asking to amend their claims as soon as the amendment is filed—they’re asking for an amendment only if their original claims are found unpatentable. The PTAB doesn’t examine contingent claims until after the final written decision has been made. If the original claims are found unpatentable, then the PTAB has to also determine the patentability of the amended claims in order to issue the final written decision.
In other words, there’s no time for the back and forth that Judge Michel complained wasn’t available at PTAB. But the blame for that lies squarely on the backs of patent owners and their choice to file contingent motions.
If a patent owner actually wanted the back and forth of patent prosecution, they could easily file non-contingent motions to substitute their existing claims for new ones and conduct the IPR based on their new claims. If the substitute claims are rejected, they could file a motion to re-amend their claims.
Or, as I discuss below, they could take advantage of the three existing avenues to revise the claims of a patent available to a patent owner.
Patent owners don’t file non-contingent motions, and they don’t use the other avenues, because it involves giving up past damages for their claims. And frankly, they don’t want to give up damages because most patent owners facing an IPR are NPEs who are more interested in the possibility of a monetary reward than in the validity of their patent. They’d rather risk losing the patent than risk losing past damages.
Why Do Motions To Amend Fail?
The other problem with the complaints about motions to amend is that, when patent owners file contingent motions to amend and lose, it isn’t because the PTAB is being unfair. They lose those motions because they fail to amend in ways that actually distinguish the prior art, or amendments that clearly don’t match up with the invention they originally disclosed, or amendments that cover unpatentable ideas. Or they file procedurally deficient amendments. For example, in Cuozzo, the PTAB determined that a proposed amendment made the claims broader, which is completely disallowed in an IPR. Attorneys for Cuozzo didn’t dispute that the amendment was properly denied.
Giving patent owners more opportunities to amend won’t fix these problems. The real problem for patent owners was seen quite clearly by the Supreme Court in Cuozzo:
“these numbers may reflect the fact that no amendment could save the inventions at issue, i.e., that the patent should have never issued at all.”
(3) Now Approaching: IPR Off-Ramp
Based on the idea that amendments aren’t available in IPR, there was some discussion of an IPR ‘off-ramp’ procedure. Broadly speaking, this refers to a procedure where a patent that’s been placed into inter partes review is taken out of review and off-ramped to a patent examiner for amendment and examination.
Now, as I just discussed, the notion that patent owners can’t amend is inaccurate and is essentially caused by patent owners. That alone makes me question why an “off-ramp” procedure is needed.
But the other issue is that if patent owners actually want the back and forth of prosecution, they already have avenues for obtaining it. There was some discussion of an “off-ramp” for IPRs, but no acknowledgement that patent owners can already have their patents reviewed by the Patent Office. They don’t even have to wait for an IPR to do it.
Three Ways To Amend Your Patent
Patent owners have three existing procedures available if they want to amend their patent. They can file an ex parte reexamination request against their patent, they can file for reissue, and they can file for supplemental reexamination. While there are small differences in each procedure regarding what can be considered relevant to the amended claims, whether claims can be expanded in scope, and similar considerations, they all fundamentally place a patent back into examination in front of a patent examiner.
In other words: if patent owners want to amend their patents, they already can. But there’s more.
The existence of an IPR doesn’t eliminate the ability of a patent owner to request one of these proceedings. If a request for one of these existing reexamination avenues comes in while an IPR is pending, then the PTO “may determine the manner in which the inter partes review or other proceeding or matter may proceed, including providing for stay, transfer, consolidation, or termination of any such matter or proceeding”. This authority is exactly what the PTAB uses when they combine multiple IPR petitions into a single proceeding. If a patent owner were to, for example, tell the PTAB that it would prefer to cancel its existing claims as unpatentable and proceed with reexamination on new claims, then the PTAB already has the ability to stay the IPR pending the reexamination, or even to terminate the IPR.
Patent Owners’ Dogs Ate Their Homework
Here’s the thing.
Around 80% of patents that have an IPR petition filed against them have been asserted in litigation. But the reverse isn’t true—only around 15% of patents that are asserted in litigation have had IPRs filed against them.
And there’s a very simple reason why.
When you litigate a patent, you’re supposed to—before you file suit—conduct your pre-suit due diligence. You’re supposed to investigate whether the person you’re suing is actually doing something that looks like your patent. And the best practice is that you’re supposed to investigate the validity of your patent. You’re supposed to look and see if you actually came up with something new, not just trust that the examiner got it right. (I’ve done exactly that.)
Patent owners who face IPRs didn’t do that. They didn’t bother to look and see what kind of prior art is out there. If they’d taken the time before suing, they could have amended their patents (or picked a different patent to file suit with). And if they had been a responsible patent owner and done it right, then they wouldn’t be facing an IPR.
A patent owner complaining that their patent was IPRed and now they can’t amend the claims, even though they’re the ones who picked the patent they sued with?
Maybe they should have done their homework.
Off-Ramps Lead Straight Into A Crash
The only way an off-ramp would be different from the existing avenues for amending claims is if the off-ramp always stayed or terminated the IPR.
Of course, if an off-ramp was guaranteed to stay or terminate the IPR, it would provide even more delay for patent owners, while also removing any opportunity for a defendant to obtain certainty. A defendant would know that they were a target, but wouldn’t know if the off-ramped patent would still affect them and if they’d be able to challenge it. Off-ramp proposals, like the expedited reexamination in the STRONGER Patents Act, would increase delay and reduce certainty in the system.
Given that the chief criticism coming from the people pushing off-ramps is that IPRs increase delay and reduce certainty, it seems a bit disingenuous to suggest that off-ramps improve the patent system. The reality is that off-ramps are desirable if you’re a patent owner because the uncertainty they generate for defendants creates an immense pressure to take a license or exit their business. They don’t improve the patent system unless you’re in the business of patent assertion.
(4) The Essence Of Management Is Delegation
There was one other odd item at the hearing, though this one seemed limited to Judge Michel. He repeatedly stated that he thought the statute required the Director of the Patent Office to make institution decisions for IPRs.
Now, if someone were to look at one section of the statute in isolation, I can somewhat understand the confusion. 35 U.S.C. § 314 does state that the “Director shall determine whether to institute an inter partes review.”
If that’s the only section of Title 35 you ever look at, you might think that the Director is the one who would make institution decisions.
But if you look at 35 U.S.C. § 131, it says that the “Director shall cause an examination to be made of the application” and that “the Director shall issue a patent therefor.” In practice, of course, this is delegated.
And of course 35 U.S.C. § 132 states that when a claim is rejected, “the Director shall notify the applicant thereof.” I’ve prosecuted hundreds of patents. I have never once had the Director tell me about a claim rejection. (I’d probably have framed it if I had.)
And in a similar vein to IPR, I’d take a look at 35 U.S.C. § 303, which states that when a request for ex parte reexamination is filed, “the Director will determine” whether to grant the request.
But if I’d just started at the beginning of the statute, I’d already have read 35 U.S.C. § 3(b)(3)(B), which explicitly gives the Director the authority to delegate his power, including to the PTAB.
Judge Michel, of course, has extensive experience with Title 35. Which leaves me a little confused as to why he thinks that 35 U.S.C. § 314 is supposed to operate differently from every other section in Title 35, and why he thinks 35 U.S.C. § 3(b)(3)(B) doesn’t apply.
Personally, I think § 314 works exactly the same as the rest of the statute—the Director delegated their authority to make the institution decision to the PTAB panel, as is their right under 35 U.S.C. § 3(b)(3)(B). But I’d love to hear Judge Michel’s reasoning.
- The Patent Office occasionally applies the Phillips standard when a patent has expired, but the vast majority of Patent Office work is conducted using the BRI standard. ↵
- In the interests of full disclosure, I was on the litigation team for Apple in this case; however, my disdain for that particular argument would exist regardless of my participation in the litigation. ↵
- Amazingly, this is the second craziest thing in that complaint. The first, of course, is the demand for trial by duel. ↵