CyWee, ZTE, and the PTAB v. the Public Interest

In an order issued this week in IPR2019-00143, a panel of PTAB judges decided that the public has no interest in ensuring that only valid patent claims issue from the Patent Office.

That’s not an exaggeration—if anything, it understates the case.  In fact, the PTAB order states that “the public is generally likely to benefit from claim amendments during an inter partes review.”  (emphasis added). In other words, this PTAB panel thinks that members of the public should be happy that the PTAB is amending a claim—even if no one is challenging its validity.

ZTE and LG v. CyWee

Starting in 2014, a company called CyWee began to sue a variety of hardware manufacturers.  CyWee is a subsidiary of SoftBank China and ITRI, a Taiwanese government-funded research entity that has previously spun off patents to NPEs.  CyWee once made products, but may have stopped doing so, transforming into an NPE in the process.

As is common when faced with patents of questionable validity asserted by an NPE, where a cross-license won’t provide benefits, ZTE went to the PTAB to challenge the validity of the CyWee patent.  And other companies faced with litigation from CyWee filed to join the IPRs against CyWee’s patents—including, most relevantly, LG.

ZTE and CyWee Make Up

At first, ZTE actively pursued an invalidation of CyWee’s patents.  But at a certain point, that began to change. CyWee proposed an amendment to its patent—and ZTE decided not to oppose that amendment.

Now, ZTE might have a very good reason for doing this—the amendment might be enough to remove the possibility that its products infringe and it might not want to spend additional money fighting this patent.  In fact, ZTE openly admitted this—ZTE doesn’t expect the amended claims to impact it, and decided not to oppose in order to “limit the expense of these legal proceedings.”

There’s nothing wrong with that—ZTE should absolutely be able to step away from an IPR if it no longer makes sense for it to participate actively.  But it creates a real problem because of a case called Aqua Products.

Aqua Products

Before Aqua Products, the patent owner bore the burden of showing patentability for claims they wanted to add during an IPR.  But in Aqua Products, the Federal Circuit determined that the USPTO’s current rules were not permissibly enacted and that, by default, petitioners bear the burden of proving an amended claim is invalid in IPR.  The various opinions also set out a way in which the USPTO could issue rules that place the burden back on the patent owner.

The USPTO did no such thing.  Instead, it issued rules to place the burden on the petitioner.  The problem with that—as I identified in CCIA’s comments on the proposed rule—is that sometimes, as with ZTE, petitioners don’t have an incentive to prove the claims invalid.  In that situation, the party that bears the burden of proof just gives up—and the amended claims are granted without any form of substantive opposition or examination.

That’s not ideal in any circumstance—and it’s part of why the USPTO should have placed the burden on the patent owner.  But the ZTE case goes one step further, because there’s a party who’s actively willing to provide that substantive opposition—and the PTAB won’t let them.

ZTE and CyWee v. LG

Given that ZTE was not going to actively participate in opposing the amended claims, LG—already a party to the ZTE IPR—asked if it could step in and serve as the opposition.

ZTE and CyWee both argued against this.  It’s obvious why CyWee would prefer to have an unopposed amendment process—it allows it to obtain claims which were never substantively examined or opposed.  But it’s less clear why ZTE would actively oppose LG having a chance to oppose the amendment. LG believes that ZTE and CyWee have an agreement whereby ZTE doesn’t oppose the amended claims and CyWee provides some other benefit—allowing CyWee to obtain claims that LG wouldn’t be able to challenge in IPR, which could still be asserted against LG.

It’s clear why CyWee wants this.  And it’s at least plausible why ZTE might be interested.  But the hope was that the PTAB—serving in its role of “protect[ing] the public’s ‘paramount interest in seeing that patent monopolies … are kept within their legitimate scope’”—would allow LG to go forward with its opposition.

That didn’t happen.

The PTAB v. the Public

In a complete abdication of its statutory role, as described by the Supreme Court, the PTAB panel in this case decided that ZTE—in the face of all logic—remained an “active participant” and that LG would not be permitted to argue against the proposed amendment.  And to add insult to injury, the PTAB did so while claiming that the public would benefit from the issuance of this unexamined amended claim.

The PTAB is intended to protect the public from patent monopolies that go beyond their legitimate scope.  That’s not the result this PTAB panel has ordered. Director Iancu should step in, trigger a Precedential Opinion Panel, and hold that if a party to an IPR is actively willing to oppose an amendment otherwise unopposed, it is permitted to do so even if the primary petitioner remains in the case.

Or better yet, when the USPTO issues its final rulemaking on amendment burden, Director Iancu should throw out the idea that petitioners should bear the burden and place the burden of proving patentability where policy and common sense says it should lie—on the party asking for a new patent claim, the patent owner.

Joshua Landau

Joshua Landau is the Patent Counsel at the Computer & Communications Industry Association (CCIA), where he represents and advises the association regarding patent issues.  Mr. Landau joined CCIA from WilmerHale in 2017, where he represented clients in patent litigation, counseling, and prosecution, including trials in both district courts and before the PTAB.

Prior to his time at WilmerHale, Mr. Landau was a Legal Fellow on Senator Al Franken’s Judiciary staff, focusing on privacy and technology issues.  Mr. Landau received his J.D. from Georgetown University Law Center and his B.S.E.E. from the University of Michigan.  Before law school, he spent several years as an automotive engineer, during which time he co-invented technology leading to U.S. Patent No. 6,934,140.

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