Post-Grant Proceedings

shutterstock_553962622On April 26, 2016, the Federal Circuit denied a petition for rehearing en banc, filed by Merck and Cie. The Federal Circuit maintained that the “substantial evidence” review standard applies for an appeal from an IPR proceeding.1 Judge O’Malley, with whom Judges Wallach and Stoll concurred in the denial of the petition, stated that in light of §§ 7 and 144 of Title 35, “we review Board decisions ‘on the record of an agency hearing provided by statute,’ and that we should therefore review Board fact-finding for ‘substantial evidence.’”2 The court explained its decision to deny the petition, “[i]n light of In re Gartside, [it] has reviewed all of the Board’s factual findings including those in IPRs, for substantial evidence.”3

Judge O’Malley, stated that the substantial evidence standard of review is seemingly inconsistent with the purpose and content of the America Invents Act (“AIA”). Indeed, according to Judge O’Malley, “[t]o the extent IPR proceedings were intended to replace district court litigation, it would make sense for this court to review factual findings by the Board in these new IPR proceedings under the same standard we employ when reviewing factual findings of district judges – for clear error.”4 However, Judge O’Malley recognized that the court is bound by the Supreme Court precedent in Dickinson v. Zurko5, and its own precedent in In re Gartside.6 Before Dickinson, the Federal Circuit had a “settled practice of reviewing factual findings of the board’s patentability determinations for clear error.”7 In Dickinson, the Supreme Court disagreed, “conclud[ing] that [5U.S.C. § 706 of the APA] does apply [to Board findings], and the Federal Circuit must use the framework set forth in that section.”8

The opinion further stated that the failure to change the standard of review at Federal Circuit is inconsistent with what Congress sought to accomplish by creating IPR proceedings;9 and, unless and until the Congress or the Supreme Court sees fit to expressly change the standard of review, the Federal Court will continue to review factual findings of the Board for substantial evidence.10 Judge O’Malley explained “when authorizing IPR proceedings under the AIA . . . Congress viewed IPR proceedings as cost-efficient substitutes for litigation in federal district courts” and, therefore, it makes sense for the Federal Circuit to review factual findings by PTAB under the AIA with the same standard employed when reviewing factual findings of district judges.11 However, the Court acknowledged, “[b]ecause Congress failed to expressly change the standard of review employed by this court in reviewing Board decisions when it created IPR proceedings via the AIA, we are not free to do so now.”12

The opinion also distinguished inter partes reexamination (which were reviewed under the standard of substantial evidence) from IPR proceedings, and explained that “Congress … enacted substantive and procedural changes that brought IPR proceedings in line with district court in meaningful ways.”13

Judge Newman, consistent with her dissent in the December 2015 decision,14 reiterated that (i) the precedence does not prohibit objective review of PTAB decisions15, (ii) the substantial evidence standard does not conform to the statutory plan,16 and (iii) the PTAB proceeding is a trial between private parties, and requires commensurate review.17 The dissent further stated that the purpose of AIA to provide a substitute for district court proceedings is “thwarted” if on appeal the Federal Circuit simply looks for substitutional evidence on the side of the PTAB decision.18

Given that (i) at least four Federal Circuit judges do not seem to think that the Court’s application of, and failure to change, the substantial evidence standard of review is consistent with the AIA, and (ii) three of the four Judges clearly call on Congress and/or the Supreme Court to address the issue of standard of review to be applied by the Federal Circuit judges, it will be interesting to see whether Merck pursues its petition to alter the standard of review to the Supreme Court.

1 Merck & Cie v. Gnosis S.P.A. et al., Case No. 2014-1779 (Fed. Cir., Apr. 26, 2016).
2 Id. at 3.
3 Id.
4 Id. at 4.
5 Dickinson v. Zurko, 527 U.S. 150 (1999).
6 In re Gartside, 203 F.3d 1305, 1313 (Fed. Cir. 2000).
7 In re Zurko, 142 F.3d 1447, 1458 (Fed. Cir. 1998) (en banc).
8 Dickenson, 527 U.S. at 152.
9 Merck & Cie at 6.
10 Id. at 7.
11 Merck & Cie at 3.
12 Id. at 2.
13 Id. at 5.
14 Merck & Cie v. Gnosis S.p.A., 808 F.3d 829 (Fed. Cir. 2015).
15 Merck & Cie (Fed. Cir., Apr. 26, 2016) at 11-12.
16 Id. at 12-14.
17 Id. at 14-15.
18 Id. at 15.

shutterstock_521023699On April 1, 2016, the U.S. Patent and Trademark Office (USPTO) released a number of amendments to the final rules of trial practices for post-issuance proceedings, i.e., inter parties review, post-grant review, the transitional program for covered business method patents, and derivation proceedings to be effective on May 2, 2016.1 In mid 2014, the USPTO had solicited input from practitioners on ways to make the trial proceedings more effective and fair. The final rules released on April 1, 2016 result from rulemaking related to some of the input. This article discusses some of the changes below.

One change to the rules that applies to all phases of these post-issuance proceedings concerns the duty of candor rule, 37 CFR 42.11, specifically requiring a Rule 11-type certification for papers filed, or later advocated, wherein the person signing the papers must attest to compliance with 37 CFR 11.18(b)(2). For example, the position advanced in the paper filed is warranted by law and not for any improper purpose. Specifically requiring compliance with 37 CFR 11.18(b)(2) could be viewed as redundant because practitioners and parties have been bound by 37 CFR 11.18(b)(2) even before the current change to 37 CFR 42.11. However, it should be noted that what was changed is more than just an explicit requirement of Rule 11-type certification. Rule 42.11 has also been amended to allow the Board to impose sanction for any violation of Rule 42.11, and a party may move for sanction after receiving authorization from the Board, which will authorize the motion if the alleged violation has not been timely cured. However, based on past USPTO experiences, sanctions are expected to be infrequent.2

Currently, claim construction is performed by the Patent Trial and Appeal Board (PTAB) with the broadest reasonable interpretation (BRI).3 However, on April 1, 2016, 37 CFR 42.100(b), 42.200(b) and 42.300(b) were amended to allow either party to move for claim construction using the standard set forth in Phillips4 if the movant certifies that the patent will expire within 18 months from the entry of the Notice of Filing Date Accorded to Petition. The motion must be filed within 30 days from the filing of the petition because the USPTO prefers to resolve the issue of which claim construction standard is applicable before the institution decision.5 PTAB will use BRI in claim construction unless the motion is granted.

The PTAB’s use of BRI was affirmed by the Federal Circuit in Cuozzo, but the Supreme Court will decide on the issue within the next several months.6 If the Supreme Court affirms the use of BRI, whether a party should move for the Phillips-type standard over the BRI has to be analyzed on a case-by-case basis. If the claims are constructed with the potentially narrower Phillips-type standard, rather than BRI, invalidation of the claims based on prior art could be less likely, but the petitioner could have a better non-infringement position in court in case the post-issuance proceeding fails to invalidate all the claims that cover the petitioner’s product or activity. For the patent owner, other than the invalidation potential versus infringement potential discussed above, the potentially narrower Phillips-type standard may cause the product or activity of a licensee to become not covered by a license resulting in less royalty income, which the patent owner may rely upon. Thus, both the petitioner and patent owner need to analyze the pros and cons to determine whether it should file the motion for the Phillips-type standard.

On April 1, 2016, 37 CFR 42.24 was amended by replacing the page limits with word counts in petitions, patent owner preliminary responses, patent owner responses and replies to patent owner responses. However, motions including motions to amend, and replies to oppositions are still subjected to page limits. The USPTO replaced the page limits with word counts to gain administrative efficiencies.7 The use of word counts instead of page limits could improve advocacy by encouraging more concise major briefings. Word counts are also a more precise way, than page numbers, to determine the volume of written information presented in the major briefings that the PTAB panel has to review.

The April 1, 2016 final rules also allow new testimonial evidence to be submitted in the patent owner preliminary response.8 However, in the event the new testimonial evidence would create a genuine issue of material fact, the issue will be resolved in favor of the petitioner only in the stage of institution decision.9 Nevertheless, the patent owner should consider presenting the new testimonial evidence, if available, in the preliminary response because the evidence may help convince the PTAB panel to not institute the post-issuance review if there is no genuine issue of material fact. Even if the panel is not convinced by the new evidence, it would be useful for the patent owner to get a reading from the panel in the Decision for Institution so that the patent owner could decide what other more convincing evidence should be presented in the patent owner response.

Some of these changes would be expected to require adjustments. Strategies used in the past may need to be revised. Nevertheless, hopefully some practitioners would find that at least some of the changes would make the post-issuance proceedings more effective and fair.

1 Amendments to the Rules of Practice for Trials Before the Patent and Trial and Appeal Board, 81 FR 18750 (April 1, 2016).
2 Id. at 18760.
3 Id. at 18752.
4 Phillips v. AWH Corp., 415 F3d 1303, 1314-1323 (Fed. Cir. 2005) (en banc).
5 81 FR at 18753.
6 In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 1278 (Fed. Cir. 2015), cert. granted sub nom., Cuozzo Speed Techs., LLC. v. Lee, 136 S. Ct. 890 (mem.) (2016).
7 81 FR at 18761.
8 Id. at 18755.
9 Id.

shutterstock_153244313The PTAB recently deemed as precedential two decisions that further clarify when a petitioner can have a second chance to challenge a patent before the Board. In order for a PTAB decision to be designated precedential, it must be nominated – anyone can nominate, including the public. Then the chief judge, the director, and a majority of the PTAB judges who vote on it must agree that opinion should be precedential. Because of the length of the process, decisions are usually retroactively designated as precedential.

The precedential decisions explain that (1) estoppel at the PTAB applies on a claim-by-claim basis and only to those claims that have resulted in a final written decision (CBM2014-00176), and (2) a second complaint does not restart the one year clock to file a petition when a first complaint was dismissed both with and without prejudice, at least under the facts of this particular IPR (IPR2015-00937).

In CBM2014-00176,1 the Petitioner requested review of claims 1-42 of U.S. 6,950,807. The PTAB instituted a trial as to a subset of the challenged claims (claims 1-9, 13, and 34-42) and issued a Final Written Decision finding those claims unpatentable.

The same Petitioner requested review of the remaining claims of the same patent, (i.e., claims 10-12, and 14-33, which were not the subject of the first CBM), resulting in the institution of this case.
The Patent Owner moved for termination of the second CBM, arguing that a final decision in a post grant proceeding applies to “any patent claim challenged by the petitioner,” included those claims that were challenged but not instituted in the first CBM. If the PTAB took this approach, the Petitioner would be estopped from challenging any claims of the ‘807 before the Board.

The PTAB, however, decided that “estoppel is applied on a claim-by-claim basis” and thus, estoppel does not apply to non-instituted claims because those claims did not result in a final written decision. The PTAB therefore denied the Patent Owner’s motion for termination of the second CBM.

In IPR2015-00937,2 at issue was whether “a complaint” in 35 U.S.C. § 315(b) refers to a first complaint that was dismissed both with and without prejudice. In other words, the PTAB ruled on whether the deadline under § 315(b) barring an IPR from being filed more than one year after the date of service of a complaint applies to the first complaint, or whether the clock restarts after service of the second complaint.

The Petitioner (LG) was served with a complaint alleging infringement of U.S. 6,513,088 on two separate occasions: January 11, 2008 and October 16, 2014. The first complaint was dismissed both with and without prejudice. Within one year of receiving the second complaint, the Petitioner requested inter partes review of the ‘088 patent stating that, even though the petition was filed one year after the first complaint was served: (1) the petition was filed within one year of receiving “a complaint” thereby satisfying the requirement of § 315(b); (2) after the dismissal of the first lawsuit, both parties were left in the same position as though the first complaint had never been filed, and (3) equitable and public policy consideration favor a “broad” interpretation of § 315(b).

The PTAB interpreted the statutory timeline to end one year after the first complaint was filed because the parties were not left as though the action resulting from the first complaint had never been brought. The PTAB reasoned that the parties were not, in fact, in the same position after settlement of the 2008 complaint because the parties were prohibited from pursuing their prior claims with respect to certain products. Further, the parties were obligated to uphold the terms of their settlement agreement. Also, the PTAB found insufficient equitable or public policy reasons to allow LG a chance at filing an IPR, for example, LG still has the option to challenge the patent at the PTO in an ex parte reexamination.

1 Westlake Services, LLC v. Credit Acceptance Corp., CBM2014-00176, Paper 28 (PTAB May 14, 2015).
2 LG Electronics, Inc. v. Mondis Technology LTD., IPR2015-00937, Paper 8 (PTAB September 17, 2015).

shutterstock_464657279In Ethicon Endo-Surgery, Inc. v. Covidien LP, a majority Federal Circuit held that neither the relevant statute nor the Constitution precludes the same Patent Trial and Appeal Board panel (“Board”) from making a decision to institute an inter partes review and from also making the final determination on the validity of the claims at issue.1

Covidien filed a petition with the U.S. Patent and Trademark Office on March 25, 2013, requesting inter partes review of claims 1–14 of U.S. patent number 8,317,070 (“the ‘070 patent”) on the ground that the claims would have been obvious over the prior art. The Board granted the petition on August 26, 2013.2 In a June 9, 2014, final decision, the same panel of the Board that instituted the inter partes review rejected all of Ethicon’s arguments and found all of the challenged claims of the ’070 patent obvious under 35 U.S.C. § 103.3

Ethicon did not challenge the institution decision, but rather alleged a defect in the final decision. It argued that the final decision was invalid because it was made by the same panel that instituted inter partes review. According to Ethicon, having the same panel make the decision to institute and then later decide the merits of the inter partes review raises “serious due process concerns.”4

The Federal Circuit in confirming that it had jurisdiction, cited its recent holding in In re Cuozzo Speed Techs.5 According to the Federal Circuit, Section 314(d) provides that “[t]he determination by the Director whether to institute an inter partes review shall be final and nonappealable. Section 314(d) here plainly ‘prohibits review of the decision to institute [inter partes review] even after a final decision.’ It does not, however, preclude review of the final decision.”6

Turning to the merits, the Federal Circuit, citing several precedential cases from multiple courts including the U.S. Supreme Court, determined that there was no due process or statutory concerns in combining the functions of initial decision and final disposition in the same Board panel. According to the majority, “the inter partes review procedure is directly analogous to a district court determining whether there is “a likelihood of success on the merits” and then later deciding the merits of a case.7

The majority also disagreed with Ethicon’s argument that because Congress (1) specifically gave the Director the power to institute, (2) did not explicitly give the Director authority to delegate the institution decision to the Board, and (3) gave the Board the power to make the final determination, Congress intended to keep the functions of institution and final decision separate. According to the majority,

there is nothing in the statute or legislative history of the statute indicating a concern with separating the functions of initiation and final decision. Ethicon ignores the longstanding rule that agency heads have implied authority to delegate to officials within the agency, even without explicit statutory authority and even when agency officials have other statutory duties. Congress regularly gives heads of agencies more tasks than a single person could ever accomplish, necessarily assuming that the head of the agency will delegate the task to a subordinate officer.8

Judge Newman, dissenting, disagreed with the majority’s statement that “there is nothing in the Constitution or the statute that precludes the same Board panel from making the decision to institute and then rendering the final opinion.”9 Judge Newman believed that the statute requires that the proceedings be separated, the first decision required to be made by the Director, and the second decision made by the Board. According to Judge Newman,

the threshold determination to institute post-grant review requires the Director to find that there is more likely-than-not an error in the grant of at least one claim of the patent. When such finding is made by the Director, the newly created independent tribunal in the PTO conducts a full trial, with discovery, testimony, experts, and other trappings of district court litigation. This trial, and the ensuing Board decision, are independent of and give no deference to the Director’s decision “to institute” the proceeding.10

1 Ethicon Endo-Surgery, Inc. v. Covidien LP, 2016 U.S. App. LEXIS 473 (Fed. Cir. Jan. 13, 2016).drugs/guidancecomplianceregulatoryinformation/-guidances/ucm459987.pdf;”>www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/-guidances/ucm459987.pdf (hereinafter “FDA Guidance”)
2 Id. at *6
3 Id. at *7
4 Id. at *10
5 In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 1273 (Fed. Cir. 2015).
6 Ethicon Endo-Surgery, Inc. v. Covidien LP, 2016 U.S. App. LEXIS 473, *10 (Fed. Cir. Jan. 13, 2016).
7 <span id=”seven”See, e.g., Fed. R. Civ. P. 65; Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).
8 Ethicon Endo-Surgery, Inc. v. Covidien LP, 2016 U.S. App. LEXIS 473, *17 (Fed. Cir. Jan. 13, 2016).
9 Id. at *29
10 Id.

shutterstock_524795992In two recent companion cases, the Federal Circuit upheld the Board’s decision that claims related to administering a natural stereoisomer to treat symptoms of folate deficiency would have been obvious.

During the inter partes review, the Board considered two prior art references: a European patent application that discloses treating elevated levels of homocysteine, often associated with folate deficiency, with folate or a suitable active folate metabolite along with B vitamins. The second reference identified the stereoisomer recited in the claims at issue as a “natural metabolite” of folate. The Board then concluded that a person of ordinary skill would have been motivated to combine these references in order to arrive at the claimed invention.

During IPR, the Board also considered and rejected objective indicia of non-obviousness. Regarding commercial success of the products, the Board found that such success was not reasonably commensurate in scope with contested claims.

Regarding industry praise, the Court agreed with the Board that the praise was particularly directed to the use of a specific stereoisomer that was already known in the art. The Court concluded that the patent owner failed to connect the evidence of industry praise to the novel elements of the claims. Likewise, the inventors’ recognition that a subset of the population had difficulty processing folic acid was not adequately tied to the novel features of the claim. The Court also noted that the claims were not limited to a particular subpopulation.

Although the Court found that the Board erred in assessing the patent owner’s licensing evidence, it also found the error harmless. The Court stated the Board erred in considering whether the licensees’ product embodied the claimed invention, but rather should have considered whether the licensing activity arose out of recognition of the subject matter claimed in the patent. Nevertheless, the Court stated that even if the Board had correctly considered the evidence of licensing, that evidence was not enough to overcome the strong evidence of obviousness.

1 On December 17, 2015, the Federal Circuit decided on appeals from the PTAB decision in two companion cases, Merck & Cie v. Gnosis S.p.A., No. 14-1779 (Fed. Cir. Dec. 17, 2015) (Gnosis I) and South Alabama Medical Science v. Gnosis S.p.A., No. 14-1778 (Fed. Cir. Dec. 17, 2015) (Gnosis II).
2 See Gnosis II, at 3-4.
3 See Gnosis II, at 6.
4 See id.
5 See id. at 6-7 (“[E]vidence was not adequately tied to the novel features of the claimed invention.”).
6 See id. at 7-8 (The Court held that this error was “harmless” to the overall determination).

shutterstock_367887608The Federal Circuit ruled on Wednesday that the Patent Trial and Appeal Board’s inter partes review process, and presumably all AIA review processes, does not violate Article III of the U.S. Constitution.1

The appellant, MCM Portfolio LLC, argued that “any action revoking a patent must be tried in an Article III court with the protections of the Seventh Amendment”2 and thus, inter partes reviews, and all PTAB reviews that can deem a patent invalid, are unconstitutional.

In ruling against MCM, the Federal Circuit relied on Supreme Court precedent that “inter partes review provisions, do not violate Article III.”3 The court noted that Congress can delegate disputes over public rights to federal agencies (i.e., non-Article III courts). Public rights, as defined by the Supreme Court, are those rights that are “integrally related to particular federal government action.”4 The court noted that as a practical matter, “[i]t would be odd indeed if Congress could not authorize the PTO to reconsider its own decisions.”5

As to a right to a jury trial under the Seventh Amendment, the Federal Circuit again relied on Supreme Court jurisprudence that the Seventh Amendment is “generally inapplicable in administrative proceedings” where such jury trials would substantially interfere with the agency’s ability to adjudicate.6 The court therefore held that because patent rights are public rights reviewable by the USPTO, the Seventh Amendment presents no barrier to PTAB adjudication without a jury.

The CAFC did not address MCM’s contention that the PTAB erred in instituting the inter partes review, noting that the 35 U.S.C. § 314(d) “no appeal” clause makes an inter partes review decision “final and nonappealable” prohibiting the courts from reviewing such a decision.7 The court did, however, affirm the PTAB’s final decision that MCM’s patent was invalid.

1 MCM Portfolio LLC v Hewlett-Packard Company, No. 2015-1091, slip op (Fed. Cir. December 2, 2015).
2 U.S. Const. amend. VII (“In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the United States, than according to the rules of the common law”).
3 MCM at 9-10
4 MCM at 11 (citing Stern v. Marshall, 131 S. Ct. 2594, 2613 (2011)) (internal quotes omitted).
5 MCM at 12
6 MCM at 14 (citations omitted).
7 35 U.S.C. § 314(d) (“NO APPEAL. – The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”); see also Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015).

shutterstock_439759441The Federal Circuit vacated the PTAB’s finding of nonobviousness of Verinata’s patent directed to methods of noninvasive prenatal testing, and remanded the case back to the Board.1 The Federal Circuit remanded because it couldn’t conclude whether the Board erred based on the PTAB’s opinion. The Board’s language was too vague to come to a definitive conclusion on this point. In its explanation for vacating and remanding the case, the Federal Circuit clarified the appropriate circumstances where the PTAB could limit its consideration of a prior art reference.

The PTAB is in error if it declines to consider the reference as evidence of the background understanding of skilled artisans during the relevant time frame simply because the reference had not been identified at the petition stage as one of the pieces of prior art defining a combination for obviousness.2 On the other hand, the Board does not err if it only finds that the development of the argument invoking the reference in the Petitions was inadequate.3

The Federal Circuit’s consideration of a second cited reference in the same Petition further clarifies this issue. The Petitioner, Ariosa, also challenged the Board’s decision on the separate ground that the Board erred in failing to consider some embodiments of a reference that the Board in fact relied on to institute the petition.4 The Federal Circuit disagreed with Ariosa on this point, finding that Ariosa’s Reply relied on previously unidentified portions of a prior art reference to make in its obviousness argument.5 The Board cited 37 C.F.R. 42.104(b)(5), which says that a Petition must identify “[t]he supporting evidence relied upon to support the challenge and the relevance of the evidence to the challenge raised, including identifying specific portions of the evidence that support the challenge.”6 Thus, the Petition (not the Reply) must state the relevance of a reference or identify specific portions of the evidence that support the challenge.

This decision again emphasizes the need to put all relevant evidence up front in the Petition. Failing that, the challenger should try to characterize any new evidence in its Reply as background information regarding the state of the art as of the relevant time frame.

1 Ariosa Diagnostics v. Verinata Health, Inc., No. 2012-1215, slip. op. (Fed. Cir. Nov. 16, 2016).
2 Id. at 11
3 Id. at 12
4 Id. at 16
5 Id. at 16-17
6 Id. at 17

shutterstock_434355355The Patent Trial and Appeal Board recently found that all claims of U.S. Pat. 8,324,283, covering the multiple sclerosis treatment Gilenya, are invalid as obvious over prior art.1 The Board concluded2 that:
i. the Petitioners (Torrent Pharmaceuticals Ltd, Apotex, Inc. and Mylan Pharmaceuticals Inc.) established by a preponderance of the evidence that the claims would have been obvious over Chiba (as teaching immunosuppressive drug fingolimod) in view of Aulton (as teaching the use of mannitol and Mg stearate in orally administered drugs); and
ii. the Patent Owners (Novartis AG and Mitsubishi Pharma Corp.) failed to establish by a preponderance of the evidence that proposed amended claims 33-64 are patentable.

Under the standard of broadest reasonable construction in light of the ‘283 specification, the PTAB construed “solid pharmaceutical composition suitable for oral administration” as “solid composition capable of delivering a pharmaceutical effect when administered orally;” “is stable” to mean “meets stability requirements of a test by FDA for approval;” “a pharmaceutical composition that “has substantially uniform distribution…throughout the composition” as one that “meets content uniformity requirements for active ingredients in solid oral unit dosage forms as defined by the [United States Pharmacopeia];” and “rough particle surface” to be a particle “with higher surface area than a sphere of a diameter equal to the average diameter of the particle in question.”3

Relying heavily on a reference that was cited by the Petitioners, but not relied on to institute the inter partes review, and taking into account the knowledge in the art regarding mannitol and admissions by the Patent Owner’s own declarant, the Board concluded: (a) that it was irrelevant that Petitioners failed to establish the inventors’ actual subjective reason for combining mannitol and fingolimod;4 and (b) that the Petitioners established that a person of ordinary skill in the art would have had a reasonable expectation of success in combining fingolimod and mannitol.5

The Patent Owners argued that that objective indicia of nonobviousness established that the claimed solid oral dosage form of mannitol and fingolimod would not have been obvious to a person of ordinary skill in the art.6 However, the Board disagreed stating that:
a. even if the stability of the mannitol-fingolimod combination at low doses was unexpected, it was insufficient to support a finding of unexpected results as the evidence of unexpected results was only across a tiny portion of the unlimited dose range in the claims;7
b. because the prior art contained solid oral multiple sclerosis treatments, the claimed fingolimod dosage form was not necessary to satisfy any long-felt need for a solid oral multiple sclerosis treatment;8
c. there was no nexus between the claimed invention and the industry praise because what was praised about Gilenya was not the specific formulation recited in the claim, but rather the general fact that Gilenya was a solid oral multiple sclerosis medication;9 and
d. because of the lack of any evidence of Gilenya’s expected sales to which the actual sales of Gilenya can be compared, and because Gilenya’s market share model was flawed, the Patent Owners did not carry the burden of production necessary to trigger Petitioners’ burden to explain Gilenya’s commercial success as being due to factors extraneous to the claimed invention.10

Finally, in response to the Patent Owners’ motion to amend, in which claims 33-64 were proposed, the Board determined that the Patent Owners had not carried the burden of demonstrating the patentability of any of the proposed claims.11

1 Torrent v. Novartis, IPR2015-00518 (PTAB, Sep. 24, 2015).
2 Id. at 3.
3 Id. at 6-9
4 Id. at 18-19.
5 Id. at 20.
6 Id. at 21.
7 Id. at 22-23.
8 Id. at 25.
9 Id. at 26
10 Id. at 30.
11 Id. at 40 (the Board provided a detailed analysis highlighting that the proposed claims are obvious in view of the Chiba and Aulton at 40-46).

shutterstock_214331155For BioPharma patents, we were curious whether art that formed the basis for IPR institution was “newly discovered” prior art, or whether it was art that had previously been of record during prosecution. The answer to this question may help companies decide to take affirmative steps to discover and cite the most important art during prosecution of the patent application. If “newly discovered” prior art is generally used in IPR institution decisions, companies may be more likely to conduct affirmative prior art searches prior to prosecution to get all available art in front of the examiner. By conducting affirmative prior art searching, an examiner would possess the most important art, and theoretically the claims would be more resistant to an IPR. However, if art previously known during prosecution is generally used in IPRs, companies may feel justified in filing applications without conducting extensive prior art searches, believing that the presumption of the Examiner being aware of the prior art does not immunize the patent against a later IPR challenge.

To answer the question of whether art cited in BioPharma patents involved in IPRs was “newly discovered” prior art, we used the PTAB’s database to review the IPR institution decisions in the first 5 months of calendar year 2015 in Technical Center 1600. We then compared the art that formed the basis for IPR institution with the art cited on the patent’s face page. We did not determine whether the art was actually cited against the claims during prosecution, or whether the art was cited by the applicant or the examiner.

We found that most of the art that was the basis for IPR institutions was also made of record during prosecution of the patent. In all but one instance, at least one of the references in the IPR obviousness challenge was also before the examiner during prosecution. In each case, the primary reference used in the IPR obviousness challenge was before the examiner during prosecution. In each case of an IPR anticipation challenge, the art was also before the examiner during prosecution.

We concluded from our review of this small data set that challengers often need to look no further than the face page of the patent to find art sufficient to mount an IPR challenge. One big caveat to our conclusion is that our sample size was small (17 IPR decisions). Different patterns may emerge from a larger data set. Another reason for the prevalence of previously cited art in IPR challenges is that many (but not all) of the patents that were challenged were examined under the pre-KSR obviousness regime, but during IPRs are subject to the more liberal (from the challenger’s perspective) obviousness standard. Of course, another factor is the limited amount of time that the PTO has to examine patents allows some art to slip through the cracks.

Because art cited in the institution decisions of our study was not “newly discovered” prior art, it appears that the most relevant prior art is known by the examiner during prosecution. And the act of citing prior art to the examiner does not immunize the patent from IPRs. The patent owner must do their own, independent examination process using the prior art known to them and draft claims that are free of that art. For a patent application that covers an important invention, an exhaustive patentability analysis may be worth the expense. Certainly this won’t guarantee that a dedicated challenger won’t find better art, but it should minimize the risk.

shutterstock_411097411On August 20, 2015, the USPTO published additional proposed rules of practice for post-grant proceedings (IPR, CBM, and PGR; collectively “PGPs”) before the Patent Trial and Appeal Board (“PTAB”).1 The proposed rules are in response to comments provided by the public and practitioners in an effort to help make the proceedings more transparent and effective.2

Amongst the proposed rules are those that aim to: 1) clarify, and confirm, the use of the broadest reasonable interpretation standard (“BRI”) for claim construction during PGPs; 2) implement a Rule-11-type standard requiring that practitioners certify that their representations before the PTAB are proper and that the violation of such a standard may result in sanctions; and 3) reaffirm the PTAB’s recently revised practice, as clarified in the MasterImage trial,3 of more readily allowing claim amendments by patent owners in PGPs.4

Perhaps the most significant proposal, at least from the patent owner’s perspective, is the ability to include new testimonial evidence, such as expert declarations, in a patent owner’s opposition to a petition to institute a PGP. Up to this point, patent owners have arguably been at a disadvantage at the petition stage of a proceeding because they have been limited to attorney arguments, without the support of expert declarations, in reply to a challenger’s petition. In contrast, the challenger’s petition is almost invariably supported by one, if not many, expert declarations. Challengers also have the added benefit of more time to formulate their arguments. As a result, many argue, the PTAB is more apt to institute a proceeding because the petition, in contrast to the opposition, is backed by expert opinion.

Based on the most recent statistical data from the PTAB, the PTO’s proposed change could end up being a significant tool to help level the playing field for patent owners. As of July 31, 2015, 3,655 post-grant petitions have been filed since 2012 – the majority of which are IPR petitions (3,277 or 90%).5 Life science patents are not immune, as 14% of the total number of post-grant petitions filed in the fiscal year of 2015, targeted patents in the fields of biotech, chemicals, and pharmaceuticals.6

The fate of IPR petitions is instructive. Of the 3,277 IPR petitions filed, 1, 777 have reached a final disposition. Of the 1,777 petitions, 950 (53%) were denied, settled, or dismissed (the data is not clear on how many petitions fall into each category), and trial was instituted on the remaining 827 (47%). Of the 827 petitions that were instituted, 380 (46%) were terminated during trial due to settlement, dismissal, or requests for adverse judgment (again the data does not clarify how many fall into each category) and the remaining 447 (54%) completed trial.

This is where the data gets interesting: of the 447 IPR proceedings that completed trial, 295 of them (66%) resulted in all instituted claims being declared unpatentable and 81 of the petitions (18%) resulted in some of the instituted claims being declared unpatentable. Thus, in the end, only 16% of patents that were challenged in an IPR and completed trial escaped unscathed.7

It is not surprising then, based on this data, that patent owners have felt that PGPs are heavily weighted in favor of challengers and against patentability. So, how does the PTO’s proposed rule change the game? In short, avoiding institution of a PGP is likely a patent owner’s best chance of keeping their patent intact. As shown above, if a petition is instituted and trial begins (IPRs, in particular), the likelihood of challenged claims emerging intact is slim.

The expectation is that by allowing patent owners to include expert declarations, and perhaps other evidence, in their opposition to a petition, the probability of maintaining challenged claims will increase by decreasing the overall number of petitions that are instituted in the first place. Time will tell whether or not such a trend will occur, but it looks like the PTO is listening and trying to even the playing the field – at least from a patent owner’s perspective.

Potential strategies going forward for both challengers and patent owners, assuming the proposed rule is adopted, may include:

Challenger – even stronger petitions with numerous expert declarations; retain as many experts as possible (even if declarations are not used for each one) to deplete the field of experts available to the patent owner; target more vulnerable claims to increase likelihood of petition being granted.

Patent owner – retain experts as soon as possible (even before a petition is filed should you suspect a challenge); file an opposition to the petition with support from expert declarations; invest in knowledgeable and experienced patent prosecution practitioners to ensure strong patents with numerous patents and claims covering your product/method.

1 Amendments to the Rules of Practice for Trials Before the PTAB, 80 Fed. Reg. 50719, 50720-47 (Aug. 20, 2015).
2 Id. at 50721.
3 See MasterImage 3D, Inc. v. RealD Inc., No. IPR 2015-00040 (P.T.A.B. Decision July 15, 2015).
4 Before PTAB, 80 Fed. Reg. at 50721-25, 50744; See also Michelle K. Lee, PTAB Update: Proposed Changes to Rules Governing PTAB Trial Proceedings, Director’s Forum: A Blog from USPTO’s Leadership (Aug 19, 2015, 9:03 AM) http://www.uspto.gov/blog/director/entry/ptab_update_proposed_changes_to.
5 See PTAB Statistics (July 31, 2015).
6 Id.
7 Id.