September 18, 2012
On September 16, 2012, several provisions of the Leahy-Smith America Invents Act (AIA) pertaining to third-party practice in the U.S. Patent and Trademark Office (USPTO) became effective. This alert will discuss those provisions that provide for new third-party procedures to challenge issued patents, specifically, inter partes review, post-grant review, and a transitional program for covered business method patents.
The AIA also provides for third-party submission of prior art in pending patent applications, which we discuss in a separate alert here.
The USPTO has long provided procedures for third parties to challenge the patentability of issued patents. Previously, the USPTO allowed third parties to request reexamination of patents on either an inter partes or ex parte basis. In ex parte reexamination, a procedure which still exists after the AIA, a third party may submit a request to have the USPTO reexamine a patent. The basis for such ex parte reexamination is limited to an examination of novelty and obviousness over patents and printed publications. Once the third party submits the reexamination request, the third party is not permitted to participate further in the reexamination process. Under the former inter partes reexamination procedure, the third party was permitted to interact with the USPTO and actively participate in the reexamination.
The AIA has now eliminated inter partes reexaminations and instead provides two new replacement procedures, inter partes review and post-grant review. Each procedure provides for an administrative trial at the USPTO. Trials in each case will be subject to motion practice, discovery, protective orders, and oral arguments in a manner akin to practice in the federal courts. A new administrative body, the Patent Trial and Appeal Board (PTAB), will conduct the administrative trials in both cases.
The USPTO also provides a third new procedure, which is a transitional procedure for third-party review of covered business method patents, as described in more detail below.
On August 14, 2012, the USPTO announced these implementing rules in two rulemaking packages, “Changes to Implement Inter Partes Review Proceedings, Post-Grant Review Proceedings, and Transitional Program for Covered Business Method Patents” and “Transitional Program for Covered Business Method Patents--Definitions of Covered Business Method Patent and Technological Invention.”
One fundamental change introduced by the AIA is that priority of competing applications will be decided under a so-called “first-to-file” system, beginning for applications filed in March of 2013 (see previous alert here). Presently, priority for competing applications is decided under a “first-to-invent” system. The availability of the new third-party procedures varies depending on whether the patent was filed under the pre-AIA or post-AIA rules. Specifically, inter partes review is available for all patents, but post-grant review will be available only for patents issued under the post-AIA rules.
The USPTO indicates that each of the new proceedings is to follow a 12- to 18-month timeline.
Under the post-grant review procedure, a third party may challenge an issued patent based on essentially any grounds available for challenging patents in the federal courts. For example, a post-grant challenge may be predicated on prior art, including qualifying on-sale or public use activities. The post-grant challenge also may be based on grounds of utility, enablement, written description, and definiteness. The USPTO also will permit challenges based on subject matter eligibility.
A third party seeking post-grant review of an issued patent must file a petition for post-grant review. The petition must be filed within nine months from the date of the patent grant. The petitioner cannot have previously filed an invalidity action against the patentee. The fee for post-grant review is currently $35,800 for up to 20 claims, with a surcharge of $800 per additional claim. Unlike the preissuance third-party submission procedure, the real party in interest must be identified in the petition.
Once a third party has filed a petition, the USPTO will issue a notice indicating that the request to institute post-grant review has been granted a filing date. A patent owner has three months after this date to serve a preliminary response. The patent owner may disclaim parts of the patent in this response, but otherwise may not amend claims, and may not provide new testimonial evidence.
The PTAB will decide whether to institute the requested post-grant review proceedings based on the petition and a preliminary response from the patent owner. In evaluating whether to institute proceedings, the PTAB determines whether the petitioner demonstrated that it is more likely than not that at least one challenged claim is unpatentable. Alternatively, the petitioner may show that the petition raises a novel or unsettled legal question that is important to other patents or patent applications.
If proceedings are instituted, the patent owner will have three months to file a response, which may include a motion to amend the claims by canceling claims and/or proposing a reasonable number of substitute claims.
Once initiated, the post-grant review will take the form under the rules of the PTAB. Discovery in post-grant review proceedings is limited to evidence directly related to factual assertions advanced by either party in the proceeding.
The patent owner and petitioner jointly may request termination of the post-grant review proceedings upon settlement. The settlement must be in writing and filed with the USPTO, though parties can request that the settlement be treated as “business confidential information.”
After a decision in a post-grant review, the real party in interest will be estopped from raising in future litigation any issues actually raised in the post-grant review proceeding, and also will be estopped from raising issues that “reasonably could have been raised” in the proceeding. If the proceedings terminate by settlement, however, no estoppel will apply.
Both the petitioner and patent owner have the right of appeal to the Court of Appeals for the Federal Circuit.
Inter Partes Review
A third party wishing to challenge a patent only on the basis of issued patents and printed publications may file a petition for inter partes review. Inter partes review is limited to challenges of novelty and obviousness over patents and printed publications. The USPTO will charge a fee of $27,200 for an inter partes review of 20 claims, with a fee of $600 per additional claim.
A petition for inter partes review cannot be filed until after the nine-month window for the filing of a post-grant review or the termination of any post-grant review proceedings. There are some exceptions to this time limit. Also, a defendant in a patent infringement case cannot file a petition for inter partes review more than one year after service of a complaint alleging infringement of the patent.
The third party must serve the petition on the patent owner. Unlike the preissuance third-party submission procedure, the real party in interest must be identified.
Once a third party has filed a petition, the USPTO will issue a notice indicating that the request to institute an inter partes review has been granted a filing date. A patent owner has three months after this date to serve a preliminary response. The patent owner may disclaim parts of the patent in this response, but otherwise may not amend claims, and may not provide new testimonial evidence.
The PTAB will consider the petition and any patent owner response, and, if warranted, will initiate inter partes review. Before inter partes review may be initiated on any one or more grounds of unpatentability alleged by the third party, the PTAB must decide that the petition supporting the ground establishes that there is a reasonable likelihood that the petitioner would prevail in at least one of the claims challenged to trigger an inter partes review.
Once initiated, the inter partes review will take the form under the rules of the PTAB. Discovery is limited to the deposition of witnesses submitting affidavits or declarations and what is otherwise necessary in the interest of justice.
The patent owner and petitioner jointly may request termination of these proceedings upon settlement. The settlement must be in writing and must be filed with the USPTO, though parties can request that the settlement be treated as “business confidential information.”
After a decision in an inter partes review, the third party requestor will be estopped from subsequently raising the issues actually raised, and those that reasonably could have been raised, in the inter partes review proceedings. If the proceedings terminate by settlement, however, no estoppel will apply.
Both the petitioner and patent owner have the right of appeal to the Court of Appeals for the Federal Circuit.
Transitional Program for Covered Business Methods
“Covered business method patent review” is available to third parties that have been sued or charged within infringement such that they would have standing to bring a declaratory judgment action. Patents subject to covered business method review are those claiming a “method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except [those] for technological inventions.” The USPTO has issued guidelines to help determine what qualifies as a technological invention, but the determination of whether a patent is a covered business method patent will be made on a case-by-case basis.
The covered business method proceedings are subject to the same standards and procedures as post-grant review, with a few exceptions. For example, covered business method review is available to patents issued under either the first-to-file or the first-to-invent systems. Covered business method patents issued under the first-to-file system are subject to review based on any prior art. A patent issued under the first-to-invent system may be subject to covered business method review only on limited prior art. For challenges to covered business method patents with a first-to-invent filing date, the prior art must (1) fall under section 102(a), or (2) disclose the invention more than one year before the filing date and fall under section 102(a) if the disclosure had been made by another.
After a final written decision, the scope of estoppel from a covered business method patent review depends on the forum. In any subsequent proceedings in the USPTO, the real party in interest will be estopped from raising again those issues actually raised and those that reasonably could have been raised in the covered business method review. In other fora, such as in district court, the estoppel only applies to the grounds actually raised in the covered business method patent review.
Covered business method review is intended as a transitional program that will expire on September 16, 2020.
Highlights of the Differences in Procedures
There are many distinctions between these procedures:
• Post-grant review is available during the nine-month period after grant of a patent, whereas inter partes review is not available until nine months after grant or termination of any post-grant review proceedings. Covered business method patent review also is not available until nine months after issuance of a patent.
• The grounds for bringing inter partes review are narrower than the grounds available for seeking post-grant review. As outlined below, a petition for post-grant review can be based on any grounds, except best mode, and may include section 101, 102, 103, and 112 challenges, whereas a petition for inter partes review can only raise invalidity challenges under sections 102 and 103 based on patents or printed publications.
• For the above reason, the scope of estoppel under post-grant review is broader than in inter partes review. Estoppel in inter partes review is limited to invalidity challenges under sections 102 and 103 based on patents or printed publications.
• The threshold for institution of post-grant review proceedings is “more likely than not” or “important novel/unsettled legal question.” The threshold for inter partes review is “reasonable likelihood that petitioner would prevail.”
• Discovery is more limited in inter partes review proceedings.
• Inter partes review is available for all patents, while post-grant review will be available only for patents issued under the first-to-file system. Covered business method patent review is limited to patents for “covered business methods” but is not limited to patents filed under the first-to-file system.
• Covered business method patent review is available for all patents, but is a transitional program with a scheduled expiration date.
For more information, please contact Fitch Even attorney Amanda L. Lowerre.