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IP Alert: PTAB Designates Five AIA Review Decisions as Precedential

May 19, 2016

On May 10, 2016, the Patent Trial and Appeal Board (PTAB) designated five decisions relating to the newly created proceedings under the Leahy-Smith America Invents Act (AIA) as precedential. The five newly designated precedential decisions are Garmin v. Cuozzo,1 Bloomberg v. Markets-Alert,2 Oracle v. Click-to-Call,3 MasterImage 3D v. RealD,4 and Lumentum Holdings v. Capella Photonics.5 The designation of five new precedential decisions is particularly notable because the PTAB previously had only designated a total of three such decisions as precedential.6 Of the five decisions newly designated as precedential, two relate to discovery (Garmin with respect to inter partes reviews (IPRs) and Bloomberg with respect to covered business method patent reviews (CBMs)), two relate to procedural questions (Oracle with respect to 35 U.S.C. § 315(b) and Lumentum with respect to 35 U.S.C. § 312(a)(2)), and one relates to prior art (MasterImage 3D).

These decisions are summarized below.

Garmin Int’l v. Cuozzo Speed Techs., LLC
The Garmin decision addresses the discovery that is appropriate during an IPR. The PTAB first observed that, under the AIA, “discovery is available for the deposition of witnesses submitting affidavits or declarations and for ‘what is otherwise necessary in the interest of justice,’” and that this is “significantly different from the scope of discovery generally available under the Federal Rules of Civil Procedure.” Id. at 5 (citing 35 U.S.C., § 3165(a)(5)). Turning to the Congressional Record, the PTAB found that “Senator Kyl [who introduced the original patent reform bill] commented on the discovery standards for inter partes review, noting that it ‘restricts additional discovery to particular limited situations, such as minor discovery the PTO finds to be routinely successful, or to discovery that is justified by the special circumstances of the case.’” Id. at 5 (citing 154 Cong. Rec. S99898 (daily ed. Sept. 27, 2008)). Ultimately, the PTAB concluded that “in inter partes review, discovery is limited as compared to that available in district court litigation.” Id.

Based on the statutory language and the Congressional Record, the PTAB outlined five factors as important in determining whether additional discovery should be granted:
  1. More Than A Possibility And Mere Allegation
  2. Litigation Positions And Underlying Bias
  3. Ability to Generate Equivalent Information By Other Means
  4. Easily Understandable Instructions
  5. Requests Not Overly Burdensome To Answer
The PTAB offered guidance, in varying detail, for each of the five factors.

With respect to the first factor, the PTAB explained a discovery request that is no more than a “fishing expedition” should not be granted. Rather, “the requester of information should already be in possession of a threshold amount of evidence or reasoning tending to show beyond speculation that something useful will be uncovered” for a discovery request to be granted. Id. at 7. The PTAB further explained that with respect to this factor, “‘useful’ means favorable in substantive value to a contention of the party moving for discovery.” Id. at 7.

For the second factor, the PTAB stated that “asking for the other party’s litigation positions and the underlying basis for those positions is not necessary in the interest of justice.” Id. at 6. Put simply, a discovery request that seeks only to determine the other party’s litigation strategy should not be granted.

With respect to the third factor, the PTAB explained that it would not be in the interest of justice to require a party to produce information via a discovery request that the requesting party can “reasonably figure out or assemble.” Id. at 6. As an example of this factor, the PTAB denied Cuozzo’s request for Garmin to produce file histories for a number of prior art references upon which Garmin relied in its petition. See id. at 14. The PTAB reasoned that the requesting party, Cuozzo, can reasonably obtain the file histories without Garmin providing them.

The PTAB offered little guidance regarding the fourth element. The board simply stated that the instructions should be easily understandable and that “ten pages of complex instructions for answering questions is prima facie unclear.” Id. at 6.

Finally, with respect to the fifth factor, the PTAB recognized the “expedited nature” of IPR proceedings and noted that the “requests must not be overly burdensome to answer” given these time constraints. Id. When considering this factor, the PTAB instructed, the financial burden, burden on human resources, and burden on meeting the time schedule of IPRs should be considered.

Bloomberg, Inc. v. Markets-Alert PTY, Ltd.
Bloomberg similarly addressed the scope of appropriate discovery, in this case, during CBM proceedings. As explained in Garmin with respect to IPRs, the PTAB noted that “[t]here is a strong public policy to limit discovery in administrative trial proceedings, as opposed to the practice in district court patent litigations that have broad discovery [standards].” Bloomberg at 2. While the public policy in limiting discovery is similar for both IPRs and CBMs, the PTAB noted that a different standard applies to each. While an “interest of justice” standard applies to the grant of discovery requests in IPRs, a “good cause” standard applies to the grant of discovery requests in CBM reviews. Id. at 3. Because of the different standard, the PTAB reasoned that the five factors set forth in Garmin should be “slightly modif[ied]” for CBMs.

With respect to the first factor outlined by the PTAB (i.e., more than a possibility and mere allegation), the board held that a “good cause showing requires the moving party to provide a specific factual reason for expecting reasonably that the discovery will be ‘useful.’” Id. at 5. Here, the PTAB used the same definition of “useful” provided in Garmin.

With respect to the second factor (i.e., litigation positions and underlying rights), the PTAB stated that “[a]sking for the other party’s litigation positions and the underlying basis for those positions is insufficient to demonstrate that the additional discovery is necessary for good cause.” Id.

As to the third factor (i.e., ability to generate equivalent information by other means), the PTAB stated simply that “[a] party should not seek information that reasonably can be generated without a discovery request.”

For the fourth factor (i.e., easily understandable instructions), the PTAB again provided little guidance, reiterating that “ten pages of complex instructions for answering questions is prima facie unclear.” Id.

Regarding the fifth factor (i.e., requests not overly burdensome to answer), the PTAB held that the expedited nature of a CBM review should be considered. The PTAB stated that the “burden includes financial burden, burden on human resources, and burden on meeting the time schedule of the trial.” Id.

Ultimately, in both Garmin and Bloomberg, the PTAB concluded that the scope of discovery in administrative proceedings should be lesser than that of district court proceedings. Additionally, the takeaway from Bloomberg is that a “good cause” standard applies to CBM reviews and that the availability of discovery in CBM reviews should be more stringent than in IPRs.

Oracle Corp. v. Click-to-Call Techs., LP
Unlike the other four decisions discussed here, the PTAB designated only a portion of the Oracle decision as precedential: Section III.A., which examined 35 U.S.C. § 315(b)’s requirement that “[a]n inter partes review may not be instituted if the petition requesting the proceeding is filed more than one year after the date on which the petitioner . . . is served with a complaint alleging infringement of the patent.” Id.

In Oracle, a group of petitioners filed a petition for an IPR of the ’836 patent. The petition was filed in 2013. However, due to changing licensees, assignees, and business affiliations over the decade or so prior to the filing of the petition, one of the petitioners had previously been served a complaint alleging infringement of the ’836 patent. The complaint had been served on this petitioner more than 10 years prior to the filing of the petition. This previous suit had been voluntarily dismissed by the then-patent owner without prejudice.

At issue for the PTAB was what effect this previously dismissed suit had, if any, on the ability to institute an IPR. See id. at 15-16. The PTAB looked to Federal Circuit case law for guidance. See id. at 17. The PTAB noted that “[t]he Federal Circuit consistently has interpreted the effect of such dismissals [i.e., voluntary dismissals without prejudice] as leaving the parties as though the action had never been brought.” Id. at 17. From this the PTAB reasoned that the dismissal without prejudice of the earlier-filed suit “nullifies the effect of the service of the complaint” and does not bar the petitioner (or any other petitioners) from pursuing an inter partes review of the ’836 patent. Id. Put simply, because the previously filed suit had been dismissed without prejudice, the parties to the suit were left as if the action had never been brought. This, the PTAB held, resulted in the previously served complaint having no limiting effect on the now-filed petition with respect to 35 U.S.C. § 315(b).

MasterImage 3D, Inc. v. RealD Inc.
In MasterImage, the PTAB sought to clarify a statement made in Idle Free Systems, Inc. v. Bergstrom, Inc., IPR2012-00027, Paper 26 (June 11, 2013), regarding amendments made during an IPRs. See MasterImage at 2. In Idle Free, the PTAB states that “[t]he burden is not on the petitioner to show unpatentability, but on the patent owner to show patentable distinction over the prior art of record and also prior art known to the patent owner.” Id. at 7. In MasterImage, the PTAB clarifies what constitutes “prior art of record” and “prior art known to the patent owner,” as well as the burden of production throughout the amendment process.

First, the PTAB held that “prior art of record” includes 1) any material in the prosecution history of the patent; 2) any material art of record in the current proceeding, including art asserted in grounds on which the PTAB did not institute review; and 3) any material art of record in any other proceeding before the USPTO involving the patent.

With regard to “prior art known to the patent owner,” the PTAB held that the phrase “‘prior art known to the patent holder’ . . . should be understood as no more than the material prior art that the Patent Owner makes of record in the current proceeding pursuant to its duty of candor and good faith to the Office under 37 C.F.R. § 42.11, in light of a Motion to Amend.” Id. at 3.

Finally, the PTAB discussed burden shifting that occurs during amendments. The PTAB explained that “once Patent Owner has set forth a prima facie case of patentability of narrower substitute claims over the prior art of record, the burden of production shifts to Petitioner.” Id. at 4.

Lumentum Holdings, Inc. v. Capella Photonics, Inc.
35 U.S.C. § 312(a) enunciates requirements to file a petition for IPR under 35 U.S.C. § 311. In Lumentum, the PTAB considered whether 35 U.S.C. § 312(a) is jurisdictional; that is, whether failure to meet the requirements of 35 U.S.C. § 312(a) prevents the PTAB from having the ability to institute an IPR.

At issue in Lumentum is 35 U.S.C. § 312(a)(2), which requires that a petition for inter partes review identify all real parties in interest. Due to a reorganization, the real party in interest to the IPR changed after the petition was filed, but before a decision instituting trial was entered. See id. at 2. The patent owner asserted that the petition failed to meet the requirements of 35 U.S.C. § 312(a)(2) (i.e., it failed to name the real party in interest) at the time the PTAB was instituting review and that it was therefore incomplete. Further, the patent owner argued that because the petition was incomplete the PTAB should not have considered the petition and the IPR should be terminated.

The PTAB first looked to a previous decision, Elekta, Inc. v. Varian Medical Systems, Inc., in which the PTAB determined that 35 U.S.C. § 312(a) was not jurisdictional. See id. at 4 (quoting Elekta IPR2015-01401, slip op. 6-7 (December 31, 2015)). In Elekta, the PTAB adopted the rationale furthered by the Supreme Court in Sebelius v. Auburn Reg’l Med. Ctr. that the “determination turns on ‘whether Congress has clearly stated that the rule is jurisdictional; absent such a clear statement, . . . courts should treat the restriction as nonjurisdictional in character.” Sebelius, 133 S. Ct. 817, 824 (2013). Based on the Supreme Courts rationale in Sebelius, the PTAB concluded in Elekta that 35 U.S.C. § 312(a) should not be described as jurisdictional, but rather should be described as a claims-processing rule. See Elekta at 6-7.

Based on Elekta, the PTAB held that “§ 312(a) sets forth requirements that must be satisfied for the Board to give consideration to a petition, however, a lapse in compliance with those requirements does not deprive the Board of jurisdiction over the proceeding, or preclude the Board from permitting such a lapse to be rectified.” Lumentum at 5. Further, the PTAB noted the strange consequences of ruling that a lapse in the requirements of 35 U.S.C. § 312(a) deprive the PTAB of jurisdiction would cause. For example, 37 C.F.R. § 42.8(a)(3) allows a party to provide the PTAB notice of change in identification of the real party in interest, an unnecessary and extraneous provision if a change in the real party of interest caused the PTAB to lose jurisdiction.

--Written by Fitch Even attorney George N. Dandalides.

1Garmin Int’l v. Cuozzo Speed Techs., LLC, IPR2012-00001, Paper 26 (Mar. 5, 2013).
2Bloomberg, Inc. v. Markets-Alert PTY, Ltd., CBM2013-00005, Paper 32 (May 29, 2013).
3Oracle Corp. v. Click-to-Call Techs. LP, IPR2013-00312, Paper 26 (October 30, 2013).
4MasterImage 3D, Inc. v. RealD Inc., IPR2015-00040, Paper 42, (July 15, 2015).
5Lumentum Holdings, Inc. v. Capella Photonics, Inc., IPR2015-00739, Paper 38 (March 4, 2016).
6The three decisions previously designated as precedential are LG Electronics, Inc. v. Mondis Tech, Ltd., IPR2015-00937, Paper 8 (September 15, 2007), Westlake Services, LLC v. Credit Acceptance Corp., IPR2014-01176, Paper 28 (May 14, 2015), and SecureBuy LLC v. CardinalCommerce Corp., CBM2014-00035, Paper 12 (April 25, 2014).


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