By Josh Rich —

In AIA post-grant proceedings — specifically, Post-Grant Review ("PGR"), Inter Partes Review ("IPR"), and Covered Business Method ("CBM") review — the patentee has the right to seek to amend the claims rather than fight over the issued claims.  However, in 90% of the cases in which a motion to amend has been decided by the Patent Trial and Appeal Board ("PTAB"), the motion has been denied.  Based significantly on the dismal success rate of those motions to amend, the U.S. Patent and Trademark Office has now proposed an altered protocol for considering motions to amend in AIA post-grant proceedings.  Specifically, it proposes having the PTAB provide a preliminary review of whether amended claims would satisfy statutory and regulatory requirements, then allowing the parties to react and a Patent Owner to potentially revise the motion to amend.  Separately, the Office asked whether it should reallocate the burden of persuasion in motion to amend proceedings.  Comments on these proposals are due by December 14, 2018.

Currently, the motion-to-amend process in PGR, IPR, and CBM reviews runs directly parallel to the substantive process:  the Patent Owner must submit its motion to amend at the same time it files its Response (three months after institution), the Petitioner files its response to the motion to amend with its Reply to the Patent Owner's Response (three months later), the Patent Owner has an opportunity to reply in support of its motion to amend (one month later), and the issue is then decided in the Final Written Decision in which the PTAB resolves all of the other issues raised in the Institution Decision (twelve months after institution).[1]  Applying that procedure, parties had filed 305 motions to amend as of March 31, 2018.  The PTAB had ruled on 189 motions to amend by substituting claims (20 had requested simply cancelling claims, 35 found the original claims patentable or had already been decided, and 61 were withdrawn either by the party or by termination of the case).  Of the motions to amend resolved by the PTAB, only 7 (4%) were granted and 11 (6%) were granted in part; 171 (90%) were denied.

The vast majority (88%) of the denials of motions to amend, either in whole or in part, was on statutory grounds:

In light of these circumstances, the Patent and Trademark Office has proposed a revised process that would decouple the motion to amend and substantive filings in AIA proceedings to allow a preliminary decision from the PTAB four months after institution and two and one-half months after the filing of a motion to amend.  The Patent Owner would benefit by being able to address any statutory or procedural deficiencies in its Reply or a revised motion to amend; the Petitioner would benefit by getting the last word on any revised motion to amend.  If the preliminary decision indicates that the original motion is likely to be denied, the Patent Owner would go first with a filing one month after the decision; if the preliminary decision indicates that the motion is likely to be granted, the Petitioner would go first.  In fact, the process would potentially involve four additional briefs on the revised motion to amend (the revised motion, the Petitioner's response to the revised motion, the Patent Owner's reply in support of the revised motion, and the Petitioner's sur-reply).  The PTAB would consider all of the briefs — on both the original motion to amend and the revised motion — and would not be limited to the arguments on the revised motion.

The Federal Register notice provided a helpful timeline of the proposed new motion to amend process, as compared to the existing practice:

The Patent and Trademark Office also asked whether it should reconsider the burden of persuasion in AIA proceedings, and proposed a process for dealing with recalcitrant Petitioners.  The Office has never adopted a rule regarding the burden of persuasion on a motion to amend.  The Federal Circuit held, in Aqua Products, Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017) (en banc), that it would be inappropriate to place it on the Patent Owner, stating:

The only legal conclusions that support and define the judgment of the court are: (1) The PTO has not adopted a rule placing the burden of persuasion with respect to the patentability of amended claims on the patent owner that is entitled to deference; and (2) in the absence of anything that might be entitled deference, the PTO may not place that burden on the patentee.

Id. at 1327.  In response, the Office issued formal guidance indicating that the PTAB would no longer place the burden of persuasion on a Patent Owner.

A wrinkle arises, however, when the Petitioner stops participating in the AIA proceeding.  In one such case, Bosch Auto. Servs. Sol'ns, LLC v. Matal, 878 F.3d 1027 (Fed. Cir. 2017), amended on reh'g (Mar. 18, 2018), the parties to the proceeding had settled.  The Court first confirmed that "'the petitioner bears the burden of proving that the proposed amended claims are unpatentable by a preponderance of the evidence.''  Id. at 1040.  The Court then indicated that the PTAB could deny the motion to amend only when the existing evidence would support that conclusion:  "[W]here the challenger ceases to participate in the IPR and the Board proceeds to final judgment, it is the Board that must justify any finding of unpatentability by reference to the evidence of record in the IPR.''  Id. (quoting Aqua Products, 872 F.2d at 1311 (opinion of O'Malley, J.)).

In light of the Aqua Products and Bosch cases, as applied to PTAB proceedings in the informative decision Western Digital Corp. v. SPEX Techs., Inc. (IPR2018-00082 (Paper 13)), the Patent and Trademark Office is proposing a new rule for handling cases in which the Petitioner stops participating.  Specifically, it has proposed giving the PTAB the discretion to solicit assistance from a patent examiner to develop the record on a motion to amend.  The examiner would provide an advisory report that marshals the evidence and provides an assessment on patentability of amended claims without taking a position on any final legal determination.

The proposed changes to the motion to amend process may lack the elegance and simplicity of the current procedures, but they reflect a general agreement that the current procedures are not achieving the intended goal of the process.  Thus, while the multiple rounds of briefing, and potential involvement of examiners, in the motion to amend process may add substantially to the administrative burden of motions to amend, they are likely to increase the likelihood of motions to amend being granted, thereby permitting the Patent Owner to obtain claims to which it is would be entitled in light of the arguments raised in the AIA proceeding.

[1] The parties may alter the dates for these filings (other than the Final Written Decision) by stipulation or motion.  The can also agree to a schedule in which the motion to amend filings are not contemporaneous with the substantive filings.  However, the presumption is the timeline set forth above.

By Josh Rich —

On Friday, October 26, 2018, the Supreme Court granted certiorari in Return Mail, Inc. v. U.S. Postal Service, in order to answer the question whether the government can bring post-grant review proceedings under the Leahy-Smith America Invents Act, or AIA.  Specifically, the Supreme Court agreed to review whether the government is a "person" under the AIA, as is required to file a petition seeking the institution of AIA review proceedings.

The case began with Return Mail seeking to license its patent to the Postal Service as early as 2006.  Return Mail is the assignee of U.S. Patent No. 6,826,548, which claims methods, computer programs, and systems for processing undeliverable or returned mail.  Claim 1 covers using encoded data (essentially, a bar code) that is added to the item before mailing to identify the intended recipient and notify the sender with new recipient information to allow the sender to update its records.  Instead of licensing the '548 patent, the Postal Service filed a petition for ex parte reexamination with the U.S. Patent and Trademark Office.  The USPTO instituted the reexamination proceeding, but eventually confirmed the validity of the patent.  Return Mail then filed a complaint against the Postal Service in the Court of Federal Claims.

Return Mail's complaint against the Postal Service was based on the government's unlicensed use of the invention covered by the '548 patent, but it technically was not a patent infringement suit.  Rather, claims against the government seeking compensation are brought under 28 U.S.C. § 1498(a), an eminent domain statute.  While that action was pending, the Postal Service filed a petition seeking the institution of covered business method ("CBM") review of the '548 patent.

Return Mail opposed the institution of the CBM review​ on both substantive and procedural grounds, including that the Postal Service lacked standing to file a CBM petition.  Standing in administrative proceedings, like the USPTO's AIA proceedings, is different from the requirement for standing in a court.  Rather than requiring a case or controversy, it requires meeting statutory requirements.[1]  Under § 18(a)(1)(B) of the AIA, for CBM proceedings, "[a] person may not file a petition for a transitional proceeding with respect to a covered business method patent unless the person or the person's real party-in-interest or privy has been sued for infringement of the patent or has been charged with infringement under that patent."  Return Mail challenged the Postal Service's standing on two points:  first, that the government is not a "person" under the AIA; and, second, that the Postal Service had been (or could be) "sued for infringement of the patent" or "charged with infringement of that patent."

Return Service's challenge of the government's personalty under the AIA arose out of the interplay between the standing and estoppel provisions of the statute.  The estoppel provision, AIA § 18(a)(1)(D), states:

The petitioner in a transitional proceeding that results in a final written decision under Section 328(a) of title 35, United States Code, with respect to a claim in a covered business method patent, or the petitioner's real party in interest, may not assert, either in a civil action arising in whole or in part under section 1338 of title 28, United States Code, or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337), that the claim is invalid on any ground that the petitioner raised during that transitional proceeding.

The estoppel was viewed as a cornerstone of the CBM process (and other AIA proceedings) and was intended to prevent CBM petitioners from getting more than one bite at the same apple in litigation.  But by its own language, this estoppel does not apply to a proceeding under § 1498 in the Court of Claims.

Both the PTAB and the majority of the Federal Circuit panel found that the Postal Service satisfied both the requirement that it be a "person" and that it be "sued for infringement of the patent" or "charged with infringement of that patent."  With regard to requirement that the petitioner be a "person," even the Postal Service noted the oddity of it not being subject to estoppel.  However, the panel majority believed that it would be better to assume that the Postal Service was a "person" and allow Congress to fix the estoppel problem, if it so desired.  The majority addressed two further points.  First, it noted that the parties had not discussed the issue in any detail, which would have constituted a waiver if the issue was waivable.  Second, assuming the issue was unwaivable, the majority found that the AIA as a whole suggested that the term should include the government because otherwise the government would not benefit from intervening rights with regard to patents amended during IPRs.

Judge Newman dissented on the issue of government personalty.  First, she asserted that standing — as an aspect of subject matter jurisdiction — cannot be waived.  She then noted that it was the Court's obligation to ascertain and confirm jurisdiction, which required it to look at the definitions in the statute.  In doing so, she relied on the longstanding rule that, absent an indication otherwise, the presumption has been that the government does not fall within the definition of a "person."  That applies both when the government would benefit from being a "person" and when it would be harmed by fitting in the definition.  And here, where the Federal government (albeit not the Postal Service) argued strongly for the estoppel provision to apply as the AIA was being considered by Congress, the statutory history suggests applying the presumption against government personalty rather than abandoning it.

In its petition for certiorari, Return Mail challenged both the finding that the Postal Service was a "person" and that it had been sued for patent infringement when Return Mail brought its § 1498 action in the Court of Claims.[2]  With regard to the definition of "person," Return Mail argued that the Federal Circuit's chosen meaning, based on the lack of express Congressional guidance, conflicted with Supreme Court precedent presuming that statutes presumptively exclude the government from the scope of this term.  That is especially true when the construction would be awkward, as Return Mail asserted it was in light of the conflict between the Federal Circuit's construction and the overall intent of the statutory scheme.  In addition, Return Mail asserted that the statutory scheme indicated an intent to exclude the government from the definition of "person."  Finally, Return Mail pointed out that the Federal government already had a role in CBM review, specifically the PTO sitting in judgment over the review.

The Federal government responded by arguing, first, that Return Mail had not raised the issue below and therefore the dispute had not been fully fleshed out.  Second, even though it acknowledged that the general rule is that the government is not a "person," the government argued that the context of the AIA and the CBM review provision reinforced that the government should be considered a "person" in these circumstances.  The government's argument relied on the fact that the Patent Statute permits the government to obtain patents, yet other sections (such as § 102) limit when "a person shall be entitled to a patent."  Third, the government argued that allowing it to bring CBM petitions was consistent with the statutory intent to allow streamlined review of suspect patents.  Finally, the government argued that this case was a poor vehicle for deciding this issue because the Postal Service was fundamentally different from other Federal agencies because it is more like a business than other agencies.

In its reply, Return Mail pointed out that this situation is important to patent owners, and has been a recurring issue.  The issue of whether the government is "person" extends to all AIA proceedings, and several have been brought by the Federal government.  In addition, Return Mail pointed out (as had one of the amici that filed a brief in support of Return Mail's petition) that the government was seeking to act as both a sovereign power and a private party in the same proceeding.

The Supreme Court granted certiorari only on the first issue identified by Return Mail, whether the government is a "person" in the context of the AIA's CBM proceeding.  Thus, by the middle of next year, we should know whether government agencies are "persons," permitted to bring AIA proceedings.

[1] Here, however, in the context of a CBM review, administrative standing incorporates the Article III courts' requirements for standing:

 A petitioner may not file with the Office a petition to institute a covered business method patent review of the patent unless the petitioner, the petitioner's real party-in-interest, or a privy of the petitioner has been sued for infringement of the patent or has been charged with infringement under that patent.  Charged with infringement means a real and substantial controversy regarding infringement of a covered business method patent exists such that the petitioner would have standing to bring a declaratory judgment action in Federal court.

37 C.F.R. § 42.302.

[2] The Federal Circuit found that a § 1498 action was similar enough to a patent infringement action to give rise to standing, even though it clearly is not a patent infringement action and does not permit certain remedies (such as injunctive relief, treble damages, and attorneys' fees for an exception case).  In doing so, the unanimous panel found that "infringement" did not necessarily mean an action brought solely on the basis of the Patent Act.