By Kevin E. Noonan —

There has been a great deal of angst generated by the practice before the U.S. Patent and Trademark Office's Patent Trial and Appeal Board (PTAB) of expanding panels from the customary three Administrative Patent Judges to include additional APJ's, including the Chief Judge and his deputies.  This practice was identified, seemingly by accident, during oral argument in Yissum Research Development Co. v. Sony Corp.; there, it became evident that the USPTO administration can and had intervened to alter or expand panels.  This practice has raised concerns regarding whether the PTAB is observing the procedural niceties that ensure due process will be satisfied.  This happened most recently in Ericsson v. Regents of the University of Minnesota and LSI Logic v. Regents of the University of Minnesota, which some commentators have noted are strikingly similar, and the practice has raised judicial eyebrows at the Supreme Court as well as the Federal Circuit.  The most recent donnybrook has involved production of redacted e-mails and other documents requested by counsel and obtained under a Freedom of Information Act request relating to the St. Regis Mohawk Tribe's assertion (unsuccessful, so far) tribal sovereign immunity to avoid Final Written Decision in a series of inter partes review proceedings initiated prior to transfer of patent rights from drugmaker Allergan to the tribe.

In an effort to improve the optics of the situation, a March 13, 2018 "Chat with the Chief (Judge)" program, featuring David P. Ruschke, Chief Patent Judge, joined by Michelle N. Ankenbrand, Lead Administrative Patent Judge, addressed the issue by discussing a study of the use of expanded panels in IPR and other proceedings before the PTAB.  The program started with the assertion that the Chief Judge has the authority (albeit not citing the statutory basis therefor), to expand panels but moderated that statement by emphasizing that expanded panels are "rare" and "ordinarily not used."  Expanded panels, when they are used are used for two purposes.  According to these officials.  First, the panels are used when the Board is considering "issues of exceptional importance," which the Judge's PowerPoint slide characterized as "guidance."  Second (and perhaps more controversially), expanded panels are used to maintain uniformity (termed "consistency") in PTAB (USPTO, actually) policy decisions.  The Chief Judge explained that an expanded panel requires a written request to the Commissioner of Patents or his delegate (who?); the request can come from an APJ, a merits or interlocutory panel, a patent owner or applicant in ex parte matters, or the parties in inter partes reexamination, interference, or "AIA trial."  The request must also contain reasons for expanded panel consideration; this can, again with some controversy, relate to an issue of first impression or "governed by a prior Board decision where Commissioner has determined it would not be in the public interest to follow the prior Board decision" (emphasis added).  Acceptable justifications or rationales include:

• Predictable and uniform application of agency policy
• Similarly situated parties, under the same facts, are treated the same
• Notice to the public

In practice, when expanded panels are employed, it is preferred that the panel include the Chief and a Deputy; include in the decision an explanation of the reason for expanding the panel; and preferably the expanded panel does not change the result arrived at by the original panel.  In view of these rationales, decisions from expanded panels are expected to be designated either as informative or precedential.

The study described by the Chief Judge involved four questions:  1) how frequent were expanded panels convened? 2) under what circumstances? 3) what was the reasoning behind expanding the panel? and 4) what was the result?  The study considered 7,390 petitions filed before December 31, 2017, involving 6,033 institution decisions, 1,912 Final Written Decisions (FWDs), and "thousands" of interlocutory orders.  Expanded panel decisions were assessed "manually" and excluded families where expanded panels were used to conserve resources (multiple consolidated cases).

Regarding the first question, the statistics showed 23 expanded panels of 6,033 institution decisions; 31 expanded panels of thousands of interlocutory orders; no expanded panels in 1,912 FWDs; and 5 expanded panels involving decisions in multiple consolidated IPRs.

Expanded panels when they arose were empaneled to make a decision on the merits 80% of the time and on request for rehearing in the other 20%.

Data on the rationales for expanded panels were explicated in more detail.

There were 21 instances where the panel was expanded at institution to consider questions of statutory interpretation.

These included:

• § 314(a) Multiple Petitions:  General Plastic v. Canon, Case IPR2016-01357, -01358, -01359, -01360, -01361 (PTAB Sept. 6, 2017) (Paper 19) (precedential) (vote from 3-0 to 7-0 with expansion on rehearing)
    – Emphasizes the factors that the Board considers in deciding whether to exercise its discretion to deny a follow-on Petition in an AIA proceeding under 35 U.S.C. § 314(a).

• § 325(d) Similar Art/Arguments:  Neil Ziegmann v. Carlis G. Stephens, Case IPR2015-01860 (PTAB Sept. 6, 2017) (Paper 13) (vote from 3-0 to 5-0 with expansion on rehearing)
    – Emphasizes that prior art or arguments may be considered "substantially the same" under 35 U.S.C. § 325(d) if they are "cumulative to or substantially overlap  with issues previously considered by the Office with respect to the patent."

• CBM Pre-Institution Disclaimer:  Facebook v. Skky, Case CBM2016-00091 (PTAB Sept. 28, 2017) (Paper 12) (precedential) (vote from 3-0 to 5-0 with expansion on rehearing)
    – Emphasizes that CBM patent review eligibility is determined based on the claims of the challenged patent as they exist at the time of the decision to institute, and that statutorily disclaimed claims must be treated as if they never existed for the purpose of institution.

Five instances arose at institution decision for questions of petition requirements.

Four occurred on motion procedure.

Twelve involved decisions to impose sanctions.

Seven involved questions of sovereign immunity; and ten were at the request of the PTAB panel.  In these ten cases, HTC America v. Virginia Innovation Sciences, Case IPR2017-00870, -00871, -00872, -00873, -00874, -00875, -00876, -00877, -00878, -00879 (PTAB Sept. 13, 2017), the original panel suggested expansion to maintain uniformity due to substantial difference of opinion among the judges on a group of 10 related cases regarding an issue arising under 35 U.S.C. § 112(f).

With regard to the fourth question, the Chief Judge contended that the expanded panel came to the same conclusion as the original panel, with the exception of Target Corp. v. Destination Maternity Corp. (IPR2014-00508), and Nidec Motor Co. v. Zhongshan Broad Ocean Motor Co., No. 2016-2321, slip op. (Fed. Cir. Aug. 22, 2017).

The Chief provided these conclusions:

• Expanded panels are very rare
• Most expanded panel decisions issued as original decisions, not decisions on rehearing
• Panels were expanded for guidance and consistency:
    • to provide forward-looking guidance on reoccurring issues; and/or
    • to treat similarly situated parties the same
• Underlying result remained the same after panel expansion on rehearing, except for Target and Nidec, both of which address same-party joinder

Article I courts, and the PTAB in particular, have a legitimate goal:  providing consistent application of the law to applicants and, in the case of implementing the adversarial avenues the AIA created, developing a consistent body of procedural and substantive law.  To this end, for example, the PTAB has designated some (albeit few) cases precedential, thus providing notice to the public regarding how the Office can be expected to conduct the "trials" mandated by the statute.  But the manner in which the Board has attempted to provide this consistency, in particular with regard to expanded panels in post-grant review proceedings, has provoked sufficient controversy that Chief Judge Ruschke felt it necessary (or at least politically expedient) to requisition a study and include the results in his "chat."  The kerfuffle that has arisen over expanded PTAB panels is the direct result of the chimerical nature of the proceedings engendered by the Leahy-Smith America Invents Act.  Characterized as "trials" in the rhetoric used to obtain passage of the Act, the various post-grant review instruments are more in the nature of "a specialized agency proceeding" as the Supreme Court noted in Cuozzo Speed Technologies v. Lee.  Seen in this light the practice of expanding panels to ensure consistency of agency action would appear to have some merit.  Seen as a trial, however, the overriding consideration is due process, wherein a patentee cannot be deprived of her property except in an adjudicatory proceeding where she has a fair opportunity to be heard without the deck stacked against her.  The Office has been zealous in putting patents of purportedly dubious validity through the gauntlet of post-grant review.  To many, the Board needs to be just as zealous in ensuring that patentees be deprived of their patent properties only if due process is followed as rigorously in the Office as it is in district court.  It may be impossible to reconcile these two diverse mistresses intertwined in post-grant review, but if the Office does not, cannot, or will not, eventually the Supreme Court will.

By George "Trey" Lyons, III —

As an endcap to a recent webinar Andrew Williams and I did on the most important PTAB stories from the past year, I addressed the effects that multiple, often serial, petitions can have on patent owners and their patents, and what can be done to alleviate some of the associated stresses — or increase them if you're the petitioner.  See Top Stories at the PTAB: What You Need to Know (Mar. 13, 2018), available here.  As final topics often go, however, my coverage was constrainedly brief.  So, here I will unpack the analysis patent owners and petitioners, alike, should keep top-of-mind when moving through this strategy.

To frame this issue, for PTAB petitioners who pay no attention to sunk-cost fallacies, the idea of throwing good money after a bad petition (e.g., those filed by another petitioner, based on different art and/or arguments) may always seem like the most aggressive and effective option at your disposal.  From the point of view of the patent owner, the anxiety of finding yourself as the recipient of a multiple petition barrage crying for the revocation of your hard-earned patent rights is often real, and may even seem fundamentally unfair.

Understanding this concern, late last year the PTAB undertook a comprehensive study to look at just how many patents have actually faced multiple petitions, who filed them, when they were filed, and how effective they were, both in terms of institution rate and the number of challenged patents that were ultimately lost (in whole or part).  See Multiple Petitions Study (Oct. 24, 2017), available here.  Because both the ultimate message (i.e., "Fear not, multiple petitions are really not that big of a threat") and the delivery (e.g., fairly confusing metrics, etc.) felt a little unsettling, a few key aspects of the study are likely worth further explication.

In the study, the PTAB reviewed 7,168 petitions addressing 4,376 patents.  From this, taking a "just the facts" approach where we can, some of the more important statistics presented in the study were as follows:

Who's Filing:  84.8% of patents were challenged by a single petitioner, and 94.5% faced two or fewer.

What's Being Filed:  67% of patents are challenged by one petition, 20.2% of patents are challenged by two petitions, and the numbers fall off quickly from there.

When Are They Filed:  Next, in slightly different approach, the PTAB examined when all of these petitions were actually filed.  The presentation, however, may have been a little misleading considering the topic at hand — the impact of multiple petitions on post-grant proceedings.  The PTAB's graph below indicates that 79% of petitions are filed before the patent owner preliminary response or institution decision, 95% of petitions are filed in a given petitioner's first round (before any institution decision), and only 5% of petitions are filed after a patent owner preliminary response, but before institution decision.

The slightly confusing part of this graph, however, is that some might interpret it on first impression as applying only to multiple petitions.  Not so.  Instead, the 41% (seen here in purple) included in the PTAB-touted "79% of Petitions" being filed without the benefit of seeing a patent owner preliminary response or institution decision are actually instances in which only one petition was ever filed.  But, if you are more interested in the more pressing question seemingly at the center of the study — when multiple petitions were filed — the percentage of "wait-and-see" petitioners are actually much more substantial.  Specifically, normalizing these percentages over the number multiple petitions filed, the impact looks more like this:  64.4% of multiple petitions were filed on or near the same day, 8.4% were filed after the patent owner preliminary response, and 27.19% were filed after the decision institution.  Thus, if you're going to be filing (or facing) multiple petitions, the "wait-and-see" strategy seems to be alive and well.

Finally, perhaps not surprisingly at this point, the Board also found that instances of any further, subsequent rounds of petitions past a second round were statistically insignificant (less than 0.1%, and where a "round" is all petitions filed before receiving a decision institution on one of those petitions).  Considering the typical timeline from filing to institution decision in light of the statutory time bar for filing, the PTAB really only confirmed that there are, statistically, very few instances in which multiple full rounds of petitions were filed.

Based on these figures, it would seem that some of the biggest challenges for patent owners who consider these petitions (and PTAB proceedings generally) as "death marches" for their hard-earned property rights (e.g., facing more than one petitioner, facing more than two petitions) are not, statistically, as relevant as some may have thought; but facing the ever-dreaded (and often effective) "wait-and-see" petitioners may well be.

The impact articulated by the PTAB that these petitions actually have on the challenged patent was also very surprising — although a little difficult to appreciate in the graphs presented below.

Multiple Petition Effect on Institution Decision:

First, the PTAB noted that although institution rates have decreased, the effect that multiple petitions have on those ultimate institution rates is marginal (70% versus 64% in 2017), but has increased slightly (4% in 2013 to 7% in 2016).  To help cut through these figures, the blue line below indicates a measure of the institution rate by patent, which is agnostic of how many petitions were actually filed against the patent (e.g., two petitions filed against a patent, one gets instituted, one does not = 100% institution rate).  The green line, on the other hand, indicates a measure of the institution rate by petition, which is an outcome averaged by how many petitions were actually filed against the patent (e.g., two petitions filed against a patent, one gets instituted, one does not = 50% institution rate).

Thus, as you can see, although the overall institution rate in post-grant proceedings has decreased over the past four years, the impact of filing multiple petitions has increased slightly (note, the figures for 2017 only include analysis for the first half of the year).  Even so, the PTAB's answer to biggest question left on everyone's lips — "What will this process ultimately mean for my patent (or the one I'm challenging)?" — was perhaps the most surprising of all.

Multiple Petition Effect on Ultimate Outcome of the Challenged Patent:

Turning to this answer, it is clear that the real effect of multiple petitions is most naturally viewed by considering how these same variables affect the ultimate outcome of the trial[s] and how the patent itself actually changed by going through it [them].  In the graph below, once again the blue and green coloration reflects the scenarios above, which indicate that 69% of all petitions result in a patent being unchanged and 58% of patents are completely unchanged at the end of one or more AIA proceedings.  Furthermore, the PTAB's figures also indicate that multiple petitions are slightly more beneficial for challenging some claims as unpatentable, as opposed to all claims as unpatentable.  Regardless, from the PTAB's view, the impact of multiple petitions in post-grant proceedings on the number of challenged patents that were ultimately lost (in whole or part) does not seem as great as some people feared.

Takeaways:

Bringing all of this back home, although somewhat hard to believe the results of the PTAB's "Multiple Petition Study" seem to indicate that the threats posed to patent owners by petitioners "abusing the system" and filing multiple petitions is not as rampant or pressing as many believed — at least based on the PTAB's metrics.  The effect that these statistics really have on strategies for navigating post-grant proceedings moving forward, however, really seems to be threefold, all depending on the chair you're sitting in.

First, if you're in the petitioner's chair, and you want to make multiple attempts at invalidating a patent using these proceedings (e.g., correct deficiencies of your own petition, divide and conquer claims, or show another petitioner what they should have argued), you're going to be inclined to throw good money after what you've perceived to be bad (or, more fairly, incomplete) results.  Second, if you're in the patent owner's chair, you don't really care what this study says or what happened to anybody else, because you just got a second (or potentially third, etc.) petition dropped in your lap and you want to know the best path forward.  And third, if you're in the PTAB's chair, based on this study, you probably don't even think there's a problem, and even if there is, you'll deal with it in the "broad discretion" you've been granted by 35 U.S.C. §§ 314(a) and 325(d).

But all said, because this strategy is likely not going away in the foreseeable future, we will turn to the factors and strategies at play when navigating multiple petition proceedings in light of this study and subsequent case law in the next installment.