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  • Apotex Inc. v. Wyeth LLC (Fed. Cir. 2016)

    By Kevin E. Noonan —

    WyethPerhaps the most significant Supreme Court decision in the past quarter century for the working patent practitioner is Dickinson v. Zurko, which strictly speaking is less a patent case than an administrative law decision.  But every day the question of whether a party can successfully challenge a U.S. Patent and Trademark Office decision is decided on the basis of the Court's interpretation of the Administrative Procedure Act to require the Federal Circuit to give deference to the Office's factual determinations and only overturn them if there is not substantial evidence supporting them.  In re Gartside, 203 F.3d 1305, 1316 (Fed. Cir. 2000).  In a nonprecedential decision this week, Apotex v. Wyeth, the Federal Circuit once again applied the Court's instruction in upholding the Office's determination, in a Final Written Opinion from an inter partes review proceeding, that the claims at issue were not obvious.

    The IPR involved U.S. Patent No. 7,879,828, which claims a stabilized formulation of tigecycline:

    Structurea tetracycline-class drug that is important as a treatment against drug resistant bacteria to be used when other antibiotics have failed.  Tigecycline has a narrow stability profile, however, suffering oxidation at high pH and epimerization to an inactive form at acidic pH.  The claimed formulation addresses these concerns by formulating the drug with an acid (in practice, hydrochloric acid) in the presence of a carbohydrate (lactose) that inhibits epimerization.  Claim 1 is representative:

    A composition comprising tigecycline, lactose, and an acid selected from hydrochloric acid and gentisic acid, wherein the molar ratio of tigecycline to lactose is between about 1:0.2 and about 1:5 and the pH of the composition in a solution is between about 3.0 and about 7.0.

    The Board instituted IPR based on three references: a published Chinese patent application ("CN '550") that disclosed formulations of another tetracycline-type antibiotic, minocycline, as a powder of its hydrochloride salt in the presence of a "powder supporting agent" that could be a carbohydrate and in particular lactose.  CN '550 was combined with a reference by Pawelczyk on the kinetics of minocycline oxidative degradation at pH greater than 5, and a reference by Naggar on the effects of stabilizers such as polysorbate 20, urea, and thiourea on tetracycline epimerization.

    Apotex #1At trial, however, the Board found that Apotex had not established by a preponderance of the evidence that the claims of the '828 patent were obvious.  The decision reasoned that Apotex had not shown why the skilled worker would have substituted tigecycline for minocycline in the composition disclosed in CN '550 nor why the skilled person would have prepared a lyophilized preparation of tigecycline according to the reference.  The Board also found that Apotex had not shown why the skilled worker would combine the teachings of CN '550 with the Pawelczyk or Naggar references to arrive at the claimed formulation.

    The Federal Circuit affirmed, in an opinion by Judge Lourie, joined by Judges Wallach and Hughes.  The importance of the Zurko decision is evident in the portion of the opinion setting forth the standards of review the panel used in arriving at its opinion:

    We review the Board's legal determinations de novo, In re Elsner, 381 F.3d 1125, 1127 (Fed. Cir. 2004), and the Board's factual findings underlying those determinations for substantial evidence, In re Gartside, 203 F.3d 1305, 1316 (Fed. Cir. 2000).  Obviousness is a question of law based on underlying factual findings, In re Baxter Int'l, Inc. 678 F.3d 1357, 1361 (Fed. Cir. 2012), such as what a reference teaches, In re Beattie, 974 F.2d 1309, 1311 (Fed. Cir. 1992), and whether a skilled artisan would have had a reason to combine references, see In re Hyon, 679 F.3d 1363, 1365–66 (Fed. Cir. 2012).

    Apotex argued that the Board had imported an "epimeric stabilization" limitation into the claim in finding non-obviousness, which challenge the panel rejected based on the absence of such a limitation in the claim.  The Board had expressly stated that, because the claims did not recite this limitation "'obviousness of the claims [could] be demonstrated without a showing of epimeric stability in the prior art'" (emphasis in the Federal Circuit opinion).  Accordingly, the Federal Circuit found no basis for Apotex's argument that the Board had improperly relied upon such a limitation in its non-obviousness finding.  And the panel stated that, to the extent the Board considered epimeric stabilization at all, it was in the context of determining the motivation to combine references (a factual determination under In re Hyon).

    Apotex's second argument was that the Board failed to consider any motivation to combine "beyond the problem the patentee was trying to solve," contrary to the Supreme Court's decision in KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007).  Regarding this argument (again, a question of fact), the panel noted that the Board had considered the motivation to combine but had found Apotex's evidence thereof "wanting."  In this regard, particularly as the question related to the motivation to substitute minocycline for tigecycline, the Board rejected the evidence proffered by Apotex's expert and credited Wyeth's expert that the oxidation and epimerization rates of minocycline and tigecycline were known to differ.  According to the opinion:

    Thus, there can be no question that the Board considered the structural similarities between tigecycline and minocycline as a potential motivating factor for a skilled artisan to substitute tigecycline for minocycline in the CN '550 composition.  The Board simply found that the record did not support that finding, and we decline to disturb its decision on appeal.

    The Court also expressly rejected Apotex's reliance on Senju Pharm. Co. v. Lupin Ltd., 780 F.3d 1337, 1346 (Fed. Cir. 2015), for the proposition that the skilled worker would be motivated to "make a simple substitution of generational drugs."  The panel stated that its decision in Senju was dependent on "very factual findings" in that case, which "are notably absent here."

    The Board also found, and the panel did not disturb these findings, that the skilled worker would not have been motivated to combine the cited references because none of the references disclosed tigecycline; the Naggar and Pawelczyk references did not disclose lactose as a stabilizing agents; the CN '550 reference did not teach the use of lactose for epimerization stabilization; and Apotex did not make a showing why the skilled worker would use lactose based on the teachings of the Naggar reference, which taught polysorbate 20 instead of lactose.

    It should also be noted that this decision represents something of a unicorn, involving an IPR against a pharmaceutical (and brought by a generic company challenger) instituted over asserted prior art and resulting in a finding of non-obviousness based on that same art.  The decision suggests that factual distinctions persuasive to the Board may be useful by patentees as kryptonite against invalidation in IPR proceedings, particularly due to the difficulty in persuading a not always patent supportive Federal Circuit to reverse the Board in view of the substantial evidence standard of review.  While clearly not always available as a strategy, patentees in IPR would be remiss if they did not use expert testimony and other factual evidence to rebut prima facie obviousness assertions used as the basis for the Board's institution of an IPR against them.

    Apotex Inc. v. Wyeth LLC (Fed. Cir. 2016)
    Nonprecedential disposition
    Panel: Circuit Judges Lourie, Wallach, and Hughes
    Opinion by Circuit Judge Lourie

  • Netsirv v. Boxbee, Inc. (PTAB 2016)

    By Michael Borella —

    USPTO SealA post grant review (PGR) is an administrative reconsideration of a recent-granted U.S. patent.  The proceeding is held in the USPTO, before that body's Patent Trial and Appeal Board.  A petition for PGR is timely if it is filed within nine months of the challenged patent's issuance.

    To date, there have been 32 PGR petitions filed, only three of which have proceeded to a final written decision.  All of these decisions have involved claims being ruled invalid under 35 U.S.C. § 101.  This case is the third and most recent.

    Petitioners Netsirv and Location Motion MN petitioned for PGR of all claims of Boxbee's U.S. Patent No. 8,756,166 on grounds of invalidity under 35 U.S.C. §§ 101, 102, and 103.  The Board instituted the PGR on the § 101 grounds only.

    The '166 patent is directed to "storage container tracking and delivery in the physical storage field."  This is unlike pre-existing storage systems, in which a user "rents a single large container (e.g., using the PODS® storage system) and stores various personal property items therein."  The drawbacks to such a system are that the "user may not always need that much storage space, may not remember all that was in that storage space, [and that] large storage containers require specialized equipment to move, such as lifts and trucks."  The '166 patent addresses these issues by tracking "individual items stored in one or more relatively small storage containers," as well as a computerized method of doing so.

    Claim 1, the sole independent claim of the '166 patent, recites:

    A method for stored item distribution to a user, the user associated with a user identifier, the method comprising:
        by a computing system:
            (a) receiving a delivery request associated with the user identifier comprising a requested time, a requested location, and a requested number of containers;
            (b) facilitating delivery of a set of containers to the requested location at the requested time, the set of containers comprising at least the requested number of containers, each container of the set associated with a unique storage identifier;
            (c) receiving a set of storage identifiers from a delivery device remote from the computing system, each storage identifier of the set of storage identifiers associated with one of the set of containers;
            (d) associating the set of storage identifiers comprising a first storage identifier with the user identifier in response to receipt of the set of storage identifiers from the delivery device;
            (e) receiving a media description in association with the first storage identifier from a user device associated with the user identifier, the user device remote from the computing system;
            (f) storing the media description as a storage description for the first storage identifier;
            (g) setting a fill status of the first storage identifier to packed;
            (h) receiving a removal request comprising storage identifiers associated with empty fill statuses from a pickup device remote from the computing system;
            (i) removing the storage identifiers having an empty fill status from the set of storage identifiers associated with the user identifier;
            (j) receiving a summary request associated with the user identifier;
            (k) in response to receipt of the summary request, sending the storage description of the first storage identifier;
            (l) receiving a retrieval request associated with the user identifier comprising a selection associated with the storage description, a retrieval location, and a retrieval time; and
            (m) facilitating delivery of a first container identified by the first storage identifier to the retrieval location at the retrieval time.

    The steps of claim 1 were enumerated by the Board for purpose of reference.

    After a brief discussion of claim construction, which involved defining the broadest reasonable interpretation of several terms, the Board moved on to the substantive § 101 issues.

    Patent-eligibility under § 101 is determined by whether claims at issue meet the eligibility requirements set forth by the Supreme Court's two prong test in Alice Corp. v. CLS Bank Int'l.  First, one must determine whether a claim is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea.  If so, then one must further determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exception.  Notably, generic computer implementation of an otherwise abstract process does not qualify as "significantly more."

    Applying prong one, the Board stated that the '166 patent was related to an abstract bailment scheme using storage containers (a "bailment" involves delivering goods for a particular purpose but without transfer of ownership).  Netsirv argued that claim 1 is "preemptive of the entire containerized storage business that has been around for decades," and that "none of the dependent claims add limitations that save the claims from ineligibility."  Boxbee responded by arguing that the claims are not directed to a "business practice known from the pre-Internet world," and instead recite a previously unknown process as evidenced by the lack of relevant prior art.

    The Board reiterated that the invention was in fact directed to a well-known bailment scheme, but cited to support in Diamond v. Diehr for the principle that the § 101 inquiry was separate and distinct from those of §§ 102 and 103.  It went on the state that the "added notion of storage in a particular container does not render the idea any less abstract—it is a particular operating environment."

    The Board cited to the recent Enfish v. Microsoft case to support its position that the claims are abstract, noting that "[a] claim for which computers are invoked merely as a tool . . . requires that the analysis proceed to the second step of the Alice inquiry."  It found that "the steps of the '166 patent use computers as a tool to facilitate the receipt, storage, and transmission of information ancillary to operating a bailment scheme—an economic task, or method of conducting business."  Furthermore, "[t]he computer acts as a device to move and hold data, but the computer is used merely in its ordinary capacity."

    Moving to prong two of Alice, Netsirv asserted that "the claims generally recite bookkeeping items that do not add meaningful limitations beyond the abstract idea because they are simply those conventional, routine things a bailment business would track to run the business properly," and that these steps "naturally flow from a containerized storage business."  Supposedly-irrelevant prior art came into play, with Netsirv citing (and the Board emphasizing) a patent and a published patent application as allegedly disclosing the claim limitations.  (Oddly, the Board did not institute review under §§ 102 or 103 based on this art, so it remains unclear why the references help Netsirv's case under § 101.)

    Nonetheless, the Board pointed to three claimed concepts that go beyond just a bailment scheme.  The first was that the steps of the invention are to be performed by a computing system and involve communication between the computing system and a remote device.  But the Board found that these aspects were merely routine computerization of bookkeeping functions.  Thus, according to the Board, the claims only "provide a solution implemented with generic technical components in a conventional way."

    The second involved looking to "the nature of the data passed between the above computers to determine if the data provide an inventive concept."  But this data consisted of just "pickup and delivery instructions (time, location, count) and internal bookkeeping (associations between containers and customers)" as well as media descriptors, digital photographs, and lists of contents.  The Board found all of this data to be conventional, and that it does not "recite any particular use or technological innovation tied to their storage."

    The third was the concept of delivering more boxes than requested, as recited in a dependent claim.  But the Board determined that this is just an idea unto itself and "it is not an uncommon business practice to provide more than asked."  Further, this feature was not tied to a technological advance.

    As a consequence, the Board concluded that these additional elements did not transform the recited abstract idea into patent-eligible subject matter.  The Board justified this decision by pointing out similarities between the claimed invention and that of Ultramercial v. Hulu — "[e]ven though some of the steps were not previously employed in this art, that fact was not enough to confer patent eligibility because the steps themselves were conventional steps, specified at a high level of generality, data-gathering steps, or otherwise added nothing of practical significance to the underlying abstract idea."

    Boxbee made a last ditch attempt to rescue the claims, arguing that "a human cannot perform the dynamic associations and disassociations with sufficient speed and accuracy to enable method performance," the claims were to "a particular useful application rooted in computer technology," and "the totality of the steps improve the allegedly technical field of storage management."  The Board responded by stating that the claimed steps could be performed with pen and paper, the claims are directed to bookkeeping rather than a technological process, and that storage management is not a technical field.

    Thus, the Board ruled that Netsirv had established a preponderance of evidence that the claims were unpatentable under § 101.

    This case illustrates an odd nuance of the Alice decision — let's call it the "Alice conundrum."  In that case, the Supreme Court paid lip service to the clear language of Diehr that prohibits combining the analysis of §§ 101, 102, and 103.  Nonetheless, by requiring that we look for "well-understood, routine, conventional activity" in the claims, prior art analysis has become a typical part of the § 101 inquiry.  In Ultramercial, the Federal Circuit made it clear that one can have claims that were novel and non-obvious, but still too well-understood, routine, and conventional to be eligible subject matter.  But when Ultramercial (the patent holder in that case) attempted to rebut the notion that its claims were well-understood, routine, and conventional, the Federal Circuit shot them down on the grounds that just because some of the steps were arguably novel, that doesn't mean they are not abstract.  A similar line of reasoning was set forth by the Board in this case.

    As a consequence, the courts have laid out an intellectually unappealing set of rules: (i) prior art is not relevant in the § 101 analysis, (ii) but if claims are deemed abstract and involve only well-understood, routine, and conventional activities, these claims are ineligible.  Still, there is a way to make sense of this (to the extent that sense is involved in any recent § 101 jurisprudence).  While the terms "well-understood, routine, and conventional activities" seem to invoke prior art undertakings (and many tribunals have used them in this fashion), it is more accurate to think of them as referring to "using technology as a tool."  And even if this use is new and innovative, the courts seem to have taken the position that such innovation does not advance the technological arts.

    Or, another way of looking at the Alice conundrum as illustrated herein is to consider the lengths to which the Board went to establish analogies between the claimed invention and a non-computerized bailment scheme.  Any differences were deemed just a conventional use of computing technology.  Thus, use of technology as a tool would be obvious to the skilled artisan.

    When viewed in the light, the Board has actually performed a fairly detailed § 103 analysis under the guise of § 101.  If this is how judicial bodies are going to view patent-eligibility, they should stop telling us that Diehr is still good law.

    Before Administrative Patent Judges William V. Saindon, Justin T. Arbes, and Christopher L. Crumbley
    Final Written Decision by Administrative Patent Judge Saindon

  • IPRs Threatened/Filed as Money-Making Strategy

    By Joseph Herndon —

    Silver Star CapitalOn March 10, 2016, Silver Star Capital, LLC filed a petition for Inter Partes Review of U.S. Patent No. 6,212,079 (IPR2016-00736).  The patent owner is Power Integrations, Inc.  On its face, this seems like another IPR filed using the post grant review process of the AIA as intended.  However, the patent owner's preliminary response indicates otherwise, as the Principal of Silver Star Capital, LLC is Kevin Barnes.

    The '079 patent relates generally to switched mode power supplies and, more specifically, to a method and apparatus for improving efficiency in a switching regulator at light loads.  The IPR petition alleges that the '079 patent is anticipated by or obvious over a number of prior art references.

    Power IntegrationsIn the patent owner's preliminary response, the patent owner indicated that Silver Star is not in the semiconductor business, nor in the switching regulator integrated circuit ("IC") business which is the specific semiconductor product at issue in this IPR, but that Silver Star filed its Petition simply for the purpose of extorting a settlement from Patent Owner in return for not filing its Petition, and after its filing, for withdrawing the Petition.

    This extortion is being perpetrated by Kevin Barnes, Principal of Silver Star, who is certainly not new to this type of extortion.  See e.g., Ferrum Ferro Capital, LLC v. Allergan Sales, LLC, IPR2015-00858.

    Attached to the patent owner's preliminary response were many exhibits, including four letters that highlight the story here.

    First, an important fact in the story is that the '079 patent is the subject of two patent infringement litigation cases pending in the Northern District of California, Civil Actions Nos. 09-cv-5235-MMC and 15-cv-4854-MMC (e.g., Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. et al., 3:09-cv-05235 (CAND); Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. et al., 3:15-cv-04854 (CAND)).

    The first letter, from Mr. Barnes at Silver Star Capital to the President and CEO of Power Integrations, indicates that Silver Star has prepared an Inter Partes Review petition demonstrating the invalidity of specific claims of the '079 Patent, and that Silver Star is aware that institution of an IPR petition can potentially be denied if the real-party in interest is otherwise time-barred under the 12-month litigation threshold.  Silver Star indicated that it is in no way affiliated or in privity with Fairchild Semiconductor Corp/, System General Corp., or any other previously accused infringers of the '079 Patent.  Nevertheless, upon Silver Star filing the '079 IPR with the USPTO, formerly time-barred entities, including Fairchild Semiconductor, will have the opportunity to join Silver Star's IPR proceedings challenging the '079 Patent once the claims are instituted and aid in the prosecution to invalidity.  The first letter ends with an invitation to Power Integrations to have a discussion to determine if Silver Star should consider alternatives to its contemplated '079 IPR Petition strategy.

    The second letter, written as a response to Mr. Barnes from counsel for Power Integrations, declined the invitation and called the event a "shakedown effort".

    The third letter, written by counsel for Power Integrations as a response to a telephone call from Mr. Barnes, declined a so-called proposed "settlement".  Apparently, the settlement to forego the IPR with respect to Power Integrations' '079 patent included one of:

    • Pay Mr. Barnes $600,000 up front + 10% gross of any damages PI collects for infringement of the '079 patent going forward; or

    • Pay Mr. Barnes $1,800,000 up front + 3% gross of any damages PI collects.

    In the fourth letter, written by Mr. Barnes at Silver Start Capital to counsel for Power Integrations, Mr. Barnes put forth allegations of invalidity of the '079 patent, and noted that in a recent PTAB ruling dated September 25, 2015 (IPR2015-01169, Paper No. 21) (Coalition for Affordable Drugs VI, LLC v. Celgene Corp), in a decision denying sanctions, the judge stated:

    Profit is at the heart of nearly every patent and nearly every inter partes review.  As such, an economic motive for challenging a patent claim does not itself raise abuse of process issues.  We take no position on the merits of short-selling as an investment strategy other than it is legal, and regulated.

    Thus, Silver Star appeared on sound ground with its strategy for attempting to extract money from Power Integrations.

    As we see, instead of only targeting biopharma companies as he has in the past, Mr. Barnes is now targeting hi-tech companies.

    Previously, Mr. Barnes, the sole principal of Ferrum Ferro Capital LLC, tried a similar attempt to "shakedown" Allergan (see links below), and he has also brought more drug IPRs under different names (e.g., Gray Square Pharmaceuticals LLC), and once as an "IPR partner" of a St. Louis-based virtual generic company (Generico LLC (which collaborated on its IPR with an entity called "Flat Line Capital," whose principal is Kevin Barnes)).

    The entity called "Silver Star Capital LLC" seems to have been formed for going after valuable high tech patents that have been successfully asserted in litigation by their owners.  The strategy is simple — provide Mr. Barnes a large payment and share of the infringement damages award or Mr. Barnes will file an IPR.  And if you do not pay off Mr. Barnes, you may be in for a long batter because once the IPR is filed, formerly time-barred entities (such as the defendants being sued by the patent owner) will have the opportunity to join Silver Star's IPR proceedings challenging the '079 Patent to aid in the prosecution to invalidity.  What this means is that the defendant, who has undoubtedly spent more time, money, and effort, and who has a substantial interest to invalidate the patent, can join teams with Mr. Barnes in the IPR.

    The IPR between Silver Star and Power Integrations is on-going now, as are the two pending litigations in California.  It will be interesting to see who wins this battle, but at this stage, it would appear that Power Integrations is not backing down.

    For additional information regarding this topic, please see:

    • "Ferrum Ferro Capital Files Motion to Strike Allergan's Complaint Alleging Misuse of IPR Process," August 12, 2016
    • "Allergan Fights Back, Files Complaint Against Venture Fund That Filed IPR Petition," July 13, 2016

  • In re Aqua Products, Inc. — CAFC Grants Rehearing En Banc to Consider PTAB Motions to Amend

    By Andrew Williams —

    Federal Circuit SealOn Friday, August 13, 2016, the Federal Circuit granted a petition for rehearing en banc filed in the In re Aqua Products, Inc. case to consider two questions related to the PTAB's treatment of Motions to Amend in IPR proceedings.  Specifically, the Court requested that Appellant (Aqua Products, Inc.) and Intervenor (the Director of the U.S. Patent and Trademark Office) file supplemental briefs directed to the following two questions:

    (a) When the patent owner moves to amend its claims under 35 U.S.C. § 316(d), may the PTO require the patent owner to bear the burden of persuasion, or a burden of production, regarding patentability of the amended claims as a condition of allowing them?  Which burdens are permitted under 35 U.S.C. § 316(e)?

    (b) When the petitioner does not challenge the patentability of a proposed amended claim, or the Board thinks the challenge is inadequate, may the Board sua sponte raise patentability challenges to such a claim?  If so, where would the burden of persuasion, or a burden of production, lie?

    Aqua's supplemental brief is due by noon, September 26, 2016.  Any party wishing to file an amicus brief supporting Aqua's position or supporting neither position must be filed by noon, October 5, 2016.  The Patent Office must file its supplemental brief by noon, October 26, 2016, and any amicus briefs in support of the Office must be filed by noon, November 2, 2016.  Finally, Aqua's reply brief is due by noon, November 10, 2016.  Oral argument will be Friday, December 9, 2016 at 10:00 am.

    As readers of this blog are aware, these questions have previously been addressed by various three-judge panels on the Court.  The first case to squarely address the issue of the PTAB's practice related to motions to amend was Microsoft Corporation v. Proxyconn, Inc.  In that case, the Federal Circuit approved the PTAB's interpretation of its regulations as found in the early, "informative" decision, Idle Free Sys., Inc. v. Bergstrom, Inc., IPR2012-00027, Paper 26 (PTAB June 11, 2013).  Specifically, the Board in Idle Free had indicated that the burden is on the patent owner to show "a patentable distinction over the prior art of record and also prior art known to the patent owner."  Among other reasons, the Court found that this interpretation was consistent with the very nature of IPR proceedings — because if the motion to amend is granted, the claims will be added to an issued patent without further examination.  The Microsoft case was decided by Chief Judge Prost, Circuit Judge Lourie, and District Judge Gilstrap (sitting by designation).

    Likely due to outcries from the patent community, the Board subsequently appeared to relax the patent owner's burden to amend the claims in MasterImage 3D, Inc. v. RealD Inc., IPR2015-00040, Paper 42 (PTAB July 15, 2015).  In this case, instead of requiring the patent owner to identify how its claim amendments were patentable over all prior art, it only had to show patentability over the "prior art of record," which could include "any material art in the prosecution history of the patent."  The MasterImage 3D opinion was ultimately designated as precedential by the Board.  The Federal Circuit, in Nike v. Adidas (Fed. Cir. 2016), also acknowledged the clarification of Idle Free as made by the MasterImage 3D decision.  In the Nike case, the Board had rejected a motion to amend because Nike had failed to address prior art references that were not of record in the case.  That rejection occurred before the decision in MasterImage 3D, and the Patent Office conceded during the Federal Circuit oral argument that its reading of the Idle Free decision had been too aggressive.  Correspondingly, the Federal Circuit found the Board's ground for denying the motion to amend improper and remanded for further proceedings.  Nevertheless, the Court found the Board's interpretation of its regulations was still consistent with the statutory framework, even if it required the patentee to demonstrate the patentability of the substitute claims.  The Nike case was decided by Circuit Judges Chen, Mayer, and Stoll.

    Not every Federal Circuit judge, however, has been approving of the PTAB's motion-to-amend practice.  In Prolitec Inc. v. Scentair Technologies, Inc. (Fed. Cir. 2015), a case from late 2015, Judge Newman authored a scathing dissent for the Court's apparent acquiescence to the Board with regard to the burden shift for motions to amend.  "[T]he purpose of [the] post-grant review [system] is not to stack the deck against the patentee, but to achieve a correct and reliable result–for innovative enterprise is founded on the support of a system of patents," Judge Newman emphasized.  She had at least four main arguments.  First, she thought the America Invents Act limits the reasons that a motion can be denied, and that none of the reasons existed in the present case.  Second, Judge Newman complained that the placement of burden of proof for claim amendments on the patentee was contrary to the statute.  Third, she criticized the Court for using the "substantial evidence" standard to review these motion denials instead of reviewing these cases to determine whether the "preponderance of the evidence" standard had been correctly applied.  Finally, Judge Newman did not believe that MasterImage 3D was being followed because it had not yet been designated precedential by the Board.  Interestingly, a petition for rehearing en banc was also pending in the Prolitec case.  That petition was stayed by the Aqua order pending resolution of the issues in that case.

    For its part, the sole issue in the Aqua Federal Circuit opinion (which was vacated by the order) turned on the denial of the motion to amend.  The technology at issue in the case involved automated swimming pool cleaners.  Specifically, the patent disclosed cleaners that used angled jet drive propulsion systems to move the system in a controlled manner.  This was a less expensive alternative to cleaners in the art that required the use of motor-driven wheels.  Moreover, the motorless prior art cleaners that did exist allegedly used suction or water jets, which caused the units to move erratically.

    The three judge panel that rendered the Aqua opinion was Chief Judge Prost, Circuit Judge Reyna, and Chief District Judge Stark (sitting by designation).  The opinion did note that the because of the precedent of Microsoft and Nike, "this panel cannot revisit the question of whether the Board may require the patentee to demonstrate the patentability of substitute claims over the art of record."  Instead, the Court only considered whether the Board abused its discretion by not evaluating "objective indicia of non-obviousness and various new limitations in the proposed claims . . . ."  Ultimately, the Federal Circuit affirmed the PTAB because the Court found that the Board adequately rebutted Aqua's argument that a new limitation related to the downward vector force rear of the front wheels would make the claims patentable over the two cited prior art references.  And the Court concluded that because Aqua's arguments rested exclusively on this limitation, the Board need not have addressed the other amendments or the objective indicia of non-obviousness.

    The activity of amici should be substantial in this case.  Patent owners have been concerned about the low rates of motions to amend.  In fact, the PTAB commissioned a study to look into the issue that issued a report dated April 30, 2016.  As of the date of the study, the Board reported instituting and completing 1539 trials.  And in those cases, the Board decided the merits of a motion to amend in 118 trials (8%).  Of those, the motions were granted (or granted-in-part) in only six.  This amounts to 5% of the cases in which a motion was filed, and significantly less when considering all PTAB trials to that date.  And, even though no amicus briefs were filed in support of en banc review in the Aqua case, the Biotechnology Innovation Organization did file an amicus brief in the Prolitec case in an effort to obtain review of these issues.  Of course, the presence of a dissent in the Prolitec case made it the more conventional type of case to hope for review by the full court.  Now that an en banc petition has been granted, it would not be surprising to see a significant number of amicus briefs filed in this case.  Patent Docs will continue to monitor this case and provide any updates as warranted.

  • In re Magnum Oil Tools Int’l, Ltd. (Fed. Cir. 2016)

    By Michael Borella —

    Federal Circuit SealMcClinton Energy Group filed an inter partes review (IPR) petition against all claims of U.S. Patent No. 8,079,413, owned by Magnum Oil Tools International, Ltd.  The USPTO's Patent Trial and Appeal Board (PTAB) instituted the IPR, and eventually rendered a final decision finding that all challenged claims of the '413 patent were obvious.  Magnum appealed to the Federal Circuit and the USPTO intervened in the proceeding.

    The '413 patent is directed to downhole wellbore plugs that can be used to facilitate hydraulic fracturing ("fracking").  Since our interest in the case is focused on its procedural aspects, we will ignore the technology, including what the challenged claims of the '413 patent actually recite, as well as the teachings of the prior art.

    In its petition for review, McClinton argued in detail that all claims were obvious over three references, which we will call "A", "C", and "K".  McClinton had also contended that another reference, which we will call "L", disclosed the same relevant features as the primary reference, A.  Accordingly, McClinton also asserted that the claims were obvious over L, C, and K, but in doing so largely incorporated by reference its earlier arguments for A, C, and K, but with L replacing A.

    An IPR proceeding has two distinct phases.  First, the PTAB reviews the challenger's petition for review, and determines whether, and on what grounds, review should be instituted.  If the petitioner offers multiple grounds for review, the PTAB is permitted to institute on some, all, or none of these grounds.  If the review is instituted, an abbreviated trial is then held before the PTAB, and that body ultimately decided whether to cancel any of the claims under review.

    In this case, the PTAB instituted the IPR based on references L, C, and K, and eventually found the challenged claims obvious over this combination of references.  Magnum requested a rehearing on the basis that the PTAB had improperly relied on a new ground of rejection in its obviousness determination.  Magnum also argued that "there was no evidence supporting the [PTAB's] finding that a skilled artisan would have had a reasonable expectation of success" in combining the L and C references.  The PTAB denied the request, holding that "McClinton had explained adequately why a skilled artisan would have had a reasonable expectation of success and a motivation" to make this combination.

    Before the Federal Circuit, Magnum's main line of reasoning was that McClinton never established a prima facie case that the claims were obvious over L, C, and K.  Specifically, Magnum took the position that the PTAB erred because McClinton has not explained why one of ordinary skill in the art would have been motivated to combine L with C and K.

    At this point in the case, McClinton had dropped out due to a settlement with Magnum, and the USPTO intervened.  The USPTO countered, stating that since the IPR was instituted, the PTAB had concluded that McClinton's petition demonstrated the requisite reasonable likelihood of success.  The USPTO further argued that this finding (i.e., the decision to institute) shifted the burden to Magnum, and that Magnum had to produce evidence of non-obviousness as a result.  Essentially, the USPTO was arguing that the Board's institution decision (finding a reasonable likelihood of success that at least one challenged claim is invalid) is equivalent to establishment of a prima facie case of obviousness for all challenged claims.

    The Court disagreed.  As an initial step, the Court pointed out that:

    [T]here are two distinct burdens of proof: a burden of persuasion and a burden of production.  The burden of persuasion is the ultimate burden assigned to a party who must prove something to a specified degree of certainty, such as by a preponderance of the evidence or by clear and convincing evidence . . . .  A distinct burden, the burden of production may entail producing additional evidence and presenting persuasive argument based on new evidence or evidence already of record.

    Referring to 35 U.S.C. § 316(e), the Court observed that "[i]n an inter partes review, the burden of persuasion is on the petitioner to prove unpatentability by a preponderance of the evidence," and that this burden never shifts to the patent owner.  In contrast, patent application prosecution before the USPTO involves a burden-shifting framework in which the burden of proving claims non-obvious shifts to the applicant once the USPTO makes its prima facie case.  But, in the Court's view, such a framework does not apply in IPR proceedings.

    The burden of production, on the other hand, shifts between the petitioner and patent owner when the PTAB institutes an IPR.  For instance, if the patent owner is attempting to disqualify prior art by establishing an earlier conception and reduction to practice than the patent's filing date, the burden of production naturally falls on the patent owner.  The Court noted that "the shifting of the burden of production is warranted because the patentee affirmatively seeks to establish a proposition not relied on by the patent challenger and not a necessary predicate for the unpatentability claim asserted—effectively an affirmative defense."

    The Court stated that "the ultimate burden of persuasion of obviousness must remain on the patent challenger and a fact finder must consider all evidence of obviousness and non-obviousness before reaching a determination."  Further, the Court observed that "[t]he PTO's proposed burden shifting framework is also directly at odds with our precedent holding that the decision to institute and the final written decision are two very different analyses, and each applies a qualitatively different standard."  Particularly, a decision to institute is a preliminary, non-binding determination made without the PTAB considering the full record.  It is also non-appealable.  But, after an IPR is instituted, the PTAB is free to change its mind in view of the full record.

    Looking to the facts of the present case, Magnum's position was that the PTAB instituted the IPR based on the combination of references L, C, and K, but McClinton had only presented a prima facie case of obviousness for the combination of A, C, and K.  This, according to Magnum, amounted to the PTAB improperly incorporating by reference McClinton's arguments based on A into the conclusion that L, C, and K rendered the claims obvious.  The USPTO argued that the differences between A and L were irrelevant, and that "it is not error for the Board to rely on an unpatentability theory that could have been included in a properly-drafted petition, but was not."

    The Court concluded that the PTAB improperly shifted the burden to Magnum to disprove obviousness, essentially because the PTAB assumed without deciding that McClinton proved that L, C, and K rendered the claims obvious.  As a result, the PTAB did not require McClinton to support its claim of obviousness by a preponderance of the evidence.

    Further, the Court rejected the USPTO's position that "the Board is free to adopt arguments on behalf of petitioners that could have been, but were not, raised by the petitioner during an IPR."  Instead, the PTAB "must base its decision on arguments that were advanced by a party, and to which the opposing party was given a chance to respond."

    When drafting an IPR petition, which has a 14,000-word limit, it can be tempting to incorporate earlier arguments by reference in later grounds for institution.  This case instructs us that doing so can be fraught with danger for the petitioner.  Instead, the petitioner should attempt to make out a full prima facie case of invalidity for each of its asserted grounds.

    Additionally, the patent owner should be on the lookout for improper burden shifting and the PTAB adopting grounds of invalidity not set forth by the petitioner.  The patent owner should also take every opportunity to remind the PTAB that the burden of persuasion always remains with the petitioner.

    In re Magnum Oil Tools Int'l, Ltd. (Fed. Cir. 2016)
    Panel: Circuit Judges Newman, O'Malley, and Chen
    Opinion by Circuit Judge O'Malley

  • Conference & CLE Calendar

    CalendarAugust 16, 2016 – "Attorney's Fees in Patent and Trademark Litigation: Best Practices Two Years After Octane and Highmark" (American Bar Association Center for Professional Development) – 1:00 to 2:00 pm (EST)

    August 17, 2016 – "Navigating Patent Eligibility: Leveraging New USPTO Guidance and the Enfish and TLI Communications Decisions" (Strafford) – 1:00 to 2:30 pm (EDT)

    August 17, 2016 – "AIA Post-Grant Proceedings: Uncovering the Implications of the New AIA Review Rules" (The Knowledge Group) – 12:00 to 2:00 pm (EST)

    August 18-19, 2016 - Advanced Patent Prosecution Workshop 2016: Claim Drafting & Amendment Writing (Practising Law Institute) – San Francisco, CA

    August 25, 2016 – "The Next Wave of Data Privacy: What the GDPR, Privacy Shield and Brexit Mean for U.S. Intellectual Property Litigation" (McDonnell Boehnen Hulbert & Berghoff LLP) – 10:00 am to 11:15 am (CT)

    September 1, 2016 – "Drafting and Prosecuting Patent Applications to Withstand PTAB Scrutiny — Building Reasonable Claim Construction to Avoid Unpatentability and Using Declarations to Survive Post-Grant Proceedings" (Strafford) – 1:00 to 2:30 pm (EDT)

    September 7, 2016 – "USPTO's Subject Matter Eligibility: A 2016 Update" (The Knowledge Group) – 12:00 to 2:00 pm (EST)

    September 8, 2016 – "After-Final Practice: Navigating Expanding PTO Options to Compact Patent Prosecution — Utilizing Post-Prosecution Pilot Program (P3), After-Final Consideration Pilot 2.0, Pre-Appeal Conference and More" (Strafford) – 1:00 to 2:30 pm (EDT)

    September 8, 2016 – "Europe's Unified Patent Court and Patents with Unitary Effect: Status, Perspectives and Impact of Brexit" (Practising Law Institute) – 1:00 to 2:00 pm (Eastern)

    September 11-13, 2016 - 44th Annual Meeting (Intellectual Property Owners Association) – New York, NY

    September 14-15, 2016 - Advanced Patent Prosecution Workshop 2016: Claim Drafting & Amendment Writing (Practising Law Institute) – Chicago, IL

    September 15, 2016 – "On Sale and Public Use Bars to Patentability: Leveraging Recent Developments — Minimizing Risk of Patent Ineligibility or Invalidation" (Strafford) – 1:00 to 2:30 pm (EDT)

    September 20, 2016 – "The Shifting Landscape of Bio/Pharma Litigation: The Influence of PTAB Proceedings" (McDonnell Boehnen Hulbert & Berghoff LLP) – 10:00 am to 11:15 am (CT)

    ***Patent Docs is a media partner of this conference or CLE

  • Webinar on Influence of PTAB Proceedings on Bio/Pharma Litigation

    MBHB Logo 2McDonnell Boehnen Hulbert & Berghoff LLP will be offering a live webinar entitled "The Shifting Landscape of Bio/Pharma Litigation: The Influence of PTAB Proceedings" on September 20, 2016 from 10:00 am to 11:15 am (CT).  In this presentation, MBHB attorneys Alison J. Baldwin and Paula S. Fritsch, Ph.D. will discuss the following topics:

    • A look at who is using PTAB proceedings to challenge bio/pharma patents;
    • A review of how bio/pharma patents have fared before the PTAB, since inception and more recently;
    • An analysis of how PTAB proceedings are impacting ANDA and biosimilar litigations; and
    • A discussion of the potential future impact of PTAB invalidity proceedings in the bio/pharma space.

    While there is no fee to participate, attendees must register in advance.  Those wishing to register can do so here.  CLE credit is pending for the states of California, Illinois, New Jersey, New York, North Carolina, and Virginia.

  • Webcast on AIA Post-Grant Proceedings

    The Knowledge GroupThe Knowledge Group will offer a live webcast entitled "AIA Post-Grant Proceedings: Uncovering the Implications of the New AIA Review Rules" on August 17, 2016 from 12:00 to 2:00 pm (EST).  Thomas M. Croft of Dunlap Bennett & Ludwig PLLC and Barry J. Schindler of Greenberg Traurig, LLP will cover the following topics:

    • Patent Owner Submission of New Testimonial Evidence with Preliminary Response
    • Proper Use of new (non-petition cited) evidence in post-grant proceedings
    • Phillips-Like Claim Construction for Patent Claims that Expire Before the Proceeding Concludes
    • Sufficiency of evidence to show a motivation to combine to establish a prima facie case of obviousness
    • Practice Tips For Expert Declarations In AIA Post Grant Proceedings
    • Strategic consideration regarding petitioner’s expert rebuttal declaration
    • Word-Count Limits Instead of Page-Count Limits for Major Briefing
    • Strategic considerations in preparing for oral argument
    • Rule 11-Type Certifications for Papers Filed in Proceeding

    The registration fee for the webcast is $299 (regular rate) or $199 (government/nonprofit rate).  Those interested in registering for the webinar can do so here.

  • Webinar on On Sale and Public Use Bars to Patentability

    Strafford #1Strafford will be offering a webinar/teleconference entitled "On Sale and Public Use Bars to Patentability: Leveraging Recent Developments — Minimizing Risk of Patent Ineligibility or Invalidation" on September 15, 2016 from 1:00 to 2:30 pm (EDT).  Daniel G. Brown of Latham & Watkins and Doris Johnson Hines and Thomas L Irving of Finnegan Henderson Farabow Garrett & Dunner will examine the on sale and public use bars to patentability/validity and the impact of the AIA on these statutory bars, discuss recent court treatment, and offer best practices to minimize the risk of patent ineligibility or invalidation.  The webinar will review the following issues:

    • How do AIA changes impact the on sale bar and the public use bar?
    • How are courts treating the on-sale bar and the public use bar?
    • What best practices can counsel employ to adapt patent prosecution and enforcement strategies?

    The registration fee for the webinar is $297.  Those registering by August 19, 2016 will receive a $50 discount.  Those interested in registering for the webinar, can do so here.

  • Webcast on Europe’s Unified Patent Court and Patents with Unitary Effect

    PLI #1Practising Law Institute (PLI) will be offering a one-hour webcast entitled "Europe's Unified Patent Court and Patents with Unitary Effect: Status, Perspectives and Impact of Brexit" on September 8, 2016 from 1:00 to 2:00 pm (Eastern).  Francesca Giovannini of Osha Liang SARL and Jeffery P. Langer of Osha Liang LLP will:

    • Provide a status of the process for the ratification of the Agreement on the Unified Patent Court;
    • Provide an overview and discuss the pros and cons of European patents with unitary effect and Unified Patent Court; and
    • Highlight strategic considerations when deciding on opting out European patents from the exclusive jurisdiction of the Unified Patent Court in the transitional period.

    The registration fee for this webcast is $299.  Those interested in registering for the webcast, can do so here.