B&B Hardware Emphasizes Risks of Patentee Legislative Initiatives

A week back the U.S. Supreme Court decided B&B Hardware, Inc. v. Hargis Indus., Inc., No. 13-352, slip op., 575 U.S. __ (2015). In B&B, the Court held that a decision of the Trademark Trial and Appeal Board (TTAB) can have preclusive effect in subsequent district court proceedings (if the requirements of issue preclusion are otherwise met). That is, the Court determined that the action of an administrative agency can preclude later litigation of the "same issue" in a district court.

At present, the claim construction analysis employed by the Patent Trial & Appeal Board (PTAB), broadest reasonable interpretation (BRI), is considered different than the Philips construction employed by the district courts. For this reason, a claim construction ruling of the agency is not binding in a subsequent litigation pursuant to B&B. Yet, patentees urge that the use of what they consider to be an unfairly broad read of their claims (BRI) at the PTAB leads to improper cancellation of their patents. As I have pointed out previously this is a misguided belief. Different interpretations of a same patent claim term can be found, yet, in my view a proper determination is rarely different under either standard. Nevertheless, to cure this perceived inequity, patentees have consistently urged the PTAB to adopt the Philips analysis of the district courts for AIA trial proceedings.   

Yet as B&B makes clear, if the exact analysis used by the district court (i.e., Philips) is adopted by the PTAB, patentees may be stuck with it. This would put patentees in a far worse position than present. 

If Philips were adopted by the PTAB, a mere 6 months from filing an AIA trial petition, 3 technically trained judges would provide a district court claim construction.  While this preliminary construction is not binding until the time of the final written decision (FWD), an FWD would be in hand 18 months from petition filing. (6 month preliminary proceeding + 12 month trial). Adding to that the tightening of appellate review on claim construction findings after Teva, waiting 18 months for a claim construction that will have preclusive effect (regardless of the outcome on the merits) would seem to be a major simplification factor to consider for district court proceedings. For example, those district courts with longer paths to Markman determinations can simply stay the case and wait for a major component to be decided for them, or for the case to go away all together. Sounds like a great opportunity for patent challengers to me, especially if you accept my view that the Philips analysis will not move the bar in any significant regard for patentees—I'll say it again, be careful what you wish for patentees.

Right now, B&B Hardware has limited impact at the PTAB as AIA trials are directed to patentability, not validity. Likewise, the limited discovery of AIA trials constrains the development of the factual record in a manner akin to the district courts. That said, purely legal issues that are analyzed the same by the district courts such as entitlement to priority, and ability of a preamble to limit a claim might be leveraged in a later proceeding with the help of B&B. Extra care should be taken in addressing such issues going forward.

Seems the plot thickens almost daily.