On August 14, 2012, the United States Patent and Trademark Office (“USPTO”) published final rules in the Federal Register to implement three administrative trial provisions of the Leahy-Smith America Invents Act (“AIA”). These three proceedings include inter partes review, post-grant review, and a transitional program for post-grant review of covered business method patents. The new rules under 37 CFR 42 – Trial Practice Before the Patent Trial and Appeal Board (the “Board”) – represent a consolidated set of rules relating to inter partes review and post-grant review (including review of covered business method patents) to take effect on September 16, 2012.

All three types of administrative trial proceedings are statutorily required to be complete within one year of institution, with a few exceptions, and the rules around motion practice (especially those involving amendment) are accordingly restrictive. The time may be extended up to six months for good cause, or adjusted by the Board in the case of joinder. Only a person who is not the patent owner and has not previously filed a civil action challenging the validity of a claim of the patent may petition for any of these proceedings. The USPTO is authorized to set standards and procedures for the taking of discovery, including that discovery be limited to evidence directly related to factual assertions advanced by either party in the proceeding. The final rules also provide for protective orders to govern the exchange and submission of confidential information.

Many of the final rules relating to procedures for conducting a trial have been adopted and modified based on the current rules for conducting interference proceedings before the Board of Patent Appeals and Interferences. Notable modifications include the addition of a protective order to be issued for good cause by the Board and an E-discovery order based on the Federal Circuit’s Model order. Furthermore, lead counsel must be registered to practice before the USPTO. Other counsel may be recognized pro hac vice upon a showing of good cause (e.g., that counsel is an experienced litigating attorney and has an established familiarity with the subject matter at issue in the proceeding).

Post-Grant Review

A petitioner for post-grant review may request to cancel one or more claims of a patent as unpatentable on any invalidity ground that could be raised under paragraph (2) or (3) of 35 U.S.C. 282(b), with the exception of best mode. This review is only available for first-to-file patents (those issuing from applications filed on or after March 16, 2013), with limited exceptions (e.g., the transitional program for post-grant review of covered business method patents). This review may be requested up to nine months after the grant of an eligible patent or issuance of an eligible reissue patent. A successful petition for post-grant review must show that it is more likely than not that at least one of the challenged claims is unpatentable. Alternatively, the petition may raise a novel or unsettled legal question that is important to other patents or patent applications. The Board of Patent Appeals and Interferences (soon to be renamed the Patent Trial and Appeal Board) will decide petitions for post grant review and conduct any ensuing reviews. In instituting a review, the Board may take into account whether the same or substantially same prior art or arguments previously were presented to the Office, and subsequently reject the petition or request.

Transitional Post-Grant Review of Covered Business Method Patents

A petitioner for covered business method review may request to cancel as unpatentable one or more claims of a covered business method patent granted under the first-to-file provisions of the AIA on any ground. This program is available with respect to all patents that include at least one claim drawn to a covered business method.

A covered business method patent is one that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions (where the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art, and solves a technical problem using a technical solution. The final rules establish that the determination of whether a patent covers a technological invention is based on whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art, and solves a technical problem using a technical solution. In order to preserve standing, the petitioner bears the burden of proving that the challenged patent includes at least one claim that is not directed to a technological invention - this determination is made on a case-by-case basis.

The transitional program for post-grant review of covered business method patents differs from the regular post-grant review proceedings in certain respects. For first-to-invent patents (includes all patents issuing from applications filed on or after March 16, 2013), only a subset of prior art is available to support the petition. A petitioner in a covered business method review may not request or maintain a subsequent proceeding before the Office with respect to any claim on any ground raised or reasonably could have been raised in the covered business method review. And accordingly, a petitioner in a covered business method review may not assert in a subsequent district court or ITC action that a claim is invalid on any ground that the petitioner raised. In addition, a patent owner is estopped from taking action inconsistent with any adverse judgment, including obtaining in a patent a claim that is patentably indistinct from a finally refused or cancelled claim or amending its specification or drawing in a way that it was not permitted to do during the proceeding.

This transitional program ends on September 16, 2020, so no new petitions filed on or after that date will be accepted.

Inter Partes Review

The grounds for instituting an inter partes review are more restrictive – a petitioner may request to cancel as unpatentable one or more claims of a patent only on a ground that could be raised under § 102 or § 103 and only on the basis of prior art consisting of patents or printed publications. All patents are eligible for inter partes review; however, a petition for inter partes review cannot be filed until after the later of: (i) nine months after the grant of a patent or issuance of a reissue of a patent; or (ii) the date of termination of any post-grant review of the patent. One additional requirement must be met for inter partes review: the petition requesting the proceeding must be filed within one year after the date on which the petitioner, the petitioner’s real party in interest, or a privy of the petitioner has been charged with infringement under the patent.

Institution of inter partes review requires a higher standard than post-grant review: the petitioner must demonstrate that there is a reasonable likelihood that he/she would prevail as to at least one of the challenged claims. In instituting a review, the Board may reject the petition or request because the same or substantially the same prior art or arguments previously were presented to the USPTO. All parties are statutorily precluded from filing an appeal with a higher court to challenge the Board’s decision whether to institute an inter partes review. However, if the petition for inter partes review is denied, the petitioner may submit a request to the Board itself for a rehearing of the decision.

Although the inter partes review procedure will largely replace inter partes reexamination on September 16, 2012, there are a few significant differences. The new procedure will be available for all patents, regardless of priority date, whereas the old procedure is only available for original applications filed on or after November 29, 1999. The new procedure also adds the requirement that a petition must be filed (1) before seeking a declaratory judgment challenging the validity of the patent, and (2) within a year of receiving a complaint of infringement.

Conclusion

The new rules state that all rules under 37 CFR 42 “shall be construed to secure the just, speedy, and inexpensive resolution of every proceeding.” This policy statement underlines the expectation that these new trial procedures before the Board will create a timely and cost-effective alternative to litigation.