As we have noted in each of the past two newsletters, things seem to be “looking up” for Patent Owners. The USPTO recently published statistics (see graph below) for the fiscal year 2017 and institution rates have dropped again. Given recent trends and PTAB activity, we expect that institution rates will continue to drop.
USPTO Trial Statistics[i]
As we previously reported, Congress granted the Board broad discretionary power to deny institution of AIA proceedings under 35 U.S.C. §325(d) - denial is discretionary if Petitioner uses “the same or substantially the same prior art or arguments previously presented to the Office.” Though infrequently given as a reason for denial for the first few years following passage of the AIA, it is becoming a very common reason for denial. The Board has repeatedly exercised this discretion and denied institution when the “same or substantially the same prior art or arguments” were presented during original prosecution.[ii], [iii], [iv]
In Telebrands Corp. v. Tinnus Enterprises, LLC, the Board denied the institution of a petition under § 325(d) that challenged a patent directed to a system and method for filling containers with fluids. In its petition, Telebrands asserted the same prior art that was expressly considered by the Examiner during original prosecution. Telebrands argued that the PGR record was different than the one before the Examiner because the testimony of its expert witness was not before the Examiner and because one of the issues presented in the petition included the inherent characteristics of the prior art references. The Board found that “the Examiner’s explanation shows that he expressly considered the issues of inherency, and offered detailed findings why the functional limitations related to the elastic fastener were not necessarily present in the art at issue.” Ultimately, the Board exercised its § 325(d) discretion to deny institution “because the same art and arguments were considered by the Examiner during the original prosecution.”
In Dorco Co. v. Gillette Co, The Board declined institution under § 325(d) of a petition filed against a patent covering a razor blade with a hard coating. The petitioner’s asserted grounds comprised some prior art references not expressly considered during original prosecution, but the Board determined that the grounds “merely raise[ ] the same issues that the Office has already considered and rejected.” The Board thus declined institution under § 325(d) where the equivalent art was raised before the Examiner and where the petitioner’s expert declaration “does not add facts or analysis substantially beyond what was considered by the Office during prosecution.”
In Alarm.com Inc. v Vivint, Inc., the Board declined institution where the petitioner relied on a patent owner’s contentions in an earlier proceeding involving the same parties, the same patent, and the same claims, and where the petition sought to cure deficiencies that were in the petitioner’s capacity to avoid in the earlier petition. For example, the Board found that “[t]hese facts suggest that at least this latest proceeding is a case of undesirable, incremental petitioning, in which a petitioner relies on a patent owner’s contentions or a Board decision in an earlier proceeding or proceedings involving the same parties, the same patent, and the same claims to mount another…challenge after an earlier, unsuccessful or only partially successful challenge, by fixing deficiencies, noted by the Board, that were within the petitioner’s capacity to avoid in the earlier petition or petitions.”
On October 18, 2017, an expanded PTAB panel designated General Plastic Industrial Co. Ltd. v. Canon Kabushiki Kaisha[v] as a precedential case. The PTAB “precedential” designation was limited to Section II.B.4.i. of the decision, which adopts the seven factors for evaluating follow-on petitions first laid out in NVIDIA Corp. v. Samsung Elec. Co.[vi]
Section 325(d) arguments are very relevant in quashing follow-on petitions and such arguments have been successful in avoiding institution. We will step away from §325(d) for a moment to discuss the Board’s broader discretion under §314(a).
In General Plastic, the Board explained that under §314(a), the Director has discretion to institute an inter partes review. Under 37 C.F.R. § 42.108(a) “the Board may authorize the review to proceed on all or some of the challenged claims and on all or some of the grounds of unpatentability asserted for each claim” (emphasis added)). There is no per se rule precluding the filing of follow-on petitions, but the Board adopted a seven-factor test as a measure to help prevent undue inequities and prejudices against Patent Owners. The factors include:
- whether the same petitioner previously filed a petition directed to the same claims of the same patent;
- whether at the time of filing of the first petition the petitioner knew of the prior art asserted in the second petition or should have known of it;
- whether at the time of filing of the second petition the petitioner already received the patent owner’s preliminary response to the first petition or received the Board’s decision on whether to institute review in the first petition;
- the length of time that elapsed between the time the petitioner learned of the prior art asserted in the second petition and the filing of the second petition;
- whether the petitioner provides adequate explanation for the time elapsed between the filings of multiple petitions directed to the same claims of the same patent;
- the finite resources of the Board; and
- the requirement under 35 U.S.C. § 316(a)(11) to issue a final determination not later than 1 year after the date on which the Director notices institution of review.
While the Board gives weight to and addresses each factor, it appears that the General Plastic panel seemed the most concerned about Factor 3. For instance, the Board stresses that its intent on formulating the factors was to “take undue inequities and prejudices to Patent Owner into account” and to stop petitioners from benefiting from receiving and having the opportunity to study Patent Owner’s Preliminary Response, as well as our institution decisions on the first-filed petitions, prior to its filing of follow-on petitions. Specifically, the Board held that the “filing of sequential attacks against the same claims, with the opportunity to morph positions along the way, imposes inequities on [Patent Owner]."
Time appears to be another key issue with the Board. Factors 2-5 each describe some element of time. It appears that time may be the Patent Owner’s best friend. That is, in each of Factors 2-5, as more time passes between the first-filed petition and any follow-on petitions, more scrutiny will be applied to any articulated rationale for the time elapsed between the filings.
Upon summarizing the factors, the Board characterized them as being “non-exhaustive” and explained that “additional factors may arise in other cases for consideration, where appropriate.” So additional factors may be added to the list in the future. Did you hear the loud collective gulp and/or sigh of relief coming from Petitioners and Patent Owners across the country? These factors will certainly change PTAB litigation strategies in “war rooms” spanning the globe.
Given the rise of §325(d) as a reason for non-institution in the last year, and now the rigid factors that are evaluated with respect to follow-on petitions, the most critical Petitioner decision is the selection of the right prior art. Consequently, the most critical step for Patent Owner is thwarting the first institution. The recent developments bode well for the general outlook for Patent Owners.
As we detailed in the previous issues, there are countless nuances that can tilt the scales in favor of either party. While it can be difficult to predict with certainty how a PTAB panel might decide on a follow-on petition or on a §325(d) issue, especially without knowing the specific panel members or the nuances of each fact pattern, experienced PTAB practitioners can help you manage that nuance and ambiguity. As a firm with more PTAB proceedings than nearly any firm, Sterne Kessler has the experience – including time spent researching and studying these issues – to help you navigate the ambiguity around follow-on petitions and §325(d) denials.