In mid-July, the United States Patent and Trademark Office began rolling out final versions of patent rules to implement the America Invents Act (AIA). In the last edition of the IP Bulletin, we reported on the PTO's proposed rules and the various public comments that were received on the proposed rules. It appears that the PTO seriously considered the public comments, and made some changes from the proposed rules accordingly. However, for the most part, the proposed rules were left intact, notwithstanding significant concerns about how they would apply in practice.

Patent Trial and Appeal Board Practice

Among the most dramatic of the rules are those addressing procedures to be used by the new Patent Trial and Appeal Board (PTAB). Pursuant to the AIA, the PTAB will replace the existing Board of Patent Appeals and Interferences. The PTO's rules governing trial practice before the PTAB, to be enacted under 37 C.F.R. § 42, apply to inter partes review, post-grant review, the transitional program for covered business method patents, and derivation proceedings.

Section 42 in its final form mandates that the default standard in contested cases is to be a "preponderance of the evidence" standard. Some of the proposed procedural constraints, such as page limitations on petitions and responses, have been loosened in the final rulemaking, and the PTO has granted the PTAB greater discretion regarding trial management. This is both good and bad; while it allows parties to argue for case-specific modifications, it also leaves them with less initial guidance on how a trial is likely to play out.

The PTO's proposed fees for inter partes review, post-grant review, and covered business method patent review were widely criticized as being unworkably high, but the PTO made only a minor concession in this area. Specifically, the PTO kept the final cost of the inter partes procedure at a base level of $27,200 (about three times the cost of the inter partes reexamination it replaces), but allowed an incremental increase of $600 per claim where over 20 claims are contested. The proposed rulemaking had applied a tiered system based on groups of ten additional claims. The final rules also require that if any contested claim is dependent upon an uncontested independent claim, a further charge is made for the independent claim, as it will need to be analyzed as well. Nor was the PTO deterred from implementing its proposed fees increase for post-grant review and business method patent review — $35,800 for up to 20 claims and $800 for each additional claim. Thus, these procedures are unlikely to be used very often by smaller companies or individuals that cannot afford these fees.

The PTO also took a fairly strict stance regarding who can participate in such proceedings. The PTO is requiring that parties be represented by a PTO-registered practitioner as lead counsel, and will only allow pro hac vice representation by unregistered counsel upon a showing of good cause. This will be a significant limitation for those litigation firms that do not have patent attorneys/agents on staff, and we expect a scramble over the next months as such firms seek to develop relationships with registered practitioners.

The PTO has also published a Trial Practice Guide that "is intended to advise the public on the general framework of the rules, including the structure and times for taking action in each of the new proceedings." The guide provides a plain English explanation of the AIA requirements relating to the proceedings, an overview of the rules and how they work together, as well as some commentary regarding issues that the PTO expects to arise under this new forum. Because the PTAB has been given significant discretion to run these proceedings, such guidance is likely to be heavily relied upon. For example, with regard to the PTO's requirement that lead counsel be a registered practitioner, the guide states, "The Office expects that lead counsel will, and back-up counsel may, participate in all hearings and conference calls with the Board and will sign all papers submitted in the proceeding. . . . . Actions not conducted before the Office (e.g., taking of deposition) may be conducted by lead or back-up counsel."

For those interested in a general overview of the new AIA contested cases framework, the guide is an excellent starting point. The guide can be found at

Inventor's Oath/Declaration

Effective September 16, 2012, the PTO's new rules regarding who can file and prosecute an application, and how and when inventor documentation gets submitted come into play. Although this might seem at first glance a fairly mundane procedural issue, the new rules significantly streamline common practice and should help to make patent prosecution more cost effective for many companies. For instance, applicants can now postpone filing certain inventor documentation until an application is in condition for allowance, and if an inventor cannot be found or refuses to sign, the rules allow for filing of a substitute statement instead. Since a significant percentage of patent applications never actually issue, and since amendments sometimes change the claims enough that the original listing of inventors is no longer correct at the time of allowance, these changes meaningfully reduce the paperwork that will need to be filed as a routine manner. Many companies may still choose to obtain and file such documentation at the time that an application is first submitted (for instance to avoid the $130 surcharge for later filing), but that is now optional rather than a required step in seeking patent protection.

The PTO originally interpreted the AIA to prohibit an assignee from being treated as the actual applicant for the patent (as is common in other countries), but after considering public comments on the proposed rules the PTO has revised its position, and now recognizes that an assignee may be considered the applicant. This is significant for numerous reasons, one of which is that previously, some employee inventors may have considered patent counsel to be representing them personally even when such counsel expressly stated that they were representing the employer and merely acting as attorney for the "applicant" as a necessary step in seeking a patent on the employer's behalf. Under the new rules, the "applicant" may expressly be the company, even though at some point each inventor will be called upon to execute an oath or declaration. One by-product of this change is that at the time of replying to a notice of allowance, the PTO is requiring applicants who are assignees to notify the PTO of any change in the real party in interest. The PTO has commented that notwithstanding the change in focus, it will still refer to patents by inventor names, as they "tend to provide a more distinct identification than assignee names." In a related area, the PTO will no longer require inventors to identify country of citizenship in their oaths or declarations.

Supplemental Examination

Under the AIA, a patent owner may request supplemental examination of a patent based on certain relevant information; if the information is found to raise a substantial new question of patentability, the PTO will order ex parte reexamination of the patent. The purpose of the supplemental examination is to insulate the patent owner from certain defenses that might be brought by accused infringers, such as allegations of unenforceability of a patent due to failure to apprise the PTO of prior art that the patent owner may have been aware of during the pendency of the application.

The PTO's final rules list how a patent owner requests such supplemental examination and what information must be provided. Specifically, after identifying each item of information, the patent owner is required to identify each claim of the patent for which supplemental examination is requested, provide an explanation of the relevance and manner of applying the information to each claim, and summarize relevant portions of any submitted document that is more than 50 pages in length. The PTO final rules set base fees of $5,140 for the supplemental examination request, $16,120 for any ex parte reexamination that results, as well as additional fees for processing documents over 20 pages in length. A patent owner may submit up to a dozen items of information for supplemental examination under a single request.

Because the AIA requires the PTO to conclude the supplemental examination within three months of the request, the PTO included various rules that prevent a request from getting a filing date unless it is in a complete form. Also driven by this tight timeframe is the PTO's approach that an "item of information" will be narrowly construed such that one document such as a declaration relating to both a § 101 issue and § 103 issue will be treated as two items of information. In general, the PTO in its rulemaking has imposed stricter burdens on the patent owner in these rules than in other areas of AIA-related rulemaking, expressly in order for the PTO to be able to stay within the three-month statutory requirement.

Various related issues, such as reexamination fees in general, and how the PTO addresses misconduct and material fraud that it becomes aware of in connection with such proceedings, are also addressed in the final rules. As to the reexamination fees, notwithstanding numerous public comments, the PTO has held fast to a significant fee increase based on the statutory requirement that the PTO set fees at an amount that recovers the estimated average cost to the PTO. In the case of ex parte reexaminations, the new fees come close to being an order of magnitude (i.e., ten times) higher than existing fees, particularly when coupled with the supplemental examination request. Notably, the PTO also warned in its August 14 final rulemaking that it is in the process of adjusting and setting all patent fees in accordance with AIA mandates, so the reexamination increases that come into play on September 16 may be a harbinger of more generalized increases in the near future.

Inter Partes and Post-Grant Review

The AIA created new inter partes and post-grant review proceedings that take effect on September 16, 2012 and that are conducted before the PTAB. The inter partes review provisions apply to any patent that issued before, on, or after September 16, 2012. The post-grant review provisions generally apply to patents issuing from patent applications subject to the "first-inventor-to-file" provisions of the AIA, which come into force on March 16, 2013.

Many aspects of the inter partes review process are set forth in the AIA itself. For example, the inter partes petitioner (anyone not the owner of the patent) may request that the PTAB cancel one or more claims of a patent only on a ground that could be raised under 35 U.S.C. §§ 102 or 103, and only on the basis of prior art consisting of patents or printed publications. The petitioner has the burden of proving unpatentability by a preponderance of the evidence. A petition for inter partes review may be filed after the later of either:

  1. nine months after the grant of a patent or issuance of a reissue of a patent; or
  2. if a post-grant review is instituted, the termination of that post-grant review.

Once a petition for inter partes review is filed, the patent owner has the right to file a preliminary response that sets forth reasons why no inter partes review should be initiated. The PTO may not initiate an inter partes review unless it determines that there is a reasonable likelihood that the petitioner will prevail with respect to at least one of the challenged claims. The PTO must grant or deny the petition within three months after: (1) receiving a preliminary response to the petition; or (2) if no preliminary response is filed, the last date on which such response may be filed. The PTO's decision whether to initiate an inter partes review is final and not appealable.

During inter partes review, the patent owner may file one motion to amend the patent by (1) canceling any challenged patent claims; and (2) for each challenged claim, proposing a reasonable number of substitute claims. Amendments to the claims may not enlarge the scope of the claims or introduce new matter. Additional motions to amend may be permitted at the joint request of the petitioner and patent owner to advance a settlement or as permitted by regulations prescribed by the PTO.

Post-grant review is available only for nine months after a patent issues and provides broader grounds for challenge. Not only can the patent be challenged based on prior art consisting of patents or printed publications, it can be challenged on numerous other grounds as well, including essentially all of the grounds typically asserted as a defense to patent infringement under sections 101, 102, 103, and 112 of the patent statute with the exception of best mode. Further, the standard for review is different; review may be authorized if the Director determines that the information presented in a petition, if not rebutted, "would demonstrate that it is more likely than not that at least one of the claims challenged in the petition is unpatentable," or if "the petition raises a novel or unsettled legal question that is important to other patents or patent applications."

The PTO's final rules relating to inter partes and post-grant review differ from the proposed rules published in February 2012 in several respects. For example, the proposed rules provided that an inter partes or post-grant review proceeding must be concluded within one year, except that a six-month extension was available for good cause. The final rules clarify that the one-year period for completing the review may be adjusted by the PTAB in the case of joinder.

The proposed rules required the petition for inter partes or post-grant review to include a certification of standing (the patent is subject to review and the petitioner is not barred or estopped from requesting review) and an identification of the challenge, including the claim(s), the specific statutory grounds on which the challenge is based, how each challenged claim is to be construed, how each construed claim is unpatentable, and the exhibit number(s) of the supporting evidence. The final rules include these same provisions and further clarify that the petitioner must certify that it is not estopped from requesting review of the challenged claims (as opposed to the patent) on the grounds identified in the petition.

The proposed rules allowed the petitioner to serve the patent owner at the correspondence address of record for the patent at issue or at any other address the petitioner knows is likely to effect service, but required the petitioner to contact the PTAB to discuss alternate modes of service if the two modes of service identified in the rule were not effective. The final rule eliminates the requirement that the petitioner contact the PTAB to discuss alternate routes of service and provides that:

  1. the petitioner may serve the patent owner electronically upon agreement of the parties,
  2. personal service is not required, and
  3. service may be by Express Mail or by means at least as fast and reliable as Express Mail.

Under the PTO's proposed rules, the patent owner had two months from the notice assigning the petition a filing date to file a preliminary response setting forth the reasons why an inter partes or post-grant review should not be initiated. Likewise, if the PTAB's order granting review did not provide a due date for the patent owner's response, the proposed rules provided that the default due date was two months from the date the review was instituted. The final rules extend the two-month time period for both the preliminary response and the default time period for the patent-owner response to three months.

The final rules still allow the patent owner to file motions to amend the challenged claims. Like the proposed rules, the final rules provide that a motion to amend may be denied where (1) the amendment does not respond to a ground of unpatentability involved in the proceeding, or (2) the amendment seeks to enlarge the scope of the claims or introduce new subject matter. However, the final rules allow a patent owner to file one motion to amend after conferring with the PTAB only if the motion is filed no later than the filing of the patent owner's response. The final rules allow the PTAB to authorize additional motions to amend only where there is a good-cause showing or a joint request of the petitioner and patent owner to advance a settlement, and instruct the PTAB to consider whether the petitioner has submitted supplemental information after the time period that the patent owner had to file a motion to amend. The final rules further state that a reasonable number of substitute claims is presumed to be one substitute claim per challenged claim, which may be rebutted by a demonstration of need.

The final and proposed rules also differ with respect to filing supplemental information. In particular, the proposed rules provided that a petitioner could request authorization to file a motion identifying supplemental information relevant to the ground for which the trial had been instituted if the request was made within one month of the review being instituted. The final rules further provide that a petitioner who seeks to submit late information, or information that is not relevant to a claim under review, must show why the information reasonably could not have been obtained earlier and that consideration of the information is in the interests of justice.

The final rules have not significantly changed discovery practice under PTAB proceedings relative to what was proposed. Routine discovery is defined slightly differently, the parties are given more flexibility to agree to scope of discovery, international deposition procedures have been made more flexible, and some of the details regarding "information that is inconsistent with a position" advanced by a party have been modified. However, the overall structure of discovery, which is far broader than the PTO has used in the past for any common proceeding, remains as it was previously proposed.

The PTO received numerous comments regarding the proposed rule that the claims in an inter partes or post-grant review be given their broadest reasonable construction in light of the patent specification. This differs from the standard used in courts, where there is no attempt to seek the broadest reasonable construction. The PTO has been steadfastly asserting that the standard it uses, though admittedly different than that used for the same purpose in courts, is not only sensible but required. The PTO's position remained unchanged in the final rules. The PTO continues to believe that a broader interpretation is warranted because unlike a proceeding in a court, a proceeding before the PTO gives the patent owner an opportunity to amend claims. In its response to the critical comments, the PTO stated, "Indeed, the Federal Circuit has acknowledged the longstanding practice that the patent system has two claim construction standards, the 'broadest reasonable interpretation' standard applied to Office's [sic] proceedings, and that used by district courts in actions involving invalidity and infringement issues." Now that the AIA has provided additional mechanisms for potential infringement defendants to challenge patents, we expect to see some forum shopping based on which standard a party believes will best suit its needs in a particular case.

Transitional Program for Covered Business Method Patents

As explained above, the AIA creates a post-grant review process for all granted patents, but generally limits the window for bringing such a challenge to nine months post-issuance. Section 18 of the AIA, however, allows post-grant review of certain "covered business method patents" so long as the challenge is brought between September 16, 2012 and September 16, 2020.

The AIA defines a "covered business method patent" as "a patent 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." Although the transitional program generally employs the standards and procedures of post-grant review, certain exceptions apply. First, transitional review of covered business method patents may only be sought by a party that has been sued for or charged with infringement of the patent at issue. Second, for challenges based on §§ 102 and 103, only a subset of prior art is available to support the petition, namely: (1) prior art described in pre-AIA § 102(a), or (2) prior art that discloses the invention more than one year before the U.S. patent application date and would be described by pre-AIA § 102(a) if the disclosure had been made by another before the invention by the patentee. And third, if a final written decision issues, the petitioner is estopped from later asserting that the challenged claims are invalid on any ground that the petitioner raised during the transitional proceeding — estoppel does not extend to grounds that could have been raised during the transitional proceeding.

Although the AIA excludes "technological inventions" from the definition of a "covered business method patent," it calls upon the PTO to define what constitutes a "technological invention." Public comments on the PTO's proposed rules largely criticized the PTO for defining that term using variants on the word "technological" three times. Nonetheless, the PTO has maintained its position in the final rules, and suggested that future guidelines and case law will be used to better define which patents will be subject to this further level of review. The new rules promulgated by the PTO state that the following will be considered in determining whether a patent is for a technological invention: "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 while using a technical solution." Notably, the PTO's commentary on the final rules states general agreement with the notion that the definition of a covered business method patent should be broadly construed, so we expect to see a number of third parties attempt to find the outer boundaries of this definition starting about a month from now.

The procedure for covered business method patents is particularly interesting because it provides a new PTO-based forum for attempting to invalidate patents in a manner that was not previously possible. As discussed above, the PTO's interpretation of patent claims is expressly broader than that used by courts, so more patents may be subject to challenge than the prior case law would have suggested. Further, as noted above, the AIA includes a requirement that such challenge may only be brought by one who has been sued or "charged with infringement." In response to public comments, the PTO provided some clarification as to what "charged with infringement" means, stating that it is found when "a real and substantial controversy regarding infringement of a covered business method patent exists such that the petitioner would have standing to bring a declaratory judgment action in Federal Court." This should significantly reduce collateral litigation that would have been brought if the term "charged with infringement" had been left without interpretation.

Notably, these new procedures begin to apply on September 16, 2012, and can then be used immediately against newly issued patents until the post-grant provisions come into play (after which time the post-grant procedure will impose a nine-month bar to bringing a challenge based on the transitional program for covered business method patents).

Third-Party Submission of Materials

The AIA mandates that beginning September 16, 2012, third parties will be able to submit to the PTO materials, such as printed publications, for consideration in a pending patent application. The PTO final rules in this regard call on the submitting party to provide a short statement of relevance regarding each document, as well as a filing fee (exempted for initial submissions of up to three documents). The PTO has developed a dedicated, web-based interface to allow third parties to make such filings electronically, anonymously and without the need for a registered practitioner. Note that the documents submitted may already be of record in the case and may not necessarily even be prior art, thus allowing third parties to provide statements of relevance that may comment on matters missed by an examiner. There are limited time periods available for third parties to make such submissions – depending on circumstances, the window may close as early as six months after publication.

Third parties are also permitted under the AIA to submit in the file of an issued patent written statements of a patent owner filed in a proceeding before a Federal court or the PTO regarding the scope of a claim of the patent. Such statements can then be used in subsequent proceedings, such as ex parte reexaminations, inter partes reviews and post-grant reviews. The PTO's final rule requires that such statement not only identify the forum and proceeding, but also explain how each statement is a statement in which the patent owner took a position on any claim of the patent and explain the pertinence and manner of applying the statement to at least one patent claim. The rule is significant in that it provides a third party with an opportunity not only to supply the patent owner's statement, but provide the third party's own slant on the relevance of that statement, even by including supporting affidavits or declarations. The PTO also responded to public comments by expanding the scope of what can be submitted from what the PTO had first proposed—now, any document can be submitted as long as at some point it is filed for inclusion in a federal court or PTO proceeding. Thus, a company press release, for example, could under certain circumstances qualify. Although the patent owner needs to be notified and proof of service must accompany such a filing, the filing can still be done anonymously through a registered practitioner.

Other AIA Rulemaking

The AIA also changed the PTO's statute of limitations for addressing violations of the PTO Code of Professional Responsibility, in general, lengthening it from five to ten years but requiring that the PTO commence such proceedings no later than one year from the date that the misconduct was made known to the PTO. The PTO final rules in this area are, according to some of the comments received, contrary to the statutory provisions, but these squabbles are in fairly minor areas, such as whether notice of misconduct to a PTO examiner would be sufficient to start the one-year clock ticking (the final rules say that the notice needs to be to an appropriate person in the PTO's Office of Enrollment and Discipline).

The PTO final rules also address new "derivation proceedings" applicable after the transition to "first inventor to file" provisions on March 16, 2013. As the time frame for these provisions nears, we will report on the ongoing developments regarding derivation proceedings. In addition to promulgating these final rules, the PTO is still in the process of proposing additional rules for the remaining provisions of the AIA. For example, on July 26, the PTO proposed examination guidelines to implement the first-inventor-to-file provisions of the AIA, which by statute will become effective March 16, 2013. Public comments on those provisions will be accepted until October 5, 2012.