The Patent Trial and Appeal Board (“PTAB”) is experiencing significant practice changes thanks to recent feedback from the Supreme Court. In addition, the new U.S. Patent and Trademark Office’s (“USPTO”) Director has committed to bringing further change to the PTAB. In a bold move, the Director has proposed a significant change to PTAB claim construction practices after only a few months on the job — with further proposals to come. In this podcast, Doug Hallward-Driemeier, who leads Ropes & Gray’s appellate and Supreme Court practice, and Scott McKeown, who leads Ropes & Gray’s Patent Trial and Appeal Board practice, discuss these changes and what they might mean for stakeholders.
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Doug Hallward-Driemeier: Hello and welcome to this Ropes & Gray podcast. I'm Doug Hallward-Driemeier, chair of the firm's appellate & Supreme Court practice, and I'm joined today by Scott McKeown, chair of the firm's Patent Trial and Appeal Board practice. Today we'll be discussing recent changes at the PTO and what those changes might mean for the PTAB. Scott, help set the stage for us here. It feels like a tumultuous time politically here in Washington D.C. How much do you think the political environment impacts the USPTO?
Scott McKeown: It certainly is a tumultuous time and being located here on Pennsylvania Avenue, we see the frequent demonstrations go by, but not so much on matters of patent law. Certainly, the United States Patent and Trademark Office as a division of the Department of Commerce is an executive agency and like most executive agencies, there's certainly a lot of input that can come from the President and his administration. For example, the PTO, like other administrative agencies, their undersecretary is appointed by the President. There're certain executive orders such as President Trump's two-for-one prohibition on new administrative rules – that certainly impacts the Patent Office. But the Patent Office has always been somewhat unique in that it is a fully, fee-funded agency, meaning all of its funding comes from the public in form of fees, and it's also not an administrative agency that's covering issues that are of great interest to the voting public. So in some respects, the Patent Office is not as susceptible to the whims of different agencies and public opinions. So in that regard, I think it's somewhat a shelter from the storm of what's going on here in D.C. right now.
Doug Hallward-Driemeier: Well, but as you mentioned, the President does get to appoint the leaders, and the President recently appointed a new Under Secretary of Commerce for Intellectual Property, Andrei Iancu, who in that role becomes the new director of the PTO. What does his arrival mean for the Patent Trial and Appeal Board?
Scott McKeown: So, Director Iancu's obviously new leadership and the last administration had appointed Michelle Lee, who was a former in-house attorney at Google. And Director Iancu is a little bit different from a lot of the past few directors in that he is a hardcore, I would call, litigator – came from a very well known plaintiffs firm here in the United States that did a lot of patent litigation, so his interests are very focused maybe less so on the big policy-side as past directors, like Director Kappos. So all of the directors sort of came in with sort of an overarching purpose or agenda. And Director Kappos wanted to clean up the backlog or shorten the backlog of unexamined patent applications. Director Lee came in and focused on improving examination quality. And Director Iancu I think is coming in with a very focused agenda on the PTAB, so the Patent Trial and Appeal Board, because this is the aspect of the Patent Office that he's most familiar with and certainly, the most controversial aspect of the Patent Office over the past couple years in that the Patent Trial and Appeal Board has, in a lot of ways, supplanted traditional patent litigation practices, where the first hurdle now to patent monetization is getting through the gauntlet at the PTAB, and it's been called a “death squad” and there've been a number of Supreme Court challenges. So Director Iancu, at his confirmation hearings, has made it clear that he is focusing on bringing balance, or what he perceives as balance, to the PTAB. And that balance, you know, from his perspective is maybe leveling the playing field a little bit from the perspective of patent owners. And even though Director Iancu's only been on the job for two months time, he's already proposed a fairly significant rule package which impacts the claim construction standard that's employed at the PTAB. So it's very clear that Director Iancu has an agenda to not only bring change to the PTAB, but to do it quickly.
Doug Hallward-Driemeier: Well, given that the PTAB is going to be a focus of his and that he has a lot of experience sort of in this area, do you have specific changes that you're expecting to see from him?
Scott McKeown: Yes. As I've said, he's already proposed a rule package to change the claim construction. So this was a popular criticism of patent owners in that if they take their patents to the District Court, a Phillips- style claim construction is used, yet when they go to the Patent Office, a broadest, reasonable interpretation is applied. And from the patent owner perspective, the Phillips construction applied in the District Court is narrower, therefore, narrower claims are able to overcome prior art more readily. And then when they go to the PTAB, there's this different construction that's used, a broader construction which then makes their claim susceptible to more prior art. So there's this belief that changing that construction at the PTAB to align it with that of the District Court will help patent owners – so that's the first step that the Director has taken. And as I've said, he's done that with only two months on the job, which is a record as far as I remember.
So the changes that I expect to come from the Director going forward address some of those criticisms that are out there from patent owners, such as the criticism about amending at the PTAB. So you have an opportunity to amend at the PTAB, yet it's argued that it's really an illusory opportunity and that the PTAB rarely grants these amendments. In fact, there's only been probably a handful, less than five, despite the fact that there’s been over 100 attempts at amendments. So the Director is looking to bring some balance to that mechanism, whether it's changing the decision makers or expanding the amendment analysis to include patent examiners or to extend the schedule to allow a little bit more briefing on these topics – those are some of the changes I expect going forward. Also, if the Phillips construction is adopted at the PTAB, which seems very likely given that most of the major Bar Associations are behind it, there will probably also be some additional briefing mechanisms proposed more along the lines of the District Court, Markman proceedings to allow these types of claim constructions to be fleshed out a little bit more. What the Director keeps emphasizing in his public statements is this idea of consistency and predictability in patent law, and the best way, at least from his perspective as we can tell right now to bring predictability and consistency to the PTAB, is to make it look more and operate more like the District Courts.
Doug Hallward-Driemeier: And, of course, he has a lot of authority to do that either through formal or informal rule making. Do you see him as having any particular appetite for patent reform legislation?
Scott McKeown: Yes, but I think it's interesting the way he's sort of come in and, within two months, proposed this change to the claim construction standard, I think it's ruffled a few feathers on the Hill. He was there a week or two back, just generally discussing, reporting on Patent Office progress and status, and he did get some flack from some members, some key members of various, I believe it was the House Judiciary, may have been the Senate, I don't recall. But basically, the pushback was, "Hey, wait a minute. You've just changed this claim construction standard. You haven't consulted us. Let's work together as a team." And that's sort of the message I think that he was given because the switch from BRI to Phillips is in some pending legislation, and seemingly, there's a little bit of a disconnect there. So there's definitely an appetite, and I think, especially on the heels of the SAS decision, where there was a significant change to PTAB practice in that the Supreme Court, in considering the SAS challenge a few months back on whether or not the Patent Office had the ability to prune, if you will, or kick out claims from a trial proceeding that were present in a petition, and the Supreme Court came back and said, "Well, wait a minute. The petitioner is sort of the master of this proceeding, and if you find that one claim is weak, then you need to consider them all. You can't just decide that some are stronger than others and go forward with a subset of those claims." So that was a significant change to the PTAB, and it was a change that probably isn't in the favor of patent owners. So I could see the agency getting behind a push to maybe unravel that decision, change the statutes to allow for the pruning of claims. At least from an administrative perspective, it's probably the most efficient way to run the railroad. And then just from the perspective of the stakeholders, patent owners certainly don't want to have all of their claims thrown into a trial when they can get some back earlier. And petitioners sort of like the old system as well because if they lost on a couple claims at institution, statutory estoppel didn't necessarily kick in for those claims. So SAS in some respects was an outcome that no one wanted other than SAS itself.
Doug Hallward-Driemeier: Well, thanks very much, Scott. That's fascinating and obviously a lot going on and a lot to follow. And thank you too to our listeners. We will keep you posted with further developments in new podcasts. But I think that's all the time we have for today. We will continue this discussion with another podcast I think soon with respect to the SAS decision itself and what that means for patent owners and petitioners. But until then, please visit www.ropesgray.com and Scott's blog at www.patentspostgrant.com for additional news and analysis.