In the Winter 2017 edition of the Intellectual Property Bulletin, we reported on IP-related changes expected with the incoming Trump administration and the new Congress. Here we look at two such changes currently underway: the nomination of a new director of the U.S. Patent and Trademark Office, and a restructuring of the Copyright Office.

On September 5, 2017, President Trump formally nominated Andrei Iancu to become director of the U.S. Patent and Trademark Office. The Senate Judiciary Committee has yet to schedule a hearing on the nomination, so it is unclear what his nomination means for patent and trademark holders. Still, Iancu's background provides clues as to how the USPTO might evolve under his leadership.

Iancu is the managing partner at a California law firm and teaches patent law at UCLA Law. Prior to becoming a lawyer, he was an award-winning aerospace engineer. Iancu's legal practice focuses on IP litigation, but he is also registered to prosecute patents in the USPTO and has been active in inter partes review proceedings since their creation by the America Invents Act in 2012.

Some commentators have questioned Iancu's suitability, citing his lack of government or in-house experience. However, former Director David Kappos had no government experience prior to his appointment and his tenure is widely regarded as having been extremely successful. Furthermore, Iancu's service as managing partner of a large law firm for the past five years constitutes significant experience that is comparable to serving in-house.

But while Iancu appears qualified to serve as director of the USPTO, his résumé alone reveals little about what policy directions the USPTO might take were he to be confirmed. Some have criticized Iancu's nomination on the grounds that he will favor patent holders too strongly, but that is not clear from his history. Although Iancu has had some high-profile wins against patent infringers, most of his work has been on the defense side. For example, he successfully invalidated a genetic testing patent in Ariosa Diagnostics, Inc. v. Sequenom, Inc. — a result that was not popular among biotechnology companies. His litigation work says more about his commitment to his clients than about any particular policy position.

Over the last 10 years, Iancu has produced a steady stream of articles on patent law matters, although his publications provide only marginally more insight into the policies he might adopt. For the most part, they present analysis and guidance on various legislative and judicial developments in patent law, with a focus on predicting future developments rather than advocating one position over another.

The most revealing of Iancu’s publications is his 2008 article in the Journal of the Patent and Trademark Office Society, Code on Disks and Hat Tricks – Is Computer Software on a Medium Really Patentable? There he predicted that the courts would soon find Beauregard claims (claims to computer code stored on a computer-readable medium) to be invalid. He argued that because the code itself was not patentable as abstract, and computer-readable mediums were known, merely adding non-patentable code to a medium was obvious. Although his specific prediction did not come to pass, the general thrust of his reasoning was prescient; if courts had adopted his approach, it would essentially align U.S. obviousness analysis with the European approach of separating out the technical and non-technical features in a claim. Many commentators have noted that the recent trend in subject matter eligibility decisions coming from the Federal Circuit Court of Appeals is bringing U.S. law closer to the European approach. In other words, although the precise route the courts have taken differs from Iancu's prediction, the end result is remarkably similar.

Overall, the available information suggests Iancu would likely be an objective director who understands the conflicting interests that the patent system must balance—although again, most of that information has been gleaned from his work as a practicing attorney with a range of clients. His apparent neutrality could reflect his own beliefs, or could be a product of balancing different client interests. Whether he has particular policy positions or preferences that he would push as director remains to be seen.

Assuming Iancu is confirmed, he will immediately be faced with several pressing issues. In Aqua Products, Inc. v. Matal, for example, the Federal Circuit invalidated the USPTO’s rule requiring a patent holder to show a proposed amended claim is patentable over known prior in an IPR proceeding. The decision was en banc but highly fractured, with five separate opinions issued by the 11 judges. The USPTO must determine—most likely before confirmation of the new director—whether to seek review by the Supreme Court, and how to revise its rules should such an appeal not be taken or fail. The USPTO also faces a broader challenge to the IPR system as a whole in Oil State Energy Services, LLC v. Greene’s Energy Group, LLC, and the new director likely will need to deal with changes prompted by that ruling when it comes down.

On the legislative side, the USPTO’s fee-setting authority expires in September 2018 absent congressional renewal, which might be difficult given the current political climate in Washington. The USPTO also faces questions over its participation in the Department of Commerce's Enterprise Services initiative, under which various human resources, information technology and procurement services are centralized across the Department of Commerce. Several major IP groups have expressed concern that the program violates the America Invents Act by using USPTO fees to fund services for other branches of the Department of Commerce. Iancu’s experience as a litigator and managing partner might serve him well in addressing these issues, but the positions he would take remain purely speculative.

Patent and trademark holders should be cautiously optimistic about Iancu’s nomination, but should pay close attention to his Senate confirmation hearing once it is scheduled. With luck, the hearing will provide greater insight, and interested parties will be better able to plan accordingly.

Since President Trump assumed office, copyright issues have, for the most part, taken a back seat in the administration. This is true despite the urgent push for reforming what some call the “antiquated” structure of the Copyright Office. With the core copyright industries adding $1.2 trillion to the U.S. GDP and employing nearly 5.5 million people in 2015, many in IP are keeping a close eye on what steps the administration will take in this increasingly vital area.

One significant development has emerged—but from the legislative, rather than the executive, branch. On April 26, 2017, the House of Representatives passed H.R. 1695 - The Register of Copyrights Selection and Accountability Act of 2017 by an overwhelmingly bipartisan vote (378-48). The bill amends federal copyright law to allow the president to appoint, with the consent of the Senate, a Register of Copyrights from a list of individuals recommended by a panel composed of the Speaker of the House of Representatives, the President pro tempore of the Senate, the majority and minority leaders of the House and the Senate, and the Librarian of Congress. (Currently, the Librarian of Congress is in charge of appointing the Register of Copyrights.) In addition, the bill seeks to limit the term of office for the Register of Copyrights to 10 years, although the Register may be reappointed. Finally, the bill gives the president the power to remove the Register of Copyrights from office.

Upon introduction of the bill, House Judiciary Committee Chairman Bob Goodlatte, Ranking Member John Conyers, Jr., Senate Judiciary Committee Chairman Chuck Grassley, Ranking Member Dianne Feinstein and Senate Judiciary Committee member Patrick Leahy issued a joint statement making clear their commitment to modernizing the Copyright Office, writing: “Reforms being considered include public advisory committees, improvements to Copyright Office systems for data inputs and outputs, and the copyright ownership transparency. However, time is of the essence when it comes to the selection process for a new Register of Copyrights. … With the current Register serving only on an acting basis, now is the time to make changes to ensure that future Registers are transparent and accountable to Congress.”

To many, this bill is a step in the right direction. Because the copyright industry has grown exponentially in the past century, some have argued that it has become increasingly important to have an independent Copyright Office. For example, former Register of Copyrights Ralph Oman (1985-1993) and Marybeth Peters (1994-2010) cited as a problem having the Copyright Office in the Library of Congress, stating that the competing missions and differing priorities of the two institutions have been an increasing source of tension. They expressed this sentiment in a letter to the Committee on the Judiciary following the dismissal of Maria Pallante as the Register of Copyrights, writing: “Stripped to its basics, the choice is stark: Does Congress want modernization and independent copyright advice straight and true from the expert agency, or does it want copyright administration and advice filtered through the lens—and shaped by the perspective—of the head of the national library?”

The bill has also gained wide support from property rights groups such as the Motion Picture Association of America, the Copyright Alliance, the Directors Guild of America and SAG-AFTRA, which represents more than 160,000 media artists. These and other advocates believe the law would make Congress more accountable and increase public transparency. They also contend that it would (1) enable interested parties to provide input through their elected officials on the selection of the Register, (2) allow the Copyright Office to more effectively focus on its modernization and (3) enable the office to fully exercise the authorities granted to it in the U.S. Copyright Act.

On the other hand, critics such as Rep. Zoe Lofgren (D-Ca.) see this bill as problematic, considering that President Trump’s list of nominations for federal positions currently numbers in the hundreds. In a statement, she wrote: “… this legislation will harm and delay much-needed modernization efforts by making the Register a presidentially appointed position. Currently, there is a backlog of 495 Appointee positions that have not even been nominated. This not only will delay effective administration of the Copyright Office, but also puts the efficiency gains made by the Library at risk.”

At the same time that proponents of the bill argue that—given the urgency for modernization — the president appoint the Register, opponents believe the bill will actually harm modernization efforts. Indeed, current Librarian of Congress Dr. Carla D. Hayden has already drafted modernization plans for the Copyright Office that she believes can speed modernization by almost two years and save significant amounts of money.

If H.R. 1695 does become law, it's anyone's guess as to how long it might take President Trump to appoint a new Register of Copyrights. Currently, the bill awaits Senate action, so for now, interested parties not undertaking lobbying efforts remain in a wait and see position.

General Plastic: Comforting Limits for Patent Owners and Guidance for Petitioners in PTAB Trial Follow-On Petitions

The recent decision in General Plastic Industrial Co. v. Canon Kabushiki Kaisha denying the petitioner’s requests for a rehearing provided a “baseline” of factors to be considered as to the limited circumstances when second — or “follow-on” — petitions are likely to be successful in Patent Trial and Appeal Board trials.

The petitioner in General Plastic filed two inter partes review petitions, each challenging one patent. The PTAB denied institution on the merits. The petitioner then sought rehearing, which was denied. The petitioner filed further petitions several months later with newly discovered art, challenging the same two patents based in part on the new references.

The decision, rendered by an “expanded” panel including Chief Judge David P. Ruschke, is significant both procedurally — because the decision was rendered by an expanded panel — and substantively — because it provided greater clarity to all parties in an area of PTAB trials processes that had previously been somewhat inconsistent.

To date, less than half of follow-on petitions have been instituted, showing the PTAB’s reservations about them. However, there was great disparity in the prior PTAB decisions on this topic, including whether all seven factors laid out in NVIDIA v. Samsung Electronics were addressed. The varied outcomes led commentators and practitioners alike to wonder whether initiation of a given follow-on petition was dependent on the particular panel drawn by petitioner. Thus, the decision to render the decision via an expanded panel likely represents a recognition of the inconsistency of the PTAB decisions in follow-on petitions, and perhaps stands as a statement that — while designated “informative” rather than “precedential” — the analysis in the General Plastic decision should be followed by the PTAB on a going-forward basis.

Substantively, the decision by the expanded panel describes how multiple challenges to the same patent will be evaluated. It made clear that the seven NVIDIA factors — which the PTAB stated should, at minimum, serve as a baseline moving forward — likely will limit the number of challenges that a patent ultimately goes through, which could be encouraging for patent owners.

The seven NVIDIA factors are:

  1. the finite resources of the PTAB;
  2. the requirement to issue a final determination not later than one year after institution;
  3. whether the same petitioner previously filed a petition directed to the same claims of the same patent;
  4. whether, at the time of the filing of the first petition, the petitioner knew or should have known of the prior art asserted in the later petition when it filed its earlier petition;
  5. whether, at the time of filing of the later petition, the petitioner already received the patent owner’s preliminary response to the first petition or received the PTAB’s decision on whether to institute review in the earlier petition;
  6. the length of time that elapsed between when the petitioner learned of the prior art asserted in the second petition and the filing of the second petition; and
  7. whether the petitioner provides adequate explanation for the time elapsed between the filing of multiple petitions directed to the same claims of the same patent.

The PTAB said, however, that “additional factors may arise” — essentially leaving open the door for panels to consider other factors outside the seven NVIDIA factors. In its decision denying the requests for rehearing, the Board noted that both 35 U.S.C. § 314(a) and § 325(d) made institution of review “discretionary.” Indeed, the discretionary nature of the institution decision might be the reason the PTAB opted to designate the decision as “informative” rather than precedential, despite rendering the decision via an expanded panel — so that panels rendering future decisions do not feel compelled to follow the guidance of General Plastic to the letter, maintaining the discretionary nature of such decisions.

However, the limits of the Board’s discretion is being called to question in SAS Institute v. Lee, which the Supreme Court will hear this term, in which SAS argues that the USPTO cannot partially institute IPR proceedings, since 35 U.S.C. § 318(a) says the PTO “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” In the past, the Board has taken its interpretation of its discretion to an extreme, e.g., in Shaw Industries Group v. Automated Creel Systems, arguing that the statute only articulates the negative of when the trial may not be instituted, but that institution is never compelled. If SAS prevails, however, the decision could impose new limits on the Board's discretion.

While the Board stated that the NVIDIA factors would serve as a “baseline” going forward, a few factors in particular stood out in the General Plastic decision as holding more weight than others. Factor 1, “PTAB resources,” was articulated in the decision as: “the Board’s resources would be more fairly expended on initial petitions, rather than follow-on petitions.” If this is the way the PTAB is interpreting factor 1, it is likely to always weigh in favor of the patent owner, i.e., if the PTAB is favoring initial petitions over follow-on ones.

In addition, factors 5 and 7 seemed particularly important, as each addresses some aspect of the timing of the follow-on petition: whether a patent owner preliminary response (POPR) and/or institution decision has been issued in the first petition, i.e., whether two and five months have elapsed, respectively, from the notice of a filing date (factor 5), and whether the petitioner has provided an adequate explanation of the time elapsed between petition filings (factor 7). Here, the second petitions were filed a few months after the institution decisions in the prior petitions and no adequate rationale was provided — so both of these weighed against the petitioner.

Factor 6 (time elapsed since knowledge of art in the second petition) seemed less important than did factor 4, as it was a relatively short timeframe that the art in the second petition actually was known to the petitioner, since it came from a prior art search performed after the institution decision in the first cases. However, there was no clear reason why the new art could not have been found/applied previously (i.e., it “should have” been known) — which weighed in the patent owner’s favor for factor 4.

On the whole, the decision provides patent owners some comfort that no true ‘second bite at the apple’ — i.e., a new petition challenging the same claims of the same patent after the PTAB has issued an institution decision — is likely to be allowed unless truly changed circumstances justify the second petition (factor 5). Considering the seven factors, such attempted ‘second bites’ of this type likely would mean at least four factors (factors 1, 3, 5 and 6) — and possibly more — weigh in favor of denying institution. The expanded panel in General Plastic echoed this sentiment in cautioning against using a first institution decision as a roadmap for follow-on petitions, noting that second petitions are not a time for modifying challenges to cure the board-identified deficiencies of the prior petition.

Many commentators have pointed out that patent owners should be pleased with the decision. Although the expanded panel indicated that “there is no per se rule precluding the filing of follow-on petitions” and that “there may be circumstances where multiple petitions by the same petitioner against the same claims of a patent should be permitted,” most read this language as followed by an implied “however”: e.g., however, the institution of follow-on petitions is reserved for exceptional circumstances.

For petitioners, the expanded panel decision provides some clarity when seeking to file follow-on petitions — specifically, as to how to bolster their chances of success in getting them instituted. In particular, petitioners should attempt to file any follow-on petition before the institution decision is rendered in the first petition, and before the POPR if possible. Furthermore, petitioners need to articulate a strong rationale justifying any delay in filing the second petition.

What the General Plastic decision makes clear is that petitioners seeking a true ‘second bite at the apple’ — in which a petitioner tries to remedy the shortcomings of the earlier petition, especially those noted by the PTAB in the institution decision in the first petition — are almost certain to be unsuccessful. This aspect alone should provide some comfort to patent owners who face challenges to their patent via PTAB trials, who previously were uncertain as to what limits existed for such challenges. Although it might seem limiting to petitioners, the General Plastic decision does provide guidance that will help prevent petitioners wasting time, cost and resources filing second petitions when they are almost certain to be unsuccessful.

The upcoming SAS case may shed light on whether the Board has been applying the right amount of discretion to its institution decision, including the application of the seven NVIDIA factors in General Plastic. By asking the Supreme Court to interpret 35 U.S.C. § 318(a), the SAS case will require the justices to interpret the language of the AIA to determine what level of discretion the Board may apply. It seems likely that the absolute discretion that the Board has argued is not the correct standard, especially without explanation of the underlying rationale, for precisely the reasons Judge Moore cautioned against during oral arguments in Shaw, when she likened the Board’s institution inconsistencies to throwing darts while blindfolded.

In particular, of the seven NVIDIA factors, the most problematic may be factor 1 (PTAB resources), since it seems to favor denial of institution without analysis beyond convenience for the PTAB. The one other AIA section noted by the Board that provides possible guidance as to second petitions is 35 U.S.C. § 325(d), which allows the Director to “reject the petition or request because, the same or substantially the same prior art or arguments previously were presented to the Office.” This statue seems related to NVIDIA factors 4, 6 and 7. It seems likely that the SAS decision may place some limits on the Board's institution discretion, including whether the NVIDIA factors will continue to serve as a “baseline” going forward.

The Board recently designated three decisions as informative, underscoring the difficulty of challenging patents using arguments that were previously rejected during patent prosecution. All three cases — Unified Patents Inc. v. John L. Berman, Hospira Inc. v. Genentech Inc., and Cultec Inc. v. StormTech LLC — were denied institution on the holding that the art and/or the arguments were the same or similar to those previously presented to the USPTO.