The US Congress granted the US Patent Office Patent Trial and Appeal Board (PTAB) broad discretionary power to deny institution of American Invents Act (AIA) proceedings under 35 U.S.C. §325(d) - denial is discretionary if the 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, an expanded PTAB panel recently gave §325(d) sharper teeth against follow-on petitions.[i] More specifically, the expanded PTAB panel adopted a seven-factor analysis[ii] to determine whether a follow-on petition should be instituted.
As illustrated in Figure 1 below, §325(d) has been cited in an increasing number of institution denials. What used to be a seemingly throwaway patent owner argument has been picking up steam and is becoming a viable, and even reliable, defense in the right circumstances.
Given the rise of §325(d) as a reason for non-institution in the last year, it is becoming even more imperative to know how to select and use the best prior art at the outset. Yet our experience and research indicates that each PTAB panel (and each PTAB judge) seems to apply a different threshold when determining whether to invoke their discretionary §325(d) power. So, finding prior art that offers the greatest likelihood of success may be the most important decision to be made by petitioners. But what prior art or arguments are (or are not) the same or substantially the same as those previously presented to the Office? The answer: it depends.
Even though the Board can be unpredictable, some very fact-specific trends are developing that give us some insight on how a majority of PTAB panels may treat a certain prior art reference. For example, a petitioner needs to ask itself:
- What if the prior art was part of an examiner’s rejection during the prosecution of the patent being challenged?
- What if the prior art was cited in an Information Disclosure Statement (IDS)?
- What if the examiner made the prior art part of the record but did not rely on it for any rejections?
- What if the prior art has been used in an inter partes review, post-grant review, covered business method, re-examination proceeding, or any other proceeding before the Patent Office?
- If the prior art was cited in a prior proceeding, at what stage of the prior proceeding is the prior art no longer “available” for follow-on proceedings?
- What if a previous petition cited the prior art challenging a different claim than the claim(s) you are seeking to challenge?
- What if the examiner overlooked a key portion of the reference or seemingly misunderstood, and thereby misapplied, the prior art?
- Can a potential §325(d) issue be overcome with an Expert Declaration where the Expert corrects previous deficiencies in the record?
- What if the prior art shares the same, or a substantially similar, specification as a reference already cited during prosecution or cited in a proceeding before the Patent Office?
- What if the prior art is a journal article that substantially mirrors a patent or patent publication cited during prosecution or cited in a proceeding before the Patent Office?
Each of the questions presented above are inquiries that may sway the PTAB panel to invoke (or not invoke) its discretionary §325(d) power.
The Right Prior Art
Given the rise of §325(d) as a reason for non-institution in the last year, the most critical petitioner decision is the selection of the right prior art. What does “right” mean? Of course, it starts with the best prior art to invalidate claims. But it also means understanding and owning the original prosecution, and any related proceedings, and making sure the petition’s prior art or arguments are (or are not) the same or substantially the same as those previously presented to the Office. OK – what does that mean? The answer: it depends.
In order to better address this question, we have broken down the prior art into the following three categories: (1) prior art that was cited during original examination and/or during another proceeding at the PTAB; (2) prior art that has a similar disclosure and/or covers substantially the same technology, i.e., the old “new question” and “new light” analysis from reexamination; and (3) prior art cited only on the face of the patent, but not used in any Office action or notice of allowance. Due to certain constraints, we will limit our discussion to only these three categories. The analysis below assumes the OLD or NEW PRIOR ART is the only prior art that truly meets the claims.
(1) Using Old Prior Art -- utilized during original Examination and/or during another proceeding at the PTAB – is risky even with new expert testimony.
Old prior art is at the most at risk for invoking a § 325(d) denial – but is not fatal when used correctly.
The Board has instituted when the old prior art is combined with a new reference (new prior art) that has not yet been before the USPTO. In Edwards Lifesciences Corp. v. Boston Scientific SciMed, Inc.[iii], the Board partly granted institution of inter partes review of a patent directed to a stent delivery system. The Board rejected the patent owner's argument that the petition should be denied under 35 U.S.C. § 325(d), stating that “we determine that the Petition’s and the Examiner’s reliance on [the reference] is substantially different…The Examiner…did not consider whether such a feature may have been obvious…over [the reference] in combination with additional prior art...Thus, in this circumstance, we agree with Petitioner’s contention that such an obviousness analysis was appropriate during prosecution, and remains appropriate now, in this inter partes review proceeding.”
With regard to adding argument in an AIA review through expert testimony, the Board has shifted its view from this being a new argument [iv] to this not being enough to avoid 325(d) denial. For example, the Board denied Grounds despite new expert testimony in Telebrands Corp. v. Tinnus Enterprises, LLC. [v] The Board was “not persuaded that [Petitioner’s Expert] testimony meaningfully distinguishes the record that is before us from the record that was before the Examiner…Thus, weighing these considerations, we determine that facts of this case weigh in favor us exercising our discretion and declining to institute on the obviousness grounds presented in the Petition.”
(2) New Prior Art with the same disclosure as Old Prior Art, without explanation, is also risky.
On October 24, the PTAB designated three cases “informative” on this issue[vi]. Two of the cases include Cultec Inc. v StormTech LLC[vii] and Unified Patents Inc. v. John L. Berman [viii] .
In Cultec, the Petitioner, Cultec, challenged a patent that uses a series of corrugations and sub-corrugations in the sheet material to provide large stormwater chambers that have desirable performance and safety factors. Cultec submitted a third party submission in StormTech’s patent application prosecution. The third party submission cited “reference A” for teaching a specific claim element, “Element 1.” In the IPR, Cultec cited “reference B” for teaching Element 1. The Board denied institution under § 325(d) because the petitioner’s arguments were too similar to the arguments that the examiner had considered during prosecution.
In Unified Patents, the petitioner, Unified Patents, challenged a patent that describes techniques for superimposing images over television scenes. The Board denied institution under asserted § 325(d) because Unified Patents asserted an obviousness combination that included a reference already considered during original prosecution, as well as a second reference that was cumulative of prior art the examiner had likewise considered.
However, not all PTAB panels have denied institution on similar facts. For example, in C&D Zodiac, Inc. v. B/E Aerospace, Inc. [ix] , the Board partly granted institution on a patent directed to a space-saving aircraft enclosure. In instituting, the Board rejected the patent owner's argument that the petition should be denied under 35 U.S.C. § 325(d). The Board held that “Patent Owner has not shown that the arguments in the Petition were ever previously presented to the Office. . . . It is true that substantially the same arguments and art are raised in the instant Petition as were raised during examination of [the patent], and yet the [the patent] issued. However, it is also true that substantially the same arguments and art were raised in [a related case], and many of the challenged claims of [a related patent] were held unpatentable. Because the challenged claims before us are of similar scope to those held unpatentable in [the related case], we decline to invoke § 325(d) to reject this Petition.”
(3) Old Prior Art – Submitted in IDS but not used by Examiner or PTAB.
If this category is the best prior art available – the risk of denial is substantially reduced. For example, in Microsoft Corp. v. Parallel Networks Licensing, LLC [x] , the Board granted institution on a patent directed to a method for managing dynamic web page generation requests. During an ex parte reexamination of the patent, the patent owner listed a “Reference C” in an IDS. Later, the petitioner cited Reference C in a petition for IPR. The Board found that “the references were not applied against the claims and there is no evidence that the examiner considered the particular disclosures cited by [the petition].” The Board instituted on the claims in view of Reference C.
The cases summarized above are offered as examples of how past boards have handled the issue and should not be considered precedential or exhaustive (in fact, the Board cited two as ‘informative’).
Things are Looking Up for Patent Owners
As we have noted, things seem to be “looking up” for patent owners. The USPTO recently published statistics (see graph) 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[xi]
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. [xii] , [xiii], [xiv]
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 [xv] 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. [xvi]
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 the patent owner is thwarting the first institution. The recent developments bode well for the general outlook for patent owners.
In short, 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 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 navigate the ambiguity around follow-on petitions and §325(d) denials.
Jason D. Eisenberg is a director in the Electronics Group of Sterne, Kessler, Goldstein & Fox. Drawing upon a quarter century of patent experience gained before and after law school, he provides counsel to clients in a broad array of IP matters, including patent prosecution and strategic management of global patent portfolios.
Trent W. Merrell is an associate in the Electronics Group of Sterne, Kessler, Goldstein & Fox. His practice includes both patent prosecution and litigation at the US Patent and Trademark Office. His technological experience spans medical devices, digital healthcare, computer architecture, data processing, network communications, data generation, and software/business methods.
[i] General Plastic Industrial Co. Ltd. v. Canon Kabushiki Kaisha, IPR2016-01357 (PTAB September 6, 2017) (Paper 15).
[ii]NVIDIA Corp. v. Samsung Elec. Co., Case IPR2016-00134 (PTAB May 4, 2016) (Paper 9).
[iii] Edwards Lifesciences Corp. v. Boston Scientific SciMed, Inc., IPR2017-01295 (PTAB October 25, 2017) (Paper 9).
[iv] Micron Technology, Inc. v. The Board of Trustees of the Univ. of Ill., IPR2013-00008 (PTAB March 13, 2013) (Papers 24 and 59).
[v] Telebrands Corp. v. Tinnus Enterprises, LLC, PGR2017-00015 (PTAB October 11, 2017) (Paper 16).
[vi] The informative designation is a step below precedential, though nonbinding, the rulings will serve as guidance to future PTAB Boards.
[vii] Cultec Inc. v StormTech LLC, IPR2017-00777 (PTAB August 22, 2017) (Paper 7)(informative).
[viii] Unified Patents Inc. v. John L. Berman, IPR2016-01571 (PTAB December 14, 2016) (Paper 10) (informative).
[ix] C&D Zodiac, Inc. v. B/E Aerospace, Inc., IPR2017-01275 (PTAB, Oct. 31, 2017) (Paper 12).
[x] Microsoft Corp. v. Parallel Networks Licensing LLC, IPR2015-00486 (PTAB July 15, 2015) (Paper 10).
[xi] USPTO, Trial Statistics IPR, PGR, CBM Patent Trial and Appeal Board October 2017. (Accessed on December 14, 2017 at https://www.uspto.gov/sit.es/default/files/documents/trial_statistics_october_2017.pdf)
[xii] Telebrands Corp. v. Tinnus Enterprises, LLC, PGR2017-00015, Paper 16 at 8-12 (PTAB Oct. 11, 2017).
[xiii] Dorco Co. v. Gillette Co., IPR2017-00500, Paper 7 at 18 (PTAB June 21, 2017)
[xiv] Alarm.com Inc. v Vivint, Inc., IPR2016-01080, paper 11 at 11-12 (PTAB November 17, 2016.)
[xv] General Plastic Industrial Co. Ltd. v. Canon Kabushiki Kaisha, IPR2016-01357 (PTAB September 6, 2017) (Paper 15).
[xvi] NVIDIA Corp. v. Samsung Elec. Co., Case IPR2016-00134 (PTAB May 4, 2016) (Paper 9).