Earlier this morning the United States Patent and Trademark Office (USPTO) published a final rule in the Federal Register changing the claim construction standard applied during inter partes review (IPR), post-grant review (PGR), and covered business method (CBM) review proceedings before the Patent Trial and Appeal Board (PTAB). This final rule replaces the broadest reasonable interpretation standard the USPTO has used to interpret claims since AIA administrative trial proceedings came online effective September 16, 2012 with the Phillips standard, which is the same claim construction standard used to construe patent claims in patent infringement litigation in federal district courts. According to the USPTO, a total of 374 comments were received in response to the May 9, 2018, Notice of Proposed Rulemaking (NPRM).
“The change to a universal post-issuance claim construction standard is positive for the overall patent system, but I don’t think we will see a resultant change in IPR decisions,” said Russell Slifer, partner with Schwegman Lundberg & Woessner, and former Deputy Director of the USPTO. “I don’t believe the claim construction standard has been the primary contributor to PTAB decisions.”
“Director Iancu is to be commended for being responsive to the wide majority of parent practitioners who have raised concerns that the PTAB procedures were unfairly tilted against patent owners,” said Robert Stoll, partner with Drinker Biddle, and former Commissioner for Patents at the USPTO. Hopefully this will be an iterative process until the proper balance is clearly achieved.
The federal district courts have interpreted patent claims using the Phillips standard, which gains its name from the claim construction standard articulated by the United States Court of Appeals for the Federal Circuit in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc). When creating the first set of regulations applicable to Administrative Trial Proceedings conducted by the PTAB, the USPTO elected to have the PTAB apply the broadest reasonable interpretation standard, which is the standard applied by patent examiners to determine whether a patent claim should issue in the first instance.
Use of BRI to interpret and subsequently invalidate patent claims already issued has been the source of much criticism. While it makes sense for a patent examiner to logically stretch claims to their reasonable limits prior to awarding the patent, having two different standards for interpreting claims for the purpose of invalidity led to gaming the system and treated previously examined and issued patent claims, which the statute says are supposed to be presumed valid, and essentially treated them equivalent to unexamined patent claims.
Under the final rule, when construing a claim term in an IPR, PGR, or CBM, the PTAB will now also take into consideration any prior claim construction determination that has been made in a civil action, or a proceeding before the International Trade Commission, if that prior claim construction is timely made of record in that IPR, PGR, or CBM. As strange as it may sound, this is also a departure from current practice. Currently, the PTAB does not need to consider any prior claim construction. With different standards, the argument goes, what a different tribunal may have ruled would not necessarily be of any concern to the PTAB. This has lead to inconsistent rulings, and claims that have been finally adjudicated as valid by the Federal Circuit because the challenge emanated from the ITC and then when the same claims were challenged on the same prior art they were finally adjudicated as invalid by the Federal Circuit. See Are all Claims Invalid?
The madness leading to patent claims being both finally adjudicated as valid and invalid by the Federal Circuit will not necessarily stop because the burden remains lower at the PTAB. The statute requires only a preponderance of evidence to invalidate patent claims in a challenge at the PTAB, while clear and convincing evidence is required in federal courts and at the ITC to invalidate claims. Still, all tribunals using the same claim construction standard moving forward can only help. Statutory reform requiring clear and convincing evidence to invalidate patent claims in proceedings at the PTAB is still a necessity.
“While only time will tell, I expect court construction under Phillips will mean that fewer patent claims will be invalidate in AIA reviews than under BRI,” said Chief Judge Paul Michel, retired Chief Judge of the United States Court of Appeals for the Federal Circuit. “That is because constructions will be narrower than before, reducing the span of relevant prior art references and the force of relevant ones. And, APJs may rely more on expert testimony than on their own assessment of how the ordinary artisan would understand claim scope. In most cases the APJs on the panel are not themselves the ordinary artisans in the actual field of technology of the patent claims, so such reliance on those who are should make the constructions more accurate and rigorous and, I think, narrower. In any event, the unseemly spectacle of courts upholding claims that the PTAB later invalidates should be ended or at least greatly reduced. In addition, the earlier construction will be more useful to the later tribunal because the standard will be the same. Possibly, the frequency of stays in district court will be reduced, reducing the excessive delays in enforcement and the expenses of both parties. The USPTO should be commended for making this adjustment.”
A significant majority of comments received by the USPTO supported the proposed change, but there were some who were uncomfortable with the retroactive application of the rule. In response to these concerns, the USPTO decided not to make the final rule retroactively apply. Instead, the Phillips standard will apply only to IPR, PGR, and CBM petitions filed on or after the effective date of the final rule, which is November 13, 2018. While I am ordinarily not a fan of retroactive changes in rules and law based on parties having relied and acted accordingly, the further perpetuation of a dual standard only allows continued mischief and madness. It makes no sense to have different standards for the same exact legal question in different fora. That was a bad idea in September 2012, and it remains a bad idea in October 2018.
I suppose at least now we will see whether those challenging patents believe the BRI standard is advantageous. For the past six years we have listened to attorneys who represent challengers say that whether you apply BRI or Phillips is a difference without distinction. If there is a filing spike over the next month, which I suspect there will be, that argument will be shown to be specious. “I also expect a spike in petition filings just before the transition,” Slifer said.
But in some cases, there is no doubt that the whether BRI or Phillips is applied will not make a big difference. “Practically speaking in most cases BRI and Phillips claim construction in PTAB AIA proceedings are not materially different,” said Steve Kunin, partner with Maier & Maier, and former Deputy Commissioner of Patent Examination Policy at the USPTO, “I see the the real impact will be in district court proceedings when the patent owner is arguing for a narrow claim construction and can now point to the AIA trials as supporting the position.”
UPDATED Wednesday, October 10, 2019 at 10:06pm adding quotes from Chief Judge Michel and Steve Kunin.