As we look ahead towards 2019, it is worth reflecting on several high-profile patent cases and brewing developments from the past year. Here are five lessons we learned from 2018 that may be useful in developing IP litigation strategies for the coming year:
Lesson 1: Some patent law doctrines do not apply in inter partes reviews (IPRs). In the widely publicized St. Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc. (Case No. 18-1638), the Federal Circuit affirmed the Patent Trial and Appeal Board (PTAB)’s finding that tribal sovereign immunity does not apply in IPRs. The issue arose when Allergan sold its patents covering its drug Restasis to the St. Regis Mohawk tribe and retained a license. When Mylan challenged the patents by filing an IPR petition, the Tribe argued that its sovereign immunity shielded its patents from invalidation in an IPR. The case and its underlying transaction raised alarm bells, both in the legal community and on Capitol Hill, with concerns about the same entity using patents offensively without being subject to an IPR. But those concerns have not materialized, or at least not yet. The Federal Circuit held that tribal sovereign immunity does not apply in IPRs because they are “hybrid proceeding[s]” with “adjudicatory characteristics” that make them “less like a judicial proceeding and more like a specialized agency proceeding.” In 2019, we will see whether the United States Supreme Court shows any interest in St. Regis and, on a related note, whether the Federal Circuit reaches the same result for the doctrine of state sovereign immunity in Regents of the University of Minnesota v. LSI Corp. (Case No. 18-1559).
The Federal Circuit also addressed this year whether assignor estoppel applied in IPRs and found that it did not. In district court, this equitable doctrine prohibits inventors and assignors (and those in privity) from later challenging an assigned patent’s validity. But recently in Arista Networks, Inc. v. Cisco Systems, Inc. (Case No. 2017-2336), the Federal Circuit held that assignor estoppel has “no place” in IPR proceedings. Because the AIA allows “a person who is not the owner of a patent” to petition for review, the Court found no statutory basis to preclude assignors from filing petitions against the patents they assigned. This case may also find its way to further review in 2019, either by an en banc Federal Circuit or at the Supreme Court.
Lesson 2: Section 101 might be more unsettled now than it was in 2017. In a pair of cases issued within one week of each other—Aatrix Software, Inc. v. Green Shades Software, Inc. (Case No. 17-1452) and Berkheimer v. HP Inc. (Case No. 17-1437)—the Federal Circuit challenged conventional wisdom about resolving Section 101 claims. Historically, district courts analyzed Section 101 challenges on motions to dismiss, or at the latest, on summary judgment. Yet in Aatrix and Berkheimer, the Federal Circuit concluded that the second step of the section 101 analysis—whether the claims are directed to an inventive concept—can in some cases have underlying factual questions not amenable to resolution as a matter of law. Patent owners are likely to rely upon these decisions to defend against Section 101 challenges, but these cases may only be a temporary tool as they likely will not be the final word on the issue. Indeed, dissenting from denials of en banc rehearing in both cases (see Aatrix and Berkheimer), Judge Lourie (joined by Judge Newman) wrote that “the law needs clarification by higher authority, perhaps by Congress, to work its way out of what so many in the innovation field consider are § 101 problems.” And Judge Reyna, dissenting separately, explained that in his view, the status quo “offers no meaningful guidance to the bar, the government, or the public on how to proceed” in addressing Section 101 determinations. This is an area that the Federal Circuit will likely further explore next year.
There may also be increased uncertainty in the line of Section 101 cases in the pharmaceutical and biotech areas with the Federal Circuit’s decision in Vanda Pharmaceuticals Inc. v. West-Ward Pharmaceuticals International Limited (Case No. 16-2707). The court held that claims covering a method for treating patients with iloperidone based on an identified biological relationship were patent eligible, and tried to distinguish the Supreme Court’s Mayo Collaborative Services v. Prometheus Laboratories, Inc. decision. According to the Federal Circuit, the claims in Vanda applied the biological relationship instead of merely claiming the relationship itself. But consistent with Chief Judge Prost’s dissent in Vanda, some have perceived that distinction as a thin one: Like Vanda, Mayo also involved claims including the step of administering a drug to a patient, although those claims did not specify the dosages like the claims in Vanda.
Lesson 3: The United States Patent & Trademark Office is using its rulemaking authority to address patent owner criticisms. One significant example was harmonizing the standards for claim construction between IPR proceedings with their district court counterparts. Previously, the PTAB applied the “broadest reasonable interpretation” (BRI) standard, which allowed IPR petitioners to rely on a broader scope of potentially invalidating publications. In Cuozzo Speed Technologies v. Lee—decided just two years ago—the Supreme Court expressly upheld the PTO’s use of the BRI standard as a reasonable exercise of its rulemaking authority. But this year, the PTO reversed course and adopted the Phillips approach to claim construction—the same standard used in district courts (final published rule here).
Another area that has received much attention is the procedure for a patent owner to amend its claims during an IPR. As a matter of statute, patent owners have the right to file one motion to amend the patent to propose substitute claims. 35 U.S.C. § 316(d). How that is applied has been a subject of PTO regulation, see 37 C.F.R. § 42.121, and those procedures may soon change. The PTO recently proposed introducing a step where, after the patent owner files a motion to amend, the PTAB issues a preliminary non-binding decision conveying a tentative view on the merits of the amendment (proposed rule here). Thereafter, the patent owner would have the opportunity to file a revised motion to amend. This proposed practice was intended to answer critics who have repeatedly noted the low motion-to-amend grant rate.
Lesson 4: Statutory interpretation is playing a big role in the Supreme Court patent cases. Historically, many patent law disputes had little to do with the Patent Act’s statutory language. But the AIA has provided, and will likely continue to provide, opportunities for statutory interpretation. This year, the Supreme Court determined in SAS Institute, Inc. v. Iancu that 35 U.S.C. § 318(a)’s requirement that the Patent Office must “issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner” means that it cannot institute a trial on only some of the claims challenged. And two more cases focusing on specific AIA language are on the horizon at the Supreme Court. In Helsinn Healthcare v. Teva Pharmaceuticals USA Inc., the Court heard arguments recently about whether the AIA’s on-sale bar deems only public sales to be invalidating acts. Helsinn turns on whether the meaning of “on sale” differs between the AIA’s “in public use, on sale, or otherwise available to the public” and the pre-AIA “in public use or on sale.” Second, Return Mail, Inc. v. United States Postal Service, a case the Supreme Court agreed to hear in November, presents the question of whether the government is a “person” entitled to file an IPR petition.
Lesson 5: IPRs do not violate Article III, but that does not necessarily make them constitutional. In Oil States Energy Services v. Greene’s Energy Group, LLC (Case No. 16-712), the Supreme Court concluded that the AIA’s establishment of inter partes review did not impermissibly vest the executive branch with cases committed to the judicial branch through Article III. But in doing so, the Supreme Court left open other avenues of attack, noting that Oil States did “not challenge the retroactive application of inter partes review” “even though that procedure was not in place when its patent issued” and did not “raise a due process challenge.” That language invites future constitutional challenges on these grounds, for example, to address the alleged possibility that the PTAB could stack its panels to achieve a specific outcome.
Those questions are being raised now. For example, last month the Federal Circuit heard argument in Goodson Holdings LLC v. Titeflex Corp. (Case No. 18-1134), a case that addresses whether a patent owner’s due process is violated when a patent that issued before the AIA is reviewed in an IPR. And in a class action pending before the Court of Federal Claims, Christy, Inc. (owner of a patent invalidated in IPR), is arguing that the process amounts to an unconstitutional taking. See Christy, Inc. v. United States (Case No. 18-657 (Fed. Cl.)). Though doubt has been raised about the likelihood of success in these cases, the cases still form an interesting and developing part of the patent landscape.