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February 20, 2012 Articles

Inter Partes Review: The New Markman Hearing?

Inter partes review could be a big hit and may even replace Markman hearings as the defining moment in many patent litigations.

By Robert M. Asher

The U.S. Supreme Court did not impose Markman hearings on patent litigation. In the case of Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), the court merely held that "claim construction is a matter of law for the judge to decide." District courts have since experimented with a variety of ways of handling patent litigation to give effect to this governing law. Depending on the court, claims have been construed by the judge before trial, after trial, and in the context of summary judgment motions. Over time, claim-construction hearings have become the most widely accepted approach to patent litigation.

The America Invents Act (AIA) may revolutionize patent litigation again through the introduction of inter partes review proceedings. Inter partes review has the promise of a swift contested administrative patent review with estoppel effect in which the proper meaning of claims will be determined. As of September 16, 2012, one may seek inter partes review of any U.S. patent. This new procedure replaces and eliminates the existing inter partes reexamination process. Inter partes reexaminations have suffered from a protracted timetable that discourages district court stays of litigation, and they thus make the prospect of preclusive effect remote.

The final determination of claim patentability or unpatentability in an inter partes reexamination creates an estoppel effect against the parties in civil litigation. However, that estoppel does not become effective until the termination of all appeal rights. Bettcher Indus., Inc. v. Bunzl USA, Inc., 661 F.3d 629, 648 (Fed. Cir. 2011) ("[W]e hold that the estoppel provision of 35 U.S.C. § 315(c) applies only after all appeal rights are exhausted, including appeals to this court."). Inter partes reexamination can take years before the examiner, years before the board of appeals, and a year at the Federal Circuit Court of Appeals. As a result, it often takes five or more years before it has an estoppel effect. District court judges hesitate to stay a litigation for several years to wait for the results of a proceeding that might not even resolve the litigation.

Inter partes review has the potential to resolve these issues and thereby significantly enhance the prospect of making a substantive impact on litigations and obtaining a stay of district court litigation. An inter partes review is quick to reach a decision with estoppel effect. Moreover, the statute prevents the delayed filing of an inter partes review more than one year after being served with a complaint alleging infringement of the patent.

Inter partes review will be conducted before the Patent Trial and Appeal Board (PTAB). The PTAB will replace the Board of Patent Appeals and Interferences. Expert declarations may be submitted, and any declarant may be deposed. Either party has the right to an oral hearing before the board. The patent owner will be allowed one motion to propose a reasonable number of substitute claims. Any further motions to amend and the specifics as to how inter partes reviews will be handled await Patent and Trademark Office (PTO) rulemaking over the coming year. Any appeal goes directly to the Federal Circuit Court of Appeals. Finally, the statute sets out time limits that should keep inter partes reviews to about 1.5 to 2 years in duration. In particular, the statute gives the board one year, extendible by not more than six months, after a PTO notice agreeing to institute an inter partes review, to issue its final written decision.

Whereas estoppel is not triggered in an inter partes reexamination until patentability has been "finally determined" (which includes all appeals), inter partes review triggers estoppel on receiving the "final written decision" from the PTAB. Because an inter partes review decision may be reversed on appeal to the Federal Circuit, courts will presumably stay or continue to stay a litigation during such an appeal. Such a stay remains discretionary with the courts. Given the hope of an estoppel-triggering decision in less than one year from institution of an inter partes review, even more aggressive judges may consider staying a litigation until the completion of a co-pending inter partes review. The prospect of staying litigation and averting the associated enormous costs of discovery and motions could provide a major incentive for the filing of inter partes reviews.

Another advantage of inter partes review over court litigation, at least for the petitioner, is the standard of proof. While an inter partes review petitioner needs to show anticipation or obviousness only by a preponderance of the evidence, a litigant must prove invalidity by a clear and convincing showing. In other words, the presumption of validity does not apply in inter partes reviews. On appeal to the Federal Circuit, underlying factual findings will be reviewed under a substantial-evidence standard for both inter partes reviews and appeals from jury decisions. Appeals from factual rulings made by judges may apply the slightly stricter "clearly erroneous" standard.

What Does the AIA Mean by the "Proper Meaning" of a Patent Claim?
Questions remain as to how claims will be construed in inter partes review proceedings. Reexaminations have long been attractive to requesters because of the comfort of knowing the PTO applies the broadest reasonable interpretation to claim language. As recognized by the Federal Circuit, "unlike in district courts, in reexamination proceedings [c]laims are given their broadest reasonable interpretation, consistent with the specification." In re Swanson, 540 F.3d 1368, 1377–78 (Fed. Cir. 2008) (internal quotations and citations omitted).

The differences between court proceedings and reexaminations can be dramatic. The Federal Circuit noted that "if the district court determines a patent is not invalid, the PTO should continue its reexamination because, of course, the two forums have different standards of proof for determining invalidity." Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1428–29 (Fed. Cir. 1988). In reviewing board decisions in reexaminations, the Federal Circuit, while reviewing claim construction de novo, "must determine whether the Board's construction of the term was reasonable." In re NTP, Inc., 654 F.3d 1279, 1287 (Fed. Cir. 2011). This may all change with the AIA.

Instead of referring to "broadest reasonable interpretation," the new statute tasks the PTO—in ex parte reexamination, inter partes review, and post-grant review—to determine "the proper meaning of a patent claim." 35 U.S.C. § 301(d). The proper meaning of a claim has normally been the province of litigation. "To determine the proper meaning of claims, we first consider the so-called intrinsic evidence, i.e., the claims, the written description, and, if in evidence, the prosecution history." Digital Biometrics, Inc. v. Identix, Inc., 149 F.3d 1335, 1344 (Fed. Cir. 1998). "The proper construction of a patent's claims is an issue of Federal Circuit law. . . . To ascertain the scope and meaning of the asserted claims, we look to the words of the claims themselves, the specification, the prosecution history, and any relevant extrinsic evidence." Absolute Software, Inc. v. Stealth Signal, Inc., 659 F.3d 1121, 1129 (Fed. Cir. 2011) (citing Phillips v. AWH Corp., 415 F.3d 1303, 1315–17 (Fed. Cir. 2005)).

To better understand what the AIA means when it refers to the "proper meaning" of a claim, let's examine the phrase in context. Section 301 is amended to allow any person to cite to the PTO at any time "statements of the patent owner filed in a proceeding before a Federal court or the Office in which the patent owner took a position on the scope of any claim of a particular patent." The statement may be accompanied by "documents, pleadings, or evidence from the proceeding in which the statement was filed that addresses the written statement." Such statements and accompanying information "shall not be considered by the Office for any purpose other than to determine the proper meaning of a patent claim in a proceeding that is ordered or instituted pursuant to section 304, 314, or 324." See 35 U.S.C. § 301.

Thus, as of September 16, 2012, positions taken by a patent owner on claim scope may be used in determining the "proper meaning" of a claim in ex parte reexaminations, inter partes reviews, and post-grant reviews, but not in reissue proceedings.

Will Proper Claim Construction Be Redefined?
The courts are left to determine how a patent owner's positions on claim scope should influence "the proper meaning of a patent claim." Moreover, courts must define "the proper meaning of a patent claim." While reissue proceedings and original patent prosecutions will continue to apply the "broadest reasonable interpretation, consistent with the specification, and limitations appearing in the specification are not to be read into the claims," In re Yamamoto, 740 F.2d 1569, 1571 (Fed. Cir. 1984), presumably Congress intends that in the new review proceedings and in ex parte reexamination, "the proper meaning" will be applied.

The proper meaning in inter partes reviews, post-grant reviews, and ex parte reexaminations will be informed in part by statements made by the patent owner in litigation. Arguments for a broad scope may inform the "broadest reasonable interpretation," and arguments in favor of a narrowed scope might suggest which interpretations are consistent with the specification. Alternatively, a patent owner's arguments for a broad scope may incur what might come to be called litigation history estoppel. The broad construction proposed in litigation might be adopted by the PTO, thereby subjecting the patent to a wider prior art attack and an increased risk of cancellation or amendment. Many questions remain. Must the claim construction be reasonable to be applied by the PTO? Does the position taken in court have weight if the court did not adopt the position?

On the other hand, courts have been referring to the Phillips claim-construction approach as the proper claim construction. Might not the Federal Circuit interpret the statute as asking the PTO to apply the Phillips approach when handling review proceedings or ex parte reexaminations? Statements regarding claim scope made by the patent owner in patent litigation could then be considered extrinsic evidence, and the courts would need to determine how the PTO should weigh and apply such evidence. The PTO has limited experience applying Phillips, doing so only in reexaminations of patents that have expired. If this approach is followed, it will be interesting to see if the PTAB has any better success than the district courts in arriving at claim constructions ultimately approved by the Federal Circuit.

Proposal for a Unitary Approach to Claim Construction
Although Congress created a single U.S. Court of Appeals to handle patent appeals from both the district courts and the PTO, a uniform standard for determining patent invalidity has been elusive. The validity of patents currently depends on one approach to claim construction in the district courts and an entirely different approach in the PTO. A unitary approach to claim construction of issued U.S. patents should create greater certainty and enhance confidence in the judicial system. Under current law, the validity of a patent can depend on whether it reaches the Federal Circuit from a district court decision or from the Board of Patent Appeals and Interferences, rather than on a consistent measure of the merits of the invention.

Litigators can play a big role in inviting courts to determine whether the framework for construing claims should be revised in view of the AIA. At some point, a litigator in district court will demand that the claims in litigation be construed according to their "proper meaning." If the PTAB is determining the "proper meaning" of a claim pursuant to the AIA, shouldn't the court also be deciding patent disputes on the basis of the "proper meaning" for the claims? Can courts decide a case on the basis of a claim construction that is not proper? The language of the AIA appears to cry out for a unitary approach to claim construction.

This is a great opportunity for courts to take a fresh look at determining the best framework for claim construction. In arriving at a preferred, uniform approach, would there not be far greater certainty if courts determined the scope of a patented invention on the basis of the claim language as set forth in In re Yamamoto requiring consistency with the specification rather than relying heavily and unpredictably on the specification to interpret the claim language when trying to apply Phillips? Patent claims are examined and amended during patent prosecution to arrive at a scope that constitutes a patentable invention relative to the prior art according to the PTO. If this broad patentable interpretation of the claims were also applied by the courts, the doctrine of equivalents would become less necessary. Courts could be encouraged to revisit the debate between those who saw a need for a doctrine of equivalents to protect the incentive for innovation and those who favored the competing desire to make the scope of patents more certain. Perhaps the use of the doctrine of equivalents under such a new claim-construction framework could be more strictly limited. Patent owners can still pursue equivalents outside the scope of their claims by seeking broader claims in continuations and broadening reissues. A patent would only be entitled to such scope if that scope was still novel and not obvious.

Greater certainty would result if courts could adopt a claim-construction framework in which the incorporation of limitations from the specification does not occur unexpectedly and the use of the doctrine of equivalents is limited. This would provide greater predictability and would increase the availability of summary judgments of noninfringement. If the patent owner finds that its claims are too broad, the patent laws offer numerous options to seek narrower claims, including in continuation applications, reissue applications, and ex parte reexamination.

Will Inter Partes Review Replace Markman Hearings?
If courts decide to adopt a uniform claim construction for review proceedings and litigation, then a review proceeding could serve as a Markman-like hearing. Unlike a Markman hearing in court, the PTAB inter partes review decision can be reviewed on appeal by the Federal Circuit before the district court case proceeds to trial. Thus, by staying a litigation for an inter partes review, the court may benefit from a Federal Circuit-approved construction of the patent claims.

Stays will be further beneficial because inter partes review can result in a settlement. This is not the case with reexaminations, which continue even without the involvement of the parties. Inter partes review also offers the customary possibility of a cancellation of some or all of the patent claims or confirmation of the patentability of some of the claims with estoppel effect. Thus, stays should be more readily granted. If the PTAB is able to issue its final decisions in a timely manner, inter partes review is likely to be a big hit and may even replace Markman hearings as the defining moment in many patent litigations.

A uniform and more predictable claim-construction approach would enhance our patent system and the economy. Litigators can play a critical role in shaping the law by urging new approaches and dramatic changes or arguing to preserve a semblance of the status quo. Interpreting the AIA will bring a new world for patent law.

Keywords: litigation, intellectual property, America Invents Act, inter partes review, claim construction

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