Post Grant Challenges: Strategy and Considerations after the America Invents Act of 2011

1. Post Grant Challenges:Strategy and Considerationsafter theAmerica Invents Act of 2011 IP Law & Management Institute November 7, 2011 Justin J. OliverFITZPATRICK, CELLA, HARPER & SCINTO975 F Street, N.W. Washington, DC 20004-1462 Michael K. O’Neill FITZPATRICK, CELLA, HARPER & SCINTO650 Town Center Drive, Suite 1600 Costa Mesa, CA 92626-7130

2. The Leahy-Smith America Invents Act of 2011

3. Topics • AIA’s changes to post-grant challenges • What stays the same and what is new? • Practice and procedure • What do we know (thus far) about the operation of the new proceedings? • Strategies and considerations • How will post-grant practice change in general? • How do the changes help/hurt challengers? • How should in-house counsel plan for the changes?

4. Before: Ex parte reexam Inter partes reexam Transition: Ex parte reexam (virtually unchanged) Inter partes reexam Will be phased out in 1 year Change of SNQ to “reasonable likelihood” Post grant review – new Business method patents All other patents Inter partes review – new Changes to Post-Grant Challenges After: • Ex parte reexam • Post grant review • Transitional business methods program • Inter partes review • Third party submission

5. Changes to Post-Grant Challenges • Immediate Changes • Change in standard for inter partes reexamination • Substantial new question of patentability is now “reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged.” • September 16, 2012 • Post-Grant Review • Transitional business method program • Interferences • Inter Partes Review – all patents • End of inter partes reexamination • Third Party Submission of Prior Art

6. Changes to Post-Grant Challenges • March 16, 2013 • Post-Grant Review • For non-business method applications having an effective filing date on or after this date • Keep in mind that applications with earlier effective filing dates are not eligible for Post-Grant Review

7. Topics • AIA’s changes to post-grant challenges • What stays the same and what is new? • Practice and procedure • What do we know (thus far) about the operation of the new proceedings? • Strategies and considerations • How will post-grant practice change in general? • How do the changes help/hurt challengers? • How should in-house counsel plan for the changes?

8. Practice and Procedure • Post-Grant Review Features • Transitional Business Method Patents Program • Inter Partes Review Features • Common Features

9. Practice and Procedure – Post-Grant Review • Timing • Petition must be filed not later than 9 months from date of grant of patent (or broadening reissue) • Threshold • “that it is more likely than not that at least 1 of the claims challenged in the petition is unpatentable”; or • there is a “showing that the petition raises a novel or unsettled legal question that is important to other patents or patent applications” • Scope • Arguments under §§ 101, 102, 103, and 112 (but not best mode) • Applicability • Effective September 16, 2012 • Applies to patents having a claim with an effective filing date after March 16, 2013

10. Practice and Procedure – Post-Grant Review • Transitional Program for Covered Business Method Patents • Allows for Post-Grant Review of business method patents after September 16, 2012 • Features unique to program: • Must be sued or charged with infringement • Applicable to all business method patents, regardless of filing date • Estoppel only for grounds actually raised • § 102(a) art • If not “by another” must be more than a year before filing date

11. Practice and Procedure – Inter Partes Review • Timing • Petition can be filed after 9 months from date of grant or after termination of a Post-Grant Review (includes broadening reissue) • Threshold • There is “a reasonable likelihood that petitioner would prevail with respect to at least 1 claim of the claims” • Scope • Arguments under §§ 102 and 103, based on patents and printed publications (same as inter partes reexam) • Applicability • Effective September 16, 2012 • Applies to all patents (replaces inter partes reexamination)

12. Practice and Procedure – Common Features • Initial Determination • Petition filed by challenger • Patent owner may file response • USPTO issues decision on petition within 3 months of Patent Owner response (or deadline for response) • Not appealable

13. Practice and Procedure – Common Features • Conduct During Review • Before panel of judges at the Board • Removes Examiners from process • Limited discovery • Patent owner may amend the patent to: (1) Cancel a challenged claim; or (2) Propose a reasonable number of substitute claims • Similar to EP Opposition practice, and cuts down on new claim binges common in current inter partes practice • Each side will have chance to file comments and request an oral hearing • Final determination to issue within 1 year • USPTO may extend deadline by 6 months for good cause

14. Practice and Procedure – Common Features • Settlement • Joint request for termination with respect to a Petitioner who is settling • Terminated with respect to that Petitioner unless the USPTO has decided the merits • USPTO might or might not terminate the proceedings • If no Petitioner remains USPTO may still proceed to a final written decision • No estoppel attaches with respect to a terminated Petitioner • Settlement must be in writing and made of record

15. Practice and Procedure – Common Features • Estoppel • If a review results in a final decision by the Board, the petitioner may not challenge the claim before the USPTO or court based on any ground the petitioner raised or reasonably could have raised • Changes • “Reasonably” could have raised • Attaches with Board decision, as opposed to final appeal • Estoppel does not attach in EP oppositions – still a big difference • Common (and unresolved) concerns: • That new art will be uncovered during discovery and trial prep • That post grant challenges will tie client’s hand with respect to art turned up during discovery, but after start of a review

16. Practice and Procedure – Common Features • Intervening Rights • Standard: • Any amended or new claim shall have the same effect as that for reissued patents with respect to the right of any person who, before the issuance of the certificate: • made, purchased, or used within the United States anything patented by the amended or new claim, • imported into the United States anything patented by the amended or new claim, or • made substantial preparation therefor • Amended claims should eliminate past damages, even if new/amended claim still covers accused device/process

17. Comparison

18. Comparison - continued

19. Topics • AIA’s changes to post-grant challenges • What stays the same and what is new? • Practice and procedure • What do we know (thus far) about the operation of the new proceedings? • Strategies and considerations • How will post-grant practice change in general? • How do the changes help/hurt challengers? • How should in-house counsel plan for the changes?

20. Strategies and Considerations – General Practice • Practicing before the Board • Will reviews operate, procedurally, like interferences? • Experts and declarations become more critical • Board prefers “evidence” • Experts will now be subject to cross-examination • Claim deluge to be reduced • Current practice gives patent owners incentive to submit numerous new claims during reexaminations • “reasonable number” of “substitute” claims changes that • Cost • Declarations and cross-examinations increase cost • Removal of Central Reexam Unit layer reduces cost • Shortened period likely means no multiple non-final actions • Fewer claims, lower cost

21. Strategies and Considerations – Tactical Considerations • New Threshold • Higher than former threshold of “substantial new question” (SNQ) • “reasonable likelihood” for inter partes review/reexam • “more likely than not” for post-grant review • 95% of inter partes requests granted under SNQ threshold • Explicit intent of Congress to cut back on that number • Will work against challengers • Unlike EP Opposition practice

22. Strategies and Considerations – Tactical Considerations • New Threshold (continued) • Will the higher threshold matter in the overall analysis? • Real issue is likelihood of invalidating claims, which may or may not change • Even if odds change, will they be better than in district court? • USPTO is typically more receptive to § 103 rejections • USPTO uses broader claim interpretation and de novo review • Expected changes with new threshold • Lower chance of appeal to Federal Circuit • Can still get there through district court, but uphill battle • First action allowances will likely go away

23. Strategies and Considerations – Tactical Considerations • New Grounds for Invalidity Under Post-Grant Review • “any ground that could be raised under paragraph (2) or (3) of section 282(b)” • §§ 102 and 103 • Beyond printed publications • § 101 • Most useful in business method and biotech patents • Quicker (and cheaper) route to Federal Circuit • No longer have to wait for litigation or threat of litigation • § 112 • Indefiniteness • Lack of written description • Enablement

24. Strategies and Considerations – Tactical Considerations • Streamlined Process • Current inter partes reexam takes too long • If a stay is not granted, litigation is likely to finish before reexam • This renders the reexam is of little use, but an added expense • Long timeline was likely to make more courts deny stays • New procedures • Direct to Board • Decision in 1 -1.5 years • Result: • Now more attractive option when sued in a plaintiff friendly jurisdiction • Better argument for stay

25. Strategies and Considerations – Tactical Considerations • Estoppel • Not significantly changed relative to current inter partes reexams • Any ground that the petitioner raised or “reasonably” could have raised • Available or known to you? • Different than European opposition practice • Common concern: • Later discovered prior art (e.g., discovery) • Does not attach if petitioner settles and the challenge is terminated with respect to the petitioner • Bottom line: • Must be confident that you have been diligent in your search for the best prior art

26. Strategies and Considerations – Tactical Considerations • Overall question: • Which avenue gives you the best chance of success for invalidation • USPTO vs. district court • Considerations • Will overall success rates for post-grant challenges change? • Are you in a plaintiff friendly venue? • How deep is your knowledge of the prior art? • How worried are you about new/amended claims? • Cost? • In general, the new law works in favor of challengers

27. Strategies and Considerations – Looking Beyond Challenges • Are you already tracking competitor patents? • Will need to do so for Post-Grant Review • Docketing systems will need to track deadlines for challenging • Do you need to budget for reviews filed against your patents? • 5% of European patents face opposition • Will European numbers be a guide? • Estoppel may continue to keep the U.S. numbers down • European practice is unique in that it provides the last opportunity to challenge in a single forum • But, U.S. practice will combine Post-Grant Review and Inter Partes Review, providing more opportunity for challenge than in European practice

28. Strategies and Considerations – Preference by Industry Source: G. Scellato, et al., "Study on the Quality of the Patent System in Europe“, European Commission (March 2011)

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