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These issues were explored recently at a White & Case seminar series in Tokyo. The series, "Managing economic and social change toward a sustainable future?" featured lectures and discussions on energy policy, patents and trademarks, shareholder activism and global responses to America's recent disruptions in longstanding trade relationships.
USPTO UNDER DIRECTOR IANCU
No sector of the US business world is immune from change, as the changes at the US Patent and Trademark Office (USPTO) since the appointment of Andrei Iancu as director in February 2018 have demonstrated.
Moderating the discussion in the second seminar of the series, White & Case local partner David Albagli (Tokyo) opened with an outline of Iancu's education and successful career, initially in engineering before he switched to the law, where he advocated as a patent litigator in federal court, the International Trade Commission, and at the Patent Trial and Appeal Board (PTAB). Citing one of Iancu's earliest public comments after becoming Director—that "we are at an inflection point with respect to the patent system" and "we [the USPTO] will not continue down the same path"—Albagli said the new director clearly signaled that the Office would aggressively support changes to make the patent system stronger and more predictable. Albagli's comments have been backed up by policy changes initiated and, now in one instance implemented, by the USPTO. Albagli noted that Director Iancu seemed focused on three major issues—clarifying the scope of patent-eligible subject matter; aligning the PTAB's claim construction standard with the standard used by US federal courts and the International Trade Commission (ITC); and simplifying the PTAB claim amendment process in post-grant proceedings.
The White & Case team has been closely monitoring USPTO developments, and has written about them here, here, and here.
Under the current process, the board does not rule on the motion until its final written decision at the end of the case.
1. Clarifying the scope of patent-eligible subject matter
The first policy area of considerable importance is the question of what is patentable subject matter under Section 101. The Office issued three memorandums to the examination corps after recent decisions by the Court of Appeals for the Federal Circuit, finding patent claims to meet the standard for patentable subject matter, in an effort to ensure that these positive examples are recognized and implemented. The memorandums involved software-related inventions (Finjan Inc. v. Blue Coat Systems, Inc. and Core Wireless Licensing v. LG Electronics, Inc.), standards for analyzing a certain legal question in the analysis (Berkheimer v. HP Inc.), and pharmaceutical methods of treatment (Vanda Pharmaceuticals Inc. v. West-Ward Pharmaceuticals).
White & Case partner Anita Varma (Boston/London) described the effect of the memos as "a breath of fresh air, at least for those of us in the life sciences industry." Previous rulings have called into question diagnostic patents as well as method of treatment claims, which are a staple within the life sciences sector, she said. And, as a consequence, there is a change among examiners in how they approach a request for patent protection for "really groundbreaking inventions."
Coming from a litigation standpoint, White & Case partner Shamita Etienne-Cummings (Washington, DC) noted that, ironically, the opposite might apply in the courtroom. As a litigator focused primarily on the consumer electronics sector, Etienne- Cummings said the Berkheimer ruling "introduced ambiguity and some more uncertainty in litigation." It has become impossible to settle cases early, meaning that there is a need to carry out discovery and leave the decision in the hands of a jury—many of whom find it difficult to know which courtroom expert to believe.
White & Case partner David Tennant (Washington, DC) addressed the issue from a prosecution angle, pointing out that there has been a sharp increase in examiners issuing rejections of claims "in a very inconsistent manner." In addition, practitioners are having to do a lot more work with the examination court to instruct them on previous court rulings, while the changes also mean that the way in which applications for high-tech patents are drafted has become more complex. And while Iancu's aim may have been to introduce consistency to the examination process, that effort, so far, has come with "limited success," Tennant said.
Albagli concurred, saying that the issue is something that all patent attorneys are "grappling with, whether it's prosecution or litigation," but added that it is important to bring increased clarity and predictability to the question of patent eligibility as we increasingly move into the age of the Internet of Things, artificial intelligence and other advanced technologies.
2. Narrowing the claim construction standard in post-grant proceedings
Albagli next introduced proposed rulemaking by the USPTO that would change the standard by which claims of unexpired patents are construed in post-grant proceedings at the PTAB. (Note: since the White & Case event in Tokyo, the claim construction rule became final, applicable to PTAB matters filed on or after November 13, 2018.)
At the Tokyo seminar, Albagli noted that administrative patent judges construing patent claims had been using a "broadest reasonable interpretation" (BRI) standard. The BRI standard differs from the claim construction standard used by US federal courts and the International Trade Commission (ITC) and favored by Director Iancu—the standard applied in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) and its progeny. Under the BRI, parties challenging an unexpired patent in PTAB proceedings would argue that a challenged claim must be broader than how a court would interpret the claim, thus increasing the possibility that the claim, read more broadly, would encompass prior art and be canceled as unpatentable.
The proposal was applauded in most quarters, but not universally, Albagli said, with a member of the US Congress stating that moving away from the BRI system would "completely blow up what we are trying to do in Congress" and, potentially, lead to a return of "patent trolls."
Tennant said there has been a "misimpression" that PTAB post-grant processes serve as an easy way to invalidate a patent. As evidence, Tennant showed that while approximately 63 percent of petitions filed are instituted, ultimately the invalidation rate is still low. In practice, moreover, Tennant said that any change to the claim construction standard is unlikely to have a significant impact on the approaches taken by lawyers, the win rate or the number of filings.
Etienne-Cummings pointed out that early filing of an IPR petition can provide a strategic advantage by narrowing the scope of the patent.
The debate has caught the attention of the patent sector in Japan, with the Japan Patent Attorneys' Association submitting a comment in favor of converting from BRI to the district court claim construction system, while the Japan Industrial Patent Association insists that BRI is a fairer way to adjudicate patent rights.
Varma concurred with Tennant that the new claim construction standard would not have much impact, as even under BRI the standard is the broadest reasonable interpretation rather than the broadest possible interpretation. Tennant said that the main difference is in the arguments during prosecution history of the original patent application while the evidentiary burden in PTAB is much lower, although as a practitioner he is "not too concerned about this change."
(As noted, since the discussion in Tokyo took place, the USPTO made final the rule, and the new claim construction standard is in effect for PTAB matters filed on or after November 13, 2018. The White & Case team will continue to monitor any developments that spring from the claim construction change.)
3. Simplifying the PTAB claim amendment process in postgrant proceedings
The final topic of discussion concerned the USPTO's publication of a Request for Comments on a proposed pilot program intended to make easier amending patent claims before the PTAB during post-grant proceedings. Albagli noted that a recurring criticism has been the perceived difficulty of amending challenged claims in post-grant proceedings. In response to that criticism, the PTAB launched a study to investigate the motion to amend process.
Under the current process, the patent owner has three months to submit a response following the PTAB decision to institute review. At that time, the patent owner may submit a motion to amend claims in response to grounds of unpatentability under review. However, under the current process, the board does not rule on the motion until its final written decision at the end of the case. Iancu has publicly identified the process for amending claims in a PTAB trial as an issue for reform.
According to the USPTO statistics, 3,200 PTAB trials have been completed and motions to amend were filed in 305 cases, approximately 20 percent of the total. The PTAB only granted seven of those motions and a further 11 in part, so the success rate of getting claims amended at the PTAB has been very low, Albagli said. So what happens in the case of a PTAB proceeding and a parallel litigation?
According to Etienne-Cummings, an amendment is treated as a new claim that is being asserted and the process begins over again, although the most serious issue is over the scale of damages if a patent is due to expire soon.
Tennant suggested that the initiative is "more for optics," as it is unlikely that the mechanism to amend a claim will be used very often because parallel proceedings are under way in litigation.
And while in the US a patent owner has a lesser degree of flexibility in amending a claim, the situation in Europe perhaps allows too much freedom to patent owners, who are free to submit entirely different claim sets, Varma said. In her experience, it has meant that she has had to carry out completely new requests for the invalidation of a patent.
Summing up the changes in the US, Tennant said he concurred with Iancu's efforts to bring about consistency in the examination of patent applications as well as in the claim construction standards between the PTAB and the courts—a position that his fellow panelists agreed with.
Panelists taking part in the White & Case seminar series laid out the pros and cons of changes in US patent law.
They explored specifically the bypolicy changes recently initiated and in one instance implemented by the United States Patent and Trademark Office (USPTO): clarifying the scope of patent-eligible subject matter; narrowing the claim construction standard in post-grant proceedings; and simplifying the PTAB claim.
Panelists agreed that all three changes have positive aspects and the potential to improve the process, but also agreed that the efficacy of all three remained in doubt. "Cautious optimism" best describes the current mood among close observers of US patent policy.
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