U.S. Patent and Trademark Office Issues Proposed Rules for Post-Grant and Inter Partes Review

February 13, 2012

On February 10, 2012, the U.S. Patent and Trademark Office published its proposed rules for post-grant and inter partes review before the renamed Patent Trial and Appeal Board.[1]  Under the proposed rules, the Board will conduct a "trial" on the patentability of previously issued patents, including covered business method patents.[2]  The proposed rules largely mirror the statutory requirements but, despite labeling these proceedings as "trials," create a sequential process conducted largely on the filings.[3]  Comments on the PTO’s various rule proposals are due either April 9th or 10th, 2012.[4]

The PTO’s proposed rules provide a new framework for expedited review of patent claims, but with significant procedural limitations.  The proposed rules contain the following example timeline for a typical review under either procedure: 

Post-grant and inter partes review will, as shown in the timeline, follow the same three-part procedure: (1) petition for review, (2) sequential discovery and substantive briefing, and (3) an oral hearing, upon request, after which the Board will issue a final written decision. 

1.  Petition for Review.  Proceedings before the Board begin with a petition for review.  Each petition must contain the challenged patent claim or claims, a proposed construction of each challenged claim, and the asserted grounds of unpatentability.[5]  The patent owner then has two months from the date of the petition to file an optional preliminary response to the petition explaining the reasons why no review should issue.[6]  In a notable omission, the PTO provides no mechanism for petitioners to file a reply to the patent owner’s response to the petition.

Each petitioner must also file mandatory notices, including an identification of all real parties in interest.[7]  In defining real parties in interest, the PTO’s practice guide endorses the "control of the party’s participation in the proceeding" test as a "common consideration," but cautions that "there is no bright line test for determining the necessary quantity or degree of participation to qualify as a real party in interest."[8]  Based on these filings, the Board will determine within three months if review should be instituted. 

The proposed standards for obtaining post-grant or inter partes review recite the language of the Leahy-Smith America Invents Act ("AIA").  Inter partes review will be instituted if "the petition supporting the ground would, if unrebutted, demonstrate that there is a reasonable likelihood that at least one of the claims challenged in the petition is unpatentable."[9]  Post-grant review will be instituted only if the papers, if unrebutted, would demonstrate that it is "more likely than not that at least one of the claims challenged in the petition is unpatentable," or if the petition raises a "novel or unsettled legal question that is important to other patent applicants."[10] 

The proposed rules governing post-grant review for covered business methods, however, include further explication of when a business method patent is eligible for the transitional program.  Proposed § 42.301(a) recites the statutory definition of "covered business method" almost verbatim: "a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions."[11]  Similarly, § 42.302(a) allows a petition seeking to invalidate a business method patent only if the petitioner "has been sued for infringement of the patent or has been charged with infringement under that patent."[12]  In a separate rulemaking,  the PTO provides additional guidance as to the meaning of "technological invention" by listing two factors to be "considered on a case-by-case basis: whether the subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution."[13]

2.  Discovery and Pleading Stages.  If the Board institutes review, the patent owner has two to four months to file a response to the petition that addresses any ground for unpatentability that has not already been denied.[14]  The patent owner may also simultaneously file a motion to amend the patent to respond to the grounds of unpatentability alleged.[15]  During this four-month period, the patent owner may engage in discovery in order to obtain factual evidence to support the petition response.  While the parties may agree to discovery at any time, the scheduling order will typically not allow the petitioner to conduct discovery during this period.  The rules provide for both compelled and uncompelled testimony.[16]  Uncompelled testimony must be in the form of an affidavit, while all other testimony must be offered in the form of a deposition transcript.[17]   

After the patent owner has filed a response, the petitioner will have an opportunity to file a reply to the patent owner’s response, and an opposition to any motion to amend the patent.[18]  During this period, the petitioner will also have an opportunity to undertake discovery to obtain factual information necessary to respond to issues raised by the patent owner.[19]  Such discovery will include cross-examination depositions of any of the patent owner’s deponents.[20]  Finally, the patent owner will have one month to conduct responsive discovery and file a reply limited to responding to arguments raised in the petitioner’s opposition.

While many features of the proposed rules vary from traditional patent validity litigation–most markedly the sequential discovery and lack of live testimony–the most profound change litigants are likely to experience is in claim construction.  Neither the rules nor the practice guide allow for the Board to construe the claims before it renders its final decision.  Instead, the petitioner is required to include its proposed claim construction in the petition itself.  The patent owner will have two opportunities to contest claim construction–either in the preliminary response, filed before institution, or in the response filed after four months of discovery.  Presumably, the petitioner’s opposition will expound on terms raised by the patentee and not previously addressed but whether the Board accepts that argument as timely will have to be settled.  Regardless, both parties will apparently have to set forth their patentability contentions without knowing how the Board will construe key language in the claims.

3.  Motions, Oral Argument, and Decision.  After the completion of the filings, a period will be set for motions practice, including motions to exclude, motions to seal, motions to file supplemental information, and motions for judgment.[21]  After the completion of motion practice, the parties will be afforded oral argument before the Board, although no new evidence or arguments may be presented, and no live testimony will be taken.[22]

The Board is required to render a judgment no later than one year from the date a trial is instituted, with the possibility of a six month extension for good cause.[23]