PTAB Poised as Major Patent Player - Or Prove Too Risky…

By Maggie Tamburro
Will the USPTO’s Patent and Trial Appeal Board (PTAB) become a major patent reform player, improving administrative efficiencies, streamlining the patent process, and creating cost effective litigation alternatives as it was purposed to do? Will it offer solutions to the overburdened patent process? Or will patent litigation attorneys and their clients shy away from it, fearful of underlying uncertainties in implementation and possible negative precedential effects its rulings may have in other forums?

Patent Trial and Appeal Board (PTAB)

The USPTO’s newly created Patent Trial and Appeal Board (PTAB), an administrative arm of the USPTO, went into effect on September 16, 2012, and was created to replace the Board of Patent Appeals and Interferences. An administrative board, the PTAB is involved with legal review of certain USPTO agency decisions, and provides new ways to review patents at the administrative level post-issuance.

The PTAB is comprised of administrative judges who are appointed by the Secretary and Director, and selected to hear, in three member panels, review of adverse decisions made by examiners on patent applications, review of appeals of reexamination, derivation proceedings, and inter partes and post-grant reviews, as specified in 35 U.S.C. Section 6. July 13, 2012 welcomed the opening in Detroit of the first of four PTAB satellite offices, with the remaining three locations planned for Dallas-Ft. Worth, Denver, and Silicon Valley.

How many filings is the PTAB currently receiving? In its discussion of the final rule published in the Federal Register on August 14, 2012, the USPTO estimated for the 2013 fiscal year 420 petitions for inter partes review, 50 petitions for post-grant review and covered business method patent review combined, and 50 derivation petitions. The USPTO predicted those numbers to increase slightly for each category in 2014 and 2015.

Rules, Rules, and More Rules...

In anticipation of the PTAB effective date last year, the USPTO began churning out proposed rules of practice in order to implement the provisions of the AIA which created and established the PTAB. In general, the rules cover varying practical and evidentiary aspects concerning the matters that can be heard, promulgate specific rules relating to each type of proceeding, establish practice rules for new proceedings, and provide rules specific to judicial review of PTAB decisions, providing a framework for PTAB proceedings.

After solicitation of comments on the February 2012 proposed rule (the USPTO reports that it received over 250 comments), the USPTO published its final rule in the Federal Register on August 14, 2012. The final rule adds to 37 CFR two new parts: Section 42 entitled “Trial Practice Before the Patent Trial and Appeal Board” and Section 90 entitled “Judicial Review of Patent Trial and Appeal Board Decisions.”

Specifically, the final rule serves as a “consolidated set of rules” covering proceedings before the PTAB which relate to inter partes review, post-grant review, the transitional program for covered business method patents (which describes a patent, not including technological inventions, that relates to a method or apparatus which performs operations in financial services or products), and derivation proceedings.

Here’s the short hand version of the preface to the published final rule and comments section – the USPTO likely isn’t finished, for a variety of reasons. Expect more rules as the PTAB process evolves, as well as possible corrections, (perhaps similar to the correction the USPTO published March 7 in connection with implementation of the AIA first-inventor-to-file provisions, just days before its effective date).

Going Forward – 4 Things to Know About PTAB

Now that the bulk of the AIA's reform provisions has been implemented, we’re left in the aftermath of attempting to figure out how to operate under the auspices of a brand new system which has turned the U.S. patent system as we knew it on its head.  The PTAB is but one example.

Will the risks inherent in a new and evolving PTAB forum ultimately prove worth taking? Only time will tell. In the meantime, we’d like to point out a few items that caught our attention in the final rules.

1. Different Evidentiary Standard
The PTAB utilizes a different evidentiary standard than that which is used in federal civil court. The “default evidentiary standard” in the PTAB, for what the PTAB terms “unpatentablilty issues,” is a preponderance of the evidence - a much lesser standard than the clear and convincing evidence standard used for invalidity in federal civil court. (See 37 CFR Section 42.1 and USPTO Response to Comment 1, Policy, Section 42.1).

Specifically, the USPTO states that, “A petitioner has the burden of proving the proposed ground of unpatentability as to the challenged patent claims by a preponderance of evidence.” How PTAB decisions under the preponderance of the evidence standard might be applicable, if at all, to federal civil court or other actions involving invalidity seems unclear.

2. Wide Latitude Given to Judges
The PTAB seems to give unusually wide latitude and discretion to the panel of administrative judges hearing a petition, in order to balance the interests of adherence to a set of “precise rules” with the need for “flexibility to achieve reasonably fast, inexpensive, and fair proceedings.” (Proposed Rule’s discussion of Section 42.5, adopted in Final Rule).

For example, Section 42.5 states that, “The Board may determine a proper course of conduct in a proceeding for any situation not specifically covered by this part and may enter non-final orders to administer the proceeding.” (37 CFR Section 42.5). Will such discretion, when applied to four different PTAB satellite offices which are hearing a wide number and variety of petitions in an already murky area of brand new law, lead to inconsistencies and differences in rulings? In highly technical patent cases, even seemingly minor rulings have the potential to cause significant effects in some cases. What precedential effect, if any, will be used to standardize or reconcile differing PTAB decisions?

3. Questions Regarding Precedential Effect of PTAB Decisions
The PTAB may lead to unanswered questions involving its precedential effect in other hearings and proceedings, such as other administrative decisions and even actions filed in federal civil court. The rules seem to recognize this, as they provide much discussion on identification of the “real party in interest” and identification of “related matters” which would be affected by certain PTAB decisions.

As to which matters would be affected, PTAB rules seem murky. For example, a portion of the proposed rule, which appears to be adopted as final, states, “Examples of related administrative matters that will be affected by a decision in the proceeding include every application and patent that claims, or which may claim, the benefit of the priority of the filing date of the party's involved patent or application, as well as any ex parte and inter partes reexaminations for an involved patent ” (emphasis added). (Final Rule’s discussion of 37 CFR Section 42.8).

4. Rules Specific to Experts
As a final note for our audience, interestingly the USPTO specifically published rules pertaining to the use of expert testimony in the PTAB. This rule requires that if a party is relying on technical test or data from testing, the party must provide an affidavit specifically stating the following: (1) why the test or data is being used, (2) how the test was performed and the data was generated, (3) how the data determines a value, (4) how the test is regarded within the relevant art, as well as any other information that the PTAB deems necessary. (37 CFR Section 42.65).

However, 37 CFR 42.65 specifically precludes expert testimony which pertains to interpretation of patent law or patent examination practice. The discussion in the final rule unequivocally states, “United States patent law is not an appropriate topic for expert testimony before the [PTAB], and expert testimony pertaining thereto would not be admitted under the rule.” (Final Rule’s discussion of 37 CFR Section 42.65).

Although understandable, it seems curious that the law would be so complex in this area one would contemplate needing an expert to testify on the intricacies involved in trying to interpret and apply it.

In Closing

For now, much of what moves forward at the PTAB will be unchartered territory. As with any major change, there will be trial and error as we enter a new era under the AIA. The PTAB serves as a shining example of how difficult change can be - hopefully case precedent and evolving rules will provide answers to some of the more troubling questions. There’s little doubt that we can expect to see increased activity, as parties use the forum – but only time will tell whether it will ultimately turn out to be beneficial for all involved.

Do you think the PTAB will become a prominent player in patent reform? Or do you think practitioners will shy away from use of the PTAB due to its uncertainties?
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Maggie Tamburro

Maggie Tamburro is an attorney and writer who holds a Juris Doctor from The John Marshall Law School and a Bachelor of Arts from the University of Texas. She was admitted to the Illinois Bar in 1994 and Florida Bar in 1999 and has significant experience in legal research, editing, and writing. Maggie is active her in local community, holding various publicly appointed civic board positions.

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