Jones Day Talks: A New Game—Better PTAB Defense Litigation Strategies
Patent Trial and Appeal Board, or PTAB, defense litigation strategies continue to evolve. In a recent Law360 article, Jones Day Intellectual Property lawyers Dave Cochran, Mike Hendershot, and Matt Johnson explained why previous assumptions and strategies pertaining to PTAB litigation must be reconsidered.
Mr. Hendershot and Mr. Johnson clarify the importance of tight coordination between trial and PTAB counsel, fully developing noninfringement positions early, tailoring a PTAB petition to the claims and grounds truly at issue, and more in this Jones Day Talks podcast.
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Read the full transcript below:
Dave Dalton:
One thing about doing these podcasts and talking to these intellectual property lawyers, is you figure out that these guys must never be bored, because things are constantly changing. The America Invents Act became fully effective in 2013, but its effects over the last six years continue to disrupt U.S. patent practices. In particular, recent changes in Patent Trial and Appeal Board, or PTAB Practices, have altered key considerations underlying previous patent litigation strategies. Jones Day Partners, Mike Hendershot, Dave Cochran and Matt Johnson explain some of those changes in their article, Recalibrating Your Use of PTAB in Defense Litigation Strategy. That was published in a January edition of Law360. Mike and Matt are here to tell us more. I'm Dave Dalton, you're listening to Jones Day Talks, Intellectual Property.
Dave Dalton:
Matt Johnson and Mike Hendershot are both partners in Jones Day's Intellectual Property Practice. Matt currently co-chairs the firm's PTAB sub-practice and is heavily involved in proceedings with the board, including trials for inner partes review and Covered Business Method Review. Mike is a trial lawyer who is focused on patent and technology litigation for almost two decades. He has advised clients through the most complex and challenging IP matters through trial and appeal. Matt and Mike, along with Jones Day partner, Dave Cochran, are co-authors of Recalibrating Your Use of PTAB Defense Litigation Strategy, which appeared in a January, 2019 edition of Law360. They're here today to review some of the points they raised in the article. Mike, Matt, thanks for being here.
Matt Johnson:
Thanks, Dave. Good to be here with you.
Mike Hendershot:
Yeah, thanks for having us.
Dave Dalton:
Okay, a little background first. I think it pays a little bit to talk about where we've been before we get into the crux of your Law360 article. The American Invents Act, which I think was passed in 2011, substantially changed the patent system and how patents are challenged. Matt, can you give us some background on the American Invents Act and how PTAB evolved out of that?
Matt Johnson:
Sure. You're right, the Patent, Trial and Appeal Board was legislated into existence in the 2011 America Invents Act, often called the AIA. In addition to making changes to the U.S.'s patent laws generally, it had changed us from a first to invent system to a first to file system. The AIA also replaced the Board of Patent Appeals and Interferences, the BPAI, with what's now called the Patent Trial and Appeal Board, the PTAB. Some of the functions of the BPAI and the Patent, Trial and Appeal Board are the same. Like the BPAI, the PTAB hears and decides internal appeals during an examination.
Matt Johnson:
But the PTAB is also tasked with administrating a new type of patent validity trials for issued patents, it's different from anything that patent office has previously done. The patent office has been taking second looks at issued patents for a number of decades, all the way back to 1980. So that in itself isn't anything new, but the problem with the prior mechanisms for challenging patents that had been issued was those challenges took much too long to complete, sometimes eight years or more. Where a district court trial process, including an appeal, might only take four to five years.
Dave Dalton:
Okay.
Matt Johnson:
So in the old system at the patent office, a couple of years after an accused infringer had written out a big check, maybe for hundreds of millions of dollars after losing a patent infringement lawsuit in district court, a few years after that the patent office might then get around to issuing, and what are canceling the claims of that same patent. I guess that might make the accused infringer, who had written the big check, feel a little better, but not as good as having their hundreds of millions of dollars back.
Dave Dalton:
Yeah. I bet not.
Matt Johnson:
Yeah, so PTAB trials in contrast are fast paced, final written decisions are issued within 18 months of a petition for review being submitted. And they provide a much more workable system for accused infringers to take advantage of.
Dave Dalton:
Okay, so this is the biggest change in patent law, I think, since the 1950's or so, if I understand. So in light of what Matt just described, Mike, what were, and before we get into recent developments, what were the typical strategies relating to patent challenges that you saw clients putting into play over the last five, six years, since a PTAB was around?
Mike Hendershot:
You have varied approaches amongst companies, but there are really sort of two common themes and two cheap benefits from the PTAB, with a third being the speed with which they deal with issues that Matt alluded to. First is you get an expert tribunal to deal with the validity of a patent. And the second is really, and this drove a lot of the traffic, I think, to the PTAB, was the availability of a stay of litigation while the PTAB was dealing with the patent.
Dave Dalton:
Okay.
Mike Hendershot:
So the likelihood of getting a stay granted, of litigation, the factors favored filing earlier in the case.
Dave Dalton:
Okay.
Mike Hendershot:
And you also avoid more work in the case with a stay that way too. So the impact of a stay is going to save a company more money if they get a stay earlier on the litigation.
Dave Dalton:
Okay.
Mike Hendershot:
So, those really led to two things where filing earlier was better, and you had companies that really adopted, a number of them practices where we want to file as early as possible at the PTAB, challenging the patented suit. And really, oftentimes on all of the claims in the patent. So a patent could have dozens to hundreds of claims, you get some notice of what's at issue with those, and in a complaint, you get more through discovery and contentions. And oftentimes companies will be moving, before they even got the notice in the contentions, and would go ahead and move on with a PTAB on all claims, even if some were never going to be served in the litigation. Because that way they could tell the district court, "Look, whatever happens to the PTAB, we've challenged all these claims."
Dave Dalton:
Right.
Mike Hendershot:
So they can't switch to some other ones in litigation, so it helped you on a stay. So, early challenges on all, or substantially all claims, became a not uncommon approach amongst companies.
Dave Dalton:
Okay. So, the strategy was, file early, and on virtually all claims. Okay, so that's where we were. But recent changes in PTAB practice have altered some of these considerations. Let's dive into some of points raised, that you both raised, along with Dave Cochran, in the Law360 article. Matt, in the article you wrote about a shift to the Phillips claim construction standard, what is that standard and explain its impact on patent claims strategies?
Matt Johnson:
You're right, Dave. 2018 was a year of pretty significant change at the PTAB, and one of the biggest ones was that shift in the claim construction standard from what was previously used at the PTAB, the broadest reasonable interpretation standard to the Phillips standard, which aligns the standard with what's used at the trial courts, and that change came into effect in November of 2018. Maybe give a real brief discussion about what claim construction is.
Dave Dalton:
Sure.
Matt Johnson:
Claim construction is a process, it happens in almost every patent infringement case, where the court will look to the terms in a patent claim and work with the parties to define some of those terms. Terms that might be unclear. And you can think of this as maybe drawing a circle, where things that are inside the circle are within the scope of the claims, and things that are outside of the circle are outside the scope of the claims. So the claim construction process helps you define what the meets and bounds of that circle are.
Matt Johnson:
And then once the claims are construed, the patent owner will make their case that the accused system falls within that circle it infringes. And the accused infringer will look at the prior art and try to find things existing before the patent was filed that fall within the circle, and that would support their argument that the claims are invalid.
Dave Dalton:
Okay.
Matt Johnson:
So the Phillips claim construction standard, it's a reference to a 2005 federal circuit decision, Phillips v. AWH Corp., where the federal circuit walked through the process the trial court should use for construing or defining what the words in a claim mean. That decision identified the types of evidence that the court should use and which types of evidence are more persuasive than others.
Dave Dalton:
Okay.
Matt Johnson:
And the shorthand for the Phillips standard is that claims are given their ordinary and customary meaning to a person of ordinary skill in the art. So, a trial court construing claims uses a Phillips standard, and that results in one circle. To make things more complicated, the Patent Office has historically used a slightly different standard for claim construction. They used what is called the broadest reasonable interpretation standard, the BRI standard. Now, instead of looking at the ordinary and customary meaning of claim terms, like in Phillips, the BRI standard looks to stretch the claim terms as far as they reasonably can. So think of that as drawing another slightly bigger circle, and the Patent Office would use that slightly bigger circle to see if prior art falls within. And if so, they would say that the claims are unpatentable. The Patent Office has argued that they use this slightly bigger circle when determining whether claims are patentable, because they're protecting the public and want to head off patent owners wielding their patent monopolies more broadly than the Patent Office really intended when they granted the patent.
Matt Johnson:
So originally at the PTAB, PTAB analyzed the claims challenged, usually by those accused infringers using the BRI standard, which is a little broader than how the claims were being viewed at the trial court. And that allowed those accused infringers to argue that the claims were very broad and encompassed the prior art at the PTAB, while separately arguing that the claims were narrow and did not capture their product at the trial court. Now, many, many patent owners argued that that was unfair, and current PTO director, Iancu agreed. So November the PTAB switched from using the BRI standard, and now the PTAB uses the Phillips standard just like in the trial court. A lot of petitioners feel that this changing claim construction is going to have an impact on, not only their PTAB case, but their global strategy, and this is the reason. Why
Dave Dalton:
Are you hearing that, seeing that?
Matt Johnson:
It is cause for pause for accused infringers who are considering challenging a patent at the PTAB, because now the construction that you propose at the PTAB for looking at prior art is likely also going to be applied against you for determining whether your product falls within the claims. So it's much more difficult for our accused infringers to take inconsistent positions on claim construction at the PTAB and the trial court. So strategy-wise, what that means is accused infringers will need to identify their non-infringement positions early in cases, so they don't say anything to the PTAB arguing on patentability, it hurts their non-infringement positions. And as Mike said, the historic strategy was to file at the PTAB early, right away and go for that stay. But now with things you say to the PTAB, potentially harming your maybe broader strategy for the patent defense, maybe that's not always the best idea anymore.
Dave Dalton:
Okay. Let's talk about claim amendments. Over to Mike for a second, your article also spends a good amount of time explaining the new role of claim amendments before the PTAB. What are claim amendments, and what brought about this new emphasis?
Mike Hendershot:
Claim amendments are amendments, they're aptly named, they're amendments to claims, which Matt was discussing earlier in terms of defining the scope and the means and the bounds of the patent right. So they happen all the time during patent prosecution, which is the administrative back and forth where an inventor is trying to obtain a patent and get it issued. They were markedly less common in PTAB proceedings. The statute permitted a motion to amend by a patent owner in a PTAB proceeding, no guarantee that you could amend. And the established law for quite a while, was that the burden on establishing the viability of an amendment was on the patent owner. So, that led to a regime where you had motions being filed, and Matt correct me if I'm wrong here, I think probably in less than 10% of PTAB proceedings you'd see a motion to amend. And roughly 10% of that subset were they actually granted.
Matt Johnson:
Yeah, you could count on one or two hands the number of times it's really been successful.
Dave Dalton:
Rare. Okay.
Mike Hendershot:
And I'd say, I come to this from a sort of trial court litigator's perspective, and what that would give a company some comfort in was that, "Look, we've done a risk assessment on a patent and what threat it poses from a defense standpoint. And the claims that come out of the IPR in the worst case are likely going to be the same ones that went in, unless you're on one of those fingers on one or two hands where we're an amendment was granted." So, worst case, you still have the same claims you were dealing with previously and you've got a fixed target.
Mike Hendershot:
That shifted a little bit in 2017, where the federal circuit issued a decision on Aqua products where they said, "Look, no, the burden should be on the petitioner to establish that an amendment shouldn't be granted." Which is a procedural switch that led to maybe a slight uptick, but the real changes have come lately with the new director at the Patent Office basically saying in talks, "The amendment process was broken, it's not working properly. We really want a robust amendment process. And really encouraging further amendment and more common amendment of claims in a PTAB proceeding."
Dave Dalton:
Okay, they were encouraging more.
Mike Hendershot:
Yeah, they have adopted proposed regulations and a pilot program to really facilitate it and giving patent owners two shots at it. An initial motion and then a modified motion later in the proceeding, which is significant. Now if claims changed, there are defenses at law, including intervening rights or lack of notice, if someone's pursuing an indirect infringement claim or a willful infringement claim. So the fact that the changes claim may change, creates some additional defenses and comes with some downside, but you've got the claims which are central to the dispute in a patent case, they really control invalidity infringement, the whole nine. Being something that may change in a proceeding, and if that's done in parallel with litigation, where a plaintiff theoretically is already looking at your products and is able to then rewrite his invention and say, "Oh, I'm going to add this limitation that I know is in your accused product defendant. But I know it's not at this prior art that you've put forward," that can really shift the balance in a case.
Mike Hendershot:
And there was a recent case where a petitioner had successfully invalidated dozens of claims, everything they challenged, but an amendment was granted, new claims came out and they were faced with dozens of new and improved claims, right in their place. So, it is a significant consideration moving forward, what kind of admitted claims might a specification support if you're considering moving forward with a petition.
Dave Dalton:
Okay. Okay. Interesting insight, that's for certain. Let's talk about SAS Institute Inc. v. Iancu. Now I'm not going to feign ignorance here, we've done at least, what, two podcasts focusing on SAS Institute. I think it was referenced or talked about in a third. Jones Day was very involved in this case start to finish. That Supreme court decision held at the inter partes review statutes terms, prohibit partial institution on less than all challenged claims. And we know this case well. Well, you guys certainly do, I've heard enough about it, that's for certain. Matt, recent events, how has SAS Institute changed the PTAB process?
Matt Johnson:
You're right, Dave, we've talked a couple of times here on podcasts about the SAS decision. And early on from 2012 until April of 2018, petitioner's strategy would often be to include many grounds of unpatentability on many claims in their petitions. And then the board could pick and choose certain of those arguments that they thought were most convincing to have a trial on. So petitioners could throw the kitchen sink into their petitions to hopefully find something that resonates with the board to get a trial instituted, and hopefully, maybe get that stay that Mike was talking about earlier in our conversation. Now that Supreme Court SAS decision last April, our Jones Day colleagues, Greg Castanias, John Marlott, and Dave Cochran, successfully convinced the Supreme Court that partial institution was contrary to the AIA statute. So instead of being able to pick and choose arguments in a petition, the board must take up the entirety of a petition as presented by the petitioner or deny it entirely.
Matt Johnson:
Now you'll remember the PTAB has a very limited amount of time to complete a trial, 12 months from their institution decision. And the board also has broad discretion to deny institution of a trial for any number of reasons, including efficiency. So you can see that if you present a petition that's a shotgun blast of many arguments and claims challenged, your panel of judges is going to be nervous about how difficult that trial would be to complete within a statutory time limit. So, because the board can no longer simplify cases, savvy petitioners are looking to present clear, succinct petitions that get a panel's attention and do not look like they will be a headache to complete in time.
Matt Johnson:
Those petitions would have a limited number of claim challenge to the extent possible, and the number of grounds challenged would also be limited. So that might not be something that you can do right at the outset of your trial case. It might take a while to make sure that you are challenging the right claims you've evaluated, which claims you're at risk of infringing, and really get a handle on your invalidity positions, what grounds you have, and really just pick and choose the best one because throwing it all at the wall, see what sticks, really is not the right strategy these days.
Dave Dalton:
Very good. Nice. Well, the SAS Institute, and this won't be the last time we talk about it, so I wasn't shocked to see it appear in your article. So, again, very nice work to you all on that. Let's wrap this up with the takeaways from your article. First to Mike, you wrote in the article, "The current landscape increasingly requires fully developing non-infringement positions early," can you elaborate on the importance of that?
Mike Hendershot:
Sure. That was always a best practice, but one that wasn't necessitated by the flexibility under the regime prior to a lot of these recent changes. And really, this is driven by the collective effect of the items we've talked about. And that was kind of the point of the article was, look, you can view these as discrete items and changes, and each one might merit a podcast or an article on its own.
Dave Dalton:
Sure.
Mike Hendershot:
But it's really the collective effect of all of these on someone defending a patent litigation that really warrants, as we know, in the title of the article, recalibrating what might've been a prior approach.
Dave Dalton:
Right.
Mike Hendershot:
A big part of that is the need to do more work now in advance of going to the PTAB than you might have had to do previously. Given that you've got the common claim construction standard being applied, there are still arguments that you don't need to construe a term at the PTAB because there's not a dispute in comparing that term to the prior art that you might need to construe in district court. But it's a smaller needle to thread and plaintiffs are going to argue more and more often, whatever construction you advance the PTAB should be applied in district court.
Mike Hendershot:
So, if you've got a non-infringement defense that hinges on a claim, construction and interpretation of a given term, you want to know that, you want to get that baked into your strategy, the PTAB, early on. And that was work that before might've been don, later in a case. If you find good prior art that you thought supported an IPR petition, you could run to the Patent Office with that and try to stay a litigation before you got in the infringement contentions or into discovery, and save yourself a lot of litigation costs with a related stay.
Dave Dalton:
Right.
Mike Hendershot:
Now, it's more important given that you've got more downside and may have your hands tied more to that construction, to really fully bake your non-infringement defenses and any claim constructions you're going to need, and factor in how those are getting impact with a PTAB.
Dave Dalton:
So put that together early. Matt, you wrote, "Assessing whether a patent supports many claims and what threat they pose to your current and future products." Talk about how important that is, and if you've got an example, even a hypothetical, then let us know.
Matt Johnson:
Sure. And this goes to what Mike was discussing earlier regarding the possibility of more claim amendments surviving PTAB trials, in that the devil that you know, the claims in the issued patent being asserted against you, maybe better than the devil that you don't know. There's a potential that the patent owner through a PTAB trial, could craft an amended claim that you infringe, and is confirmed not unpatentable by the board, making it very difficult for you to nix in the future. So, if claim amendments at the PTAB become the norm rather than the exception, we could see some accused infringers opting to roll the dice in the trial court on invalidity, rather than seeking relief at the PTAB where the patent owner may be able to craft a really narrow claim, maybe based on product literature of yours or analyzing your product. That, the more limitations that are in the claim, the more difficult it is to invalidate. So you could get a page and a half long claim that you infringed dead to rights, but is almost impossible to make an invalidity case for.
Dave Dalton:
Final point you brought up in the article, let's go to Mike first. Tailoring a PTAB petition to the claims and grounds that are truly an issue. This seems apparent or obvious, so have petitioners been making mistakes or is this something that's just overlooked, or why is that so important to call out?
Mike Hendershot:
It does sound a bit obvious. And again, previously this was a best practice. I wouldn't say people are making mistakes per se, because under the prior landscape it was a viable strategy to go early and really try to get an early stay and challenge all the claims in a patent. Because you had, as Matt was alluding to prior to SAS, the ability of the PTAB to call out grounds or claims that didn't feel where that strong at the institution phase. So one thing that's in the backdrop of all this that we haven't talked about that much really is, if you go to final decision on a ground and a claim is found patentable, there is an estoppel effect on the petitioner in litigation. So you you're losing those defenses in the district court.
Dave Dalton:
Okay.
Mike Hendershot:
So, really it is more important now if you want to use the PTAB as a tool in your toolbox in defending against a patent litigation to get a better sense of, "Okay, here are the claims that are at issue. And that may require waiting to get infringement contentions or waiting till later in the case. And here are really my best grounds that dovetail with my non-infringement arguments and themes," and going with a streamlined petition there. So, were there benefits always to go in with a streamlined petition? Yes. And were those sometimes outweighed by the desire to move quickly and try to get a stay early in the case? Yeah. In numerous matters. So, really while that reads as an obvious point, it's really all the more critical strategically, and really merits doing more work upfront in a case than you might have had to before.
Dave Dalton:
Great for clients to hear, that's for certain. Any closing thoughts on patent defense litigation strategy? Something else you want to bring to the audience, or are we good?
Matt Johnson:
Two real quick ones for me. Early in consistent coordination for an accused infringers litigation team. As we've talked about now, more important than ever, when an infringement allegation's made, the defense team needs to quickly dive into both invalidity and non-infringement to see what PTAB unpatentability grounds can be developed that do not jeopardize a great non-infringement case. And second, when you make that case, be direct. Be clear and concise in the petitions that you present to the board. And that's always, of course been important from a persuasiveness point of view, but now post-SAS, a lack of focus in the petitions can be fatal to your PTAB efforts.
Dave Dalton:
Yeah. And that's probably, in the long run, in the best interest of everybody. Hey, this has been terrific. I want to talk for a second, Matt Johnson, I'm a big fan of Jones Day's PTAB blog, you guys do a great job. This is updated twice a week, I believe?
Matt Johnson:
We generally go for three times a week.
Dave Dalton:
Three times a week. Geez, I underestimated you guys. Three times a week.
Matt Johnson:
Don't sell him short Dave.
Dave Dalton:
I guess so. And I usually don't do that, I'm always pumping you guys up. But yeah, you guys are prolific. So three times a week, great content, and you spread the wealth around. It's not always the same couple of lawyers writing. You've got sort of a staff and a schedule, and it's coordinated. It's a great quality work. And people can find that, I always tell them, "Just Google, Jones Day PTAB blog," and that gets in there, correct?
Mike Hendershot:
Yeah, that's right. The actual address is ptablitigationblog.com. But yeah, we put out 150 articles in 2018. Looking to do somewhere around the same this year. But it's really been a great collaborative effort, we have almost 25 authors across the firm drafting articles on all kinds of PTAB topics of interest.
Dave Dalton:
It really is well done. Hey Mike, Matt, this has been terrific. We're going to do this again soon, I know. Certainly next quarter, if not sooner. But please keep us aware of what's going on, we'll schedule something else soon, and we'll be looking at the blog constantly. So, thanks so much for being here today.
Mike Hendershot:
Thank you.
Matt Johnson:
Looking forward to it. Thanks Dave.
Dave Dalton:
Subscribe to Jones Day Talks on Apple Podcasts, Android, Google Play, or Stitcher. And while you're there, check out our previous podcasts, and don't forget the patent litigation blog Matt was talking about. Just go to your favorite search engine, type in, Jones Day PTAB blog, and you'll find it there. Thanks for listening to Jones Day Talks, I'm Dave Dalton, we'll talk to you next time.
Disclaimer:
Thank you for listening to Jones Day Talks. Comments heard on Jones Day Talks should not be construed as legal advice regarding any specific facts or circumstances. The opinions expressed on Jones Day Talks are those of lawyers appearing on the program and do not necessarily reflect those of the firm for more information, please visit jonesday.com.
