USPTO Issues Proposed Rules Packages to Implement America Invents Act

On February 7, 2012, the USPTO released seven proposed rules packages to implement the new trial proceedings that the Patent Trial and Appeal Board (Board) will conduct under the Leahy-Smith America Invents Act (AIA). With this latest batch of proposed rules, the USPTO now has issued proposed rules for the substantive changes that take effect on September 16, 2012. The new trial proceedings (particularly inter partes review and post-grant review) offer competitors new opportunities to challenge granted patents within the USPTO. While this article highlights specific aspects of the proposed rules, patent holders and competitors also will want to consider strategic issues, such as those we have addressed in previous publications (http://tinyurl.com/7qfzlvm). Public comments on the proposed rules are due according to the schedule below, which also lists the effective dates of the various AIA provisions.

Proposed Rules Packages With AIA Effective Date of September 16, 2012

• Changes To Implement the Preissuance Submissions by Third Parties Provision of the Leahy-Smith America Invents Act; public comments due March 5, 2012
• Changes To Implement Miscellaneous Post Patent Provisions of the Leahy-Smith America Invents Act; public comments due March 5, 2012
• Changes To Implement the Inventor’s Oath or Declaration Provisions of the Leahy-Smith America Invents Act; Public comments due March 6, 2012
• Changes To Implement the Supplemental Examination Provisions of the Leahy-Smith America Invents Act and To Revise Reexamination Fees; public comments due March 25, 2012
• Rules of Practice for Trials before the Patent Trial and Appeal Board and Judicial Review of Patent Trial and Appeal Board Decisions; public comments due April 9, 2012
• Practice Guide for Proposed Trial Rules; public comments due April 9,
• Changes to Implement Inter Partes Review Proceedings; public comments due April 10, 2012
• Changes to Implement Post-Grant Review Proceedings; public comments due April 10, 2012
• Changes to Implement Transitional Program for Covered Business Method Patents; public comments due April 10, 2012
• Transitional Program for Covered Business Method Patents — Definition of Technological Invention; public comments due April 10, 2012

Proposed Rules Package With AIA Effective Date of March 16, 2013

• Changes to Implement Derivation Proceedings; public comments due April 10, 2012

For more information on the proposed rules relating to preissuance submissions, miscellaneous post patent provisions, changes to the inventor’s oath/declaration, and supplemental examination, please see patent reform-related articles on Foley’s PharmaPatentsBlog (http://www.pharmapatentsblog.com/patent-reform/) and additional information available online at Foley.com/patent reform. 

The following is a detailed summary of the USPTO’s proposed rules for the new trial proceedings.

Practice Guide for Proposed Trial Rules
The USPTO’s Practice Guide is intended to advise the public on the general framework of the proposed rules, including the structure and times for taking action, as well as standard forms and orders that the Board intends to use in the proceedings, including:

• Scheduling Order: The Board will enter a Scheduling Order concurrent with its decision to institute a proceeding in which it will set due dates. An exemplary set of proposed due dates that might be used for an inter partes review are set forth in the USPTO Practice Guide, and illustrate four months for patent owner discovery and filing a patent owner response and motion to amend, two months for petitioner discovery and filing a reply to the response and opposition to the amendment, and one month for patent owner discovery and filing a reply to petitioner’s opposition to the amendment. The goal is to proceed from a Decision on Petition to completion of the Board trial in one year, including issuance of a final written decision. The time may be extended for up to six months for good cause. The USPTO’s exemplary timeline for an inter partes review is available online (http://tinyurl.com/75hjrzf). 
• Protective Order Guidelines: The Guidelines explain the procedures for filing motions to seal and entering protective orders. The USPTO encourages parties to agree on a stipulated protective order. Absent such agreement, the Board will automatically enter a default “Standing Protective Order” upon the filing of a petition for review or institution of a derivation. In addition, the USPTO proposes a “Standard Acknowledgment for Access to Protective Order Material” for parties sign prior to gaining access to information covered by a protective order. The standard acknowledgment, as proposed by the USPTO, would subject the signatories to, among other things, jurisdiction in the U.S. District Court for the Eastern District of Virginia for purposes of enforcing the protective order.

Rules of Practice for Trials Before the Patent Trial and Appeal Board (Subpart A)
General procedures common to all four types of trial proceedings will be codified at 37 CFR 42, subpart A. Notable provisions include:

• Institution of trial: The director’s authority to institute a trial is delegated to the Board. (§ 42.4(a))
• Part interest: An owner of a part interest in the patent may act to the exclusion of an inventor or a co-owner if the inventor or co-owner is unable or refuses to prosecute the proceeding, or if it is otherwise shown to be in the interests of justice. (§ 42.9(b))
• Counsel: Parties represented by counsel should designate both a “lead” counsel and a “back-up” counsel who can conduct business on behalf of the lead counsel. The Board may recognize counsel pro hac vice upon a showing of good cause. The Board may disqualify counsel during the proceeding. Counsel may not withdraw absent Board authorization. (§ 42.10)
• Sanctions: The Board may impose sanctions against a party for misconduct. Sanctions can include attorney fees, an order requiring a terminal disclaimer of patent term, or entry of judgment in the trial. (§ 42.12)
• Filing fees: Filing fees to institute a proceeding will be based on the number of claims being challenged. For inter partes review, the fee would range between $27,200 for one to 20 claims, and $68,000 for 51 to 60 claims (plus $27,200 for each additional 10 claims or portion thereof). For post-grant and covered business method patent reviews, the fee would range from $35,800 for one to 20 claims, and $89,500 for 51 to 60 claims (plus $35,800 for each additional 10 claims or portion thereof). The fee for a derivation proceeding would be $400. (§ 42.15)
• Page limits: Page limits are set at 50 pages for petitions requesting inter partes review or derivation proceedings, 70 pages for petitions requesting post-grant or covered business method patent reviews, and 15 pages for motions. Oppositions will have the same page limits as the corresponding petition or motion. Replies to patent owner responses to petitions are limited to 15 pages, and replies to motions are limited to five pages. (§ 42.24)
• Motion deadlines: Motions may only be filed according to a schedule set by the Board. Oppositions are due one month after the motion. Replies are due one month after the opposition. (§ 42.25)
• Routine discovery: Unless previously served, any exhibit cited in a paper or in testimony must be served with the paper or testimony. Cross-examination of affidavit testimony is authorized within such time period as the Board may set. Unless previously served, noncumulative information that is inconsistent with a position advanced by the patent owner or petitioner during the proceeding must be disclosed and its relevance explained to the Board. (§ 42.51(b)) [Note: the USPTO acknowledges that this rule would “differ” from the recent proposed change to §§ 1.56 and 1.555 eliminating this same disclosure obligation in patent application and reexamination proceedings.]
• Additional discovery: Except in post-grant reviews, additional discovery may be authorized when it is shown to be in the interests of justice. (§ 42.51(c))
• Compelling testimony and production: A party seeking to compel testimony or production must file a motion for authorization. For testimony or production sought outside the United States, the motion must also explain why the testimony or production can be compelled in the foreign country and also demonstrate that the party has made reasonable efforts to obtain the testimony or production in the United States. (§ 42.52)
• Taking testimony: Uncompelled direct testimony must be submitted in the form of an affidavit. All other testimony must be in the form of a deposition transcript. The Board may authorize or require live or video-recorded testimony. The proponent of the direct testimony will typically bear all costs associated with the testimony. (§ 42.53)
• Protective order: A party or any person from whom discovery of confidential information is sought may file a motion to seal where the motion contains a proposed protective order. The Board may, for good cause, issue an order to protect a party or person from disclosing confidential information. (§ 42.54)
• Confidential information in a petition: Confidential information in a petition may be served under seal, concurrent with a motion to seal and a proposed protective order. The patent owner may only access the sealed confidential information prior to the institution of the trial by agreeing to the terms of the proposed protective order. (§ 42.55)
• Expungement of confidential information: After denial of a petition to institute a trial or after final judgment in a trial, a party may file a motion to expunge confidential information from the record. (§ 42.56)
• Federal Rules of Evidence: Admissibility of evidence is generally governed by the Federal Rules of Evidence. In determining foreign law, the Board may consider any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence. (§ 42.62)
• Objection, motion to exclude, motion in limine: Objections to the admissibility of deposition evidence must be timely raised. A motion to exclude evidence must be filed to preserve any objection. A party may file a motion in limine for a decision on the admissibility of evidence. (§ 42.64)
• Expert testimony, tests, and data: Expert testimony that does not disclose the underlying facts or data is entitled to little or no weight. A party relying on test data must provide an affidavit explaining the test procedure. Testimony on U.S. patent law or examination practice will not be admitted. (§ 42.65)
• Oral argument: Parties may request oral argument on an issue raised in a paper. The request must specify the issues to be argued. Demonstrative exhibits must be served at least five business days before the oral argument and filed no later than the time of the oral argument. (§ 42.70)
• Rehearing: A request for rehearing does not toll the time for taking action and must be filed within 14 days of a non-final decision or 30 days of a final decision. (§ 42.71(c))
• Estoppel in a derivation: The losing party in a derivation, who could have but did not move for relief on an issue, may not take action in the USPTO after the judgment that is inconsistent with that party’s failure to move, except for any contested subject matter for which the party was awarded a favorable judgment. (§ 42.73(d)(2))
• Estoppel against patent applicant or owner: A patent applicant or owner whose claim is canceled is precluded from obtaining in any patent (i) a claim to substantially the same invention, (ii) a claim that could have been filed in the proceeding, or (iii) an amendment of the specification or drawing that was denied in the proceeding. (§ 42.73(d)(3))
• Settlement: The parties may agree to settle any issue in a proceeding, but they must file in writing any agreement made in connection with or contemplation of the settlement. A party to the settlement may request that the agreement be treated as business confidential information and be kept separate from the patent file. Any person may request that the settlement be made available after paying a $400 fee and showing good cause. (§ 42.74)

Inter Partes Review (Subpart B)
Rules specific to inter partes review would be codified at 37 CFR 42, subpart B. The effective date is September 16, 2012. The comment deadline is April 10, 2012.

The most significant proposed rules for inter partes review include:

• Pendency: All inter partes reviews will normally be concluded within one year from institution, but can be extended by up to six months by the chief administrative patent judge for good cause. (§ 42.100(c))
• Who may petition: Any person who is not the patent owner may petition for inter partes review unless: (a) before filing the petition, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent; (b) the petition is filed more than one year after the petitioner, the petitioner’s real party in interest, or a privy of the petitioner was served with a complaint alleging infringement of the patent; or (c) the petitioner, the petitioner’s real party in interest, or a privy of the petitioner is estopped from challenging the claims on the grounds identified in the petition. (§ 42.101)
• Time for filing: The petition must be filed after the later of: (1) the date that is nine months after the date the patent was issued or reissued, or (2) if a post-grant review is instituted, the date the post-grant review is terminated. (§ 42.102(a))
• Limit on petitions: The Director may impose a limit on the number of inter partes reviews in each of the first four years. Petitions filed after the limit has been reached will be deemed untimely. (§ 42.102(b))
• Content of petition: The petition must certify that the petitioner has standing to seek inter partes review, which is established by, at least certifying that the patent is available for inter partes review and that the petitioner is not barred roe stopped from requesting inter partes review.  Petition must also provide a statement of the relief requested, including the specific statutory grounds under 35 U.S.C. 102 or 103 on which the challenge to the claim is based, the patents or printed publications relied upon for each ground, and how each challenged claim is to be construed. (§ 42.104)
• Service of petition: Petitioner is required to serve the petition and exhibits relied upon on the patent owner.
• Incomplete petition: An incomplete petition, including failure to submit fee, will not be accorded a filing date. The Office will dismiss the petition if the deficiency in the petition is not corrected within one month from the notice of an incomplete petition. (§ 42.106(b))
• Preliminary response to petition: The patent owner may file a preliminary response within two months from the date the petition is accorded a filing date, or may elect to waive the preliminary response. The preliminary response is limited to explaining why no review should be instituted. It may not contain any new testimony evidence beyond that already of record, and would not be allowed to include any amendment. The patent owner may disclaim one or more claims in the patent (§ 42.107)
• Institution of inter partes review: The Board will take into account any preliminary patent owner response when determining whether the petition would, if unrebutted, demonstrate that there is a reasonable likelihood of success that the petitioner would prevail with respect to at least one of the challenged claims. Board may authorize the review on some or all of the challenged claims, and on some or all of the grounds of unpatentability asserted. (§ 42.108)
• Patent owner response: Within two months from institution of the review, the patent owner may file a response to the petition addressing any ground for unpatentability not already denied. (§ 42.120)
• Amendment of the patent: A patent owner may file one motion to amend a patent after conferring with the Board. Additional motions to amend would require prior Board authorization. A motion to amend will not be authorized where it does not respond to a ground of unpatentability or seeks to enlarge the scope of the claims or introduce new subject matter. (§ 42.121)
• Multiple proceedings: The Board may enter any appropriate order regarding another matter involving the patent in the USPTO, including providing for the stay, transfer, consolidation, or termination of any such matter. (§ 42.122)
• Supplemental information: Within one month of the date the trial is instituted, a petitioner may request authorization to file a motion identifying supplemental information relevant to a ground for which the trial has been instituted. (§ 42.123)

Post-Grant Review (Subpart C)
Rules specific to post-grant review would be codified at 37 CFR 42, subpart C. The effective date is September 16, 2012. The comment deadline is April 10, 2012.

Most of the proposed rules governing post-grant review mirror those governing inter partes review. Notable provisions in post-grant review include:

• Who may petition: Any person who is not the patent owner may petition for post-grant review unless: (a) before the date on which the petition for review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent or (b) the petitioner, the petitioner’s real party in interest, or a privy of the petitioner is estopped from challenging the claims on the grounds identified in the petition. (§ 42.201). A post-grant review proceeding will not be instituted if a counterclaim challenging the validity of a patent claim does not constitute a civil action challenging the validity of a claim.
• Time for filing: No later than nine months after the grant of a patent or, in certain instances, the issuance of a reissue patent. (§ 42.202(a))
• Content of petition: The petition must certify that the petitioner has standing to seek post-grant review and provide a statement of the relief requested, including the specific statutory grounds permitted under 35 U.S.C. 282(b)(2) or (3) on which the challenge to the claim is based, and how each challenged claim is to be construed. (§ 42.204). Grounds for seeking post-grant review include §102, §103, §112, and §101, except best mode.
• Incomplete petition: An incomplete petition, including failure to submit fee, will not be accorded a filing date. The USPTO will dismiss the petition if the deficiency in the petition is not corrected within the earlier of either one month from the notice of an incomplete petition, or the expiration of the statutory deadline in which to file a petition for post-grant review. (§ 42.206(b))
• Institution of post-grant review: The Board will take into account any preliminary patent owner response when determining whether the petition would demonstrate that it is more likely than not that at least one challenged claim is unpatentable, or whether the petition raises a novel or unsettled legal question that is important to other patents or patent applications, the latter to be used sparingly. (§ 42.208)
• Amendment of the patent: A motion to amend the claims will not be authorized where the amendment does not respond to the ground of unpatentability in the trial, enlarges the scope of the claims, or introduces new matter. (§ 42.221)
• Discovery: Requests for additional discovery in a post-grant review may be granted upon a showing of “good cause” (instead of the slightly higher “interests of justice” standard in § 42.51(c)). Additional discovery is limited to evidence directly related to factual assertions advanced by either party. (§ 42.224)

Transitional Program for Covered Business Method Patents (Subpart D)
Rules specific to the transitional program for covered business method patents would be codified at 37 CFR 42, subpart D. This subpart expressly incorporates most of the rules governing post-grant review. Notable differences unique to covered business method patents include:

• Procedure: Post-grant review procedures will generally govern, except that issues specific to proceedings on covered business method patents will only apply to covered business method patent reviews filed before September 15, 2020. (§ 42.300)
• Definitions: Covered business method patent means “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.” (§ 42.301(a)). Technological invention: “In determining whether a patent is for a technological invention . . . the following will be considered on a case-by-case basis: whether the claimed subject matter as a whole (1) recites a technological feature that is novel and unobvious over the prior art; and (2) solves a technical problem using a technical solution.” (§ 42.301(b))
• Who may petition: Any petitioner may petition, but only if the petitioner, the petitioner’s real party in interest, or a privy of the petitioner has been sued for, or charged with, infringement of the patent, unless the petitioner, real party in interest, or privy is estopped from challenging the claims on the grounds identified in the petition. (§ 42.302)
• Time for filing: Any time except during the period in which a petition for a post-grant review would satisfy the requirements of 35 U.S.C. 321(c) (within nine months after the patent grant or reissue). (§ 42.303)

Derivation Proceedings (Subpart E)
Rules specific to derivations would be codified at 37 CFR 42, subpart E. Notable proposals include:

• Who may petition: Any applicant for patent can petition for a derivation proceeding (§ 42.402), including a reissue applicant (§ 42.401). The Board may decline to institute or issue judgment in a derivation proceeding involving commonly owned applications/patents. (§ 42.411)
• Time for filing: A petition must be filed within one year after the first publication in the respondent’s application of a claim to the invention at issue (§ 42.403). Notably, the first publication could be a USPTO publication or a WIPO publication, if the claim is presented in a PCT application that designates the United States. This means that the “true inventor” may need to file his own U.S. patent application and petition for a derivation proceeding before he or she even can confirm that the respondent has filed a U.S. application. 
• Fee: The fee for a derivation petition initially will be set at $400. (§ 42.15(c))
• Content of petition: The petition must show that the petitioner’s application has at least one claim that is (i) the same or substantially the same as the respondent’s claimed invention and (ii) not patentably distinct from the invention disclosed to the respondent, and must include a claim construction analysis. The petition also must demonstrate that the invention was derived from an inventor named in the petitioner’s application and that the respondent’s application was filed without the petitioner’s authorization. (§ 42.405(a)-(b))
• Sufficiency of showing: The derivation showing must be supported by substantial evidence, including at least one affidavit addressing (i) communication of the derived invention from the petitioner to the respondent and (ii) lack of authorization for the respondent’s patent application filing. The communication must be corroborated. (§ 42.405(c))
• Incomplete petition: An incomplete petition will not be accorded a filing date. The USPTO will dismiss the petition if the deficiency is not corrected within the earlier of either one month from notice of the incomplete petition or expiration of the statutory deadline for filing a derivation petition. (§ 42.407(b))
• Procedure: An administrative patent judge will institute a derivation proceeding on behalf of the USPTO director. (§ 42.408) A derivation proceeding will be conducted as a trial subject to the general rules of practice before the Board discussed above. (§ 42.400) The Board may, for good cause, authorize or direct the parties to address patentability issues that arise in the course of the proceeding. (§ 42.400(b)) 
• Arbitration: Parties may agree to binding arbitration on any issue, but the Board may independently determine any question of patentability. (§ 42.410)
• Settlement: Parties may terminate the proceeding by filing a settlement agreement. (§ 42.409)
• Open issues: The proposed rules do not address the director’s authority to defer action until a relevant patent is granted (new 35 USC § 135(c)), or the director’s authority to correct inventorship pursuant to a determination of derivation (new 35 USC § 135(b)). These are important issues that the USPTO should address before March 16, 2013.

Stakeholder Input on the Proposed Rules
The USPTO must have final rules in place before September 16, 2012. Given this relatively short timeframe, it is likely that many of the rules will be adopted substantially as proposed. Nevertheless, the USPTO has shown a willingness to modify proposed rules based on public comments. Thus, companies should take advantage of this unique opportunity to shape the rules that will govern the significant changes to U.S. patent practice enacted by the AIA. Companies may want to focus on the most onerous or substantively significant provisions, such as those relating to filing fees, deadlines, estoppel, discovery, sanctions, duty of disclosure, confidentiality, and content requirements for petitions and expert testimony.

Foley attorneys will continue to study the proposed rules and other aspects of the USPTO’s AIA implementation process, and will share updates and insight on Foley’s patent reform Web page (Foley.com/patentreform) and PharmaPatentsBlog.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this alert or would like to discuss the topic further, please contact your Foley attorney or the following:

Stephen B. Maebius
Chair, IP Department
Washington, D.C.
202.672.5569
[email protected]

Courtenay Brinckerhoff
Vice Chair, Chemical, Biotechnology & Pharmaceutical Practice
Washington, D.C.
202.295.4094
[email protected]

Kristel Schorr
Partner
Washington, D.C.
202.672.5574
[email protected]

Benjamin A. Berkowitz
Senior Counsel
Washington, D.C.
202.295.4620
[email protected]

Andrew S. Baluch
Special Counsel
Washington, D.C.
202.672.5520
[email protected]