A Hyatt Exception to Post Grant Patent Review?

September 04, 2012

Are some patents exempt from post-grant attack under the America Invents Act? The USPTO comments on post-grant trials suggest that the Office may “exercise its discretion” to refuse to review a patent on the simple basis that it would be too much work in too little time for the Patent Trial and Appeal Board.

The Patent Trial Practice Guide describes this position:

For example, the Board may decline to institute a proceeding where the Board determines that it could not complete the proceeding timely. Specifically, the Board could exercise its discretion to decline to institute a petition that seeks review of several hundred claims based upon a thousand references and the patent owner demonstrates that a determination of patentability would require testimony of dozens of nonparty controlled witnesses in foreign countries for which the testimony would need to be compelled.

It would be rare indeed that a petitioner would be able to challenge several hundred claims based upon a thousand references in an 80-page petition, and rarer still that a patent owner would require the testimony of dozens of foreign witnesses outside the control of either party. Apart from such dramatic circumstances, the USPTO comment more generally asserts that the Office has the “discretion” to refuse to institute a patent trial if it considers that the Board would be unable to complete review in the period imposed by the statute.

One possibility raised by this comment is that patentees may be able to multiply patent claims and avoid post-grant scrutiny altogether. For example, in Hyatt v. Dudas the Board considered rejections of approximately 2,400 claims in twelve related patent applications in areas including microcomputers, computer memories and displays, and global positioning systems. A petitioner seeking to invalidate a substantial number of these claims in 12 issued patents could face an insuperable burden, if the Board declines to institute a post-grant trial. Furthermore, the costs of presenting 2,400 dependent claims for examination would be about $144,000, whereas the costs of challenging the issued claims in inter partes review would be a staggering $1,440,000 at $600 per claim, and $1,920,000 in post-grant review, with no refund if a patent trial is not initiated. Such enormous filing fees could provide a measure of insurance against review for patent owners, apart from the question of whether the Board would decline to institute a post-grant trial.

Apart from these nightmares, the USPTO comment raises fundamental questions about the discretion of the Board to “streamline” post-grant trials by selecting only some claims or some issues for review, even if others are properly raised by a petitioner.

The key issue from the parties’ standpoint is the estoppel effect of a partial Board decision on subsequent court and Office proceedings.

The statute imposes claim-by-claim estoppel, and if the Office does not institute a proceeding and issue a final written decision on the patentability of a claim, there should be no estoppel against a later proceeding involving that claim. The statute does not address issue-by-issue estoppel if the Board declines to consider some of the grounds raised in a petition with respect to a claim, and the USPTO’s position on this issue is not clear. For example, if a petition for post-grant review properly raises anticipation of a claim, obviousness, written description issues, nonenablement and double patenting, and the Board limits its review and final decision to the novelty issue, is the petitioner estopped from asserting invalidity on the other asserted grounds in another proceeding? The statute may impose an estoppel, because the petitioner “raised” the other issues with respect to “a claim” in the petition, even though the Board declined to address these grounds in a final written decision. The injustice of this result is apparent, and in interferences the Federal Circuit has precluded estoppel on any ground that a party attempted to raise by motion, even if the Board exercised its discretion to decline to consider that ground.

If the Board has discretion to decline review of certain claims or issues, does it also have discretion to add claims to a review that are not directly challenged in a petition? For example, if the petitioner only asserts anticipation of a dependent claim, and the Board finds the claim invalid, what happens to the independent and intermediate dependent claims that are a fortiori also anticipated? The petitioner’s costs in the Hyatt hypothetical could be greatly reduced by challenging only certain dependent claims, provided that estoppel is limited to the selected claims. This strategy could provide critical estoppel advantages, if the petitioner is free to contest the invalidity of independent claims in litigation or subsequent USPTO proceedings. For example, if a patent contains a chain of dependent claims (1, 2/1, 3/2), and only an intermediate claim in the chain (2/1) is asserted in an infringement action, the defendant could initiate a post-grant trial challenging the noninfringed claim (3/2). If that claim is anticipated, the defendant would be able to prove invalidity of the broader claims in a subsequent USPTO patent trial, in district court, or on appeal from a district court decision.

The extent of the Board’s discretion to refuse to consider claims or issues in post-grant trials, or to consider claims not raised in a petition, will have significant strategic consequences both for patent owners in prosecution and claiming, and for challengers in selecting the claims and grounds raised in post-grant petitions.