Andrei Iancu testifies during his confirmation hearing before the Senate Judiciary Committee to be Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office, on Wednesday, November 29, 2017.

The past 12 months have seen significant change at the Patent Trial and Appeal Board (PTAB), with many of the impacts to continue to be felt in 2019. Some of the changes are attributable to new patent office leadership, while others relate to developments in the courts, including two PTAB-related opinions from the Supreme Court in 2018, which significantly impacted PTAB practice.

PTAB Under New Management

Andrei Iancu was sworn in as the director of the Patent & Trademark Office in early February 2018 and quickly focused his attention on the PTAB. By August 2018, the director announced that the chief judge of the PTAB would be stepping down from that position and moving to a newly created senior advisor position within the office. Applications for the vacated chief judge position were publicly solicited in the fall, and the position remains unfilled as of this writing.

Despite the leadership shakeup, the PTAB was extremely active in revising its rules and practices. The first change came in mid-August, when the PTAB revised its Trial Practice Guide, a practitioner guidance document that had not been updated since it was first published in 2012. The Trial Practice Guide revisions largely summarized developments in PTAB practice that occurred since the original Trial Practice Guide was published. However, the revised guide also changed the structure of the scheduling order typically issued in each PTAB Trial. The new scheduling order added a patent owner sur-reply brief as the end of the schedule, giving the patent owner the final written brief prior to the oral hearing. This was a departure from prior practice, where the petitioner (the party bearing the burden of proof) had the final brief.

The next change occurred in September, when the PTAB published an updated set of standard operating procedures governing how cases are allocated among the administrative patent judges. The most notable change was the creation of a precedential opinion panel (POP), which is convened to decide “issues of exceptional important involving policy or procedure.” The POP consists of three members: the director, the commissioner for patents, and the chief PTAB judge, although the members may delegate their authority. This move strongly signaled the intention of the new director to become more actively engaged in resolving important questions of statutory and rule interpretation impacting PTAB trials. To date, the POP has not issued any opinions, although it has announced that it will convene in 2019 to resolve a controversial issue involving adding new patentability issues to a trial after institution. Observers expect the POP to take up additional issues in 2019.

Two other important PTAB rule changes were proposed or finalized in 2018. First, the PTAB in late October published proposed rules that would significantly alter the process for amending challenged claims during a PTAB trial. The proposed rules provide the patent owner with a preliminary decision from the PTAB regarding patentability of the proposed amended claims, giving the patent owner a chance to revise its amendment to address the PTAB’s preliminary views. Under this new regime, there can be up to six briefs regarding patentability of the amended claims. The proposal has led to several public comments focusing on the practical difficulties of cross-examining the witnesses, preparing six briefs, conducting an oral hearing and permitting the board time to write a reasoned, final decision within the 12-month statutory period set forth in 35 U.S.C. Section 316(a)(11) for completing the trial. The final rule taking the comments into account is expected in 2019.

Additionally, on Nov, 13, the PTAB adopted a rule change that shifts the claim construction standard used in PTAB trial from the broadest reasonable interpretation of the meaning of the patent claim text to the standard for claim construction used in District Court and ITC proceedings. This change was meant to harmonize claim construction in the common situation where PTAB trials occur in parallel with patent enforcement proceedings. Although the rule change is not expected to change the outcome in most PTAB cases, parties raced to file petitions before the change to take advantage of the old rules. The PTAB received 102 petitions over the three-day weekend leading up to the rule change, almost as many as the monthly average of 127 in FY2018.

PTAB-Related Developments in Court

Several important court cases shaped PTAB practice in 2018. Notably, the Supreme Court issued opinions in two PTAB matters on April 24. First, in Oil States Energy Services v. Greene’s Energy Group, the U.S. Supreme Court upheld the constitutional validity of PTAB trials, resolving lingering uncertainty about the continued existence of the procedure. This led to an immediate spike in new petitions being filed in the PTAB, with 160 petitions filed in the month following the ruling, versus 88 in the prior month.

The court simultaneously issued its opinion in SAS Institute v. Iancu. This opinion ended the PTAB’s practice of “partial institution” of PTAB trials, whereby the PTAB would frequently institute trials only on a subset of the patentability grounds raised by the petitioner, leaving other grounds unresolved. Under SAS, the institution decision is now a binary one: either the trial is instituted on all patentability grounds, or it is not instituted. This change led to a significant disruption at the PTAB in 2018, as many legacy cases that had been partially instituted were revisited, and grounds originally denied institution were either added back to the case, or were dropped by agreement of the parties. The case also has introduced new strategic complexity for petitioners when choosing which grounds to present in their petitions.

The U.S. Court of Appeals for the Federal Circuit (CAFC) also decided several important cases impacting PTAB practice in 2018. First came a pair of cases setting forth criteria for determining whether a nonparty to a PTAB trial is nevertheless a “real-party-in-interest” or a “privy” of one of the named parties. In WesternGeco v. ION Geophysical, the court affirmed the PTAB’s invalidation of certain patents owned by WesternGeco. In so doing, the court held that the PTAB trials were timely filed by an entity known as PGS, because PGS was not a “privy” with ION, such that service of a district court complaint against ION triggered PGS’s statutory one-year period to file a PTAB trial. This was so despite a pre-existing business relationship and indemnity obligation between ION and PGS regarding the product accused in the district court litigation. The second case was Applications in Internet Time v. RPX, where the court disagreed with the PTAB’s analysis of the question of whether the petitioner RPX was a “real-party-in-interest” of Salesforce, who was a member of RPX, but was barred from filing its own PTAB trial petition because more than one year had elapsed since it was sued. The court vacated the PTAB’s decision and remanded to the board for it to apply a more flexible approach to determining real-party-in-interest status, with an “eye toward determining whether the nonparty [i.e., the accused infringer] is a clear beneficiary [of the PTAB trial] that has a pre-existing, established relationship with the petitioner.”

Various PTAB panels also wrestled with the privity/real-party-in interest issue.  Most notably, in Arris Int’l PLC v. Chanbond, (IPR2018-00574, July 20, 2018) the PTAB emphasized an indemnitor’s “opportunity to control” the defense of a parallel infringement action against its customers as justifying its conclusion that the petitioner was in privity with those customers, and therefore found the petition was time-barred, as it was filed more than one year after the first customer was served with an infringement lawsuit under the challenged patent. These cases have caused several companies to reconsider the scope of their traditional IP indemnity clauses and the impact of those clauses on future PTAB Trials.

Another 2018 CAFC opinion with implications for PTAB practice was St. Regis Mohawk Tribe v. Mylan Pharma. That case ruled that patents held by native American tribes are not insulated from review by the PTAB. This ended the controversial practice of transferring patents to tribal governments, receiving in return an exclusive license to the patent, in an attempt to insulate the patents from PTAB review based on tribal government immunity. However, the St. Regis case left open the question of whether similar transactions with state governments, such technology transaction arms of state-owned universities, might insulate patent from PTAB review due to state sovereign immunity. This issue will likely receive further attention from the courts in 2019.

PTAB practice continues to be a fast-changing area of the law with important implications on the patent litigation landscape. Last year proved especially dynamic, with many of the changes likely to be felt in the coming year. Stakeholders should continue to monitor this exciting area of patent practice.

Eliot D. Williams is an intellectual property partner in the Palo Alto office of Baker Botts, where he co-chairs the firm’s PTAB practice group.