On May 9, 2018, the U.S. Patent and Trademark Office (PTO) published a proposed rules package that would shift the Patent Trial and Appeal Board’s (PTAB) approach to claim construction in inter partes reviews (IPRs), post grant reviews (PGRs), and covered business method reviews (CBMs) (collectively, “America Invents Act (AIA) trial proceedings”) and potentially have far-reaching effects. See Changes to the Claim Construction Standard for Interpreting Claims in Trial Proceedings Before the Patent Trial and Appeal Board, 83 Fed. Reg. 21221 (May 9, 2018). First, the proposal would have the PTAB depart from its current approach to claim construction and adopt the one used in federal district courts and the International Trade Commission. Second, it would direct the PTAB to consider prior claim constructions from those forums. Together, the changes attempt to harmonize claim construction across forums, an apparent step in newly confirmed Director Iancu’s “endeavor to provide reliable, predictable … IP.” See Remarks by Director Andrei Iancu at the Ceremonial Swearing-In (Feb. 23, 2018). It could take months for the proposed rules to be finalized and take effect, but parties should not delay in considering their potential impact, since the rules would apply to AIA trial proceedings already underway.
I. Proposed Rule Changes
In brief, the PTO seeks to replace the “broadest reasonable interpretation” (BRI) standard, currently applied in AIA trial proceedings for construing unexpired patent claims and claims proposed in a motion to amend, with the standard articulated in Phillips v. AWH Corp., 415 F.3d 1303, 75 U.S.P.Q.2d 1321 (Fed. Cir. 2005) (en banc), and presently applied in district court and ITC proceedings. The rules currently require that a “claim in an unexpired patent that will not expire before a final written decision is issued shall be given its broadest reasonable construction in light of the specification of the patent in which it appears.” 37 C.F.R. §§42.100(b), 42.200(b), 42.300(b). Under the Phillips standard (which the PTAB already applies to claims that will expire before entry of a final written decision), claims and proposed amended claims would be construed “in accordance with the[ir] ordinary and customary meaning … as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.” See 83 Fed. Reg. at 21224. The PTO noted that the doctrine of construing claims to preserve their validity would apply, but stressed that this doctrine is of limited utility. Id. at 21223. Any prior claim construction concerning a term of the involved claim in a district court or ITC proceeding will be considered, provided that it is timely made of record. Id. at 21224.
The PTO has indicated that it intends for the rule changes to apply to AIA trial proceedings that are already underway when the rules take effect. Id. It remains unclear, however, how the PTAB would address those proceedings, and whether parties would be provided with schedule adjustments and additional briefing.
II. Practical Impact & Strategic Implications
Since the PTO formally announced its proposal to replace the BRI standard with the Phillips standard in AIA trial proceedings, many have opined on how it might affect U.S. patent disputes; it may be too soon to tell. In some respects, use of the Phillips standard might change surprisingly little. Yet the proposed changes could lead patent holders and challengers to revisit their current strategies. Whether the net effect will further the PTO’s goal of “greater uniformity and predictability of the patent grant” remains an open question. See 83 Fed. Reg. at 21222–21223. Either way, current and prospective litigants would be wise to consider the implications of the proposed rule changes, and be ready to pivot if necessary.
Impact at the PTAB
While the proposed rules clearly represent a shift in claim interpretation at the PTAB, it remains unclear to what extent the rules may affect the PTAB’s patentability determinations. The Phillips standard differs from BRI, and prior cases have shown that the difference between the two standards can be outcome determinative. The Federal Circuit’s decision in PPC Broadband Inc. v. Corning Optical Comms. is exemplary. There, the court noted that, “while the Board’s construction is not the correct construction under Phillips, it is the broadest reasonable interpretation … , and because this is an IPR, under our binding precedent, we must uphold the Board’s construction.” See PPC Broadband v. Corning Optical Comms., 815 F.3d 734, 742-43, 118 U.S.P.Q.2d 1062 (Fed. Cir. 2016). However, overlap exists between the two claim construction standards. See Facebook, Inc. v. Pragmatus AV, LLC, 2014 WL 4454956, 4 (Fed. Cir. Sep. 11, 2014) (non-precedential) (“[t]he broadest reasonable interpretation of a claim term may be the same as or broader than the construction of a term under the Phillips standard. But it cannot be narrower”). Both standards consider the ordinary and customary meaning of a claim term as understood by a person of ordinary skill in the art. Phillips, 415 F.3d at 1313-14; see also MPEP §2111.01 (“Under a broadest reasonable interpretation, words of the claim must be given their plain meaning, unless such meaning is inconsistent with the specification. The plain meaning of a term means the ordinary and customary meaning given to the term by those of ordinary skill in the art at the time of the invention.”). As a result, the PTAB and district courts occasionally adopt the same constructions of claim terms. As an example, in Cisco Systems Inc. v. AIP Acquisition LLC, IPR2014-00247, a PTAB panel evaluated a patent under both standards. Cisco Systems Inc.v. AIP Acquisition LLC, IPR2014-00247, Paper 14, at 12–18 (P.T.A.B. May 27, 2014). Ultimately, the PTAB determined that, based on the record, the claim constructions of the three terms would be the same under “the rule of construction similar to that applied by the district courts.” Id. Given that the board may arrive at the same or similar constructions under either standard, it is unclear if the rule changes will dramatically change outcomes at PTAB.
Impact Before District Courts
The proposed changes, however, could meaningfully impact how cases are litigated before district courts. For example, harmonizing approaches to claim construction at the PTAB and district courts could result in bifurcated proceedings, with validity determined by the PTAB and infringement issues determined by district courts. In other words, district courts may be more likely to stay pending litigation, as the PTAB would now provide insight on relevant claim construction issues under the same claim construction standard applied in district courts. Moreover, if the stay remains in place through the length of the AIA trial proceeding, a final determination by the PTAB incorporating claim constructions could result in issue preclusion, estopping both parties from arguing for different constructions in district court. Regardless of how district courts decide to manage the parallel proceedings, courts may be more inclined to consider, and be influenced by, representations made before the PTAB.
Tactical Considerations for Litigants
For patent challengers, the proposed rules raise strategic considerations with regard to the timing of petitions. Again, if a challenger initiates an AIA trial proceeding during the early stages of district court litigation, the court may be more likely to grant a stay while the PTAB decides claim construction and validity issues. As before, patent challengers will need to weigh the benefits of a stay of patent litigation against those of viewing a plaintiff’s infringement allegations before proposing claim constructions. For some, there may be a benefit to waiting to file petitions to account for district court and ITC claim construction orders.
Although the different claim construction standards have given patent challengers the flexibility to argue for a different construction before the PTAB than in district courts, patent challengers may no longer have this option. Instead, patent challengers may be more careful, and pursue those constructions before the PTAB that encompass the prior art and preserve non-infringement positions. For patent owners, the revised claim construction standard may be welcomed, as it may alleviate concerns that claims may be cancelled in AIA trial proceedings under a claim scope that the patent owner would not be able to assert in an infringement proceeding. 83 Fed. Reg. at 21223. Patent owners may also benefit, as the new claim construction standard may limit the prior art available in an AIA trial proceeding.
For both parties, the change in the claim construction standard before the PTAB may present practical considerations. While district courts offer an elaborate procedure—the Markman hearing—for advancing claim construction arguments prior to assessing any validity issues, the PTAB does not. Instead, petitioners and patent owners seeking to advance particular claim constructions must do so alongside their patentability arguments. Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,763–48,764 (Aug. 14, 2012). Moreover, the procedure and the word count restrictions for major briefings before the PTAB may limit the number and detail of constructions that parties raise before the PTAB, as well as their explanations of supporting evidence. Therefore, parties may have to be strategic about the particular constructions raised before the PTAB. For example, in some cases, a defendant may be best served by arguing for a construction essential to a non-infringement position in district court, where the defendant can take advantage of the procedural mechanisms available in district court to present a more compelling argument.
If implemented, the proposed changes add to the list of developments altering PTAB practice in the wake of the Supreme Court’s recent decision to reject partial institutions. SAS Inst. Inc. v. Iancu, 584 U.S. ___, 126 U.S.P.Q.2d 1307 (2018). Parties should not delay in positioning themselves to make the most of the proposed rules, both before and once their dispute finds its way to the PTAB.
Paromita (Mita) Chatterjee is an associate in the litigation practice of Paul Hastings LLP’s Washington, D.C. office. Her practice focuses on patent disputes before the PTAB, U.S. district courts, and the Federal Circuit Court of Appeals.
Phillip Citroën is an associate in the firm’s intellectual property group. His practice includes proceedings before the PTAB, U.S. district courts, the ITC, and the Federal Circuit.
Michael Stramiello, Ph.D., is an intellectual property litigation associate whose practice focuses on the life sciences industry, and includes proceedings at U.S. district courts, the PTAB, and the Federal Circuit.
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