Claim Construction on the Verge of Transformation: The Disruptive Promise of Inter Partes Review

Robert M. Asher

By Robert Asher. Co-chair of the Patent Practice Group

April 2012 IP Update

The United States Supreme Court did not impose Markman hearings on patent litigation. In the case of Markman v. Westview Instruments, Inc. (1996), the court merely held that “claim construction is a matter of law for the judge to decide.”  District courts have since experimented with a variety of ways of handling patent litigation to give effect to this governing law.

Depending on the court, claims have been construed by the judge either before trial, after trial, or in the context of summary judgment motions. The use of claim construction hearings has grown to become a widely accepted feature of patent litigation.

The America Invents Act (AIA) may revolutionize patent litigation through the introduction of inter partes review proceedings. Inter partes review offers the promise of a swift contested administrative patent review with estoppel effect in which the proper meaning of claims will be determined.

As of September 16, 2012, one may seek inter partes review of any United States patent. This new procedure replaces and eliminates the inter partes reexamination. Inter partes reexaminations have suffered from a protracted timetable that discourages district court stays of litigation and thus makes the prospect of preclusive effect remote.

While the final determination of claim patentability or unpatentability in inter partes reexamination creates an estoppel against the parties in civil litigation, that estoppel does not become effective until the termination of all appeal rights. Bettcher Industries, Inc. v. Bunzl USA, Inc. (Fed. Cir. 2011).

Considering that inter partes reexamination takes a few years before the examiner, a couple of years before the Board of Appeals, and a year at the Federal Circuit Court of Appeals, a reexamination may not have estoppel effect until five and often more years after it is filed. Consequently, district court judges hesitate to stay a litigation for that many years in deference to a proceeding that might not even resolve the litigation.

Inter partes review has the potential for changing all that, significantly enhancing the prospect of affecting  the course of patent infringement suits and of obtaining a stay of such litigation. An inter partes review is quick to reach a decision with estoppel effect. Moreover, the statute prevents a litigant from seeking inter partes review more than one year after being served with a complaint alleging infringement.

Inter partes review will be conducted before the Patent Trial and Appeal Board (“PTAB”). The PTAB will replace the Board of Patent Appeals and Interferences.  Expert declarations may be submitted and any declarant may be required to give a deposition. Either party has the right to an oral hearing before the PTAB.

The patent owner must confer with the patent judge assigned to the review to receive permission to file one motion to propose claim amendments. When adding claims, only a reasonable number of substitute claims will be permitted. Any further motions to amend will require a showing of good cause. Any appeal goes directly to the Federal Circuit.

The statute sets out time limits which should limit inter partes reviews to 1.5 – 2 years in duration. In particular, the statute gives the PTAB one year from a PTO notice agreeing to institute an inter partes review, extendible by not more than six months, to issue its final written decision.

Whereas in an inter partes reexamination estoppel is not triggered until patentability has been “finally determined” (which includes all appeals), in an inter partes review estoppel will be effective upon receiving the “final written decision” from the PTAB.

Presumably, courts will stay or continue to stay a litigation while such a decision is on appeal to the Federal Circuit to avoid an estoppel based on a decision that is later reversed. Such a stay remains discretionary with the courts.

Given the hope of an estoppel-triggering decision in less than one year from institution of an inter partes review, even more aggressive judges may consider staying a litigation until completion of a co-pending inter partes review. The prospect of staying litigation and averting the associated enormous costs of discovery and motions could provide a major incentive for the filing of inter partes reviews.

Another advantage of inter partes review over court litigation, at least for the petitioner, is the standard of proof. While an inter partes review petitioner must show anticipation or obviousness only by a preponderance of the evidence, a litigant need prove invalidity by a clear and convincing showing. In other words, the presumption of validity will not apply in inter partes reviews.

On appeal to the Federal Circuit, underlying factual findings will be reviewed under a “substantial evidence” standard for both inter partes reviews and appeals from jury decisions. Appeals from factual rulings made by judges may apply the slightly stricter “clearly erroneous” standard.

What Does the AIA Mean by the “Proper Meaning” of a Patent Claim?

Questions remain as to how claims will be construed in inter partes review proceedings. Reexaminations have long been attractive to requesters because of the comfort of knowing the PTO applies the broadest reasonable interpretation to claim language. As recognized by the Federal Circuit, “unlike in district courts, in reexamination proceedings “[c]laims are given ‘their broadest reasonable interpretation, consistent with the specification….’ ” (quoting In re Yamamoto(Fed.Cir.1984)).” In re Swanson (Fed. Cir.2008).

The differences between court proceedings and reexaminations can be dramatic. The Federal Circuit noted that “if the district court determines a patent is not invalid, the PTO should continue its reexamination because, of course, the two forums have different standards of proof for determining invalidity.” Ethicon, Inc. v. Quigg (Fed. Cir. 1988).

In reviewing Board decisions in reexaminations, the Federal Circuit, while reviewing claim construction de novo, “must determine whether the Board’s construction of the term was reasonable.”  In re NTP, Inc. (Fed.Cir. 2011). This may all change with the America Invents Act.

Instead of referring to “broadest reasonable interpretation,” the new statute tasks the PTO–in ex parte reexamination, inter partes review and post grant review–to  determine “the proper meaning of a patent claim.” 35 U.S.C. §301(d).

The proper meaning of a claim has normally been the province of litigation. “To determine the proper meaning of claims, we first consider the so-called intrinsic evidence, i.e., the claims, the written description, and, if in evidence, the prosecution history.” Digital Biometrics, Inc. v. Identix, Inc. (Fed. Cir.1998). “The proper construction of a patent’s claims is an issue of Federal Circuit law. . . To ascertain the scope and meaning of the asserted claims, we look to the words of the claims themselves, the specification, the prosecution history, and any relevant extrinsic evidence.  (quoting Phillips v. AWH Corp. (Fed Cir. 2005)).” Absolute Software, Inc. v. Stealth Signal, Inc. (Fed. Cir. 2011)

The courts are struggling to develop a proper meaning of claims that can be applied with any degree of certainty. For example, the Federal Circuit was evenly split 5-5 as to opposing meanings of patent claims in the case of Marine Polymer Technologies, Inc. v. Hemcon, Inc. (2011) because the court’s focus was on differing interpretations of the specification.

In my view, the PTAB has a key role in developing the law of claim construction so that it can be applied with greater certainty. Given the PTO’s traditional focus on the claims and the broadest reasonable construction, the judges of the PTAB will comfortably follow Federal Circuit doctrine such as “It is the claims that define the metes and bounds of the patentee’s invention. Phillips. The patentee is free to choose a broad term and expect to obtain the full scope of its plain and ordinary meaning unless the patentee explicitly redefines the term or disavows its full scope.”Thorner v. Sony Computer Entertainment America LLC (Fed.Cir. 2012)

Although the statute recites “proper meaning,” the PTO has proposed that the “broadest reasonable construction” standard be applied in inter partes reviews, relying upon In re Yamamoto. The decision in that 1984 case addressed a question not even remotely equivalent to today’s question of claim construction in an inter partes review.

Instead,, the court in Yamamoto applied the broadest reasonable construction to ex parte reexaminations, the same standard as in reissue applications. The court emphasized the ability to amend that is common to reissue applications and ex parte reexaminations:

The same policies warranting the PTO’s approach to claim interpretation when an original application is involved have been held applicable to reissue proceedings because the reissue provision, 35 U.S.C. § 251, permits amendment of the claims to avoid prior art. In re Reuter.

The America Invents Act and the rules proposed by the PTO do not offer patent owners in inter partes review the full and fair opportunity to amend, which has been afforded to reissue applicants.  An inter partes review is a trial before the PTAB, not a patent prosecution before a patent examiner.

Proposed rule 42.207 states that the patent owner’s preliminary response “shall not include any amendment.” Proposed rule 42.121 states that “A patent owner may file one motion to amend a patent but only after conferring with the Board. Any additional motions to amend may not be filed without Board authorization.”

Moreover, whereas most ex parte reexaminations result in amended allowable claims, inter partes reviews can be expected to eliminate invalid claims in a cost efficient manner with only a strictly limited opportunity to amend. The courts will ultimately decide upon the claim construction standard for inter partes review in light of the limited opportunity to amend claims and the reference to “proper meaning” in the statute.

Proposal for a Unitary Approach to Claim Construction

Although Congress created a single court of appeals, the Federal Circuit, to handle patent appeals from both the district courts and the PTO, a uniform standard for determining patent invalidity has been elusive.

The validity of patents currently depends upon one approach to claim construction in the district courts and an entirely different approach in the PTO. A unitary approach to claim construction of issued U.S. patents should create greater certainty and enhance confidence in the judicial system.

Under current law, the validity of a patent can depend on whether it reaches the Federal Circuit from a district court decision or from the Board of Patent Appeals and Interferences, rather than on a consistent measure of the merits of the invention. To interpret the claim one way for validity in the courts and another for validity in an inter partes review violates a fundamental principle of patent law: A claim in a patent cannot, the U.S. Supreme Court once ruled, be treated “like a nose of wax which may be turned and twisted in any direction.” White v. Dunbar (1886).

If the Patent Trial and Appeal Board is determining the “proper meaning” of a claim pursuant to the America Invents Act, shouldn’t the court also be deciding patent disputes on the basis of the “proper meaning” for the claims? Can courts decide a case on the basis of a claim construction that is not “proper”? The language of the America Invents Act appears to sing out for a unitary approach to claim construction.

This is a great opportunity for courts to take a fresh look at determining the best framework for claim construction. The claims of a patent are required to particularly point out and distinctly claim the subject matter which the applicant regards as his invention. Whereas the claims are written and examined to provide a certain scope, the specification fills a different role.

In arriving at a uniform approach, greater certainty will result from construing claim language in keeping with the full scope of its plain and ordinary meaning (unless redefined or disavowed as explained in Thorner) rather than attempting to construe the meaning of a patent specification, as the court struggled to do in the Marine Polymer case.

Will Inter Partes Review Replace Markman as the Center of Attention?

If courts adopt a uniform claim construction for review proceedings and litigation, such a proceeding could serve  a Markman-like function. Unlike a  Markman hearing in court, the PTAB decision can be reviewed on appeal by the Federal Circuit before the district court case proceeds to trial. Thus, by staying a litigation for an inter partes review, a district court may benefit from a Federal Circuit-approved construction of the patent claims.

Stays will be further beneficial because an inter partes review can result in a settlement, unlike reexaminations which continue even without the involvement of the parties. Inter partes review also holds the possibility of a cancellation of some or all of the patent claims or confirmation of the patentability of some of the claims with estoppel effect.

For this reason, stays should be more readily granted. If the PTAB can issue its final decisions in a timely manner, inter partes review is likely to be a big hit and may even replace Markman hearings as the defining moment in many patent litigations.

A uniform and more predictable claim construction approach would enhance our patent system and the economy. The America Invents Act opens vast new possibilities for bringing greater certainty to patent jurisprudence.

An earlier version of this article appeared in the Winter 2012 edition of Intellectual Property Litigation, a newsletter of the American Bar Association, Section of Litigation.