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February | 2012 | Patent Office Trials Blog
Posted by Ken Burchfiel / Inter partes review, Post-grant review, USPTO trial procedure
The USPTO has issued proposed general rules governing the conduct of post-grant proceedings, including a Practice Guide for Proposed Trial Rules, and a more detailed proposed Rules of Practice for Trials before the new Patent Trial and Appeal Board. The proposed rules incorporate many requirements and procedures from the current interference rules, including mandatory initial disclosures and motions lists, cross-examination of declarants and “additional” discovery, and expanded sanctions for misconduct, including the failure to follow the applicable rules. The rules governing the new proceedings will include not only the formal rules set forth in new 37 CFR Part 42, but also the Scheduling Order issued by an Administrative Patent Judge and any Standing Order setting forth additional procedural requirements. Interference practitioners will be familiar with many of the procedures and requirements imposed by the proposed rules, including an elaborate motions practice and sequenced discovery of an opponent’s case. The Practice Guide provides a succinct and clear overview of the proposed trial rules, and a useful summary of the policies underlying the new procedures.
The opposition “trial”
The “trial” envisioned by the rules bears little relationship to a court trial proceeding. Under proposed 37 CFR § 42.2 a post-grant opposition trial is the contested case commencing with the decision instituting a post-grant proceeding, including the patent owner’s single response or motion to amend claims, the petitioner’s response and opposition to the amendment, the patent owner’s reply, motions by both parties, and extensive discovery including cross-examination of both parties’ expert witnesses. The decision of the Board will ordinarily be based on a paper record, and evidence under 37 CFR § 42.63 consists of affidavits, deposition transcripts, documents and things. The Practice Guide explains that “The Board expects that most petitions and motions will rely upon affidavits of experts” including initial expert declarations supporting the petition, and the patent owner’s expert testimony responding to the decision instituting the proceeding. Although cross-examination may be required to take place in the presence of an APJ when the Board considers the demeanor of a witness to be critical to assessing credibility, the proposed rules do not contemplate presentation of live witness testimony at the final oral hearing before a 3-APJ panel.
A representative timeline for completing the trial within the one-year statutory period is described in the Practice Guide by the following figure:
The Practice Guide explains this timeline as follows:
Generally, the proceedings begin with the filing of a petition that identifies all of the claims challenged and the grounds and supporting evidence on a claim-by-claim basis. Within two months of notification of a filing date, the patent owner in an IPR, PGR, or CBM proceeding may file a preliminary response to the petition, including a simple statement that patent owner elects not to respond to the petition prior to the institution of a review. The Board will determine whether to institute the requested proceeding within three months of the date the patent owner’s preliminary response was due or was filed, whichever is first.
The Board will enter a Scheduling Order (Appendix A) concurrent with the decision to institute the proceeding. The Scheduling Order will set due dates for the proceeding taking into account the complexity of the proceeding but ensuring that the trial is completed within one year of institution. For example, a Scheduling Order for an IPR might provide a four month deadline for patent owner discovery and for filing a patent owner response and motion to amend. Once the patent owner’s response and motion to amend have been filed, the Scheduling Order might provide the petitioner with two months for discovery and for filing a petitioner’s reply to the response and the petitioner’s opposition to the amendment. The Scheduling Order might then provide the patent owner with one month for discovery and for filing a patent owner reply to petitioner’s opposition to a patent owner amendment.
In addition to these principal events, the proposed rules require initial mandatory disclosure of information including the real parties in interest. 37 CFR §42.8. Although an identification of the real parties in interest has been required in interferences to avoid potential conflicts of interest, in inter partes review and post-grant review the identification of the real party in interest by the petitioner will also affect the scope of estoppel that arises from the opposition proceeding in later USPTO and district court proceedings.
Identification and limitation of issues considered
A noteworthy aspect of the proposed rules is the extent to which proceedings will be actively managed and restricted by the APJ. The proposed rules require an early disclosure of the parties’ intended strategies, including all proposed motions and bases for relief. 37 CFR §§ 42.20-21. The Practice Guide explains that “in instituting a trial, the Board will narrow the issues for final decision by authorizing the trial to proceed only on the challenged claims for which the threshold requirements for the proceeding have been met. Further, the Board will identify which of the grounds the trial will proceed upon on a claim-by-claim basis. Any claim or issue not included in the authorization for review is not part of the trial.”
A petitioner therefore may not be entitled to raise all potential bases of unpatentability in post-grant review or inter partes review, even if they are alleged in the initial petition. As in interferences, the proposed rules provide for an initial “notice of basis for relief” which requires the parties to specify the relief that is requested and each basis for its entitlement to relief. 37 CFR § 42.21. Since any relief must be requested in the form of a motion (§ 42.20), the required notice is similar to the motions list in an interference. In interferences, a party may raise any ground of unpatentability or unenforceability of an opponent’s claims, but the party is required to specify each proposed motion in a notice of basis for relief, which must be authorized by the APJ. If the requirement of prior authorization is similarly applied in post-grant oppositions, the APJ, and not the parties, will determine the scope of the proceeding, and may decline to consider some grounds of unpatentability advanced in the initial petition.
Because the initial identification of a party’s motions in its notice of basis for relief cannot later be expanded or corrected unless the correction would satisfy the stringent “interests of justice” standard, a party’s last opportunity to present its opposition strategy and defenses is likely to be in its notice of basis for relief. 37 CFR §42.21(d). A party will be limited to filing motions consistent with its notice, and if the notice fails to state a sufficient basis for relief, the relief requested may be denied under § 42.21(c). The Practice Guide states that the Board expects to initiate a conference call within about one month from the date of institution of the trial to discuss the scheduling order and any motions that the parties anticipate filing during the trial, based on an accurate motions list filed before the conference.
For this reason, it will be essential for the parties to fully consider and determine their strategies and defenses prior to submission of the notice of basis of relief and initial conference call. A patent owner who fails to identify a proposed motion to amend its claims might be precluded from subsequently filing an amendment responsive to the grounds of invalidity set forth in the petition or decision initiating the opposition. The limitations on motions imposed by the initial notice and authorization of motions by the APJ have been strictly applied in interferences.
Discovery under the proposed rules is extremely limited in comparison with the liberal discovery of an opponent’s case afforded in federal district court. As in interferences, “discovery” in post-grant proceedings under 37 CFR § 42.51 consists of “routine” discovery including the production of exhibits and cross-examination of an opponent’s declarant; “additional discovery” of evidence that is uniquely in the possession of an opponent and that relates to an issue raised by the opponent; and compelled testimony pursuant to a subpoena. Additional discovery must be approved in advance by an APJ, based on a motion showing that the grant of such discovery is in the interests of justice in inter partes review, or that by a showing of good cause in post-grant review. In interferences, additional discovery is rarely granted except for evidence relating to inequitable conduct, inventorship, or derivation, which is directly related to a contested issue and is solely in the possession of the opponent.
In a departure from interference procedure, the proposed rules would require mandatory initial disclosure of “noncumulative information that is inconsistent with a position advanced by the patent owner or petitioner during the proceeding.” 37 CFR § 42.51(b)(3). Furthermore, the party submitting the information must specify its relevance, including where the information is presented in a document and how it is pertinent to the claims. There is little explanation of the scope of this routine “discovery” requirement, except that it is intended to avoid the practice of requests for additional discovery and that it “may differ from the proposed changes to § 1.56.” The proposed Rules of Practice indicate that sanctions under § 41.12(a) could be imposed for misconduct including the failure to comply with an applicable rule, and state that “an example of a failure to comply with an applicable rule includes failure to disclose a prior relevant inconsistent statement.”
The proposed trial rules expand the sanctions that can be imposed on a party for misconduct, to include attorney fees, as well as a broad range of penalties including an order precluding a party from filing a paper or presenting or contesting an issue, an order barring discovery or excluding evidence, an order requiring a terminal disclaimer or the ultimate sanction of adverse judgment in the trial or dismissal of the petition. 37 CFR § 42.12. Misconduct includes misrepresentation of a fact, advancing a misleading or frivolous argument, abuse of discovery and abuse of process, but extends more broadly to encompass “failure to comply with an applicable rule or order in the proceeding” and engaging in “dilatory tactics.” Id. Misconduct may include “actions that harass or cause unnecessary delay or an unnecessary increase in the cost of the proceeding.”
The proposed rules evidently do not limit misconduct to willful misbehavior, if the simple failure to comply with a rule or order in the proceeding can be a basis for imposition of sanctions. Because of the limited period imposed by the statute for completion of a post-grant trial, sanctions for engaging in dilatory tactics, or actions that cause unnecessary delay in the proceedings, may result from actions that would not be exceptional in district court proceedings.
Sanctions have been infrequent in interferences, but under the proposed rules, misconduct that results in a severe sanction such as an award of judgment could also result in a substantial award of an opponent’s attorney fees.