Welcome to Skilled in the Art. I'm Law.com IP reporter Scott Graham. Next week is a calendar week before the Federal Circuit, and I'll have a look today and Friday at who's arguing some high-stakes cases, plus an ITC order that puts a little more bite in standard-essential patents. Specifically,

• Tensegrity's Matt Powers will argue the latest challenge to the PTAB appointment process.

• Weil Gotshal has a new opponent as Illumina-Ariosa battle goes up on appeal (again).

• Mintz wins an ID recommending an exclusion order based on a standard-essential patent.

As always, you can email me your feedback and follow me on Twitter.

Left to right, Tensegrity's Matt Powers, DOJ's Melissa Hoffman and Fish & Richardson's David Hoffman.

 

The PTAB Has an Appointments Problem, Part 2

Round two in the PTAB appointment wars are set for argument before the Federal Circuit on Monday. DOJ's Melissa Patterson will be back to argue that PTAB judges are inferior officers accountable to the PTO director, and therefore don't have to be nominated by the president and confirmed by the Senate. Tensegrity Law Group's Matt Powers will make the case for WiLAN/Quarterhill subsidiary Polaris Innovations that they're principal officers under the Supreme Court's 2018 Lucia decision and other precedents, and have been acting outside their authority. Fish & Richardson partner David Hoffman will support the PTO and DOJ on behalf of Kingston Technologies.

As I wrote last week, the stakes became much higher earlier this month when a Federal Circuit panel sounded very sympathetic to the constitutional argument in the separate case of Arthrex v. Smith & Nephew. As noted on Ropes & Gray's Patents Post Grant blog, the panel followed up with an order explicitly asking the parties how it should handle remand if it finds a constitutional violation.

On Monday we'll hear in Polaris Innovations v. Kingston Technologies what another panel thinks of the issue, along with what I expect to be forceful arguments from able advocates.

To recap, Polaris argues that the Supreme Court has ruled in the past that administrative judges who take testimony, conduct trials, rule on the admissibility of evidence, and can enforce compliance with discovery orders are constitutional officers. "Indeed, PTAB judges are even more independent than Tax Court judges or SEC ALJs, because their decisions are always final and not reviewable even by the USPTO's Director," Polaris argues in a brief signed by Powers.

Kingston argues that PTAB judges are "beholden to the Director." The director issues regulations governing IPR proceedings which the judges are required to follow. The director can withhold case assignments from judges whose rulings he doesn't like, and terminate them on the basis of improving the agency's efficiency—a less exacting standard than for cause.

The director can also call on the PTAB's Precedential Opinion Panel (POP), of which he is a member, to review any PTAB panel opinion. "If, notwithstanding these many means of supervision, a Board decision with which the Director disagrees does leave the agency," Patterson writes in the DOJ's brief, the director can intervene on appeal and ask the Federal Circuit to send the case back to the PTAB. DOJ and Kingston point out that the PTO has actually exercised such authority in the past.

Judges Kimberly Moore and Raymond Chen have already thrown serious shade on most of the DOJ's positions in the Arthrex arguments. Chen questioned whether PTAB judges feel compelled to follow guidance such as Director Andrei Iancu's recent update on Section 101 examination. Moore pointed out that even if the director can persuade the precedential opinion panel (POP) to review a decision, the director is just one vote among three on the POP.

Moore repeatedly suggested that the Federal Circuit could make the appointments constitutional by reading Title 5 civil service protections out of the statute covering PTO officers, thereby giving the director unfettered removal authority. DOJ and the Arthrex parties were due to file 20-page supplemental briefs today on how to handle remands if the court follows through with that holding.

One knowledgeable PTAB practitioner posits another possible solution: The PTO could adopt a rule providing that each PTAB decision is subject to a brief period of review by the director before becoming final. That might take some time to put in place, but it would spare PTAB judges from the threat of being fired over a ruling.

Perhaps we'll hear more new arguments Monday. And in December arguments at the Federal Circuit, Koninklijke Philips and Venable will be raising the issue twice, once in an appeal against Google and Williams & Connolly, and the other against Microsoft, HTC, and Perkins Coie.

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Who Else is Arguing?

The next case up Monday after Polaris is Verinata Health v. Ariosa Diagnostics, which means that once Powers is done arguing, he'll be turning over the lectern to his former law partner Ed Reines of Weil, Gotshal & Manges.

Almost two years ago, a San Francisco jury awarded Illumina and its subsidiary Verinata $27.6 million in their patent dispute with Ariosa Diagnostics. But Illumina didn't get the permanent injunction it was seeking against Ariosa's Harmony prenatal test. Monday's appeal will be the parties' fifth skirmish at the Federal Circuit related to patents on using cell-free DNA to diagnose fetal abnormalities.

Irell & Manella represented Ariosa at trial, but Wilmer Cutler Pickering Hale and Dorr partner Mark Fleming will ask the Federal Circuit to throw out the award. Fleming will argue that Ariosa's redesigned test doesn't infringe the two patents-in-suit, and that U.S. District Judge Susan Illston wrongly blocked Ariosa from challenging the validity of one of them based on assignor estoppel.

Reines will defend the award and argue that Illston erred by finding that Illumina and Ariosa parent Roche Molecular Systems aren't direct competitors. He argues in briefs that Roche bought Ariosa in the midst of the litigation "with eyes wide open" to the risk of infringement and shouldn't be excused from an injunction. Reines is asking the Federal Circuit to order Illston to enter the injunction, a request Ariosa calls "as bewildering as it is extraordinary."

 

ITC Isn't Afraid to Enforce Standard-Essential Patents

Persistence has paid off for Mintz and Netlist Inc. in a three-year-old battle with SK Hynix over dual in-line memory modules. The Irvine-based designer of memory subsystems won an Initial Determination recommending an exclusion order based on a standard-essential patent (SEP) at the International Trade Commission on Oct. 21.

It's the first finding of a 337 violation based on an SEP since 2013, according to Mintz. It's "an important reminder that, contrary to reports otherwise, enforcement of standard-essential patents at the ITC is still possible," Michael Renaud, chair of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo's IP practice, said in a written statement.

SEPs and injunctions are a hot-button issue. The DOJ and the PTO issued guidance in 2013 that SEP-based injunctions could give rise to antitrust concerns, absent unusual circumstances (such as an implementer clearly refusing to negotiate in good faith). The DOJ withdrew from the guidance last fall, but the PTO hasn't yet followed suit. Earlier this month Sens. Thom Tillis and Chris Coons urged the two agencies to find common ground.

Netlist brought successive actions against Hynix in both the ITC and the Central District of California. The ITC found no infringement in the first case, but along the way Chief ALJ Charles Bullock ruled that Hynix had not met its burden of proving that Netlist made unreasonable licensing demands. Hynix had argued that Netlist wasn't living up to its FRAND licensing commitment because it gave Samsung a sweeter deal, but Bullock found the licenses weren't comparable because Samsung had provided other benefits as part of a strategic partnership.

Bullock's ID in the second case hasn't been made public yet, but the ITC has provided notice that he found one of Netlist's two asserted patents valid and infringed, and that he is recommending an exclusion order. The ID is reviewable by the full commission.

Hynix, which is represented by Sidley Austin, has argued that U.S. District Judge Josephine Staton was poised to set a FRAND rate in a 2018 trial, only to have it short-circuited by Netlist's ITC actions and overseas lawsuits. Hynix says it's "willing and able to take a license on RAND terms" and that courts have frowned on injunctions—and ITC exclusion orders—in those circumstances. Hynix also has persuaded the PTAB to invalidate most, though not all, of the patent supporting the ITC order. Both sides are appealing the PTAB ruling to the Federal Circuit.

Jim Wodarski, Mintz's lead lawyer in the ITC action, said there have been questions in the bar about exclusion orders and SEPs over the last five years. But, he said, the ITC has never formally ruled them out. "We've always taken the ITC at its word," he said. Plus now, "the dynamic has changed with the present administration and DOJ taking a different position."

Publicly traded Netlist's share price jumped about 56% on news of the ID, but has since given back those gains.

Along with Wodarski Mintz's team included partners Drew DeVoogd, Steve Akerley, Aarti Shah, and associates Kristina Cary, Matthew Galica, and Tiffany Knapp.

That's all from Skilled in the Art today. I'll see you all again on Friday.