This article appeared in The Intellectual Property Strategist, an ALM/Law Journal Newsletters publication that provides a practical source of both business and litigation tactics in the fast-changing area of intellectual property law, including litigating IP rights, patent damages, venue and infringement issues, inter partes review, trademarks on social media – and more.

On May 27, 2020 the U.S. Patent and Trademark Office (USPTO) proposed rule changes to govern inter partes review (IPR), post-grant review (PGR), and covered business method (CBM) review proceedings at the Patent Trial and Appeal Board (PTAB). The most significant proposal would eliminate the presumption that a genuine issue of material fact created by testimonial evidence filed with a patent owner preliminary response would be viewed in the light most favorable to petitioner when deciding to institute a review. Adoption of this rule could encourage more patent owners to file declarations with their preliminary responses, and may ultimately result in decreasing petitioner success rates in obtaining institution of review. The other changes would simply conform the rules to current USPTO practices, and are therefore less noteworthy. Below is a summary of each proposed rule change and its potential impact on PTAB practice.

Rule Change #1: Removing the requirement to view a genuine issue of material fact created by testimonial evidence filed with a patent owner preliminary response in the light most favorable to petitioner for purposes of institution.

The rule change of most import would remove the current presumption that a genuine issue of material fact created by testimonial evidence (such as an expert or inventor declaration) filed with a patent owner preliminary response would be viewed in the light most favorable to the petitioner for purposes of deciding to institute a review. Under the amended rule, the Board would consider the totality of all the evidence on even ground when determining whether a petitioner has met the applicable standard for institution.

The original 2012 rules did not allow a patent owner to submit testimonial evidence with its preliminary response. The current rule came into effect in 2016, and allows testimonial evidence to be submitted with a patent owner's preliminary response, with the caveat that any genuine issue of material fact created by such evidence is viewed in the light most favorable to the petitioner for purposes of institution. See, 37 C.F.R. §§42.108(c) and 42.208(c). The USPTO's description of this proposed rule change states that it believe the current rule should be amended due to concerns over patent owners being discouraged from filing testimonial evidence with preliminary responses. See, 85 FR 31728, 31729-30 (May 27, 2020).

If the proposed change is adopted, then it would be more desirable for patent owners to submit testimonial evidence with a preliminary response. Patent owners would receive a benefit by the Board being permitted to weigh genuine issues of material fact created by testimonial evidence on even ground for purposes of institution. This could result in further declines to institution rates below the present (and historically low) rate of 55%. See, Official USPTO Trial Statistics (April 2020).

Rule Change #2: Conforming the rules with current PTAB practice of instituting on all claims and grounds under SAS

Based on binding appellate precedent issued by the Supreme Court and Federal Circuit in 2018, the PTAB may not institute trial on fewer than all claims challenged or fewer than all grounds asserted in a petition. See, SAS Institute Inc. v. Iancu, 138 S. Ct. 1348, 1359-60 (2018); Adidas AG v. Nike, Inc., 894 F.3d 1256, 1258 (Fed. Cir. 2018). In conformance with this precedent, the USPTO implemented its current policy of either instituting trial on all claims and all grounds included in a petition, or denying the petition in its entirety. See, "Guidance on SAS" (April, 26, 2018). The USPTO proposes amendments to 37 C.F.R §§42.108 and 42.208 that simply update the rules to align with this policy.

Rule Change #3: Conforming the rules with current PTAB practice regarding: a) the scope of replies and patent owner responses; and b) the availability of sur-replies

Also in response to SAS, the USPTO implemented its current practice of: a) allowing replies and patent owner responses to address issues discussed in the institution decision; and b) authorizing sur-replies to principal briefs (i.e., to a reply to a patent owner response or to a reply to an opposition to a motion to amend). See, 83 FR 39989 (August 13, 2018); Office Patent Trial Practice Guide, August 2018 Update at 14-15. The current sur-reply practice essentially replaced the original practice of filing what were known as "observations on cross-examination." In the present practice, a sur-reply is permitted to respond only to arguments made in reply briefs, comment on reply declaration testimony, or point to cross-examination testimony. With the exception of deposition transcripts from the cross-examination of reply witnesses, a sur-reply is not allowed to make any new evidence of record. The USPTO has proposed amendments to 37 C.F.R §§42.23 and 42.24 that formalize the current practice in the regulation.

Potentially Impacted Proceedings and Timing

The USPTO has not yet decided the date in which any adopted rule change would be implemented, nor the applicability of the rule changes to pending proceedings. For example, it has not been decided if adopted rule changes would apply to all pending proceedings in which a patent owner preliminary response is filed after the effective date of the adopted changes. The period for public comment is expected to close before the publication of this article on June 26, 2020. Please contact a PTAB practitioner for additional information or to discuss how the proposed rule changes may impact you.

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Kerry S. Taylor, Ph.D. and Nathanael R. Luman, Ph.D. are partners in Knobbe Martens' San Diego office. Dr. Taylor co-chairs the firm's PTAB practice group. Dr. Taylor and Dr. Luman have been actively representing patent owners and petitioners in IPR proceedings since 2012.