On September 16, 2012, post-grant proceedings became available
as means to challenge patent validity pursuant to the America
Invents Act. The post-grant proceedings take place before the
Patent Trial and Appeal Board ("PTAB"), and include
inter partes review ("IPR"), covered business
method patent review ("CBM") and post grant review
("PGR"). Take a look at our snapshot of
these
options for more detail.
Over the last 18 months, the rules and standards for these
proceedings have begun to be hashed out, but this area of law is
still evolving. A prime example of this is the currently
pending appeal to the Federal Circuit from the PTAB's decision
in the first CBM review in SAP America, Inc. v. Versata Data
Development Group, PTAB Case CBM2012-00001. This case
involves several key issues, including the: (1) PTAB's
jurisdiction; (2) scope of available grounds of invalidity; and (3)
appropriate claim construction.
The SAP case concerns U.S. Patent No. 6,553,350, over which the
parties have been litigating for many years. In fact, the
case proceeded to trial, and a jury found that SAP infringed the
patent and awarded Versata damages of lost profits and a reasonable
royalty. The Federal Circuit affirmed the jury's verdict
on infringement and damages, but remanded as to the
injunction.
While the appeal was pending, SAP filed a CBM petition with the
PTAB, alleging that several claims of the '350 patent were
invalid. The PTAB agreed and declared that the patent was
invalid under 35 U.S.C. § 101. The '350 patent is
directed to a method and apparatus for pricing products and
services and the central concept involves hierarchal arrangement of
data. Applying the broadest reasonable interpretation
standard for claim construction, the PTAB panel found that
Versata's claims encompass unpatentable abstract ideas and lack
sufficient meaningful limitations beyond the recited abstract
idea.
Versata has now appealed the PTAB's finding of invalidity to
the Federal Circuit on several bases in two companion appeals
(Versata v. SAP, Fed. Cir. Case 2014-1194 and Versata
v. Lee, 2014-1145), arguing that "[t]he PTAB's
jurisdictional determinations were overreaching; its merits
analysis legally erroneous; and its ultimate conclusion –
holding this detailed, commercially successful software patent to
be unpatentably 'abstract' – incorrect."
In addition to arguments related to the specific merits of the
case, Versata makes three arguments to watch:
- That the PTAB lacked jurisdiction to adjudicate the CBM petition because a final decision was reached by a district court – even if still on appeal – and review was thus estopped;
- That the PTAB did not have the authority to rely on 35 U.S.C. § 101 as a grounds of invalidity. Versata asserts that the plain language of 35 U.S.C. §282(b)(2) limits grounds for invalidity in a CBM petition to 35 U.S.C. §§ 102 and 103 (as is the case with IPRs); and
- That the PTAB improperly ignored the district court's prior claim construction and incorrectly employed the broadest reasonable interpretation ("BRI") standard for claim construction.
Regarding jurisdiction, the SAP case is reminiscent of –
though the facts and timing are somewhat different – the case
of Fresenius USA v. Baxter Int'l. (Fed. Cir.
2013). There, the district court found on summary judgment
that the asserted claims were valid. That decision was
affirmed by the Federal Circuit. But before the district
court issued final judgment on remand, the PTO found the claims
invalid in concurrently pending ex parte
reexamination. In a second appeal, the Federal Circuit upheld
the PTO's invalidity decision, explaining that a validity
decision is not "final" for purposes of res
judicata until judgment is entered, and that once claims are
invalidated by the PTO, the patentee "no longer has a cause of
action." The Federal Circuit denied a rehearing en
banc, but a petition for certiorari to the Supreme
Court is pending.
Regarding the BRI standard for claim construction raised in the SAP
case, an amicus brief signed by many Fortune 500 companies
from a variety of different technical sectors was filed. The
brief argues that by imposing the BRI standard in PGR, IPR and CBM
review, the PTAB exceeded its limited rule-making authority, and
that the BRI standard is contrary to the plain language and
legislative intent of the AIA.
SAP's brief is due May 1, 2014. Meanwhile, in the
underlying district court litigation, the court has refused to stay
the proceedings – namely the award of $391 million –
while the CBM appeals are ongoing. See Versata Software,
Inc. v. SAP America, Inc., Case No. 2:07cv153-RSP (E.D. Tex.
April 21, 2014). The district court also held that the
PTAB's ruling on patent invalidity does not constitute an
"extraordinary circumstance" warranting reversal of the
jury verdict.
Venable will continue to monitor the progress of this appeal,
including updates as to oral argument and final decision when
reached.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.