United States: Appellate Implications Of Filing Post-Grant Patent Challenges At The Patent Trial And Appeal Board

It is a recurring mantra from appellate practitioners to their trial co-counsel that every decision and action made throughout the course of a trial has appellate consequences that must be considered. Properly preserving issues for review, as well as planning for the standard of review that those issues will receive on appeal, are crucial tasks that often go unappreciated during the whirlwind and drama of a trial. Nowhere is appellate planning more underappreciated, however, than in the context of filing patent challenges under the new post-grant provisions of the America Invents Act.

The America Invents Act changed several procedures within the Patent and Trademark Office for disputes related to issued patents. Among these changes was the creation of three new avenues for Defendants (or other interested parties) to challenge the validity of an issued patent, and a new administrative body within the agency, the Patent Trial and Appeal Board (PTAB), to adjudicate those challenges. The three avenues for challenging patent validity correspond to three types of petitions that a challenger can file: (1) a petition for Inter Partes Review (IPR), (2) a petition for Post Grant Review, and (3) a petition for Covered Business Method Review. The scope and timing of the filing dictate which kind of petition is available under a given set of circumstances. IPR petitions are by far the most common.

Petitions challenging patents are typically filed by Defendants in the course of patent litigation, hoping to secure a faster and less costly way of invalidating a patent asserted against them. As a result, co-pending patent infringement litigation is often stayed by district courts upon the filing or institution of a petition, pending a final written decision on the merits from the PTAB. Many defendants find filing a PTAB petition to be an attractive strategy, not only because it appears to be faster and cheaper than district court litigation (there is some debate as to whether it is actually faster or cheaper), but because the PTAB has a reputation for being a patent-hostile forum. (Former Federal Circuit Chief Judge Rader has famously referred to PTAB panels as "patent death squads" in his remarks at the AIPLA Annual Meeting in October 2013).

Regardless of one's view of the PATB, it certainly provides a challenger-friendly forum with respect to the standard of proof and the claim construction standards that it applies to the patents it reviews. A district court must treat patents with a presumption of validity, and review challenges to validity under a clear and convincing evidence standard of proof. District courts also construe claim terms according to the standard articulated by the Federal Circuit in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), while the PTAB gives disputed claims their "broadest reasonable construction," a scope more likely to ensnare the cited prior art.

There are pitfalls to filing petitions at the PTAB, however, in that adverse decisions and waivers can give rise to estoppel in co-pending district court litigation. Additionally, if a court is not willing to stay the co-pending litigation, a Defendant has merely added another layer to its litigation costs, rather than securing an expedient alternative.

But there is another reason that filing a PTAB petition is a strategic boon for a defendant; a reason often overlooked at the early stages of trial when such petitions are due—the standard of review on appeal. Final written decisions on the validity of a patent as issued by the PTAB are appealable directly to the Court of Appeals for the Federal Circuit, the same forum to which all district court patent cases are appealed. But the standard of review applied to PTAB appeals is more deferential than the standard applied to district court decisions in several ways.

First, the decision of the PTAB on whether to institute a review is not appealable at all. In re Cuozzo Speed Technologies, LLC, No. 2014-1301 (Fed. Cir. 2015). Additionally, mandamus relief is not available for PTAB evidentiary and discovery rulings, the way it would be in a district court environment. In re Telefonaktiebolaget LM Ericsson, 2014 WL 1760009, *1 (Fed. Cir. May 5, 2014); In re Redline Detection, LLC, 547 Fed. Appx. 994, 995 (Fed. Cir. 2013). These rules have benefitted challengers so far, since the patentee has more to lose in an improperly instituted or administered review.

On the merits, the standard of review that the Federal Circuit applies to PTAB decisions on obviousness and claim construction is more deferential than that applied to district court decisions on those same questions. Smith & Nephew v. Rea, 12-1343 (Fed. Cir. 2013). The standard applied to factual findings underlying PTAB decisions is "substantial evidence," which can be satisfied by anything beyond a scintilla of evidence on which the PTAB could have relied in arriving at their conclusion. By contrast, the standard of review of factual findings underlying district court decisions on those same questions is "clear error." A decision is clearly erroneous if, in light of all of the evidence, the appellate court is left with the definite and firm conviction that a mistake has been made. That standard can be satisfied even if there is just over a scintilla of evidence supporting the lower tribunal's determination.

In addition, administrative patent judges on the PTAB must have degrees in technical sciences, while typical district court judges do not. As a result, PTAB judges may be more inclined than generalist judges to render scientifically fact-intensive analyses on obviousness and claim construction. District court judges might be more inclined to rely less on the scientific details and more on the guiding legal principles in making their determinations. Legal questions for both bodies are reviewed de novo. Those differing tendencies thus stand to amplify the effect of the more deferential standard of review for factual determinations of the PTAB, while implicating more de novo review of district court decisions.

In the course of the few years that these petitions have existed, many thousands have been filed, thousands have been decided, and hundreds have been appealed. So far only a few of these appeals have been decided. None have been reversed. The patent litigation community is thus poised on the crest of a wave of new case law coming out of the Federal Circuit. As the bulk of these decisions start coming down, the appellate implications of PTAB filings will become clearer.

Nonetheless, strategic decisions regarding whether and when to file an IPR (or other PTAB petition), as well as the scope and content of that IPR, have already become some of the most important decisions a Defendant can make in the course of a patent infringement litigation. Whether counseling a client on the associated fees or coordinating the selection of prior art references with co-counsel, the appellate implications of each decision made need to be part of the conversation now.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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