November 13, 2018 marked the effective date of the United States Patent and Trademark Office’s final rules revising the claim construction standard applied in inter partes review (IPR), post-grant review (PGR), and covered business method (CBM) proceedings. The revision has recently been called a “critically important rule change” by the USPTO.1 The potential impact of the new rules has been the subject of considerable attention and speculation since their issuance.
The New Rules and Their Intended Purpose
The new rules abandon the PTAB’s previously-applied “broadest reasonable interpretation” (BRI) standard for construing unexpired claims and instead require the PTAB to use the claim construction standard applied in federal district courts and the International Trade Commission.2 Specifically, consistent with Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) and its progeny, the new rules expressly require the PTAB to construe terms based on their ordinary and customary meaning to one of skill in the art as well as on the patent’s prosecution history:
In an inter partes review proceeding, a claim of a patent, or a claim proposed in a motion to amend under § 42.121, shall be construed using the same claim construction standard that would be used to construe the claim in a civil action under 35 U.S.C. 282(b), including construing the claim in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent. Any prior claim construction determination concerning a term of the claim in a civil action, or a proceeding before the International Trade Commission, that is timely made of record in the inter partes review proceeding will be considered.3
The final rules issued only 5 months after the proposed change was published.4 In that time, the Office received and considered 374 comments from interested parties—more comments than the entire rule package for the AIA itself—the majority of which were in favor of the change.5 The new claim construction standard became effective on November 13, 2018, and, as suggested by several commenters, will apply only prospectively to petitions filed on or after that date.6
In issuing the new rules, one stated goal of the USPTO is to promote uniformity and efficiency. According to the Office, “[m]inimizing differences between claim construction standards used in the various fora will lead to greater uniformity and predictability of the patent grant, improving the integrity of the patent system.”7 To that end, the final rule also requires the PTAB to consider any prior relevant claim construction determination from district courts or the ITC if timely made of record in the PTAB proceedings.8
The new rules also respond to complaints of unfairness by patent owners as a result of using one standard for validity determinations at the PTAB and another for infringement determinations in district court. As the USPTO explained, “[b]ecause the BRI standard potentially reads on a broader universe of prior art than does the Phillips standard, a patent claim could potentially be found unpatentable in an AIA proceeding on account of claim scope that the patent owner would not be able to assert in an infringement proceeding.”9 According to the USPTO, the new rules promote fairness because, “[o]bjectively speaking, [the] meaning [of a patent] cannot, and should not, depend on the happenstance on which forum might review the patent, years after issuance.”10
Impact of the Rules
It appears clear that petitioners are bracing for a significant impact from the changed standard. PTAB filings spiked just before the effective date of the new rules, with the PTAB receiving 80 new petitions on November 12 alone.11 Whether the new rules will actually result in a tangible change in the PTAB’s approach to claim construction remains to be seen. At least some commentators have questioned if there is any real difference between the BRI and Phillips standards in the first place.12 Indeed, the BRI standard, like Phillips, requires construction of a term consistent with the “ordinary and customary meaning of the term,” “the use of the claim term in the specification and drawings,” and “the interpretation that those skilled in the art would reach.”13
Regardless of the substantive difference, facial alignment of the standards may impact the extent to which the PTAB accords deference to prior district court or ITC claim construction rulings. The new rules require the PTAB to consider such rulings if timely made of record, and the USPTO has made clear it expects this practice to promote uniformity and efficiency because now “one forum can consider the work previously done by another forum.”14 The USPTO, however, stopped short of requiring the PTAB to follow a prior district court or ITC decision, expressly rejecting “[t]he suggestions that the PTAB must necessarily defer to prior claim constructions.”15 Rulings of the ITC and district court will instead be given “appropriate weight” based on, among other things, “how thoroughly reasoned the prior decision is and the similarities between the record in the district court or the ITC and the record before the PTAB.”16
In this sense, the rules are not a significant departure from the PTAB’s procedure under the prior BRI regime, in which the PTAB frequently considered but was not bound by earlier-in-time Markman orders from district courts and the ITC. Although the PTAB can no longer point to differences in claim construction standards to explain why it is deviating from a prior construction, it can still rely on differences in trial records or other “appropriate” factors to justify doing so. The PTAB “may provide further guidance in the future on the question of how the PTAB will consider prior claim constructions as circumstances warrant.”17 Until then, PTAB decisions applying the new rules will be closely watched to determine how frequently the USPTO’s stated goals of uniformity and efficiency will be outweighed by “appropriate” reasons to limit deference to a prior district court or ITC construction.
On the flipside, district courts and the ITC will also have to grapple with how much, if any, weight to give PTAB claim constructions in IPR, PGR, and CBM proceedings now that the standards are aligned. The USPTO rejected the request of some commenters to “state its intent that PTAB trial determinations be treated as preclusive on later tribunals.”18 As the USPTO recognized, “district courts have the discretion to review and/or adopt the PTAB’s initial or final claim constructions, using their own factors and reasoning.”19 To date, district courts have taken different approaches, with some Courts applying no deference to PTAB’s constructions citing, among other things, the different standards in the two fora.20 Uniform application of the Phillips standard removes that obstacle to deference, but it remains to be seen if district courts will nonetheless continue to justify departing from prior PTAB constructions for other reasons, such as differences in the record.
Notably, to the extent district courts are now more willing to defer to the PTAB, it may also increase the likelihood of a full or partial stay of a district court proceeding pending completion of a parallel IPR, PGR, or CBM.21 PTAB proceedings often make initial claim construction decisions during the institution decision and before district courts address claim construction. Since PTAB proceedings are part of a Patent’s intrinsic record, the Courts may consider the accelerated timeline of the PTAB proceedings and the ongoing development of prosecution history when considering a full or partial stay of the district court proceeding.
In short, it is too early to tell how effective the rule change will be in accomplishing the USPTO’s goal of “[a]ligning AIA proceedings at the PTAB with the district courts and the ITC [to] bring balance, predictability and consistency to the patent system as a whole.”22 Practitioners must be prepared for all outcomes as these issues work their way through the PTAB, courts, and the ITC.
1 Andrei Iancu, Director, United State Patent and Trademark Office, Remarks delivered at the American Intellectual Property Law Association (AIPLA) Annual Meeting, Washington D.C. (Oct. 25, 2018), available at https://www.uspto.gov/about-us/news-updates/remarks-director-iancu-american-intellectual-property-law-association-annual, [hereinafter “Director’s Remarks”].
2 83 F.R. 51,340 (Oct. 11, 2018).
3 37 C.F.R. § 42.100(b) (emphasis added); see also 37 C.F.R. §§ 42.200(b) (PGR), 42.300(b) (CBM).
4 83 F.R. 21,221 (May 9, 2018).
5 See 83 F.R. 51,341.
6 83 F.R. 51,356.
7 83 F.R. 51,342.
8 See 37 C.F.R. §§ 42.100(b), 42.200(b), 42.300(b).
9 83 F.R. 51,342.
10 Director’s Remarks, supra note 1.
11 Scott Boalick, Acting Chief Judge, Patent Trial and Appeals Board, Remarks at the Tenth Annual Conference on the Role of the Courts in Patent Law & Policy at Georgetown Law: Developments at the PTAB and the ITC (Nov. 16, 2018) (transcript available at https://recapd.com/w-f26584/).
12 See Comments on Changes to the Claim Construction Standard used in AIA Trial Proceedings, available at https://www.uspto.gov/patents-application-process/patent-trial-and-appeal-board/comments-changes-claim-construction.
13 Manual of Patent Examination Procedure § 2111.
14 Director’s Remarks, supra note 1.
15 83 F.R. 51,355.
18 83 F.R. 51,356.
22 Pragmatus AV, LLC v. Yahoo! Inc., No. C-13-1176 EMC, 2014 WL 1922081, at *4 (N.D. Cal. May 13, 2014); see also Niky R. Bagley, Treatment of PTAB Claim Construction Decisions: Aspiring to Consistency and Predictability, 32 Berkeley Tech. L.J. 315, 332 (2018).
21 Evolutionary Intelligence, LLC v. Sprint Nextel Corp., No. C-13-03587, 2014 WL 4802426, at *4 (N.D. Cal. Sept. 26, 2014) (granting stay and noting that, even under the prior BRI standard, “[w]hile the PTAB’s constructions will not be binding on this court, the IPR [claim constructions] will inform this court’s ultimate reasoning”).
22 Director’s Remarks, supra note 1.
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