Please welcome Andrew Baluch as a new contributing author for PharmaPatentsBlog!

There is a lot to like about the USPTO’s proposed rules for the new patent trial proceedings that the Patent Trial and Appeal Board (PTAB) will conduct under the America Invents Act (AIA). On the whole, the proposed rules released last month appear to be sound, well-written, and based largely on the “Standing Order” governing current Interference proceedings. The team of administrative judges that drafted the proposals should be commended for their work.

But, as with any project of this size, there is bound to be some oversight and possible overreach. After studying the seven Federal Register notices spanning 133 pages that comprise the post-grant rules packages, I particularly was struck by three specific proposed rules. As explained below, these three proposed rules appear to be unnecessary, unsupported by the law, and should be dropped. The USPTO would be doing everyone a favor, including itself, if it simply omits the following from its final rules.

I.   Proposed Rule 37 CFR § 42.51(b)(3) – Routine discovery of inconsistent information

If the USPTO had wanted to revive the pre-Therasense materiality standard and impose a heightened duty of disclosure unique only to post-grant trials, it would be hard pressed to find a more onerous way of doing so than proposed rule 37 CFR § 42.51(b)(3):

 § 42.51 Discovery.
(b) Routine discovery. Except as the Board may otherwise order:
(3) Unless previously served, noncumulative information that is inconsistent with a position advanced by the patent owner or petitioner during the proceeding. The information is to be filed as soon as practicable in a motion identifying supplemental information or as part of a petition, motion, opposition, reply, preliminary patent owner response to petition, or patent owner response to petition. The party submitting the information must specify the relevance of the information, including where the information is presented in a document and, where applicable, how the information is pertinent to the claims.

Astute readers of this blog will know that the “McKesson problem“—the need to cross-cite Office actions and statements in copending applications—stems in large part from the USPTO’s Rule 56 duty to disclose information that is “inconsistent with . . . a position” advanced by the applicant. In the wake of Therasense, in July 2011, the USPTO proposed to revise Rule 56 by dropping the “inconsistent with” language and adopting the Federal Circuit’s but-for materiality test. In proposing this new standard, the USPTO sensibly explained that “a unitary materiality standard is simpler for the patent bar to implement” and thus “patent applicants will not be put in the position of having to meet one standard for materiality as defined in Therasense in defending against inequitable conduct allegations and a second, different materiality standard to fulfill the duty to disclose before the Office.”

But a second, different duty of disclosure before the USPTO is exactly what proposed 37 CFR § 42.51(b)(3) would impose. Although the rule is titled “Routine discovery” rather than “Duty of disclosure,” it imposes on parties an obligation not only to submit pre-Therasense-type information to the Board, but also to “specify the relevance of the information, including … where applicable, how the information is pertinent to the claims.” Indeed, the Federal Register Notice specifically identifies “failure to disclose a prior relevant inconsistent statement” as an example of sanctionable misconduct under the proposed rule.

The USPTO’s justification for this rule, as stated in the background section of the Federal Register Notice, is that “information covered by proposed 42.51(b)(3) is typically sought through additional discovery and that such information leads to the production of relevant evidence.” But so too would producing every single document in a party’s possession likely “lead[] to the production of relevant evidence.” The question is: at what cost, and for what marginal benefit?

In my view, unless a party has a credible, good faith basis that the other party possesses specific information that is inconsistent with its position, then such discovery requests amount to little more than a fishing expedition and should not be granted. Here, the USPTO even goes beyond simply permitting such discovery requests by imposing an affirmative duty of disclosure on the party in possession of such information. Imposing such a requirement, and burdening it with the specter of misconduct, is going to re-open the floodgates that the Federal Circuit tried to dam up in Therasense.

II.   Proposed Rule 37 CFR § 42.73(d)(3) – Estoppel against patent applicant or owner

Sections § 315(e) and § 325(e) of the AIA set forth estoppel provisions that apply against an unsuccessful petitioner in Inter Partes Review and Post-Grant Review, respectively. The AIA does not include any provisions that impose “estoppel” against an unsuccessful patent owner. So, it was surprising to see the USPTO propose “estoppel” against patent applicants and owners in proposed 37 CFR § 42.73(d)(3):

§ 42.73 Judgment.
(d) Estoppel—
(3) Patent applicant or owner. A patent applicant or owner whose claim is canceled is precluded from taking action inconsistent with the adverse judgment, including obtaining in any patent:
(i) A claim to substantially the same invention as the finally refused or cancelled claim;
(ii) A claim that could have been filed in response to any properly raised ground of unpatentability for a finally refused or cancelled claim; or
(iii) An amendment of a specification or of a drawing that was denied during the trial proceeding.

The Federal Register Notice cites no statutory authority for this part of the rule. If the USPTO is relying on common law doctrines of claim preclusion or issue preclusion, it should to take a hard look at the requirements of those doctrines. “Claim preclusion” requires, among other things, that the two proceedings be based on the same set of transactional facts. See Restatement (Second) of Judgments, § 24. “Issue preclusion” requires, among other things, that the issue have been “actually litigated and determined” by a valid and final judgment. Id. § 27. It is unclear how the proposed rule squares with these common law doctrines, given that it would apply to “any patent” (presumably even those containing different specifications, claims, and inventors), as well as to any “claim that could have been filed” (and thus not actually litigated and determined).

Proposed 37 CFR § 42.73(d)(3) also is in tension with Federal Circuit precedent, such as Abbott Labs. v. TorPharm (Fed. Cir. 2002), where the court notes:

“[P]recedent has long supported the right of an applicant to file a continuation application despite an unappealed adverse Board decision, and to have that application examined on the merits. Where the Patent Office has reconsidered its position on patentability in light of new arguments or evidence submitted by the applicant, the Office is not forbidden by principles of preclusion to allow previously rejected claims.’’

III.   Proposed 37 CFR § 42.121(c)/42.221(c) – Amendments

Proposed rules 37 CFR §§ 42.121(c) and 42.221(c) would procedurally deny entry of amendments “enlarging the scope of a claim” or adding “new matter” in Inter Partes Review or Post Grant Review, respectively.  This paradigm is a marked departure from the way the USPTO has implemented similar statutory language in reexamination and reissue proceedings under 35 USC §§ 251, 305, and 314. In those proceedings, such amendments are entered, but trigger substantive rejections (e.g., under 35 USC § 112 ¶ 1).  The two proposed rules are identical and state:

§ 42.121 [or 42.221] Amendment of the patent.
(c) A motion to amend the claims of a patent will not be authorized where:
(1) The amendment does not respond to a ground of unpatentability involved in the trial; or
(2) The amendment seeks to enlarge the scope of the claims of the patent or introduce new subject matter.

As a practical matter, it is not always easy to tell whether claim scope has been enlarged or new matter has been introduced.  Reasonable minds can differ.  Claim enlargement requires a claim construction analysis.  New matter requires a written description analysis.  These are not easy issues to decide on the fly.  Given that claim enlargement and new matter violations are statutory grounds for unpatentability, it seems odd to single them out as reasons to procedurally refuse an amendment.  Why not deny entry if the amended claims are unpatentable on any other statutory ground, like § 102 or § 103?

Another problem with these proposed rules stems from provisions in the AIA.  The statute draws a bright line between a patent owner’s first motion to amend (i.e., “1 motion to amend”) and any “[a]dditional motions to amend.”  Compare new 35 U.S.C. § 316(d)(1), with id. § 316(d)(2)).  Only as to the latter does the AIA give the USPTO fairly broad discretion to enter (or refuse) amendments “as permitted by regulations prescribed by the Director.”  There is no such language limiting the patent owner’s first motion (i.e., “1 motion”) to amend. Thus, the USPTO may be overreaching its statutory authority with these rules, at least as applied to the patent owner’s first motion to amend.

The proposed rules also are inefficient.  Substantial re-work will be required if the Board denies an amendment on this basis and applies the prior art to the unamended claims, only to have the Federal Circuit reverse the denial of the amendment because it did not in fact enlarge the scope of the claims or add new matter.  Such a case would be sent back to the Board to apply the prior art to the amended claims.  To avoid this delay and inefficient use of USPTO and judicial resources, the Board should enter the patent owner’s “reasonable number of substitute claims” (as expressly provided for in the AIA), receive full briefing and testimony on all patentability issues raised (including claim enlargement and new matter), and then decide all issues in its final written decision.

What do you think?

Public comments on the rules packages for the new patent trial proceedings are due April 9 and 10, 2012. What do you think of them? Do you agree or disagree with my analysis? Are there any other rules that should be revised or omitted?

For a detailed summary of the full rules packages for the new trial proceedings, please see Foley’s February 8, 2012 Legal News Alert.