PTAB Commits Not to Institute IPRs on Basis of Art or Arguments Considered During Patent Prosecution, Absent “Material Error”

Key Takeaways

• The PTAB’s criteria for whether to deny institution of an IPR where the prior art or arguments cited in the IPR petition were considered by the PTO during patent prosecution have been clarified by three recent PTAB decisions.
• The PTAB has made “a commitment to defer to previous Office evaluations of the evidence unless material error is shown.”¹
• Where “reasonable minds can disagree regarding the purported treatment of the art or arguments,” the PTAB will not institute an IPR.
• This explicit deference to the PTO’s decision to issue a patent may explain the recent decline in the rate of IPR institutions:
  • For the first quarter of the PTO’s FY 2020, the institution rate fell to a historically low 55%, as compared to the overall the institution rate 63% for FY 2019 and institution rates that fluctuated from 60% - 68% during FY 2015-18.
• For some accused infringers evaluating whether to challenge the validity of the asserted patents via IPR proceedings, these decisions could tip the scales in favor of just defending themselves in the district court litigation because in filing the IPR petition, they likely will have “shown their cards” well before they would have had to do so in the litigation, and if the PTAB denies institution, they will have done so for naught. 

Background

Although the PTAB has wide latitude in determining whether to institute an inter partes review (“IPR”), there are a few limits on its discretion. First, under Section 314 of the Patent Act,² the PTAB may—but is not required to—institute an IPR if it finds that “there is a reasonable likelihood that the petitioner would prevail with regard to at least one of the claims challenged in the petition.” Second, in SAS Institute, the Supreme Court held that the PTAB must either institute an IPR with regard to all of the claims challenged in a petition, or not at all.³ Beyond that, the PTAB’s determination whether or not to institute an IPR is discretionary and cannot be challenged on appeal.⁴ Section 325(d) of the Patent Act explicitly empowers the PTAB to decline to institute an IPR “because the same prior art or arguments previously were presented to the Office,” but does not require the PTAB to do so.⁵

On March 24, 2020, the PTAB clarified the criteria it will use in determining whether to institute an IPR of an issued patent when it designated two prior PTAB institution decisions as precedential, and one as informative.⁶ Taken together, these decisions signal that the PTAB has adopted a “framework” that makes it less likely that it will institute an IPR on the basis of prior art or arguments that were considered by the PTO during the course of patent prosecution. This explicit deference to the PTO’s decision to issue a patent may explain the recent decline in the rate of IPR institutions – for the first quarter of the PTO’s Fiscal Year 2020 (covering Oct. 1 – Dec. 31, 2019), the institution rate fell to a historically low 55%, as compared to the overall the institution rate 63% for all of Fiscal Year 2019 and institution rates that fluctuated from 60% - 68% during FY 2015-18.⁷

Analysis

The PTAB’s decisions in Advanced Bionics, Oticon Medical AB v. Cochlear Ltd.,⁸ and Puma North America, Inc. v. Nike, Inc.,⁹ make clear that the PTAB will be unlikely to institute an IPR where either the prior art or arguments asserted in a petition were considered by the PTO during patent prosecution.

Advanced Bionics, which issued on February 13, 2020, announced the standard that will be applied by the PTAB in determining whether to deny institution under Section 325(d):

“[U]nder §325(d), the Board uses the following two-part framework: (1) whether the same or substantially the same art previously was presented to the Office or whether the same or substantially the same arguments previously were presented to the Office; and (2) if either condition of first part of the framework is satisfied, whether the petitioner has demonstrated that the Office erred in a manner material to the patentability of challenged claims. If a condition in the first part of the framework is satisfied and the petitioner fails to make a showing of material error, the Director generally will exercise discretion not to institute inter partes review.  If reasonable minds can disagree regarding the purported treatment of the art or arguments, it cannot be said that the Office erred in a manner material to patentability. At bottom, this framework reflects a commitment to defer to previous Office evaluations of the evidence of record unless material error is shown.”

Advanced Bionics at pp. 8-9 (emphasis added).

The test articulated in Advanced Bionics sharpens the non-exclusive, multi-factor analysis the PTAB previously articulated in Becton, Dickinson and Co. v. B. Braun Melsungen AG, IPR2017-01586, Paper 8 (precedential opinion). In Becton, Dickinson, the PTAB listed six “non-exclusive factors” that were relevant to the institution decision: (a) the similarities and material differences between the asserted art and the prior art cited during examination, (b) the cumulative nature of the asserted art and prior art evaluated during examination, (c) the extent to which the asserted art was evaluated during examination, including whether the prior art was the basis for rejection, (d) the extent of the overlap between the arguments made during examination and the manner in which Petitioner relies on the prior art or Patent Owner distinguishes the prior art, (e) whether Petitioner has pointed out sufficiently how the Examiner has erred in its evaluation of the asserted prior art; and (f) the extent to which additional evidence and facts presented in the Petition warrant reconsideration of the prior art or arguments. Id. at 17-18 (emphasis in original).

In Advanced Bionics, the PTAB grouped the six Becton, Dickinson factors into two groups: (1) whether the same (or substantially the same) art or arguments previously were presented to the PTO (Becton, Dickinson factors (a), (b) & (d)), and (2) whether the Petitioner has demonstrated material error by the PTO during prosecution (Becton, Dickinson factors (c), (e) & (f)). Where the Patent Owner prevails on group 1 by showing that the prior art relied upon in the IPR petition was considered during patent prosecution, the burden is placed on the Petitioner to prove material error by the PTO. Moreover, the burden on the Petitioner becomes weightier if there is a detailed record of the PTO’s consideration of the prior art asserted in the IPR petition. “[I]f the record of the Office’s previous consideration of the art is not well developed or silent, then a Petitioner may show the Office erred by overlooking something persuasive under factors (e) and (f). On the other hand, if the alleged error is a disagreement with a specific finding of record by the Office, then ordinarily the Petitioner’s showing of material error must overcome persuasively that specific finding of record.” Advanced Bionics at 10-11.

In Advanced Bionics, the IPR petition asserted prior art references that had not been considered during prosecution, but the PTAB nevertheless declined to institute an IPR because it found the newly-asserted art was “substantially the same” as the prior art considered by the PTO during prosecution. Advanced Bionics at p. 14. In a multi-page analysis, the PTAB rejected the Petitioner’s contention that the prior art the Examiner considered during prosecution was not considered for disclosure of the same limitations that the Petitioner contended were disclosed in the newly-asserted art. Id. at 14-19.

After finding that the newly-asserted art was substantially the same as the prior art considered by the Examiner during prosecution, the PTAB then evaluated the final Benton, Dickinson factor: whether the Petitioner had sufficiently demonstrated that the Office had erred. In performing this analysis, the PTAB deferred to the Examiner’s factual findings with regard to that prior art—finding that the petition had not demonstrated “material error.” The PTAB stated that the required error would be demonstrated “by showing that the Examiner misapprehended or overlooked specific teachings in the relevant prior art such that the error by the Office was material to the patentability of the prior claims.” Id. at 21. The PTAB also stated that “an error of law, such as misconstruing a claim term, where the construction impacts patentability of the challenged claims” might also constitute a “material error” by the Examiner. Id. at 8, n.9. The PTAB held that the Petitioner had failed to make the required showing.

Oticon Medical, which issued on October 16, 2019, provides the flip-side of Advanced Bionics. There, the PTAB instituted an IPR notwithstanding the Patent Owner’s argument that the Petition advanced only prior art that was the same or substantially the same as the prior art considered during patent prosecution. It instituted an IPR based on its subsidiary finding that the newly-asserted art in the Petition was not substantially the same as the prior art considered by the Examiner during prosecution.  Specifically, the PTAB engaged in a detailed factual comparison of the newly-asserted art and the prior art considered during prosecution, and found that the newly-asserted art was “not cumulative.” Oticon Medical, at 11-16. On the basis of this finding of “new, noncumulative prior art asserted in the Petition,” the PTAB “determine[d] not to exercise our discretion under §325(d) to deny the Petition on this basis.” Id. at 20.

In Puma North America, which issued on October 31, 2019, the PTAB exercised its discretion to deny institution where all of the prior art asserted in the Petition had been considered by the Examiner during prosecution. The PTAB acknowledged that the Petitioner had submitted an expert declaration in support of the petition that had not been presented or during prosecution, but that the expert declaration was not sufficient to “demonstrate[] persuasively that the Examiner erred in considering this prior art.” Puma North America, at 21.    

Footnotes

1. Advanced Bionics, LLC v. Med-El Elektromedizinische Geräte GMBH, IPR2019-01469, Paper No. 6, Feb. 13, 2020, p. 9.
2. 35 U.S.C. § 314.
3. SAS Institute, Inc. v. Iancu, 138 S.Ct, 1348, 1354 (2018).
4. See 35 U.S.C. § 314(d); Cuozzo Speed Technologies, LLC v. Lee, 136 S.Ct. 2131, 2139 (2016).  
5. 35 U.S.C. § 325(d)
6. A presidential decision is “binding Board authority in subsequent matters involving similar facts or issues”, and an informative decision “set[s] forth Board norms that should be followed in most cases, absent justification, although an informative decision is not binding authority on the Board.”  Patent Trial and Appeal Board Standard Operating Procedure 2 (Revision 10) p. 11.
7. Trial Statistics: IPR, PGR, CBM – Patent Trial and Appeals Board – December 2019 (https://www.uspto.gov/sites/default/files/documents/Trial_Statistics_20191231.pdf)
8. IPR2019-00975, Paper No. 15 (precedential decision).
9. IPR2019-01042, Paper No. 10 (informative decision).