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American Intellectual Property Law Association

What is the Proper Standard What is the Proper Standard for Claim Construction for Claim Construction

in the new AIA post grant proceedings? – in the new AIA post grant proceedings? – Fed. Circuit Appeals by Versata and CouzzoFed. Circuit Appeals by Versata and Couzzo

Tom Engellenner, Pepper Hamilton, LLPPresentation to the IP in Japan Committee

AIPLA Mid-Winter Institute

January, 2014

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Claim Construction Tug of War2

BroadestReasonable

Interpretation

V.Ordinary AndCustomaryMeaning

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Claim Construction Tug of War

Origins of the Broadest Reasonable Interpretation Standard at the USPTO

The Phillips standard used by federal courts and the ITC for claim construction

Versata v. SAP – First appeal of Covered Business Method decision by the Patent Trial & Appeal Board

Couzzo v. Garmin – First appeal of an Inter Partes Review by the PTAB

Appellant’s Arguments Government (Intervenor) Arguments Views presented by Amica

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Broadest Reasonable Interpretation4

As the name suggests, the BRI rule gives the PTAB the ability to interpret each element of a claim as broadly as reasonably possible so long as the interpretation is consistent with the specification as understood by one of ordinary skill in the art.

The impact of such a broad interpretation is that claim language can “read on” prior art that otherwise might not be relevant if the claim element is given its ordinary meaning.

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Broadest Reasonable Interpretation5

“[The BRI standard] ensures that the public can clearly understand the outer limits applicants and patentees will attribute to their claims. And since applicants and patentees have the opportunity to amend their claims when working with the USPTO, they are able to resolve ambiguities and overbreadth through this interpretive approach, producing clear and defensible patents at the lowest cost point in the system.” (emphasis added)

-- (USPTO Director’s blog, June 19, 2012.)

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Broadest Reasonable Interpretation6

Use of the BRI is a long standing USPTO policy:

approved as an examination standard for patent applications in 1932 (In re Horton, 58 F.2d 682)

approved as the standard for reissue applications in 1981 (In re Reuter, 651 F.2d 751).

approved of the standard for reexaminations in 1984 (In re Yamamoto, 740 F.2d 1569).

However, the Federal Circuit has been careful not to call BRI a claim construction standard but instead referred to it as an “examination expedient.”

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The Phillips Standard7

A different standard is applied to issued patents by the federal courts – the so-called Phillips rule that requires judges and juries to give each element of a claim its “ordinary and customary meaning” as understood by the skilled artisan.

-- (Phillip v AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005)

Analysis focuses on inventor’s intent gleamed from:Intrinsic evidence: applicant’s own definition, other claims and specification and prosecution historyExtrinsic evidence: dictionaries, journal articles, experts

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AIPLA Position8

“The Board should use a Phillips/Markman-style claim construction standard in review proceedings because the challenged claims are issued and cannot be freely amended.”

-- AIPLA Comments on PTAB Trial Proceedings October 16, 2014

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Versata and Couzzo

Versata v. SAP concerns the very first “covered business method” (CBM) review proceeding (CBM2012-00001) conducted by the USPTO and is an appeal by the Patent Owner, Versata, of the Patent Trial and Appeal Board (PTAB) decision to invalid certain challenged claims.

Cuozzo v. Garmin concerns the first inter partes review (IPR) proceeding (IPR2012-00001) and likewise is an appeal from a PTAB decision finding Couzzo’s claims invalid.

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Versata10

Versata’s case concerns claims of USP 6,553,350, directed to methods and apparatus for pricing products.

The claims recited the use of “pricing information” that was stored in a data source and sorted against a hierarchy of product groups and purchasing organizations to determine a price of a product.

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Versata11

The claims had actually been the lynchpin of a suit brought by Versata against SAP in the federal district court for the eastern district of Texas

A Texas jury found the claims not invalid and infringed and awarded over $350 million dollars in damages!

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Versata and the BRI Standard12

The federal district court found the claim term “pricing information” was a technical feature construed it to involved use of “denormalized numbers” and, hence, the claims were not preempting an abstract idea.

The PTAB refused to adopt the District Court’s construction of “pricing information” as “denormalized numbers” and instead more broadly interpreted the term to mean any “information about pricing.”

Under this broad interpretation, the PTAB found the claims lacked any technological feature and, hence, were invalid as claiming an abstract idea.

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Cuozzo13

Couzzo’s patent was directed a system for displaying both a drivers speed and the actual speed limit using map databases and GPI technology.

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Cuozzo14

The PTAB interpreted the term “integrally attached” to require that the “speedometer” and the “speed indicator” be separate elements, During the IPR, Couzzo tried to amend the claim at issue to recite a single LCD that performed both functions.

The Board rejected the amendment because it would have broadened the claim as construed. On this basis Cuozzo has also challenged the BRI standard.

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The Versata Dilemma 15

The Versata case highlights the problem that many had predicted would occur when two different standards are used for claim construction.

The Federal District Court found the claim patent ineligible and awarded the patentee $350 million dollars.

The PTAB found the same claims were not patentable because they preempted an abstract idea.

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Appeal to the Court of Appeals Fed. Circuit16

Both Versata and Couzzo set the stage for an appeal by challenging the application of BRI standard to post-grant proceedings. Most of the Board’s 38-page final written decision in its Versata decision was devoted to a defense of the BRI standard.

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Parties to the Appeals17

Appellants (Versata & Cuozzo)

Appellees (SAP & Garmin)

Intervenor (USPTO)

Amici Curiae

Blue Chip Corporations (3M, GE, J&J, etc.)(against the BRI standard)

Social Media Giants (Ebay, Facebook, Google, etc.)(for the BRI standard)

Electronics Companies (Intel, HP, Broadcom, etc.)(for the BRI standard)

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Appellants’ Arguments18

Both Versata and Cuozzo are arguing that PTO exceeded its statutory authority in promulgating a substantive rule. They cite precedents that have held that Congress has never granted the PTO anything but procedural rule-making authority.

Moreover, they argue that the new post-grant proceedings are fundamentally different from reissue and re-exams at the PTO in the past. The appellants point out that the new proceedings are “adjudicatory,” therefore the judicial claim construction standard of the Phillips case: should be applied.

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Appellants’ Arguments (cont’d)19

Moreover, they argue that opportunity to amend is illusory. In fact, during oral argument, Couzzo’s counsel, Timothy Salmon, pointed out that in the two years of CBM and IPR proceedings, the PTAB has permitted zero opposed motions to amend and only one unopposed motion to amend.

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USPTO Arguments20

The brief by the Office of the Solicitor points out that BRI has been the PTO rule for nearly a century.

The USPTO position, of course, is that that the Patent Office did act within its authority – and in any event the AIA gave the USPTO more new powers with respect to enacting rules governing new post-grant proceedings.

The fact that the proceedings may be more adversarial does not mean the standard should be changed. Moreover, the agency argues that adversarial proceedings are what Congress wanted.

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USPTO Arguments21

The Solicitor’s brief further repeats the agency’s mantra that the fundamental rationale for the broadest reasonable interpretation is that it goes hand-in-hand with the right to amend and the Patent Owner has the opportunity to correct unduly broad interpretations by amendment.

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Appellees and Pro-BRI Amici Arguments22

The Appellee and pro-BRI argue that the BRI standard promotes clarity and precision by encouraging Patent Owners to remove ambiguities.

They also argue that the PTO rules do afford patentees an opportunity to amend, despite the poor track record.

BRI standard is aligned with Congress’s goal of providing a faster, lower cost alternative to litigation. Under the Phillips standard, the PTO would have to hear evidence of skill in the art, extrinsic evidence of meaning, prosecution history, etc. adding to the complexity of the proceedings.

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Anti-BRI Amici Arguments23

The Amicus brief submitted by the blue chip companies who oppose the BRI standard argues to the contrary – that the new post-grant proceedings are truly different from all other PTO examinations because patent owners do not have the same right to amend.

The standard for determining the scope of claims in a post-issuance proceeding is plainly substantive and can be outcome-determinative. They also argue that there is no basis in the statutory language or the legislative history to support the promulgation of the BRI rul

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Anti-BRI Amici Arguments (cont’d)24

As for the argument that the BRI rule is the universal standard of the USPTO, the blue chip amici counter by noting that the agency already applies the Phillips standard in some cases (e.g., when expired patents are reissued or reexamined) without systemic failure.

Moreover, these amici argued that it is simply inconsistent with sound patent policy to have one standard for district courts and a different one for post grant proceedings. Such a system will inevitably lead to incongruous results and opportunities for gamesmanship .

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The outcome?25

Ultimately, the Federal Circuit will have to decide whether it can live with two irreconcilable standards that will time and time again lead to different conclusions as to the validity of the same claims based on different constructions by the federal trial courts and USPTO.

A decision can be expected any day now. . .

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Thank you -- ありがとうございます

Tom Engellenner26

125 High StreetBoston, MA 02110+1-617-204-5189

engellennert@pepperlaw.com

www.postgrant-counsel.com