PTAB Update -- PTAB Claim Amendment Practice at the Federal Circuit

Prolitec Inc. v. Scentair Technologies, Inc. (Fed. Cir. 2015)

By Andrew Williams --

In another unsurprising turn, the Federal Circuit affirmed the motion-to-amend practice adopted by the PTAB in IPR proceedings.  The majority opinion in Prolitec Inc. v. Scentair Technologies, Inc., authored by Chief Judge Prost, concluded (among other things) that the Board's approach of shifting the burden to the patentee to show the patentability of claim amendments was reasonable.  Judge Newman, however, was not so approving.  In another scathing dissent, she took the panel majority to task for acquiescing to the Board regarding this burden shift.  "[T]he purpose of [the] post-grant review [system] is not to stack the deck against the patentee, but to achieve a correct and reliable result–for innovative enterprise is founded on the support of a system of patents," she emphasized.  Nevertheless, the PTAB decision in this case to deny the motion to amend and render the claims unpatentable was affirmed.

This case arose from an IPR filed against U.S. Patent 7,712,683 ("the '683 patent") related to cartridges for use with "diffusion devices" -- you know, air freshener dispensers.  The goal of the invention disclosed in the '683 patent was to have the finer mist particles exit the cartridge, while trapping the larger mist particles, turning them into liquid to flow back into the reservoir.  The Board found the two claims of the patent anticipated by WO 2004/0806042 ("Benalikhoudja") and obvious over Benalikhoudja in view of U.S. Patent No. 7,131,603 ("Sakaida"), in large part because of the adopted claim construction.  The patentee appealed.

Claim Construction and Validity

The Board construed three claim terms using its "Broadest Reasonable Construction" standard -- "mounted," "fixed in position," and "second/secondary chamber."  The term "mounted" was used in claims in the following context:  "a diffusion head mounted to the reservoir."  The Board did not construe this term to mean "permanently joined," as Prolitec wanted.  Instead, it concluded that the term meant something less permanent, because the specification apparently stated that the invention could cover reusable cartridges.  Interestingly, both the majority and Judge Newman in dissent cited the passage that "head assembly 604 and reservoir 602 may be jointed to each other by heat or ultrasonic welding spin welding, or by use of an adhesive."  The majority reached the conclusion that because the word "may" was used, the two items could be attached by other means, including those less permanent, while Judge Newman pointed out this sentence only highlighted the permanence of the attachment.  The other two terms were similarly construed contrary to the assertions of the patentee.

After the claims were construed, the anticipation and obviousness of the claims were a forgone conclusion.  For example, Prolitec had argued that Benalikhoudja's fastening of its liquid reservoir using a tamper-proof ring did not satisfy this element because it was not "permanently joined."  But because the claim term was more broadly construed, Benalikhoudja's ring satisfied this claim limitation.  A similar result flowed from the other two construed claim terms.

Judge Newman criticized this outcome.  In a section labeled "The PTAB's claim construction requires judicial review for correctness as a matter of law, not deferential review as a question of fact," she pointed out that "anticipation requires that the same invention was previously known and described, not that a claim can be construed so broadly and incorrectly as to embrace a prior art device."  For example, Judge Newman pointed out that the '683 patent improved on Prolitec's own device, which required a messy procedure to open the reservoir for refilling, resulting in leakage, inconsistent scent concentration, and cross-contamination.  It did not make sense, according to her, to construe the claim terms so broadly that they would read on (for example) a device which was not permanently sealed.  But, because BRI was used, all of the enlarged claim terms in turn could be found in prior art.  Judge Newman disagreed:  "Anticipation requires that the same invention was previously known; it is apparent from the specification that the PTAB's analysis is not correct."

Motions to Amend

As suggested above, Judge Newman's biggest complaint about the Court's ruling in this case was the approval of the Motion-to-Amend practice of the Board.  The majority simply followed, and indeed felt compelled to follow, the Microsoft Corp. v. Proxyconn, Inc. case in which the practice was already approved (see "Microsoft Corporation v. Proxyconn, Inc. (Fed. Cir. 2015)").  In fact, the Court noted that the Board had issued a "representative" decision after the Proxyconn case.  In MasterImage 3D, Inc. v. RealD Inc., IPR2015-00040 (PTAB July 15, 2015), the Board apparently relaxed the burden on the patentee in Motions to Amend.  Instead of requiring the patentee to identify how its claim amendments are patentable over all prior art, it only had to show patentability over the "prior art of record," which could include "any material art in the prosecution history of the patent."

In the present case, Prolitec sought to amend the term "mounted" to "permanently joined."  The resulting denial of the motion exemplifies why the PTO's use of the BRI standard might not make sense -- one of the main justifications for using the standard is that the Patent Owner has the ability to amend the claims to narrow the scope.  However, as this case demonstrates, in IPRs the Patent Owner doesn't necessarily have that right.  The Board denied the motion in view of the Allred reference.  Allred apparently taught a device that was permanently joined, although the other claim limitations were missing.  Nevertheless, the Board found that Allred (cited during prosecution) could be combined with Benalikhoudja (the main IPR reference), and both references were already of record in this case.  The Federal Circuit affirmed the denial because Prolitec did not adequately support its assertion of patentability over Allred and Benalikhoudja.

Judge Newman made at least four points regarding this denial.  First, she thought the PTO erred in refusing to enter the substitute claim.  The America Invents Act limits the reasons that a motion can be denied, according to her understanding of the statute.  These include when the amendment does not respond to a ground of unpatentability involved in the trial and when the amendment enlarges the scope of the claims.  Neither of these existed in this case.  According to Judge Newman "[w]hen a proposed amendment would resolve a dispositive aspect of claim breadth, refusal to enter the amendment is contrary to both the purpose and the text of the America Invents Act."

Second, Judge Newman complained that the placement of burden of proof for claim amendments on the patentee is contrary to the statute.  This criticism stems from the fact that the PTAB proceedings were intended to be a surrogate for a district court.  The obvious flaw with this argument is that claims cannot be amended in district court.

Third, Judge Newman stated that "[t]he preponderance of the evidence is the statutory standard for PTAB validity decision," and the Federal Circuit should review cases to determine whether this standard has been applied correctly.  The Court has been using the "substantial evidence" standard to conduct these reviews.  Judge Newman believes that this standard is insufficient to review whether the PTAB's decisions meet its "preponderance of the evidence" standard.

Finally, Judge Newman complained that Prolitec should have been entitled to the benefit of PTO interpretations and changes in practice.  It appears that since the time the Board handed down the Final Written Decision in this case, the rules of practice have changed.  This includes a "quick fix" that was implemented back in March, and the MasterImage 3D case referenced above.  The majority pointed out that the changes were irrelevant in this case because the two reference cited in denial were prior art of record in the case.  Judge Newman wasn't having it, though, pointing out in a footnote that the MasterImage 3D decision was only designated "representative," and even Idle Free was only designated "informative" and therefore not binding on all PTAB panels.  This error or uncertainty was sufficient for her to call for remand for reconsideration of the denial.

Prolitec Inc. v. Scentair Technologies, Inc. (Fed. Cir. 2015)
Panel: Chief Judge Prost and Circuit Judges Newman and Taranto
Opinion by Chief Judge Prost; dissenting opinion by Curcuit Judge Newman

Comments

[EG]

Hey Andrew,

Newman is right: granted motions to amend are rarer than diamonds. That a majority of the Federal Circuit panel approved of such restrictions on such motions to amend, while at the same time also believing that BRI applies and that the burden is on the patentee to justify the propriety of such amendments defies logic, fairness, and most importantly "due process." If that's how IPRs work, IPRs can't possibly comply "due process."

[Dan Feigelson]

It doesn't matter what happens in prosecution anymore, because at the end of the day PTAB is just going to kill the patent anyway using the twin pillars of "BRI" and "no amendments". That being the case, let's spare the applicants the time and expense of of this faux prosecution in the USA, and just go with a registration system.

[skeptical]

Dan,

While there are wrinkles that need to be addressed, the call for a much less expensive system really should be on the table.

Currently, the USPTO budget - paid for entirely by the innovators seeking patents - runs to the BILLION (yes, with a "B") dollars annually.

A registration system could realistically be run at a rate of 2% of that on an ongoing basis.

That would mean that 98% of the current funds propping up the system could be plowed back into the innovation activities.

98%.