PTAB Adopts Phillips Claim Construction Standard for AIA Challenges

Last week, the U.S. Patent and Trademark Office (“Patent Office”) published its Final Rule Package modifying the claim construction standard used in challenges before the Patent Trial and Appeal Board (“PTAB”), including Inter Partes Reviews (“IPR”), Post-Grant Reviews, and Covered Business Method Reviews. The change is welcome news to many practitioners who have long sought more consistency between the district courts and PTAB in how claims are construed. The news is even more welcome to patent owners, who have long argued that the PTAB’s current claim construction standard is overly broad and makes invalidating patents too easy for patent challengers.

Petitions on patent claims filed on or after November 23, 2018 will no longer be given their “broadest reasonable interpretation” (“BRI”), but will instead be construed based on their “ordinary and customary meaning . . . as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent,” the same standard used in the district courts and articulated in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005 (en banc). The new rules finally align the standards used in the two primary venues for challenging the validity of issued patents and, according to the Rule Package, should result in “uniformity and predictability” between district courts and the PTAB.

Since IPRs and other PTAB reviews became available to patent challengers following implementation of the America Invents Act in 2013, Patent Owners have sought to modify the BRI standard that was applied, arguing that it makes it too easy to invalidate duly issued patents. The BRI standard can give claims broader scope, expanding the universe of potentially invalidating prior art. Partly because of this broad construction standard, then Chief Judge Rader of the Federal Circuit even went so far as to call the PTAB “death squads killing property rights.”

Reasonable minds can disagree as to how one-sided PTAB reviews have actually been relative to similar challenges in district court. What everyone can agree on, however, is that patent owners and patent challengers have faced difficulties with inconsistent claim interpretations in concurrent proceedings. Given the inconsistent claim construction standards, the district courts and the PTAB have generally been unwilling to adopt or even consider the other’s claim interpretations, resulting in a need to re-construe claims, often with differing interpretations, and leaving parties with inconsistent and unpredictable results.

Under the new rules, not only will the standards be aligned, but the PTAB must “consider” any prior claim construction determination that is timely made of record in the proceeding. While the PTAB is not bound by that determination, it is likely that such determinations will heavily influence the PTAB’s findings going forward, leading to more consistent results.

More generally, the alignment of standards will force litigants to consider different strategies in IPR proceedings. For example, patent owner statements made during prosecution about what claim terms mean have historically gone largely ignored by the PTAB, given that the term could simply be given its broadest reasonable interpretation. Now, with the PTAB considering the ordinary and customary meaning according to a person of ordinary skill in the art (“POSITA”), patent owners’ statements during prosecution – often statements that can be fairly attributed to the relevant POSITA – become far more relevant.

In addition, the need to consider the relevant POSITA’s understanding of a claim term is also likely to lead to an uptick in expert testimony before the PTAB, including at the petition stage. Expert testimony is often the only way to establish how a POSITA would understand a claim term, whereas the BRI of a term can be, and in petitions often was, established through other means (e.g., dictionary definitions, etc.). Accordingly, experts that are commonplace in district court proceedings have been less prevalent before the PTAB. The new rule is likely to require more expert testimony in PTAB proceedings.

Finally, the new rules may put greater pressure on petitioners to file their challenges early. Already, early petition filings may advantageously position accused infringers for a stay of a co-pending infringement case, allowing a narrow focus on invalidity at the PTAB and avoiding the expense of discovery on collateral issues in district court. Under the new rule, where the PTAB is charged with “considering” any claim construction by a district court, the need to secure a stay may become even more important where petitioners desire the PTAB, rather than the district court, to construe the claims. Otherwise, fast-moving district court dockets may rule on claim construction before the PTAB, effectively deciding what the construction will be in both settings.

Overall, the new rules will provide consistency and predictability and should allow for better decision-making for all litigants.