On October 11, 2018, the U.S. Patent and Trademark Office published a final rule change, replacing the former claim construction standard of “broadest reasonable interpretation” applied by the Patent Trial and Appeal Board in review proceedings with the more narrow district court standard established in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005). The rule change has been described as an effort to harmonize results in PTAB review proceedings and district court litigation. However, the rule change specifies that the Phillips standard will apply to both America Invents Act proceedings involving unexpired patent claims and substitute claims proposed in motions to amend. This potentially gives rise to a new source of disharmony: while patent examiners apply the broadest reasonable interpretation standard when prosecuting new claims submitted in patent applications, the PTAB will now apply the narrower Phillips standard when construing new claims submitted by patent owners in motions to amend. Part I of this article will discuss the previously expressed justifications for applying the two standards in their respective forums. Part II will discuss the potential implications of the PTO’s rule change.
To grasp the implications of the PTO rule change, it is first necessary to understand the expressed justifications for patent examiners’ application of the broadest reasonable interpretation standard to new claims in patent applications, versus district courts’ application of the Phillips standard to granted patent claims. Patent examiners give new claim terms their broadest reasonable interpretation in light of the specification as it would be interpreted by one of ordinary skill in the art because doing so “establish[es] a clear record of what [an] applicant intends to claim” and “reduce[s] the possibility that the claim, once issued, will be interpreted more broadly than is justified.” Manual of Patent Examining Procedure Section 2111 (citing In re Yamamoto, 740 F.2d 1569, 1571 (Fed. Cir. 1984)); see also In re Zletz, 893 F.2d 319, 321-22 (Fed. Cir. 1989) (“During patent examination the pending claims must be interpreted as broadly as their terms reasonably allow. . . . An essential purpose of patent examination is to fashion claims that are precise, clear, correct, and unambiguous. Only in this way can uncertainties of claim scope be removed, as much as possible, during the administrative process.”). Additionally, patent examiners construe claims using the broadest reasonable interpretation standard to explore how the possible scope of a claim implicates prior art, and ensure the claim does not sweep in such prior art. In re Zletz, 893 F.2d at 321 (holding that examiners apply the broadest reasonable interpretation standard “in order to achieve a complete exploration of the applicant’s invention and its relation to the prior art”); Flo Healthcare Sols., LLC v. Kappos, 697 F.3d 1367, 1378 (Fed. Cir. 2012), overruled on separate grounds by Williamson v. Citrix Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015) (“The ostensible purpose behind the PTO’s use of the ‘broadest reasonable interpretation’ of an applicant’s proposed claim is to allow the examiner and the applicant to explore the possible scope of the claim, particularly as it implicates prior art”); In re Wong, 80 F. App’x 107, 109 (Fed. Cir. 2003) (holding that “[w]hen claim 1 is given its broadest reasonable interpretation, the claim ‘sweeps in the prior art’”). Accordingly, the stated purpose of an examiner’s application of the broadest reasonable interpretation standard to new claims in patent applications is to protect the public by ensuring that granted patent claims are clear, understandable, unambiguous, and do not cover already-patented inventions.
On the other hand, the district court standard annunciated in Phillips—the well-known “ordinary and customary meaning to a person of ordinary skill in the art at the time of the invention”—is, by its literal terms, ostensibly more narrow than the broadest reasonable interpretation standard applied by patent examiners. This standard is appropriate in court, particularly given that granted patent claims enjoy a presumption of validity. 35 U.S.C. Section 282(a) (“A patent shall be presumed valid.”). Accordingly, the stated rationale behind the Phillips standard being narrower than the broadest reasonable interpretation standard is that granted patent claims presumed to be valid should be construed more narrowly, and therefore should be harder to invalidate, as compared to new patent claims not entitled to a presumption of validity that are construed for the first time by patent examiners.
But submitting a patent application to the PTO for examination is not the only way to obtain new patent claims—a patent owner may also file a motion to amend during inter partes review and propose “a reasonable number of substitute claims” to the PTAB. 35 U.S.C. Section 316(d)(1)(B). Prior to the PTO’s recent rule change, these new “substitute claims” were construed by the PTAB using the broadest reasonable interpretation standard. See, e.g., Aqua Prod., Inc. v. Matal, 872 F.3d 1290, 1298-1301 (Fed. Cir. 2017) (noting that broadest reasonable interpretation is the claim construction standard applied by the PTAB to amended or substitute claims in inter partes reviews). Indeed, the U.S. Supreme Court in Cuozzo Speed Techs., LLC v. Lee held that it was specifically the patent owner’s opportunity to amend (or substitute) claims that justified the PTAB’s use of the broadest reasonable interpretation claim construction standard. Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2145 (2016).
The PTO’s Oct. 11 final rule change creates a potential new source of disharmony regarding the examination of new patent claims: While patent examiners at the PTO will construe new claims submitted in patent applications using the broadest reasonable interpretation standard, the PTAB will construe new “substitute claims” submitted in motions to amend using the more narrow Phillips standard. This appears to contradict the justifications by the U.S. Court of Appeals for the Federal Circuit’s described in Part I of this article for applying the broadest reasonable interpretation standard to new claims, while reserving the more narrow Phillips standard for claims that have already been granted and thus enjoy a presumption of validity. Indeed, the Federal Circuit noted in In re Morris, 127 F.3d 1048 (Fed. Cir. 1997), that applying the more narrow district court standard to new claims would be contrary to the justifications for applying each of these standards in their respective forums. There, the Federal Circuit explained that “[i]t would be inconsistent with the role assigned to the PTO in issuing a patent to require it to interpret claims in the same manner as judges who, post-issuance, operate under the assumption the patent is valid. The process of patent prosecution is an interactive one. . . . This promotes the development of the written record before the PTO that provides the requisite written notice to the public as to what the applicant claims as the invention. . . . [P]ublic notice is an important objective of patent prosecution.” 127 F.3d at 1054; see also In re Yamamoto, 740 F.2d at 1572 (“The PTO broadly interprets claims during examination of a patent application. . . . This approach serves the public interest,” whereas “[d]istrict courts may find it necessary to interpret claims to protect only that which constitutes patentable subject matter to do justice between the parties.”).
Moreover, the fact that an inter partes review, in which new “substitute claims” can be proposed in a motion to amend, is a post-grant procedure, while an examiner’s review of new claims in a patent application is a pre-grant procedure, appears to add to the potential disharmony in claim construction standards. In post-grant procedures such as reissues and reexaminations, the PTO applies the broadest reasonable interpretation claim construction standard. In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 1276 (Fed. Cir. 2015), aff’d sub nom. Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016) (“This court has approved of the broadest reasonable interpretation standard in a variety of proceedings, including ... post-grant proceedings such as reissues and reexaminations.”). This remains unchanged by the PTO’s new rules. Accordingly, the rule change’s application of the Phillips standard to substitute claims submitted in motions to amend may be inconsistent not only with the Federal Circuit’s directives regarding construction of new claims, but also with the claim construction standard applied in other post-grant procedures.
While the on-the-ground implications of the rule change will remain unclear until the rule change has been in effect for more time, the Federal Circuit has noted in the past that applying the broadest reasonable interpretation claim construction standard makes invalidation based on prior art easier. See, e.g., ePlus, Inc. v. Lawson Software, Inc., 790 F.3d 1307, 1314 (Fed. Cir. 2015) (noting that the “claim construction construct—broadest reasonable interpretation— . . . makes invalidation based on prior art easier.”). Based on this theory, and the Federal Circuit’s directives described above, one possible on-the-ground effect of this potential disharmony in claim construction standards is that it would be easier to reject a new claim as anticipated by or obvious in light of prior art at the PTO in front of a patent examiner (because the examiner is applying a broader construction standard that sweeps in more prior art), than it would be to reject that same claim in light of prior art at the PTAB as submitted in a motion to amend (because the PTAB is applying a more narrow construction standard that avoids certain prior art). This would mean, conversely, that it would be more difficult to invalidate a new claim submitted in a motion to amend at the PTAB (and therefore easier to obtain a new claim as a motion to amend applicant), than it would be for a patent examiner to reject that same claim if submitted in a patent application.
This potential effect may be entirely theoretical if, as pointed out by various practitioners, certain Federal Circuit panels, and select PTAB judges, there is really no difference in claim construction outcome regardless of which standard is applied. Examples of cases in which the standard applied did not make a difference to the outcome of claim construction include Black & Decker, Inc. v. Positec USA, Inc., 646 F. App’x 1019, 1024 (Fed. Cir. 2016) (noting that the PTAB erroneously applied the broadest reasonable interpretation standard to an expired patent, but holding that, “[d]espite the Board’s use of an improper standard, applying the Phillips standard, we find that its ultimate construction of ‘fixedly secured/securing’ is nonetheless correct”); Straight Path IP Grp., Inc. v. Sipnet EU S.R.O., 806 F.3d 1356, 1360 (Fed. Cir. 2015) (“Straight Path . . . asks us to determine the governing construction under the principles of Phillips . . . , rather than the broadest-reasonable-interpretation standard. . . . We need not explore the issues raised by that request, however, because we conclude that the Board adopted a claim construction that is erroneous even under the broadest reasonable-interpretation standard.”); In re CSB-System International, Inc., 832 F. 3d 1335, 1337-38 (Fed. Cir. 2016) (“We agree with CSB that the Board should have applied the Phillips standard of claim construction rather than the broadest reasonable interpretation standard used by the examiner. . . . We conclude, however, that the Board’s claim construction was correct even under the Phillips standard.”); and Cisco Systems, Inc. v. AIP Acquisition, LLC, IPR2014-00247, Paper 20 at 3 (July 10, 2014) (“We have determined, on the record before us, that the claim construction of the three phrases . . . under the rule of construction similar to that applied by the district courts, . . . are the same as the claim construction for those phrases under the rule of broadest reasonable interpretation.”). However, even if this may be the case in certain circumstances, if it were universally true, then that would mean the PTO just went through a whole lot of effort to change the standard applied by the PTAB in America Invents Act proceedings for no practical purpose. Indeed, in other cases, the standard applied has made a difference in outcome. See, e.g., PPC Broadband, Inc. v. Corning Optical Communications RF LLC, 815 F.3d 734, 741 (Fed. Cir. 2016) (“This case hinges on the claim construction standard applied—a scenario likely to arise with frequency. And in this case, the claim construction standard is outcome determinative.”). Moreover, by its own most recent statistics based on AIA trial data through March 31, the PTAB has only allowed claim amendments (granting or granting-in-part) ten percent of the time in response to motions to amend filed by patent owners. This may suggest that any potential practical effect of the recent rule change on the issuance of new claims at the PTAB would be minimal, if present at all.
If it turns out that the rule change does, in fact, create a more-than-theoretical effect on the issuance new claims at the PTAB, the significance of this potential effect may be heightened by PTO Director Andrei Iancu’s recent statements on the rule change made in his speech at the American Intellectual Property Law Association’s annual meeting on Oct. 25. During the meeting, Director Iancu emphasized that the current system “is not working as intended” and that the PTO is proposing a “robust new amendment process” to address the current sentiment among patent owners that motions to amend submitted during inter partes review proceedings are always unsuccessful. Director Iancu specifically noted that “[s]ome have suggested that parties have simply stopped even trying to amend the claims because they see the effort as largely futile,” but “the AIA statute specifically provides for claim amendments in [inter partes reviews], so in order to fully implement the intent of the AIA, we must find a way to make this amendment process feasible and meaningful.” Under the proposed new amendment rules, after a compressed 12-week schedule for motion practice, the PTAB would issue a preliminary ruling on the proposed amendments to which both parties could respond prior to receiving the PTAB’s final ruling. Director Iancu explained that this procedure “should lead to more narrowly tailored and focused claim amendments, and potential earlier resolution of the issues.” Accordingly, if these new procedures for motions to amend are put into effect and patent owners are incentivized to file more motions to amend, then we may potentially see even more test grounds for new “substitute claims” to be granted at the PTAB using the more narrow Phillips standard that may not have been granted by a patent examiner using the broadest reasonable standard.
The PTO’s rule change just took effect on Nov. 13, so we will soon see whether this potential source of disharmony regarding claim construction standards applied to new claims will have any on-the-ground effects on claim issuance at the PTAB.