USPTO’s Patent Trial and Appeal Board Moves to Phillips Standard

Background

On October 11, 2018 the United States Patent and Trademark Office (USPTO) adopted a final rule that changed the standard of claim construction in the Patent Trial and Appeal Board (PTAB) to the standard used in district court as articulated in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc). The PTAB is the adjudicatory body of the USPTO that hears appeals regarding rejected patents and conducts trials regarding validity of issued patents. PTAB proceedings previously gave the claim language of patents their broadest reasonable interpretation, while district courts give claim language the ordinary and customary meaning, which is generally a narrower interpretation. This rule applies to inter partes review (IPR), post-grant review (PGR), and covered business methods (CBM).

When the USPTO first published practice guidelines for the PTAB in 2012, it emphasized that adopting the broadest reasonable interpretation standard would be consistent with the standard the patent office utilized during the initial patent examination process. The USPTO was cognizant that this standard different from that used in district court, but pointed the fact that patent owners are allowed to amend their claims during IPR, PGR, and CBM to resolve ambiguities and over-breadth. However, the difference between standards turned out to be problematic, since most patents challenged under a PTAB proceeding are also challenged in district court.

The USPTO recognized that the difference in standards could pose a contradiction in the scope of prior art. A product that would be adjudged as non-infringing in district court for being sold after the effective filing date could nonetheless be considered prior art in a PTAB invalidity proceeding if sold before the effective filing date due to the different constructions of a patent’s claim language. The change in PTAB claim construction guidelines looks to bring the two into harmony.

Potential Impact 

The Intellectual Property Organization (IPO) analyzed the differences between these two standards by comparing shifts in interpretation when a challenged patent expired mid-proceeding. In these cases, the PTAB is obliged to shift from broadest reasonable interpretation to the district court standard. The IPO report found that in five of the nine cases it analyzed, the shift in standard led to a new construction. This suggests that there could be some potential impact on claim construction outcomes due to the shift in standard.

On the other hand, scholars have argued that many of the steps taken in broadest reasonable interpretation and Phillips are practically very similar and have led to very little inconsistency in claim construction regardless of which standard was used. Therefore, the change in claim construction standard may not end up changing PTAB decisions much. Scholars have suggested that other differences between district court and PTAB proceedings besides claim construction, such as the different evidentiary standards, provide a better explanation for inconsistent outcomes regarding validity.

In practice, the shift from broadest reasonable interpretation to Phillips may end up having a larger impact on strategy and district court treatment of PTAB proceedings than on actual litigation outcome. Some practitioners have suggested that district courts may be more inclined to stay proceedings during a pending IPR and place more weight on PTAB claim constructions. Whether this is necessarily a good thing for patent owner is unclear. While patent owners no longer have to fear their claims being held invalid for a scope that they could not have used to assert infringement rights and there may be a smaller pool of prior art for invalidity proceedings, validity and claim construction will now be more likely to be decided exclusively by the PTAB. This brings into question the other procedural differences between PTAB and district court litigation and could amplify those concerns.

Conclusion

How the shift from broadest reasonable interpretation to Phillips in the PTAB will actually affect patent owners and litigation strategy remains an open question. The change in interpretive standard will go into effect for proceedings filed starting today, November 13, 2018. There will be no retroactive application of the standard for currently pending PTAB hearings.

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