Post Grant Review Considerations: Subject Matter Eligibility and Estoppel

By: Jeff Guinn


Patent owners and potential patent infringers should be aware of a new process for reviewing the validity of granted patents.  Post Grant Review (“PGR”), which was established by provisions of the Smith-Leahy America Invents Act (“AIA”), allows for the validity of a patent to be challenged within nine months of the patent being granted.  Unlike the more common Inter Partes Review (“IPR”), which is limited to invalidity contentions based on anticipation and/or obviousness, a PGR invalidity challenge may be based on a wider range of potential grounds to invalidate a patent.  For example, in addition to anticipation and obviousness, invalidity grounds in a PGR petition may be based on: double patenting; patent-ineligible subject matter under 35 U.S.C. § 101; and/or written description, enablement, and/or indefiniteness under 35 U.S.C. § 112.

However, PGR petitioners may only challenge patents with an effective filing date on or after March 16, 2013.  Thus, due to the amount of time required to prosecute a patent application to grant, relatively few granted patents qualify yet to be challenged via a PGR.  To date, approximately 30 PGR petitions have been filed, and only three final decisions have been rendered.

The first two PGR decisions, both issued on June 13, 2016, were based on challenges by petitioner American Simmental to two livestock valuation patents owned by Leachman Cattle of Colorado LLC.  In those decisions, the petitioner challenged the two patents on obviousness grounds as well as patent-ineligible subject matter grounds.  The Patent Trial and Appeal Board (“PTAB”) found that some claims were obvious, but that some were not.  However, the PTAB also found that all claims were invalid as patent-ineligible subject matter under the patentable subject matter test set forth in the U.S. Supreme Court’s Alice v. CLS Bank decision.

The framework set forth in Alice requires that a claim first be assessed to determine whether the claim falls within one of the statutory categories of patent eligible subject matter, namely a “…process, machine, manufacture, or composition of matter, or any new and useful improvement thereof…”  35 U.S.C. 101.  If the claim falls within such a category, then the claim must be examined to determine whether it is directed to a judicially created exception to patent eligibility.  Such exceptions include laws of nature, natural phenomenon, and abstract ideas.  If a claim is not found to be directed to one of the judicial exceptions, then the analysis ends and the claim is patent eligible.  However, if the claim is found to be directed to a judicial exception, then the claim must be further analyzed to determine whether the elements of the claim, either individually or in combination, amount to significantly more than the judicial exception, and thus include an inventive concept sufficient to transform the claim into a patent eligible application of the judicial exception.

More recently, on August 3, 2016, the PTAB issued it’s third-ever PGR decision.  In that decision, the petitioner challenged all claims of U.S. Patent No. 8,756,166 under 35 U.S.C. § 101 as patent-ineligible subject matter, in addition to asserting that various claims were either anticipated or obvious.  In regards to the patent-ineligible subject matter challenge, the petitioner asserted that the claims of the patent were directed to the abstract idea of facilitating containerized storage, and that the elements of the claims failed to amount to significantly more than the abstract idea.  Once again, the PTAB agreed, and found all claims invalid as being directed to patent-ineligible subject matter, noting that the claims were directed to the abstract idea of a “bailment scheme using storage containers .”  The PTAB found that the claimed bailment scheme was a long-prevalent industry practice, which a number of court decisions have held to be an abstract idea.  For example, the court in Alice considered and invalidated a claim directed to an escrow service for facilitating financial transactions, which was found to be a long-standing economic practice.   Having found that the claims were directed to an abstract idea of a bailment scheme, the PTAB moved on to the second part of the Alice analysis.  The PTAB agreed with the petitioner that the additional claim limitations, individually or in combination, did not amount to significantly more that the abstract idea and thus did not include the requisite “inventive concept” that would have saved the patent claims from the finding that the claims were directed to an abstract idea.

It is interesting to note that every patent challenged via a PGR in which a final decision has thus far been rendered has been invalidated, and, further, that all three decisions found all claims to be invalid under Alice.  This is of particular importance to patent owners that may have patents with claims potentially subject to Alice challenges, as well as to infringers and potential infringers of patent claims that may be challenged under Alice.

An additional important issue to consider is the effect of estoppel that an instituted PGR challenge raises.  Specifically, a petitioner challenging a patent via a PGR is estopped from raising in a future proceeding (e.g., in district court, in an IPR, or at the International Trade Commission) any ground that was raised or reasonably could have been raised in the PGR petition.  With the wider range of invalidity grounds that are available to petitioners in a PGR, the estoppel may potentially be devastating to a petitioner who fails to invalidate a patent via PGR when attempting to make invalidity contentions later.  Such broad estoppel would almost certainly make a patent owner’s job considerably easier when asserting that the patent is being infringed by the PGR petitioner in a future proceeding.  As such, both patent owners and potential PGR petitioners should be aware of strategic considerations of whether or when to assert a patent or file a PGR.

In conclusion, PGR is a powerful new tool for challenging the validity of a patent, but failure by a petitioner to achieve invalidation of the challenged patent may have serious consequences for the petitioner’s ability to later assert invalidity.  As such, it is important for both owners of PGR-challenged patents and potential PGR petitioner’s to engage legal counsel that is well suited to handle the wide variety of possible grounds of invalidation, as well as the intricacies of either challenging a patent via a PGR, or defending against such a challenge.  Here at Osha Liang, our years of experience prosecuting patent applications and litigating patents has allowed us to develop a deep understanding of all of the potential invalidity grounds that may be raised in a PGR, including the patent eligible subject matter test of Alice.  Additionally, we have a wealth of experience in handling AIA post grant proceedings, having previously handled 39 IPR or Covered Business Method (“CBM”) matters, both on behalf of petitioners and patent owners.