The Importance of Candor in PTAB Practice
By: Stuart Nelson and Kim Leung
On November 6, 2019, Fish & Richardson Principal Stuart Nelson and Associate Kim Leung hosted the Post-Grant for Practitioners webinar “USPTO Ethics Rules at the PTAB.” The webinar highlighted some of the major ethics rules at play in Patent Trial and Appeal Board (PTAB) practice, with a particular emphasis on a practitioner’s duty of candor toward the tribunal. If you missed the webinar, you can find a partial summary of its content below.
Sources of Ethics Rules in PTAB Practice
The ethics rules governing PTAB practice derive from two sources: the United States Patent and Trademark Office (USPTO) Rules of Professional Conduct at 37 CFR Part 11, which mirror the American Bar Association Model Rules of Professional Conduct and apply to all practice at the Office, and the PTAB practice rules at 37 CFR Part 42, which apply specifically to proceedings before the PTAB. While these statutes contain overlapping ethical provisions and govern much of the same conduct, they remain separate sources of authority and a court may impose sanctions for violations of either. Post-grant practitioners, as well as the parties to post-grant proceedings, are bound by both sets of rules.
The Duty of Candor
Practitioners before the PTAB owe a duty of candor toward the tribunal – a duty that is codified in both the USPTO Rules of Professional Conduct at 37 CFR § 11.303 and the PTAB practice rules at 37 CFR § 42.11.
Under 37 CFR § 11.303(a) of the USPTO rules:
(a) A practitioner shall not knowingly:
(1) Make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the practitioner;
(2) Fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the practitioner to be directly adverse to the position of the client and not disclosed by opposing counsel in an inter partes proceeding, or fail to disclose such authority in an ex parte proceeding before the Office if such authority is not otherwise disclosed; or
(3) Offer evidence that the practitioner knows to be false. If a practitioner, the practitioner’s client, or a witness called by the practitioner, has offered material evidence and the practitioner comes to know of its falsity, the practitioner shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal. A practitioner may refuse to offer evidence that the practitioner reasonably believes is false.
And under 37 CFR § 42.11 of the PTAB rules:
(a) Duty of candor. Parties and individuals involved in the proceeding have a duty of candor and good faith to the Office during the course of a proceeding.
(b) Signature. Every petition, response, written motion, and other paper filed in a proceeding must comply with the signature requirements set forth in § 11.18(a) of this chapter. The Board may expunge any unsigned submission unless the omission is promptly corrected after being called to the counsel’s or party’s attention.
(c) Representations to the Board. By presenting to the Board a petition, response, written motion, or other paper – whether by signing, filing, submitting, or later advocating it – an attorney, registered practitioner, or unrepresented party attests to compliance with the certification requirements under § 11.18(b)(2) of this chapter.
At their heart, the ethics rules concerning candor toward the PTAB impose three primary duties on practitioners and the parties they represent:
1. Do NOT say things that are untruthful.
2. DO disclose adverse controlling law.
3. DO disclose contrary facts.
The purpose of the duty of candor is to protect the integrity of the judicial process by ensuring that the court has made a full and fair determination of the issues presented in light of the totality of the evidence. To that end, the duty of candor applies both prospectively and retroactively; not only are practitioners required to act honestly and in good faith throughout the proceedings, but they must also take remedial measures to correct any prior false statements when the statements’ falsities come to light. While practitioners also owe their clients an ethical duty of diligent representation to advance their cause, they must carefully balance that duty against the overarching duty of candor. Breaches of the duty of candor can expose practitioners to sanctions and harm their clients’ interests.
Candor: Claim Construction
The duty of candor in PTAB practice comes up particularly often in the context of claim construction, especially where there is related district court litigation and a party is advancing different proposed claim constructions in each proceeding.
In Facebook, Inc. v. Sound View Innovations, LLC, IPR2017-00998, Paper 13 (PTAB Sep. 5, 2017), the petitioner filed a petition without any specific claim constructions and indicated that no claim construction had occurred in related district court litigation. However, during the related litigation, the petitioner had argued that the challenged claim was indefinite because it converged different subject matter classes or, in the alternative, it included means-plus-function language without sufficient disclosure of structure in the specification. The district court agreed with the first of petitioner’s theories and ruled that the challenged claim was indefinite. In its preliminary response, the patent owner alerted the Board to petitioner’s inconsistent positions on claim construction and subsequent failure to notify the Board of them. The Board found that, while it is not improper for a party to take inconsistent claim construction positions in district court and PTAB proceedings, the party who does so is obligated to inform the Board of its prior arguments. This obligation extends even to prior arguments that would be inadmissible in IPR proceedings, as occurred here. The PTAB denied institution in this case because the Board agreed with the district court’s ruling on indefiniteness and because the petitioner demonstrated a lack of candor.
The PTAB reached a similar conclusion in Orthopediatrics Corp. v. K2M, Inc., IPR2018-01548, Paper 9 (PTAB Mar. 1, 2019). There, the petitioner argued that no terms needed construction in its petition, despite having argued in related litigation that certain terms included means-plus-function language. In its preliminary response, the patent owner urged the Board to adopt the district court’s claim construction for the means-plus-function limitations because the petitioner had argued for that claim construction in the related litigation. Although the Board stopped short of finding that the petitioner lacked candor, it indicated that the petitioner was obligated to address the district court’s claim construction because it should have known that those constructions would be at issue in the PTAB proceeding.
As Facebook and Orthopediatrics demonstrate, post-grant practitioners have an obligation to inform the PTAB of all claim construction arguments in related district court litigation, regardless of their inconsistency with arguments advanced at the PTAB.
Candor: Real Parties in Interest
The duty of candor can also arise for petitioners when identifying real parties in interest (RPIs). Under 35 U.S.C. § 312(a)(2), an IPR petition may be considered only if the petition identifies all RPIs. Identification of RPIs is necessary to disclose conflicts of interest, ensure compliance with the one-year time bar of 35 U.S.C. § 315(b), and determine to which parties the estoppel provisions of 35 U.S.C. § 315(e) will attach. The PTAB grants petitioners considerable latitude to identify the parties they believe are RPIs, and the petitioner’s identification will be accepted unless and until it is disputed by the patent owner. Worlds, Inc. v. Bungie, Inc., 903 F.3d 1237, 1243 (Fed. Cir. 2018).
In some cases, the petitioner may identify RPIs only to later amend its petition to add or remove certain parties. For the most part, the Board allows these types of amendments but considers the following factors when deciding whether to do so:
• Attempts to circumvent the § 315(b) time bar or § 315(e) estoppel provision
• Bad faith or gamesmanship by the petitioner
• Prejudice to the patent owner caused by the delay
Proppant Express Investments, LLC v. Oren Technologies, LLC, IPR2017-01917, Paper 86 (PTAB Feb. 13, 2019). The Board also looks to whether the petitioner’s incorrect RPI determination was objectively reasonable and can support good cause justifying late action. Reflectix, Inc. v. Promethean Insulation Technology, LLC, IPR2015-00039, Paper 18 (PTAB Apr. 24, 2015).
Given that the legal definition of “real party in interest” remains unsettled for the purposes of post-grant proceedings, identification of RPIs presents an ethical gray area for practitioners. When there is a question of whether an entity is an RPI, practitioners have several choices, each of which could present its own ethical dilemma. Some of the options include:
• Choosing RPIs based on whatever is best for the client
• Choosing RPIs in the spirit of total candor toward the tribunal
• Taking different views of what qualifies as an RPI based on whether the practitioner is representing a petitioner or patent owner
Practitioners concerned with committing ethical infractions when identifying RPIs may explain in writing how they made their RPI determinations. The USPTO ethics rules also allow a practitioner to identify RPIs in a way that is contrary to the current law if they believe that there is a “nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law” (37 CFR 11.18[b][iii]). In all cases, petitioners should consider keeping a record of how they made their RPI determinations should the other party raise the issue.