Limitations on Discovery in Inter Partes Review Proceedings
Companies accused of patent infringement have a number of basic alternatives to contemplate: settle the matter; defend the suit; or consider resort to a post grant patent proceeding at the United States Patent and Trademark Office (USPTO). With an eye towards cost, risk and accurate resolution, inter partes review (IPR) proceedings are an attractive alternative to settling or defending.
IPR proceedings are adjudicated by a panel of three Administrative Patent Judges (APJs) at the Patent Trial and Appeal Board (PTAB), who determine the validity of the patent at issue. In addition to a law degree and extensive patent law experience, APJs have a technical degree and are generally assigned to a case based on knowledge in a particular area of science. Therefore, a case with any scientific or technical complexity might be suitable for resolution before a PTAB panel. According to some researchers, an IPR proceeding should prove to be about an order of magnitude more cost effective than standard District Court litigation. And, while the average time to trial in District Court is about 27 months, by statute, an IPR hearing will go to decision within one year.
In District Court litigation, a predominant cost and consumption of litigation resources stems from discovery, both fact and expert. Here is where IPR might be an attractive option.
Where any concurrent District Court proceedings are stayed (yes, the first stay pending IPR was ordered last December), rules governing IPR proceedings before the PTAB envision minimal discovery. And, where the PTAB discovery rules appear vague, the PTAB is stepping up to deny litigators access to traditional discovery scope (often referred to as a “fishing expedition”), to keep the proceedings as intended – lean and mean.
Under the recently enacted rules, IPR practice permits parties to obtain mandatory discovery regarding initial disclosures. See Rule § 42.51. Additionally, the rules also permit “Limited Discovery,” defined as “Routine Discovery” and “Additional Discovery.” Id. “Routine Discovery” includes: “unless previously served or otherwise by agreement of the parties, any exhibit cited in a paper or in testimony;” “cross examination of affidavit testimony;” and “unless previously served, relevant information that is inconsistent with a position advanced by the party during the proceeding.” Id. Additional discovery contemplates everything that is unrelated to initial disclosures or “Routine Discovery.” Further, and unless on agreement of the parties, a “moving party must show that such additional discovery is in the interests of justice.” Id.
The recent decision in Garmin Int’l Inc., v. Cuozzo Speed Techs. LLC, IPR2012-00001 (PTAB March 5, 2013), tested the mettle of this limited discovery. There, Cuozzo, the patent owner, filed a motion for “Additional Discovery” seeking interrogatories, documents and requests for depositions. The PTAB panel held that Cuozzo’s motion for “Additional Discovery” was deficient under the “interests of justice standard.” Garmin at 16-17. The panel explained by highlighting five factors that must be considered, as follows:
1. More Than A Possibility And Mere Allegation – The mere possibility of finding something useful, and mere allegation that something useful will be found, are insufficient to demonstrate that the requested discovery is necessary in the interest of justice. The party requesting discovery should already be in possession of evidence tending to show beyond speculation that in fact something useful will be uncovered. (emphasis added)
Cuozzo’s motion primarily related to secondary considerations of nonobviousness such as long-felt, but unresolved need, failure of others, commercial success and copying by others. Importantly, the PTAB noted with respect to all these requests that Cuozzo’s motion lacks any evidence or reasoning tending to show beyond speculation that the information to be discovered will be useful. Id at 7-8. “‘Useful’ means favorable in substantive value to a contention of the party moving for discovery.” Id. at 7.
2. Litigation Positions And Underlying Basis – Asking for the other party’s litigation positions and the underlying basis for those positions is not necessary in the interest of justice. The Board has established rules for the presentation of arguments and evidence. There is a proper time and place for each party to make its presentation. A party may not attempt to alter the Board’s trial procedures under the pretext of discovery.
Id at 6.
Garmin was not obligated to keep Cuozzo informed of its positions on substantive issues. Id. at 13. The panel held that if and when Garmin presents affidavit or declaration testimony to support a position, Cuozzo would have an opportunity to cross-examine. Id.
3. Ability To Generate Equivalent Information By Other Means – Information a party can reasonably figure out or assemble without a discovery request would not be in the interest of justice to have produced by the other party. In that connection, the Board would want to know the ability of the requesting party to generate the requested information without need of discovery.
Id. at 6.
With regards to Cuozzo’s discovery on whether Garmin charged an unusual premium for the “speed limit alert feature,” the PTAB determined that Cuozzo was not entitled to such discovery. Id. at 6-7. At its own cost, Cuozzo may conduct market surveys, independently acquire file histories and prior art publications, and solicit analysis and opinions of the state of the art. Id. at 7.
4. Easily Understandable Instructions – The questions should be easily understandable. For example, ten pages of complex instructions for answering questions is prima facie unclear. Such instructions are counter-productive and tend to undermine the responder’s ability to answer efficiently, accurately, and confidently.
Id. at 6-7.
5. Requests Not Overly Burdensome To Answer – The requests must not be overly burdensome to answer, given the expedited nature of IPR. The burden includes financial burden, burden on human resources, and burden on meeting the time schedule of IPR. Requests should be sensible and responsibly tailored according to a genuine need.
Id. at 7.
The PTAB reviewed both cost and the burden imposed for meeting the IPR time schedule. Id. at 15-16. Based on a total cost of $50,000 to $100,000 and the fact that the requests were not reasonably tailored, the panel denied the requests based on the speed limit alert feature. Id. at 15-16.
Interestingly, the panel called Cuozzo to task for mischaracterizing its “Additional Discovery” requests as “Routine Discovery.” Id. at 3. “Routine Discovery” is narrowly directed to specific information known to the responding party to be inconsistent with a position advanced by that party in the proceeding, and not broadly directed to any subject area in general within which the requesting party hopes to discover such inconsistent information.” Id. at 4. The panel noted that Cuozzo did not reference information known to Garmin to be inconsistent with positions taken in the petition. Id. Instead, “Cuozzo casts a wide net directed to broad classes of information which may or may not include anything inconsistent with positions taken by Garmin.” Id. The panel characterized Cuozzo’s attempt to label very broad requests as narrowly directed was misplaced. Id.
Based on this precedent, IPR may be an appropriate strategy for defendants in certain patent infringement cases.