In 2019, the Patent Trial and Appeal Board initiated a pilot program allowing patent owners to request preliminary guidance on a motion to amend.1

Under the pilot program, the board provides feedback on the patent owner's proposed substitute claims and makes an initial determination as to whether they meet the statutory and regulatory requirements for a motion to amend. The patent owner may then file a revised motion to amend if dissatisfied with the preliminary guidance.

This preliminary guidance may provide significant value to patent owners by enabling them to address any deficiencies in a motion to amend and preview a petitioner's opposition arguments. Patent owners and practitioners alike should be aware, however, that the board's preliminary guidance is nonbinding.2

Despite the nonbinding nature of the preliminary guidance, the board's surrounding procedures are still subject to the strictures of the Administrative Procedure Act, which requires the parties have notice and the opportunity to respond to the board's actions.3

Thus, if the board alters its decision between its preliminary guidance and final written decision, it must provide notice to the parties and an opportunity to respond. The question then arises as to when the board can change its opinion after preliminary guidance and what procedures it must follow to comply with the APA.

The U.S. Court of Appeals for the Federal Circuit weighed in on this issue in the June 27 Medytox Inc. v. Galderma SA decision.

The Federal Circuit held that it was permissible for the board to issue preliminary guidance adopting the patent owner's proposed construction of a term, but then issue a final written decision adopting the petitioner's opposing construction of the same term. This article explores this case and its implications for parties that elect preliminary guidance.

At the PTAB, Galderma challenged Medytox's patent relating to animal-protein-free botulinum toxin composition for use treating cosmetic and noncosmetic conditions.4

The board instituted Galderma's petition, and Medytox filed a noncontingent motion to amend in response with proposed substitute claims. Medytox also requested preliminary guidance.

Among other things, Medytox's substitute claims added "wherein said botulinum toxin composition has a greater length of effect compared to about 20 units of BOTOX," which "is determined by physician's live assessment at maximum frown and requires a responder rate at 16 weeks after the first treatment of 50% or greater."5 According to the specification, a "responder rate" is the proportion of patients who responded favorably to treatment.6

In its preliminary guidance, the board considered the claimed responder rate of "50% or greater" and held that it was "not of the view that the limitation ... should necessarily be interpreted as a range of 50-100%," as Galderma had argued.7

From this, the board found that "50% or greater" did not introduce new matter. However, the board found other limitations in Medytox's claims were insufficient to meet the requirements for a motion to amend.

In response, Medytox filed a revised motion to amend that maintained the "50% or greater" limitation. Medytox cited the board's construction and asserted, contrary to what Galderma had argued, the limitation is just "a minimum threshold requirement, not a range."8

In opposition, Galderma argued that "there is no practical difference between PO's alleged '50% minimum threshold' construction and Petitioners' proposed range of '50-100%,'" and "[e]ven if [Medytox's] proposed construction w[as] correct, it does not save the substitute claims."9

In support, Galderma cited deposition testimony of Medytox's expert, who conceded that responder rates of 70%, 80% and 90% all satisfy Medytox's claims despite no support for these percentages in the written description.10

In its final written decision, the board altered its interpretation of "50% or greater" and rejected Medytox's position that the responder rate is simply a 50% threshold. The board held that "50% or greater" should instead be interpreted as a range from 50%-100%.11 According to the board, the record had "further developed" since its preliminary guidance, prompting a different interpretation of the limitation.12

The board cited Medytox's expert agreeing that responder rates could be as high as 90% and still be encompassed by the claims, and Medytox's counsel stating in oral argument that "the proposed substitute claims would read on higher responder rates, including up to 95%."13

Based on the revised claim construction and the specification's limited examples of 52%, 61%, and 62% responder rates, the board found that "50% or greater" impermissibly introduced new matter, was not supported by the written description, and was not enabled.14

On appeal, Medytox challenged the board's substantive rulings and asserted the board's revised claim construction violated the APA. The Federal Circuit affirmed the board's claim construction, finding no meaningful difference between the parties' constructions and agreeing that "the responder rate limitation has a natural upper limit of 100%."15

The court similarly affirmed the board's findings of no enablement, holding that the disclosed responder rates of 52%, 61% and 62% in the specification did not enable the full scope of the claimed 50%-100% range.16

The court also dismissed Medytox's APA arguments, holding that Medytox was on notice of the claim construction dispute by virtue of Galderma's proposed construction and the board's discussion in its preliminary guidance. Thus, Medytox had full opportunity to brief the term before the final written decision.17

Of note, the court affirmed the board's revised construction despite the board acknowledging in its preliminary guidance that Galderma had argued "50% or greater" should be interpreted as a range up to 100% and the specification "does not disclose any responder rates of 80-100%."18

The court found that the "[t]he extrinsic record relied on by the Board was developed after the Board's Preliminary Guidance was issued ... thus ... the Board's decision to change its claim construction for the responder rate limitation was not arbitrary and capricious."19

While endorsing the board's approach in this case, the court reaffirmed the limitations imposed by the APA on the board: "[T]he agency must inform the parties on procedures relevant to its practices, like the Pilot Program, and must respect the boundaries imposed by the APA," including due process and the opportunity to be heard.20 In this case, the court found that the board had complied with the APA.

Given the particular circumstances of this case, Medytox should not be viewed as a blanket endorsement of the board's ability to change theories after preliminary guidance, despite it being nonbinding.

Medytox involved a unique set of facts: The board's initial interpretation did not cite intrinsic evidence and its revised interpretation relied primarily on a further developed extrinsic record, including admissions by the petitioner's expert and statements by petitioner's counsel during oral argument.

Medytox and Galderma also litigated their opposing constructions throughout the trial, so both had notice of the dispute and knowledge that it may be case dispositive.

To be sure, the Federal Circuit has previously declared that "an agency may not change theories in midstream without giving respondents reasonable notice of the change and the opportunity to present argument under the new theory."21 Thus, while the director as intervenor argued in Medytox that "[p]reliminary guidance is exactly that — preliminary,"22 the APA continues to limit the board's ability to alter its theories midstream without notice and opportunity to respond.

Practitioners should be aware of the advantages and pitfalls of preliminary guidance and its nonbinding nature, but Medytox likely does not close the debate as to what the board may do during an America Invents Act trial.

This case also highlights the different burdens on the patent owner on a motion to amend. At the preliminary guidance stage, the patent owner need only show a "reasonable likelihood" that the motion to amend complies with the applicable regulatory and statutory requirements, including no new matter and support in the written description.23 24 The patent owner's burden elevates to a "preponderance of the evidence" on a final written decision.25

The court identified those as standards as being "qualitatively different" and having "significant difference."26 Thus, parties should not consider an issue closed after receiving a favorable decision on preliminary guidance, as those determinations are subject to revision in a final written decision.27

Foontotes

1. 84 Fed. Reg. 9497, 9497-9507 (Mar. 15, 2019).

2. Id.

3. Nike, Inc. v. Adidas AG , 955 F.3d 45, 52 (Fed. Cir. 2020) (citing 5 U.S.C. §§ 554(b)(3), 554(c)(1)).

4. Medytox, Inc. v. Galderma S.A., 71 F.4th 990, 993-96 (Fed. Cir. 2023)

5. Id.

6. Id. at 995 n.4.

7. Galderma S.A. v. Medy-Tox, Inc., PGR2019-00062, Paper 28 at 4-9 (P.T.A.B. Nov. 24, 2020)

8. Galderma S.A. v. Medy-Tox, Inc., PGR2019-00062, Paper 30 at 13 (P.T.A.B. Dec. 11, 2020)

9. Galderma S.A. v. Medy-Tox, Inc., PGR2019-00062, Paper 40 at 12-14 (P.T.A.B. Jan. 22, 2021)

10. Id.

11. Galderma S.A. v. Medy-Tox, Inc., PGR2019-00062, Paper 66 at 19-28 (P.T.A.B. Jul. 16, 2021)

12. Id. at 19-33.

13. Id.

14. Id.

15. Medytox, 71 F.4th at 996-98.

16. Id. at 998-99.

17. Id. at 999-1000.

18. Galderma, PGR2019-00062, Paper 28 at 5.

19. Medytox, 71 F.4th at 1002.

20. Id.

21. Id. at 998.

22. Nike, Inc. v. Adidas AG , 955 F.3d 45, 52 (Fed. Cir. 2020); see also SAS Inst., Inc. v. ComplementSoft, LLC , 825 F.3d 1341, 1351 (Fed. Cir. 2016), rev'd on other grounds, 138 S. Ct. 1348 (2018).

22. Brief for Intervenor, Medytox, Inc. v. Galderma S.A., No. 2022-1165 at 8-12 (Fed. Cir. July 15, 2023)

23. 84 Fed. Reg. 9497, 9497-9507 (Mar. 15, 2019).

24. 37 C.F.R. § 42.221(d)(1) ("A patent owner bears the burden of persuasion to show, by a preponderance of the evidence, that the motion to amend complies with the requirements of paragraphs (1) and (3) of 35 U.S.C. 326(d), as well as paragraphs (a)(2), (a)(3), (b)(1), and (b)(2) of this section").

25. Id.

26. Medytox, 71 F.4th at 999 (citing Trivascular, Inc. v. Samuels , 812 F.3d 1056, 1068 (Fed. Cir. 2016)).

27. Id. at 1000 ("We have encouraged the Board to 'change its view of the merits after further development of the record' if necessary, such as when a holding otherwise would 'collapse' the two analyses and standards into one.) (quoting Trivascular, Inc., 812 F.3d at 1068).

Originally published by Law360

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