Federal Circuit provides guidance on broadest reasonable interpretation standard for claim construction in PTAB proceedings

In two recent cases, the Federal Circuit provided guidance on applying the broadest reasonable interpretation (BRI) standard for claim construction in IPR proceedings. PPC Broadband Inc. v. Corning Optical Communications RF, LLC, No. 2015-1361, 1366, 1368, 1369 (Fed. Cir. Feb. 22, 2016) (“PPC I”) and PPC Broadband Inc. v. Corning Optical Communications RF, LLC, No. 2015-1364 (Fed. Cir. Feb. 22, 2016) (“PPC II”).

In PPC I, the CAFC affirmed portions of the Board’s decision, vacated other portions, and remanded. The CAFC reviewed claim constructions for terms in claims that the Board previously found unpatentable as obvious. Recognizing that the “case hinge[d] on the claim construction standard applied—a scenario likely to arise with frequency,” the CAFC compared the constructions under the district court Phillips standard and the Board’s BRI standard.

For some claim terms, the CAFC found a difference under the two standards: “[W]hile the Board’s construction is not the correct construction under Phillips, it is the broadest reasonable interpretation . . . and because this is an IPR . . . we must uphold the Board’s construction.” Other claim terms, when properly construed, had the same definition under both the BRI and Phillips standards.

In PPC II, the CAFC vacated and remanded the Board’s holding of obviousness after finding that the Board erred in its construction of a term under the BRI standard. The CAFC reminded the Board that it must give claims their broadest reasonable interpretation consistent with the specification.

The CAFC found that the Board improperly arrived at its construction by referencing a dictionary cited by the parties and selecting the broadest definition therein. While the selected definition was the broadest, it was not the broadest when read in light of the specification: “The Board’s approach in this case fail[ed] to account for how the claims themselves and the specification inform the ordinary skilled artisan as to precisely which ordinary definition the patentee was using.”

As these decisions show, when drafting patent applications practitioners should consider whether certain terms, especially those that are essential to claiming the invention, may be interpreted differently under the BRI and Phillips standards (assuming the Supreme Court does not do away with the BRI standard in its pending decision in Cuozzo Speed Techs. v. Lee). It may make sense to specifically define such terms in the specification, so that if the patent is subsequently challenged (whether before the Patent Office or in district court litigation), a broader definition will not be applied.

Federal Circuit Affirms PTAB’s Conclusion that Claims Reciting a Subsidy Are CBM Eligible

In Blue Calypso, LLC, v. Groupon, Inc., the Federal Circuit concluded that the Board did not exceed its authority to conduct a CBM review of Blue Calypso’s challenged patents, and that the Board correctly applied the statutory definitions of “covered business method” and “technological invention” to the challenged claims. Nos. 2015-1396, -1397, -1398, -1399, -1401 (Fed. Cir. Mar. 1, 2016).

While the Board’s decision to institute a covered business method review is “final and nonappealable” under the AIA, the AIA does not prevent the Federal Circuit from reviewing whether a claim is eligible for CBM review. See Versata Dev. Grp., Inc. v. SAP Am., Inc. (Versata II), 793 F.3d 1306, 1318–23 (Fed. Cir. 2015); SightSound Techs., LLC v. Apple Inc., 809 F.3d 1307 (Fed. Cir. 2015). Because the Federal Circuit has jurisdiction under the AIA to review the Board’s final decisions in CBM reviews, the AIA does not prevent the Federal Circuit from reviewing the Board’s conclusion that the challenged patent claims are “covered business methods” that lack any “technological invention.” Versata II, 793 F.3d at 1323.

Noting its decisions in Versata II and SightSound, the Federal Circuit first rejected Blue Calypso’s arguments that the Board interpreted the statutory CBM definition in an overly broad way. Blue Calypso argued that its patents are not CBM patents because they relate to a method for managing and distributing advertising content, which is not a “financial product or service” that traditionally originated in the financial sector, such as banks, brokerages, holding companies, and insurance firms. The Federal Circuit rejected this argument, noting that the legislative history of the AIA suggests that the definition of CBM should be broadly interpreted, and “a financial activity” that is not directed to money management or banking nevertheless can constitute a “financial product or service” within the meaning of the statute.

Likewise, the Federal Circuit rejected Blue Calypso’s argument that the technological invention exception applies to any claims that are computer-based and contemplate hardware, software, a network, and communications devices. In so ruling, the Court relied on its decision in Versata II, in which it “rejected the argument that merely reciting the use of a computer would satisfy the technological invention exception.”

Having dispensed with Blue Calypso’s attacks on the Board’s interpretation of the statutory CBM definition, the Federal Circuit next addressed whether the Board correctly applied the definitions of “covered business method” and “technological invention” to the Blue Calypso patents. The claims at issue included a subsidy concept, as exemplified by the recitation in one of the claims of “subsidizing the qualified subscriber according to the chosen subsidy program.” The Board noted the centrality of this concept to the claims, and construed “subsidy” as “financial assistance given by one to another.” The Federal Circuit concluded that, based on this understanding of the subsidy concept, the Board’s conclusion that the challenged claims are financial in nature and subject to CBM review was not arbitrary and capricious and was supported by substantial evidence. So, too, was the Board’s conclusion that the claims recited nothing more than general computer system elements, and thus did not meet the technological innovation exception.

Practitioners should take note of the Court’s criticism of Blue Calypso’s failure to address the language of the challenged claims in its arguments. Whether seeking to establish or thwart CBM eligibility, a successful argument will center around what the claims themselves recite.

Federal Circuit rules that it has no jurisdiction to review PTAB’s refusal to institute redundant grounds

In a recent decision affirming the PTAB’s patentability determination in an IPR, the Federal Circuit confirmed that it has no jurisdiction to review the Board’s refusal to institute grounds it deemed to be redundant of instituted grounds. Harmonic, Inc. v. Avid Technology, Inc., No. 2015-1072 (Fed. Cir. Mar. 1, 2016).

In its IPR petition, the Petitioner challenged claims 1-20 of the patent at issue in view of seven different prior art grounds. The Board instituted review of claims 1-16 on one obviousness ground, declined to institute review on four other grounds it deemed to be “redundant” to the instituted ground, and declined to institute review of claims 17-20 in view of the two remaining grounds. The Board ultimately found claims 1-10 invalid and claims 11-16 valid in its final written decision.

The Petitioner appealed the Board’s finding that claims 11-16 were valid and argued that the Board, after concluding that the instituted ground did not render claims 11–16 unpatentable, erred by failing to consider the other prior art grounds in Harmonic’s IPR petition that were not instituted.

On appeal, the Federal Circuit upheld the Board’s validity finding as supported by substantial evidence and ruled that it had no jurisdiction to review the Board’s decision not to institute on the other grounds. In discussing its rationale, the Court confirmed that the Board’s institution decisions are “final and nonappealable” under 35 U.S.C. § 314(d), and that the Board’s reference to the non-instituted grounds as “redundant” did not alter that conclusion.

Interestingly, the Court found that in using the term “redundant,” “the Board suggested nothing more than that the claims addressed by the non-instituted grounds were already addressed by the instituted ground.” In other words, according to the Federal Circuit, “the Board did not determine that the prior art relied on in the non-instituted grounds was duplicative of that relied on in the instituted grounds” (emphasis added). This is apparently the position the PTO argued in its intervenor’s brief.

This decision confirms that the Board has broad discretion to decide whether it will even consider certain grounds on the merits at the institution stage. Moreover, this decision confirms that the Federal Circuit has no jurisdiction to review whether the Board appropriately exercised its discretion in declining to consider non-instituted grounds on the merits.

This decision highlights the difficulties of challenging the Board’s institution decisions. The Federal Circuit has repeatedly affirmed that it has no jurisdiction to review PTAB institution decisions, and this case illustrates that the Board’s refusal to institute grounds deemed to be redundant is not an exception to this rule. However, the fact that non-instituted grounds deemed redundant may not be subject to future estoppel (as we wrote about here) might still counsel in favor of including such grounds in the petition.

New PTAB Rules Take Effect May 2, 2016

The Patent Office has published a final rule with amendments to 37 CFR § 42, et seq., governing IPR, CBM, PGR, and derivation proceedings before the Patent Trial and Appeal Board. The new rules take effect Monday, May 2, 2016 and apply to all AIA petitions filed on or after that date and to any ongoing proceeding or trial before the Office. A revised Trial Practice Guide is forthcoming.

The published final rule describing the amended rules is available here. A redline comparing the amended rules to the old rules is available here.

We detail the major rule changes and give some practice pointers below.

I. New word counts and Rule 11-type certification requirements

The new rules will immediately affect how petitioners prepare their petitions and how patent owners must respond.

A. Word counts replace page limits for major briefing
[37 CFR § 42.24, 37 CFR § 42.107(a), 37 CFR § 42.207(a)]

The new rules require word counts instead of page limits for petitions, patent owner preliminary responses, patent owner responses, and petitioner replies. The word count excludes the grounds for standing under 37 CFR § 42.104, 42.204, and 42.304, and any mandatory notices. The page limits for motions to amend and other motions remain the same.

Paper IPR PGR CBM Derivation
Petition 14,000 w 18,700 w 18,700 w 14,000 w
Patent Owner Preliminary Response 14,000 w 18,700 w 18,700 w 14,000 w
Patent Owner Response 14,000 w 18,700 w 18,700 w 18,700 w
Petitioner Reply to Patent Owner Response 5,600 w 5,600 w 5,600 w 5,600 w
Motions to Amend 25 p 25 p 25 p 25 p
Oppositions to Motions to Amend 25 p 25 p 25 p 25 p
Replies to Oppositions to Motions to Amend 12 p 12 p 12 p 12 p
Other Motions 15 p 15 p 15 p 15 p
Oppositions to Other Motions 15 p 15 p 15 p 15 p
Replies to Other Motions 5 p 5 p 5 p 5 p

B. A Rule 11-type certification applies to papers filed with the Board [37 CFR § 42.11]

Section 37 CFR § 42.11, which prescribes the duty of candor owed to the Office, has been amended to include a certification requirement analogous to Rule 11 of the Federal Rules of Civil Procedure. The new rule also provides sanctions for noncompliance.

Every petition, response, written motion, and other paper filed in a proceeding must comply with the signature requirements set forth in Section 37 CFR § 11.18(a). Presenting such a paper to the Board operates as a certification under §11.18(b)(2), namely: that the paper is not being presented for an improper purpose; that the legal contentions are warranted by existing law or by nonfrivolous arguments about the law; that the allegations and factual contentions have or are likely to have evidentiary support; and that the denials of factual contentions are warranted by the evidence or reasonably based on a lack of information or belief.

The Office observed that this rule has a strong deterrent effect and expects that it will be infrequently invoked. Responding to fears that the proposed rule will lead to an increase in investigations by the Office of Enrollment and Discipline, the Office noted that, like all motions in an AIA trial proceeding, a motion for sanctions must be authorized by the Board. And, a copy of the motion most be served on the opposing party at least 21 days before seeking authorization from the Board to file the motion.

One other notable departure from Rule 11 in the Federal Rules is that sanctions imposed by the Board may only apply to practitioners and parties, not entire law firms.

II. New rules for testimonial evidence, Phillips-type claim construction, and substitute claims

The new rules will also change how patent owners approach their preliminary responses and post-institution responses, as well as patent owners’ strategies for obtaining substitute claims.

A. Preliminary responses can include new testimonial evidence
[37 CFR § 42.23(b), 37 CFR § 42.108(c), 37 CFR § 42.208(c)]

Under the new rules, a patent owner’s preliminary response may include new testimonial evidence, such as expert declarations. The Office amended the rules to provide that any factual dispute created by testimonial evidence that is material to the institution decision will be resolved in favor of the petitioner only for the purposes of determining whether to institute a trial. This is because, ordinarily, the shortened timeframe for the institution phase of an AIA proceeding does not allow for cross-examination of a declarant as of right and because the denial of institution is not appealable.

Though new testimonial evidence will now be permitted in preliminary responses, it is not required. The Office noted that no negative inference will be drawn if the patent owner fails to submit new testimonial evidence in the preliminary response. Patent owners should take this into account when deciding what testimonial evidence should be submitted with the preliminary response, and what testimonial evidence should be reserved for its response if a trial is instituted.

B. Either party may request Phillips-type claim construction for soon-to-expire patents
[37 CFR § 42.100(b), 37 CFR § 42.200(b), 37 CFR § 42.300(b)]

Though either party may do so, patent owners in particular may wish to request a Phillips-type claim construction if the patent will expire within 18 months of the Notice of Filing Date Accorded to Petition.

A typical situation would unfold as follows: the petitioner files a petition construing the claims under broadest reasonable interpretation standard that applies in AIA proceedings. The Board then issues a Notice of Filing Date, and the patent owner observes that the challenged patent is set to expire within 18 months of the date of entry of the Notice. The patent owner may then request a call with the Board to request leave to file a motion requesting a Phillips-type claim construction, certifying that the patent will indeed expire within the allotted timeframe. The Board may then allow the petitioner to brief the Phillips-type analysis before the patent owner’s preliminary response is due.

C. Patent owner must make prima facie case that substitute claims are patentable
[37 CFR § 42.20(c), 37 CFR § 42.121(a), 37 CFR § 42.221(a)]

Finally, the Office reiterated its rules governing motions to amend, which are meant to address the Office’s concern that substitute claims may become part of an issued patent without being independently examined by the Office.

Consistent with its explanation in MasterImage 3D, Inc. v. RealD Inc., the Office clarified that a patent owner must argue for the patentability of the proposed substitute claims over the prior art of record. “Prior art of record” includes:

(a) any material art in the prosecution history of the patent;

(b) any material art of record in the current proceeding, including art asserted in grounds on which the Board did not institute review;

(c) any material art of record in any other proceeding before the Office involving the patent;

(d) any art provided in light of the patent owner’s duty of candor; and

(e) any other prior art or arguments supplied by the petitioner.

The Office also noted that the substitute claims must be narrower than the claims being replaced.

As clarified in MasterImage, once the patent owner establishes that the narrower substitute claims are prima facie patentable over the prior art of record, the burden of production shifts to the petitioner. The petitioner may then explain why the patent owner did not make out its prima facie case of patentability, or attempt to rebut that case by addressing the patent owner’s arguments and evidence or by applying additional prior art against the proposed substitute claims. The ultimate burden to establish patentability, however, remains with the patent owner.

III. Guidance regarding additional discovery

The Office did not address the procedures for routine discovery, or elaborate on what inconsistent information may be available under routine discovery under Section 42.51(b)(1)(iii). The Office did, however, provide significant guidance regarding additional discovery.

A. Garmin remains the standard for requesting additional discovery

The Office stated that it will continue to apply the factors outlined in Garmin Int’l, Inc. v. Cuozzo Speed Techs. LLC. While the Office acknowledged concerns that an overly-strict application of the Garmin factors effectively require a party possess the evidence that it seeks, it was not persuaded to alter the factors or their application. Rather, the Office emphasized that “reasoning tending to show beyond speculation” could satisfy the first factor, and that a party need not have actual evidence of the type being sought.

The Office also stressed that the Garmin analysis is a case-by-case inquiry, and while additional proposed factors were rejected for implementation into the Rules, the Office noted that other factors may be considered when considering a request for additional discovery, such as those considered in Int’l Sec. Exch., LLC v. Chi. Bd. Options Exch., Inc.

B. Real party-in-interest and privity issues should be resolved as early as possible

The Office did not implement any formal rule changes regarding real party-in-interest disputes.

The Office will continue to permit patent owners to raise challenges to real party-in-interest and privity at any time during a trial proceeding, but emphasized that these challenges should be raised as early as practicable. Late challenges that could have been raised earlier will be considered on a case-by-case basis. The Office will provide further guidance in the revised Trial Practice Guide, and noted that it is considering alternative approaches that will allow petitioners to amend their real party-in-interest designations.

C. Patent owners must present a threshold amount of evidence or reasoning to obtain discovery of secondary considerations evidence

The Office also specifically addressed how the Garmin factors should be applied to discovery regarding secondary considerations of nonobviousness.

The Office noted that “[e]vidence of many secondary considerations (e.g., long-felt need, industry praise, commercial success of patent owner’s patented product, widespread licensing) is available to patent owners without discovery,” which suggests that information otherwise available to the requesting party should not be sought as additional discovery.

When the patent owner seeks discovery of secondary considerations evidence, it must show some nexus between the claims of the patent and the information sought to ensure that additional discovery is necessary in the interest of justice (in an IPR) or is supported by a showing of good cause (in a PGR). The Office does not require a conclusive showing of nexus, however, and rejected comments that argued the nexus requirement imposed too high a burden on the patent owner.

Federal Circuit holds that grounds denied institution as redundant are not subject to estoppel

In its recent decision in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., the Federal Circuit held that estoppel does not apply to grounds denied institution on the basis of redundancy. No. 2015-1116 (Fed. Cir. Mar. 23, 2016).

In its institution decision in an IPR, the Board instituted two obviousness grounds against a set of claims, but denied an anticipation ground against the same claims solely on the basis that the ground was redundant. The Board did not address the substance of the anticipation ground, nor did it explain how the ground was redundant. In the final written decision, the Board held that the claims were not obvious over the instituted grounds.

Before the Federal Circuit, the Petitioner sought a writ of mandamus requiring the Board to reevaluate the redundancy decision and institute IPR based on the anticipation ground.

The court noted that mandamus is an extraordinary remedy and that it requires that the “petitioner have no other adequate means to attain the desired relief.” To establish this element, the Petitioner argued that because the Board denied institution on the anticipation ground, the Petitioner may be estopped from pursuing that ground in any future proceedings in either the PTO or district courts.

The court denied the mandamus petition because it disagreed that estoppel would apply to the denied anticipation ground. The court based this holding on its interpretation of the IPR estoppel statute, 35 U.S.C. § 315(e), which states that after a final written decision on a challenged claim, a petitioner cannot assert that the claim is invalid “on any ground that the petitioner raised or reasonably could have raised during that inter partes review” (emphasis added). The court explained that because “an IPR does not begin until it is instituted,” the denied anticipation ground was not, and could not have been, raised during the IPR. Thus, raising the ground during the pre-institution phase did not trigger estoppel with respect to that ground.

Petitioners should take this decision into account when deciding what grounds to include in a petition. If grounds denied as redundant can be raised in future IPRs or district court cases, it may be advisable to raise multiple challenges against the same claims to provoke a redundancy denial. Practitioners should monitor how this case is applied by district courts and PTAB panels going forward. The court’s interpretation of § 315(e) could make the scope of estoppel more narrow than was previously thought.

Federal Circuit re-affirms and clarifies PTAB rules for motions to amend claims

In Nike, Inc. v. Adidas AG, the Federal Circuit re-affirmed the PTAB’s requirement that in IPR proceedings the Patent Owner must show the patentability of proposed substitute claims over both the prior art of record in the IPR and other prior art known to the Patent Owner. No. 2014-1719 (Fed Cir. Feb. 11, 2016). However, the court clarified that for known prior art not of record in the IPR, the Patent Owner needs only to submit a simple statement of patentability if the Patent Owner’s duty of good faith and candor to the PTO is not at issue.

The Patent Owner proposed substitute claims during the underlying IPR, which the Board rejected. On appeal, the Patent Owner argued that, because 35 U.S.C. § 316(e) puts the burden of proving unpatentability on the Petitioner, the Board erroneously placed the burden of proving patentability of the proposed substitute claims on the Patent Owner. The Federal Circuit, however, rejected this argument. In doing so, the court made clear that the burden of proof under § 316(e) is on the Petitioner to prove unpatentable only those issued claims that were challenged in the IPR petition, and not substitute claims proposed by the Patent Owner after the IPR has been instituted.

The court further explained that placing the burden on the Patent Owner to prove the patentability of proposed substitute claims is appropriate because IPRs are different from a typical prosecution, where an examiner performs a prior art search and independently conducts a patentability analysis. Placing the burden on the Patent Owner, therefore, ensures that proposed substitute claims are critically analyzed before they become part of the issued patent.

The Patent Owner also objected to the Board’s practice (which we wrote about here) of requiring a patent owner to establish patentability of substitute claims over all known prior art not of record. During the IPR, the Board denied the proposed substitute claims in part because the Patent Owner simply stated that the proposed claims were patentable over known prior art not of record. On this point, the Federal Circuit held that the simple statement from the Patent Owner sufficed to carry the burden of patentability, because there was no allegation that the Patent Owner violated its duty of candor and good faith to the PTO.

This decision re-affirmed the PTAB’s general authority to prescribe the standards and procedures for motions to amend a patent in an IPR. At the same time, the Federal Circuit clarified that the burden of proving patentability over known prior art not of record can be fairly simple if the Patent Owner’s duty of candor and good faith is not at issue.

Federal Circuit approves PTAB practice of addressing patentability of only instituted claims in final written decisions

In Synopsys, Inc. v. Mentor Graphics Corp., a split Federal Circuit panel held that final written decisions in IPR proceedings need not address all claims challenged in the petition. Nos. 2014-1516, 2014-1530 (Fed. Cir. Feb. 10, 2016).

In its institution decision, the Board instituted review of only some of the claims challenged in the petition. In the final written decision, the Board found a subset of those instituted claims unpatentable. Consistent with Board practice, the final written decision did not address the patentability of challenged claims that were not instituted.

On appeal, in addition to substantively disputing the Board’s decision that some of the instituted claims were not anticipated, the Petitioner argued that the Board erred by not addressing in the final written decision the patentability of the claims that were challenged in the petition but not instituted. The petitioner based its argument primarily on the requirement in 35 U.S.C. § 318(a) that the Board “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.”

The Federal Circuit majority disagreed that the AIA requires the Board to address all challenged claims in the final written decision. The majority concluded that § 314(a), which prohibits institution unless “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition,” strongly implies that the Board can “pick and choose among the claims in the decision to institute.” Given that not all challenged claims are required to be part of the trial, the majority argued that it would not make sense to require a final decision on the non-instituted claims.

In her dissenting opinion, Judge Newman argued that § 314(a) does not authorize the Board to “pick and choose” which claims to institute and that § 318(a) requires the Board to address every challenged claim in the final written decision. Judge Newman argued that, besides being contrary to statutory requirements, the Board’s practice frustrates the purpose of IPRs as a “complete substitute” for the invalidity phase of district court litigation based on patents and printed publications.

This decision is yet another example of the Federal Circuit being broadly deferential to the PTO with regard to its procedures for administering the AIA post-issuance proceedings.

Federal Circuit rules that PTAB failed to adequately describe its reasoning for obviousness finding

In a recent decision vacating the PTAB’s obviousness findings in an IPR, the Federal Circuit set forth criteria necessary to support future obviousness findings. Cutsforth, Inc. v. MotivePower, Inc., No. 2015-1316 (Fed. Cir. Jan. 22, 2016) (nonprecedential).

In its 2014 IPR petition, the Petitioner challenged all claims of the patent at issue as being invalid for obviousness over a combination of references. The Board instituted review of all claims on this ground and ultimately found all claims invalid for obviousness in its final written decision.

On appeal, the Federal Circuit upheld the Board’s claim constructions but vacated the Board’s obviousness finding because the Board did not “provide enough explanation to support its finding.” According to the Federal Circuit, the Board’s final written decision did not state any “independent reasons” of obviousness, formally adopt the reasons given in the Petitioner’s arguments, or give reasons why one of ordinary skill in the art would know to combine elements from the cited references.

In discussing its rationale for vacating the Board’s decision, the Court stated that the Board must “articulate its reasoning” why a person of ordinary skill in the art would find a combination obvious. “Broad and conclusory statements” are not adequate to meet this threshold. The Court found that the PTAB merely summarized the Petitioner’s obviousness arguments and offered only “conclusory analysis of its own.” This, according to the Federal Circuit, is not sufficient reasoning to support an obviousness finding.

This decision clarifies the level of support necessary to uphold an obviousness finding. As the decision shows, the PTAB must either formally adopt the obviousness reasoning of a party’s arguments or provide its own reasoning why a person of ordinary skill in the art would find an asserted combination obvious. Most importantly, the Board must avoid mere conclusory statements of obviousness. Unless the Board provides adequate reasoning, the Federal Circuit cannot properly review whether there is “substantial evidence” to support an obviousness finding.

Federal Circuit rules that PTAB has full discretion to deny request to file motion for supplemental information

A unanimous Federal Circuit panel recently affirmed the PTAB’s decision denying a Petitioner’s request to file a motion to submit an expert report as supplemental information under 37 C.F.R. § 42.123(a). Redline Detection, LLC v. Star Envirotech, Inc., No. 15-1047 (Fed. Cir. Dec. 31, 2015).

USPTO regulations permit a party to file a motion to submit supplemental information after the Board issues its Institution Decision. 37 C.F.R. § 42.123. In particular, Section 42.123(a) states that a party may request to file a motion to submit supplemental information as long as (1) the request is made within one month of the institution date and (2) the supplemental information is relevant to a claim for which the trial is instituted.

Petitioner Redline challenged the validity of two claims of Star’s patent for methods of generating smoke for use in volatile and explosive environments, asserting twelve invalidity grounds over various combinations of four references. Redline did not submit an expert declaration with its Petition.

The PTAB instituted review on two of the twelve grounds. Within a month of the institution date, STAR sought leave to submit four new exhibits, including a sixty-page expert declaration that addressed the two institution grounds. The Board denied leave, determining that nothing in the regulations requires an automatic grant of a request to submit supplemental information as long as the timeliness and relevance requirements are met.

The Board emphasized that it has discretion to grant or deny such requests, and that the Board must always consider its statutory mandate “to ensure the efficient administration of the Office and the ability of the Office to complete IPR proceedings in a timely manner.” 35 U.S.C. § 316(b). Because the party filing the motion has the burden to prove that it is entitled to the requested relief, and Redline failed to do so, denial was proper.

On appeal, Redline argued that the Board abused its discretion, and that the plain language of the regulation required its motion be granted because it satisfied the timeliness and relevance requirements. The Federal Circuit disagreed, holding that the Board did not abuse its discretion. The plain language of Section 42.123 does not exclude the application of other general governing regulations. The Board rightly considered its mandate for economy, integrity, efficient administration, and timely consideration of IPRs in denying Redline’s motion.

In particular, the Federal Circuit rejected Redline’s reliance on Pacific Market Int’l, in which the Board authorized a short, ten-page supplemental expert report under of Section 42.123(a). Calling Redline’s characterization “inaccurate and misleading,” the Federal Circuit pointed out that the Pacific Market Int’l panel stated that Section 42.123 is not a routine avenue to pursue, nor does the regulation require an automatic acceptance of, supplemental information. Further, “Redline fails to appreciate the stark difference between the short, supplemental expert report which the PTAB reasonably permitted in Pacific Market International, and its de novo expert report submitted for the first time.”

As this decision shows, IPR petitioners should not count on a motion for supplemental information as a vehicle for submitting evidence not submitted with the petition.  Now that the Federal Circuit has endorsed the Board’s ability to exercise its discretion in deciding such motions, it is reasonable to expect that the Board will continue to scrutinize such motions even where the timeliness and relevance requirements are met.

Federal Circuit weighs in again on reviewability of institution decisions

In a recent case affirming the PTAB’s final decision of invalidity, the Federal Circuit held that it lacks jurisdiction to review whether the Board improperly instituted a CBM Review on a ground not asserted in the petition. SightSound Techs., LLC v. Apple Inc., 809 F.3d 1307 (Fed. Cir. 2015). The Federal Circuit, however, reiterated that it has jurisdiction to review whether the Board improperly determined that the patents qualify as CBM patents.

While 35 U.S.C. § 324(e), like its IPR counterpart § 314(e), bars appellate review of the Board’s determination of whether to institute a CBM Review, the Federal Circuit held in Versata (as we discussed here) that the Board’s determination of an issue that affects or limits its authority to render a final decision invalidating a patent (e.g., whether patents qualify as CBM patents) is reviewable—even if the Board “does not revisit the issue” in its final written decision.

In SightSound, Apple filed CBM petitions challenging SightSound’s patents that disclose methods for the electronic sale and distribution of digital audio and video signals. Although Apple had asserted anticipation grounds only, the Board, “exercis[ing its] discretion,” instituted trial additionally on obviousness grounds. In its final written decision, the Board reaffirmed its institution decision, explaining that Apple’s petitions supported the obviousness grounds based on its detailed explanation of the references. The Board ultimately held that the challenged claims were invalid as obvious—though not as anticipated.

On appeal, SightSound challenged the final decision by arguing that the Board improperly instituted on the unasserted grounds. SightSound’s argument, the Federal Circuit held, was foreclosed by its decision in Cuozzo, which held that institution of an IPR petition on a ground that relied upon references not cited in the petition is not reviewable. Similar to its rationale in Cuozzo, the Federal Circuit explained that the CBM statute “does not limit the Board’s authority at the final decision stage to grounds alleged in the CBM petitions.”

The Federal Circuit therefore held that the Board’s decision to institute on grounds not raised in the petitions is unreviewable. However, echoing its reasoning in Versata, the Federal Circuit held that the question of whether the patents qualify as CBM patents is reviewable because it “is a limitation on the Board’s authority to issue a final decision.”

As SightSound illustrates, the Federal Circuit’s opinions regarding which institution issues are and are not reviewable to some extent build upon and harmonize its Cuozzo opinion. Recently, however, the Supreme Court granted certiorari in Cuozzo, indicating that it will review the issue of whether the Board’s decision whether to institute an IPR proceeding is judicially unreviewable. Therefore, it remains to be seen whether the Federal Circuit’s approach in Cuozzo, Sightsound, and other cases regarding the reviewability of institution decisions will ultimately be approved by the Supreme Court.