May/June 2017
IP Litigator
The inter partes review (IPR) proceeding, introduced by the America Invents Act, has been widely adopted as a fast, cost-effective procedure for raising patentability challenges. An IPR ordinarily must be completed within one year of institution, much faster than district court litigation or ex parte reexamination. This speed is achieved through a highly streamlined set of procedures; for example, the patent owner usually only has one opportunity after institution to submit substantive evidence supporting the patentability of its claims. Given the streamlined nature of an IPR, significant disputes have arisen when a petitioner or the Patent Trial and Appeal Board(PTAB or Board) raises new arguments or evidence after the patent owner has submitted its post-institution response. The Federal Circuit recently has begun to adjudicate these disputes. In In re Magnum Oil Tools International, Ltd.,1 for example, the Court circumscribed the Board’s authority, restraining it from adopting unpatentability theories that could have been, but were not raised by the petitioner. In In re NuVasive, Inc.,2 the Court similarly restricted the petitioner’s ability to advance new arguments in reply, holding that the patent owner was entitled under the Administrative Procedure Act (APA) to an opportunity to respond to these new arguments. This evolving Federal Circuit case law has created important procedural protections—and potential pitfalls—for parties involved in IPR proceedings. This article assists those involved in IPRs to successfully navigate the emerging procedural boundaries in these proceedings.
IPR proceedings are intended to be not only speedy and inexpensive, but also just.3 They are therefore subject to various procedural protections to ensure that each party receives adequate due process. In particular, IPRs are formal administrative adjudications subject to the procedural protections of the APA. Under the APA, a party is entitled to notice and an opportunity to respond. That is, the U.S. Patent and Trademark Office (PTO) must timely inform the patent owner of "the matters of fact and law asserted," allow all interested parties an opportunity to submit and consider facts and arguments, and allow them to submit rebuttal evidence.4
Separately, the statutes and regulations governing IPR proceedings provide further protections to ensure due process.5 A petition must identify each challenged claim, the grounds on which the challenge is based, and the evidence that supports each challenge.6 Before institution, the patent owner has the right to file a preliminary response to the petition, and if instituted, the patent owner also has the right to file a response to the petition.7 The petitioner has a right to reply to the patent owner’s response, but may only respond to arguments raised in the patent owner response.8 Both parties have the right to request an oral hearing.9
The procedural protections provided by the APA and the statutes and regulations governing IPRs recently have come to the forefront in cases where the Board or a petitioner raises new arguments or evidence after the patent owner response. These cases provide helpful insight to petitioners and patent owners. Generally, the Board may not raise, address, or decide arguments not presented in a petition. In addition, a petitioner may not raise new arguments or evidence during oral argument or in reply, though limited exceptions exist for introducing evidence to show the state of the art.
The Board must base its decision on arguments and evidence presented in the petition and not on what the petitioner could have argued, but did not. In In re Magnum Oil Tools International, Ltd., the Board instituted review of all claims of a patent in the field of oil drilling through use of hydraulic fracturing.10 The petitioner proposed two grounds of unpatentability based on alternative primary references, Alpha and Lehr.11 The petitioner largely incorporated by reference its arguments based on Lehr from its arguments based on Alpha.12 It did not separately describe how one of ordinary skill would have modified Lehr in view of the secondary references and only noted high-level similarities between Alpha and Lehr.13 The Board declined to institute review based on Alpha and instead instituted review based on Lehr, ultimately finding all the challenged claims obvious.14
On appeal, the patent owner argued that the Board erred in finding obviousness because the petitioner failed to explain how one would have modified Lehr in view of the secondary references and instead explained how one would have modified Alpha in view of the secondary references.15 The Court reversed, holding that the Board improperly shifted the burden of proof to the patent owner to disprove obviousness.16 The Court explained that the Board expected the patent owner to explain, and faulted it for failing to explain, why an obviousness argument based on a first set of references (Alpha and secondary references) that the Board did not adopt would not apply to a second set of references (Lehr and secondary references).17 The Court also stated that the Board must base its decision on arguments advanced by a party, and to which the opposing party had an opportunity to respond, and that the Board may not adopt arguments that the petitioner could have, but did not raise.18
The Board also must give the parties an opportunity to respond to new claim constructions. In SAS Institute, Inc. v. ComplementSoft, LLC,19 the Board instituted review of certain claims of a patent directed to an integrated development environment for generating and maintaining source code, ultimately determining that all challenged claims except for claim 4 would have been obvious. In its institution decision, the Board construed "graphical representations of data flows" as a depiction of a map of the path of data through the executing source code.20 But in its final written decision, the Board construed the term as a graphical representation comprised of icons depicting data processing steps and arrows to depict the movement of data through source code.21 Based on this modified construction, the Board determined that claim 4 would not have been obvious.22
On appeal, the petitioner argued that the Board improperly changed its construction in its final written decision without giving the parties an opportunity to respond.23 The Court agreed, holding that the Board may not "change theories in midstream" by modifying its construction from that set forth in the institution decision.24 The Court found that it was "difficult to imagine either party anticipating that already-interpreted terms were actually moving targets" and that it was "thus unreasonable to expect that they would have briefed or argued, in the alternative, hypothetical constructions not asserted by their opponent."25
Generally, arguments and evidence may not be raised for the first time during oral argument. In Dell Inc. v. Acceleron, LLC, the petitioner challenged the patentability of certain claims of a patent directed to a computer network appliance.26 Claim 3 required a caddie, and the Board held that this claim was anticipated.27 To satisfy the caddie limitation, the Board relied on a portion of a prior-art reference, Hipp, which the petitioner raised for the first time during oral argument.28 On appeal, the patent owner argued that the Board’s reliance on this portion of Hipp was improper.29 The Court agreed, holding that the Board denied the patent owner adequate notice and an opportunity to respond.30 The Court reasoned that the patent owner was denied a chance to present arguments or evidence on whether this portion of Hipp met the claim limitation.31
Moreover, a reply may not introduce new arguments or evidence, and the Board may exercise its discretion to exclude a reply that does. In Intelligent Bio-Systems, Inc. v. Illumina Cambridge Ltd., the Board instituted review of claims 1–6 and 8 of the challenged patent on two obviousness grounds.32 The claims were directed to a method of labeling nucleotides in a deoxyribonucleic acid strand and required a protecting group comprising an azido group.33 The first obviousness ground was based on Ju in combination with Zavgorodny, and the second was based on Tsien in combination with Zavgorodny. Neither Ju nor Tsien disclosed a protecting group comprising an azido group, and the Board determined that the petitioner failed to show that the claims would have been obvious.34 In its decision, the Board declined to consider the petitioner’s reply and accompanying expert declaration.35 It found that the reply presented new arguments and evidence, changing the unpatentability rationale from express reliance on Zavgorodny’s deprotecting conditions to asserting that those conditions would have been obvious to modify.36 The petitioner appealed, arguing that the Board abused its discretion in declining to consider its reply and expert declaration.37 The Court, however, affirmed, holding that the Board did not abuse its discretion.38 The Court reasoned that the petitioner relied on an entirely new rationale for why one of ordinary skill would have been motivated to combine Tsien or Ju with a modification of Zavgorodny.39 The Court also explained that neither it nor the Board must parse a reply to discern which parts are responsive and which parts are improper.40
Similarly, in In re NuVasive, Inc., the petitioner filed two petitions challenging a patent directed to implants for spinal fusion surgery.41 The Board instituted review and later held all but one of the challenged claims obvious, finding that a prior-art reference, Michelson, met two of the limitations of the claimed implant—having a length both greater than 40 mm and at least 2.5 times its width.42
On appeal, the patent owner argued that it did not receive adequate notice of or an opportunity to respond to the particular portions of Michelson that the Board relied on to meet the claim limitations.43 The Court agreed in part, holding that patent owner was provided adequate notice in the first IPR but not in the second.44 The Court explained that in the first IPR, the petitioner cited the portions of Michelson that the Board relied on to meet the claim limitations, whereas in the second IPR, the petitioner cited those portions only in its reply.45 After petitioner cited those portions, the Board did not permit the patent owner to file a surreply or to address the issue during oral argument.46 The Court therefore held that the patent owner was denied an opportunity to respond.47 Although the patent owner was permitted to cross-examine the petitioner’s expert and file observations on the cross-examination, the Court held that the opportunity to file observations was not sufficient, as observations may not contain arguments or evidence.48
Limited exceptions, however, exist for introducing new evidence to show the state of the art. In Genzyme Therapeutic Products Ltd. Partnership v. Biomarin Pharmaceutical Inc., for example, the petitioner filed two petitions challenging the ’410 and ’226 patents directed to treating Pompe’s disease with injections of human acid α-glucosidase.49 The Board instituted review of claim 1 of the ’410 patent and claims 1 and 3-6 of the ’226 patent.50 The instituted grounds were based on references describing only in vitro experiments, and the patent owner argued that one of ordinary skill would not find those experiments predictive of results in a human patient.51 In reply, however, the petitioner cited two in vivo studies.52 Relying on these in vivo studies to show the state of the art, the Board ultimately held the claims obvious.53 The patent owner appealed, arguing that the Board’s reliance on the in vivo studies violated the APA’s notice and opportunity to respond requirements.54 The Court, however, disagreed, holding that the Board’s final written decision was based on the same grounds set forth in its institution decision.55 The Court reasoned that the patent owner did not lack notice, as it raised the in vivo studies in its response.56 The Court further reasoned that the Board may consider references to show the state of the art at the time of the invention.57
Similarly, in Ariosa Diagnostics v. Verinata Health, Inc., the petitioner filed two petitions challenging a patent directed to methods for noninvasive prenatal testing for the presence of fetal chromosomal abnormalities.58 The Board instituted review but ultimately determined that the petitioner had failed to prove the claims obvious.59 In particular, the Board found that the petitioner failed to explain how the asserted references differed from the challenged claims, how one of ordinary skill would go about combining their disparate elements, or what modifications one would have made to combine these disparate elements.60 The Board also declined to consider the petitioner’s attempt, through its reply and accompanying declaration, to bolster its reliance on a reference not included in the asserted grounds.61 On appeal, the petitioner argued that the Board erred in declining to consider the reference for what it showed about the background knowledge of one of ordinary skill at the time of the invention.62 Because the Board’s language left open the possibility that the Board improperly limited its consideration of the reference, the Court vacated the Board’s nonobviousness determination and remanded for further proceedings.63
This exception for introducing new evidence has been interpreted narrowly. In Qualtrics, LLC v. OpinionLab, Inc., the petitioner challenged the patentability of certain patent claims directed to a system and method for gathering feedback from visitors to a Web site.64 The Board instituted review on the basis that the challenged claims would have been obvious over a combination of three references.65 The patent owner argued that the combination did not disclose or suggest a particular claim limitation, which was used to distinguish the claims over a fourth reference during prosecution.66 In addition to arguing that the combination did disclose the claim limitation, the petitioner argued that the fourth reference disclosed the claim limitation.67 The Board ultimately determined that the petitioner had failed to prove obviousness, reasoning that the combination did not suggest the particular claim limitation.68 The Board considered whether the claim limitation could be found in the background knowledge of one of ordinary skill but did not specifically address the fourth reference.69
On appeal, the petitioner argued that the Board erred by focusing on the disclosures of the three asserted references and not on the disclosure of the fourth reference, which the petitioner argued evidenced the background knowledge of one of ordinary skill.70 Affirming the Board’s nonobviousness determination, the Court reasoned that the Board found that the background knowledge of one of ordinary skill did not disclose the claim limitation.71 The Court also distinguished this case from Ariosa, reasoning that the petitioner did not include the fourth reference in its petition or accompanying declaration.72
Taken together, this recent Federal Circuit case law begins to delineate the emerging procedural boundaries in IPR proceedings and provides helpful insight to petitioners and patent owners. Petitioners should expend the resources necessary to develop strong positions in their petitions. These positions should be evaluated critically in an effort anticipate counter arguments. If possible, counter arguments should be addressed in the petition itself (and supporting expert declarations), as petitioners run a risk of having their replies excluded to the extent that they include new arguments or evidence. Petitioners should anticipate being held to the positions set forth in their petitions.
A petitioner also should explain in its reply why any new arguments or evidence are responsive to something raised by the patent owner in its patent owner response. Similarly, if a patent owner believes that improper new arguments or evidence have been raised in a reply, it should promptly request a conference call with the Board and seek leave to move to strike the improper new reply evidence or arguments or, alternatively, to submit a surreply with responsive evidence. Failure to do so may waive the patent owner’s right to raise a procedural due process challenge on appeal. Both parties should be as specific as possible in making a record before the Board so that the Board (and, later, the Federal Circuit) are not left guessing about why a petitioner believed it was entitled to raise new arguments or evidence or why a patent owner contends these new arguments or evidence were improper.
Despite the Federal Circuit’s recent guidance, many open questions remain. For example, the Court has not defined the true limits on the Board’s discretion to address new arguments and evidence raised in reply. It also has not addressed the remedies available to a petitioner that has had its reply excluded or whether a patent owner may waive an improper reply argument by not timely raising it at the PTAB. Stay tuned for what promises to be a rapidly growing area of Federal Circuit law.
Endnotes
1 In re Magnum Oil Tools Int’l, Ltd., 829 F.3d 1364 (Fed. Cir. 2016).
2 In re NuVasive, Inc., 841 F.3d 966 (Fed. Cir. 2016).
3 37 C.F.R. § 42.1(b).
4 5 U.S.C. §§ 554(b)-(c), 556(d); see also 5 U.S.C. § 557(c).
5 IPR proceedings are governed by 35 U.S.C. §§ 311-19 and 37 C.F.R. §§ 42.1-42.80, 42.100-42.123.
6 35 U.S.C. §§ 311, 312(a)(3); 37 C.F.R. § 42.104(b).
7 35 U.S.C. §§ 313, 316(a)(8); 37 C.F.R. §§ 42.107(a), 42.120(a).
8 35 U.S.C. § 316(a)(13); 37 C.F.R. § 42.23(b).
9 35 U.S.C. § 316(a)(10).
10 Magnum Oil, 829 F.3d at 1367-1368.
11 Id. at 1372.
12 Id.
13 Id. at 1373, 1379.
14 Id. at 1373.
15 Id. at 1374.
16 Id. at 1381.
17 Id. at 1378.
18 Id. at 1380-1381.
19 SAS Inst., Inc. v. ComplementSoft, LLC, 825 F.3d 1341, 1343 (Fed. Cir. 2016).
20 Id. at 1346.
21 Id.
22 Id.
23 Id. at 1347.
24 Id. at 1351-1352.
25 Id. at 1351.
26 Dell Inc. v. Acceleron, LLC, 818 F.3d 1293, 1294 (Fed. Cir. 2016).
27 Id.
28 Id.
29 Id. at 1295.
30 Id. at 1301.
31 Id.
32 Intelligent Bio-Systems, Inc. v. Illumina Cambridge Ltd., 821 F.3d 1359, 1362 (Fed. Cir. 2016).
33 Id. at 1363.
34 Id. at 1366.
35 Id.
36 Id.
37 Id.
38 Id. at 1370.
39 Id.
40 Id. at 1369.
41 NuVasive, 841 F.3d at 967.
42 Id.
43 Id. at 967-968.
44 Id. at 968.
45 Id. at 972-973.
46 Id. at 973.
47 Id.
48 Id.
49 Genzyme Therapeutic Prods. Ltd. P’ship v. Biomarin Pharm. Inc., 825 F.3d 1360, 1363 (Fed. Cir. 2016).
50 Id. at 1364.
51 Id.
52 Id. at 1364-1365.
53 Id. at 1365.
54 Id. at 1365-1366.
55 Id. at 1366.
56 Id. at 1367.
57 Id. at 1368.
58 Ariosa Diagnostics v. Verinata Helath, Inc., 805 F.3d 1359, 1360 (Fed. Cir. 2015).
59 Id. at 1363.
60 Id.
61 Id. at 1364.
62 Id. at 1365.
63 Id.
64 Qualtrics, LLC v. OpinionLab, Inc., No. 2016-1177, 2017 WL 562460, at *1 (Fed. Cir. Feb. 13, 2017).
65 Id. at *2.
66 Id.
67 Id.
68 Id. at *2-3.
69 Id. at *3.
70 Id.
71 Id. at *4-5.
72 Id. at *4 (citing Ariosa, 805 F.3d at 1365).
Originally printed in IP Litigator in May/June 2017. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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