The Role of the Administrative Procedure Act in Appeals from the PTAB

Introduction

The Administrative Procedure Act[1] governs, among other things, the judicial functions of all administrative agencies, including (because it is part of the Patent and Trademark Office) the Patent Trial and Appeal Board. Under the APA, a reviewing court must “hold unlawful and set aside agency action . . . without observance of procedure required by law.”[2]

As the Federal Circuit has explained, inter partes review proceedings are formal adjudications and, as such, require the procedures enumerated in . . . the APA.[3] Among these requirements are that the Board “timely inform[]” parties of “the matters of fact and law asserted” in the IPR[4]; provide “all interested parties opportunity for the submission and consideration of facts [and] arguments . . . [and] hearing and decision on notice”[5]; and permit “a party . . . to submit rebuttal evidence . . . as may be required for a full and true disclosure of the facts.”[6] Each of these requirements, if violated by the Board, creates an  opportunity for appeal, and whether the Board has met these requirements is a question reviewed by the Federal Circuit de novo.[7]

APA Requirements in Appeals from the PTAB

Consistent with other courts, the Federal Circuit has applied the APA’s procedural requirements to mean that the “agency [here, the Board] may not change theories midstream without giving the parties reasonable notice of the change” and “the opportunity to present argument under the new theory.”[8]

Three common situations in which the Federal Circuit has addressed whether notice and opportunity to respond were lacking are: (1) where the Board’s Final Written Decision relied on evidence or arguments beyond the scope of the petition; (2) where the Board’s Final Written Decision relied on new facts or arguments raised for the first time late in the proceedings; and (3) where the Board’s Final Written Decision adopted a new claim construction. Each of these is explored below.

Evidence or Arguments Beyond the Scope of the Petition

The scope of an IPR is limited by the grounds set forth in the petition.[9] As the Federal Circuit has explained, “[i]t is the petitioner that bears the burden of proof in IPRs,” and the Board is not “free to adopt arguments on behalf of petitioners that could have been, but were not, raised by the petitioner during an IPR.”[10] This means that the Board may not “raise, address, and decide unpatentability theories never presented by the petitioner and not supported by record evidence.”

This situation arose in In re NuVasive, Inc., where Medtronic, Inc. filed two petitions challenging, among others, claim 1 of NuVasive Inc.’s patent on implants for spinal fusion surgery.[11] In the first petition, Medtronic relied on a combination of references, Frey and Michelson, and pointed specifically to Figure 18 of Michelson as teaching a limitation prescribing dimensions for the implant.[12] In the second, Medtronic relied on two other references in combination with Michelson, but this time did not point to Figure 18 for the dimensional limitation.[13] The Board instituted IPR on both petitions, finding in both “a reasonable likelihood that Medtronic would establish” the claim obvious based in part on Michelson.[14]

NuVasive’s Patent Owner Responses in both IPRs disputed whether Michelson taught the dimensional limitation but did not address Figure 18.[15] Medtronic’s Replies both argued this limitation was taught by Figure 18.[16] NuVasive objected, arguing Figure 18 was a new ground of invalidity asserted for the first time on reply.[17] Nevertheless, the Board found the claim unpatentable, relying in both its Final Written Decisions on Figure 18 of Michelson.[18] Despite this, the Board ultimately canceled all but one of the challenged claims as obvious.[19] NuVasive appealed.[20]

The Federal Circuit held there was no APA violation in the IPR based on Medtronic’s first petition, which pointed specifically to Michelson’s Figure 18.[21] But the IPR based on Medtronic’s second petition, the Court explained, “is different.”[22] “[T]here was no notice of the Figure 18 point” in that IPR “before NuVasive filed its Patent Owner Response.”[23] And “at no point after the Reply did the Board give NuVasive the required opportunity to respond to that point.”[24] The Board’s Final Written Decision, which “treated Michelson’s Figure 18 as an essential part of its obviousness findings,” thus violated the APA.[25]

The Court’s analysis offered helpful guidance for the Board and future parties. First, the Court highlighted that NuVasive’s “entitle[ment] to an adequate opportunity to respond” to Medtronic’s reliance on Michelson’s Figure 18 “was not lessened . . . by virtue of the opportunity NuVasive had to respond to other factual assertions about Michelson.”[26] Reliance on a new portion of the same prior art can still be a “new ground,” beyond the scope of the petition.[27] Second, the Court distinguished the Board’s “essential” reliance on Figure 18 (which violated the APA) from situations where the Board’s citations to a prior art reference “merely serve[] to describe the state of the art” or are not “necessary to the prima facie case” (which do not).[28] Third, the Court discussed what constitutes an adequate opportunity to respond. While NuVasive was “permitted to cross-examine” Medtronic’s expert and “file observations” after Medtronic’s Reply, the Board “refused to permit NuVasive to file a surreply or even to address the matter during oral argument.”[29] Observations, the Court explained, are not “always sufficient to ensure the required opportunity to respond[,]” because they “are not a vehicle for submitting new evidence” and their “content and format” are “tightly circumscribed” by the Board’s rules.[30]

Notably, though, “[t]here is no blanket prohibition against the introduction of new evidence during an inter partes review proceeding.”[31] Rather, “the petitioner . . . may introduce new evidence after the petition stage if the evidence is a legitimate reply to evidence introduced by the patent owner, or if it is used ‘to document the knowledge that skilled artisans would bring to bear in reading the prior art identified as producing obviousness.’”[32] And the Board may rely on such evidence in its Final Written Decision, so long as such reliance does not “come as a surprise” to the patent owner.[33] In Anacor Pharmaceuticals, Inc. v. Iancu, for instance, the Court rejected a patent owner’s claim that “the Board improperly relied on new evidence to which [it] did not have an opportunity to respond.”[34] Anacor complained “that the Board improperly cited two references . . . that were not cited in the petition.”[35] The Court disagreed, noting these references were cited “as evidence of the knowledge that a skilled artisan would bring to bear in reading” the references that were cited in the petition, the patent owner had addressed one of these references in its patent owner response, and the other had been addressed during expert depositions and at the hearing.[38] The Board concluded the patent owner “was not denied its procedural rights.”[37] Finally, “[t]he Board is entitled to discretion in how it interprets petitions” and it “review[s] the Board’s judgments concerning what arguments are fairly presented in a petition and other pleadings for abuse of discretion.”[38] As the Federal Circuit has observed, “the Board walks a fine line when interpreting the scope of a petition and determining what arguments have been fairly presented.”[39] “[T]he Board should not take an overly mechanistic view of a petition and decline to address an argument because the petitioner did not present it with ideal vigor and clarity,” but “the Board should also not have to decode a petition to locate additional arguments beyond the ones clearly made.”[40] Where, for example, the “IPR petitioner [has] contend[ed] that a particular argument was properly raised, but overlooked or otherwise incorrectly interpreted by the Board,” the Federal Circuit has reminded that “[u]ltimately, it is the petitioner’s burden to present a clear argument.”[41]

New Facts or Arguments Raised for the First Time Late in the Proceedings

Another common situation in which a party may not have adequate notice and an opportunity to respond is when new facts or arguments are raised for the first time too late in the IPR. For example, in Dell Inc. v. Acceleron, LLC, the Federal Circuit considered whether the Board’s Final Written Decision could rely on an argument and evidence raised for the first time during the hearing.[42] In its petition, Dell had relied on one component shown in a prior art figure as disclosing the claimed “caddies.”[43] But at the oral hearing, Dell pointed to another component in the same figure, and the Board relied on this later- identified component in its Final Written Decision.[44] The Federal Circuit held the Board’s Decision violated the APA.[45] This later-identified component, the Court explained, was “an essential part of its anticipation ground decision[,]” yet “Acceleron was given no prior notice” of it and had “no opportunity . . . to supply evidence” in response.”[46]

Board Adopts a New Claim Construction

While, as noted above, the petition “is supposed to guide the life of” the IPR, the Federal Circuit has approved of Board decisions adopting a construction other than that proposed in the petition, whether it be a new construction by the Board or that offered by the patent owner.[47] As always, though, the APA requires that the petitioner have notice and an opportunity to respond. As the Federal Circuit has summarized: “[A] petitioner is entitled under the APA to respond to new claim construction arguments made by a patent owner or adopted by the Board sua sponte” and “both parties are entitled to respond to a new construction adopted by the Board sua sponte after an institution decision.”[48]

In WesternGeco LLC v. ION Geophysical Corp., for example, the Federal Circuit found no violation of the APA where the Board adopted in its Final Written Decision a claim construction that neither party had proposed. [49] The Federal Circuit pointed out that the patent owner itself had disputed the meaning of the term in its patent owner response, and “[h]aving put it at issue, [the patent owner] was well aware that the Board could alter its construction in the final written decision.”[50] As the Court explained, “the Board was permitted to issue a new construction in the final written decision given that the claim construction was a disputed issue during the proceedings.”[51] “[T]he Board,” the Court added, “is not bound to adopt either party’s preferred articulated construction of a disputed claim term.”[52]

Another situation arose in SAS Institute, Inc. v. ComplementSoft, LLC. There, the petitioner and patent owner had agreed to a claim construction adopted by the Board in the institution decision, but the Board adopted a different construction in the final written decision.[53] This, the Federal Circuit held, violated the APA, because the Board had “change[d] theories in midstream.”[54] As the Court explained, “[i]t [was] difficult to imagine either party anticipating that already-interpreted terms were actually moving targets, and it is thus unreasonable to expect that they would have briefed or argued . . . constructions not asserted by their opponent.”[55]

By contrast, in Hamilton Beach Brands, Inc. v. f’real Foods LLC, the Federal Circuit held the requirements of the APA had been met where the Board adopted claim constructions first proposed in a patent owner’s response.[56] According to the Court, the petitioner “received adequate notice in [the patent owner] response regarding the [constructions], as shown by the fact that [the petitioner] argued against [the] proposed constructions in its reply brief and during the oral hearing.”[57]

Axonics, Inc. v. Medtronic, Inc. adds a notable caveat. There, as in Hamilton Beach, the Board relied on a claim construction raised for the first time in a patent owner’s response.[58] The petitioner submitted, with its reply, a supplemental expert declaration, but the Board declined to consider it.[59] The Federal Circuit held the petitioner was not given an adequate opportunity to respond because, “[a]lthough the Board considered [the petitioner’s] arguments against the new claim construction, it refused to consider [the petitioner’s] evidence and argument under that construction.”[60] The Court clarified that it was not saying “[a] petitioner may rely on new prior art in response to a new claim construction presented in the patent owner response[,]” and “le[ft] for another day the question of whether, when presented with a new claim construction, a petitioner can rely in its reply on new embodiments from the prior art references that were relied on in the petition.”[61]

Conclusion

Both petitioners and patent owners should be aware of the procedural requirements imposed by the APA. A defeat before the Board may find success on appeal—or a victory before the Board may be lost—if these requirements have not been met.

Endnotes

1. 5 S.C. §§ 550 et seq.
2. 5 S.C. § 706.
3. Corephotonics, 84 4th 990, 1001 (Fed. Cir. 2023).
4. 5 S.C. § 554(b)(3).
5. 5 S.C. § 554(c).
6. 5 S.C. § 556(d).
7. Sirona Dental GMBH v. Institut Straumann AG, 892 F.3d 1349, 1352 (Fed. Cir. 2018).
8. Belden v. Berk-Tek LLC, 805 F.3d 1064, 1080 (Fed. Cir. 2015) (quotingRodale Press, Inc. v. FTC, 407 F.2d 1252, 1256–57 (D.C. Cir. 1968)).
9. See 35 S.C. § 312; SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1354 (2018).
10. In re Magnum Oil Tools Int’l, , 829 F.3d 1364, 1380 (Fed. Cir. 2016).
11. In re NuVasive, , 841 F.3d 966, 967 (Fed. Cir. 2016).
12. Id. at 968-69.
13. Id.
14. Id. at 969.
15. Id.
16. Id.
17. Id. at 970
18. Id.
19. Id. at 967
20. Id. at 96768.
21. Id. at 972
22. Id.
23. Id.
24. Id.
25. Id. at 973.
26. Id. at 971.
27. Id. at 972 (emphasis added).
28. Id.
29. Id. at 971 (quoting Genzyme Therapeutic Prods. Ltd. v. Biomarin Pharm. Inc., 825 F.3d 1360, 1368–69 (Fed. Cir. 2016); Belden, 805 F.3d at 1079).
30. Id. at 973.
31. Id. (citing Belden, 805, F.3d at 1081).
32. Anacor , Inc. v. Iancu, 889 F.3d 1372, 1380 (Fed. Cir. 2018).
33. (quoting Genzyme, 825 F.3d at 1366)
34. Id. at 1380–81 (citing Novartis AG v. Torrent Pharms. Ltd., 853 F.3d 1316, 1325–26 (Fed. Cir. 2017)); see also Corephotonics, 84 F.4th at 1002 (“Any marked departure from the grounds identified with particularity in the petition would impose ‘unfair surprise’ on the patent owner and, consequently, violate both the APA and the IPR statute.”).
35. Id. at 1380.
36. Id. 
37. Id. at 1381–82.
38. Id. at 1382
39. Id. (citing Ericsson Inc. v. Intell. Ventures I LLC, 901 F.3d 1374, 1379 (Fed. Cir. 2018); Altaire Pharms., Inc. v. Paragon Bioteck, Inc., 889 F.3d 1274, 1284 (Fed. Cir. 2018)).
40. Netflix, v. DivX, LLC, 84 F.4th 1371, 1377 (Fed. Cir. 2023).
41. Id. at 1377.
42. Id. at 1376–77.
43. Dell v. Acceleron, LLC, 818 F.3d 1293, 1294 (Fed. Cir. 2016)
44. Id. at 1301.
45. Id.
46. Id.
47. Id.
48. Axonics, Inc Medtronic, Inc., 75 F.4th 1374, 1380–81 (Fed. Cir. 2023).
49. Id. at 1382.
50. WesternGeco LLC ION Geophysical Corp., 889 F.3d 1308, 1328 (Fed. Cir. 2018).
51. Id.
52. Id. (citing Intellectual Ventures II LLC v. Ericsson Inc., 686 F. App’x 900, 905 (Fed. Cir. 2017); Exxon Chem. Patents, Inc. v. Lubrizol Corp., 64 F.3d 1553, 1556 (Fed. Cir. 1995)).
53. Id. (citing Intellectual Ventures II LLC v. Ericsson Inc., 686 F. App’x 900, 905 (Fed. Cir. 2017); Exxon Chem. Patents, Inc. v. Lubrizol Corp., 64 F.3d 1553, 1556 (Fed. Cir. 1995)).
54. SAS , Inc. v. ComplementSoft, LLC, 825 F.3d 1341, 1351 (Fed. Cir. 2016),rev’d on other grounds sub nom. SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348 (2018).
55. Id. (quoting Belden, 805 F.3d at 1080).
56. Id. See also Qualcomm Inc. v. Intel Corp., 6 F.4th 1256, 1262–63 (Fed. Cir. 2021).
57. Hamilton Beach Brands, v. f’real Foods LLC, 908 F.3d 1328, 1335 (Fed. Cir. 2018).
58. Id. at 1138.
59. Axonics, 75 4th at 1380. See also Qualcomm Inc. v. Intel Corp., 6 F.4th 1256, 1263 (Fed. Cir. 2021).
60. Id. at 1379.
61. Id. at 1383.
62. Id. (citing Apple Inc. v. Andrea Elecs. Corp., 949 F.3d 697, 706 (Fed. Cir. 2020) (concluding, in a case where there had not been a changed claim construction, that petitioner’s reply arguments did not exceed the scope of a proper reply because those arguments did not cite new embodiments or new prior art).