Federal Circuit Questions PTAB’s “Redundancy” Practice in Shaw Industries Hearing

Although there are no formal limits on the number of grounds a petition may raise, the PTAB often eliminates alternative grounds challenging the same patent claims as “redundant,” even if the redundant grounds would establish unpatentability. See, e.g., Liberty Mutual Insurance Co. v. Progressive Casualty Insurance Co., CBM2012-00003, Paper 7 (Oct. 25, 2012). The PTAB cites its statutory 12-month deadline for completing proceedings as making it necessary to eliminate redundant grounds and run trials efficiently. On November 2, 2015, the Court of the Appeals for the Federal Circuit heard a case that may change the PTAB’s redundancy practice. Shaw Indus. Group, Inc. v. Automated Creel Sys’s, Inc., Nos. 15-1116, -1119 (Fed. Cir.).

In IPR2013-00132, and -00584, Petitioner Shaw raised a three-reference obviousness ground and a single-reference anticipation ground. The PTAB instituted the obviousness ground and denied the anticipation ground as redundant. On appeal to the Federal Circuit, Shaw argued that the PTAB’s denial of the anticipation ground was unlawful.

At the hearing, the PTO argued that the Federal Circuit cannot review the PTO’s redundancy practice because it lacks jurisdiction to review institution decisions. It contends that the practice “is within [the PTAB’s] discretion . . . to institute the IPRs in the way that they see fit” to meet Congress’s one-year deadline to complete PTAB trials. The PTO also emphasized that, when the PTAB denies a ground as redundant, it is not making a substantive determination on the merits of the ground. Rather, the PTAB is “saying we are going to institute on these particular grounds” because “[w]e don’t have to go forward on that same claim under multiple theories.”

Judges Moore and Reyna acknowledged the PTO’s stance on jurisdiction, but then questioned the PTO regarding the propriety of its redundancy practice.  Judge Moore questioned whether redundancy denials resulted in any efficiency gains, asking, “How is it more efficient to look at three-reference obviousness for those claims than one-reference anticipation?” And rather than the PTAB choosing the grounds, Judge Moore suggested that a better approach might be to limit the petitioner to a specified number of claims and “put[] the onus back on the [petitioner] . . . to justify which things were the most important.” Judge Moore was particularly troubled by what she saw as the randomness of the decision, stating that “what seems to be occurring here . . . is the PTO putting a blindfold on and throwing darts at the wall and deciding which grounds to go forward with” without any “rhyme, reason, or logic in the decision.”

Judge Reyna questioned the constitutionality of the redundancy practice, stating that it is “doing something that prevents . . . [people] from having their day in court” and “taking away causes of action.” The PTO argued, however, that the dismissal of redundant grounds should not create estoppel outside the PTO, and that the petitioner “could go to the district court” and “wouldn’t be estopped from arguing those same grounds at a district-court level where they’d have a jury that can decide.”

Given the concerns voiced by Judges Moore and Reyna at oral argument, if the Federal Circuit determines that it has jurisdiction to address this issue, it may significantly change the PTO’s redundancy practice.