Federal Circuit Vacates and Remands PTAB’s “Midstream” Claim Construction Change

In SAS Institute, Inc. v. ComplementSoft, LLC, Nos. 2015-1346 & 2015-1347 (Fed. Cir. June 10, 2016), the Federal Circuit found error in a final written decision rendered by the Patent Trial and Appeal Board. The Board adopted a new construction for a term it had construed differently in its institution decision. The Court stated that the Administrative Procedure Act (APA) prevents the Board from “chang[ing] theories in midstream without giving [the parties] reasonable notice of the change and the opportunity to present argument under the new theory.”

The Federal Circuit affirmed the Board’s decision for terms that had not been previously construed, but vacated and remanded the aspects of the Board’s decision relying on the new claim construction “so that the parties may address [the] new construction that the Board adopted in its final written decision after interpreting the claim differently before.” Judge Stoll wrote, “[i]t is 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, in the alternative, hypothetical constructions not asserted by their opponent.”

SAS additionally argued that the Board’s final written decision should have addressed the patentability of all claims challenged in its petition, even those the Board did not institute. But the panel followed its recent holding in Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016), which rejected “SAS’s argument that the Board must address all claims challenged in an IPR petition in its final written decision.” Judge Newman echoed her Synopsys dissent, arguing that the Board’s failure to address non-instituted claims in the final written decision undermines the goals of the AIA because “[f]inal determination of the validity of a challenged patent is not achieved when the PTO selects, at its sole and unreviewable choice, which claims it will review and which it will not touch.”