Federal Circuit holds that due process is not violated when PTAB employs ‘surprise’ claim construction

On May 8, 2017, the U.S. Court of Appeals for the Federal Circuit issued a non-precedential decision in Intellectual Ventures II, LLC v. Ericsson, Inc. (2016-1739, 2016-1740, 2016-1741) directed to three related IPRs, denying that the patentee was denied due process when the Patent Trial and Appeal Board (the “Board”) employed a “surprise” claim construction in its opinion that had not been explicitly argued by either side to find the claims obvious. Because the Federal Circuit decided that the patentee had both notice and an opportunity to respond, it held that no due process violation occurred.

The Federal Circuit panel consisted of Judges Reyna, Wallach, and Chen. Judge Reyna delivered the panel’s opinion.

The patentee cited two recent decisions, In re Magnum Oil International, Ltd., 829 F.3d 1364 (Fed. Cir. 2016) (reversing a Board decision when the Board “adopt[ed] arguments on behalf of petitioners that could have been, but were not, raised by the petitioner during an IPR” because “the Board must base its decision on a rguments that were advanced by a party, and to which the opposing party was given a chance to respond”) and SAS Institute, Inc. v. ComplementSoft, LLC, 825 F.3d 1341 (Fed. Cir. 2016)(improper for the Board to change theories in midstream).

The Federal Circuit disagreed that the present case was like either of the two earlier precedential opinions because in this case, (1) the claim construction issue, if not the precise claim construction finally adopted by the Board, was vigorously argued and the patentee had notice that it was central to the case, (2) after reviewing the petitioners’ arguments (which the Federal Circuit does not say advocated the precise claim construction used by the Board), the patentee could have, but did not, request leave to file a sur-reply, and (3) the Board “asked questions” about claim construction during oral argument and, not being constrained by the parties’ proposed constructions, was free to adopt its own construction. Per the Federal Circuit, in contrast, in SAS the Board construed a claim term one way in its Institution Decision and, unexpectedly, a different way in its Final Written Decision.

The “sur-reply” rationale for due process opportunity to respond seems weak, because, although the opinion is somewhat opaque on the point, it did not appear that the Petitioners’ briefs ever actually argued for the precise construction eventually adopted by the Board. However, the Federal Circuit further grounded its finding that the patentee was accorded an opportunity to respond because the patentee could have, but did not, request a rehearing. In both Magnum Oil and SAS the patentee had requested, and was denied, rehearing.

This leads to the conclusion that one should always request a rehearing – but if you request a rehearing and are denied, you still lose, albeit a clear vindication of your due process rights. If that seems like cold comfort, better take it, because it’s the only kind of comfort a patentee is likely to get under the IPR regime.

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3 comments so far.

  • [Avatar for Cardinal Intellectual Property]
    Cardinal Intellectual Property
    May 16, 2017 06:31 pm

    The PTAB reasoned that “as recognized by the Federal Circuit in Belden Inc. v. Bek-Tek LLC, we have the discretion to strike or, alternatively, consider Patent Owner’s positions regarding the alleged new arguments or evidence in a sur-reply, a motion for observations, or during the oral hearing.”

    http://medicaldevicesip.com/wp-content/uploads/2016/02/View-Attachment-PDF8.pdf

  • [Avatar for Eric Berend]
    Eric Berend
    May 16, 2017 02:05 pm

    Lifetime appointment of CAFC judges is an opportunity for powerful IP pirates we call infringers, to ensure their dominance for a very long time. The mechanisms for review and impeachment of Judges so appointed, is now, apparently, inadequate to the modern challenge of such pervasive corruption; as is demonstrated here, in the patent part of the IP space in U.S. law.

    IOW, (‘tl/dr’ version): this is what it looks like, when the system breaks down, having been perverted away from its original and inherently correct purposes.

  • [Avatar for Bemused]
    Bemused
    May 16, 2017 08:04 am

    Yet another abject failure by the Federal Circuit to rein in a PTAB that is running amok. All this decision does is embolden and incentivize the APJs on the PTAB to continue to act in callous disregard to due process and rule of law. A complete failure of leadership by CJ Prost, et al.

    Sad and pathetic behavior by the CAFC which makes me question whether lifetime tenure for federal judges is really a good idea. Sure, it supposedly insulates judges from outside influence (although I’m not sure this is particularly true when it comes to Google) but it also breeds a certain arrogance and no fear that if they don’t do their job they will be replaced.

    Don’t these supposed learned jurists realize the damage they are doing to the patent system and to the US economy with these types of decisions? Is there really any surprise that efficient infringement is the licensing model of choice nowadays?