On May 8, 2017, the U.S. Court of Appeals for the Federal Circuit issued a non-precedential decision in Intellectual Ventures II, LLC v. Ericsson, Inc. (2016-1739, 2016-1740, 2016-1741) directed to three related IPRs, denying that the patentee was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.