Federal Circuit Allows USPTO to Defend Appeal from Inter Partes Reexamination

Knowles Elecs. LLC v. Iancu, No. 2016-1954, 2018 (Fed. Cir. Apr. 6, 2018) (Before Newman, Clevenger, and Wallach, J.) (Opinion for the court, Wallach, J.) (Dissenting opinion, Newman, J.).

Knowles appealed the inter partes reexamination decision of the Board, which affirmed an examiner’s finding that certain claims were anticipated while other claims would have been obvious over various prior art references. The third-party requester declined to defend the judgment in its favor. The Director of the USPTO intervened to defend the Board’s decision, pursuant to 35 U.S.C. § 143. On appeal, the Court permitted the Director to intervene and affirmed the Board’s decision.

As an initial matter, the Court responded to a constitutional challenge in Judge Newman’s dissent, questioning whether the Director enjoyed Article III standing in this case, sufficient to intervene. Without lengthy discussion, the majority refuted Judge Newman’s concerns, citing 35 U.S.C. § 143, which gives the Director “an unconditional statutory ‘right to intervene in an appeal from a [PTAB] decision.’” Federal Circuit precedent also permits the USPTO to intervene and defend a Board decision, when a petitioner withdraws on appeal. The Supreme Court, in Cuozzo Speed Techs., LLC v. Lee, also held that “‘the [USPTO] may intervene in a later Judicial proceeding to defend its decision—even if the private challengers drop out.’” 136 S. Ct. 2131, 2144 (2016).

The Knowles patent at issue provides a silicon condenser microphone used in certain hearing aids to protect the transducer from outside interference. The components also referred to as the “package” or “package housing,” may be processed “in panel form” and can be later separated into individual units. This purportedly improves drawbacks in the prior art associated with manufacturing these housings, such as time, cost, and tooling.

On appeal, Knowles argued that (i) the Board improperly construed “package” by failing to consider the Court’s construction of that term in a related patent and (ii) the Board improperly relied on a new ground of rejection to sustain the obviousness findings.

Knowles asked the Court to direct the Board to adopt the definition of “package” used in a related judicial proceeding. It argued that the “package” requires a second-level connection with a mounting mechanism, and certain through-hole or surface mounting requirements. The Board’s construction did not require any specific mounting mechanism or second-level connection.

The Court noted that the claims themselves do not recite any particular second-level connection, nor did the specification. Notably, the specification describes an embodiment in which microphone packages are “coupled” together, without mention of a mounting mechanism. Finding no citations to the prosecution history by the parties, the Court turned to “previous judicial interpretations of a disputed claim term[, which] may be relevant to the PTAB’s later construction of that same disputed term.”

The Court found that the Board considered a previous interpretation and properly determined that it was consistent with the “broadest reasonable interpretation” at play in a reexamination. The Board explained that it adopted a prior construction with nearly identical language, as identified by Knowles. That construction did not require a “package” to be limited to constructions with through-hole or surface mounting but instead provided “a self-contained unit that has two levels of connection, to the device and to a circuit (or other system).” (emphasis in opinion). The phrase “or other system,” according to the Court, “comports with the construction of ‘package’ with a broad ‘second-level-connection’ as adopted by the PTAB in this case.” Finally, the Court decided that the “extrinsic evidence cannot overcome the intrinsic evidence.”

Regarding a new ground of rejection, Knowles argued that the Board’s finding regarding motivation to combine does not appear in the examiner’s decision and therefore was not previously raised to the applicant by the Examiner. The Court disagreed. The Examiner stated that substituting one known element for another in two cited references would have yielded predictable results. The Board also relied on functional similarities between the references, supporting the predictability of switching the microphone from one reference to the other. Thus, the Court found that the Board merely used different language in relying on the same reasoning as the Examiner.

Knowles argued in its appeal to the Board that the rejection based on “substitution with predictable results” was incorrect because of functional differences between the references, which would preclude substitution. The Court found that “Knowles’s response demonstrates that it had sufficient notice of this particular rejection and took advantage of its opportunity to respond.” Accordingly, the Court affirmed the Board’s holdings.

Judge Newman dissented, finding that “[t]he ‘requirement of injury, in fact, is a hard floor of Article III jurisdiction that cannot be removed by statute,’” and thus, “[t]he AIA, in authorizing intervention [by the Director], did not and could not create Article III jurisdiction in circumstances where Article III jurisdiction is absent.” Further, “in the rare situation where there is no remaining appellee and the intervenor has asserted no injury to itself, the intervenor of right does not have independent standing to continue the litigation.” Judge Newman further explained that “[w]here, as here, the PTO Director as intervenor is requesting [the Federal Circuit] to affirm the PTAB decision, although no party is requesting this action, an independent PTO interest is required such as a challenge to PTO jurisdiction or procedure.” According to Judge Newman, any interest held by the PTO in upholding the Board’s decisions is insufficient to instill Article III standing.

Judge Newman also found that the Director, on intervening, filed a Supplemental Appendix containing documents not previously in evidence, and according to Judge Newman, the admission of this evidence was improper and inconsistent with administrative law. Judge Newman stated that the proper course for consideration of such evidence is to request remand to the agency tribunal to ensure there is an appropriate opportunity to respond.

Take Away

Under current precedent and Article III challenges notwithstanding, in appeals from Board decisions in which the appellee has withdrawn, appellants should be prepared to argue against the Director in lieu of the withdrawn appellee. Further, such appellants should be prepared to rebut additional evidence which may be added to the record by the intervening Director.