In re Hodges, No. 2017-1434, (Fed. Cir. Feb. 12, 2018) (Before Lourie, O’Malley, and Wallach, J.) (Opinion for the court, O’Malley, J.) (Concurring in part and dissenting in part, Wallach, J.).
The ’222 application is directed to a valve assembly for draining contaminants, condensation, and other fluids that adversely affect the efficiency and function of a pressurized system. The examiner found that: (1) Rasmussen anticipates claims 1-3, 5-8, and 15-20 of the ’222 application, (2) Frantz anticipates claims 1, 2, 9, 10, 14-18, 20, and 21, and (3) the two references collectively render all claims obvious. The Board affirmed the examiner’s rejections, and Hodges appealed with respect to claims 1-3, 5-8, and 21.
A prior art reference anticipates a patent’s claim when the four corners of the document “describe every element of the claimed invention, either expressly or inherently, such that a person of ordinary skill in the art could practice the invention without undue experimentation.” Spansion, Inc. v. Int’l Trade Comm’n, 629 F.3d 1331, 1356 (Fed. Cir. 2010).
At issue was claim 1’s recitation of an “inlet seat” that is “define[d]” by a “valve body.” The examiner found that Rasmussen inherently discloses an inlet seat within an unlabeled valve. The examiner’s rejection turned on whether Rasmussen’s unlabeled valve in Rasmussen’s Figure 7 containing the inlet seat is “define[d]” by Rasmussen’s valve body. The Board’s finding was that it could be unsupported by substantial evidence. Rasmussen’s unlabeled valve, and therefore, the inlet seat therein, is not an “internal part” of and “contained within” the outer casing of the drain valve. The Board’s sole support for its finding was that the positioning of Rasmussen’s unlabeled valve is similar to the positioning of the ’222 application’s second member 16. However, the Board neither supported its assertion of similarity nor explained how the positioning of the unlabeled valve in Rasmussen’s Figure 7 would enable a skilled artisan to “practice the invention without undue experimentation.” Even if Rasmussen’s unlabeled valve was “similar,” it is different in the only respect relevant to the claim at issue, i.e., it is not an internal part of or contained within the valve body. Therefore, the Court reversed the Board’s anticipation determination with respect to Rasmussen as to claims 1-3 and 5-8.
The Board also affirmed the examiner’s determination that Frantz anticipates the claims. The Board adopted the examiner’s construction of “signal” as “an act, event, or the like that causes or incites some action.” Based on this construction, Frantz’s piston stem and head generate a “signal,” as required by the claims, in the form of a mechanical force determined by the pressure in the valve chambers. The ’222 application’s description showed that the signal must be at least capable of being compared to a “predetermined limit.” However, the Board’s construction would encompass virtually any mechanical component within the valve drain that moves in response to the flow of fluid through the drain. The Board’s interpretation of “signal” was thus unreasonably broad and inconsistent with the ’222 application and did not accord with the broadest reasonable interpretation standard. The Court reversed the anticipation determination based on Frantz as to claims 1-2 and 21.
Finally, the Board determined that the claims would have been obvious over Rasmussen in view of Frantz because the unlabeled valve depicted in Rasmussen’s Figure 7 could be made part of Rasmussen’s drain valve body such that the seat of the unlabeled valve would be “‘an internal part’ of and contained within the ‘outer casing’ of drain valve 10.” However, the Board did not explain how Rasmussen’s drain valve assembly could be so modified. Additionally, the Board made no findings regarding the obviousness factors laid out in Graham v. John Deere Co. of Kan. City, 383 U.S. 1 (1966). The Board must “explicate its factual conclusions, enabling [the Court] to verify readily whether those conclusions are indeed supported by ‘substantial evidence’ contained within the record.” In re Gartside, 203 F.3d 1305, 1314 (Fed. Cir. 2000).
Unlike the Board’s anticipation determinations, which contravened the only permissible findings that could be drawn from the prior art under the proper constructions of the relevant claim terms, the obviousness determinations involved “potentially lawful but insufficiently or inappropriately explained” factual findings. In re Van Os, 844 F.3d 1359, 1362 (Fed. Cir. 2017). The Board failed to explain its reasoning to allow the Court to determine whether its findings would be lawful. When faced with similarly deficient factual findings, the Court has “consistently vacated and remanded for further proceedings.” Id. Consequently, the Court vacated the Board’s obviousness rejections with respect to claims 1-3, 5-8, and 21, and remanded for further factual findings and explanation on this issue.
Judge Wallach concurred in part and dissented in part. He explained that when an agency fails to make requisite factual findings or to explain its reasoning, “the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation.” Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985). First, the Court may reverse when the PTAB has committed legal error and no further factual findings are required. Second, it may reverse when the PTAB has made erroneous factual findings and “only one permissible factual finding” exists. Owens Corning v. Fast Felt Corp., 873 F.3d 896, 903 (Fed. Cir. 2017).
Judge Wallach argued that the majority attempted to fit its reversal of the PTAB’s determination that Rasmussen anticipates the asserted claims of the ’222 application into the second of the rare circumstances allowing reversal. Relying on an annotated version of Rasmussen Figure 7, the majority assumed that the inlet seat is located within the unlabeled valve and that the entire unlabeled valve is outside the outer casing of the drain valve, whereas the PTAB assumed that the inlet seat is located at inlet port 17A and that the entirety of inlet port 17A is within the outer casing of the drain valve. Judge Wallach explained that if only one of those findings were permissible, Supreme Court guidance dictates that affirmance would be appropriate.
When the Board fails to explain its reasoning and prevents the Court from determining whether the Board’s findings would be lawful, the Court will typically vacate and remand for further proceedings.