The Federal Circuit Clarifies Notice Requirements in AIA Trials

In EmeraChem Holdings LLC v. Volkswagen Group of Am. Inc., No. 2016-1984 (Fed. Cir. 2017), the Federal Circuit faulted the Patent Trial and Appeal Board (“PTAB”) for violating the Administrative Procedure Act (“APA”) in an inter partes review (“IPR”) proceeding.  The court determined that the PTAB failed to provide the patent owner with adequate notice and opportunity to respond to the specific obviousness rationale set forth in the final written decision.

Under the APA, the PTAB “must timely inform the patent owner of ‘the matters of fact and law asserted,’ give all interested parties the opportunity to submit and consider facts and arguments, and allow a party ‘to submit rebuttal evidence . . . as may be required for a full and true disclosure of the facts.’” Slip op. at 11 (quoting 5 U.S.C. § 554(b)). In AIA proceedings, APA issues arise in situations where the PTAB’s rationale set forth in the final written decision differs from rationales presented earlier in the proceeding.  This raises the question of whether parties were given adequate notice of, and opportunity to respond to, the rationale ultimately adopted in the final written decision.

As previously discussed, recent Federal Circuit decisions have addressed the sufficiency of notice in AIA trials. In Genzyme Therapeutic Products L.P. v. Biomarin Pharm. Inc., 825 F.3d 1360, 1366 (Fed. Cir. 2016), the Federal Circuit held that the APA does not require notice of “every legal or factual issue that might arise in the course of the trial.” EmeraChem identifies issues for which notice is required and provides guidance on the scope of APA protection in AIA trials.

Notice Requires Explicit Identification of the Prior Art Reference Relied on to Satisfy a Particular Claim Limitation

In the IPR proceeding, the PTAB determined that certain claims of the challenged patent were unpatentable. In the final written decision, the PTAB relied on a particular reference, Stiles, for satisfying certain limitations recited in claims 3, 16, and 20 of the challenged patent.  On appeal, the Federal Circuit held that the PTAB failed to provide adequate notice of its reliance on the Stiles reference for satisfying limitations of claims 3, 16, and 20.

The Federal Circuit first considered whether the petition provided adequate notice of the PTAB’s rationale. The petition cited Stiles in a combination of four references to support an obviousness challenge against claims 1-14 and 16-20.  The court determined that broad statements in the petition relying on the Stiles reference did not constitute notice of the specific manner in which the PTAB relied on the Stiles reference.  The PTAB noted the specific manner in which the four prior art references were relied on in the petition and concluded that the petitioner relied on Saito, not Stiles, for satisfying the specific limitations of claims 3, 16, and 20.  Thus, the petition did not provide notice of the PTAB’s reliance on Stiles to arrive at the limitations of claims 3, 16, and 20, as set forth in the final written decision.

The court also found that the institution decision did not provide the patent owner with adequate notice. Like the petition, the institution decision only relied on the Saito reference for satisfying the limitations of claims 3, 16, and 20.  The court distinguished the present case from In re Cuozzo Speed Technologies, LLC, 793 F.3d 1268 (Fed. Cir. 2015), aff’d, 136 S. Ct. 2131 (2016).  The court explained that in Cuozzo, the institution decision provided the patent owner with notice that the PTAB was relying on a new combination of prior art that was ultimately adopted in the final written decision.  On the contrary, in EmeraChem, the Federal Circuit emphasized that the institution decision provided no notice that the PTAB was relying on the Stiles reference to satisfy the limitations of claims 3, 16, and 20.

The court also gave weight to the fact that neither party before the PTAB addressed the application of the Stiles reference with respect to the claim limitations in question:

The fact that neither party ever mentioned Stiles in the context of discussing claims 3, 16, and 20, helps make the point that neither party was on notice that Stiles was at issue as to those challenged claims.

Slip op. at 18.

Detailed Explanations in the Petition and Institution Decision Weighed Against Finding Adequate Notice

Interestingly, the fact that both the petition and institution decision included detailed explanations of how the prior art satisfies each claim limitation, weighed against finding adequate notice:

Where the petitioner uses certain prior art references to target specific claims with precision, or the Board does the same in its decision to institute, the patent owner is directed to particular bases for alleged obviousness. A general statement that lists all challenged claims and all asserted prior art is not a separate, additional articulation that each of the claims may be obvious over any combination of all listed prior art.

*   *   *

The question is whether the Board provided adequate notice and opportunity to respond to Stiles being used to reject claims 3, 16, and 20, given the specificity with which the Board itemized the challenged claims with specific grounds for rejection in the Institution Decision. On this question, we find it did not.  [Emphases added.]

Slip op. at 13, 17. Thus, because the petition and institution decision contained precise explanations mapping out how the prior art references satisfy each claim limitation, and the PTAB did not rely on those explanations in the final written decision, the Federal Circuit determined that notice of the PTAB’s rationale was lacking.

The detailed explanations provided in the petition in EmeraChem are typical for AIA proceedings.  Petitioners routinely present detailed claim charts and arguments to satisfy their burden of demonstrating a reasonable likelihood of success at trial.  37 C.F.R. § 42.104(b)(4).  Likewise, PTAB panels regularly provide detailed analyses of the claims and prior art in institution decisions.  Thus, it appears that the Federal Circuit’s rationale for limiting notice due to the detailed nature of the petition and institution decision in EmeraChem would be applicable to the vast majority of AIA proceedings.

Conclusion

EmeraChem contributes to a growing body of Federal Circuit cases scrutinizing the PTAB over due process concerns.  In EmeraChem, the Federal Circuit was careful to point out that the APA does not require “word-for-word parity between the institution and final written decisions.”  Slip op. at 17 (quoting Genzyme, 825 F.3d at 1368). Thus, the Federal Circuit affords the PTAB some latitude to adjust its rationale over the course of a trial.  Still, by requiring the PTAB to provide explicit notice of the prior art reference relied on to satisfy a particular claim limitation, EmeraChem articulates minimum requirements under the APA. Given the mandate of securing “just, speedy, and inexpensive resolutions” (37 C.F.R. § 42.1(b)), the holding in EmeraChem is a reminder that the PTAB must balance efficient resolutions with fair processes that provide parties with adequate notice.

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