The Federal Circuit vacates a decision by the PTAB for relying on facts raised for the first time at oral argument.

Executive Summary

On March 15, 2016, the US Court of Appeals for the Federal Circuit vacated a decision by the Patent Trial and Appeal Board (PTAB or the Board) cancelling a claim in an inter partes review because the Board based its decision on an assertion raised by the petitioner for the first time at oral argument.^[1] The decision underscores the importance of raising all essential facts and arguments in the papers presented to the Board prior to oral argument and signals the Federal Circuit will likely look with disfavor upon any Board decision that purports to rest on new arguments raised at oral argument.

Discussion

In Dell Inc. v. Acceleron, LLC, the Petitioner sought inter partes review of Acceleron, LLC’s blade server patent, contending, among other things, that a prior art patent anticipated a challenged claim by disclosing the required “caddie” claim element. In its petition, Petitioner argued that the prior art reference’s articulating door performed the same function as the caddie limitation. The Federal Circuit, however, found that Petitioner subsequently advanced two additional invalidity arguments relating to this limitation that were not articulated in its initial petition. As the Federal Circuit explained in its decision, one of these arguments was raised for the first time in Petitioner’s reply to the patent owner’s arguments and evidence, and the second was raised for the first time during oral argument before the Board. In its decision, the Board relied on the argument raised during oral argument to find the challenged claim invalid as anticipated over the prior art reference.

On appeal, the Federal Circuit vacated the Board’s ruling, holding that the Board could not properly rely upon arguments that were not raised in the papers.  The court noted that the Administrative Procedural Act imposes particular requirements on the US Patent and Trademark Office (PTO) for conducting administrative trials. An agency must (1) “timely inform[] the patent owner of matters of fact and law asserted,” (2) “provide all interested parties opportunity for the submission and consideration of facts [and] arguments,” and (3) “allow a party . . . to submit rebuttal evidence . . . as may be required for a full and true disclosure of the facts.”^[2]

Quoting the Office Patent Trial Practice Guide, the court found that the PTO’s procedural rules reflect these fundamental requirements by prohibiting parties from presenting evidence or arguments not relied upon in any previously submitted papers:

[A] party . . . may only present arguments relied upon in the papers previously submitted. No new evidence or arguments may be presented at the oral argument.^[3]

The court found that without receiving notice prior to oral argument, a patent owner is not given an adequate opportunity to present rebuttal evidence. Because the Board relied on a contention raised for the first time at oral argument, the court vacated the Board’s decision.

The Federal Circuit’s decision gives teeth to the Board’s rules designed to prevent parties from gaining an unfair tactical advantage by making last-minute changes to their contentions. The decision also demonstrates the Federal Circuit’s willingness to police situations where a party does not receive fair notice and an opportunity to respond. Although the court did not address what circumstances, if any, permit an argument to be raised for the first time in a reply, the Federal Circuit’s decision suggests that it would look with disfavor on any Board decision resting on newly raised arguments where a patent owner was not afforded a meaningful opportunity to respond.

Ultimately, the Federal Circuit’s decision serves as a reminder to all inter partes review parties of the importance of fully developing their contentions at the outset to ensure that all essential facts and arguments are included in their initial papers.

^{[1] See generally Dell Inc. v. Acceleron, LLC, Nos. 2015-1513, 2015-1514, 2016 WL 1019075 (Fed. Cir. March. 15, 2015).}

^{[2] Dell, 2016 WL 1019075, at *6 (internal quotations and citations omitted).}

^{[3] Id. (quoting Office Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,768 (Aug. 14, 2012)).}