So You Won At The PTAB — Can You Defend The Final Written Decision On Appeal?

Article co-written by Yuri Levin-Schwartz, Ph.D., a law clerk at MBHB.

Many people have come to believe that Inter Partes Review (IPR) proceedings in front of the Patent and Trademark Appeal Board (PTAB) are a good substitute for litigation. The reasons for this belief are not without basis. IPRs provide a forum for challenging issued patents in a relatively rapid and inexpensive manner (at least as compared to litigation in the Federal District Courts). Indeed, in many cases it has proven to be a successful forum as a large percentage of the IPRs that have been instituted have resulted in the PTAB finding the patents at least partially invalid or not properly issued. Thus, the procedure seems to be accomplishing the intent of Congress when it passed the AIA.

It must be remembered, however, that a decision from the PTAB is an administrative decision of the Executive Branch of the Federal Government, and as a result it is reviewed on appeal entirely differently from a District Court decision. PTAB decisions are reviewed substantively under patent law but procedurally under the Administrative Procedures Act. Thus, IPR decisions are reviewed to ensure that they are not arbitrary, capricious, an abuse of discretion, or unsupported by substantial evidence.[1] Indeed, the agency is obligated to “provide an administrative record showing the evidence on which the findings are based, accompanied by the agency’s reasoning in reaching its conclusions.”[2] The PTAB as an administrative agency must articulate “logical and rational” reasons for its decision.[3] An appropriate record is necessary because “courts cannot exercise their duty of review unless they are advised of the considerations underlying the action under review. . . . [T]he orderly functioning of the process of review requires that the grounds upon which the administrative agency acted by [must be] clearly disclosed and adequately sustained.”[4]

As a result, a party that is victorious at the PTAB finds itself not defending its case on appeal, but rather it must defend the decision of the PTAB. In other words, it may not matter what kind of record you made at the PTAB, all that really matters is what the PTAB says and relies upon in its final written decision. Only the record created by the PTAB in its final written opinion is the subject of appeal.

There have been many recent examples where a PTAB ruling has been either reversed or remanded because the PTAB did not appropriately set forth the bases for its decision in its opinion. For example, in Arendi S.A.R.L. v. Apple Inc., the Federal Circuit reversed a conclusion of obviousness because the PTAB relied on the “common sense” of one skilled in the art to fill in the blanks from the art.[5] The problem was that the PTAB did not cite to any support for the conclusion about the common sense possessed by such a person. The court found that “common sense” must be supported by substantial evidence and that the PTAB’s conclusory statements were not sufficient. Similarly, in DSS Technology Management Inc. v. Apple Inc., the Court reversed a conclusion of obviousness because the PTAB relied on “ordinary creativity” of a skilled artisan without any stated support for such reliance.[6] Since the claim element the PTAB attributed to “ordinary creativity” played a major role in the subject matter claimed, substantial evidence was necessary and the conclusory statement of the PTAB was not enough to support the obviousness conclusion.

The Federal Circuit also went to the PTAB’s failure to support its conclusions in Black & Decker, Inc. v. Positec USA, Inc.[7] In Black & Decker the PTAB relied on the knowledge of one skilled in the art to conclude that such a person would know to modify the prior art. The court noted that “[o]ur precedent requires that the [PTAB] explain a rationale why a person of ordinary skill would have modified [the prior art].”[8] The court then found that the PTAB’s opinion provided no such rationale and reversed the PTAB’s conclusion of obviousness.

The court vacated and remanded the conclusion of obviousness in two other cases holding (in part) that the PTAB had failed to articulate any basis for its conclusion of a motivation to combine the prior art in support of its obviousness conclusions.[9] In Nuvasive, the court identifies three ways that the court has found are insufficient to support a conclusion of the existence of a motivation to combine: (1) “‘conclusory statements’ alone are insufficient and instead the finding must be supported by a reasonable explanation;” (2) “it is not adequate to summarize and reject arguments without explaining why the PTAB accepts the prevailing argument”; and (3) “although reliance on common sense may be appropriate in some circumstances,…the PTAB cannot rely solely on common knowledge or common sense to support its findings.”[10] Because the court could not reasonably discern the PTAB’s reasoning as to motivation to combine the case was vacated and remanded to the PTAB for further findings.[11]

In Personal Web Technologies, when addressing whether the record supports the existence of a motivation to combine, the court found that at most the PTAB found that the two prior art references “could” be combined and held that such a finding is insufficient.[12] The court reasoned that such a finding “does not imply a motivation to pick out those two references and combine them to arrive at the claimed invention.”[13] The court went on to say that “the [PTAB] nowhere clearly explained, or cited evidence showing, how the combination of the two reference was supposed to work.”[14] The court did clarify that the amount of explanation required “necessarily depends on context” and that it may depend on the complexity of the technology involved.[15]

The Federal Circuit has also remanded cases to the PTAB when it felt that evidence was either ignored or not adequately addressed by in the final written decision. In Polaris Industries, Inc. v. Arctic Cat, Inc., the patentee argued before the PTAB that the prior art taught away from the claimed invention.[16] The patent at issue related to an all-terrain vehicle with a fuel tank under the seat, thus raising the level of that seat within the vehicle. Patentee argued that the cited art taught that the seats of the prior art vehicle should be as low as possible thus teaching away from putting a fuel tank under the seats. The court held that PTAB failed to properly analyze this teaching away and applied the wrong analysis to the evidence. Indeed, the court found that the “[PTAB]’s analysis encourages the fact-finder to outright discard evidence relevant both to ‘teaching away’ and to whether skilled artisans would have been motivated to combine references.”[17] Citing this failure, the court remanded the issue for further consideration.

It should be noted that successful patentees are not immune on appeal from errors made by the PTAB. While these cases tend to depend largely on claim construction, that is not always the case. For example, in Owens Corning v. Fast Felt Corporation, the court reversed the conclusion of non-obviousness because the PTAB’s findings with respect to the evidence, or lack thereof, were inconsistent with the record.[18]

It is clear from these cases that counsel’s job is not done when they received a favorable PTAB final written decision. Since a large percentage of PTAB opinions are appealed to the Federal Circuit, it is imperative to ensure that the PTAB’s opinion will withstand appellate review or at least be well aware of any problems. To accomplish this, a party should review the final written decision to ensure – (1) that all the appropriate issues have been addressed; (2) that no material evidence has been omitted or left undiscussed; and (3) that the PTAB has set forth the appropriate legal analysis to support its conclusions.

If as part of this analysis an issue is identified with the final written decision, the question is ultimately – what do you do about it? The first reaction may be nothing. You won at the PTAB and you do not want to upset the apple cart. This may be the right answer if the issue is one you determine the Federal Circuit will not latch onto or that you can adequately address on appeal.

If, on the other hand, you identify an issue that will likely result in remand (or worse reversal) at the Federal Circuit, it may make sense to try take preemptive action with the PTAB. The PTAB’s rules provide a potential avenue for such action. 37 CFR § 42.71(d) allows for motions for rehearing to identify matters the PTAB has misapprehended or overlooked. While such motions have generally been filed by the losing party and not been well received by the PTAB, it is likely they will be viewed in a different light when the party is not asking the PTAB to change the result, rather is seeking to bolster the support for the decision and increase the likelihood it will be affirmed on appeal.

It is understandably a difficult decision to choose to go back to the PTAB and ask them to amend their final written decision when they ruled in your favor. Such an option clearly has two significant risks, first the PTAB may revisit the decision entirely in light of your motion and second the PTAB may deny your motion and you may highlight the weakness in the decision to the opposing party, thereby potentially weakening your position on appeal. As a result, such motions must be carefully crafted in a manner that both supports the final written decision as written and suggests that it could be improved based on the record before the PTAB. Clearly, however, as the cases discussed above illustrate, there are times when taking pre-emptive action may make sense. For example if the PTAB, in finding a patent claim obvious, simply fails to set forth the complete analysis (i.e. omits any discussion of a motivation to combine, a likelihood of success or fails to perform an appropriate Graham analysis). Or, the PTAB may have overlooked or failed to address a key piece of evidence or testimony that is necessary to support (or refute) its conclusions. Such fact scenarios may make it appropriate to seek a rehearing to amend the final written decision and put it in better condition for appeal.

A party victorious in front of the PTAB is left with few options if the final written decision is flawed or incomplete in its analysis. The default option is to address it on appeal, but clearly that has its own risks. In the proper case, it may, however, be more economic or efficient to be proactive and ask the PTAB to amend its final written decision before the appeal process begins.

Perhaps the better practice should be to take all the steps you can during the pendency of the IPR to assist the PTAB in drafting a final written decision that is not flawed and will withstand review. However, the PTAB rules and procedures provide counsel with very few pathways to assist the PTAB with the content of its final written decision. Unlike District Court litigation, there is no opportunity to provide the PTAB with proposed findings of fact and conclusions of law. There is also no opportunity to give the PTAB post-trial briefing. In most cases a litigant’s opportunity to assist the PTAB is limited to four documents – the original petition, voluntary response to the petition, the patent owner’s statement, and the petitioner’s response thereto. While top priority in these documents is to make your case, thought should be given to assist the PTAB as much as possible by setting out clearly and concisely each of the elements of the case and the support thereof. In this way you may pave the path for a successful appeal.

© 2018 McDonnell Boehnen Hulbert & Berghoff LLP

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[1] See Pers. Web Techs., LLC v. Apple, Inc., 848 F.3d 987 (Fed Cir. 2017).

[2] Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309, 1322 (Fed. Cir. 2016) (citing In re San Su Lee, 277 F.3d 1338, 1342 (Fed Cir. 2002)).

[3] Synopsys, Inc., 814 F.3d at 1322 (citing Allentown Mack Sales and Serv., Inc. v. NLRB, 522 U.S. 359, 374 (1998)); see also Power Integrations, Inc. v. Lee, 797 F.3d 1318, 1326 (Fed. Cir. 2015).

[4] Sec. & Exch. Comm’n v. Chenery Corp., 318 U.S. 80, 94 (1943).

[5] 832 F.3d 1355, 1366–67 (Fed. Cir. 2016).

[6] 885 F.3d 1367 (Fed. Cir. 2018).

[7] 646 Fed. App’x 1019 (Fed. Cir. 2016).

[8] Id. at 1027.

[9] See Pers. Web Techs., LLC v. Apple, Inc., 848 F.3d 987 (Fed Cir. 2017); In re Nuvasive, Inc., 842 F.3d 1376 (Fed. Cir. 2016).

[10] In re Nuvasive, Inc., 842 F.3d at 1383 (citation omitted).

[11] Id. at 1385.

[12] Pers. Web Techs., 848 F.3d at 994.

[13] Id. at 993-94.

[14] Id. at 994 (emphasis in the original).

[15] Id.; see also In Re Hodges, 882 F.3d 1107 (Fed. Cir. 2018) (where the court remanded the case to the Office because of the lack of findings to support the obviousness conclusion and reversed the anticipation finding as not supported by substantial evidence).

[16] 882 F.3d 1056 (Fed Cir. 2018).

[17] Id. at 1069.

[18] 873 F.3d 896 (Fed. Cir. 2017); see also E.I. DuPont de Nemours & Co. v. Synvina C.V., 904 F.3d 996 (Fed. Cir. 2018).