Simplification of PTAB Trial Grounds May Not Help CAFC

Under the old inter partes patent reexamination model, patentees were often faced with 10+ grounds of rejection. The numerosity and overlap in these rejections rendered USPTO processing quite tedious and resource intensive. For at least this reason  these proceedings would take upward of five years to make their way through the USPTO.

With the inefficiencies of inter partes patent reexamination still fresh on the minds of the Patent Trial & Appeal Board (PTAB), it is not surprising that the Board has attempted to simplify such issues for Inter Partes Review (IPR) and Covered Business Method (CBM) patent challenges (and presumably PGR). In the PTAB Trial Orders to date, grounds of unpatentability that are deemed “redundant” are filtered out at the close of the preliminary proceeding and trial is ordered going forward on the strongest grounds (as determined by the panel of PTAB judges). However, in view of the recent CAFC decision in Rexnord Industries LLC. v. Kappos (CAFC 2013), this redundancy determination may only serve as  a temporary reprieve for patentees.

In Rexnord, the third party requester presented several grounds of rejection relative to a key claim feature. The focus of that reexamination then switched to a subset of references. The examiner rejected the claims based on the chosen subset of references, the Patentee appealed (i.e. Rexnord was appellee). On appeal to the PTAB, the examiner was reversed and the claims were confirmed as patentable. On rehearing, Rexnord pointed out that other rejections outside of the focused subset explicitly demonstrated the feature found distinguishing by the Board. However, the Board denied the argument as waived since it was not presented in the appellee briefing. On appeal to the CAFC, the USPTO advanced the same waiver theory.

The CAFC explained that the USPTO’s concept of waiver was incorrect for appellees:

When [patentee] appealed the examiner’s decision, Rexnord was not barred from presenting this argument in defense of the examiner. The PTO states in its brief on this appeal:

“Just as this Court does not entertain arguments made outside of appellant’s opening brief, see, e.g., In re Watts, 354 F.3d 1362, 1367 (Fed. Cir. 2004); In re Schreiber, 128 F.3d 1473, 1479 (Fed. Cir. 1997), the Board has a rule that similarly bars the presentation of new arguments outside appellant’s opening brief (absent circumstances not alleged here), see 37 C.F.R. § 41.79(b). PTO Br. 24.”

We observe that Rexnord was not the appellant before the Board, and that the premise is an incorrect statement of the appellate process. On judicial review, the correctness of the decision appealed from can be defended by the appellee on any ground that is supported by the record, whether or not the appellant raised the argument. See Jaffke v. Dunham, 352 U.S. 280, 281.

Of course, PTAB analysis in IPR and CBM proceedings is no longer an appeal process, but instead the actual trial. As such, the PTAB can maintain their procedural position that redundant grounds are not part of the ordered trial. Yet, if inter partes patent reexamination is any kind of barometer of likely IPR and CBM outcomes, the petitioner will most often times be the appellee in a subsequent CAFC appeal. In this situation, redundant grounds may be argued as being part of the trial record (i.e., raised in a both the petition filed and supporting declaration). Indeed, the USPTO has defined “proceeding” to include the preliminary proceeding as well as the trial phase (37 C.F.R. § 42.2).

Going forward petitioners would be wise to fully develop all grounds of unpatentability, especially in their declaration so that some may come back from the dead, as needed, on appeal.