APA Safeguards Rebuttal Opportunity to New Claim Construction

A fundamental safeguard of the Administrative Procedure Act (APA) is the opportunity to be heard and to present evidence. Over the years the Federal Circuit has reminded the PTAB that parties must have notice of the agency’s positions and a meaningful opportunity to rebut such positions. The same opportunity must be provided for positions of opposing parties — as long as such positions are deemed timely.

Since the SCOTUS decision in SAS institute, which explained that the petition serves to “guide the life of the litigation,” the Board has considered positions expressed in a petition to be fixed. That is, if a patent owner raises a new claim construction mid-trial, the petitioner may not stray from its original positions (typically addressing a different construction) to rebut the new position of the patent owner. As can be appreciated there is a clear tension between the due process guarantees of the APA and a rigid application of the SCOTUS explanation in SAS.

Yesterday, the CAFC issued a precedential decision to clarify that there is at least some wiggle room for petitioners.

Taking a step back, the scenario above is quite commonplace. Patent owners rarely argue for the narrowest construction until after trial is instituted. This is because the first goal is to avoid institution without risking unnecessary estoppels. Of course once trial is instituted there is no holding back. In my experience such narrowing constructions are rarely successful where the Board has initially determined that no construction is needed. Still, petitioners are wise to address all arguments.

In Axonics v. Medtronic (here) the Court made clear that the while the petition guides the life of the PTAB litigation as stated in SAS, such practice must be counterbalanced with the due process values of the APA. So, where a petitioner has no prior notice of a claim construction (i.e., could not have been anticipated in the petition), the petitioner may rely on the same prior art materials of its petition to rebut the alleged claim distinction.

The Court explained:

[W]e have continued to recognize that a petitioner is entitled under the APA to respond to new claim construction arguments made by a patent owner or adopted by the Board sua sponte and that both parties are entitled to respond to a new construction adopted by the Board sua sponte after an institution decision.

As to how far a petitioner can go in responding with evidence that is different from the original positions of the petition, the Court stated:

That is not to say a petitioner may rely on new prior art in response to a new claim construction presented in the patent owner response. . . .But that is not the situation here: Axonics did not rely on new prior art in its reply. We leave for another day the question of whether, when presented with a new claim construction, a petitioner can rely in its reply on new embodiments from the prior art references that were relied on in the petition.

(emphasis added)

Going forward trial grounds can be adapted by petitioners to respond to new claim construction as long as the same prior art embodiments cited in the petition are able to meet the newly argued construction; this much is clear.

The Court left for another day the question as to whether a new reference might be used in response to a new claim construction position of a patent owner. Still, a prior art reference that appears nowhere in the record beforehand is almost certainly a bridge too far. On the other hand, background art of the petition (given the patent owner is on notice, or “guided”) is a closer call. For this new reason, (and plenty of old ones) petitioners should ensure that declarations supporting petition grounds include a comprehensive state of the art description with a healthy inventory of prior art exhibits. In addition to providing important context and evidentiary support for obviousness determinations, minor variations in claim scope might be newly addressed at trial by such exhibits as having already been demonstrated in the background art of record.

As for patent owners, arguments might exist in cases of parallel proceedings that a different construction was noticed in the litigation, but the petition deliberately chose a different path.

If the claim construction is truly new, and where the petitioner has addressed it for the first time in its trial brief, patent owners will need to seek authorization from the Board to submit responsive evidence with the patent owner Reply brief. This is because at present, the Reply is limited by agency rule to a deposition transcript only. But as the Court explained in its decision, it is “confident that in circumstances such as these, the Board will allow an appropriate opportunity for a patent owner to submit evidence with a sur-reply.”

Finally, where authorized patent owner Reply evidence includes a declaration, the petitioner will then need to seek authorization to submit the transcript (ideally with an observation style cover sheet), or have this clarified in the Order allowing the Patent Owner Reply evidence.