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Federal Circuit Puts the Brakes on PTAB Final Written Decision For Procedural APA Violation

In EmeraChem Holdings LLC v. Volkswagen Group of Am. Inc., the Federal Circuit reminded the PTAB that it must abide by the APA’s requirements of adequate notice and an opportunity to respond when conducting a post-grant review.  While affirming certain challenged claims as being obvious under pre-AIA 35 U.S.C. § 103(a), the Court reversed the PTAB’s obviousness determination on a trio of claims and remanded them for further consideration and clarification.  The PTAB’s conclusion that claims 3, 16 and 20 were obvious was based on the inclusion of a reference that was not properly identified in the petition or Institution Order and which the patent owner never had the opportunity to address during the inter partes review proceeding.

Volkswagen Group of America, Inc. (“Volkswagen”) filed an IPR petition challenging claims 1–14 and 16–20 of EmeraChem’s U.S. patent No. 5,599,758 (“the ’758 patent”) on four grounds.  In its petition, Volkswagen included a claim chart identifying the grounds for each challenged claim, including the identification of prior art Japanese Patent Application No. 62-106826 to Saito (“Saito”) only as to dependent claims 3, 16, and 20.  The PTAB instituted review on all four grounds and provided an itemized list of challenged claims and the specific references relied upon for each adopted ground of rejection in the Institution Decision.  The PTAB identified Saito only for claims 3, 16, and 20.

In its final written decision, the PTAB concluded that claims 1–14 and 16–20 of the ’758 patent were unpatentable as being obvious under 35 U.S.C. § 103(a).  As to claims 3, 16, and 20 the PTAB did not rely on Saito, but rather U.S. Patent No. 5,362,463 to Stiles (“Stiles”).  On appeal, EmeraChem argued that the PTAB violated the Administrative Procedure Act by not giving EmeraChem adequate notice of or an opportunity to respond to the Board’s reliance on Stiles for claims 3, 16, and 20.  The Federal Circuit agreed and reminded the PTAB that IPRs are formal adjudication proceedings where the APA requires “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.’”  In this case, the patent owner, EmeraChem, was not properly apprised of “the matters of fact and law asserted” against it, namely an identification of the art the Board planned to rely upon for its obviousness rejections of claims 3, 16, and 20.  Without notice, the patent owner was also not afforded a fair opportunity to respond, warranting the remand.

In the decision, the Federal Circuit rejected the PTAB’s arguments that the IPR institution decision provided fair notice to EmeraChem.  Specifically, the panel rejected the PTAB’s position that the language of the institution decision stating that “claims 1–14 and 16–20 of the ’758 patent [are] likely unpatentable under 35 U.S.C. § 103(a) over Campbell, Hirota, Saito, and Stiles” informed EmeraChem of the Board’s reliance on Stiles for claims 3, 16, and 20.  The Federal Circuit noted that the institution decision “listed claims 2–20 and identified, claim-by-claim, specific portions of the prior art references on which it was instituting review.”  When considered in combination with the petition’s claim chart, the Federal Circuit held that the general statements of unpatentability in the institution decision failed to direct the patent owner to the particular bases of the obviousness grounds.  The Board’s block quoting from Stiles in its Institution Decision in a discussion of claim 1 also did not sufficiently notify EmeraChem that the PTAB would later rely on Stiles for claims 3, 16, and 20.

The case serves as a reminder that a party to a post-grant proceeding must be provided with adequate notice and an opportunity to respond to positions adverse to that party’s interest that are being considered by the Board.  Where the PTAB does not afford such notice, it runs afoul of the APA’s procedural requirements necessitating a remand.

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William A. Meunier is a Mintz attorney who has mastered inter partes review (IPR) proceedings and high-stakes patent litigation. He has helped patent owners achieve success in over 90% of IPRs, compared to the industry average of only 35%. Bill has decades of experience litigating patent cases.
Peter J. Cuomo focuses his practice at Mintz on intellectual property enforcement and defense and counseling clients on issues related to IP rights. He handles all phases of patent litigation, and he has experience with resolving inventorship disputes.