May 10, 2016

PTAB’s Decision to Ignore New Arguments in Petitioner Reply Affirmed by CAFC

By Gregory S. DeLassus, Associate

On Monday, the Federal Circuit affirmed a judgment by the PTAB that the challenged claims in Illumina’s US 7,566,537 are not unpatentable. The Federal Circuit affirmed in a way that imposes an important constraint on the PTAB going forward. Intelligent Biosystems (IB) had challenged several claims that cover a method of labeling DNA. IB proposed a three-way combination of art in its petition, and offered an explanation as to why one of ordinary skill would expect success from combining two of these references. In its patent-owner reply, Illumina countered IB’s reasonable-expectation of success argument. In IB’s reply, IB introduced a new (as in, not present in the original petition) basis on which the ordinary artisan could have expected success. The PTAB cited its own regulations (37 C.F.R. § 42.23(b)), which provide that a “reply may only respond to arguments raised in the corresponding opposition or patent owner response.” Because the PTAB considered that IB’s reply went beyond this, the PTAB refused to consider IB’s reply at all—even the portions of the reply that did not run afoul of any regulation.

On appeal, IB urged the Federal Circuit to order the PTAB to consider the reply, and to reverse the holding of no unpatentability. Instead, Judge O’Malley (writing for a unanimous panel that also includes Judges Wallach and Hughes) wrote that

Unlike district court litigation—where parties have greater freedom to revise and develop their arguments over time and in response to newly discovered material—the expedited nature of IPRs bring with it an obligation for petitioners to make their case in their petition to institute. While the Board’s requirements are strict ones, they are requirements of which petitioners are aware when they seek to institute an IPR.

This is the first occasion that the Federal Circuit has had to consider 37 C.F.R. § 42.23(b), and the affirmance has important implications for whether a patent challenger should choose IPR or district court litigation. Going forward, would-be petitioners need to ask themselves whether the arguments that they hope to make to the board are likely to change and evolve during back-and-forth with the patentee. If so, one eye should be kept firmly on a potential district court battle. On the other hand, if the scope of the argument looks fairly clear and set, the expedited nature of IPR litigation might be preferable.