November 9, 2016

Federal Circuit to PTAB: “Play Fair.”

By Bryan K. Wheelock, Principal

In In re Nuvasive, Inc., [2015-1672, 2015-1673] (November 9, 2016), the Federal Circuit reversed one of two PTAB decisions because the patent owner was not given adequate notice of the grounds of invalidity asserted against the patent.  The Federal Circuit said that the Board’s ultimate reliance on material not adequately identified by petitioner in the cited reference, together with the Board’s refusal to allow NuVasive to respond fully once that material was called out, violated NuVasive’s rights under the Administrative Procedure Act.

The Federal Circuit described the Board’s conduct:

NuVasive objected to Medtronic’s argument regarding Michelson’s Figure 18, which it contended was a new ground of invalidity asserted for the first time on reply. It requested leave to file motions to strike or, alternatively, surreplies, which the Board denied. NuVasive also attempted to address the matter at oral argument, but the Board refused to allow NuVasive to make substantive arguments in response. When Medtronic made arguments relating to Michelson’s Figure 18 in its rebuttal time, NuVasive objected again, but the Board assured NuVasive that it understood NuVasive’s position and would consider the propriety of Medtronic’s arguments when making a final decision.

Under the Administrative Procedure Act, the Federal Circuit must “hold unlawful and set aside agency action … not in accordance with law [or] … without observance of procedure required by law.” 5 U.S.C. §706.  A patent owner is undoubtedly entitled to notice of and a fair opportunity to meet the grounds of rejection, based on due-process and APA guarantees.  For a formal adjudication like the Inter Partes Review considered here, the APA imposes particular requirements on the PTO: The agency must timely inform the patent owner of the matters of fact and law asserted, 5 U.S.C. §554(b)(3),
must provide all interested parties opportunity for the submission and consideration of facts and arguments and hearing and decision on notice, 5 U.S.C. §554(c), and must allow a party to submit rebuttal evidence as may be required for a full and true disclosure of the facts, 5 U.S.C. § 556(d).

The Federal Circuit said that although the Board is not limited to citing only portions of the prior art specifically drawn to its attention, in this case it is clear that the Board treated Michelson’s Figure 18 as an essential part of its obviousness findings identifying claim elements in the prior art.  Under the APA’s standards, NuVasive was entitled to an adequate opportunity to respond to the asserted facts about Michelson.  And under the APA’s fact-specific standard, common sense, and this court’s precedent, that entitlement was not lessened in this case by virtue of the opportunity NuVasive had to respond to other factual assertions about Michelson.

In one of the IPRs, the Federal Circuit found that the Notice was adequate based upon the way that the reference was described in the Petition, but in the other there was no notice before NuVasive filed its patent owner response.  It was only after the petitioner’s reply that NuVasive was given fair notice, but at no point after the Reply did the Board give NuVasive the required opportunity to respond to that point.