The Federal Circuit recently issued a decision further clarifying the Patent Trial and Appeal Board's (PTAB) ability to invalidate claims on reconsideration even when the claims were not addressed in the final written decision.  In the analysis below, we review only the procedural question of the PTAB's ability to address claims on reconsideration.

In this case, the PTAB issued a final written decision ruling certain claims of AC Technologies S.A.'s U.S. Patent No. 7,904,680 unpatentable.  Then, on reconsideration, the PTAB invalidated the remaining claims based on a ground of unpatentability raised by Amazon.com, Inc. and Blizzard Entertainment, Inc. (collectively, "Amazon") in their petition but not addressed in the final written decision.

AC appealed to the Federal Circuit, arguing that the Board exceeded its authority and deprived it of fair process by belatedly considering this ground.

As analyzed below, the Federal Circuit disagreed with AC, and found that precedent mandates that the Board consider all grounds of unpatentability raised in an instituted petition.

The IPR

Amazon challenged the '680 patent in an IPR.  It based its unpatentability arguments on a single prior art reference:  "Dynamic Replication on the Internet," by Dr. Michael Rabinovich.  Amazon's petition for IPR presented three grounds.

• Ground 1: Amazon argued that if "computer unit" in the claims were construed narrowly and mapped to Rabinovich's client, Rabinovich rendered all claims of the '680 patent obvious.

• Ground 2 and Ground 3: Amazon argued that if "computer unit" were instead construed broadly and mapped to Rabinovich's host, it anticipated some claims (Ground 2) and rendered remaining claims 2, 4, and 6 obvious (Ground 3).

At institution, the Board adopted the broad construction of "computer unit" and then instituted review of Grounds 1 and 2.

With respect to Ground 3, the Board stated that it had "addressed Petitioner's contentions in our analysis above of Ground 1 and determined that Petitioner has established a reasonable likelihood of showing that claims 2, 4, and 6 are unpatentable as obvious over Rabinovich under our construction of 'computer unit.'  As a result, this ground is moot."

The Board concluded by instituting review of whether all claims of the '680 patent would have been obvious over Rabinovich and whether some claims were anticipated by Rabinovich.

The IPR then proceeded.  In its final written decision, the Board found that Rabinovich anticipated every claim except claims 2, 4, and 6.  The Board's final decision did not address whether claims 2, 4, and 6 would have been obvious if the host in Rabinovich were treated as the "computer unit," as Amazon had asserted in Ground 3.

Pointing to that omission, Amazon promptly moved for reconsideration.  Despite AC's protest that Ground 3 had never been part of the IPR, the Board determined that it should reach the challenge.  With the Board's permission, both parties submitted additional arguments, expert declarations, and supporting exhibits.  AC urged that under the Board's claim constructions, the claims permitted only ad hoc wireless networks, with which Rabinovich would have been incompatible.  But the Board determined that nothing in the claims or the specification limited the claimed wireless network to a particular type of network, and it held that Amazon had proven claims 2, 4, and 6 unpatentable.

Appeal

On Appeal to the Federal Circuit, AC argued that the Board erred procedurally when it invalidated claims 2, 4, and 6 based on a ground that it did not institute in its institution decision.  AC claims that in doing so, the Board exceeded its statutory authority and fell short of the requirements of due process.

However, the Supreme Court recently clarified that institution is "a binary choice—either institute review or don't" in SAS Inst. Inc. v. Iancu, 138 S. Ct. 1348, 1355 (2018).  If the Board institutes an IPR, it must issue a final written decision addressing all claims challenged by the petitioner.

Further, the Federal Circuit has since held that if the Board institutes an IPR, it must similarly address all grounds of unpatentability raised by the petitioner.  See Adidas AG v. Nike, Inc., 894 F.3d 1256, 1258 (Fed. Cir. 2018).

This precedent was found to foreclose AC's argument that the Board exceeded its statutory authority when it reconsidered its final written decision and addressed non-instituted Ground 3.  Indeed, it would have violated the statutory scheme had the Board not done so.

The Federal Circuit also recognized that SAS did not displace the Board's responsibility to comply with due process, and that due process dictates that parties before the Board must receive adequate notice of the issues the Board will decide as well as an opportunity to be heard on those issues.

The Federal Circuit found no due process violation occurred here.  As AC admits, after the Board decided to accept Amazon's rehearing request and consider Ground 3, it permitted AC to take discovery and submit additional briefing and evidence on that ground.  Though AC did not receive a hearing specific to Ground 3, it never requested one.  Had AC desired a hearing, it should have made a request before the Board.  Other cases follow this guideline, such as finding no due process violation where a party had notice and an opportunity to be heard and failed to request surreply or rehearing to address the issue.  See, e.g., Intellectual Ventures II LLC v. Ericsson Inc., 686 F. App'x 900, 905–06 (Fed. Cir. 2017).

The Federal Circuit also reviewed AC's challenge specific to the unpatentability of the claims (not addressed in this analysis here), and found the Board's decision to be based on substantial evidence.  Thus, the Federal Circuit affirmed the Board's decision.

AC Technologies S.A. v. Amazon.com, Inc. (Fed. Cir. 2019)
Panel:  Circuit Judges Moore, Schall, and Stoll
Opinion by Circuit Judge Stoll