The PTAB at the Federal Circuit -- Supplemental Evidence Edition

On New Year's Eve, the Federal Circuit affirmed the PTAB's denial of a motion to submit supplemental evidence pursuant to 37 C.F.R. § 42.123(a), notwithstanding the fact that the motion was timely filed and relevant.  In Redline Detection, LLC v. Star Envirotech, Inc., the Court explained that the Patent Office could interpret its own regulations related to PTAB trials, and that 37 C.F.R. § 42.5 provided the Board discretion in granting related motions.  Finally, the Court affirmed the Board's findings that the claims at issue were not unpatentable as obvious in view of the cited -- a decision that was apparently reached because the Board did not consider the expert declaration filed by Redline as supplemental evidence.

The regulation at issue in this case provides for the filing of supplemental information after the trial is instituted, but only by motion:

§ 42.123 Filing of supplemental information.
    (a) Motion to submit supplemental information.  Once a trial has been instituted, a party may file a motion to submit supplemental information in accordance with the following requirements:
        (1) A request for the authorization to file a motion to submit supplemental information is made within one month of the date the trial is instituted.
        (2) The supplemental information must be relevant to a claim for which the trial has been instituted.
    (b) Late submission of supplemental information.  A party seeking to submit supplemental information more than one month after the date the trial is instituted, must request authorization to file a motion to submit the information.  The motion to submit supplemental information must show why the supplemental information reasonably could not have been obtained earlier, and that consideration of the supplemental information would be in the interests-of-justice.
    (c) Other supplemental information.  A party seeking to submit supplemental information not relevant to a claim for which the trial has been instituted must request authorization to file a motion to submit the information.  The motion must show why the supplemental information reasonably could not have been obtained earlier, and that consideration of the supplemental information would be in the interests-of-justice.

This rule was promulgated in response to the statutory mandate found at 35 U.S.C. § 316(a)(3): "The Director shall prescribe regulations . . . establishing procedures for the submission of supplemental information after the petition is filed . . . ."  Redline argued that this mandate was incorporated into the three tier scheme of subsections (a)-(c) of the rules.  If filed within the first month after institution, the argument went, and the information is relevant, the Board has no basis to deny the motion.  This position, however, did not take into account the overarching concern that the Office completes IPR proceedings in a timely manner, and that the moving party in all motions has "the burden of proof to establish that it is entitled to the requested relief."  37 C.F.R. § 42.20.

Important in Redline's argument was the rules of statutory construction.  Specifically, that (1) the exclusion of language in one section that was included in another section generally means that the disparate inclusion or exclusion was intentional and purposeful, and (2) language that appears in different sections that were created and considered simultaneously creates a strong negative implication that they should be conflated.  The Federal Circuit deftly sidestepped these concerns by referring to these rules of construction as mere "guides" and citing to the Supreme Court precedent that these rules "need not be conclusive."  Chickasaw Nation v. United States, 534 U.S. 84, 95 (2001).

Redline also argued that the plain language of the statute "establishes a comprehensive scheme that leaves no room for [the] PTAB to impose its own discretionary requirements."  If discretion were permitted, the argument goes, the rules should have so indicated.  The Court, however, pointed out that this rule does not, in fact, support such a reading.  Timeliness and relevance, instead, were two additional requirements for consideration of the motion, but this section must also be construed within the overarching context of IPR and PTAB trial regulations.  And ever present in this consideration is the one-year deadline for issuing a final written decision.

Finally, Redline argued that prior PTAB decisions dictate that its motion to file supplemental information should have been granted.  In this case, Redline filed its petition without reliance on an expert declaration.  After the case was instituted on July 1, 2013, Redline filed its Motion for Supplemental Disclosure of New Exhibits on July 30, 2013.  This motion included the submission of four new pieces of evidence:  a sixty-page expert declaration, a resume of the expert, and two patents.  The Board denied the motion because it was not clear that any of the arguments or evidence could not have been filed with the original petition.  As such, the evidence was not "supplemental."  For its part, Redline argued cost-saving -- the original petition presented twelve grounds of rejection, while the Board only instituted trial on two of those grounds.  By waiting, Redline argued, it only need to prepare the expert declaration directed to those two grounds.

Redline and the Court focused on the cases of Palo Alto Networks, Inc. v. Juniper Networks, Inc., IPR2013-00369, and Pacific Market International, LLC v. Ignite USA, LLC, IPR2014-00561, as analogous to the present case.  In Palo Alto Networks, the Board allowed the introduction of supplemental information that helped establish that a prior art reference cited in the petition did in fact qualify as prior art.  The Board reasoned in that case that the information was not intentionally withheld, and allowing the information would not limit the timely completion of trial.  Redline asserted that the Board cited to § 42.123(b) and (c) for the requirement that the evidence not have been available earlier.  The Federal Circuit, however, found Redline's reliance on this case misplaced.  The Board in that case had stressed that granting the motion would not prevent trial from concluding in one year because the Patent Owner was already in possession of the information.  The petitioner had served the information in response to the Patent Owner's objections.  In this case, Redline did not (and apparently could not) make the same assertion.

Redline's citation to Pacific Market International was equally unavailing.  There, as here, the petitioner sought to introduce a new declaration that supplemented its arguments of obviousness found in the petition.  Unlike the present case, however, the petition as-filed had included a sixty-page declaration.  That distinction was probably important in the Board's decision to grant the motion in Pacific Market International.  Again, Redline's reliance was found to be misplaced.  The Board in that case made it clear that meeting the requirements of 37 C.F.R. § 42.123(a) did not, itself, guarantee that the motion would be granted.  Therefore, to the contrary of Redline's assertion that the PTAB was obligated to follow the outcome of Pacific Market International, the case actually warns of the outcome about which Redline is complaining.

Redline did also appeal the determination that the claims at issue were not unpatentable as obvious because the Board did not consider all of the evidence -- mainly the testimony of its expert.  Specifically, because the Board did not grant Redline's motion and excluded the expert declaration, it necessarily erred in its motivation-to-combine analysis and ultimate obviousness determination.  Not surprising, however, the Court found there was substantial evidence "of record" for the Board's conclusion.

There are at least two important takeaways of this case.  First, as a petitioner, always include in the petition all of the evidence of which you are aware.  It has to be assumed that if the evidence might want to be introduced later, any such motion might be denied.  Second, if there is legitimate supplemental evidence, it would behoove the moving party to explain in detail why the motion to introduce the evidence should be granted.  For example, for the petitioner, if the evidence is necessitated by the patent owner's preliminary response or the Board's decision to institute, explain why.  Plus, if possible, the sooner you can provide copies to the opposing party the better.  Chances are if you do not look like you are hiding the ball, and if there is still sufficient time to conclude the trial, the motion will likely be granted.  But if it is not, it is very unlikely the Federal Circuit will do anything about it on appeal.

Redline Detection, LLC v. Star Envirotech, Inc. (Fed. Cir. 2015)
Panel: Circuit Judges Lourie, Wallach, and Hughes
Opinion by Circuit Judge Wallach