Addressing patentability, the US Court of Appeals for the Federal Circuit reversed the Patent Trial and Appeal Board’s (PTAB’s) rejection of claims as being anticipated, and vacated and remanded the obviousness determination, finding that the PTAB’s anticipation determination was not supported by substantial evidence and that the obviousness determination was based on insufficiently or inappropriately explained factual findings. In re: Hodges, Case No. 17-1434 (Fed. Cir., Feb. 12, 2018) (O’Malley, J) (Lourie, J, concurring) (Wallach, J, concurring in part, dissenting in part). 

Hodges filed a patent application directed to a valve assembly for draining contaminants, condensation and other fluids that adversely affect the efficiency and function of a pressurized system. The patent claims a “valve body, wherein said valve body defines an inlet seat and a first outlet seat downstream of said inlet seat.” In response to a prior art rejection, Hodges argued that while the cited references disclosed an inlet seat, the references did not disclose an inlet seat defined by a valve body. The examiner and PTAB disagreed, finding that in the prior art reference, the unlabeled valve allows or prevents flow into the inlet port, and that the seat of the valve would therefore be an internal part of, and contained within, the outer casing of the drain valve. The PTAB maintained the examiner’s rejection, finding the claims anticipated and obvious. Hodges appealed.

The Federal Circuit disagreed with the PTAB’s findings, explaining that the inlet seat of the valve is not an internal part contained within the outer casing of the drain valve in the prior art reference, and that the only permissible finding that can be drawn from the prior art is that it does not disclose the claim limitation at issue. The Court also found that the PTAB’s finding was predicated on an erroneous construction of the claimed “sensor,” and that the only permissible factual finding that could be drawn from the prior art is that it does not disclose a sensor that generates a “signal” under any reasonable construction of that term. The Court also held that the PTAB’s obviousness determination involved insufficiently or inappropriately explained factual findings, warranting reversal and remand.

Judge Wallach dissented in part, believing reversal of the PTAB’s determination exceeded the Court’s authority because the basis for the majority opinion (i.e., erroneous factual findings and the existence of only one permissible factual finding) did not fit the facts of this case. The dissent stated that neither the majority nor the PTAB provided sufficient support for their mutually exclusive findings regarding the location of the inlet seat relative to the unlabeled valve and the outer casing of the drain valve.