Addressing claim construction and procedural issues during an inter partes review (IPR), the US Court of Appeals for the Federal Circuit vacated a Patent Trial and Appeal Board (PTAB or Board) patentability determination for failing to provide the parties with an opportunity to address a claim construction presented for the first time in the PTAB’s final written opinion. SAS Institute, Inc. v. ComplementSoft, LLC, Case Nos. 15-1346; -1347 (Fed. Cir., June 10, 2016) (Stoll, J) (Newman, J, dissenting in part).
ComplementSoft brought suit against SAS for infringement of a patent relating to an integrated development environment. SAS then filed a request for IPR of all 16 claims of the patent. The PTAB instituted IPR only for claims 1 and 3–10. As part of the institution decision, the PTAB construed the term “graphical representations of data flows” in claim 4. In its final written decision, the PTAB concluded that claims 1, 3 and 5–10 were unpatentable as obvious over the prior art. The PTAB found claim 4 to be patentable based on a new construction that was significantly different from the construction in its institution decision. SAS sought rehearing, which the PTAB denied. In denying SAS’s request for rehearing, the PTAB concluded that the new construction was not prejudicial because SAS could have presented its construction arguments for the term in the IPR petition. SAS appealed and ComplementSoft cross-appealed.
On appeal, SAS argued that it was improper for the PTAB to change its interpretation of the claim term in the final written decision without affording the parties an opportunity to respond. The Federal Circuit agreed, finding that the PTAB failed to provide the parties with an adequate opportunity to address the new construction.
The Court noted that IPR proceedings are formal administrative adjudications and are therefore subject to the requirements of the Administrative Procedure Act (APA). As part of the APA, “persons entitled to notice of an agency hearing shall be timely informed of . . . the matters of fact and law asserted.” The Court interpreted this “notice” provision to apply to both the patent owner and the petitioner, as both are interested parties standing to lose significant rights in the proceeding. In this case, because neither party proposed the PTAB’s new construction, the Court found it unreasonable to expect the parties to have briefed or argued hypothetical constructions in the alternative that were not asserted by their opponent. According to the Court, while it is unclear whether SAS will be able to show claim 4 to be unpatentable under the PTAB’s claim construction in the written decision, SAS should nevertheless have the opportunity to address the issue. For these reasons, the Court vacated the PTAB’s decision with regard to patentability of claim 4 and remanded to allow the parties to address the new construction.
SAS also argued that the PTAB’s final written decision was deficient for failing to address the patentability of all claims challenged in the IPR petition, including those claims for which the PTAB did not institute IPR. The Court found this argument foreclosed by the recent decision in Synopsis (IP Update, Vol. 19, No. 3).
In dissent, Judge Newman argued that the written decision should address the patentability of all of the challenged claims, contending that the PTAB’s practice of deciding the validity of only some of the challenged claims negates the intended legislative purpose of the America Invents Act.