In Qualcomm Inc. v. Intel Corp.[i], the Federal Circuit ruled that the Patent Trial and Appeal Board violated patent owner Qualcomm’s rights under the Administrative Procedures Act (APA) by not giving it notice and a chance to respond to the Board’s sua sponte construction of a claim term that neither Qualcomm nor petitioner Intel had disputed. The Court vacated the invalidity decision and remanded for further proceedings.

The Court first explained that, under the APA, 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,” id. § 554(c), and must allow “a party . . . to submit rebuttal evidence . . . as may be required for a full and true disclosure of the facts,” id. § 556(d). If the agency fails to safeguard these requirements, then the Court explained that it 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. Here, the Board failed to comply.

In the initial proceedings, the parties had agreed that the claims require carrier signals that increase user bandwidth (the “bandwidth requirement”). However, in its decision to invalidate the patents, the Board’s construction excluded the bandwidth requirement. On appeal, Qualcomm argued that it was unfair for the Board to adopt a different construction for an agreed upon claim term.

When evaluating whether the Board provided the requisite notice and opportunity to respond with respect to the bandwidth requirement, the Court considered three factors: 1) whether Qualcomm was prejudiced; 2) whether the Oral Hearing provided Qualcomm notice and opportunity to respond; and 3) whether Qualcomm’s option to move for a rehearing, which they did not take, constituted an adequate opportunity to respond.

Was Qualcomm prejudiced? Yes. The Court explained that Qualcomm argued throughout the IPR proceedings that the prior art did not disclose the increased bandwidth requirement. And, by removing that requirement, sua sponte, the Board eliminated an element for which Intel bore the burden of proof, and for which Qualcomm would have had no reason to brief or establish evidentiary record supporting its position. Under those facts, Qualcomm was prejudiced.

Was the oral hearing sufficient to meet the APA requirements? No. The Court observed that during the hearing the Board did not announce a construction, criticize the parties’ agreed-upon requirement, ask any follow-up questions to Intel or ask any related questions to Qualcomm, or request any additional briefing on the bandwidth requirement (as it did, sua sponte, for another term). And, a single question-answer exchange between one judge and Intel regarding the increased bandwidth requirement was insufficient. The Court also found that the hearing did not provide an adequate opportunity to respond because the Board “failed to provide any theory or rationale for its departure from the agreed-upon requirement to which Qualcomm could have responded”[ii] during the hearing.

Is the option to seek rehearing sufficient to meet the APA requirements? No. The Court ruled that just because Qualcomm had the opportunity to seek rehearing after the final written decision, which it did not take, does not provide adequate opportunity to respond because “this would effectively require an aggrieved party to seek rehearing before appealing.” No such requirement exists, and the Court declined to impose one.

The opinion should not be understood, however, to constrain the Board’s ability to adopt a claim construction for which neither party has advocated. Where a term is disputed, for example, the Court reaffirmed that the Board may impose its own construction without running afoul of the APA. However, when diverging from an undisputed construction of a claim term, the APA requires the Board “to provide notice of and an adequate opportunity to respond to its construction.” The Court reasoned that “it is difficult to imagine either party anticipating that this agreed-upon matter of claim construction was a moving target.”

Takeaway: Where the Board departs from an agreed-upon claim construction without proper notice or an opportunity to be heard, the Board may run afoul of the APA and an aggrieved party may have good cause for appeal.

[i] Qualcomm Inc. v. Intel Corp., Appeal No. 20-1589 (Fed. Cir. July 27, 2021) (precedential).

[ii] Id., 12.