United States: Federal Circuit Gives PTAB Free Hand On Claim Construction

The Federal Circuit recently held that the Patent Trial and Appeal Board is not constrained by parties' proposed constructions and may, in fact, adopt an alternative construction that the Board raises for the first time at oral argument, so long as both sides have adequate notice and an opportunity to respond.

On May 8, the US Court of Appeals for the Federal Circuit affirmed the Patent Trial and Appeal Board's (Board's) decision to invalidate certain claims challenged in an inter partes review (IPR) proceeding based on an alternative construction previewed by the Board for the first time at oral argument and that no party had previously argued for or expected. As long as both parties offer constructions for that claim term prior to argument and are given an opportunity to respond during the argument, the court held that the Board may adopt that alternative construction in its final written decision without violating a party's due process rights.

The Decision

In Intellectual Ventures II LLC v. Ericsson Inc. et al., the Board granted three petitions for IPR filed by Ericsson and Google challenging different claims from two different Intellectual Ventures II (IV) patents, both of which claimed methods for selecting an appropriate bandwidth in a multibandwidth communication system.[1]

In their briefing, the parties offered competing constructions of a key term recited in both patents: "an indication of an operating bandwidth." IV advocated for one construction, Google contended that the plain and ordinary meaning should control, and Ericsson argued that IV's definition was too narrow and no construction was needed.[2] This debate carried over into the oral argument for each petition—an exchange later characterized by the Board as a "vigorous dispute over the proper construction." [3]

During the oral argument, however, the Board sua sponte asked the parties whether it would be "sufficient for us to say that enough information is conveyed from the transmitter to the receiver so that the receiver can configure itself to receive that which is transmitted"—i.e., an alternative construction of the term that neither party had proposed and that was notably broader than IV's proposed construction.[4] Google's counsel responded affirmatively. And although IV's counsel disputed the Board's proposed construction, it too conceded that "there's no special requirement for the form of an indication of operating bandwidth." In its final written decision, the Board relied solely on its alternative construction to find all challenged claims of the IV patents invalid over the cited references.[5]

IV appealed on several grounds, including that the Board had denied it procedural due process by construing a claim term to mean something no party had proposed or expected.[6]

The Federal Circuit disagreed. The court explained that "[d]ue process requires notice and an opportunity to be heard by an impartial decision-maker."[7] In other words, due process requires that the Board "give the parties an opportunity to submit facts and arguments for consideration," so that each party may "present oral and document evidence in support of its case, as well as rebuttal evidence."[8] The court also reiterated that "the Board may not change theories midstream without giving the parties reasonable notice of its change."[9]

Turning to the facts at hand, the Federal Circuit found "no due process violation" given "the continuous focus on 'an indication of an operating bandwidth' before and during oral arguments and [IV's] opportunity to seek a sur-reply or rehearing."[10] As long as the Board provides parties with the necessary notice and opportunity to be heard, the court held that "the Board is not constrained by the parties' proposed constructions and is free to adopt its own construction, as it did here."[11]

However, the Federal Circuit issued a word of caution: "To be clear, after the Board adopts a construction, it may not change theories without giving the parties an opportunity to respond."[12] According to the court, however, "[n]o such change occurred here" because "the Board questioned counsel about [the disputed term] at oral argument, asked for a reaction to a hypothetical construction, and issued its construction in its Final Written Decision."[13]

Future Implications

The Intellectual Ventures decision falls in line with two recent Federal Circuit decisions—In re Magnum Oil International Ltd.[14] and SAS Institute, Inc. v. ComplementSoft, LLC[15]—that addressed similar due process concerns in the context of post-grant proceedings.  

In Magnum Oil, the Federal Circuit reversed the Board's decision to "adopt[] arguments on behalf of petitioners that could have been, but were not, raised by the petitioner during an IPR."[16] Because the petitioner bears the burden of proving unpatentability, the court held that "the Board must base its decision on arguments that were advanced by a party, and to which the opposing party was given a chance to respond."[17] In other words, "the Board supplied completely new arguments that the petitioner never raised."[18] This differs from Intellectual Ventures, "where the Board questioned counsel extensively over the construction of [the disputed term] after receiving briefs that contested both whether and how the Board needed to construe the term."[19]

Along the same lines, the Federal Circuit in SAS reversed the Board's decision to "adopt[] a construction in its final written decision" after "chang[ing] theories in midstream."[20] Unlike SAS, however, "where the Board construed a claim term one way in its Institution Decision and, unexpectedly, a different way in its Final Written Decision," the Board in Intellectual Ventures posed the hypothetical construction to both parties during oral argument before adopting the construction in its final written decision.[21]

At bottom, the Intellectual Ventures decision makes clear that the Board may adopt a construction not advanced by any party so long as it provides the parties with notice and an opportunity to respond, even if that construction is raised for the first time at oral argument. Accordingly, parties to a post-grant proceeding should be prepared to substantively address any alternative construction previewed by the Board during oral argument, especially where both sides argued competing constructions prior to argument. But even where the Board adopts a construction for a claim term that neither side briefed, or adopts a construction without affording both sides a meaningful opportunity to respond, parties should still consider seeking a sur-reply or rehearing in order to preserve their due process claim for appeal.

Footnotes

[1] Nos. 2016-1739, 2016-1740, 2016-1741, 2017 WL 1842527 (Fed. Cir. May 8, 2017).

[2] Id. at *2.

[3] Id.

[4] Id.

[5] Id. at *3.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id. at *4.

[11] Id.

[12] Id.

[13] Id.

[14] 829 F.3d 1364, 1381 (Fed. Cir. 2016).

[15] 825 F.3d 1341, 1351 (Fed. Cir. 2016).

[16] In re Magnum Oil, 829 F.3d at 1381.

[17] Id.

[18] Intellectual Ventures, 2017 WL 1842527, at *4.

[19] Id.

[20] 825 F.3d at 1351.

[21] Intellectual Ventures, 2017 WL 1842527, at *4.

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