On Thursday, the Federal Circuit ruled that the Patent Trial and Appeal Board ("PTAB") must give the parties proper notice if considering a sua sponte theory of unpatentability in relation to a motion to amend. In doing so, the Federal Circuit revived Nike's longstanding bid to amend a sneaker patent first challenged by Adidas in 2012, where the panel denied a motion to amend without such notice. This decision shows that the Federal Circuit continues to take the requirements of notice contained in the Administrative Procedure Act ("APA") seriously in relation to IPRs. In addition, the Federal Circuit resolved an issue it "expressly declined to address" in its 2017 en banc Aqua Prods., Inc. v. Matal decision.

In 2012-a mere two months after inter partes review ("IPR") first became available under the America Invents Act-Adidas filed an IPR challenging Nike's knitted textile footwear patent (U.S. Patent No. 7,347,011) as obvious under 35 U.S.C. § 103. Nike responded by canceling 46 claims and asking the PTAB to amend the patent to add four substitute claims. The amended claims describe omitting stiches to create holes for shoelaces. The Board first denied the request on obviousness grounds, but the Federal Circuit vacated the decision and remanded for proper consideration of Nike's arguments.

On remand, the PTAB found the amended claims obvious yet again, but this time, based in part on a 2001 "Knitting Technology" handbook. Adidas introduced this handbook into the record, but did not rely on it as grounds for invalidity. And, while both parties' experts discussed the handbook, those discussions were "entirely different" from the Board's obviousness determination. On appeal, Nike argued that the Board violated the APA by failing to provide notice that the Board would cite the handbook as grounds for invalidity.

The Federal Circuit agreed. While the Board may sua sponte identify patentability issues for amended claims, it must provide notice of these issues and provide the parties with an opportunity to respond. The Federal Circuit provided two examples: (1) the PTAB can inform the parties of its intent to rely on its theory and request supplemental briefing, and (2) the Board can notify the parties of its theory before an oral hearing and request that the parties are prepared to discuss. Neither occurred in the present case. The Federal Circuit vacated as to the substitute claim at issue and remanded to ensure the parties have an opportunity to respond to the Board's theory before a determination is made.

In addition to extending this IPR for nearly eight years, this decision clarifies an issue that the Federal Circuit "expressly declined to address" in its 2017 en banc Aqua Products decision. In Aqua Products, the Federal Circuit held that the petitioner bears the burden of proving a patent owner's amended claims are unpatentable. Aqua Products also ruled that the Board must consider the entire record when ruling on motions to amend. But, the Federal Circuit refused to state whether the Board was able to raise its own patentability challenges to proposed amended claims.

On Thursday, the Federal Circuit answered this affirmatively-but declined to state if the Board is limited to new challenges based on the record. "We do not decide today whether the Board may look outside of the IPR record in determining the patentability of proposed substitute claims. This case does not present that precise question. Therefore, we reserve it for another day."

In light of this decision, patent owners intent on maintaining their patent rights should continue to consider filing motions to amend. While the success rate for these motions has historically been low, they have been increasing in recent trends. This decision, coupled with Aqua Products, indicates that the PTAB will continue to provide patent owners a fairer shake than previously provided when considering motions to amend. Stay tuned to IP Viewpoints for future developments in this area.

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