IPR proceedings are formal administrative adjudications subject to the procedural requirements of the Administrative Procedure Act (APA). One such requirement is that “[p]ersons entitled to notice of an agency hearing shall be timely informed of … the matters of fact and law asserted.” In Belden Inc. v. Berk-Tek LLC, 805 F.3d 1064 (Fed. Cir. 2013), the Federal Circuit interpreted this to bar the PTAB from changing theories in the middle of an IPR trial without giving reasonable notice of and an opportunity for the parties to respond to the new theories. The court left unresolved, however, just how much notice and how much of an opportunity to respond the APA requires. A recent Federal Circuit decision gives some clues as to how the court will resolve those open questions.
In Intellectual Ventures II LLC v. Ericsson, Inc., Appeal No. 2016-1739, the patent owner and petitioners disputed the broadest reasonable interpretation of the phrase “an indication of an operating bandwidth.” Although the Board did not construe the phrase in its institution decision, the phrase became a focal point of the parties’ dispute during the IPR trial, with the Board describing their arguments as “vigorous.” At that hearing, the Board listened to both sides’ arguments as to the broadest reasonable interpretation of the phrase and also asked counsel to consider the Board’s own hypothetical construction of the phrase. In its final written decision, the Board ultimately adopted its hypothetical construction and found all the challenged claims unpatentable.
On appeal, the patent owner, citing SAS Institute, Inc. v. Complementsoft LLC, 825 F.3d 1341 (Fed. Cir. 2016), argued that the procedural requirements of the APA were violated because the Board adopted a “surprise” construction. In SAS Institute, the Federal Circuit found that the Board violated the APA when it adopted a new claim construction in its final written decision that differed from the claim construction it adopted in its institution decision. The Federal Circuit, although it affirmed the Board’s construction, found it troubling that the Board had not notified the parties of the change, and remanded the case back to the Board with the expectation that the parties would address the patentability of the challenged claim in view of the new claim construction.
Turning back to Intellectual Ventures, the Federal Circuit disagreed with the patent owner that SAS Institute required a reversal of the Board’s decision. The court first found that while the Board “is not constrained by the parties’ proposed constructions and is free to adopt its own constructions,” it may not change its adopted construction “without giving the parties an opportunity to respond.” The court then found that no such impermissible “change” occurred because the patent owner knew the broadest reasonable interpretation of the phrase “an indication of an operating bandwidth” was in dispute given the petitioners’ arguments and the Board’s questioning at the oral hearing. Despite this knowledge, the patent owner did not seek a sur-reply to address the petitioners’ arguments nor did it seek a rehearing of the Board’s final written decision. As a result, the Federal Circuit concluded that the patent owner’s due process rights under the APA were not violated because it had notice of the potential new construction and had an opportunity to respond, though it failed to avail itself of that opportunity. The court then proceeded to affirm the Board’s decision.
Taken together, SAS Institute and Intellectual Ventures indicate that the Board will likely be found to have violated the due process rights of parties to an IPR proceeding when it adopts truly unexpected claim constructions in its final written decision. Under SAS Institute, an unexpected claim construction is one that differs from the construction the Board initially adopted in its institution decision and that neither party disagreed with during the proceeding. Conversely, when a claim term is clearly in dispute between the parties and the Board has not taken a firm position on its proper construction, the Board likely will not have violated the parties’ due process rights so long as it provided (or did not deny) the parties the opportunity to argue for their preferred construction.
The practical advice for patent owners and petitioners is simple—if the Board appears inclined to construe a term more narrowly or more broadly than you want, challenge that construction vigorously. If the period for submitting briefing has already passed, then you should request authorization to file additional briefing to address the potential new construction. Even if such a request is denied, that denial may be a factor that the Federal Circuit considers in determining whether the Board’s new construction violated your due process rights.