B/E Aerospace, Inc. v. Mag Aerospace Industries, LLC

Clarifying what is impermissible “new” evidence for a Patent Owner Preliminary Response in an inter partes review (IPR), the Patent Trial and Appeal Board (PTAB or Board) ordered that the patent owner’s exhibit, in the form of an expert report on patentability from a related district court litigation, be ignored and not considered in the determination of whether to institute the proceeding. B/E Aerospace, Inc. v. Mag Aerospace Industries, LLC, Cases IPR2014-00510; -00511; -00513 (PTAB, Jan. 20, 2015) (Kauffman, APJ.).

The petitioner sought review of the Mag Aerospace’s patents directed to modular vacuum toilets, such as those that might be used on a commercial airplane. The patents covered so-called line-replaceable units, LRUs, which the patents described as being easily replaceable components intended to make maintenance or repair of vacuum toilets easier. In its Preliminary Response, patent owner Mag Aerospace relied heavily on and included as an exhibit a rebuttal expert report prepared for the parallel district court action.  The arguments against institution of the IPR extensively cited to the expert report to rebut the petitioner’s invalidity arguments and to conclude that the challenged claims were patentable.

The petitioner immediately call foul, challenging the expert report as being “new” testimony evidence, and therefore prohibited at that stage of the proceedings by 37 C.F.R. § 42.107(c). After conferring with the parties, the PTAB , agreeing with the petitioner, issued an order on the conduct of the proceedings.  The Board explained that, while it had (in another IPR proceeding) found that a declaration submitted in a district court action was not “new” testimony under 37 C.F.R. § 42.107(c), absent compelling reasons in the interest of justice, the rule nevertheless barred the submission of new testimony on patentability.  The Board noted that generally a patent owner is only permitted to submit testimonial evidence in its post-institution response, not in its preliminary response. According to the Board, the prior proceeding relied upon by the patent owner was distinguishable because the exhibit at issue was not testimony regarding patentability of any claim under review in that proceeding.  The Board explained that new testimonial evidence offered by a patent owner prior to institution might be permissible under the “interests of justice” standard, where such evidence addresses issues relating to a petitioner’s standing.  However, because the expert report here addressed patentability and not just issues relating to the standing, the Board concluded that the report and associated arguments in the Preliminary Response not be considered in connection with the institution decision.

Practice Note:  A key take-away from this case is that the Board will not consider testimonial evidence in a preliminary response unless that evidence is offered to address issues relating to standing or is otherwise shown to be in the interests of justice. Examples include an IPR petition’s improper or incomplete listing of related parties and privies.