Under the Administrative Procedure Act (the “APA”), a court reviewing the actions of an administrative agency “shall hold unlawful and set aside agency actions, findings, and conclusions found to be . . . unsupported by substantial evidence . . . [when] reviewed on the record of an agency hearing provided by statute.”1  As the Patent Office’s adjudicative body, the Patent Trial and Appeal Board and its predecessor, the Board of Patent Appeals and Interferences (collectively, the “Board”), must set forth its reasoning in support of each written decision in sufficient detail to permit meaningful appellate review.2

In several recent appeals from post-grant proceedings, the Federal Circuit has addressed the issue of whether the Board has provided adequate factual findings and reasoning to support its conclusions concerning patentability. This issue has arisen both in the context of the Board’s decisions in inter partes review (“IPR”) and ex parte reexamination.

In each of the cases discussed below, the Federal Circuit reached the same result—it vacated and remanded the Board’s decision with instructions to articulate its reasoning and any factual findings necessary to support its conclusions. Although the Board has not provided the parties instructions in many of these cases, each provides an example of when the APA has successfully been raised as a source of appeal. In one case, the Board allowed the petitioner to file a brief limited to the single issue identified by the Federal Circuit as deficient under the APA, and the patent owner was allowed to file an opposition on the same issue.3

I.    Cutsforth, Inc. v. MotivePower, Inc.

On January 22, 2016, the Federal Circuit vacated the Board’s final written decision from an IPR holding that all twenty-four claims of Cutsforth’s patent were invalid for obviousness, and remanded “for proceedings appropriate to the administrative process.”4  Although the Board construed two key terms before finding all claims obvious in light of the claim construction, the Federal Circuit determined based on pre-AIA case law that the Board failed to adequately describe its reasons for finding the claims invalid.5  Specifically, the Federal Circuited relied on In re Sang-Su Lee, which held that the Board could not satisfy its obligation under the APA to set forth specific findings necessary to affirm an examiner’s obviousness rejection by merely  relying on conclusory statements made by the examiner.6  In its decision, the Board states “the conclusion of obviousness may be made from common knowledge and common sense of a person or ordinary skill in the art without any specific hint or suggestion in a particular reference.”7  Because the decision failed to explain the “common knowledge and common sense” on which the Board relied, the Federal Circuit was left unable to evaluate how it reached its conclusion.8  On remand, the Board was instructed to articulate and place on the record any reasoning relied on to negate patentability, and as the Federal Circuit clarified, its initial failure to do so was “not consistent with either effective administrative procedure or effective judicial review.”9

In Cutsforth, the Federal Circuit points out that the Board merely recites MotivePower’s belief that one reference discloses several claim limitations and that it would have been obvious to adapt elements of a second reference to produce the remaining limitations. By doing so, the Board “stated no independent reasons for why [each claim] is obvious nor did it formally adopt MotivePower’s arguments as its own reasoning.”10  The final point raises the question of whether it would have been sufficient for the Board to have merely included a statement in its decision indicating that it agrees with the petitioner’s arguments as the factual basis for its finding of obviousness. However, pre-AIA Supreme Court precedent Dickinson v. Zurko indicates that such a statement may still be insufficient—as the Federal Circuit reviews the Board’s decisions, the “APA requires meaningful review,” “not simply rubber-stamping agency factfinding.”11  As illustrated here, if the Federal Circuit is unable to determine how the Board reached a material factual conclusion or why it adopted a party’s reasoning necessary to reach that conclusion, it must vacate the final written decision as defective under APA standards. In this situation, the Federal Circuit may not accept any post-decision rationalization of the Board’s action because it may only review the Board’s findings for substantial evidence based on the existing record.12

II.    Ariosa Diagnostics v. Verinata Health, Inc.

On November 16, 2015, the Federal Circuit vacated another final written decision from an IPR proceeding.13  In its final written decision, the Board held that petitioner Ariosa had not met its burden of proving the challenged claims obvious, after deciding it would give “no weight” to part of an expert declaration reliant on a commercially available brochure submitted as evidence of the knowledge of one of ordinary skill in the art.14  Ariosa’s appeal focuses on the Board’s treatment of this brochure.

Here, the Board failed to provide sufficient reasoning for the Federal Circuit to determine whether it erred in its treatment of evidence in support of obviousness. The Federal Circuit explains that the Board erred if it declined to consider the declaration, even as evidence of background understanding of one of ordinary skill as of the filing date, simply because the brochure had not been identified at the petition stage as a piece of prior art defining an obvious combination.15  However, the Board did not err if, by giving the expert’s testimony “no weight,” it meant the development of argument invoking the declaration was inadequate.16  In any event, the Board’s lack of explanation and ambiguous language leaves open the distinct possibility that it incorrectly limited its consideration of the declaration. On this record, the Federal Circuit is unable to “confidently discern whether the Board . . . was actually relying on a legally proper ground rather than the erroneous ground” discussed.17

Notably, the Federal Circuit makes clear that it does “not direct the Board to take new evidence or, even, to accept new briefing” and that it leaves the conduct of remand proceedings to the Board’s discretion, explaining that the Board’s control over its own proceedings is supported by governing statutes and regulations underlying post-grant proceedings such as IPR.18  Although the Federal Circuit did not give explicit instructions on remand, the Board allowed the petitioner nine days to file a brief limited to the single issue identified by the Federal Circuit as deficient under the APA—specifically, how the Board may have overlooked the Petitioner’s reliance on the brochure in the record.19 The Board allowed the patent owner fourteen days to file an opposition on the same issue.20  While the petitioner was not initially allowed to file a reply to the opposition, the Board later authorized a reply.21

III.    Conclusions

For patentees and challengers alike, it remains to be seen whether the Board will rewrite each decision with much greater detail or simply with explicit statements adopting a party’s reasoning. Nonetheless, with the larger volume of post-grant final written decisions being appealed, we do know that the Federal Circuit will be reviewing the Board on a more frequent basis. In light of the various contexts in which this issue has resulted in a decision to vacate and remand, the cases discussed, though non-precedential, may inspire more appeals raising the issue of whether the Board has provided sufficient factual findings, reasoning, and explanation of its conclusions to allow for meaningful appellate review.