In Rovalma, S. A. Böhler-Edelstahl GmbH & Co., No. 2016-2233 (Fed. Cir. May 11, 2017), the Federal Circuit vacated the PTAB’s final written decision and remanded the case for the PTAB to provide a further explanation for its determination that the challenged claims were obvious. According to the court, the PTAB’s decision lacked sufficient detail necessary for the court to determine if the PTAB’s findings were supported by substantial evidence, or if the PTAB provided the Patent Owner proper notice and opportunity to respond to the PTAB’s claim construction and theory of unpatentability.

Rovalma’s challenged patent relates to “hot-work” steels, and claims a process for producing steels with particular thermal conductivities. The claims recite steps including: (1) providing a hot-work steel including particular constituents; (2) metallurgically creating an internal structure of the steel; (3) selecting a surface fraction (or volume fraction) and thermal conductivity of some of the constituents; and (4) setting the thermal conductivity of the steel to recited ranges.

In Böhler’s IPR petition, it argued that the challenged claims should be construed to cover steels with particular chemical compositions, as disclosed in the specification, whether or not created according to the four process steps recited in the claims. In its institution decision, the PTAB adopted the Petitioner’s proposed construction, and determined that there was a reasonable likelihood that the challenged claims would have been obvious over various prior-art references.

In the Patent Owner Response, Rovalma argued that the PTAB incorrectly construed the claims; that a proper construction required performance of each recited process step; and that the cited art did disclose the process steps. In support of its proposed construction, Rovalma submitted additional evidence concerning steel processing, to show that the claims as construed were enabled by the specification.

In its Reply, Böhler repeated its contention that the claims should be construed to cover chemical compositions, not processes, and it did not argue in the alternative that the claims would have been obvious under the Patent Owner’s proposed construction.

At oral argument, the PTAB questioned the Patent Owner’s counsel about the effect on patentability, of the evidence the Patent Owner had submitted with its Response. In its final decision, the PTAB adopted the Patent Owner’s construction, but determined that the challenged claims would have been obvious under that construction, based on the chemical compositions disclosed in the prior art submitted with the petition. Specifically, the PTAB determined that, in view of the evidence the Patent Owner submitted, a person of ordinary skill would have known how to optimize the prior-art compositions to achieve the recited properties.

On appeal, the Patent Owner argued that the PTAB’s decision was not supported by substantial evidence, and was procedurally improper in that the PTAB relied on the Patent Owner’s own submissions and proposed construction to determine that the claims were obvious, without adequate notice and opportunity to respond. The Federal Circuit vacated the final decision and remanded the case to the PTAB for two reasons. First, the court concluded that the PTAB failed to sufficiently explain the basis for its obviousness determinations, so that the court could not determine if the decision was supported by substantial evidence. Second, the court determined that without a more detailed explanation for the PTAB’s reasoning, the court could not determine whether the PTAB provided the Patent Owner adequate notice and opportunity to respond.

In evaluating whether the PTAB’s decision was supported by substantial evidence, the court determined that the PTAB adequately explained how the prior art disclosed the claimed steel compositions, but that the PTAB “did not sufficiently lay out the basis for its implicit findings regarding the remaining process limitations,” such as the PTAB’s finding that a person of ordinary skill would have “at least inherently” completed the recited “selecting” steps; that the other recited steps were obvious in view of the evidence submitted by the patent owner; and that a person of ordinary skill would have been motivated to increase the thermal conductivities of the steels disclosed in the prior art, and would have a reasonable expectation of success.

On the procedural challenges, the court determined that the court’s decision in In re Magnum Oil Tools Int’l (which we have previously discussed) does not preclude the PTAB from relying on the patent owner’s own submissions in determining unpatentability, as long as the patent owner had adequate notice and opportunity to respond. The court rejected the Patent Owner’s argument that Magnum Oil or the patent statute prohibit the PTAB from relying on the patent owner’s submitted evidence. However, the court determined that because it could not sufficiently determine how the PTAB reached the conclusion that the challenged claims were obvious, it also could not conclusively determine whether the PTAB provided the Patent Owner with adequate notice and opportunity to respond to its new theory of unpatentability. The court also determined that on the current record it could not determine if the Petitioner forfeited the new unpatentability argument by failing to present in its Reply an argument for unpatentability under the Patent Owner’s proposed construction. Accordingly, the PTAB remanded the case to the PTAB consider these issues and issue a revised opinion.

The court’s decision to vacate and remand the case, rather than reverse, is surprising in view of the court’s two concerns about the PTAB’s opinion—substantial evidence; and notice and opportunity to respond. If on the appeal record including the final written decision the court could not determine whether substantial evidence supported the decision, it does not seem possible for the Board on remand to “fix” the decision to address substantial evidence in a way that does not demonstrate that there was a lack of notice and opportunity to respond. To maintain its position that the claims are unpatentable, the Board would have to add some new reasoning to its opinion, and that would be too late for the Patent Owner to respond. Perhaps the PTAB will permit additional briefing or argument, although that would appear to be inconsistent with the PTAB’s rules prohibiting new reply or hearing arguments.

One lesson from this case is that a patent owner (or any party) needs to be careful about what evidence it submits to the PTAB. Although the final outcome of this case is unclear, the Federal Circuit has made clear that if the PTAB provides notice and opportunity to respond, the PTAB may use any evidence in the record, including that submitted by the patent owner, to support a decision that the challenged claims are unpatentable.