Addressing the Patent Trial and Appeals Board’s (PTAB’s or Board’s) reliance on the so-called redundancy doctrine in connection with instituting grounds for inter partes review (IPR), the US Court of Appeals for the Federal Circuit explained that conclusory reliance on the doctrine left district courts and the International Trade Commission in doubt regarding the grounds to which estoppel should apply, and was difficult to square with the requirements of the Administrative Procedure Act, which requires the Board to provide a reasoned basis for its decisions. Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., Case Nos. 15-1116; -1119 (Fed. Cir., Mar. 23, 2016) (Moore, J) (Reyna, J, concurring). In an eight-page concurrence, Judge Reyna expounded on the redundancy doctrine’s impact on the integrity of the patent system.

Automated Creel Systems (ACS) is the owner of a patent relating to supplying yarn and other stranded materials to a manufacturing process by way of a creel (a bar with skewers for holding bobbins in a spinning machine). One set of claims (the non-interposing claims) involved creel magazines having two spools, and another set of claims (the interposing claims) involved magazines with more than two spools. ACS filed an infringement action in February 2012 naming Shaw as a defendant. Soon afterward Shaw filed a petition for IPR challenging all 20 claims of the patent based on 15 separate grounds of unpatentability. The Board instituted IPR on all claims except claim four. Shaw later filed a second IPR petition, requesting review of claim four. 

Regarding the interposing claims, the Board instituted IPR on two of Shaw’s three proffered grounds, but denied the third (based on Payne) without substantive explanation, merely citing to its authority under 37 CFR § 42.108. For the second IPR petition, the Board instituted IPR based on two of the six proposed grounds, denying the others as redundant. The Board found that 35 USC § 315(b) did not bar the second IPR, because ACS’s voluntarily dismissal of its complaint without prejudice effectively converted the action into a legal nullity. 

Reaching its final decision for the two consolidated IPRs, the Board found that Shaw had not shown the interposing claims to be unpatentable based on the instituted grounds, but made the proper showing for the non-interposing claims. Shaw appealed to the Federal Circuit as to the interposing claims. ACS appealed as to claim four, arguing that Shaw’s second petition was barred under 35 USC § 315(b). Shaw also petitioned for a writ of mandamus instructing the US Patent and Trademark Office (PTO) to reevaluate its “redundancy decision” (with respect to the Payne-based ground). The PTO director was granted intervenor status in the appeal.

The Federal Circuit found that it could not review the Board’s decisions on institution, including those denying grounds as being redundant. While noting that the Board’s institution on certain obviousness grounds might not have actually made the proceedings more efficient, as compared to review on the denied grounds of anticipation, the Federal Circuit noted that its recent St. Jude decision (IP Update, Vol. 18, No. 11) made clear that the Court does not have the authority to review an IPR institution decision. In so holding, the Court rejected Shaw’s argument that its authority to review an IPR’s final written decision effectively permits a revisit of issues initially determined in the institution decision. 

Addressing Shaw’s petition for a writ of mandamus, the panel looked to the requirements spelled out by the Supreme Court of the United States in Cheney v. US Dist. Court for DC. The Federal Circuit noted that Shaw’s argument was predicated on its concern that the IPR statutory estoppel provisions would prevent it from raising the Payne-based ground in future proceedings. But the Court noted that, as the PTO as intervenor had argued, the estoppel provisions of 35 USC § 315(e) apply only to those grounds raised during an IPR or those that reasonably could have been raised, but not to those grounds for which institution was denied. For these reasons, the Court denied Shaw’s petition for a writ of mandamus.

Turning to Shaw’s appeal of the Board’s determination that Shaw had not sufficiently shown that the interposing claims would have been obvious over the cited references, the panel found that the Board’s language as to a particular feature was unclear (“ambiguous at best”) and remanded for further fact findings on the issue. Regarding the cross-appeal, the Court cited its decision in Achates Reference Publishing v. Apple (IP Update, Vol. 18, No. 10), holding that the Court lacks jurisdiction to review the Board’s determination to initiate an IPR based on an assessment of the time-bar of § 315(b). As to claim four, the panel found that the Board’s factual findings were supported by substantial evidence, and saw no error in the Board’s conclusion of obviousness.

Practice Note: By cabining redundancy analysis as falling within the scope of an institution decision, the Federal Circuit effectively condoned the Board’s reliance on the redundancy doctrine, even though the PTO, as an intervenor, emphatically denied that any such doctrine exists. The majority and the concurring opinion both made it clear that the doctrine, when couched in conclusory statements, while an expedient for the PTO and untouchable under 35 USC § 314(d), is “antithetical” to the Administrative Procedure Act and leaves those tribunals tasked with actually deciding whether estoppel applies in a predicament.