Federal Circuit No. 2014-1575, -1576

In Belden v. Berk-Tek, the Federal Circuit reversed a decision by the Patent Trial and Appeal Board ("PTAB"), which had upheld two patent claims in dispute in an inter parties review ("IPR") proceeding by finding them non-obvious, was erroneous on legal grounds. 

Belden Inc. is the patent owner of U.S. Patent 6,074,503 (hereinafter "'503 Patent"), which is directed toward as method for manufacturing communication cables.  Berk-Tek petitioned for IPR of all six claims within the '503 Patent asserting both anticipation and obviousness grounds in view of seven references.  In its original petition to the PTAB, Berk-Tek did not attach any expert declaration together with the petition.

After the PTAB issued a decision instituting IPR finding a reasonable likelihood  that the six claims were unpatentable, Belden filed a Patent Owner's Response with an expert declaration from the named inventor.  Berk-Tek subsequently filed a Reply with its own expert declaration.  Belden orally opposed Berk-Tek's expert declaration, on the ground that Belden lacked opportunity to respond.

The PTAB noted 37 C.F.R. § 42.514(b)(1)(ii) permitted patent owner to cross-examine the declarant, and to file an non-argumentative observation.  After cross-examining Berk-Tek's expert, Belden filed its observations on cross and moved to exclude Berk-Tak's expert declaration on the ground that Berk-Tek's declaration was non-responsive to Belden's expert declaration, and because it contained arguments and evidence necessary to establish prima facie obviousness.

The PTAB denied Belden's motion to exclude, and further held that claims 1-4 of the '503 Patent were invalid in light of cited references.  However, the PTAB confirmed the validity of claims 5 and 6, finding that the cited references on their own did not disclose or suggest the claimed features of the respective claims, and that Berk-Tek offered no apparent reason to combine the references.  Further, the PTAB held that Berk-Tek's expert declaration was not necessary to establish a prima facie case of obviousness.

On appeal, the two questions in front of the Federal Circuit were:  (1) whether the PTAB erred in upholding or rejecting some or all of the claims of the '503 Patent; and (2) whether the PTAB erred in denying Belden's motion to exclude.

On the substantive ground, the Federal Circuit reiterated that whether an invention is obvious in light of prior art is a question of law, subject to de novo review on appeal.  However, the underlying determinations for obviousness, such as the scope and content of the prior art, differences between the prior art and the claims, level of ordinary skill, and the motivations to modify or combine, are all questions of fact subjected to the substantial evidence standard.  In other words, the Federal Circuit would give a high degree of deference to PTAB on factual determinations.

In view of this standard of review, the Federal Circuit held that regarding claims 1 to 4, PTAB's findings in invalidating the claims were supported by substantial evidence.  Nonetheless, regarding claims 5 and 6, the PTAB's findings in upholding the claims were found not to be supported by substantial evidence.  The Federal Circuit held that "[t]he Board's contrary finding rests on legal errors" and that there was no dispute the prior-art if combined suggested the methods in claims 5 and 6.  The only dispute was whether a skilled artisan would have had motivation to combine them.

The Federal Circuit held that a reference must be considered for everything it taught, not limited to a particular invention disclosed in the reference.  Further, the Federal Circuit found that the PTAB's reason in finding lack of motivation to combine was flawed.  The PTAB reasoned, inter alia, that because the primary reference disclosed only methods for producing un-insulated conductors, an ordinary skilled artisan tasked to produce conventional cables would not have been motivated to substitute insulated conductors with un-insulated conductors.  However, the Federal Circuit concluded that the method of manufacturing cables was insulation-independent.  Therefore, the Federal Circuit held that PTAB erred in determining that Berk-Tak had not proven the obviousness of claims 5 and 6 by a preponderance of the evidence.

On the procedural ground, the Federal Circuit held that a violation of 37 C.F.R. § 42.23(b), which provides that "[a] reply may only respond to arguments raised in the corresponding opposition or patent owner response," permits the PTAB to reject the Reply in its entirety, at the PTAB's sole discretion.  The PTAB is not obligated nor required to reject a non-compliant Reply. 

Further, the Federal Circuit noted that expert testimony is not required when filing a petition.  And indeed, the PTAB can rely on its own technical expertise when the references and invention are relatively simple in nature.  However, if a petitioner filed an expert declaration in its reply, the patent owner should be given the opportunity to cross-examine the petitioner's expert.

Finally, the Federal Circuit held that in order for a patent owner to assert non-adequate opportunities to respond, the patent owner must first file sur-replies, additional observations, or ask for leave from PTAB to file further motions.  A patent owner that failed to file any of the aforementioned motions waived its right to appeal the adequateness of opportunities to response on appeal.  The Federal Circuit affirmed the PTAB's holdings on procedural grounds by finding no abuse of discretions.