Ariosa Diagnostics, Inc. v. Verinata Health Inc.

While the U.S. Court of Appeals for the Federal Circuit supported the Patent Trial and Appeal Board’s (PTAB or Board) application of procedural rules to limit the petitioners to one bite at the IPR petition apple, it nonetheless vacated and remanded a Board opinion based on a possible misapplication of those rules. Ariosa Diagnostics, Inc. v. Verinata Health Inc., Case Nos. 15-1215; -1226 (Fed. Cir., Nov. 16, 2015) (Taranto, J.).

Challenging another patent concerning prenatal diagnostic methods (Ariosa Diagnostics, v. SequenomIP Update, Vol. 18, No. 7), Ariosa Diagnostics filed a petition for inter partes review, asserting that the patent claims were obvious over several prior art references. Two expert declarations filed along with Ariosa’s petition each referred to an exhibit as evidence of the background knowledge of one or ordinary skill. The petition did not explicitly rely on the exhibit as a ground of unpatentability.

In contrast to its petition, Ariosa’s reply focused more heavily on the teachings of the exhibit as substantive prior art. In its reply the petitioner even submitted a new expert declaration that included testimony going to patentability based on the exhibit. The Board viewed this as a new argument, replacing the teachings of the originally cited references upon which patentability arguments in the petition were based, with the teachings of the exhibit. Because “a reply may only respond to arguments raised in the corresponding . . . patent owner response” and the Board did not see “why [the exhibit] could not have been presented as part of the asserted ground of unpatentability in the first instance,” the Board decided it would accord “this aspect of [the expert’s] testimony no weight.”

Separately, the Board also rejected the petitioner’s reliance in its reply on newly identified portions of the cited prior art references. The petitioner had tried to use these portions to rebut arguments that two of the cited references could not be combined. The Board ultimately concluded that the petitioner had not established obviousness by a preponderance of the evidence and upheld the challenged claims. The petitioner appealed.

The Federal Circuit vacated and remanded the Board’s decision while expressing full support for the Board’s enforcement of its procedural rules. First, regarding the testimony based on the exhibit, the Federal Circuit found that the arguments based on the exhibit were properly raised in the Petition so the testimony could not have been properly excluded as a new argument. The Court stated that there were permissible grounds for the Board to exclude the evidence, but it could not discern the grounds upon which the evidence was given no weight. Further, the Federal Circuit could not discern whether any error in that regard had a dispositive effect. Thus, the Court vacated the Board’s order and remanded to give the Board an opportunity to explain the effect of the erroneous “no weight” determination. Second, regarding the newly identified portions of the previously cited references, the Federal Circuit affirmed the Board’s exclusion of the evidence as properly grounded in applicable regulations and congressional intent to balance fairness and expediency. In sum, the Federal Circuit upheld the Board’s practice of strictly applying procedural rules to promote expediency even as it remanded the order for the Board to consider whether it had applied those rules correctly.

Practice Note: The PTAB practice of requiring petitioners to make all of their arguments and cite all of their evidence in the Petition is sanctioned by the Federal Circuit. Subject (of course) to page limitations, petitioners should err on the side of over-inclusiveness when presenting evidence in their petitions.