Federal Circuit Affirms PTAB Ruling on Filing Of Supplemental Information

Filing Supplemental Information

The Leahy-Smith America Invents Act (AIA) authorizes the U.S. Patent and Trademark Office (USPTO) to establish regulations relating to the submission of supplemental information after an IPR trial has been instituted. 35 U.S.C. '316(a)(3). The requirements for filing such motions are set forth in 37 C.F.R. '42.123. The Rule has three subsections. Subsection (a) applies to a motion submitted within one month of the IPR institution, and requires that the supplemental information must be relevant to a claim for which the trial has been instituted. Prior authorization is not required. Subsection (b) applies to motions filed after the one-month period, and requires prior authorization before submitting the motion. A motion under section (b) must show that the information could not have been obtained earlier, and that consideration of the information would be in the interests of justice. Subsection (c) concerns information “not relevant to a claim for which the trial has been instituted” and also requires showings that the information could not have been obtained earlier, and that consideration of the information would be in the interests of justice.

Alleged Error in the PTAB Ruling

Redline argued that 37 C.F.R. '42.123 effectively obligated the PTAB to consider supplemental information presented with a motion under Section 42.123(a), provided that the information was relevant to a claim in the IPR and submitted within one month of the IPR institution, as these are the requirements stated in the Rule itself.

This argument was based largely on statutory construction. Aside from the Rule being clear on its face, Redline argued that the regulatory history of the Rule “reflect[ed] a balance of interests expressed in agency notice-and-comment rulemaking,” which left no room for the PTAB to impose its own discretionary requirements. Having promulgated the Rule under the authority of the governing statute, the USPTO should be obliged to follow it.

Appellant argued that the PTAB should not have evaluated factors from subsections (b) and (c) of the Rule (which both require a showing that the supplemental information could not reasonably have been provided earlier) in deciding a motion made under subsection (a). Canons of statutory construction generally hold that where particular language is excluded from one subsection of a statute and included in another ' the agency has made a deliberate choice. According to these canons of construction, the PTAB should not have been permitted to mix and match requirements from different subsections to decide a motion. In deciding a motion under subsection (a), Appellant argued, the PTAB should not consider factors beyond the timeliness and relevance requirements identified in the Rule.

Finally, Redline argued that other IPR plaintiffs had successfully obtained consideration of similar supplemental information under 37 C.F.R. '42.123(a), and that denial of Redline's motion was therefore arbitrary and capricious.

Federal Circuit Panel Shows Deference to PTAB

Federal Circuit review of the PTAB's interpretation of USPTO regulations is governed by the “plainly erroneous” standard. The PTAB's management of PTAB rules governing trial proceedings is reviewed by the Federal Circuit for “abuse of discretion.” Slip op. at 9.

Judge Wallach wrote the opinion for the Federal Circuit panel, which also included Judges Lourie and Hughes, and which rejected each of Appellant's contentions in turn. The court took a much broader view of the PTAB's discretion under the statutory scheme of the AIA, noting that the statute requires the USPTO to give consideration to the effect of each regulation on the “efficient administration of the Office, and the ability of the Office to timely complete [IPR] proceedings.” 35 U.S.C. '316(b).

Further, IPR trials are subject to the procedures set forth in subpart A of Section 42, which requires USPTO regulations to “be construed to secure the just, speedy and inexpensive resolution of every proceeding.” 37 C.F.R. '42.1(b).

In this broader context, “nothing within subsection (a) excludes application of other PTAB regulations. Rather, timeliness and relevancy provide additional requirements that must be construed within the overarching context of the PTAB's regulations governing IPR and general trial proceedings.” Slip op. at 18. Canons of construction, moreover, are not mandatory rules, but are merely “designed to help judges determine the Legislature's intent as embodied in particular statutory language.” Slip op. at 15 (citation omitted). Ultimately, the PTAB has discretion to grant or deny motions as it sees fit. Slip op. at 18.

The Federal Circuit saved the strongest language for Appellant's argument that “[s]everal other [PTAB panels], in deciding motions brought under '42.123(a), have started and ended their analysis with the plain meaning of this regulation.” Here, Redline's argument relied heavily on Pacific Market Int'l, LLC v. Ignite USA, LLC, IPR 2014-00561 (P.T.A.B. Dec. 2, 2014), where the PTAB accepted an expert declaration submitted by an IPR Petitioner under '42.123(a).

The Federal Circuit found Appellant's characterization of Pacific Market to be “inaccurate and misleading.” Slip op. at 22. The expert declaration allowed by the PTAB in Pacific Market was a relatively short supplement to a 60-plus page expert report filed with the Petition. In contrast, Redline had not filed an expert report with its original Petition. Moreover, the panel in Pacific Market had specifically remarked that 37 C.F.R. '42.123(a) “is not a routine avenue to pursue, nor does the regulation require an automatic acceptance of, supplemental information.” Slip op. at 22. The Federal Circuit noted that the basis for the PTAB allowing the supplemental information in Pacific Market was “the exact opposite” of having an obligation to consider the evidence.

Having affirmed the PTAB's procedural ruling, the Federal Circuit reviewed the PTAB's factual findings underpinning nonobviousness for “substantial evidence,” and the legal conclusions de novo. The Federal Circuit found all of the factual underpinnings of the PTAB decision to have been supported by substantial evidence, and affirmed the PTAB's Final Decision that claims 9 and 10 of the '808 patent were not invalid for obviousness. Of course, the panel's task was eased by the absence of an expert declaration from Redline's expert.

Conclusion

Redline Detection shows that the PTAB has wide discretion to deny entry of supplemental information after institution of an IPR trial, even within the one-month window, notwithstanding that the structure of 37 C.F.R. '42.123 allows for submitting the motion in that window without prior authorization, and might have suggested that a more permissive standard would apply. The successful IPR litigant seeking to have such information entered would do well to consider the PTAB's overall mandate to keep proceedings on track, and plead reasons why entry of the supplemental information was not submitted sooner and why its entry would be in the interests of justice.

Both the PTAB and the Federal Circuit in this case remarked that Redline's initial IPR Petition was not supported by an expert declaration and could have been. With the benefit of hindsight, a more cost effective strategy for the Petitioner would have been to present fewer grounds in the initial Petition, but supported with declaration evidence.

Brendan Mee is a Partner with Pearl Cohen Zedek Latzer Baratz LLP in the Patent Group, specializing in all aspects of practice before the U.S. Patent and Trademark Office.