In an IPR, the PTAB May Itself Identify a Patentability Issue of a Proposed Substitute Claim Based on Prior Art of Record, but Must Provide Notice and Opportunity for the Parties to Respond

Nike, Inc. v. Adidas AG, No. 2019-1262 (Fed. Cir. Apr. 9, 2020)

Responding to an inter partes review (IPR) of its patent, the patentee cancelled certain claims and proposed certain substitute claims. After remand from an intervening appeal (requiring the Patent Trial and Appeal Board (PTAB) to articulate its fact findings to support any obviousness determination), the PTAB found the substitute claims unpatentable. For one particular claim, the PTAB relied on prior art of record, but articulated an analysis of that reference that the challenger had not put forward and to which the patentee had not had an opportunity to respond.

The Federal Circuit vacated and remanded the decision as to that claim, finding a violation of the Administrative Procedure Act (APA). The APA requires that parties be “timely informed of . . . the matters of fact and law asserted,” and an opportunity for submission and consideration of facts and arguments. On the other hand, in the context of a patentee’s motion to amend its claims, the PTAB may raise unpatentability grounds “based on the IPR record” and is not “limited to the unpatentability grounds asserted by the petitioner in its petition or opposition to the motion to amend.” The court left aside the issue of whether the PTAB may rely on prior art that was not of record. However, if the PTAB does sua sponte raise such grounds, “it must provide notice of the issue and an opportunity for the parties to respond before issuing a final decision.” Because the PTAB did not provide notice to the patentee, nor did the parties “discuss or debate the relevant portions” of the prior art reference (such as by supplemental briefing or even oral argument), that portion of the PTAB’s decision was vacated and remanded to afford the parties such an opportunity.

A copy of the opinion can be found here.