Federal Circuit Weighs in on Evidentiary Challenge in IPR, Reversing PTAB

34447773_sMore often than not, evidentiary issues in IPR proceedings fail to make headlines because the Board will structure its Final Written Decision to avoid evidentiary challenges. Findings that a party’s motion to exclude is denied as moot are common. That makes the Federal Circuit’s decision in REG Synthetic Fuels, LLC v. Neste Oil Oyj (November 8, 2016) all the more interesting. In that decision, the Court reversed the Board’s decision to exclude certain evidence submitted by Patent Owner during the trial.

More specifically, Patent Owner sought to swear behind one of the prior art references presented in the Petition. Among the evidence provided for this purpose was test data from third parties, communications between the inventor and third parties, and minutes from a meeting that the inventor had attended. Id. at 5. Petitioner moved to exclude this evidence on the basis of lack of authentication, hearsay, or as improper reply evidence. The Board granted the motion to exclude.

On appeal, the Court first clarified that priority issues, including conception and reduction to practice, are questions of law predicated on subsidiary factual findings. Id. at 6. The Court addressed the Board’s finding that two emails between the inventor and a third party (Exhibit 2061 in the case) provided necessary corroboration of the patented invention. Id. at 16. Petitioner argued that the emails were hearsay because they contain out of court statements by a third party. Patent Owner responded by arguing that it did not offer the emails to prove the truth of the matter asserted. The Court agreed with Patent Owner, finding that the emails were offered for the non-hearsay purpose to show that the inventor thought he had achieved a quality claimed in the patent-at-issue. “The act of writing and sending the email is, by itself, probative evidence on whether [the inventor] recognized–at the time that he had written the email–” the claimed property. Id. at 17. In short, the exhibit was legally significant because it showed that the inventor communicated the conception of the invention to the third party.

Because the Board excluded relevant evidence in the trial, the case was remanded for further consideration.

Federal Circuit Weighs in on Propriety of New Evidence Adduced During IPR Trial

cafc1In Genzyme Therapeutics v. Biomarin Pharma., the Federal Circuit considered what sort of notice and opportunity to be heard in an IPR will satisfy the Administrative Procedure Act (“APA,” 5 U.S.C. § 554(b) & (c)). Genzyme owns US 7,351,410 and US 7,655,226, which both concern methods of treating Pompe’s disease. When Biomarin petitioned for IPR of these two patents, Genzyme submitted a patent-owner statement arguing that the in vitro data in Biomarin’s petition were not sufficient to establish a reasonable expectation of success for the claimed methods, and therefore could not show that the challenged claims were more likely than not to be obvious.

The Board instituted IPR on both patents, despite Genzyme’s arguments about the insufficiency of in vitro data. In its petitioner response, Biomarin responded to Genzyme’s arguments about in vitro data by citing additional references that included in vivo data. Instead of arguing that these additional references do not establish a reasonable expectation of success, Genzyme pressed a procedural point, arguing that it was improper for the Board to consider references that were not included in the grounds of institution for each IPR trial. When the Board disagreed with Genzyme’s argument and relied on two of the in vivo references in its final written decision of unpatentability, Genzyme appealed this point to the Federal Circuit.

Judge Bryson wrote for a unanimous panel that also included Judges Moore and Reyna. The court disagreed with Genzyme’s argument in the strongest possible terms. The Federal Circuit noted that IPRs are trials, and that it is expected that additional evidence will come to light during the course of a trial. The Federal Circuit strongly disagreed with the idea that the Board is constrained to consider only those references that are cited in the institution decision. Indeed, the court noted that it had previously reversed the PTAB for refusing to consider a reference on the same grounds that Genzyme was urging here. Ariosa Diagnostics v. Verinata Health, 805 F.3d 1359, 1365 (Fed. Cir. 2015).

Rather, drawing on D.C. Circuit precedents, the court held that the APA is satisfied so long as the patentee has reasonable notice of the argument being advanced for unpatentability, and an adequate chance to respond. Here Genzyme was on notice of Biomarin’s reliance on the in vivo data from at least the point of Biomarin’s response brief. Also, during oral argument the PTAB questioned Genzyme extensively about several of the in vivo references. Genzyme could have moved under 37 C.F.R. § 42.64(c) to exclude the challenged references, but it did not. Therefore, the Federal Circuit held that Genzyme had been afforded adequate notice and opportunity to respond under the APA.

The Federal Circuit affirmed the PTAB’s holding of unpatentability for the challenged claims.

PTAB Grants IPR Motion to Exclude – Knocks Out Exhibits As Untimely

53129743_sThe Board rarely grants motions to exclude, but it did so in Toshiba Corp. v. Optical Devices, LLC, IPR2014-01447 (March 9, 2016).  There, Patent Owner moved to exclude four exhibits; the motion was denied as two of them and granted as to the other two.  Patent Owner objected to the two admissible exhibits (a data sheet and press release) on grounds of lack of authentication, inadmissible hearsay, and/or irrelevance.  The PTAB dispensed with these objections quickly.  Concerning authentication, a trademark notice on the document sufficiently authenticated the material.  The document’s date was not hearsay:  “the fact that a document bears a date is not hearsay.”  As to irrelevance, the PTAB found (as is common) that the Patent Owner’s argument was really about sufficiency of the evidence, which should not be raised in the form of an irrelevance objection.

The two excluded exhibits were a current website containing a link to a downloadable datasheet, and an accompanying authentication declaration from the Internet Archive.  These exhibits submitted for the first time with Petitioner’s reply.  The Board noted these exhibits were not provided in response to evidentiary objections from Patent Owner, nor were they submitted in accordance with the procedures for introducing supplemental evidence or information into proceedings (37 C.F.R. § 42.64(b)(2) and 42.123(a)–(c)), despite Petitioner’s early awareness of Patent Owner’s objections to the alleged public availability of the information.  Because the submission of these exhibits was untimely, the PTAB excluded them.  Notably, the PTAB’s exclusion order was not based on any Federal Rule of Evidence, but rather solely on the Board’s rules concerning the timing of submissions.

Board Explains the Process for Evidentiary Objections—and Illustrates the Severe Penalty for Not Following It

35378580_sPractitioners who are used to district court litigation may be surprised—and tripped up—by the rules for objecting to evidence in IPRs, which differ significantly from the approach used in litigation.  The Board’s Final Written Decision in IPR2014-01204 (Valeo v. Magna Elecs.) serves as a good case study of the IPR rules’ strict process for evidentiary objections.

By way of background, possibly the biggest difference between evidentiary objections in IPRs and litigation is the IPR rules require objections to be filed with the Board within ten business days after the evidence is submitted.  Failure to object within that time waives the objections, and precludes a later motion to exclude the evidence.  After evidentiary objections are served, the proponent of the evidence can, within 10 business days, serve “supplemental evidence” in an effort to overcome the objection.  That supplemental evidence is not filed as a matter of course without the Board’s approval; rather, its use is generally limited to filing in opposition to a motion to exclude.

The Board often requires strict compliance with this procedure, and will strike objections if they do not comply, as illustrated in the Valeo case.  There, the Decision to Institute was entered on January 28, 2015.  That triggered the 10-day deadline for Patent Owner to object to the evidence in the Petition, and Patent Owner timely filed its objections on Feb. 11.  In turn, Petitioner timely served supplemental evidence on Feb. 25.  The next day, Petitioner properly sought permission from the Board to file a motion to file the supplemental evidence as “supplemental information.”  On March 4, the Board granted Petitioner permission to file its motion.  The same day, Patent Owner objected to the supplemental evidence.

On April 10, the Board granted Petitioner’s Motion to File Supplemental Information.  Thus, by operation of the rules, the “supplemental evidence” became evidence on that day.  Patent Owner never renewed its objection.  As a result, the Board ruled that Patent Owner waived its objections to the supplemental information, despite having earlier objected.  The earlier objections were ineffective, according to the Board, because the “rules provide for objections to evidence, but do not provide for objections to supplemental evidence.”

Regarding the substance of admissibility issues, the Federal Rules of Evidence apply to IPRs.  The Valeo case addresses a variety of other evidentiary objections that were effectively lodged, and a few particular points from the decision provide a window into how many PTAB judges approach evidentiary issues:

  1. Arguments about admissibility should not be included in Patent Owner’s Response; such arguments should only be raised in a motion to exclude. (See FWD at 14-15);
  2. On the flip side of that same coin, arguments about sufficiency of the evidence should be presented in the Patent Owner’s Response, not in a motion to exclude under the guise of an objection on relevance grounds. (See FWD at 16);
  3. Hearsay objections are of very limited utility with respect to expert declarations, because the Board does not consider declarations submitted as a part of the IPR to be “out of court statements,” as the declarants may be cross-examined (see FWD at 17);
  4. Objections should be precise and comprehensive. For example, if an objection does not include reference to Rule 403, then the Board may not later allow an argument based on FRE 403.  (See FWD at 20);
  5. Be sure to object to the right document. For example, an FRE 901 objection should be directed to the underlying document, not a declaration that tries to authenticate the underlying document.  Otherwise, the Board may decline to consider the issue (see FWD at 21).

In the Valeo IPR, as usually happens in IPRs, the motion to exclude was denied.

Board Offers New Technique to Solve an Often-Raised IPR Issue

45686244_sOne panel of the PTAB has introduced a technique that may help solve the oft-raised complaint that a reply brief from Petitioner contains new evidence and/or argument not raised in the Petition. In early decisions, when this issue arose, the Board would simply dismiss the complaint by stating that it would, upon consideration of the entire record after the oral hearing, decide whether or not new evidence or argument had been relied upon. But, in Nintendo of Am. Inc. v. iLife Tech., IPR2015-00105, Paper 23, the Board offered Patent Owner a brief opportunity to point out the purported new evidence that will, frankly, probably make life easier on the Board.

More specifically, the Board addressed a complaint from Patent Owner that Petitioner’s reply brief included new arguments and referred to evidence not previously addressed in the Petition. Id. at 2. The Board introduced a new concept (a “Motion for Attention to New Material”???) that allowed the Patent Owner to file a 2-page brief that lists “the location and a concise description of any portion of the Petitioner’s Reply that Patent Owner wishes to draw to the Board’s attention, but it should not contain argument.” In turn, Petitioner was authorized to file a response to this paper, identifying an itemized list of what from the Patent Owner Response triggered Petitioner to include each item listed by the Patent Owner in its Reply. Again, no argument is allowed.

It is interesting to continue to watch the Board evolve to find new ways to solve the issues that come up so often in IPR proceedings.

Motion to Exclude is Proper Vehicle in IPR to Remove Reference as Evidence

34447773_sPatent Owners have often made the argument that certain art of record in an inter partes review is not actually prior art. The proper way to remove that evidence from the record is via a Motion to Exclude, not merely by making arguments in a Patent Owner Response or at the oral hearing. This issue, and an improper attempt at exclusion, arose in ABB, Inc. v. Roy-G-Biv Corporation, IPR2013-00063, involving US Pat. No. 6,513,058.

Earlier in a previous inter partes review proceeding, Patent Owner had argued that the invention of the ‘058 patent was conceived and reduced to practice prior to the effective art date of the relied-upon prior art references. As such, Patent Owner asserted that the references relied upon in the challenge were not available as prior art. Decision at 5-6. The Board rejected this argument in the earlier IPR as lacking adequate evidentiary support for diligence in reducing the invention to practice. Id. at 6.

In this later proceeding, Patent Owner made additional arguments and cited additional cases, all in an unsuccessful attempt to convince the Board. As a backup argument, Patent Owner argued that Petitioner failed to meet its burden of proof in establishing the publication date of one of the references, and therefore the reference was not eligible as prior art. This challenge, however, was made at the final hearing – not as part of a motion to exclude the prior art reference. Id. at 8.

The Board found that Patent Owner’s argument was untimely, including that the final hearing “is not the place to advance a new theory of the case.” Order at 9. Further, pursuant to 37 C.F.R. § 42.64(b)(1), an objection to the admissibility of a reference must be served within ten business days of the institution of the trial. This must be followed by a motion to exclude the reference. Id. at 8. However, Patent Owner did not raise an objection to the reference nor did it file a motion to exclude.  With these actions now time barred, the Board deemed Patent Owner’s attempt to challenge the art-date of the reference to be untimely. Id. at 9.

PTAB Reiterates Prohibition Against New Arguments at IPR Oral Hearing

15503338_sOne of the most litigated aspects of inter partes review proceedings is the issue of whether an argument presented in a petitioner reply or at oral hearing is “new.” This issue arose in Level 3 Communications, LLC v. AIP Acquisition LLC, IPR2013-00296, Paper 42, at 9-10, wherein the Board discussed what will and will not be allowed in terms of new arguments at oral hearing.

Patent Challenger objected to four arguments asserted by Patent Owner during oral hearing:

  • Reliance on a case not yet of record;
  • A previously-unasserted argument of unpredictable results;
  • A new argument regarding a reference of record; and
  • Reference to a specific page of reference of record.

Order at 9.

The Board began by addressing Patent Owner’s reliance on a case at oral hearing that had not been previously discussed in the trial.  Because Patent Challenger had no opportunity to address the new case, the Board sustained an objection to its use in this proceeding. Id. at 9.

Second, Petitioner objected to Patent Owner’s argument that the patent-at-issue disclosed unpredictable results and a characterization of the claimed invention. Patent Owner countered that its arguments were made in response to a new argument in Patent Challenger’s reply brief and should, therefore, be allowed.  The Board sided with Petitioner, finding that there are no exceptions to the rule that new arguments may not be raised during oral hearing, even if in reply to another new argument.  Accordingly, the Board sustained these objections, as well. Id. at 9-10.

Lastly, the Board addressed the fourth objection, listed above, where Patent Owner referenced a specific page of a reference of record during oral hearing. The Board noted that the specific page of the reference was previously admitted as evidence and Petitioner had access to it.  Further, the reference citation was in support of a previously-asserted argument. Accordingly, the Board overruled this last objection.  Id. at 10.

The Board reiterated its rule that no new arguments can be presented during oral hearing, disallowing arguments which depended on new references or which were not previously advanced. However, if argument or evidence relied upon were previously presented, the Board will allow discussion of it during oral hearing.

Conclusory Arguments Plus Citation to KSR Insufficient to Institute IPR

Dart arrows missing targetThe Board has instructed, time and again, that a Petition for Inter Partes Review must tell a story. Mere conclusory attorney argument, or conclusory statements from an expert, are not sufficient to carry the burden of demonstrating the unpatentability of a challenged claim. This lesson was learned again, the hard way, by a Petitioner in Bear Archery, Inc. v. AMS, LLC, IPR2014-00700, involving US Pat. No. 6,517,453, where the Board addressed a weak conclusory argument by Petitioner. The Board found that Petitioner’s unsupported, conclusory arguments, even when combined with citation to the KSR decision, was not enough to meet the reasonable likelihood of success standard to institute an inter partes review trial.

The ‘453 patent relates generally to a bowfishing bow and arrow and, of particular interest, is a ring component which acts like a slide.  A further key limitation of the ‘453 invention is a “slide stop” mounted on the end of the arrow.

Patent Challenger’s arguments essentially consisted of simply using KSR language to say that it “would have been a matter of merely using routine skill for a predictable result” to substitute disclosures of components of two supplementary references for components in the primary reference in order to describe the slide and slide stop claimed in the ‘453 patent.  No further support for combining the references was given by Petitioner, and the Board explained in detail the reasons why one of skill would have not have been motivated to combine the references.  See, e.g., Order at 10.

Accordingly, the Board was unpersuaded by Patent Challenger’s undercooked arguments, and denied the petition for inter partes review.

Rare Grant (in Part) of an IPR Motion to Exclude

iStock_000001758213XSmallMotions to Exclude Evidence have been one of the features of inter partes review practice that have, to date, had a less significant effect than expected. Very few motions have been granted, largely because the Board constructs its Final Written Decisions so as to not rely upon any disputed evidence. As such, motions are often denied as moot. Because the grant of such motions is so rare, we address such a grant that was issued in Corning Inc. v. DSM IP Assets B.V., (IPR2013-00043 and IPR2013-00044), wherein Petitioner moved to exclude evidence and portions of an expert’s declaration.

Petitioner argued in its motion that Patent Owner’s expert testimony relied on experiments that contain hearsay. Id. at 3. More specifically, Patent Owner’s expert relied on various documents generated in Patent Owner’s research laboratories that were created after the filing of the petition and report information relating to particular experiments performed by Patent Owner (such as preparation of samples, chromatography data, viscosity measurements, etc.). Id. 

In rebuttal, Patent Owner argued that the documents, while hearsay, are admissible based on the “business record” exception to the hearsay rule. Fed. R. Evid. 803(6). Id.

The Board found the records-at-issue were excluded because they did not fall within the “business rule” exception. Id. Applicable Federal Circuit and Board precedent declines to invoke a Rule 803(6) exception to a laboratory notebook documents and laboratory generated data of properties of compositions experimentally made in laboratories. Further, “conducting specific and unique scientific experimental work is not ‘a regularly conducted activity.'” Id. at 5.

All was not lost, however, for Patent Owner. Despite the fact that Patent Owner cannot have the exhibits admitted under Rule 803(6), its expert was allowed to rely on them in forming his opinion. Id. To that end, Rule 703 provides in part: “An expert may base an opinion on facts or data in the case that the expert has been made aware of or personally observed. If experts in the particular field would reasonably rely on those kinds of facts or data in forming an opinion on the subject, they need not be admissible for the opinion to be admitted.”

Because the documents-at-issue were not shown to be unreliable, the evidence of the experiments is excluded as hearsay, but the expert’s related testimony was admissible. Id. at 8.

Board Eschews Federal Circuit Claim Construction in Granting IPR Trial Requested by Google

iStock_000017334347XSmallIn concise decision, Google was able to get 9 challenged claims of a Whitserve patent into a trial for inter partes review in a case styled as Google, Inc. v. Whitserve LLC (IPR2013-00249), involving U.S. Pat. No. 6,981,007.

The ‘007 patent relates to a “system for backing up data stored on a central computer over the Internet to a local client computer.” In particular, the ‘007 patent relates to “outsourced, Internet-based data processing” and “safeguarding customer/client data.”

Of interest in the claim construction portion of the Board’s opinion is the construction of the term “internet-based data.” Petitioner pointed out to the Board that the term was construed by the Federal Circuit, but argued that such construction was too narrow and that, under the “broadest reasonable interpretation” standard, a more broad interpretation was appropriate in this proceeding.  Order at 6. More specifically, the Federal Circuit found the term to require “the ability to modify centrally stored data from across the Internet, rather than simply sending it across the Internet.”  Petitioner sought a finding that the term meant “data that is accessible, stored, modified, or processed via the Internet.”  Id.

The Board agreed that Petitioner’s construction was too broad, basing its conclusion in part on the fact that the specification disparages embodiments that that fall within that proposed claim scope.  As such, the Board found that the term should be construed to mean “data that is capable of being modified via the internet.”  Order at 8.

While the Board’s definition is different than that adopted by the Federal Circuit, and arguably broader because of the inclusion of the “capable of” language in that definition, the subsequent unpatentability analysis indicates that the Board would likely have found unpatentability no matter which definition was used.  For example, with regard to one of the prior art references, a bank website, Patent Owner argued that the download of data, to a local program, was not Internet-based data, because it was not modified at a central server.  The Board disagreed, finding that additional disclosure from that reference, including bill paying, necessarily would require a modification of data at a central server (such as ending balance of an account).  This finding would, seemingly, have read on both the Federal Circuit’s and Board’s construction of the term.  It is, nonetheless,  interesting to see the Board come to a different conclusion regarding the scope of a claim than that adopted by the Federal Circuit.

It is also interesting to note that the bank website was obtained via the Internet Archive.  The Board did not seem to have any issue in accepting this reference as prior art, despite its Internet-based nature.  The Internet Archive is, of course, an excellent resource for prior art and the Board’s acceptance of this evidence is helpful to future Petitioners.

In the end, the Board granted an IPR trial on all 9 claims at issue in the Petition.