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.

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.

37 for 42: Previously-Considered Art Lives Again in Grant of Inter Partes Review Trial

iStock_000014464933XSmallThe Board has again failed to toss aside argument and art previously considered by the Patent Office (this time in an ex parte reexamination) and, instead, instituted an inter partes review trial on all six challenged claims in a case styled Nexans, Inc. v. Belden Technologies, Inc. (IPR2013-00057), involving US Pat. No. 6,074,503. Four of 9 proposed grounds for challenge were granted in the Board’s decision.

The invention of the ‘503 patent involves a method of producing a cable. The method includes a step of passing a plurality of transmission media such as wires and a core through a first die which aligns the plurality of transmission media with surface features of the core and prevents twisting motion of the core. The method includes another step of bunching the aligned plurality of transmission media and core using a second die which forces each of the plurality of transmission media into contact with the surface features of the core. The bunched plurality of transmission media and core are twisted close to the cable, and the closed cable is jacketed.

Patent Owner first argued that because three of the references contained in the petition were already considered by the examiner in a prior ex parte reexamination which resulted in confirmation of the claims, the Board should deny those portions of the petition. The Board cited 35 U.S.C. § 325(d) and stated the statute gives the Director the authority not to institute review on the basis that the same or substantially the same prior art or arguments were presented previously to the USPTO, but does not require so. Because the Patent Challenger’s alleged unpatentability grounds have some merit, the Board declined to deny the petition under 35 U.S.C. § 325(d). Order at 8. This continues a trend of the Board’s willingness to consider references even if they were previously considered during original prosecution or a reexamination.

The Board then turned to its claim construction analysis and interpreted the terms “core” and “prevents twisting motion of the core.” Basing its definition of “core” strictly on the specification of the ‘503 patent, the Board found that the term “core” does not have to have a bulky or extensive cross-section and there is no reason to exclude structure in the form of thin tape from forming or constituting the core. The Board also determined that “prevents twisting motion of the core” was met by the prevention of twisting in the area where the core passes through the first die once the desired position of the core for alignment during production is established. Thus, twisting of the core need not be prevented (1) at all places along the axial length of the core, or (2) before the desired alignment of the core has been determined and put in place and cable production has commenced.

The Board then considered several grounds asserting anticipation of the challenged claims.  To that end, Patent Challenger argued that a prior art reference disclosed a branching board of a first die which inherently prevented twisting of the core. The Board rejected the argument, stating that because the disclosure does not show an axial view of the branding board in the direction of cable feed, it could not be known what manner the core passes through the branching board. To establish inherent disclosure, the limitation at issue necessarily must be present in the corresponding element described in the prior art reference. Inherency may not be established by probabilities or possibilities. The mere fact that a certain thing may result from a given set of circumstances is not sufficient to establish inherency. Order at 26. The Board found that even if the branching board, in some circumstances, prevented twisting of the core, the possibility is inadequate to establish inherent disclosure of twist prevention.

In the obviousness challenge grounds analysis, the Board determined that inserting an additional die upstream of a wire-splitting board of the assembly of a prior art reference involved merely a predictable use of a prior art element disclosed in other references.  Further, Board held that such a combination need not be predicated on any specific teachings; that is, the Board “need not seek out precise teachings directed to the specific subject matter of the challenged claim, for a court can take account of the inferences and creative steps that a person of ordinary skill in the art would employ.” Order at 33.

Patent Owner sought exclusion of one of the Patent Challenger’s exhibits on the ground that it constituted inadmissible hearsay. The exhibit is a collection of selected trial transcripts from related litigation, including the testimony of an expert witness. The Board stated that exclusion of evidence at this stage of the proceeding is premature. Order at 41. In any event, the exhibit appeared to have been relied on by the Patent Challenger only in connection with arguments regarding a reference that was not applied as a basis for any granted challenge grounds.

In the end, the Board instituted trial on all challenged claims including, notably, some challenge grounds that used a reference that was previously considered during an ex parte reexamination.