In re NuVasive Brings the Administrative Procedure Act to IPRs

45686244_sNuVasive owns US 8,187,334, which claims certain spinal implants. Medtronic filed a petition challenging various claims of the ‘334 patent as obviousness over US 2002/0165550 (Frey) in view of US 5,860,973 (Michelson). Medtronic also filed a second petition challenging other claims over a promotional brochure for the Synthes Vertebral Spacer-PR (SVS-PR) in view of Michelson. Medtronic specifically mentioned Michelson figure 18 in its argument for obviousness over Frey, but not in its argument about obviousness over SVS-PR. The PTAB instituted two separate IPR proceedings on these two petitions. The proceedings were not consolidated, but there was a single oral hearing held for both proceedings.

In its patent owner response, NuVasive argued that its claimed implant was long and narrow, but that the cited art taught long and wide implants, for larger surface area to stabilize. Medtronic responded by noting that Michelson’s figure 18 shows a long and narrow implant. NuVasive attempted to have Medtronic’s response stricken as a new ground of rejection not present in the petition, or alternatively to be allowed to file a surreply. The PTAB denied both requests, and cut NuVasive off when it tried to make arguments on this point during the oral hearing.

Both IPRs ended with a determination that all challenged claims but one were unpatentable. Both final decisions relied on Michelson figure 18 to establish prima facie obviousness.

On appeal, the Federal Circuit (CAFC) affirmed the first IPR (in which figure 18 was cited in the petition). However, the CAFC vacated the second IPR, and remanded for the PTAB to give NuVasive a chance to respond to Medtronic’s argument about figure 18. The CAFC concluded that this result was compelled by the Administrative Procedures Act (APA), which requires (5 U.S.C. § 706) that a reviewing court “set aside agency action… not in accordance with law [or]… without observance of procedure required by law.” This case constitutes only the second time (after Dell Inc. v. Acceleron LLC, 818 F.3d 1293 (Fed. Cir. 2016)) that an IPR appellant has successfully challenged a PTAB defeat on APA grounds.

There are a few points to pause and notice about this outcome. First, the argument here is not about introducing a new reference into the mix, but rather about whether NuVasive was sufficiently on notice about one figure in Michelson. Second, there is no question that NuVasive actually knew about Michelson figure 18 at the time that it was writing its response to the argument about SVS-PR, because figure 18 was cited in the Frey petition. In other words, the APA failure here lay in not calling out figure 18 in the other of the pair of IPR petitions. It requires a very rigorous application of the APA to find reversible error in this argument about figure 18.

Other appellants have made APA arguments after a PTAB loss, and the NuVasive court was careful to distinguish from the cases in which APA arguments failed. In particular, the NuVasive court distinguished Genzyme Therapeutic Prods. v. Biomarin Pharm., 825 F.3d 1360 (Fed. Cir. 2016) and Belden Inc. v. Berk-Tek LLC, 805 F.3d 1064 (Fed. Cir. 2015). While the PTAB decisions in those cases had cited references or portions of references not specifically mentioned in the petition, the “new” material was merely cited as background, but not relied upon for part of the prima facie rejection.

There are a few take-home lessons to learn from this. First, if you are challenging a patent, be careful about citing to any portion of a reference in the challenger’s reply that was not cited in the petition. Similarly, if you are defending a patent, pay careful attention to what is cited in the challenger’s reply, compared to the original petition, and do not be shy about insisting on a right to make additional replies to anything that is cited for the first time in the reply. Finally—and more broadly—this case shows that the APA can provide a successful basis for an appeal from the PTAB.

PTAB’s Decision to Ignore New Arguments in Petitioner Reply Affirmed by CAFC

cafc1On Monday, the Federal Circuit affirmed a judgment by the PTAB that the challenged claims in Illumina’s US 7,566,537 are not unpatentable. The Federal Circuit affirmed in a way that imposes an important constraint on the PTAB going forward. Intelligent Biosystems (IB) had challenged several claims that cover a method of labeling DNA. IB proposed a three-way combination of art in its petition, and offered an explanation as to why one of ordinary skill would expect success from combining two of these references. In its patent-owner reply, Illumina countered IB’s reasonable-expectation of success argument. In IB’s reply, IB introduced a new (as in, not present in the original petition) basis on which the ordinary artisan could have expected success. The PTAB cited its own regulations (37 C.F.R. § 42.23(b)), which provide that a “reply may only respond to arguments raised in the corresponding opposition or patent owner response.” Because the PTAB considered that IB’s reply went beyond this, the PTAB refused to consider IB’s reply at all—even the portions of the reply that did not run afoul of any regulation.

On appeal, IB urged the Federal Circuit to order the PTAB to consider the reply, and to reverse the holding of no unpatentability. Instead, Judge O’Malley (writing for a unanimous panel that also includes Judges Wallach and Hughes) wrote that

Unlike district court litigation—where parties have greater freedom to revise and develop their arguments over time and in response to newly discovered material—the expedited nature of IPRs bring with it an obligation for petitioners to make their case in their petition to institute. While the Board’s requirements are strict ones, they are requirements of which petitioners are aware when they seek to institute an IPR.

This is the first occasion that the Federal Circuit has had to consider 37 C.F.R. § 42.23(b), and the affirmance has important implications for whether a patent challenger should choose IPR or district court litigation. Going forward, would-be petitioners need to ask themselves whether the arguments that they hope to make to the board are likely to change and evolve during back-and-forth with the patentee. If so, one eye should be kept firmly on a potential district court battle. On the other hand, if the scope of the argument looks fairly clear and set, the expedited nature of IPR litigation might be preferable.