On August 27, 2018, the Federal Circuit in Ericsson Inc. v. Intellectual Ventures I LLC, vacated the Patent Trial and Appeal Board’s (“PTAB”) final written decision in an inter partes review (IPR) and remanded for the PTAB to properly consider all portions of the petitioner’s reply. No. 17-1521, slip op. at 13 (Aug. 27, 2018).
In June 2015, Ericsson requested IPR of Intellectual Ventures’ U.S. Patent No. 5,602,831 (“the ’831 patent”), asserting obviousness. Id. at 6. The ’831 patent relates to increasing the reliability of wireless communication systems by reducing signal transmission errors that can occur with a moving wireless receiver. Id. at 2. The specification explains that data is transmitted to a receiver via packets and discloses several techniques that can minimize transmission errors including interleaving multiple data packets together. Id. at 3.
Although the ’831 patent expired before the filing of the petition, Ericsson construed claim terms under the broadest reasonable interpretation standard, instead of the generally narrower standard set forth in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc). Id. at 7. In its decision instituting IPR, the PTAB also applied the broadest reasonable interpretation standard and construed the independent claims with “encoding” limitations to not require interleaving. Id. After institution, Intellectual Ventures argued for the first time that the claim terms should be construed under the Phillips standard because the patent was expired. Id. at 8. Intellectual Ventures asserted that the “encoding” limitations required “interleaving packets together.” Id. Ericsson argued in its reply that interleaving was known in the art and that the asserted prior art references teach the “interleaving packets together” limitation. Id.
In its Final Written Decision, the PTAB adopted Intellectual Ventures’ proposed constructions for the “encoding” limitations under the Phillips standard. Id. at 8. The PTAB declined to consider portions of Ericsson’s reply arguments about the prior art teachings related to interleaving, finding it improperly raised a new theory of obviousness, which was not addressed in the petition or in response to arguments raised in the Patent Owner’s response. Id. at 9. The PTAB concluded the prior art did not teach the claimed interleaving and found that Ericsson had not shown the claims at issue to be unpatentable. Id.
Ericsson appealed and the Federal Circuit panel (Judges Reyna, Taranto, and Chen) vacated and remanded the PTAB’s decision, and found it was improper for the Board to not consider all of Ericsson’s arguments on reply. Id. at 2. Although the PTAB may strike arguments improperly raised for the first time in a reply under 37 C.F.R. 42.23(b), the Court concluded that the PTAB erred here by “parsing Ericsson’s arguments on reply with too fine of a filter.” Id. at 10-11.
First, the Court noted that the ’831 patent itself acknowledged that interleaving was known in the prior art, and Ericsson’s petition described how a skilled artisan would be familiar with the interleaving technique. Id. The Court determined that Ericsson’s arguments on reply expressly followed from arguments made in the petition. Id. at 11. Second, in the Court’s view, the PTAB’s error was “exacerbated” because the significance of the interleaving technique arose only after the PTAB adopted a different construction of the “encoding” limitations, which occurred after the institution decision. Id. Because the interleaving limitation was an essential basis for the PTAB’s decision that the claims were not unpatentable, Ericsson should have had an opportunity to respond. Id. at 11-12. Third, the Court noted this was a unique case in which both parties and the PTAB initially applied the wrong claim construction. Id. at 12. Because the PTAB revisited claim construction after institution because of this error, “Ericsson likewise deserved an opportunity to do the same.” Id.
Finally, the Court explained that their decision should not be viewed as changing the Court’s precedents supporting the Board’s discretion to reject arguments raised for the first time on reply. Id. The Court distinguished Ericsson’s reply from improper replies in previous Federal Circuit decisions. In Ariosa Diagnostics v. Verinata Health, Inc., 805 F.3d 1359 (Fed. Cir. 2015), the Federal Circuit upheld the PTAB’s decision to strike arguments in a reply relying on portions of prior art references previously not identified or discussed in the petition. Id. And in Intelligent Bio-Systems, Inc. v. Illumina Cambridge Ltd., 821 F.3d 1359, 1370 (Fed. Cir. 2016), the Federal Circuit upheld the PTAB’s rejection of a reply that constituted an “entirely new rationale” regarding why a skilled artisan would have motivation to combine prior art references. Id. at 12-13. In contrast to Ariosa and Intelligent Bio-Systems, Ericsson did not rely on previously unidentified prior art or an entirely new rationale, but instead, Ericsson’s arguments expanded on the same arguments and rationale previously argued in the petition. Id. at 13.