PTAB Must Give Parties A Chance To Respond To New Grounds
In Nike, Inc. v. Adidas, AG, the Federal Circuit held in the context of an Inter Partes Review proceeding that “[i]f the Board sua sponte identifies a patentability issue for a proposed substitute claim … it must provide notice of the issue and an opportunity for the parties to respond before issuing a final decision.” While the court outlined possible ways the Patent Trial and Appeal Board (PTAB) could provide such an opportunity, it did not address the constraints of 35 USC § 316(a)(11), which requires the PTAB to issue a final determination “not later than 1 year” after institution, with an additional 6 months available “for good cause.”
The IPR Proceedings
This decision is the latest entry in the battle between Nike and Adidas over Nike’s U.S. Patent No. 7,347,011, relating to knitted upper pieces of footwear. After Adidas petitioned for Inter Partes Review of the ’011 patent, Nike sought to substitute new claims 47-50. The PTAB found those claims unpatentable over three prior art references in a decision issued April 28, 2014 that was appealed to the Federal Circuit. That appeal resulted in a remand for the PTAB to evaluate the substitute claims under the “then-informative decision Idle Free” and to examine Nike’s “long-felt need evidence.”
On remand, the PTAB again found claims 47-50 unpatentable as obvious, but in so doing newly cited the “Spencer” reference, which, while in the record, had not been discussed by either party for “the disclosure on which the Board relied.”
Nike appealed that decision on the merits and under the Administrative Procedures Act (APA).
The Federal Circuit Decision
The Federal Circuit Decision was authored by Judge Stoll and joined by Judges Lourie and Chen.
The Federal Circuit characterized its decision as refining its holding in Aqua Products:
This case presents part of the question posed but left undecided in Aqua Products. We hold today that the Board may sua sponte identify a patentability issue for a proposed substitute claim based on the prior art of record. If the Board sua sponte identifies a patentability issue for a proposed substitute claim, however, it must provide notice of the issue and an opportunity for the parties to respond before issuing a final decision under 35 U.S.C. § 318(a).
Although the parties had included Spencer in the record, the Federal Circuit found the PTAB’s reliance on Spencer to be a “new theory [presented] for the first time in its decision on remand.” The court noted in particular:
Although it is undisputed that Spencer is part of the IPR record, Adidas did not rely on Spencer in its asserted ground for unpatentability of substitute claim 49 in either its opposition to Nike’s motion to amend or its briefing on remand. And although the parties’ experts and Nike’s counsel cited certain disclosures in Spencer for other reasons, those disclosures were entirely different from the disclosures on which the Board relied in finding that the formation of apertures by skipping stitches was well-known.
The Federal Circuit identified several cases – including Magnum Oil, SAS, and IPR Licensing – for “principles regarding fair notice and an opportunity to respond,” and extended them “to apply in the context of a motion to amend.”
The Federal Circuit suggested several ways the PTAB could have provided adequate notice, such as by informing the parties of its intention to rely on Spencer and requesting supplemental briefing prior to issuing its decision, or, if an oral hearing had been held, the PTAB “could have requested that the parties be prepared to discuss Spencer in connection with substitute claim 49 at the hearing.” According to the court, “[e]ither of these actions would satisfy the APA’s notice requirements, but neither occurred in this case.”
Thus, the court once again vacated the PTAB decision (in part) and remanded for the PTAB to assess substitute claim 49 after giving Nike and Adidas an opportunity to respond.
When Should The PTAB Raise New Grounds?
In a recent decision designated as precedential, the PTAB refined the Aqua Products/Nike holdings further, and addressed when the PTAB should raise new grounds of unpatentability of proposed substitute claims. Specifically, in Hunting Titan, Inc. v. DynaEnergetics Europe GmbH, No. IPR2018-00600 (July 6, 2020), the PTAB characterized Nike as making clear that the PTAB “may advance a ground of unpatentability … against substitute claims proposed in a motion to amend,” but leaving open “the circumstances in which the Board should advance such a ground of unpatentability.” The PTAB took a conservative view of its role, and held that it should do so “only under rare circumstances should the need arise,” i.e., in “situations in which the adversarial process fails to provide the Board with potential arguments of [un]patentability with respect to the proposed substitute claims.”
Did the new rejection in Nike meet this high standard?
Milad Emamian, Summer Associate, contributed to the creation of this article.