Does the Federal Circuit Treat APA Challenges Differently if Brought by Petitioner vs. Patent Owner? Yes.

Last month’s newsletter discussed Alacritech, Inc. v. Intel Corp, where patent owner Alacritech appealed a final written decision (FWD) of the Patent Trial and Appeal Board (“Board”) for inter partes review (IPR) IPR2017-01410 alleging Administrative Procedure Act (APA) violations—and won. This month we compare that decision to FanDuel, Inc. v. Interactive Games LLC, where petitioner FanDuel appealed a FWD of IPR2017-01491 alleging similar APA violations—and lost.

In both cases, appellant essentially argued the Board raised and answered its own issues in the FWD without addressing issues raised by either appellee (FanDuel) or both parties (Alacritech). Yet the Court rendered opposite decisions. So we ask—are these outcomes due to different burdens and requirements on petitioners and patent owners? No in Alacritech and yes in FanDuel. We discussed Alacritech last month. This month we focus on FanDuel and petitioner appeals.

In FanDuel, the Board found all challenged claims unpatentable except claim 6.[i] FanDuel’s appeal alleged that the Board violated the APA because the Board’s obviousness findings for claim 6 were not based on issues that the patent owner raised during the proceeding. FanDuel also argued that, because the Board based its decision on Board-raised issues, FanDuel was entitled to notice and an opportunity to respond before the Board could issue a FWD.

The Federal Circuit disagreed with FanDuel and affirmed the Board. Judge Hughes held that under the APA “the petitioner shall have the burden of proving a proposition of unpatentability.”[ii] The Federal Circuit further determined that “the Board complied with the APA and its obviousness findings are supported by substantial evidence.”[iii]

First, the Court held that different standards of proof are required to institute an IPR versus to invalidate a patent. The different standards allow the Board to adopt an initial view versus a final decision without notifying the parties. To institute an IPR, the Board needs only a reasonable likelihood that a petitioner will succeed. But to invalidate a patent, the petitioner has the burden of proving a proposition of unpatentability by a preponderance of evidence.[iv]

Second, the Court held that “because the IPR petitioner is the party seeking an order from the Board, § 556(d) [of the APA] requires the petitioner to bear the burden of persuasion.”[v] FanDuel asserted in its petition that claim 6 was obvious in view of a three-reference combination. Patent owner did not have to submit any response to a petition before or after institution.[vi] So to require patent owner to develop a post-institution record, e.g., on whether claim 6 is rendered obvious, “effectively and impermissibly” shifts the burden of persuasion to the patent owner to defend a claim’s patentability. [vii]

Finally, because petitioners and patent owners have different burdens of persuasion to bear, the APA was not violated by the Board confirming the claim even under its own theories.

In contrast, as discussed in last month’s article, the Court in Alacritech held that under the APA “[the Federal Circuit’s] review of a patentability determination is confined to ‘the grounds upon which the Board actually relied.’”[viii] And that under the APA “the agency [has an]… obligation to develop an evidentiary basis for its findings.”[ix] The Board’s FWD was vacated and remanded because it did not “articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.”[x]

Summary: In an IPR, the burden of persuasion is borne by the petitioner whose petition defines the scope of litigation from institution to final decision. The patent owner’s responses are optional and do not limit the issues the Board can address in the FWD when finding a claim valid. Yet the Board is always obligated to articulate a satisfactory explanation when invalidating a claim.

[i] FanDuel, Inc. v. Interactive Games LLC, No. IPR2017-01491, 2018 WL 6112966 (P.T.A.B. Nov. 20, 2018).

[ii] 35 U.S.C. § 316(e).

[iii] FanDuel, Inc. v. Interactive Games LLC., 966 F.3d 1334 (Fed. Cir. 2020).

[iv] See In re Magnum Oil Tools Int’l, Ltd., 829 F.3d 1364, 1376 (Fed. Cir. 2016) (“[T]he decision to institute and the final written decision are ‘two very different analyses,’ and each applies a ‘qualitatively different standard.’” (quoting TriVascular, Inc. v. Samuels, 812 F.3d 1056, 1068 (Fed. Cir. 2016))).

[v] See Magnum Oil, 829 F.3d at 1375 (stating that the petitioner bears the burden to prove un-patentable the challenged claims); see also Worlds Inc. v. Bungie, Inc., 903 F.3d 1237, 1242 (Fed. Cir. 2018.)

[vi] 37 C.F.R. §§ 42.107(a).

[vii] See Magnum Oil, 829 F.3d at 1376 (“[I]t is inappropriate to shift the burden to the patentee after institution to prove that the patent is patentable.”); Dynamic Drinkware, LLC v. Nat’l Graphics, Inc., 800 F.3d 1375, 1378 (Fed. Cir. 2015) (“In an inter partes review, the burden of persuasion is on the petitioner to prove ‘unpatentability by a preponderance of the evi-dence,’ 35 U.S.C. § 316(e), and that burden never shifts to the patentee.”).

[viii] Alacritech, Inc. v. Intel Corp., 966 F.3d 1367, 1372 (Fed. Cir. 2020) (citing TQ Delta v. Cisco Sys., Inc., 942 F.3d 1352, 1358 (Fed. Cir. 2019) (quoting Power Integrations, Inc. v. Lee, 797 F.3d 1318, 1326 (Fed. Cir. 2015)).

[ix] Id. (quoting Lee, 277 F.3d at 1344).

[x] Id. at 1373 (citing In re NuVasive, Inc., 842 F.3d 1376, 1382 (quoting Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)).

This article appeared in the September 2020 issue of PTAB Strategies and Insights. To view our past issues, as well as other firm newsletters, please click here.