The Federal Circuit in Icon Health & Fitness, Inc. v. Strava, Inc., Appeal No. 2016-1475 (Feb. 27, 2017), made several interesting points and revealed a disagreement among four of its judges about the proper disposition when the PTO fails to carry its burden in “examination appeals.” More specifically, the court explained when an appellant might successfully raise an issue it did not raise in the lower tribunal. It also addressed the burden on the PTO to defend its rejections at the Federal Circuit. Finally, the opinion reflects a disagreement about whether the court should give the PTO a second bite at the apple when it fails to carry that burden. 

Regarding a party’s raising new issues on appeal, usually a fruitless exercise, the court observed that it has discretion to forgive any implicit waiver. It described “[s]ome of the relevant considerations” as follows:

whether (1) “the issue involves a pure question of law and refusal to consider it would result in a miscarriage of justice”; (2) “the proper resolution is beyond any doubt”; (3) “the appellant had no opportunity to raise the objection” below; (4) “the issue presents significant questions of general impact or of great public concern”; or (5) “the interest of substantial justice is at stake.”

Slip op. at 5 (quoting Automated Merch. Sys., Inc. v. Lee, 782 F.3d 1376, 1379 (Fed. Cir. 2015)). The court added as considerations “whether the issue has been fully briefed, a party will be prejudiced by consideration of the issue, or no purpose will be served by remand.” Id. (citing Automated Merch. at 1380).

In the case before it—an appeal by the patent owner in an inter partes reexamination—the appellant had failed to argue before the PTAB that the examiner had improperly relied on the legal conclusions in its expert’s declarations. Although the court acknowledged that several considerations weighed in favor of a waiver, it nevertheless considered the appellant’s new arguments because “the issue potentially could affect the weight afforded to a large number of expert declarations,” and further “[b]ecause the issue has been fully briefed, the record is complete, there will be no prejudice to any party, and no purpose is served by remand.” Id. at 5-6 (citing Automated Merch., 782 F.3d at 1379-80).

Thus, when appealing to the Federal Circuit, one can attempt to raise new issues by asserting the existence of some of the circumstances described above. But the existence of those circumstances will not guarantee success. By far the better practice is to raise and preserve all issues in the lower tribunal that one might want to argue on appeal. On the other hand, the party opposing new issues on appeal should argue waiver, to avoid waiving the waiver, and should nevertheless also address the new issues on the merits rather than risk that the court will hold that the appellant waived the new issues because of the lack of full briefing.

Regarding the PTO’s burden to defend a rejection at the Federal Circuit, although affirming the rejection of some of the patent claims on appeal, the court sharply criticized the PTAB’s affirmance of the examiner’s rejection of other claims. The court approved reliance on an expert’s declarations containing legal conclusions of obviousness “so long as other aspects of the declarations contain statements related to factual findings.” Slip op. at 7. But the court disapproved the PTAB’s failure to address some of the appellant’s arguments except by Rincorporating the examiner’s comments that incorporated the appellees’ arguments. The court commented that “[a]rgument is not evidence” and “[t]his multi-layered incorporation by reference does not satisfy the substantial evidence standard of review.” Id. at 10-11. The court stressed that the PTAB must make findings that have a sufficient evidentiary basis and must adequately explain how those findings support its legal conclusion. Id. at 11-12 (citing In re NuVasive, 842 F.3d 1376, 1382 (Fed. Cir. 2016)).

Thus, with respect to a number of claims, the court declined to affirm “[b]ecause the PTAB failed to make the requisite factual findings or provide the attendant explanation.” Id. at 15. As long as the PTAB or the examiner made findings based on evidence and provided a reasonable explanation for the rejection based on those findings, the court deferred to the PTAB in accordance with Dickinson v. Zurko, 527 U.S. 150, 152 (1999). The court appears to be carefully scrutinizing the PTAB’s procedure and otherwise according it great deference.

Finally, the panel majority vacated and remanded, rather than reversed, the PTAB’s rulings that were not supported by evidence-based findings and adequate explanations. Slip op. at 12 (citing In re Van Os, 842 F.3d 1359, 1362 (Fed. Cir. 2017)). In that case, the panel majority, consisting of Circuit Judges Moore and Wallach, vacated and remanded a PTAB affirmance of an examiner’s rejection in ex parte examination of an application filed by inventors at Apple Inc. As in Icon Health, the court declined to affirm because “neither the Board nor the examiner provided any reasoning or analysis to support finding a motivation” to combine the teachings of the references. 844 F.3d at 1361-62. The third panel member, Circuit Judge Newman, however, would not have given the PTO a second bite at Apple “because remand is not the appropriate remedy in examination appeals in which the PTO has not carried its burden of establishing unpatentability.” Judge Newman reasoned that under 35 U.S.C. § 102(a), when the PTO has not carried its burden, Apple is “entitled to a patent.” Id. at 1362. Judge Newman distinguished “examination appeals” from post-grant procedures under the AIA because “[i]n examination appeals, the PTO and the PTAB are not neutral arbiters; they bear the burden of establishing unpatentability. . . . If the PTO fails to carry that burden, by statute the applicant is ‘entitled to a patent.’” Id.[1]

In Icon Health, the panel majority consisted of Circuit Judges Reyna and Wallach, and this time Circuit Judge O’Malley dissented in part, adopting Judge Newman’s opinion in In re Van Os and applying Judge Newman’s reasoning regarding “examination appeals” to inter partes reexamination. Consequently, two judges—Newman and O’Malley—would simply reverse erroneous PTO rejections in “examination appeals” with instructions to allow the appealed claims, while two other judges—Moore and Wallach—would at least in some cases remand to the PTAB for further proceedings, such as “when the Board’s action is ‘potentially lawful but insufficiently or inappropriately explained.’” In re Van Os, 844 F.3d at 1362 (quoting In re Lee, 277 F.3d 1338, 1346 (Fed. Cir. 2015)). It remains to be seen which view will ultimately prevail.

[1] Presumably, if the petitioner in an IPR settles with the patent owner and drops out of the proceeding and the PTO nevertheless continues with the proceeding, in that case the PTO would no longer be a neutral arbiter; if it failed to then carry the burden of establishing unpatentability, the patent owner would be “entitled to a patent.” See Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131, 2144 (2016):

As explained above, challengers need not remain in the proceeding; rather, the Patent Office may continue to conduct an inter partes review even after the adverse party has settled.  § 317(a). Moreover, as is the case here, the Patent Office may intervene in a later judicial proceeding to defend its decision—even if the private challengers drop out. And the burden of proof in inter partes review is different than in the district courts:  In inter partes review, the challenger (or the Patent Office) must establish unpatentability “by a preponderance of the evidence” . . . .