Axonics v Medtronic: Fed Circ addresses PTAB ‘errors’
In Axonics v Medtronic, the US Court of Appeals for the Federal Circuit held that the Patent Trial and Appeal Board (PTAB) erred by adopting a claim construction first presented in the patent owner’s response after the institution decision, and refusing to consider the petitioner’s reply arguments and evidence under the new claim construction.
The case involves Medtronic’s US patent numbers 8,457,758 and 8,738,148, which relate to the “transcutaneous (ie, through the skin) charging of implanted medical devices”.
Axonics petitioned for an inter partes review (IPR) of the two patents and appealed the PTAB’s decision finding that Axonics had failed to show the asserted claims were unpatentable.
In its final written decision, the PTAB adopted a new claim construction first presented by Medtronic in its patent owner response after the institution decision. The new construction proposed that each of the two “wherein” clauses in the independent claims required a separate input, which the Federal Circuit designated the “two-input” construction as opposed to the previous “one-input” construction.
Axonics had offered new arguments in reply to the new construction raised by Medtronic but the PTAB refused to consider the arguments. The PTAB reasoned that the “petitioner had an adequate opportunity to assess the ’758 patent and to understand that it disclosed support for two separate measurements, but failed to do so”.
Moreover, the PTAB stated that Axonics’ reply arguments essentially amounted to “an entirely new rationale based on a new combination of elements in the asserted references to show unpatentability based on what amounts to a new ground not set forth in the petition.” The PTAB concluded that it could not consider the new grounds not set forth in the petition.
Opportunity to respond
However, the Federal Circuit reversed the PTAB’s decision, concluding that when the Board adopts a new claim construction following institution, an IPR petitioner must have adequate notice and an opportunity to respond under the new construction.
It added that: “In particular, the petitioner must be afforded a reasonable opportunity in reply to present argument and evidence,...at least where it relies on the same embodiments for each invalidity ground as were relied on in the petition.”
The court noted that to hold otherwise “would create opportunities for ‘sandbagging’ by the patent owner in order to create an estoppel,” particularly since there was “no rule . . . requiring a petition to describe all possible or reasonable claim constructions and to present invalidity theories under those constructions”.
This opinion highlights a common and growing strategy in inter partes review practices where a patent owner forces the petitioner to lock in arguments and then provides a strategically new response at a subsequent juncture.
In Axonics, the patent owner submitted a new claim construction proposal in a post-institution response but the PTAB did not permit the petitioner to respond. The Federal Circuit reversed on appeal, largely focusing on the Administrative Procedure Act (APA) and concluding that it was only fair that a petitioner be allowed to submit new responsive arguments and briefing.
The Federal Circuit rejected the PTAB’s decision to refuse to consider Axonics’ reply arguments as improper new arguments, and vacated the case for presumably further development of the record on the claim construction issue.
No new prior art
Interestingly, the opinion places emphasis on a quote from the oral argument transcript where counsel for patent owner Medtronic conceded that the PTAB approach risked ‘sandbagging’ by the patentee.
Presumably, the concern for sandbagging flowed from the fact that under the PTAB’s conclusion, a patent owner could propose a new claim construction after institution without risk of drawing a full response from the petitioner. This would presumably provide an unfair advantage to the patent owner, thus framing the “sandbagging” question from the Federal Circuit panel during argument.
Nevertheless, the Federal Circuit in Axonics also appears to have recognised some rational limitations that should be placed on a petitioner’s reply—likely seeking to even the playing field. The Axonics court clarified that a petitioner may not raise brand new prior art references in reply to a patent owner’s response, a rational ruling to keep things moving on schedule.
Interestingly, the briefing of the parties raised the issue of whether a petitioner could raise new arguments from previously submitted prior art to counter a new claim construction raised by a patent holder but the panel refused to address the question, leaving it “for another day” likely because that precise scenario did not exist in Axonics.
It will be interesting to see which direction PTAB practitioners go with this issue. While it is clear that entirely new prior art references cannot be provided in reply (reverse sandbagging), the issue of whether new portions or different embodiments from previously submitted references can be relied upon post-institution remains open.
Ongoing cases will likely continue to shape the precise boundaries between fair response and improper new arguments in this contentious field, and practitioners will undoubtedly look for creative ways to advocate positions in a manner that provides advantages.
The lesson from Axonics appears to be that overreaching can come back to bite you—so perhaps more nuanced strategies will be implemented as the boundaries continue to be tested.
Blair Jacobs is a principal at McKool Smith. He can be contacted at bjacobs@mckoolsmith.com
