Pennywise and Ground Foolish

In  Redline Detection, LLC v. Star Envirotech, Inc., [2015-1047] (December 31, 2015) the Federal Circuit affirmed the PTAB’s denial of the Redline’s motion to submit supplemental information (an expert declaration) and the PTAB’s determination that Redline failed to show claims 9 and 10 of U.S. Patent No. 6,526,808 were obvious.

Redline filed its petition for IPR on January 2013, which was instituted on July 1, 2013.  On July 30, 2013, Redline filed a Motion for Supplemental Disclosure of New Exhibits, requesting submission of four pieces of evidence. In August 2013, the PTAB denied Redline’s request to submit supplemental information and expunged the submitted evidence.

37 CFR §42.123(a) states:

Motion to submit supplemental information.  Once a trial has been instituted, a party may file a motion to submit supplemental information in accordance with the following requirements:

   (1) A request for the authorization to file a motion to submit supplemental information is made within one month of the date the trial is instituted.

(2) The supplemental information must be relevant to a claim for which the trial has been instituted.

The PTAB concluded Redline did not establish a sufficient basis for submitting new evidence and its “‘supplemental evidence’ is in essence something more than just supplemental evidence.  On Appeal Redline argued that §42.123(a) stated the only conditions on the admission of supplemental evidence, and that the PTAB had no discretion to reject its Expert declaration.  Before the Federal Circuit Redline explained that its failure to submit the expert was a cost savings strategy, so that the Expert did not waste time on grounds for which trial was not instituted.

The Federal Circuit found that the PTAB’s interpretation of its governing regulations was “not plainly erroneous”:

Its interpretation of § 42.123(a) is consistent with the regulation’s plain language and the USPTO’s intent in promulgating § 42.123. The plain language of § 42.123(a) does not exclude the application of other general governing regulations.

The Federal Circuit said that the guiding principle for the PTAB in making any determination is to “ensure efficient administration of the Office and the ability of the Office to complete IPR proceedings in a timely manner,” and that requiring admission of supplemental information so long as it was timely submitted and relevant to the IPR proceeding would cut against this mandate and alter the intended purpose of IPR proceedings.

Redline pointed to Pacific Market Int’l, LLC v. Ignite USA, LLC, IPR2014-00561, Paper 23 at 3 (P.T.A.B. Dec. 2, 2014)) as a case where the Board accepted an expert declaration as supplemental information.  However, the Federal Circuit reiterated that the timeliness and relevancy requirements of §42.123(a) are additional requirements that must be construed within the overarching context of the PTAB’s regulations governing IPR and general trial proceedings.  The Federal Circuit further noted that “the PTAB has discretion to grant or deny motions as it sees fit.” citing 37 C.F.R. § 42.5(a), (b).

The Federal Circuit further pointed out that in Pacific Market the PTAB cautioned that:

“[a]lthough a party may meet the [37 C.F.R. § 42.123] requirements . . . that does not, itself, guarantee that the motion will be granted.” 3 (emphasis added). This provision does not offer “a routine avenue for bolstering deficiencies in a petition raised by a patent owner in a Preliminary Response.  . . . Petitioner should not expect . . . a ‘wait-and-see’ opportunity to supplement a petition after initial comments or arguments have been laid out by a patent owner.” Id.

The Federal Circuit found that Redline’s characterization of Pacific Market was “inaccurate and misleading”. The PTAB expressly stated 37 C.F.R. § 42.123(a) is not a routine avenue to pursue, nor does the regulation require an automatic acceptance of, supplemental information. The Federal Circuit said “[t]his is the exact opposite of having an obligation to allow the supplementary information.” The Federal Circuit concluded “Redline fails to appreciate the stark difference between the short, supplemental expert report, which the PTAB reasonably permitted in Pacific Market International, and its de novo expert report submitted for the first time. Pacific Market International is inapposite.”

Expert declarations are an important part of a Petition for inter partes review, used about 90% of the time.  Waiting to submit an expert declaration until after institution to save costs is not an effective strategy.

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About Bryan Wheelock

Education J.D., Washington University in St. Louis B.S.E. in Mechanical Engineering, Duke University Bryan Wheelock's practice includes preparation and prosecution of patent and trademark applications and drafting of intellectual property agreements, including non-compete agreements. He has brought and defended lawsuits in federal and state courts relating to intellectual property and has participated in seizures of counterfeit and infringing goods. Bryan prepares and prosecutes U.S. and foreign patent applications for medical devices, mechanical and electromechanical devices, manufacturing machinery and processes, metal alloys and other materials. He also does a substantial amount of patentability searching, trademark availability searching and patent and trademark infringement studies. In addition to his practice at Harness Dickey, Bryan is an Adjunct Professor at Washington University School of Law and Washington University School of Engineering.