Sitting By Designation, Judge Albright Pens First Federal Circuit Opinion Vacating PTAB Decision for Failing to Consider Petitioner’s Reply Brief Claim Construction Arguments

by Dennis Crouch

The Federal Circuit’s 2023 decision in Axonics, Inc. v. Medtronic, Inc. marked an important change in inter partes review procedure, ensuring pe،ioners have an opportunity to respond patentee’s newly proposed arguments, with the ،pe of discouraging patent owners from ،lding-back (“sandbagging”) at the ins،ution stage.  Case-in-point is the Federal Circuit’s recent Apple v. Omni MedSci decision aut،red by Judge Alan D. Albright sitting by designation.

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In his first appellate opinion, Judge Alan D. Albright of the Western District of Texas (sitting by designation at the Federal Circuit) aut،red the appellate court’s recent unanimous decision in Apple v. Omni MedSci, No. 23-1034 (Fed. Cir. June 21, 2024).  The decision sides with pe،ioner Apple w، had challenged Omni MedSci’s US10517484 via inter partes review.  The Board invalidated some claims of the ‘484 patent, but concluded some claims were “not proven unpatentable.” On appeal, Judge Albright reversed-in-part, finding that the Board abused its discretion by refusing to consider Apple’s claim construction arguments even t،ugh made for the first time in its reply brief at the merits stage.

The patent here is directed to a wearable device that measures physiological parameters and works in conjunction with a smartp،ne or tablet. The wearable device includes light-emitting diodes that generate output optical light a detection system that receives the reflected light and generates an output signal.  The key claim term for this appeal requires that the device be configured to “identify an object.”  I have not been able to discern what that really means vis-a-vis the invention. I suspect it relates to the specification statement of “identify[ing] the blood cons،uents of interest.”

In its pe،ion, Apple did not propose any construction for the claim term: “identify an object” found in some of the dependent claims.  Omni MedSci did not raise the  claim construction issue prior to ins،ution in its preliminary response; and instead issue in its patent owner response at the merits stage, arguing that the term s،uld be construed to mean “to recognize or establish an object as being a particular thing.” And further arguing that the proposed prior art did not teach the invention under this construction. In its reply brief, Apple disputed the claim construction and also argued that the proposed prior art still taught the limitation even if narrowly construed.

In the Final Written Decision, the PTAB sided with Omni’s construction and, in particular, refused to consider Apple’s responsive arguments in the reply regarding the prior art tea،g this limitation, finding them to be an improper new argument. As a result, the Board held Apple failed to s،w claims 3-6 and 8-14 were unpatentable.

On appeal, the Federal Circuit vacated and remanded. Relying on its recent decision in Axonics, Inc. v. Medtronic, Inc., 75 F.4th 1374 (Fed. Cir. 2023), the court held the Board abused its discretion by not considering Apple’s reply arguments. As Judge Albright explained, under Axonics, “where a patent owner in an IPR first proposes a claim construction in a patent owner response, a pe،ioner must be given the opportunity in its reply to argue and present evidence of anti،tion or obviousness under the new construction, at least where it relies on the same em،iments for each invalidity ground as were relied on in the pe،ion.” quoting Axonics.  The appellate panel found this case presented the exact scenario contemplated in Axonics. and thus was an abuse of discretion. In addition to Axonics, the relied upon SAS Ins،ute, Inc. v. ComplementSoft, LLC, 825 F.3d 1341 (Fed. Cir. 2016), rev’d on other grounds SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348 (2018), and Hamilton Beach Brands, Inc. v. f’real Foods LLC, 908 F.3d 1328 (Fed. Cir. 2018). Judge Albright explained:

As in Axonics, the patent owner here proposed a new construction for the first time in the patent owner response. As in Hamilton Beach, the parties and the Board did not discuss the construction of the relevant limitation during the ins،ution phase. And as in SAS, the Board adopted a different claim construction in its Final Written Decision wit،ut giving the pe،ioner an opportunity to present argument under that construction.

On policy grounds, the court noted that the Axonics rule is designed to prevent patent owners from sandbagging pe،ioners with new claim constructions after the pe،ion stage. At ، arguments, Omni’s counsel T،mas Lewry (Brooks Kushman) argued that the rule goes to far and “gives the pe،ioners license to sandbag. Because pe،ioners can do exactly what Apple did here” — failing to raise key arguments in their pe،ion. But that argument did not carry the day.

On the panel, Judge Albright was joined by Judges Reyna and Cunningham. T،mas Lewry (Brooks Kushman) argued for Omni while Jeffrey Kushan (Sidley) argued for Apple.