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The Federal Circuit Clarifies The Notice Requirements Of The Administrative Procedure Act for Motions To Amend

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Sterne, Kessler, Goldstein & Fox

In Nike, Inc. v. Adidas AG, No. 19-1262 (Fed. Cir. Apr. 9, 2020), the Federal Circuit offered important guidance to Patent Trial and Appeal Board (PTAB) litigants regarding how the notice requirements of the Administrative Procedure Act operate in the context of claim amendments during inter partes reviews (IPRs).

Adidas filed an IPR challenging the patentability of all claims of Nike’s ’011 patent. In response, Nike filed a motion to amend under 35 U.S.C. § 316(d), requesting cancellation of all claims and entry of substitute claims 47-50. Adidas opposed the motion, arguing that the substitute claims were unpatentable over a combination of three prior-art references. The Board agreed that the substitute claims would have been obvious and denied the motion to amend. On appeal, the Federal Circuit vacated the Board’s decision, holding that the Board had failed to engage in “critical fact-findings needed for [the] obviousness determination.”

On remand, the Board again found the proposed substitute claims unpatentable. In its analysis of claim 49, the Board relied on a prior-art reference called Spencer that, while in the record, had never been relied upon by Adidas in its obviousness arguments. Nike appealed a second time and argued that the Board violated the APA’s notice requirements by failing to give Nike notice that it would rely on Spencer as an invalidating reference.

The Federal Circuit agreed. It held that, although “the Board may sua sponte identify a patentability issue for a proposed substitute claim based on the prior art of record,” the Board “must provide notice of the issue and an opportunity for the parties to respond before issuing a final decision under 35 U.S.C. § 318(a)."

In other words, in addressing the patentability of substitute claims, the Board is not limited relying on “arguments and theories raised by the petitioner in its petition or opposition to the motion to amend”; the Board may rely on its own evaluation of the claims based on its consideration of the entire record. This only made sense, the panel explained, because any other rule would mean that the Board is unable to examine the patentability of proposed substitute claims at all in cases where the petitioner does not oppose a motion to amend. But, before relying on a theory of unpatentability not raised in the petition or an opposition to the motion to amend, the Board must explain the new theory to the patent owner and give the patent owner an opportunity to respond (through, for example, supplemental briefing or oral argument at the hearing). This notice, the Nike panel held, was compelled by § 554 of the APA and by the Federal Circuit’s own caselaw requiring the Board to “base its decision on arguments that were advanced by a party, and to which the opposing party was given a chance to respond.” In re Magnum Oil Tools Int’l, Ltd., 829 F.3d 1364, 1381 (Fed. Cir. 2016).

Applying these principles to Nike’s case, the panel held that the Board had violated these notice requirements by failing to advise Nike of its intent to rely on Spencer in its obviousness analysis. “Nike,” the panel explained, “had no notice that the Board might rely on Spencer to teach the limitations of substitute claim 49.” The court accordingly vacated the Board’s finding that claim 49 is unpatentable and remanded for further proceedings.

While the facts of Nike involved only a previously un-raised invalidating reference, the panel’s holding appears to apply to any new argument that the Board might rely on in determining the patentability of proposed amended or substitute claims. So, for example, if the Board were to believe that a key term should be construed differently from the constructions proffered by the petitioner and the patent owner, the Board would need to provide both parties with notice of the potential alternative construction and an opportunity to submit arguments regarding that construction. The scope of the notice requirements outlined in Nike will likely be further refined in future litigation.


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