PTAB Panel Excludes Entire Reply Brief for Raising Untimely Arguments

A PTAB panel excluded a Petitioner’s entire Reply Brief because it exceeded the proper scope of a reply.

The AIA trial rules prohibit a Petitioner from raising new issues in a Reply Brief. 37 C.F.R. § 42.23(b) (“A reply may only respond to arguments raised in the corresponding opposition, patent owner preliminary response, or patent owner response.”). In explaining this rule, the PTO’s Trial Practice Guide states that “a reply that raises a new issue or belatedly presents evidence will not be considered and may be returned.” The Trial Practice Guide further cautions parties that “[t]he Board will not attempt to sort proper from improper portions of the reply.”

Despite this warning in the Trial Practice Guide, the Board generally does not refuse to consider an entire paper on the basis of Rule 42.23(b). Recently, however, the Board in Dell Inc. v. Realtime Data LLC, IPR2016-00972 (PTAB May 15, 2018) (Paper 71) took the drastic step of excluding a Reply Brief in its entirety because it raised a plethora of new, untimely issues.

In DellIPR was instituted on five grounds. Each of the grounds asserted that it would have been obvious to combine Franaszek and Osterlund (and various other references) to arrive at the claims of the challenged patent. Franaszek described systems and methods for compressing and decompressing data blocks using optimal encoders, while Osterlund was directed to an optical disk data storage system.

In the Petition, the Petitioner argued that it would have been obvious to modify Franaszek’s teaching of a data compression system with Osterlund’s teaching of wide data buses, positioning in the data stream, and direct memory access. According to the Petition, this would result in a system with faster data storage and retrieval rates. Furthermore, the Petitioner argued that because the relevant art is predictable and compression algorithms and transmission times may be modeled, simulated, and easily tested, a person of ordinary skill in the art would have had a reasonable expectation of success in combining the teachings of Franaszek and Osterlund to achieve the claimed invention.

However, during cross-examination, the Petitioner’s expert provided testimony that contradicted the obviousness conclusions made in the Petition. For example, the expert testified that a person having ordinary skill in the art would not incorporate Osterlund’s compression algorithm into Franaszek, or incorporate Franaszek’s compression algorithms into Osterlund. Moreover, the expert testified that there was an “unlimited” number of possible permutations faced by a person of ordinary skill in combining these references and that it was “impossible” for him to address “all the permutations of those possibilities.”

Because the Petitioner’s expert acknowledged that there was an unlimited number of possible permutations, and that it was impossible to address them all, the Board concluded that the Petitioner failed to establish its burden of proof in showing that one of ordinary skill in the art would have had a reasonable expectation of success in combining Franaszek with Osterlund. And because all instituted grounds relied on a combination of Franaszek and Osterlund, the Board concluded that the Petition failed to establish that the challenged claims were unpatentable.

Although this case is notable simply for the fact that the Board rejected an obviousness argument for failure to establish a reasonable likelihood of success in a field of technology that many consider to be “predictable,” this case is also noteworthy because the Board excluded Petitioner’s Reply Brief in its entirety.

After the Petitioner filed its Reply Brief, the Patent Owner filed a “List of Improper Reply Arguments” identifying portions of the Reply Brief that allegedly raised new, untimely arguments as to why it would have been obvious to combine the asserted references. In response, the Petitioner filed a list asserting why each of those arguments was responsive to an issue raised in the Patent Owner Response.

The Board examined the parties’ lists and concluded that the Petitioner’s Reply Brief contained at least nine portions that raised new theories of obviousness that were not presented in the Petition. Because so many portions of the brief exceeded the proper scope of a reply, the Board declined to “demarcat[e] Petitioner’s Reply into proper and improper portions because such a task would involve mining through Petitioner’s Reply and deciphering whether improper segments spanning a significant amount of pages … bleed into other parts of the Reply.” Relying upon Intelligent Bio-Systems, Inc. v. Illumina Cambridge Ltd., 821 F.3d 1359, 1370 (Fed. Cir. 2016), the Board excluded the Reply Brief in its entirety.

Administrative Patent Judge Crumbley filed a concurring opinion in which he agreed with the Board’s obviousness conclusions but stated that he would have not excluded the Reply Brief. He found the arguments in the Reply Brief to be insufficient to prove obviousness, even when they were considered.

In response to Federal Circuit decisions underscoring the principle that parties in an IPR are entitled to due process under the Administrative Procedure Act, the Board appears to have been taking a more active role in declining to consider untimely arguments raised in Reply Briefs. Petitioners should heed the warning in Dell and ensure that their Petitions raise all invalidity arguments they intend to rely upon throughout the proceeding.