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The PTAB Mistakenly Excluded Exhibit Showing Conception

The PTAB Mistakenly Excluded Exhibit Showing Conception REG Synthetic Fuels, LLC, v. Neste Oil Oyj, IPR2013-00578 (Fed. Cir. Nov. 8, 2016)

In REG Synthetic Fuels (“REG”), the PTAB found anticipated all challenged claims 1-5 and 8 of U.S. Patent 8,231,804.  These claims covered even-carbon-number paraffins and methods of making them.  Claims 1, 3, 4, and 8 were found anticipated based on a U.S. patent to Craig, and claims 1-3, 5, and 8 were found anticipated based on a U.S. patent application to Dindi.  Slip op. at 2.  The Federal Circuit affirmed the PTAB’s determinations based on Craig but reversed those based on Dindi.  The reason for its reversal was that the PTAB had incorrectly excluded an exhibit relevant to conception prior to Dindi’s filing date.  Slip op. at 12-19.  It then remanded the case for the PTAB to make further findings regarding diligence and reduction to practice – findings the PTAB had not made in its original decision.  Slip op. at 19.

The court determined that three exhibits were sufficient to establish conception – two that were in evidence and one, Exhibit 2061, that had been incorrectly excluded based on hearsay.  Id.  Exhibit 2061 was a set of email exchanges between the inventor and Microtek discussing testing of a sample supplied by the inventor in which the inventor said he was having difficulty recovering a 90+%  and that “80% purity … is the best [they] got.”  Thus, the emails supplied the inventor’s knowledge that certain percentages should be summed up, and, if summed, would meet one of claim 2’s limitations, i.e., “at least 80 wt%.”

Neste argued that the emails were hearsay.  In response, REG argued that they were not because they were not being offered to prove the truth of the matter asserted but rather to show that the inventor recognized the usefulness of the claimed paraffins.  Id. at 17.  While the Board admitted the exhibit to show the inventor contacted Microtek, it refused to consider the content of the exhibit but rather treated it as hearsay.

On appeal, the Federal Circuit concluded:

We find that the Board erred to the extent that it excluded the content of Exhibit 2061 based on hearsay because REG offered Exhibit 2061 for the non-hearsay purpose to show that Mr. Abhari thought he had achieved 80 wt% purity C18 product.  The act of writing and sending the email is, by itself, probative evidence on whether Mr. Abhari recognized—at the time that he had written the email—that the sum of the weight percentages of even-carbon-number paraffins in his compositions was at least 80 wt% and communicated this to a third party.  In Knorr v. Pearson, 671 F.2d 1368, 1372–73 (C.C.P.A. 1982), the U.S. Court of Customs and Patent Appeals found that a statement was not hearsay if “the communication (as opposed to the truth) ha[d] legal significance.”  Knorr involved a telephone call, in which two co-inventors,

Buergin and Pearson, discussed an invention, and which was overheard by a third party, Rutkowski.  Id. at 1370.  The court held that Rutkowski’s testimony on what he heard Buergin say to Pearson was not hearsay because the communication of the idea had legal significance as the basis for the conception of the invention.  Id. at 1373–74.  By contrast, Rutkowski’s testimony on “Buergin’s statements to Rutkowski regarding what Pearson said” was hearsay.  Id. at 1373.  [Slip op. at 17.]

In this case, the email communication from Mr. Abhari to Microtek was “legally significant because it shows that Mr. Abhari communicated the conception of his invention to a third party, Microtek.”  Id. at 18.  On this basis, the court reversed the Board’s findings on conception.  Id. at 19.  It then remanded to the PTAB to make findings relating to diligence and reduction to practice.  Id.

This is one of two cases to be decided by the Federal Circuit in the past few weeks relating to antedating a reference.  See also Perfect Surgical Techniques, Inc. v. Olympus America, Inc., Olympus Medical Systems Corp., IPR2014-00233 (Fed. Cir. Nov. 15, 2016) in which the PTAB incorrectly applied a too stringent standard to prove reasonable diligence.  Slip op. at 7.  Given these two cases, patent owners should consider whether they have sufficient evidence to challenge allegations that a §102(a) or §102(e) reference is, in fact, prior art.