In Perfect Surgical Techniques, Inc. v. Olympus America, Inc., Olympus Medical Systems Corp., IPR2014-00233 (Fed. Cir. Nov. 15, 2016) (Judges Moore, Schall, and O’Malley), the Federal Circuit vacated and remanded the Board’s decision invalidating certain claims of U.S. Patent 6,030,384 (“’384 patent”).  The Board’s decision was based on prior art under pre-AIA §102(a).  This statute states that “[a] person shall be entitled to a patent unless (a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for a patent.”  Another pre-AIA statute, §102(g)(2) “allows a patent owner to antedate a §102(a) reference by proving earlier conception and reasonable diligence in reducing the invention to practice.”  Perfect Surgical, slip op. at 4.  In relevant part, that statute reads:

A person shall be entitled to a patent unless … (2) before such person’s invention thereof, the invention was made in this country by another inventor who had not abandoned, suppressed, or concealed it. In determining priority of invention under this subsection, there shall be considered not only the respective dates of conception and reduction to practice of the invention, but also the reasonable diligence of one who was first to conceive and last to reduce to practice, from a time prior to conception by the other.

The “time prior to conception” in this case was February 9, 1998 (one day before the reference’s publication) to May 1, 1998 (the date the invention was reduced to practice).  Dr. Nezhat, the inventor, hired James Heslin to draft and file his application.  Dr. Nezhat received a draft on January 28, 1998, and the application was filed on May 1, 1998.  Dr. Nezhat testified he was reasonably diligent during the three month period but also was working 80 hours per week performing four to six surgeries each week.  He submitted comments to a first draft on March 2, participated in two conferences with his lawyer, and submitted comments to a second draft on April 13.  A declaration from Mr. Heslin, letters, and billing records corroborated Dr. Nezhat’s testimony.  The Board “accepted Dr. Nezhat’s testimony and corroborating evidence but determined that [the patent owner] was not ‘sufficiently specific as to facts and dates’ of Dr. Nezhat’s diligence during” certain time periods and thus “concluded that PST failed to demonstrate Dr. Nezhat’s ‘continuous exercise of reasonable diligence for the entire critical period.’”  Slip op. at 6.

In Perfect Surgical, the court held that the Board’s requirement that Perfect Surgical Techniques, Inc. (“PST”) establish continuous exercise of reasonable diligence during the entire critical period was “too exacting and in conflict with [the court’s] precedent.”  Perfect Surgical, slip op. at 7.  According to the court:

A patent owner need not prove the inventor continuously exercised reasonable diligence throughout the critical period; it must show there was reasonably continuous diligence. See, e.g., Tyco Healthcare Grp. v. Ethicon Endo-Surgery, Inc., 774 F.3d 968, 975 (Fed. Cir. 2014); Monsanto, 261 F.3d at 1370. Under this standard, an inventor is not required to work on reducing his invention to practice every day during the critical period. See Monsanto, 261 F.3d at 1369. And periods of inactivity within the critical period do not automatically vanquish a patent owner’s claim of reasonable diligence. For example, in Monsanto, we held that substantial evidence supported the jury’s presumed finding that an inventor was reasonably diligent where there was no corroborating evidence of any activity for a series of months. Id. at 1370. We explained that, notwithstanding the absence of daily notebook entries and the resulting gaps during the critical period, “the work involved in the experiments was continuous in nature” and therefore the reduction to practice was “reasonably continuous.” Id. In Brown v. Barbacid, we held that the patent owner’s evidence of diligence during a 31-day critical period was “sufficient to show substantially continuing activity” despite the lack of activity during six single-day gaps. 436 F.3d at 1380–83.

Our holdings in these cases are consistent with the purpose of the diligence inquiry. In determining whether an invention antedates another, the point of the diligence analysis is not to scour the patent owner’s corroborating evidence in search of intervals of time where the patent owner has failed to substantiate some sort of activity. It is to assure that, in light of the evidence as a whole, “the invention was not abandoned or unreasonably delayed.” Id. at 1379. That an inventor overseeing a study did not record its progress on a daily, weekly, or even monthly basis does not mean the inventor necessarily abandoned his invention or unreasonably delayed it. The same logic applies to the preparation of a patent application: the absence of evidence that an inventor and his attorney revised or discussed the application on a daily basis is alone insufficient to determine that the invention was abandoned or unreasonably delayed. One must weigh the collection of evidence over the entire critical period to make such a determination.  [Slip op. at 7-8.]

The Board distinguished In re Mulder, 716 F.2d 1542, 1542-46 (Fed. Cir. 1983), in which a 2-day period of inactivity was fatal to the patent owner.  Id. at 8.  According to the court, in Mulder there was a “complete lack of evidence” during that period.  Id.

The court vacated and remanded Perfect Surgical so the Board could “properly weigh PST’s evidence under a rule of reason” analysis under which “PST was not required to corroborate every day the application was worked on, every surgery Dr. Nezhat performed, or specify precisely what work was done.”  Id. at 9.  According to the court, “[s]uch corroboration is particularly unnecessary when, as here, the record indisputably shows that activities must have occurred within the relevant time period.”  Id. at 9-10.  On remand, the court instructs the Board to focus on the evidence as a whole rather than on “gaps of inactivity.”  Id. at 11-13.

The court also determined that the Board’s claim construction of “perforated” was not supported by substantial evidence in that the Board turned to extrinsic evidence –dictionary definitions – rather than relying on the specification, where “perforated” was distinguished from “passages.”  Thus, defining “perforated” to include “perforations or passages” was not supported by the intrinsic evidence.  Id. at 14-15.

Judge Schall concurred in part and dissented in part.  According to Judge Schall, the Board’s finding regarding reasonable diligence was supported by substantial evidence.

Cases such as this one are heavily fact-dependent and not often reversed by the Federal Circuit.  Further, because a number of Board APJs have interference experience, the stringent requirements when two inventors are competing for patent rights often spill over to cases such as this one in which a patent owner is attempting to antedate a reference.  Thus, it should be helpful to patent owners to be able to cite cases such as this one and focus on the record as a whole under a rule of reason analysis  when attempting to antedate a reference.