On Monday, February 12, 2018, the Federal Circuit reversed the Patent Trial and Appeal Board’s (“the Board”) anticipation rejections and vacated and remanded the obviousness rejections against U.S. Patent Application No. 12/906,222 (“the ’222 application”), an application directed to a valve assembly for draining contaminants, condensation, and other fluids that adversely affect the efficiency and function of a pressurized system.

In the precedential decision, the Federal Circuit said the Board’s decisions must be made with sufficient detail so the Court can verify that the Board’s decision is supported by “substantial evidence.”  And more specifically, the Federal Circuit held that finding that a feature in a prior art reference is “similar” to a claimed limitation is not sufficient to support a legal conclusion of anticipation without further explanation.

In the present case, inventor Kenneth Andrew Hodges appealed from examination of the ’222 application, where the Board affirmed the Examiner’s rejection of all claims as anticipated and/or obvious.  The Examiner relied on two prior art references: (1) U.S. Patent No. 5,531,241 to Rasmussen (“Rasmussen”) and (2) U.S. Patent No. 3,262,464 to Frantz (“Frantz”).

The Federal Circuit held that the Board failed to provide substantial evidence to support a finding of anticipation.  The first rejection turned on whether an unlabeled valve containing an inlet seat is defined by Rasmussen’s valve body in Figure 7.  The Board argued that the positioning of Rasmussen’s valve is similar to the positioning of a second member recited in claim 1 of the ’222 application.  However, the Federal Circuit concluded that substantial evidence does not support a finding of anticipation, reasoning that the Board failed to support its assertion of similarity and failed to explain how the positioning of the unlabeled valve would be enabled without undue experimentation.

The Federal Circuit also noted that the Patent Office did not attempt to defend the Board’s findings in the second rejection over Frantz because it was based on an unreasonably broad interpretation of the term “signal,” which the Board construed as “an act, event, or the like that causes or incites some action.”  The Federal Circuit concluded that such a broad construction would “encompass virtually any mechanical component within the valve drain that moves in response to the flow of fluid through the drain.”

The Federal Circuit reversed both rejections based on anticipation because the Board failed to meet its burden to establish all of the claim limitations were disclosed.

On the question of obviousness, the Federal Circuit said that the Board must “explicate its factual conclusions enabling us to verify readily whether those conclusions are indeed supported by ‘substantial evidence’ contained within the record.”  The Federal Circuit found that the Board’s reasoning failed to meet this threshold.  First, in reaching its conclusion, the Board asserted that it would have been obvious to modify a valve depicted in Rasmussen’s Figure 7, but provided no reasoning for how such a modification would have been made.  Second, the Board alleged that it would have been obvious to include a sensor disclosed in Rasmussen as part of the valve body taught in Frantz for the purpose of generating a control signal, but again the Board did not explain how the sensor would operate according to the claims.  Therefore, the Federal Circuit vacated the obviousness rejection and remanded for further factual findings, stating the Board’s reasoning was insufficient and thus precluded meaningful review on appeal.

Judge Wallach dissented in part with respect to the anticipation rejection over Rasmussen, concluding that the majority went too far in reversing the Board’s decision.  Specifically, Judge Wallach contended that the rejection should be vacated and remanded, reasoning that in reversing a deficient agency decision, the majority improperly acts as the fact-finder.