In Ericsson Inc. v. Intellectual Ventures I LLC, the Court of Appeals for the Federal Circuit vacated and remanded a final written decision of the Patent Trial and Appeal Board (“the Board”) because the Board erred in not considering portions of Ericsson’s Reply regarding new claim constructions adopted by the Board after institution. — F.3d —-, slip op. (Fed. Cir. Aug. 27, 2018).

Ericsson petitioned for IPR of a patent owned by Intellectual Ventures directed to increasing the reliability of wireless communications by minimizing the effects of burst errors and nulls through a coding technique known as interleaving. Id. 2-3.  Although the patent expired prior to the filing of Ericsson’s petition for IPR, Ericsson proposed constructions for various terms under the broadest reasonable interpretation standard rather than the Phillips standard. Id. at 7.

In its decision to institute IPR, the Board construed certain terms under the broadest reasonable interpretation standard even though neither party requested construction of those specific terms. Id.  After institution, Intellectual Ventures argued for the first time in its Patent Owner Response that the claims must be construed under the Phillips standard and proposed unopposed constructions under the Phillips standard. Id. at 8.  After adopting the new constructions, the Board revisited whether the combination of the prior art taught interleaving as disclosed in the patent. Id.  In its Reply, Ericsson discussed how interleaving was known in the prior art and argued that the differences under the narrower Phillips construction would have been “insubstantial at best” to a person of ordinary skill, given that interleaving was known in the art. Id. at 8-9.

In its Final Written Decision, the Board relied entirely on Intellectual Ventures’ construction and found that Ericsson had not proven that the challenged claims were obvious in light of the prior art. Id. at 8.  In doing so, the Board rejected the portions of Ericsson’s Reply that addressed the new claim constructions, holding that it “was a new theory beyond the scope of a proper reply as defined in 37 C.F.R. §42.23(b).” Id. at 9.  The Board further stated that “the reply is not an opportunity for Petitioner to identify, for the first time, new and different prior art elements that are alleged to satisfy the claim requirements,” and declined to consider portions of Ericsson’s Reply. Id.

The Federal Circuit held that, given the admissions within the patent itself, the arguments raised in the petition, and the Board’s own evolving interpretation of the claims, the Board’s decision not to consider portions of Ericsson’s Reply was erroneous. Id. at 10-11.  Since the patent acknowledged that interleaving was known in the art, the court stated that Ericsson was entitled to argue in its reply that the distinction in the specific type of interleaving between the prior art and the patent would have been insubstantial to a person of ordinary skill in the art. Id. at 11. The court noted that the “error was exacerbated by the fact that the significance of interleaving arose after the Petition was filed” because the Board adopted a different claim construction after institution was granted. Id.  Because the new construction regarding “interleaving” formed an essential basis for the Board’s decision, the court held that Ericsson should have been given an opportunity to respond. Id. (citing 5 U.S.C. § 554(b)(3), (c)).

This case shows that the Board must consider arguments in a petitioner’s reply that expand upon the same arguments made in the petition and that are necessary to address claim construction issues arising after the institution decision.