IPR Reply Briefs: Drawing the Line Between “Responsive” and “New”

Ericsson Inc. v. Intellectual Ventures I LLC, Fed. Cir. (Aug. 27, 2018)

37 C.F.R. § 42.23(b) limits a petitioner’s inter partes review (“IPR”) reply papers to arguments raised by the patent owner in its opposition. Under this rule, a petitioner cannot assert new invalidity arguments, cite previously unidentified parts of a prior art reference, or introduce new evidence such as a new prior art reference. The line between this and what is merely responsive, however, can be blurry. The Federal Circuit’s recent decision in Ericsson sheds some light on this line.

By way of background, Ericsson petitioned for an IPR of an Intellectual Ventures patent relating to interleaving communication data packets. Specifically, the patent disclosed a way of rearranging data bits across multiple packets to protect against communication errors. The Board instituted review on certain independent claims that were limited to “encoding” generally but that were not limited to “interleaving” in particular. For those independent claims, the Board held that it would not require “encoding” to be limited to “interleaving,” and, thus, Ericsson had a reasonable likelihood of success given that the prior art disclosed encoding generally. The Board declined, however, to review those remaining claims that were expressly limited to “interleaving” (or “packets are interleaved together”). Critical to this decision was the Board’s holding that, under the broadest reasonable interpretation standard for claim construction, these latter terms “require interleaving portions from each of the packets in the packet block together, but not interleaving within a packet.” Opinion, at 7.  The board held that the prior art did not have interleaving under this construction.

In its subsequent Response papers, Intellectual Ventures argued that the Phillips standard for claim construction applied and that, under it, the claims subject to review should be construed to require interleaving packets together. In its Reply, Ericsson argued that a person of skill in the art would have found interleaving packets together obvious based on the prior art. In its Final Written Decision, the Board did an about-face from its decision to institute review, finding that under the Phillips standard the claims upon which it had instituted review required interleaving packets together. It then held that Ericsson failed to prove the challenged claims obvious. In so holding, the Board rejected Ericsson’s argument as beyond the proper scope of a reply under 37 C.F.R. § 42.23(b), for failure to raise its arguments in its Petition.

The Federal Circuit reversed. According to the Federal Circuit, the “Board’s error was parsing Ericsson’s arguments on reply with too fine of a filter.” Opinion, at 11.  Foremost, “[g]iven the acknowledgement in the patent that interleaving was known in the art, Ericsson was entitled to argue on reply that the distinction in the specific type of interleaving [in the prior art] and the [patent at issue] would have been insubstantial. . . .” Id. The court found this error “exacerbated by the fact that the significance of interleaving arose after the Petition was filed, in that the Board adopted a different construction of the ‘encoding’ terms after the Petition instituting inter partes review was granted.” Id. If anything, the Court held, Ericsson should have been given an opportunity to respond to the Board’s new, post-institution construction. See 5 U.S.C. § 554(b)(3), (c). “[T]he Board revisited its approach to the claims . . . and Ericsson likewise deserved an opportunity to do the same.” Opinion, at 12.

Ericsson highlights an issue that has bedeviled courts for as long as there have been waive rules: that is, when is a reply argument new and when is it merely responsive? Under Ericsson, that line is a little clearer in the IPR context, highlighting that where one “does not identify a previously unidentified piece of prior art to make a meaningfully distinct contention, but instead expands the same argument made in its Petition,” id., there is unlikely to be a failure to comply with 37 C.F.R. § 42.23(b).