Appeals Court Faults Patent Office for Panel’s Added Judges

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By Tony Dutra

Two members of a federal appeals court Aug. 22 criticized the Patent and Trademark Office for boosting the number of administrative patent judges hearing a challenge in order to get the ruling the office wants ( Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co. , 2017 BL 293274, Fed. Cir., No. 2016-2321, 8/22/17 ).

A panel of the PTO’s Patent Trial and Appeal Board had decided, 2-1, to refuse to add a late validity challenge to a trial against Nidec Motor Corp.'s U.S. Patent No. 7,626,349 on an HVAC system. However, the PTAB’s chief judge granted a rehearing on allowing the petition and added two judges to the panel, a move that shifted the vote to 3-2 against Nidec.

The PTO argued before the U.S. Court of Appeals for the Federal Circuit that the practice of sometimes expanding a panel is intended to “secure and maintain uniformity of the Board’s decisions.” But while the court ultimately agreed with the five-judge panel’s invalidity ruling, the concurring opinion criticized adding new judges to the panel as a way of achieving uniformity.

The case highlights the court’s continuing concerns with the PTAB’s implementation of the America Invents Act of 2011. The underlying question—the basis for the PTAB chief judge’s decision to overturn the original panel—was whether Zhongshan Broad Ocean Motor Co. could fix a problem with its initial challenge to the patent after a one-year time bar for filing new challenges had passed. The concurring Federal Circuit judges said no, and the PTAB shouldn’t have added judges to allow it.

The two concurring judges could have made their view the opinion of a panel majority, but the court published it as a concurrence, which has no binding effect on other Federal Circuit panels or on the PTAB. The full Federal Circuit is set to rule within the next few months on the broader issue of parties’ ability to appeal issues that arise in PTAB decisions to institute trial in Wi-Fi One, LLC v. Broadcom Corp . The Supreme Court, in Cuozzo Speed Techs., LLC v. Lee , stated that PTAB “shenanigans” at the trial-institution stage are appealable, and the 12-member Federal Circuit is considering the boundaries of that term.

Is PTAB Reading AIA Correctly?

Broad Ocean filed a first petition against the patent in July 2014. Trial was instituted on the obviousness challenge but not on a separate challenge for anticipation, or lack of novelty. Broad Ocean filed a second petition in February 2015 to address the weakness in its anticipation challenge. The question was whether that was too late.

The AIA bars filing a petition more than one year after litigation in federal court begins, under 35 U.S.C. § 315(b). Nidec had sued Broad Ocean, its competitor in the electromagnetic motor market, in the U.S. District Court for the Eastern District of Missouri in September 2013, so the second petition was five months past the time bar. But the AIA allows an exception to the time bar if a new petition seeks joinder with an existing petition, per 35 U.S.C. §315(c). Broad Ocean sought joinder with its second petition.

The original three-judge PTAB panel said no; the five-judge panel with the two new judges said yes. The Federal Circuit’s concurring opinion—penned by Judge Timothy B. Dyk and joined by Judge Evan J. Wallach—said that Section 315(c) only meant to allow parties to join, not to allow parties to add new issues.

Obviousness Judgment Affirmed

The court agreed with the board that the ‘349 patent was an obvious improvement over a General Electric Co. HVAC invention disclosed in a patent application 15 years earlier. The court rejected Nidec’s arguments that the board’s decision was faulty.

First, Nidec argued that the improvement—which was disclosed in a doctoral thesis on motor controllers generally—was not directed to HVAC systems. But the board’s invalidity ruling was independent of whether Nidec’s invention was targeted only to HVAC systems, the Federal Circuit said. Seeing no problem with that PTAB judgment, the court said there was no need to further interpret “HVAC system” as it appeared in the patent’s claims.

Second, the court disagreed with Nidec that the GE patent’s thermostat was “too primitive” to be considered the same as Nidec’s system controller. The GE thermostat sent only on-off signals, while Nidec’s system sends “control signals"—e.g., torque, speed, and airflow—to indicate a desired function. But the PTAB is allowed to give claims their “broadest reasonable interpretation,” the court said, and an on-off signal “amounts to a control signal” under the BRI standard.

Judge Jimmie V. Reyna, the third judge on the Federal Circuit panel, joined the opinion of the court on obviousness but did not join the concurring opinion.

Scott R. Brown of Hovey Williams LLP, Overland Park, Kan., who represented Nidec, told Bloomberg BNA that Nidec was considering its options to respond to the decision. Locke Lord LLP, New York, represented Broad Ocean and didn’t immediately respond to Bloomberg BNA’s request for comment. PTO Solicitor Nathan K. Kelley argued the position of the office, as intervenor. A PTO spokesman said the office had no comment.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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