Monday, August 28, 2017

Appellant Ultratec prevails at CAFC. PTAB decision vacated.

The outcome

Because the Board failed to consider material
evidence and failed to explain its decisions to exclude the
evidence, we vacate and remand.

This is another case wherein the Board and a District Court reached
different outcomes:

Ultratec and CaptionCall are currently litigating in
both district court and before the Board. Ultratec sued
CaptionCall and its parent company for infringement in
the Western District of Wisconsin. The case proceeded to
trial, where the jury found the patents valid and infringed
and awarded damages of $44.1 million. Five months after
the verdict, the Board issued final written decisions
holding all challenged claims of Ultratec’s patents were
either anticipated or would have been obvious. The
district court subsequently stayed all post-judgment
proceedings pending final resolution of the IPRs.

An issue:

Ultratec sought to introduce the trial testimony into the
IPRs, alleging that Mr. Occhiogrosso’s trial testimony
conflicted with written declarations he made in the IPRs
Ultratec moved to supplement the record with the inconsistent
Occhiogrosso trial testimony. Because Ultratec
had not first requested authorization to file the motion
with the inconsistent testimony, the Board expunged the
motion from the record. PTO Br. at 10 n.8.

The CAFC noted:

A number of problems with the Board’s procedures
contributed to its errors in this case. First, the Board
lacked the information necessary to make a reasoned
decision. According to the Board, the movant cannot
submit for consideration the evidence it seeks to admit
into the record, and its briefing “must not include a discussion
of the contents or types of the particular documents
sought to be entered.” PTO Br. at 10 n.8. In this
case, the Board denied a request to admit evidence without
ever seeing the evidence it was denying
; it never
reviewed Mr. Occhiogrosso’s testimony because Ultratec
was not allowed to submit that evidence with its request
to file a motion to supplement the record. The Board’s
only exposure to the disputed testimony was the parties’
competing characterizations of it during the conference
call for which there exists no record.

The CAFC criticized the Board:

Second, the Board’s procedures allowed it to make significant
evidentiary decisions without providing an explanation
or a reasoned basis for its decisions. See Motor
Vehicle Mfs. Ass’n of U.S. v. State Farm Mut. Auto. Ins.
Co., 463 U.S. 29, 43 (1983) (“[T]he agency must examine
the relevant data and articulate a satisfactory explanation
for its action including a rational connection between
the facts found and the choice made.” (internal quotation
marks omitted)).

Third, the Board’s procedures impede meaningful appellate
review of the agency decision-making. “[W]e will
uphold a decision of less than ideal clarity if the agency’s
path may reasonably be discerned, but we may not supply
a reasoned basis for the agency’s action that the agency
itself has not given.” Rovalma, S.A. v. Bohler-Edelstahl
GmbH & Co., 856 F.3d 1019, 1024 (Fed. Cir. 2017) (internal
quotation marks omitted). “For judicial review to be
meaningfully achieved within these strictures, the agency
tribunal must present a full and reasoned explanation of
its decision.” In re Lee, 277 F.3d 1338, 1342 (Fed. Cir.
2002). The agency does not have unfettered discretion in
these matters, and we cannot affirm agency decisionmaking
where the agency fails to provide a reasoned basis
for its decision. See SEC v. Chenery Corp., 318 U.S. 80, 94
(1943) (“[T]he orderly functioning of the process of review
requires that the grounds upon which the administrative
agency acted b[e] clearly disclosed and adequately sustained.”);
SEC v. Chenery Corp., 332 U.S. 194, 196 (1947)
(“That rule is to the effect that a reviewing court, in
dealing with a determination or judgment which an
administrative agency alone is authorized to make, must
judge the propriety of such action solely by the grounds
invoked by the agency. If those grounds are inadequate
or improper, the court is powerless to affirm the administrative
action by substituting what it considers to be a
more adequate or proper basis.”). There is no Board order
explaining why it denied Ultratec’s request to file a mo
tion to supplement the record. Nor is there any Board
explanation capable of review from the conference call.5
We are also prohibited from viewing Mr. Occhiogrosso’s
testimony because it is not part of the record. In district
court litigation, a party dissatisfied with a ruling excluding
evidence is allowed to make an offer of proof to preserve
error. Fed. R. Evid. 103. Parties in IPRs are not
given similar protections.6 In this case, the PTO forbade
even a “discussion of the contents or types of the particular
documents sought to be entered.” PTO Br. at 10 n.8.
And it refused to permit the record to include Ultratec’s
email requesting authorization to file a motion to supplement
the record. Excluding such discussion from the
record contributes to the unreviewability of the Board’s

Footnotes 5 and 6 are of interest:

Footnote 5:

The PTO indicated that the Board typically utilizes
conference calls to address issues such as requests for
extensions or requests to extend page limits. Oral Arg. at
54:45, 1:02:00. We do not address whether the Board can
decide these types of minor procedural issues during
conference calls. We hold that when the Board makes a
substantive evidentiary ruling, it is required to explain its

Footnote 6:

During oral argument, CaptionCall argued that
although Mr. Occhiogrosso’s trial testimony was not part
of the IPR record, it is publicly available as part of the
district court record, and therefore we could take judicial
notice of the testimony and determine in the first instance
whether it was consistent with his IPR declarations. Oral
Arg. at 40:30–43:25. Our court does not have authority,
as CaptionCall urges, to review evidence not considered
by the agency and make factual determinations about the
substance of that evidence.

Also of interest:

The Board
reasoned that “Patent Owner argues that the record is
incomplete because we did not issue an order denying its
motion. Req. Reh’g 13–14. Patent Owner’s [sic]
mischaracterizes the events in this proceeding because no
such motion was denied; we denied Patent Owner’s
request for authorization to submit evidence and, as such,
no order denying its motion was necessary.” Id. If the
APA requires the Board to explain a denial of a motion
then it likewise requires the Board to explain the denial
of a request to make a motion. To the extent the Board
views the two-step process it created to file motions as
insulating it from its APA obligations, this is incorrect.

The final thoughts:

The Board abused its discretion when it refused to
admit and consider Mr. Occhiogrosso’s trial testimony and
when it refused to explain its decision. Because the Board
relied on Mr. Occhiogrosso’s credibility in every IPR, we
vacate every decision. See In re Van Os, 844 F.3d 1359,
1362 (Fed. Cir. 2017) (“[W]hen the Board’s action is
potentially lawful but insufficiently or inappropriately
explained, we have consistently vacated and remanded for
further proceedings.” (internal quotation marks omitted)).
On remand, the Board shall admit and consider Mr.
Occhiogrosso’s trial testimony. If the Board finds he gave
inconsistent testimony, the Board shall consider the
impact on the specific patents at issue in the trial testimony
as well as on his credibility as a whole.


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