Regulations & Guidelines - Satisfying the Duty of Disclosure in AIA Trials

In ClearOne, Inc. v. Shure Acquisition Holdings, Inc., Appeal 2021-1517, Slip Op. at 2 (Fed. Cir. June 1, 2022), the Federal Circuit affirmed a Patent Trial and Appeal Board order that refused to authorize a sanctions motion the petitioner requested after the Board issued its final written decision granting (in relevant part) the patent owner’s motion to substitute claims. As basis for the motion the petitioner alleged the patent owner violated its duty to disclose prior art.  According to the Board, the prior art was cumulative and authorization of the motion would have been inefficient to “this inter partes review.” Board Order, Case IPR2019-00683, Paper 95, at 6 (PTAB Nov. 2, 2020) (citing 37 CFR § 42.1(b), which requires the Board “secure the just, speedy, and inexpensive resolution of every proceeding”).

ClearOne successfully petitioned the Board to institute a trial to review whether the Patent Office should have issued Shure a patent claiming a microphone assembly array disposed in a drop-ceiling. During the trial, Shure successfully moved the Board to grant-in-part its motion to substitute claims. Board Final Written Decision, Case IPR2019-00683, Paper 91, at 94–115 (PTAB Aug. 14, 2020). ClearOne then requested rehearing and requested authorization to file a sanctions motion against Shure, “arguing Shure violated its duty to disclose material prior art.” CAFC Slip Op. at 4.

A few weeks before the Board issued its final written decision, Shure identified this prior art to the Board in a different AIA trial—where Shure was challenging a ClearOne patent—but not in this case. To ClearOne, that prior art renders obvious Shure’s substitute claims because it discloses features the Board concluded were missing in other prior art it considered in granting Shure’s motion to substitute claims. The Board disagreed and eventually denied ClearOne’s rehearing request. While the rehearing request was pending, the Board held a telephonic hearing to learn the basis of the requested sanctions motion. In its written order, referencing the hearing transcript, the Board exercised its discretion to deny the request. The Board reasoned that granting the request would give ClearOne “a second bite at the apple to meet its burden of demonstrating [Shure’s] substitute claims … are unpatentable.” Board Order at 5. The Board also found the purportedly “material prior art” was cumulative to record prior art. Id. at. 5–8. It’s not clear which mattered more to the Board. To the public, a second bite at the apple may be appropriate where the prior art is not cumulative. After all, should the public be burdened with a patent claim surviving just because the Patent Office became aware of material, non-cumulative prior art late in a trial?

In the ensuing appeal, the Federal Circuit concluded the Board did not abuse its discretion. CAFC Slip Op. at 9. The court acknowledged ClearOne’s oral-argument concession that its positions supporting a sanctions motion would be identical to arguments it raised in its denied rehearing request. The court also credited two of the Board’s fact findings. According to the court, the Board found that authorizing the motion would result in an inefficient proceeding. The Board also found that Shure did not intend to breach its duty to disclose, because the “material prior art” was cumulative. The court thus concluded the Board did not abuse its discretion. The court also concluded that the Board’s telephonic hearing offered ClearOne sufficient notice and opportunity to be heard, such that there was no due process violation. Id. at 10.

This case illustrates that nothing more may be needed to avoid a conclusion the Board abused its discretion than a telephonic hearing and a reasoned written order dispensing of the issue that prompted the hearing. Accordingly, AIA trial participants should prepare carefully for that hearing and the Board should issue a reasoned written order. Further, this case illustrates that a patent owner should exercise due care in defending the patentability of its proposed substitute claims while simultaneously attacking its opponent’s claims in a different proceeding. Prior art disclosed in one proceeding may need to be disclosed to the Board in the other, if only to avoid an accusation that the patent owner violated its duty of disclosure in pursuing substitute claims. Lastly, the Board’s Order made clear its finding that Shure lacked an intent to violate its duty of disclosure. That seems important if only because the Patent Office’s rules—37 CFR §§ 1.56 and 42.11(a)—require patent applicants and patent owners to comply with the disclosure duties they owe the Office. The Board is often in a sufficiently good position to assess this compliance and it therefore should do so, as it did here and whenever practical.