Can a petitioner’s reply in an IPR proceeding present new arguments and evidence responding to a proposed claim construction first raised in the patent owner’s response? In Axonics, Inc. v. Medtronic, Inc., Nos. 2022-1532, 2022-1533 (Fed. Cir. Aug. 7, 2023), the Federal Circuit answered in the affirmative, vacating the PTAB’s final written decision of no unpatentability and remanding for further proceedings.
PTAB Disregards New Arguments and Evidence First Raised in Reply
Axonics filed two IPR petitions challenging as anticipated or obvious certain claims of Medtronic’s U.S. Patent Nos. 8,457,758 and 8,738,148, both of which are directed to transcutaneous charging of implanted medical devices. Axionics’ petitions did not propose express constructions of any claim term; instead, Axonics implicitly adopted a construction of two “wherein” clauses (the “one-input” construction). Medtronic’s preliminary responses agreed that no express construction of any term was necessary and argued that the petitions failed to show that the asserted prior art disclosed the two wherein clauses under the one-input construction. The Board found that Axionics had shown a reasonable likelihood of prevailing and instituted both petitions.
For the first time in its patent owner responses, Medtronic urged a different construction of the two wherein clauses (the “two-input” construction). Axonics’ replies argued that the asserted prior art satisfied the two wherein clauses even under Medtronic’s new two-input construction and submitted a supplemental expert declaration in support. The Board’s final written decisions adopted Medtronic’s two-input construction, and then refused to consider Axonics’ reply arguments and evidence that replied to Medtronic’s new construction. Axonics, Inc. v. Medtronic, Inc., Cases IPR2020-00680, IPR2020-00712 (Sept. 22, 2021). The Board explained that Axonics had not identified where in the petitions the two-input anticipation arguments had been made, and thus considered them to be improper reply arguments. Axonics appealed.
Federal Circuit Vacates and Remands
In a precedential opinion by Judge Dyk, the Federal Circuit held that when a patent owner first proposes a claim construction in its patent owner response, the petitioner must be given the opportunity in its reply to argue and present evidence of anticipation or obviousness under the new construction. Although the court noted that the November 2019 Consolidated Trial Practice Guide disallows new arguments or evidence in a reply that could have been presented earlier, the Board’s rules permit a petitioner to respond to new arguments raised in a patent owner response. Prior Federal Circuit decisions require providing the petitioner an opportunity to address new claim construction arguments made by the patent owner or adopted by the Board sua sponte after the institution decision. The court did foreclose a petitioner from relying upon new prior art to respond to a new claim construction argument. And the court raised, but did not decide, the question of whether a petitioner’s reply may rely on new embodiments from an existing prior art reference that was relied upon in the petition.
[T]he petitioner must be given the opportunity in its reply to argue and present evidence of anticipation or obviousness under the new construction.
Explaining its decision, the Federal Circuit noted that a patent owner may propose a new claim construction in its preliminary response, and the Board may adopt the patent owner’s proposed construction and deny institution; the result would be no estoppel. But the court expressed concern that the Board’s approach would encourage sandbagging by patent owners who could save their strongest claim construction arguments for their post-institution response. The Board’s approach, foreclosing a substantive petitioner reply, would therefore result in an estoppel. Based in part on this reasoning, the court effectively rejected the Board’s approach.
Petitioners may respond to new, post-institution claim construction arguments in their reply briefs. But for several reasons, it may be a wiser strategy to anticipate and address those potential arguments in the petition for several reasons: the Board may adopt constructions raised in the preliminary response and deny institution, the petitioner cannot not rely upon new prior art in the reply brief to address the new constructions, and reply brief word limits may constrain petitioners’ ability to address the new constructions.