In a non-precedential decision, Baker Hughes Oilfield Operations, LLC v. Hirshfeld, the Federal Circuit held that, under the Administrative Procedures Act, once the Board decided Ground 3 was too imprecise and would not be instituted but for SAS procedures, the Board could no longer act on that Ground in the final written decision. And since claims 2-6 were only challenged in Ground 3, the Board should not have addressed those claims in its final written decision.
The Petitioner challenged claims 1 and 7-23 in Ground 1 and 2 under obviousness over Head and Star. The Petitioner also challenged claims 1-23 in Ground 3 as being obvious over any one of six distinct combinations of prior art: (1) Head in view of Xu, (2) Head in view of Holmes, (3) Starr in view of Xu, (4) Starr in view of Holmes, (5) Stout in view of Xu, and (6) Stout in view of Holmes. For Ground 3, the Petitioner stated there was “a reasonable expectation of successfully fitting the teachings of Head/Starr/Stout and Xu/Holmes together like pieces of a puzzle.”
The Board agreed Grounds 1 and 2 met the reasonably likelihood standard, but that for Ground 3, it was instituting solely because “an inter partes review may not institute on less than all claims challenged in the petition [under SAS].” Baker Hughes Oilfield Operations, LLC v. Hirshfeld, 20-1932, Paper 58, 5 (C.A.F.C. Sept. 16, 2021). Yet the final written decision devoted forty pages—the majority of its analysis—to parsing the different theories that the Petitioner confusingly lumped together in Ground 3 explaining it “was able to discern Petitioner’s obviousness arguments, even if the Petition was less focused than desirable.” Id. at 6.
The Court held “that the Board’s conduct violated the APA.” Id. The Court found “it was reasonable for Baker to rely on the Board’s initial position. Otherwise, in its Patent Owner Response, Baker would need to use its allotted pages to rummage through Innovex’s petition ‘to divine an obviousness theory.’” Id. The Court also found that Petitioner’s Reply was too late to sort out Ground 3, and that the Patent Owner had no ability to present new evidence in its Sur Reply.
The Office argued that the Patent Owner “had notice of the six obviousness combinations jumbled together in Ground 3.” Id. at 7. The Court disagreed with the Office and explained that “[t]he question, however, is not whether Baker had notice of those combinations; it is instead whether Baker had notice that the Board would delve into their substance after stating it would not. Under these unusual circumstances, the Board needed to provide adequate notice and an opportunity for the submission of evidence regarding obviousness.” Id. at 7-8.
In the end, it appears the Court treated this like a pre-SAS partial institution decision where the Board clearly instituted trial on Grounds 1 and 2 and clearly did not institute trial on Ground 3. But the Court gave the Board a second bite at the apple to get it right on remand, telling the Board to allow the Patent Owner a full opportunity to present argument and evidence rebutting Ground 3 after the case returns to the Board.
