Shaw Industries Group, Inc. v. Automated Creel Systems, Inc. , 817 F.3d 1293 ( 2016 )

United States Court of Appeals
for the Federal Circuit
______________________
SHAW INDUSTRIES GROUP, INC.,
Appellant
v.
AUTOMATED CREEL SYSTEMS, INC.,
Cross-Appellant
______________________
2015-1116, 2015-1119
______________________
Appeals from the United States Patent and Trade-
mark Office, Patent Trial and Appeal Board in Nos.
IPR2013-00132, IPR2013-00584.
______________________
Decided: March 23, 2016
______________________
THAD CHARLES KODISH, Fish & Richardson, P.C., At-
lanta, GA, argued for appellant. Also represented by ERIN
ALPER; JOHN A. DRAGSETH, Minneapolis, MN.
SCOTT D. SMILEY, The Concept Law Group, P.A., Fort
Lauderdale, FL, argued for cross-appellant. Also repre-
sented by MARK C. JOHNSON.
MONICA BARNES LATEEF, Office of the Solicitor, United
States Patent and Trademark Office, Alexandria, VA,
argued for intervenor Michelle K. Lee. Also represented
2 SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS
by NATHAN K. KELLEY, SCOTT WEIDENFELLER, WILLIAM
LAMARCA.
______________________
Before MOORE, REYNA, and WALLACH, Circuit Judges.
Opinion for the court filed by Circuit Judge MOORE.
Opinion concurring specially in the judgment filed by
Circuit Judge REYNA.
MOORE, Circuit Judge.
Shaw Industries Group, Inc. appeals from the United
States Patent and Trademark Office’s (“PTO”) Patent
Trial and Appeal Board’s (“Board”) final written decision
in consolidated inter partes reviews (“IPR”) of claims 1–21
of U.S. Patent No. 7,806,360. Shaw also petitions for writ
of mandamus. Automated Creel Systems (“ACS”) cross-
appeals. We affirm-in-part, vacate-in-part, and remand.
We deny Shaw’s petition for writ.
BACKGROUND
ACS is the owner of the ’360 patent, which relates to
“creels” for supplying yarn and other stranded materials
to a manufacturing process. ’360 patent, col. 1, ll. 14–17.
An exemplary creel supply system of the patent comprises
creel magazines with a stationary frame and two movable
carts. Id. at figs. 1, 12; col. 3, ll. 18–19, 59–61. The carts
carry multiple levels of spools (or packages) of stranded
material that can be routed using guides. Id. at col. 3,
ll. 62–63. Continuous runtime can be achieved by
(1) tying the material from various packages together,
and (2) replenishing empty packages on one cart while
packages on the opposite cart are used. Id. at col. 8,
ll. 32–41; col. 9, l. 64 to col. 10, l. 16; col. 11, l. 1 to col. 12,
l. 16.
Claims 1–5, 8–12, 14, 19, and 20 (“the non-interposing
claims”) involve creel magazines with two packages of
SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS 3
stranded material at each level. They allow for transfer of
stranded material from one package to another across the
frame. For example, claim 5 recites:
5. A creel magazine for feeding stranded material
to a manufacturing process comprising:
a magazine having a stationary magazine
frame comprising a common guide for said
stranded material;
a first and a second removable cartridge
positioned adjacent said magazine frame
on respective opposite sides of said maga-
zine frame,
said first removable cartridge having at
least one support arm supporting an ac-
tive package of stranded material thereon;
said second removable cartridge having at
least one support arm supporting a ready
package of stranded material thereon
wherein a trailing end of said stranded
material carried by said active package is
connected to a leading end of said strand-
ed material carried by said ready package;
wherein said common guide is an annular
turning surface and said stranded materi-
al is sequentially fed to said common
guide from said active package then from
said ready package.
Claims 6, 7, 13, 15–18, and 21 (“the interposing
claims”) involve creel magazines with more than two
packages of stranded material at each level. They allow
for transfer of stranded material from one package to
another across the frame (like the non-interposing
claims), as well as on the same side of the frame. For
example, claim 6 recites:
4 SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS
6. The creel magazine of claim 5, further compris-
ing an additional support arm supported adjacent
to said at least one support arm for supporting an
additional ready package on said removable car-
tridge, to be selectively interposed between said
active package and said ready package on said
second removable cartridge to feed said stranded
material.
In February 2012, ACS sued Shaw for infringement of
the ’360 patent in the U.S. District Court for the Northern
District of Georgia. Automated Creel Sys., Inc. v. Shaw
Indus. Grp., Inc., No. 1:12-cv-00424-RWS (N.D. Ga. 2012).
ACS voluntarily dismissed the suit without prejudice.
Within one year of service of the complaint, see 35 U.S.C.
§ 315(b), Shaw petitioned for IPR of all twenty-one of the
’360 patent claims. Shaw proposed fifteen grounds of
rejection. Most of the grounds were directed to the non-
interposing claims. There were only three grounds di-
rected at the interposing claims: (1) ground 3, alleging
that all of the interposing claims would have been obvious
over German Patent Application Publication
DE 3429153 A1 (“Munnekehoff”) in view of U.S. Patent
No. 5,624,082 (“Ligon”); (2) ground 8, alleging that all of
the interposing claims would have been obvious over
German Patent DE 7413531 (“Barmag”) in view of Ligon;
and (3) ground 11, alleging that all of the interposing
claims were anticipated by U.S. Patent No. 4,515,328(“Payne”) (“the Payne-based ground”). The Board insti-
tuted IPR on all claims except claim 4. 1 It did not, how-
ever, institute IPR on all fifteen grounds argued by Shaw.
With regard to the interposing claims, the Board institut-
ed IPR on the grounds that these claims would have been
1 The Board held that Shaw did not demonstrate a
reasonable likelihood of prevailing on its grounds with
regard to claim 4.
SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS 5
obvious over Munnekehoff or Barmag in view of Ligon
(grounds 3 and 8, respectively). Shaw Indus. Grp., Inc. v.
Automated Creel Sys., Inc., No. IPR2013-00132, 2013 WL
8563792 (P.T.A.B. July 25, 2013) (“First Institution
Decision”). The Board denied Shaw’s petition on the
Payne-based ground. The Board explained that the
Payne-based ground was “denied as redundant in light of
[its] determination that there is a reasonable likelihood
that the challenged claims are unpatentable based on the
grounds of unpatentability on which we institute an inter
partes review.” Id. at *20 (citing 37 C.F.R. § 42.108).
There were no substantive determinations of the Payne-
based ground in the Board decision.
In September 2013 (over one year after service of the
complaint), Shaw filed a second petition, requesting IPR
of claim 4. The Board instituted IPR based on two of the
six grounds proposed by Shaw—alleged obviousness over
Munnekehoff in view of U.S. Patent No. 4,572,458(“Bluhm”) (ground 3) and alleged obviousness over Bar-
mag in view of Bluhm (ground 6). Shaw Indus. Grp., Inc.
v. Automated Creel Sys., Inc., No. IPR2013-00584, 2013
WL 8595536 (P.T.A.B. Dec. 31, 2013) (“Second Institution
Decision”). It denied the other proposed grounds, writing
that it “exercise[d] [its] discretion under 37 C.F.R.
§ 42.108 to institute an inter partes review based solely on
the asserted grounds directed to combinations with
Bluhm and deny the remaining grounds as redundant.”
Id. at *12–13. It rejected ACS’s argument that 35 U.S.C.
§ 315(b) precluded it from instituting IPR. It determined
that because ACS had voluntarily dismissed the suit
without prejudice, it “nullifie[d] the effect of the alleged
service of the complaint on Petitioner.” Id. at *6.
The two IPRs proceeded in parallel. The Board then
consolidated them and issued one final written decision,
concluding that Shaw (1) had not shown by a preponder-
ance of the evidence that the interposing claims were
unpatentable based on the instituted grounds, and (2) had
6 SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS
shown by a preponderance of the evidence that the non-
interposing claims (including claim 4) were unpatentable
based on the instituted grounds. Shaw Indus. Group, Inc.
v. Automated Creel Sys., Inc., Nos. IPR2013-00132,
IPR2013-00584, 2014 WL 3725531 (P.T.A.B. July 24,
2014) (“Final Decision”). Shaw appeals as to the interpos-
ing claims and ACS appeals as to claim 4. The PTO
submitted a brief (“PTO Br.”) and presented oral argu-
ment as intervenor. See 35 U.S.C. § 143.
DISCUSSION
I. SHAW’S APPEAL AND PETITION FOR WRIT
A
Under 28 U.S.C. § 1295(a)(4), we have jurisdiction to
review the Board’s final written decisions in IPRs. St.
Jude Med., Cardiology Div., Inc. v. Volcano Corp., 749
F.3d 1373, 1376 (Fed. Cir. 2014); see also 35 U.S.C.
§ 141(c) (“A party to an inter partes review who is dissat-
isfied with the final written decision of the Patent Trial
and Appeal Board under section 318(a) or 328(a) may
appeal the Board’s decision only to the United States
Court of Appeals for the Federal Circuit.”); id. § 319 (“A
party dissatisfied with the final written decision of the
Patent Trial and Appeal Board under section 318(a) may
appeal the decision pursuant to sections 141 through
144.”). We lack jurisdiction, however, to review the
Board’s decisions instituting or denying IPR. St. Jude,
749 F.3d at 1376; see also 35 U.S.C. § 314(d) (“The deter-
mination by the Director whether to institute an inter
partes review under this section shall be final and nonap-
pealable.”). This is true regardless of whether the Board
has issued a final written decision. In re Cuozzo Speed
Techs., LLC, 793 F.3d 1268, 1273 (Fed. Cir. 2015), cert.
granted sub nom. Cuozzo Speed Techs., LLC v. Lee, 136 S.
Ct. 890 (U.S. Jan. 15, 2016) (No. 15-446).
SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS 7
Shaw argues we have jurisdiction to review the
Board’s final written decision, including its decision not to
consider the Payne-based ground as redundant. Appel-
lant’s Opening Br. 58. It argues that § 314(d) is inappli-
cable because it is not seeking review of the Board’s
institution decision, but rather asking us “to review the
Board’s authority, and correctness in exercising the same,
in deeming a subset of asserted grounds redundant of
instituted grounds.” Appellant’s Reply Br. 65. It argues
that “whether the Board can deem grounds ‘redundant,’
and whether the Board properly exercised that authority,
is not a decision whether to institute.” Id.
We disagree. As we recently explained, Congress au-
thorized the PTO to prescribe regulations regarding
institution and governance of inter partes reviews. Har-
monic Inc. v. Avid Tech., Inc., No. 15-1072, 2016 WL
798192, at *8 (Fed. Cir. Mar. 1, 2016). The PTO exercised
this authority in promulgating 37 C.F.R. § 42.108, which
allows the Board to institute IPR on only some of the
challenged claims and to institute IPR of a given claim
based on only some of the proposed grounds. Id. (citing 37
C.F.R. § 42.108(a), (b)).
We can see benefit in the PTO having the ability to
institute IPR on only some of the claims and on only some
of the proposed grounds, particularly given the Board’s
statutory obligation to complete proceedings in a timely
and efficient manner. 35 U.S.C. § 316. For example, in
Liberty Mutual Insurance Co. v. Progressive Casualty
Insurance Co., No. CBM2012-00003, 2012 WL 9494791, at
*1 (P.T.A.B. Oct. 25, 2012), the petitioner presented over
four-hundred grounds of unpatentability for twenty
patent claims. The Board determined that “numerous
redundant grounds would place a significant burden on
the Patent Owner and the Board, and would cause unnec-
essary delays.” Id. It wrote that “multiple grounds,
which are presented in a redundant manner by a peti-
tioner who makes no meaningful distinction between
8 SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS
them, are contrary to the regulatory and statutory man-
dates, and therefore are not all entitled to consideration.”
Id. at *2. The Board made specific findings that certain
groups of grounds were redundant. It ordered the Peti-
tioner to choose which ground in each group to maintain,
and even explained which ground it would proceed with if
the Petitioner did not choose. The PTO has made similar
constraints in prosecution by requiring applicants to
narrow the number of claims they wish to prosecute. See,
e.g., Hyatt v. U.S. Patent & Trademark Office, 797 F.3d
1374, 1376 (Fed. Cir. 2015) (discussing the PTO’s re-
quirement that the patentee select some of the hundreds
of thousands of claims to prosecute, absent a showing that
more claims were necessary).
Here, Shaw proposed three grounds of unpatentability
for the interposing claims: the Payne-based anticipation
ground and two other multiple reference obviousness
grounds. The Board did not consider the substance of the
Payne reference or compare it to the art cited in the other
two proposed grounds. 2 It made no specific findings that
the three grounds overlapped with one another or in-
2 We understood the Board’s “redundancy” denial to
amount to nothing more than a choice by the Board for
efficiency purposes not to review three different grounds
as to the interposing claims. Though it is not entirely
clear, we did not read the Board’s opinion as deciding any
substantive issues with regard to the Payne grounds. For
example, the denial is not a determination that the IPR
standard is not met as to the Payne grounds. Nor is it a
determination of substantive redundancy with regard to
Payne and Munnekehoff or Barmag. The PTO confirmed
our understanding of the denial of the Payne-based
grounds during oral argument. Oral argument at 31:23–
32:59, 38:18–38:21, available at http://oralarguments.cafc.
uscourts.gov/default.aspx?fl=2015-1116.mp3.
SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS 9
volved overlapping arguments. It did not order Shaw to
either choose which ground to maintain or show that the
grounds were not, in fact, redundant. 3 Instead, the Board
merely denied IPR of the claims based on the Payne-based
ground, writing without making any specific findings that
the ground was “redundant” of the other two grounds. We
cannot say we agree with the PTO’s handling of Shaw’s
petition. We also cannot say that the PTO’s decision
made the proceeding more efficient, particularly given
that the Payne-based ground was alleged anticipation by
a single reference while the two instituted grounds were
alleged obviousness over combinations of references.
We have no authority, however, to review the Board’s
decision to institute IPR on some but not all grounds.
“Denial of a ground is a Board decision not to institute
inter partes review on that ground.” 37 C.F.R.
§ 42.108(b). We thus lack jurisdiction to review the
Board’s decision not to institute IPR on the Payne-based
ground, which includes its decision not to consider the
Payne-based ground in its final written decision.
B
Shaw alternatively petitions for a writ of mandamus
instructing the PTO to reevaluate its redundancy decision
and to institute IPR based on the Payne-based ground. A
3 In its second IPR petition, Shaw preemptively ar-
gued that the proposed grounds there were not redun-
dant. Petition for IPR, Shaw Indus. Grp., Inc. v.
Automated Creel Sys., Inc., No. IPR2013-00584 (Sept. 13,
2013) (J.A. 1085–132). The Board did not address the
argument. As in the first institution decision, the Board
merely denied IPR on four of the proposed grounds,
writing without any specific findings that they were
“redundant” of the other two. Second Institution Deci-
sion, 2013 WL 8595536, at *12.
10 SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS
writ of mandamus is a “drastic and extraordinary reme-
dy” that can only be used in “exceptional circumstances
amounting to a judicial usurpation of power or a clear
abuse of discretion.” Cheney v. U.S. Dist. Court for D.C.,
542 U.S. 367, 380 (2004) (internal quotations omitted). A
writ requires (1) that the petitioner have no other ade-
quate means to attain the desired relief, (2) that the
petitioner have a “clear and indisputable” right to the
writ, and (3) that the issuing court, in the exercise of its
discretion, be satisfied that the writ is appropriate under
the circumstances. Id.Shaw argues that these three conditions are satisfied.
First, it argues it has no other means to attain the desired
relief “since review by appeal is unavailable.” Pet. 5
(quoting Cuozzo, 793 F.3d at 1275). It argues that be-
cause it brought the Payne-based ground in its petition
and the PTO denied IPR on that ground, it may be es-
topped from arguing the ground in any future proceed-
ings. Second, Shaw argues that it has a “clear and
indisputable right” to have the PTO consider a reasonable
number of grounds and references given the “estoppel
rules.” Id. at 4 (quoting Cheney, 542 U.S. at 380). Third,
it argues that we should find in our discretion that the
writ is appropriate.
Shaw’s argument is predicated on its concern that the
statutory estoppel provisions would prevent it from rais-
ing the Payne-based ground in future proceedings. Sec-
tion 315(e) of Title 35 provides:
(1) Proceedings before the Office.–The petitioner
in an inter partes review of a claim in a patent
under this chapter that results in a final written
decision under section 318(a) . . . may not request
or maintain a proceeding before the Office with
respect to that claim on any ground that the peti-
tioner raised or reasonably could have raised dur-
ing that inter partes review.
SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS 11
(2) Civil actions and other proceedings.—The peti-
tioner in an inter partes review of a claim in a pa-
tent under this chapter that results in a final
written decision under section 318(a) . . . may not
assert in either a civil action arising in whole or in
part under section 1338 of title 28 or in a proceed-
ing before the International Trade Commission
under section 337 of the Tariff Act of 1930 that
the claim is invalid on any ground that the peti-
tioner raised or reasonably could have raised dur-
ing that inter partes review.
35 U.S.C. § 315(e) (emphasis added). The PTO argues
that Shaw’s statutory interpretation of the estoppel
provision is incorrect because “the denied ground never
became part of the IPR.” PTO Br. 38. We agree with the
PTO that § 315(e) would not estop Shaw from bringing its
Payne-based arguments in either the PTO or the district
courts. Both parts of § 315(e) create estoppel for argu-
ments “on any ground that the petitioner raised or rea-
sonably could have raised during that inter partes
review.” Shaw raised its Payne-based ground in its
petition for IPR. But the PTO denied the petition as to
that ground, thus no IPR was instituted on that ground.
The IPR does not begin until it is instituted. See Cuozzo,
793 F.3d at 1272 (“IPRs proceed in two phases. In the
first phase, the PTO determines whether to institute IPR.
In the second phase, the Board conducts the IPR proceed-
ing and issues a final decision.” (citations omitted)).
Thus, Shaw did not raise—nor could it have reasonably
raised—the Payne-based ground during the IPR. The
plain language of the statute prohibits the application of
estoppel under these circumstances. In light of our con-
struction of the statute, mandamus is not warranted.
Thus, we deny Shaw’s petition for writ of mandamus.
12 SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS
C
We turn now to Shaw’s challenges to the Board’s de-
termination that Shaw had not shown by a preponderance
of the evidence that the interposing claims would have
been obvious over Munnekehoff or Barmag in view of
Ligon. We review the Board’s ultimate conclusion of
obviousness de novo and its factual findings for substan-
tial evidence. In re Gartside, 203 F.3d 1305, 1316 (Fed.
Cir. 2000). The parties do not dispute that Munnekehoff
taught all of the limitations of the interposing claims
except the transfer of stranded material from one package
to another on the same side of the frame. Shaw argues
that this limitation was taught by Ligon. The Board
rejected Shaw’s argument, finding that adding a second
package as taught in Ligon to either side of the frame in
Munnekehoff would cause tangling and result in an
inoperable assembly, absent complete redesign. In mak-
ing this finding, the Board considered the explanation by
Shaw’s expert, Dr. Youjiang Wang, that “tube Q” could be
used to prevent tangling. The Board wrote that “[t]he use
of tube Q . . . is not disclosed in the cited references” and
that Dr. Wang did not “provide any basis (in Ligon or
otherwise) for adding the additional tube to the
Munnekehoff assembly in the manner proposed.” Final
Decision, 2014 WL 3725531, at *11.
Shaw argues that the Board found that Munnekehoff
did not disclose the “tube Q” relied on by Dr. Wang. Such
a finding would be undisputedly erroneous, as ACS ad-
mits that Munnekehoff has a structure corresponding to
Dr. Wang’s “tube Q.” ACS argues, however, that the
Board did not make such a finding. ACS argues that
instead, the Board found that Munnekehoff did not dis-
close “tube Q” the same way that Dr. Wang illustrated,
i.e., as a structure that an artisan would have used to
prevent tangling.
SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS 13
The language of the Board’s decision as to “tube Q” is
ambiguous at best. If the Board found that “tube Q” was
not disclosed in Munnekehoff, it was an undisputed error.
The parties dispute what impact the error would have on
the Board’s ultimate conclusion, but given the factual
nature of the teachings of a reference, we leave to the
Board such fact findings in the first instance. Thus, we
vacate-in-part and remand.
II ACS’S CROSS-APPEAL
A
ACS challenges the Board’s decision that the second
IPR was not barred pursuant to 35 U.S.C. § 315(b). This
section provides:
An inter partes review may not be instituted if the
petition requesting the proceeding is filed more
than 1 year after the date on which the petitioner,
real party in interest, or privy of the petitioner is
served with a complaint alleging infringement of
the patent.
It argues that we have jurisdiction to review the decision
because it is not challenging the Board’s institution
decision but rather the Board’s interpretation of § 315(b).
Our court recently faced a similar challenge in Acha-
tes Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652(Fed. Cir. 2015). We held that we lack jurisdiction to
review “the Board’s determination to initiate IPR proceed-
ings based on its assessment of the time-bar of § 315(b),
even if such assessment is reconsidered during the merits
phase of proceedings and restated as part of the Board’s
final written decision.” Id. at 658 (citing 35 U.S.C.
§ 314(d)). We noted that a “narrow exception to the bar
on judicial review exists for claims that the agency ex-
ceeded the scope of its delegated authority or violated a
clear statutory mandate.” Id. (quoting Hanauer v. Reich,
82 F.3d 1304, 1307 (4th Cir. 1996)). Section 315(b) keys
14 SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS
the time bar at issue to the service of the patent in-
fringement complaint. The Board decided that ACS’s
voluntary dismissal of the suit without prejudice “nulli-
fie[d] the effect of the service of the complaint.” Second
Institution Decision, 2013 WL 8595536, at *6. The Board
reasoned that we “consistently ha[ve] interpreted the
effect of dismissals without prejudice as leaving the
parties as though the action had never been brought.”
Id. (citing, e.g., Graves v. Principi, 294 F.3d 1350, 1356
(Fed. Cir. 2002); Bonneville Assocs., Ltd. v. Barram, 165
F.3d 1360, 1364 (Fed. Cir. 1999)). Thus, the Board con-
cluded that Shaw’s petition was not time barred.
It is true we have held in other cases that dismissals
without prejudice leave the parties as though the action
had never been brought. While these cases did not ad-
dress § 315(b) or whether service of a complaint can be
nullified, based on Achates, we lack jurisdiction to review
this aspect of the Board’s decision. We note that the
Supreme Court’s decision to grant certiorari as to the
second question in Cuozzo Speed Technologies, LLC v.
Lee, 136 S. Ct. 890 (2016) may affect this court’s holding
regarding the reviewability of the decision to institute in
Achates. As of now, we are constrained by our earlier
precedent.
B
As to the merits, the Board determined that Shaw
showed by a preponderance of the evidence that claim 4
would have been obvious over Munnekehoff or Barmag in
view of Bluhm. The Board’s factual findings are support-
ed by substantial evidence and we see no error in its
conclusion of obviousness. Thus, we affirm the Board’s
decision with regard to claim 4.
CONCLUSION
We affirm-in-part, vacate-in-part and remand the
Board’s decision. We deny Shaw’s petition for writ.
SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS 15
AFFIRMED-IN-PART, VACATED-IN-PART, AND
REMANDED
COSTS
No costs.
United States Court of Appeals
for the Federal Circuit
______________________
SHAW INDUSTRIES GROUP, INC.,
Appellant
v.
AUTOMATED CREEL SYSTEMS, INC.,
Cross-Appellant
______________________
2015-1116, 2015-1119
______________________
Appeals from the United States Patent and Trade-
mark Office, Patent Trial and Appeal Board in Nos.
IPR2013-00132, IPR2013-00584.
______________________
REYNA, Circuit Judge, concurring specially.
I fully join the panel opinion. I write separately on
the Patent Trial and Appeal Board’s (“Board”) application
of the so-called “Redundancy Doctrine.” The Board’s
improper, conclusory statements declining to implement
inter partes review (“IPR”) of grounds it found to be “re-
dundant” leave me deeply concerned about the broader
impact that the Redundancy Doctrine may have on the
integrity of the patent system. In particular, other tribu-
nals will be tasked with deciding whether estoppel applies
based on cryptic statements the U.S. Patent and Trade-
mark Office (“PTO”) makes under the guise of its pre-
sumed “complete discretion” over IPR institution.
2 SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS
I
In both petitions, the Board implemented one ground
for each claim-at-issue and declined to implement all
additional grounds as “redundant.” In the first petition
the Board stated, in full: “With respect to claims 1–3 and
5–21, the additional asserted grounds are denied as
redundant in light of our determination that there is a
reasonable likelihood that the challenged claims are
unpatentable based on the grounds of unpatentability on
which we institute an inter partes review. See 37 C.F.R.
§ 42.108.” Shaw Indus. Grp., Inc. v. Automated Creel
Sys., Inc., IPR2013-00132, 2013 WL 8563792, at *20
(PTAB July 25, 2013). As is apparent, the Board’s only
basis for not instituting the additional grounds was that
those grounds are “redundant” of the instituted grounds,
without any reasoned basis why or how the denied
grounds are redundant. In the second petition, the Board
discussed Shaw’s arguments, made no findings about the
grounds and concluded, “we exercise our discretion under
37 C.F.R. § 42.108 to institute an inter partes review
based solely on the asserted grounds directed to combina-
tions with Bluhm and deny the remaining grounds as
redundant.” Shaw Indus. Grp., Inc. v. Automated Creel
Sys., Inc., IPR2013-00584, 2013 WL 8595536, at *13
(PTAB Dec. 31, 2013). Shaw Industries argues these
statements apply the “Redundancy Doctrine” through
which the Board arbitrarily and capriciously denies some
grounds but not others. Appellant’s Opening Br. 62–75.
The PTO emphatically denies that any such Redun-
dancy Doctrine exists. E.g., PTO Br. 17 (“As an initial
matter, there is no ‘redundancy doctrine,’”); Oral Argu-
ment 40:25 (“There is no Redundancy Doctrine.”) (herein-
after “Hr’g”), available at http://oralarguments.cafc.
uscourts.gov/default.aspx?fl=2015-1116.mp3. Because no
explanation other than the redundancy finding was
provided by the Board, the lack of a doctrine on redun-
dancy deprives the Board’s decisions of any basis. But the
SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS 3
PTO has a ready answer: it need not provide any basis for
its institution decisions. Hr’g at 46:13 (“We do not even
have to state in our institution decisions why we’re choos-
ing not to go forward.”). The PTO argues this is so be-
cause “the Director [of the PTO] has complete discretion
to deny institution.” PTO Br. 20 (capitalization altered).
II
The PTO’s claim to unchecked discretionary authority
is unprecedented. It bases this claim on the statute that
makes institution or denial of inter partes review “final
and nonappealable.” See 35 U.S.C. § 314(a), (d). Regard-
less of appealability, administrative discretion is not and
never can be “complete” because it is always bounded by
the requirement that an agency act within the law and
not violate constitutional safeguards. See 35 U.S.C.
§ 2(b)(2) (PTO “may establish regulations, not incon-
sistent with law”). There is good reason for this. “Expert
discretion is the lifeblood of the administrative process,
but unless we make the requirements for administrative
action strict and demanding, expertise, the strength of
modern government, can become a monster which rules
with no practical limits on its discretion.” Burlington
Truck Lines, Inc. v. United States, 371 U.S. 156, 167
(1962) (internal quotation marks omitted).
Indeed, regardless of whether the Board’s institution
decisions can be appealed, the Board cannot create a
black box decisionmaking process. Conclusory statements
are antithetical to the requirements of the Administrative
Procedures Act (“APA”), which the PTO and its Board are
subject to. 35 U.S.C. § 2(b)(2)(B); see also Dickinson v.
Zurko, 527 U.S. 150, 154 (1999). The APA requires
“reasoned decisionmaking” for both agency rulemaking
and adjudications because it “promotes sound results, and
unreasoned decisionmaking the opposite.” Allentown
Mack Sales & Serv., Inc. v. N.L.R.B., 522 U.S. 359, 374–
75 (1998) (citation omitted). The APA requires that Board
4 SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS
decisions evince both its authority to render the decision
and a reasoned basis for rendering that decision. Id. at
372 (“Not only must an agency’s decreed result be within
the scope of its lawful authority, but the process by which
it reaches that result must be logical and rational.”). The
problem here is not that the Board’s reasoning is illogical
or irrational; the problem is that there is no reasoning at
all.
Both Board decisions only cite 37 C.F.R. § 42.108 as
its authority for denying institution of certain grounds,
and the PTO maintains this position on appeal. PTO Br.
19–32. The regulation allows for selective institution of
certain grounds and not others. 37 C.F.R. § 42.108(a);
Harmonic Inc. v. Avid Tech., Inc., No. 15-1072, 2016 WL
798192, at *7 (Fed. Cir. Mar. 1, 2016). The regulation,
however, does not itself provide a reason to deny some
grounds and institute others, it only provides the authori-
ty to do so. This authority neither satisfies nor exempts
the Board from its obligation to include “findings and
conclusions, and the reasons or basis therefor, on all the
material issues of fact, law, or discretion presented on the
record.” 5 U.S.C. § 557(c) (emphasis added); Burlington
Truck Lines, 371 U.S. at 167. The sole basis advanced by
the Board is that the additional grounds are redundant.
Despite repeatedly denying any Redundancy Doctrine
exists, the PTO argues the decision is supported by rea-
soning not articulated in the Board’s final written deci-
sion. Before this Court, the PTO argues efficiency; that is,
the Board may choose among the grounds asserted be-
cause a particular ground may resolve the case and a
multiplicity of grounds would increase the Board’s work-
load and make it difficult to meet its statutory deadlines.
PTO Br. 26–32; Hr’g at 39:35–46:20. 1 The Board’s insti-
1 The PTO cites the considerations Congress in-
structed the PTO to take into consideration in regulating
SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS 5
tution decisions, however, say nothing about efficiency so
we, normally, would deem it improper for the PTO to
make these arguments on appeal. Burlington Truck
Lines, 371 U.S. at 168–69 (“The courts may not accept
appellate counsel’s post hoc rationalizations for agency
action; Chenery requires that an agency’s discretionary
order be upheld, if at all, on the same basis articulated in
the order by the agency itself”). But the Redundancy
Doctrine exists, as articulated repeatedly in the Board’s
other decisions, and we assume that the word “redun-
dant” here means that Doctrine was applied, even if no
citation was provided. For the PTO to deny that a Redun-
dancy Doctrine exists in light of its caselaw development
strains credulity.
In a prior Order issued by the Chief, Vice Chief, Lead,
and six other Administrative Patent Judges from the
Board, the Board devoted seventeen pages exclusively to
discussing and applying two “types of redundancy.”
Liberty Mut. Ins. Co. v. Progressive Cas. Ins. Co., CBM-
2012-00003, 2012 WL 9494791, at *2 (Oct. 25, 2012). 2
Both types of redundancy discussed were substantive
redundancies between grounds with “essentially the same
teaching to meet the same claim limitation” or exactly the
same references combined in different ways. Id. Shaw
Industries directs us to numerous other Board decisions
IPRs as the statutory basis for applying 37 C.F.R.
§ 42.108(a) in this fashion, namely that it “consider . . .
the efficient administration of the Office, and the ability
of the Office to timely complete proceedings instituted
under this chapter.” 35 U.S.C. § 316(b).
2 Notably, this Order is listed among the Board’s
“Representative Orders, Decisions and Notices” at
http://www.uspto.gov/patents-application-
process/appealing-patent-decisions/decisions-and-
opinions/representative-orders.
6 SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS
discussing, relying on and further developing the Redun-
dancy Doctrine born in Liberty Mutual. See Appellant’s
Opening Br. 59–62. 3 In some of these decisions the Board
appears to find redundancy not on any substantive basis,
but rather on the basis that it need only hear one ground
for each claim and that hearing multiple grounds might
require “redundant” effort on its part. See, e.g., EMC
Corp. v. PersonalWeb Techs. LLC, IPR2013-00087, 2013
WL 6514050, at *2 (June 5, 2013) (“the references are
redundant insofar as each ground of unpatentability is
sufficient to invalidate the claims.”) (quotation omitted).
The Board’s invocation of the Redundancy Doctrine
represents, at least in some instances, a substantive
decision. Even here, despite the PTO insistence that
labeling of grounds as “redundant” doesn’t reflect a sub-
stantive determination, the PTO’s own statements and
arguments seem to indicate the contrary conclusion. The
PTO insists that the Board did consider the rejected
grounds in making its institution decision and cannot say
efficiency was the sole basis that the redundant grounds
were not instituted. E.g., Hr’g at 50:48 (“I wouldn’t say
that it’s not that they’re considered, the Board is going to
do their job . . . .”); Hr’g at 51:20 (“[The Board] may be
choosing not to go forward on the Payne ground for rea-
sons other than likelihood of success.”). The statutory
scheme’s estoppel provisions make such ambiguity about
whether substantive determinations were made problem-
atic.
The effects of estoppel are profound. Under 35 U.S.C.
§ 315(e)(2), “[t]he petitioner in an inter partes review of a
3 Particularly troubling are instances where, as
here, the Board found Section 102 anticipation grounds
redundant of Section 103 obviousness grounds without
explanation. See, e.g., Oracle Corp. v. Clouding IP,
IPR2013-00088, 2013 WL 8595567, at *7 (May 14, 2013).
SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS 7
claim in a patent under this chapter that results in a final
written decision . . . may not assert either in a civil action
. . . or in a proceeding before the International Trade
Commission . . . that the claim is invalid on any ground
that the petitioner raised or reasonably could have raised
during that inter partes review.” (emphasis added).
Indeed, the potential for estoppel is one of the important
considerations for defendants in deciding whether or not
to file an IPR petition. 4
The PTO asserts that estoppel will not attach to re-
dundant grounds because grounds that are not instituted
are not those the petitioner “raised or reasonably could
have raised.” See, e.g., PTO Br. 32 n.20, 37–39; Hr’g at
32:38–44. (“We would not find estoppel on that Payne-
based ground because we did not institute on it.”).
Whether estoppel applies, however, is not for the Board or
the PTO to decide. Nor is it for us to decide in the first
instance, despite the invitation from Shaw Industries,
because the issue is not properly before us. See Appel-
lant’s Opening Br. 75–76. Instead, whether the “redun-
dant” grounds are subject to estoppel must be determined
in the first instance by the district court or the U.S.
International Trade Commission. 35 U.S.C. § 315(e)(2).
These tribunals should not have to parse cryptic state-
ments or search out uncited doctrines to make this deter-
mination.
4 E.g., Saurabh Vishnubhakat, Arti K. Rai, Jay P.
Kesan, Strategic Decision Making in Dual PTAB and
District Court Proceedings, BERKELEY TECH, L.J. (forth-
coming 2016) (manuscript 15), available at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=27310
02.
8 SHAW INDUSTRIES GROUP v. AUTOMATED CREEL SYSTEMS
III
The Board should, at a minimum, provide a reasoned
basis how or why grounds are “redundant.” The PTO
claims the Board’s statement here refers to efficiency
concerns, but in failing to clearly articulate the basis of its
decision, the Board’s final written decision fails to satisfy
its obligations under the APA. Regardless of the reviewa-
bility of that decision, the lack of a reasoned basis de-
prives future tribunals of the necessary basis to
determine whether estoppel should apply. The PTO has
lost sight of its obligation to “consider the effect of” its
implementation of the IPR process on “the integrity the
patent system” as a whole. 35 U.S.C. § 316(b).