# United States **Court of Appeals**  **for the Federal Circuit**

______________________
SHAW INDUSTRIES GROU P, INC., Appellant

v.

AUTOMATED CREEL SYST EMS, INC., Cross

- Appellant

______________________

2015

- 1116, 2015

- 1119

______________________ Appeal s from the United States Patent and Trad emark Office, Patent Trial and Appeal Board in No s

. IPR2013

- 00132, IPR2 013

- 00584

.

______________________

Decided: March 23, 2016

______________________

T HAD C HARLES K ODISH , Fish & Richardson, P.C., A tlanta, GA

, argued for appellant. Also represented by E RIN A LPER ; J OHN A. D RAGSETH , Minneapolis, MN.

S COTT D. S MILEY , The Concept Law Group, P.A., Fort Lauderdale, FL

, argued for cross

- appellant . Also repr esented by M ARK C. J OHNSON

.

M ONICA B ARNES L ATEEF , Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA, argued for intervenor Michelle K. Lee. Also representedSHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 2

by N ATHAN K. K ELLEY , S COTT W EIDENFELLER , W ILLIAM L A M ARCA

.

______________________
Before M OORE , R EYNA , and W ALLACH , Circuit Judges.

Opinion for the court filed by Circuit Judge M OORE

. Opinion concurring specially in the judgment filed by Circuit Judge R EYNA

. M OORE , 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 review s (“IPR”) of claims 1– 21 of U.S. Patent No. 7,806,360. Sha w also petition s 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.

B ACKGROUND
ACS is the owner of t he ’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 f igs. 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,

an d (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 m agazines with two packages ofSHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 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 manufa cturing 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 mag azine f rame, said first removable cartridge having at least one support arm supporting an a ctive 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 stran ded material carried by said ready package;
wherein said common guide is an annular turning surface and said stranded mater ial is sequentiall y 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:SHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 4

6. The creel magazine of claim 5 , further compri sing an additional support arm supported adjacent to said at least one support arm for supporting an additional ready package on said removable ca rtridge , 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

. Mos t of the grounds were directed to the non

interposing claims. There were only three grounds d irected 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 o f the inter posing claims were anticipated by U.S. Patent No. 4,515,328 (“Payne”) (“the Payne

- based ground”)

. The Board inst ituted IPR on all claims except claim 4

. 1 It did not, ho wever, institute IPR on all fifteen grounds argued by Shaw. With regard to the interposing claims

, the Board institu ted 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 GROU P v. AUTOMATED CREEL SYST EMS 5

obvious over Munnekehoff or Barmag in v iew of Ligon (grounds 3 and 8, respectively)

. Shaw In dus. Gr p. , Inc. v. Automated Creel Sys., Inc.

, No. IPR2013

- 00132
, 2013 WL 8563792 (P.T.A.B. Ju ly 25, 2013 ) (“First Institution Decision”). The Board denied Shaw’s petition on the Payne

- based ground. The Board expla in ed 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 dete rminations of the Payne

based ground in the Board decision.
In September 2013 (over one year after service of the complaint)

, Shaw filed a second peti tion , requesting IPR of claim 4 . T he 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 Ba rmag 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 a sserted 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 the m and is sued one final written dec ision, concluding tha t Shaw (1) had not shown by a preponde rance of the evidence that the interposing claims were unpatentable based on the instituted grounds , and (2) hadSHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 6

shown by a preponderance of the evidence that the non

inte rposing claims (including claim 4) were unpaten table 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 interpo sing cla ims and ACS appeals as to claim 4. T he PTO submitted a brief (“PTO Br.”) and present ed oral arg ument as intervenor

. See 35 U.S.C. § 143.

D ISCUSSION

I. S HAW ’ S A PPEAL AND P ETITION FOR W RIT
A
Under 28 U.S.C. § 1295(a)(4), w e have jurisdiction to review the Board’s final written dec isions 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 dissa tisfied 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.”)

. W e lack jurisdiction , however, to review t he Board’s decisions instituting or denying IPR

. St. Jude

, 749 F.3d at 1376 ; see also 35 U.S.C. § 314(d) (“The dete rmination by the Directo r whether to institute an inter partes review under this section shall be final and nona ppealable.”). 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 GROU P v. AUTOMATED CREEL SYST EMS 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 redund ant. Appe llant’s Op ening Br. 58. It argues that § 314(d) is inappl icable 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 sub set 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 a uthorized the PTO to prescribe regulations regarding institution and governance of inter partes reviews. Ha rmonic 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. § 42.10 8(a) , (b)).

W e 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 unne cessary delays.” Id. It wrote that “multiple grounds, which are presented in a redundant manner by a pet itioner who makes no meaningful distinction betweenSHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 8

them, are contrary to the regulatory and statutory ma ndates, and therefore are not all entitled to consideration.” Id. at *2. T he Board made specific findings that certain groups of grounds were redundant. It ordered the Pet itioner 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 r equirement that the patentee select some of the hundreds of thousands of claim s 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 . T he Board did no t 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 i n-

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 opi nion 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 redundan cy with regard to Payne an d Munnek e hoff 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 GROU P v. AUTOMATED CREEL SYST EMS 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

p etition. We also cannot say that the PTO’s decision made the proceeding more efficient, particularly given that the Payne

- based ground was alleged anticipatio n 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 d ecision 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 grou nd in its final written decision

. B

Shaw alternatively peti tions 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 a rgued that the proposed grounds there were not redu ndant. 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 Dec ision

, 2013 WL 8595536, at *12.SHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 10

writ of mandamus is a “drastic and extraordinary rem edy” 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 ad equate 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 u nder the circumstances. Id.
Shaw argues that the se 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 b ecause it brought the Payne

- based ground in its petition and the PTO denied IPR on that ground, it may be e stopped from arguing the ground in any future procee dings. 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 rai sing the Payne

- based ground in future proceedings. Se ction 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 pet itioner raised or reasonably could have raised du ring that inter partes review.SHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 11

(2) Civil actions and other proceedings.

— The pet itioner in an inter partes review of a claim in a p atent under this chapter that results in a final written decision under section 318(a)

. . . may not

as sert in either a civil action arising in whole or in part under section 1338 of title 28 or in a procee ding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the pet itioner raised or reasonably could have raised du ring 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 arg uments “on any ground that the petitioner raised or re asonably 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 th at ground, thus no IPR was instituted on that ground. The IPR does not begin until it is inst ituted. See Cuozzo

, 793 F.3d at 1272 (“IPRs proceed in two phas es. In the first phase, the PTO determines whether to institute IPR. In the second phase, the Board conducts the IPR procee ding and issues a final decision.” (cita tions omitt ed))

. 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 co nstruction of the statute, mandamus is not warranted. Thus, we deny Shaw’s petition for writ of mandamus.SHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 12

C
We turn now to Shaw’s challenges to the Board’s d etermination that Shaw had not shown by a preponderance of the evidence that the interposing claims would have been obvi ous over Munn ekehoff or Barmag in view of Ligon. We review the Board’s ultimate conclusion of obviousness de novo and its factual findings for substa ntial evidence. In re Gartside , 203 F.3d 1305, 1316 (Fed. Cir. 2000). The p arties do not dispute that Munnekehoff
tau ght 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 ma king 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 AC S a dmits 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 di sclose “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 GROU P v. AUTOMATED CREEL SYST EMS 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 undisp uted error

. T he 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 C ROSS -A PPEAL

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 Achates 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 procee dings based on its assessment of the time

- bar of § 315(b), even if such assessment is reconsidered during the merits ph ase 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 e xceeded 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) keysSHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 14

the time bar at issue to the service of the patent i nfringement complaint. The Board decided that ACS’s voluntary d ismissal of the suit without prejudice “ null ifie [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 a s 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 co ncluded 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 t hese cases did not a ddress § 315(b) or whether service of a complaint can be nullified

, b ased on Achates , we lack jurisdiction to review th is 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 cla im 4

w ould have been obvious over Munnekehoff or Barmag in view of Bluhm. The Board’s factual findings are suppor ted 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

. C ONCLUSION

We affirm

- in

- part, vacate

- in

- part and remand the Board’s decision

. We deny Shaw’s petition for writ.SHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 15

AFFIRMED

- IN

- PART, VACATED

- IN

- PART , AND REMANDED

C OSTS

No costs.

# United States **Court of A**  **p peals**  **for the Federal Circuit**

______________________
SHAW INDUSTRIES GROU P, INC., Appellant

v.

AUTOMATED CREEL SYST EMS, INC., Cross

- Appellant

______________________

2015

- 1116, 2015

- 1119

______________________ Appeal s from the United States Patent and Trad emark Office, Patent Trial and Appeal Board in No s

. IPR2013

- 00132, IPR20 13

- 00584.

______________________ R EYNA , Circuit Judge

, concurring sp e cially

. I fully join the panel opinion. I write separately on the Patent Trial and A p peal Board ’s (“ Board ”) applic a tion of the so

- called “Redundancy Doctrine.” T he Board’s improper, conclusory statement s declining to implement inter partes re view (“IPR”) of grounds it found to be “r edundant” leave me deeply concerned about the broader impact that the Re dundancy Do c trine may have on the in tegrity of the patent system

. In partic u lar

, other trib unals will be tasked with de ciding whether estop pel applies based on cryptic statements the U.S. Patent and Trad emark Office (“PTO”) mak es under the guise of its pr esumed “co m plete discretion” over IPR institution.SHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 2

I
In both petitions, t he Board implemented one ground for each claim

- at

- issue and declined to impl e ment 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

reaso nable likelihood that the cha l lenged 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 institu t ing 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 di s cussed 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 combin ations with Bluhm and deny the remaining g rounds as redundant.” Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc. , IPR2013

- 00584, 2013 WL 8595536, at *13 (PTAB Dec. 31, 2013)

. Shaw Indu s tries argues these
statements appl y the “Redundancy Doctrine” thro ugh which the Board arbitrarily and capriciously denies some ground s but not others. Appellant’s Op ening Br. 62

– 75.

T he PTO emphatically denies that any such R e du ndancy Doctrine exists. E.g.

, PTO Br. 17 (“ As an initial matter, there is no ‘ re dundancy d octrine,’”); Oral Arg ument 40:25 (“There is no Redundancy Do c trine.”) (herei nafter “ 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 r e du ndancy deprive s the Board’s decisions of any basis

. But t heSHAW INDUSTRIES GROU P v. AUTOM ATED CREEL SYSTEMS 3

PTO has a ready answer: it need not provide any basis for its institution decisions. Hr ’g at 46:13 ( “W e do not even have to state in our institution dec i sions why we ’re choo sing not to go forward.”). The PTO argues this is so b ecause “the Director [of the PTO] has complete discretion to deny institution.” PTO Br. 20 (capitalization altered ).

II

T he PTO’ s claim to unchecked discretionary a u thority 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). Regar dless of appealability, a dministr a tive discretion is not and never can be “complete” because it is always bounded by the requirement that an agenc y act within the law and not violate constit u tional safeguards

. See 3 5 U.S. C. § 2 (b)(2) (PTO “ may establish regulation s, not inco nsistent 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

mo d ern 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 instit u tion decisions can be appealed , the Board cannot cr e ate 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. 3 5 U.S. C. § 2 (b)(2)( B ); s ee also Dickinson v. Zurko , 527 U.S. 150, 154 (1999). The APA requires

“ reasoned decisionma k ing ” 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)

. T he APA requires that BoardSHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 4

dec i sions 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 pr o cess 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 a p peal. PTO Br. 19

– 32. The regulation allow s for sele c tive 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). T he regulation

, however, does not itself pr o vide a reason to deny some grounds and institute others

, it only provides the author ity to do so. This authority neither satisfies nor exempts the Board from its obligation to include “ findings and concl u sions, 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) ; Bu r lington 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 Do c trine exists , the PTO argues the decision is supported by re asoning not articulated in the Board’s final wri t ten dec ision. Before this Court, the PTO argues eff i ciency; that is, the Board may choose among the grounds asserted because a particular ground may resolve the case and a multipl icity of grounds would increase the Board ’ s wor kload and make it difficult to meet its statutory deadlines. PTO Br. 26

– 32; Hr’g at 39:35

– 46:20. 1 The Board’s inst i-

1 The PTO cites the considerations Congress i nstructed the PTO to take into consideration in regula t ingSHAW INDUSTRIES GROU P v. AUTOM ATED CREEL SYSTEMS 5

tution decisions, ho wever, 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 t he Redundancy Doctrine exist s, as articulated repeatedly in the Board’s other decision s, and we assume that the word “re du ndant ” here means that Doctrine was applied, eve n if no citation was provided. For the PTO to deny that a Redu ndancy 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, t he 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 B oth types of redundancy di s cussed were substantive redundancies between grounds with “essentially the same teaching to meet the same claim limitation” or exactly the same refe r ences combined in different ways

. Id

. Shaw Indu s tries 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 Notic es” at http://www.uspto.gov/patents

- application

process/appealing

- patent

- decisions/decisions

- and

opinions/representative- orders

.SHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 6

discussing, relyin g on and further developing the Redu ndancy Doctrine born in Liberty Mutual

. See Appellant’s Op ening Br. 59

– 62. 3 In some of these decisions the Board appears to find redundancy not on a ny substantive basis, but rather on the basis that it need only hear o ne 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, 201 3) (“ the references are redundant insofar as each ground of unpatentability is sufficient to i n validate the claims

. ”) (quotation omitted)

. T he 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 su bstantive determination, the PTO’s own statements and arguments seem to indicate the contrary concl u sion. The PTO insists that the Board did consider the rejected grounds in making its institution decision and cannot say efficiency wa s 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 consi d ered, 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 re asons other than likelihood of success.”). The statutory scheme’s estoppel prov i sions make such ambiguity about whether substantive determinations were made probl e matic

. 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 1 03 obviousness grounds without explanation. See, e.g

. , Oracle Corp. v. Clouding IP

, IPR2013

- 00088, 2013 WL 8595567, at *7 (May 14, 2013).SHAW INDUSTRIES GROU P v. AUTOM ATED 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 a n IPR petition. 4

T he PTO asserts that estoppel will not attach to r edundant grounds because grounds that are not i n stituted are not those the petitioner “ raised or r easo na bly 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 Appe llant’s Op ening Br. 75

– 76. In stead, whether the “redu ndant” 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 stat eme nts or search out uncited doctrines to make this dete rmination.

4 E.g.

, Saurabh Vishnubhakat

, Arti K. Rai , Jay P. Kesan, Strategic Decision Making in Dual PTAB and District Court Proceedings

, B ERKELEY T ECH , L.J. ( fort hcoming 2016 ) (manuscript 15)

, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=27310 02

.SHAW INDUSTRIES GROU P v. AUTOMATED CREEL SYST EMS 8

III

T he Board should, at a minimum, provide a re asoned basis how or why ground s are “redundant.” T he PTO claims the Board’s statement here refers to eff i ciency

concerns , b ut i n failing to clearly articulate the basis of its decision , the Board’s final written decision fails to satisfy its obligations under the A P A. Regar d less of the review ability of that decision, the lack of a reasoned basis d eprives future tribunals of the nece s sary basis to determine whether estoppel should a p ply. T he 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).