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

______________________ AXONICS, INC., Appellant

v.

MEDTRONIC, INC., Appellee

______________________

2022

- 1532, 2022

- 1533

______________________ Appeals from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No s . IPR2020

- 00680, IPR2020

- 00712.

______________________
Decided: August 7, 2023

______________________
A

ARON M ATTHEW N ATHAN , Tensegrity Law Group LLP, McLean, VA, argued for appellant. Also represented by A ZRA H ADZIMEHMEDOVIC , S AMANTHA A. J AMESON , S TEPHEN S HAHIDA ; W ILLIAM P. N ELSON , M ATTHEW D. P OWERS , Redwood Shores, CA.

N AVEEN M ODI , Paul Hastings LLP, Washington, DC, argued for appellee. Also represented by Q UADEER A HMED , C HETAN B ANSAL , S TEPHEN B LAKE K INNAIRD , A LEXA L OWMAN

.

______________________ Case: 22-1532 Document: 47 Page: 1 Filed: 08/07/2023AXONICS , INC

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Before L OURIE , D YK , and T ARANTO , Circuit Judges

. D YK , Circuit Judge.
Appellant Axonics, Inc. appeals two i nter p artes r eview (“IPR”) determinations. T he Patent Trial and Appeal Board held , in relevant part, that Axonics had failed to show that claims 1, 5, and 9 of U.S. Patent No. 8,457,758 (“’758 patent”) and claims 3

– 6, 9

– 12, and 15

– 18 of U.S. Pa tent No. 8,738,148 (“’148 patent”)

, in patents owned by Med tronic, Inc., were unpatentable as anti cipated or obvious . In each f inal w ritten d ecision, the Board adopted a claim construction first presented in the p atent

o wner ’s r esponse after the institution decision and declined to consider Axonics’ reply arguments and evidence under the new claim construction

. We hold that the Board’s refusal to consider the n ew arguments and evidence was erroneous, and we vacate and remand for the Board to consider the merits of Axonics’ responsive arguments and evidence under the new claim construction

. B ACKGROUND

I

The ’758 and ’148 patents , which share a specification,relate to the transcutaneous (i.e., through the skin) charging of implanted medical devices. This charging occurs by inductive coupling, whereby energy is transferred between a primary coil in the external charger and a secondary coil in th e implanted device when the two coils are placed in proximity to each other. The patents seek to improvecharging efficiency by automatically varying the power output of the external charger based on various measured parameters of the current passing thro ugh the implanted device. For example, in one embodiment, the charger would decrease its charging power “if the voltage across rechargeable power source 24” in the implanted device is over 4.05 volts

, J.A. 242 (’7 5 8 patent, col. 21, ll. 56

– 5 7 ) Case: 22-1532 Document: 47 Page: 2 Filed: 08/07/2023AXONICS , INC

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(emphasis o mitted) ; the charger would also decrease its charging power i f the voltage is less than 4.05 volts but “the charging current through rechargeable power source 24 is over a current rate” of 50 milliamperes

, J.A. 242 (’7 5 8 patent, col. 21, ll. 63

– 64) (emphas is omitted)

. T he patent claims at issue here require the power of the external charger to be automatically varied based on (in the language of claim 1 of the ’758 patent) a “value associated with [the] current passing through [the] internal
power source ” a nd a “measure d current associated with [the] current passing through [the] internal power source.” J.A. 242 (’758 patent, col. 22, ll. 41

– 46). As discussed later, the parties have disagreed as to the meaning of these two clauses and whether a single disc losure, e.g., a measured charging current over 50 milliamperes, could satisfy both limitations. The parties agree that c laim 1 of the ’758 patent is representative:

1. A system for transcutaneous energy transfer, comprising:
an implantable medical device having componentry for providing a therapeutic output, said implantable medical device having an internal power source and a secondary coil operativelycoupled to said internal power source, said implantable medical device adapted to be implanted in a patient; and
an external power source having a primary coil, said external power source providing energy tosaid implantable medical device when said primary coil of said external power source is placed in proximity of said secondary coil of said implan table medical device and thereby generating a current, having a value, passing through said internal power source: Case: 22-1532 Document: 47 Page: 3 Filed: 08/07/2023AXONICS , INC

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wherein said external power source automaticallyvaries its power output based on a value associated with said current passing through said i nternal power source ; wherein said external power source automatically varies its power output based on a measured current associated with said current passing through said internal power source

. J.A. 242 (’758 patent, col. 22, ll. 25

– 46) (emphasis added)

. We refer to the two “wherein” limitations as the “value” limitation and the “measured current” limitation. 1

II

Axonics filed two IPR petitions challenging claims of the ’758 and ’148 patents as anticipated by three prior art references: Schulman (U.S. Patent No. 3,942,535)

, Fisch ell, 2 and Baumann (U.S. Patent No. 6,227,204)

. Given the parties ’ agree ment that claim 1 of the

1 Each challenged claim in this appeal includes (or depends from an independent claim that includes) two “wherein” clauses similar to those present in claim 1 of the ’758 patent, requiring the power of the external power source to be automatically varied (1) based on a “value” associated with the current passing through the internal power source, and (2) based on a specific kind of value, e.g., a “measured current,” J.A. 242

– 44 (’758 patent, claims 1, 5, & 9)

, a “signal,” J.A. 272

– 74 ( ’148 patent, claims 3, 9, & 15), or a “measured voltage,” J.A. 272

– 74 (’148 patent, claims 6, 12, & 18), associated with or proportional to the
current.

2 R.E. Fischell et al., A Long

- Lived, Reliable, Re chargeable Cardiac Pacemaker, in Advances in Pacemak er Technology 357

– 82 (M. Schaldach et al. eds. 1975). Case: 22-1532 Document: 47 Page: 4 Filed: 08/07/2023AXONICS , INC

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’758 patent is representative, we focus on the ’758 IPR and the treatment of claim 1 in that proceeding

. 3

In its p etition

, Axonics did not propose an express construction of any claim term. But in its claim chart s , the

p etition adopted a construction of the two “wherein” clauses, stating that “[i]t is .

. . clear th at the second wherein clause simply narrows the ‘value’ of the first

3 The ’758 petition challenged claims 1, 5, and 9 ( the only claims of the ’758 patent that Axonics still challenges on appeal ) as independently anticipated by Schulman, Fischell, and Baumann. The petit ion had originally challenged all of the claims of the ’758 patent (claims 1

– 12)

, but following the institution decision, Medtronic disclaimed claims 3, 7, and 11. The petition had also challenged claims 2, 4, 6, 8, 10, and 12 as anticipated by Baumann or obvious over a combination of Baumann and either Schulman or Fischell.

The ’148 p etition initially challenged all of the claims of the ’148 patent (claims 1

– 18) , but, following the institution decision, Medtronic disclaimed claims 1

– 2, 7

– 8, and 13

– 14. Axonics continues to challenge on appeal all of the remaining claims on the grounds asserted in the ’148 petition. T he petition , as relevant here, asserted anticipation grounds based on Schulman ( claims 3

– 6, 9

– 12, and 15

– 18 ) and Fischell (claims 3

– 4, 9

– 10, and 15

– 16) , but not Bau mann , and also challenged certain claims (5

– 6, 11

– 12, and 17

– 18) as obvious over a combination of Fischell and another reference, U.S. Patent No. 3,888,260 (“Fischell ’260 ” )

. Axonics continues to assert obviousness based on Fischell and Fischell ’260 for the ’148 patent . As to the obviousness ground, the same question as in the anticipation grounds is central

— whether the prior art reference (here, Fischell) discloses the two “wherein” limitations

. Case: 22-1532 Document: 47 Page: 5 Filed: 08/07/2023AXONICS , INC

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wherein clause to ‘measured current,’ and does not require a separate measurement.” J.A. 301 ( comparing the claim with Schulman); J.A. 317

– 18 ( same with respect to Fisch ell); see also J .A. 338 ( same with respect to Bau mann)

. Axonics thus adopted a “one

- input” claim construction under which both “wherein” limitations could be satisfied if the external power source automatically varied its power output using a single input based on the c urrent in the implanted device. Under the implicit one

- input claim construction , Axonics argued that Schulman, Fisch ell, and Baumann disclosed the two “wherein” limitations because each prior art reference disclosed varying the power output of an externa l charger based on some parameter of the current in the implanted device.

Medtronic filed a p reliminary r esponse to the p etition arguing that Axonics had failed to show that Schulman, Fischell, and Baumann disclosed an input anticipating the “wherein” limitations under the one

- input construction. In addressing Axonics invalidity arguments, Medtronicagreed that “the Board need not construe any terms because .

. . construction is unnecessary to resolve any u nderlying controversy.” J.A. 509

. Following the parties’ lead , the Board, in its i nstitution d ecision, agreed that “no term requires express construction.” J.A. 609. Indeed, the Board explicitly noted that “Patent Owner does not yet dispute Petitioner’s contention that the measured current limitation only narrows the [value] limitation.” J.A. 621

. On the merits of Axonics’ invalidity arguments under the one

- input construction, the Board found Axonics had shown a reasonable likelihood of prevailing and granted institution.

After the Board’s i nstitution d ecision, Medtronic, i n its

p atent o wner r esponse, for the first time advanced a claim construction that each of the two “wherein” clauses in the challenged independent claims required a separate input Case: 22-1532 Document: 47 Page: 6 Filed: 08/07/2023AXONICS , INC

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(wh at we will refer to as the “two

- input” construction). Under the two

- input construction, a “measured current” that satisfied the second “wherein” clause could not also qualify as a “value” for purposes of the first “wherein” clause. In other words, the fi rst “wherein” clause required a second “value,” other than the value of the “measured current” of the second “wherein” clause. Arguing almost exclusively

u nder the two

- input construction, Medtronic contended that the p etition had not identified two separa te inputs in any of the prior art references. In some respects , Medtronic went further and argued that Ax onics could not have made such a showing, because the prior art reference s in fact did
not teach two separate inputs. 4 Unlike the preliminary response, t he final response largely abandoned the argument that the p etition had failed to show the prior art references satisfied the one

- input construction.

In Axonics’ r epl y , it continued to defend the one

- input construction . Bu t Axonics also argued , under Medtronic’s
new two

- input construction, that each of Schulman, Fisch ell, and Baumann disclosed two separate inputs that would satisfy the two “wherein” limitations

. In support, Axonics submitted a s upplemental e xpert d eclarat ion. Both the r epl y and the s upplemental e xpert d eclaration cited additional disclosures in the prior art references pertaining to the same embodiments relied on in the p etition.

Medtronic filed a s ur

- r epl y continuing to argue the prior art references did not disclose two separate inputs and also arguing it would be prejudicial for the Board to

4 For example, Medtronic argued that “Schulman teaches that the magnetic output signal is used as the sole input used to regulate the external power source.” J.A. 713; see also J.A. 715 (“Indeed, Fischell teaches that it is this frequency modulated signal that is used as the sole input to regulate the external power source.”). Case: 22-1532 Document: 47 Page: 7 Filed: 08/07/2023AXONICS , INC

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consider Axonics’ new reply arguments without providing Medtronic an opportunity to submit its own s upplemental

e xp ert d eclaration

. Medtronic did not seek leave to submit

a s upplemental e xpert d eclaration in support of its s ur

- r epl y

. III

In the f inal w ritten d ecision, the Board adopted the
two

- input construction, concluding that the one

- input construction would have r endered the first “wherein” limitation superfluous. The Board then refused to consider Axonics ’ anticipation arguments and evidence under the
two

- input construction

. 5 The Board found that Axonics had not identified anywhere in the p etition that the two

input anticipation arguments had originally been made and , for that reason, considered them to be improper reply arguments. The Board explained that, before filing the petition, “Petiti oner had an adequate opportunity to assess the ’758 patent and to understand that it disclosed support for two separate measurements, but failed to do so.” J.A. 36. Although the Board agreed that “Petitioner may respond to arguments raised in the Patent Owner Response in its Reply,” the Board concluded that a r eply “maynot offer an entirely new rationale based on a new combination of elements in the asserted references to show unpatentability based on what amounts to a new ground not set forth in the Pet ition.” J.A. 36

. Axonics appeals . We have jurisdiction under 35 U.S.C. § 141(c) and 28 U.S.C. § 1295(a)(4)(A).

5 I n the ’148 IPR , the Board declined to consider Ax onics obviousness arguments on the same grounds. Case: 22-1532 Document: 47 Page: 8 Filed: 08/07/2023AXONICS , INC

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D ISCUSSION On appeal, Axonics does not argue the Board erred in adopting the two

- input claim construction, only that the Board erred in refusin g to consider Axonics’ reply arguments and evidence under the two

- input construction.

We review a determination by the Board that , under the Board’s own regulations, a party exceeded the scope of a proper reply for abuse of discretion. Apple Inc. v. Andre a Elec tronic s Corp. , 949 F.3d 697, 705 (Fed. Cir. 2020). “An abuse of discretion is found if the decision: (1) is clearly unreasonable, arbitrary, or fanciful; (2) is based on an erroneous conclusion of law ; (3) rests on clearly erroneous fact finding; or (4) involves a record that contains no evidence on which the Board could rationally base its decision.” Er icsson Inc. v. Intellectual Ventures I LLC , 901 F.3d 1374, 1379 (Fed. Cir. 2018) (citation omitted)

. We review the Board’s compliance with the pro cedural requirements of the Administrative Procedure Act (“APA”) de novo. Sirona Dental Sys. GmbH v. Institut Staumann AG , 892 F.3d 1349, 1352 (Fed. Cir. 2018) ; 5 U

. S

. C

. § 706(2)(D) ( “ The reviewing court shall .

. . hold unlawful and set aside agency action, findings, and conclusions found to be .

. . without observance of procedure required by law. ” )

. A n IPR is an expedited administrative procedure, driven by the invalidity theories presented in a petition. As the Supreme Court has explained, “ t he petitioner’s petition

. . . is supposed to guide the life of the litigation [in an IPR proceeding ].” SAS Inst., Inc. v. Iancu , 138 S. Ct. 1348, 1356 (2018). By creating the IPR procedure, “Congress chose to structure a process in which it’s the peti tioner .

. . who gets to define the contours of the proceeding.” Id. at 1355. An IPR proceeds “in accordance with or in conformance to the petition,” id. at 1356 (internal quotation marks , modification, and citation omitted), and “the petitioner’s Case: 22-1532 Document: 47 Page: 9 Filed: 08/07/2023AXONICS , INC

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conten tions .

. . define the scope of the litigation all the way from institution through to conclusion,” id. at 1357.
Under the statute, a petition is required to identify “in writing and with particularity .

. . the grounds on which the challenge to each claim is based, and the evidence that supports the grounds for the challenge to each claim.” 35 U.S.C. § 312(a)(3); see also Intelligent Bio

- Sys., Inc. v. Illumina Cambridge Ltd. , 821 F.3d 1359, 1369 (Fed. Cir. 2016). A ccording to patent office guidance, a petitioner “may not submit new evidence or argument in reply that it could have presented earlier, e.g. to make out a prima facie case of unpatentability.” U.S. Patent Trial and Appeal Board, Consolidated Trial Practice Guide 73 (Nov. 2019).

However , u nder the Board’s rules and consistent with the Supreme Court’s decision in SAS

, a petitioner is entitled to respond to new arguments made in a patent owner
response

. The rules provide that the petitioner may “respond to arguments raised in the correspondi ng opposition,patent owner preliminary response, or patent owner response.” 37 C.F.R. § 42.23(b). “As we have regularly held,the petitioner in an inter partes review proceeding may introduce new evidence after the petition stage if the evidence is a le gitimate reply to evidence introduced by the patent owner.” Apple , 949 F.3d at 706

– 07 ( internal quotation marks and citation omitted ).
The Board’s rules do not address the specific question presented here: whether, where a patent owner offers a new claim construction for the first time in its response after the institution decision, a petitioner may introduce new arguments and evidence in reply under the newly proposed claim construction. There is no rule, for example, requiring a petition to describe all possible or reasonable claim constructions and to present invalidity theories under those constructions. Case: 22-1532 Document: 47 Page: 10 Filed: 08/07/2023AXONICS , INC

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In a formal adjudication under the APA , such as an IPR proceeding, the Board must inform the parties of “the matters of fact and law asserted,” 5 U.S. C. § 554(b)(3), and “give all interested parties opportunity for .

. . the submission and consideration of facts [and] arguments ,” id. § 554(c)

. The Board must also permit parties “to submit rebuttal evidence, and to conduct such cross

- examination
as may be required for a full and true disclosure of the facts

. ” I d. § 556(d) ; s ee Fanduel, Inc. v. Interactive Games LLC , 966 F.3d 1334 , 1339 (Fed. Cir. 2020). Thus, i n an IPR proceeding , “the Board must base its decision on arguments that were advanced by a party, and to which the opposing party was given a chance to respond.” Rovalma, S.A. v. Bohler

- Edelstahl GmbH & Co. KG , 856 F.3d 1019, 1027 (Fed. Cir. 2017) (citation omitted)

. Despi te the Supreme Court’s admonition in SAS that the petition “is supposed to guide the life of the litigation,” 138 S. Ct. at 1356, w e have specifically held that, under theAPA, it is permissible for the Board to adopt a new construction , proposed either by the patent owner or by the Board itself, in a final written decision

. 6 But before t he

6 See WesternGeco LLC v. ION Geophysical Corp.

,889 F.3d 1308, 1328 (Fed. Cir. 2018) (“[T]he Board was permitted to issue a new construction in the final written decision given that claim construction was a disputed issue during the proceedings

. . . [and] is not bound to adopt either party’s preferred articulated construction of a disputed claim term.”) ; Praxair Distribution, Inc. v. Mallinckrodt Hospital Prods. IP Ltd. , 890 F.3d 1024, 1034 (Fed. Cir. 2018) (affirming the Board’s decision to adopt a claim c onstruction for the first time i n the final written decision where “the parties litigated the meaning and relevance of the [disputed] term .

. . and the Board resolved the Case: 22-1532 Document: 47 Page: 11 Filed: 08/07/2023AXONICS , INC

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Board decides a case under a construction adopted after the institution decision , it must give a petitioner an opportunity to respond to the new construction , whether that construction was first proposed by the patent owner or the Board

. 7

In this c ourt’s decision in SAS , both parties had agreedto the claim construction adopted by the Board in the institution decision, but the Board, without notice , adopted a different construction in the final written decision. SAS Inst., Inc. v. ComplementSoft, LLC , 825 F.3d 1341, 135 1 (Fed. Cir. 2016), rev’d on other grounds sub nom

. SAS Inst., Inc. v. Iancu , 138 S. Ct. 1348. We rejected the Board’s reasoning that its approach was permissible “because [the petitioner] could have made construction arguments for the term in its IPR pet ition

, ” i d.

, a justification similar to the

one adopted by the Board in this case. See J.A. 36 (“Petitioner had an adequate opportunity [before filing its petition] to assess the ’758 patent and to understand that it disclosed support for two separate mea surements, but failed to do so.”). In SAS , w e held that, u nder the APA

, the Board “may not change theories midstream ” by adopting a different claim construction in the final written decision than that adopted in the institution decision “ without

issue in [ the petitioner’s] favor”)

. In general, “we have encouraged the Board to c hange its view of the merits after further development of the record [following an institution decision] if convinced its initial inclinations were wrong

. ” Fanduel , 966 F.3d at 1340

– 41 (Fed. Cir. 2020) ( internal quotation marks, modification, and citation omitted ).

7 If the ultimate construction adopted in the finalwritten decision is sufficiently similar to a construction disputed by the parties, the Board need not give t he parties prior notice of the exact construction the Board adopts

. See WesternGeco , 889 F.3d at 1328

. Case: 22-1532 Document: 47 Page: 12 Filed: 08/07/2023AXONICS , INC

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giving re spondents reasonable notice of the change and the opportunity to present argument under the new theory.” SAS , 825 F.3d at 1351 ( internal quotation marks and citation omitted)

. Following the Supreme Court’s SAS decision

— which reversed our SAS decision solely on the ground that theBoard could not institute on only some of the claims challenged in the petition

— we have continued to recognize that a petitioner is entitled under the APA to respond to new claim construction arguments made by a pate nt owner or adopted by the Board sua sponte and that both parties are entitled to respond to a new construction adopted by the Board sua sponte after an institution decision

. In that connection, we have continued to cite as authority our earlier SAS decis ion.

In Ericsson
, after the Supreme Court’s SAS decision, we again addressed a new construction proposed for the first time in a p atent owner response. 901 F.3d at 1378. In its institution decision, following the parties’ lead, the Board construed the relevant claim terms under the “broadest reasonable interpretation ” standard. Id. at 1378

– 79. For the first time in the p atent o wner r esponse, because the patent had expired, the p atent o wner proposed a different construction under the stan dard set forth in Phillips v. AWH Corp. , 415 F.3d 1303 (Fed. Cir. 2005) (en banc). 8 In the f inal w ritten d ecision, the Board adopted the

8 Ericsson was decided before the U.S. Patent and Trademark Office adopted the Phillips standard for all IPR proceedings. See 37 C.F.R. § 42.100(b); Ch anges to the Claim Construction Standard for Interpreting Claims in Trial Proceedings Before the Patent Trial and Appeal Board , 83 Fed. Reg. 51,340 (Oct. 11, 2018). Even b efore that revision, the Phillips standard applied in IPR Case: 22-1532 Document: 47 Page: 13 Filed: 08/07/2023AXONICS , INC

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new claim construction under the Phillips standard but refused to consider portions of p etitioner’s r eply containing arguments and evidence under the newly proposed claim construction

, explaining “that the reply is not an opportunity for Petitioner to identify, for the first time, new and differe nt prior art elements that are alleged to satisfy the claim requirements.” Id. at 1379 (internal quotation marks and citation omitted).
We vacated, disagreeing that the p etitioner’s reply arguments were improper, in part because “the significance of [the arguments in the Petition] arose after the Petitionwas filed, in that the Board adopted a different construction of the [relevant] terms after the Petition instituting inter partes review was granted.” Id. at 1380. W e held
t hat , under the APA, the p etit ioner “should have beengiven an opportunity to respond” to the new claim construction in its r eply

. Id. We conclud ed that “[i]n light of [the] changed circumstances [regarding the correct claim construction] , the Board revisited its approach to the clai ms in light of this error , and [the p etitioner] likewise deserved an opportunity to do the same

. ” Id. Similarly, in Hamilton Beach Brands, Inc. v. f’real Foods LLC

, relying on our earlier decision in SAS , we concluded, again, that a petitioner is entitled to respond to a new claim construction. 908 F.3d 1328 (Fed. Cir. 2018). There, a s here, prior to institution

, neither party had proposed an express construction of the relevant terms, andthe Board instituted under the parties’ implicit understanding of the terms. Id. at 1335. After institution t he patent owner response proposed a new construction, which the Bo ard adopted in its final written decision. Id. Citing

proceedings concerning exp ired and soon

- to

- be

- expired patents

. See Changes to the Claim Construction Standard , 85 Fed. Reg. at 51,341. Case: 22-1532 Document: 47 Page: 14 Filed: 08/07/2023AXONICS , INC

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our SAS decision, w e reiterated the rule that, under the APA, the Board cannot adopt a new claim construction without giving the petitioner an opportunity to respond. Id. at 1338. But we held that t hose requirements had been met because the petitioner was able to respond in its r eply and at oral argument to the construction proposed in the

p atent o wner r esponse. Id. at 1338

– 39.

In Qualcomm Inc. v. Intel Corp.

, we again relied on our SAS decision and held that, under the APA, parties in an IPR must be permitted to respond to a new claim construction adopted by the Board sua sponte after the institution decision. 6 F.4th 1256, 1263 (Fed. Cir. 2021) . There, through the oral argument before the Board

, the parties had proceeded under a shared understanding of the relevant claim term. Id. at 126 1

– 6 2. In the f inal w ritten d ecision, without providing any notice or opportunity to respond , the Board adopted a new claim construction. Id. at 1262

. T he patent owner appealed. Relying on our decision in SAS

, we h eld that, because the Board’s construction in the f inal w ritten d ecision “diverged from the agreed

upon” construction of the parties

, the Board needed to provide notice and an adequate opportun ity to respond

. Id. at 1263. 9

We think this case falls squarely within the rule of SAS

, Eric s son , Hamilton Beach , and Qualcomm : that , under the APA, when the Board adopts a new claim construction following institution, a n IPR petitioner must have

9 Compare TQ Delta, LLC v. DISH Network LLC

, 929 F.3d 1350, 1356 (Fed. Cir. 2019) (affirming where the Board adopted a claim construction in the f inal w ritten d ecision after having not adopted any construction in the i nstitution d ecision, because the complaining party “had notice of the claim construction issue and the opportunity to be heard” (citing Hamilton Beach , 908 F.3d at 1339)). Case: 22-1532 Document: 47 Page: 15 Filed: 08/07/2023AXONICS , INC

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adequate notice and an opportunity to respond under the new construction

. In particular, t he p etitioner must be afforded a reasonable opportunity in reply to present argument and evidence under that new construction. 10 Here, Axonics was not afforded that opportunity. Although the Board considered Axonics’ arguments against the new claim construction, it refused to consider Axonics’ evidence and argument under that construction.

That is not to say a petitioner may rely on new prior

a rt in response to a new claim construction presented in the patent owner response. We have held that a petitionermay not in reply rely on new prior art to teach a claim limitation. See Intelligent Bio

- Sys. , 821 F.3d at 1369 (holding a reply brief and de claration exceeded the proper scope for a reply because they cited “a number of non

- patent literature references which were not relied upon to support unpatentability in the Petition”). But that is not the situation

10 Medtronic argues on appeal that Axonics “clearly anticipated” the two

- input claim construction and should have presented argument and evidence under the construction in the petition . Appellee’s Br. 1. The Board made no finding that Axonics clearly anticipated the two

- input construction in the petition

. See SEC v. Chenery Corp. , 318 U.S. 80, 95 (1943) (“[A] n administrative order canno t be upheld unless the grounds upon which the agency acted in exercising its powers were those upon which its action can be sustained. ”). There is, moreover, no support for a rule that would create challenges including line

- drawing and unworkability probl ems and consistency with the regulation that governs the content of a petition, which does not direct a petitioner to raise, address, and apply alternativepossible constructions, but instead requires a petitioner affirmatively to state “[h]ow the challeng ed claim is to be construed.” 37 C.F.R. § 42.104(b)(3). Case: 22-1532 Document: 47 Page: 16 Filed: 08/07/2023AXONICS , INC

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here: Axonics did not rely on new prio r art in its reply. Weleave for another day the question of whether, when presented with a new claim construction, a petitioner can relyin its reply on new embodiments from the prior art references that were relied on in the petition. See Apple , 949 F. 3d at 706 (concluding, in a case where there had not beena changed claim construction, that petitioner’s reply arguments did not exceed the scope of a proper reply because those arguments did not cite new embodiments or new prior art). Here, Axonics, in the reply, relied on the same embodiments as it relied on in the petition.

B arring argument and evidence in a reply directed to a new claim construction proposed by the patent owner would create opportunities for sandbagging by the patent owner in order to create an estoppel. A patent owner hasthe opportunity in a preliminary response to oppose institution on the ground that the claim construction relied on by the petitioner is incorrect, and the Board may adopt the patent owner’s proposed claim c onstruction and deny institution if the petition fails to demonstrate a reasonable likelihood that a claim would be unpatentable under the correct claim construction. See 35 U.S.C. § 314(a). The result would be that there would be no institution and no e stoppel pursuant to 35 U.S.C. § 315(e). But if instead of raising the issue in a preliminary response, a patent owner sit s on its strongest claim construction arguments before institution and then raise s them in response after institution

, a patent owner could obtain a favorable final IPR decision and an estoppel without the Board ’s reaching the merits of any invalidity arguments under the newly adopted claim construction. Indeed, Medtronic admitted in this appeal that the Board’s approach below would all ow Case: 22-1532 Document: 47 Page: 17 Filed: 08/07/2023AXONICS , INC

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for such sandbagging. 11 We are reluctant to adopt a construction of the APA and the Board’s rules that would permit such gamesmanship.

Medtronic argues that it is unfair to permit a new expert declaration to be submitted with a reply, because a patent owner is not permitted to submit a supplemental declaration in sur

- reply. See 37 C.F.R. § 42.23(b) (“A sur

reply .

. . may not be accompanied by new evidence other than deposition transcripts of the cross

- examination of any reply witnesses.”)

. But the Bo ard “may waive or suspend” such requirements in appropriate cases. See id. § 42.5(b). Indeed, while t he Board here recognized that declarations are not “typically” permitted with sur

- replies, it also noted Medtronic had not asked for leave to submit an a dditional expert declaration in this case. J.A. 37 n.7. We are confident that in circumstances such as these, the Board willallow an appropriate opportunity for a patent owner to submit evidence with a sur

- reply.

C ONCLUSIONWe hold that where a patent owner in an IPR first proposes a claim construction in a patent owner response, a petitioner must be given the opportunity in its reply to argue and present evidence of anticipation or obviousness

11 The Court: “ But isn’t there a risk here of sandbagging, that you realize there’s a good claim construction argument, [and] you leave it out of your preliminary response. If you argued it in your p reliminary response, then maybe institution would be denied and there would be no estoppel. But if you hold back on the argument andwait to make it until the response, then you get the estoppel. Isn’t there a risk of that? ” Medtronic ’s counsel : “ Certai nly, your honor, there is a risk of that

. . . .” Oral Arg. at 14:24

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under the new construction , at least where it relies on thesame embodiments for each invalidity ground as were relied on in the petition

. W e vacate the Board’s decisions in these IPRs and remand for the Board to consider Axonics ’ arguments and evidence under the two

- input claim constr uction and, correspondingly, to consider any request by Medtronic to present new evidence in support of its s ur

r eply

. VACATED AND REMANDED

C OSTS
C osts to Axonics

. Case: 22-1532 Document: 47 Page: 19 Filed: 08/07/2023