PTAB Strategy: Balancing the Sandbagging

by Dennis Crouch

The Federal Circuit’s recent Axonics decision reflects an ongoing tension between IPR petitioners and patent owners concerning litigation strategies and procedural fairness. A prevalent patentee strategy aims to force the petitioner to lock in specific arguments, only to provide a game-changing response later on.

In Axonics, the patentee offered a new claim construction proposal in its post-institution response. On appeal, the Federal Circuit determined that it was only just, and mandated by the APA, for the petitioner to present new responsive arguments and evidence in its reply briefing. Additionally, the court suggested that the patentee should then have the opportunity to submit further evidence in a sur-reply. The PTAB had adopted the patentee’s claim construction proposal and refused to consider Axonics reply arguments and evidence — finding them to represent improper new arguments.  The Federal Circuit vacated that decision and sent the case back down for reconsideration.

Sandbagging Risk and the Need for Balance

In his opinion for the court, Judge Dyk quotes from the oral argument transcript after getting an admission from Medtronic’s attorney (Naveen Modi from Paul Hastings) that the PTAB approach risks sandbagging by the patentee:

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 preliminary response, then maybe institution would be denied and there would
be no estoppel. But if you hold back on the argument and wait to make it until the response, then you get the estoppel. Isn’t there a risk of that?”

Medtronic’s counsel: “Certainly, your honor, there is a risk of that . . . .”

Oral Arg. at 14:24–51.  Modi went on to explain that the risk could also affect the petitioner. The new rule permits the petitioner to provide an unreasonable initial claim construction, then present new evidence later if challenged. Here, the court explicitly concluded that petitioners are not bound to preemptively address all potential reasonable claim interpretations.

Important Caveats and Ongoing Questions

The case has some important caveats regarding what argument/evidence can be provided in reply.  The court made clear that a petitioner cannot raise entirely new prior art references in a reply to a patent owner’s response: “a petitioner may not in reply rely on new prior art to teach a claim limitation.”  And, the court refused to decide an intermediary question of whether the petitioner can rely upon “new embodiments” from the already presented prior art in order to counter a new claim construction proposal. “We leave for another day the question of whether, when presented with a new claim construction, a petitioner can rely in its reply on new embodiments from the prior art references that were relied on in the petition.”  That particular situation was not at issue because “Axonics, in the reply, relied on the same embodiments as it relied on in the petition.”

In essence, while a petitioner cannot introduce entirely new prior art references in a reply, it remains an open question whether new portions or embodiments from the same preexisting references can be cited to address a new claim construction proposed post-institution.

Striking a Middle Course

In this frame, the decision shows the Federal Circuit steering a middle course – allowing petitioners to respond to changed claim constructions with arguments tied to the same prior art, while prohibiting entirely new prior art in replies. Ongoing cases will likely continue to shape the precise boundaries between fair response and improper new arguments in this contentious field.

Citation: Axonics, Inc. v. Medtronic, Inc., 2022-1532 (Fed. Cir. Aug. 7, 2023) (opinion by Judge Dyk, joined by Judges Lourie and Taranto).

In July 2023, the same panel released a separate decision involving the same parties and also siding with the petitioner Axonics in holding that Board erred in its obviousness analysis by improperly framing the motivation-to-combine inquiry. [LINK]

The result: Although the Board sided with the patentee on the four challenged patents, the Federal Circuit vacated those holdings and given the petitioner another chance to prove its case. and See U.S. Patent Nos. 8,036,756, 8,457,758, 8,626,314, and 8,738,148.  As with most Medtronic patents, the inventions are super interesting. One set relates to implanting a neurostimulation lead and the second set relates to transcutaneous charging of implanted medical devices.