Shaw Industries Group, Inc. v. Automated Creel Systems, Inc.

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).