Baker Hughes Oilfield v. Hirshfeld

• Court: Court of Appeals for the Federal Circuit
• Decided: September 16, 2021
• Docket: 20-1932
• Status: Unpublished

Opinion

Case: 20-1932 Document: 58 Page: 1 Filed: 09/16/2021

NOTE: This disposition is nonprecedential.

United States Court of Appeals for the Federal Circuit ______________________

BAKER HUGHES OILFIELD OPERATIONS, LLC, Appellant

v.

ANDREW HIRSHFELD, PERFORMING THE FUNCTIONS AND DUTIES OF THE UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE, Intervenor ______________________

2020-1932 ______________________

Appeal from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No. IPR2019- 00158. ______________________

Decided: September 16, 2021 ______________________

KYRIE CAMERON, Patterson & Sheridan LLP, Houston, TX, argued for appellant. Also represented by JOHN HANSON BARR, JR.

PETER J. AYERS, Office of the Solicitor, United States Case: 20-1932 Document: 58 Page: 2 Filed: 09/16/2021

Patent and Trademark Office, Alexandria, VA, argued for intervenor. Also represented by THOMAS W. KRAUSE, WILLIAM LAMARCA, FARHEENA YASMEEN RASHEED. ______________________

Before MOORE, Chief Judge, PROST and STOLL, Circuit Judges. MOORE, Chief Judge. Baker Hughes Oilfield Operations, LLC (Baker), ap- peals a Patent Trial and Appeal Board final written deci- sion finding claims 1 and 7–23 of U.S. Patent No. 9,080,439 were anticipated and holding claims 1–23 would have been obvious. Innovex Downhole Sols., Inc. v. Baker Hughes Oil- field Operations, LLC, No. IPR2019-00158, 2020 WL 1862460 (P.T.A.B. Apr. 13, 2020) (Board Decision). We af- firm-in-part, vacate-in-part, and remand for further pro- ceedings. I The ’439 patent relates to a system for plugging a bore- hole in an oil or gas well. The system comprises a deform- able member and a tool operatively arranged to deform the deformable member. ’439 patent at Abstract. The tool in- cludes a disintegrable material so that it can later be cleared from the flow path without the need for time-con- suming and costly retrieval operations. Id. at 2:46–3:6. The patent’s written description states that the tool “could be any suitable tool or take any suitable form, e.g., a wedge, swage, shoulder, cone, ramp, mandrel, etc.” Id. at 2:26–30. Figure 1 below depicts an embodiment in which the tool 102 is a plug: Case: 20-1932 Document: 58 Page: 3 Filed: 09/16/2021

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Claim 1 recites: 1. A deformation system, comprising: a deformable member having a first set of dimensions; and a tool within the deformable member hav- ing at least a portion thereof operatively ar- ranged to impart a deforming force to the deformable member in order to deform the member from the first set of dimensions at which the deformable member is positiona- ble with respect to a structure to a second set of dimensions at which the deformable member engages with the structure, wherein at least the portion of the tool that imparts the deforming force at least par- tially comprises a disintegrable material responsive to a selected fluid. Innovex Downhole Solutions, Inc. (Innovex), petitioned for inter partes review (IPR) of claims 1–23 of the ’439 pa- tent. The Board instituted IPR, found claims 1 and 7–23 were anticipated by both U.S. Patent No. 5,709,269 (Head) and U.S. Patent No. 7,168,494 (Starr), and held claims 1–23 would have been obvious over various combinations of Head, U.S. Patent Pub. No. 2010/0139911 (Stout), U.S. Patent Pub. No. 2011/0132143 (Xu), and U.S. Patent Pub. Case: 20-1932 Document: 58 Page: 4 Filed: 09/16/2021

No. 2010/0294510 (Holmes). Baker appealed. Having set- tled with Baker, Innovex withdrew from the appeal. The Director intervened. We have jurisdiction under 28 U.S.C. § 1295(a)(4)(A). II The only issue Baker raises regarding the Board’s an- ticipation finding is whether the Board erred in construing the claim term “tool.” The Board construed this term as a means-plus-function limitation and held that the corre- sponding structure is “any suitable setting tool, a wedge, a swage, a shoulder, a cone, a ramp, a mandrel, a plug, and a dart.” Board Decision, 2020 WL 1862460, at *13. In the alternative, the Board held that even if “tool” were not a means-plus-function limitation, it would cover the same structures. Id. at *14. The patent’s written description supports the Board’s alternative construction. It states that “tool 102 could be any suitable setting tool or take any suitable form, e.g., a wedge, swage, shoulder, cone, ramp, mandrel, etc.” ’439 patent at 2:26–30. It further states that tool 102 can be “a plug or dart.” Id. at 2:34–37. Baker’s argument that those structures are mere compo- nents of tools, rather than tools themselves, is not persua- sive. Because we discern no error in the Board’s alternative construction, we affirm its determination that claims 1 and 7–23 were anticipated, and we do not reach whether “tool” is a means-plus-function limitation. III Baker next argues that the Board violated the Admin- istrative Procedure Act (APA) by changing its position re- garding obviousness without providing Baker reasonable notice and an opportunity to respond. We review de novo whether the Board’s procedures satisfy the APA, and we set aside Board decisions that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Sirona Dental Sys. GmbH v. Institut Straumann AG, 892 F.3d 1349, 1352 (Fed. Cir. 2018) (quoting 5 U.S.C. Case: 20-1932 Document: 58 Page: 5 Filed: 09/16/2021

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§ 706). The APA prohibits the Board from changing theo- ries midstream without giving reasonable notice of the change and an opportunity to present argument and evi- dence addressing the new theory. Belden Inc. v. Berk-Tek LLC, 805 F.3d 1064, 1080 (Fed. Cir. 2015). Because the Board violated this principle, we vacate the Board’s obvi- ousness determination as to claims 2–6. 1 Innovex’s IPR petition purported to assert three grounds of invalidity. In Grounds 1 and 2, Innovex argued claims 1 and 7–23 were anticipated by Head and Starr, re- spectively. J.A. 148–49. In Ground 3, Innovex argued claims 1–23 would have been obvious over any one of six distinct combinations of prior art: (1) Head in view of Xu, (2) Head in view of Holmes, (3) Starr in view of Xu, (4) Starr in view of Holmes, (5) Stout in view of Xu, and (6) Stout in view of Holmes. Id. Rather than analyze each proposed combination separately, however, the petition wove to- gether its arguments and evidence for all six combinations. See, e.g., J.A. 206 (“[A skilled artisan] would have a reason- able expectation of successfully fitting the teachings of Head/Starr/Stout and Xu/Holmes together like pieces of a puzzle.” (internal quotation marks omitted)). In its decision to institute IPR, the Board reasoned that Innovex showed a reasonable likelihood of success on Grounds 1 and 2. Innovex Downhole Sols., Inc. v. Baker Hughes Oilfield Operations, LLC, No. IPR2019-00158, 2019 WL 1749214, at *10, *13 (P.T.A.B. Apr. 15, 2019) (In- stitution Decision). Regarding Ground 3, however, which the Board construed as six separate grounds, the Board made clear it was instituting solely because “an inter partes review may not institute on less than all claims challenged in the petition.” Id. at *14 n.5 (citing SAS Inst., Inc. v.

1 Having affirmed the Board’s decision finding that claims 1 and 7–23 were anticipated, we do not reach the Board’s obviousness determination as to those claims. Case: 20-1932 Document: 58 Page: 6 Filed: 09/16/2021

Iancu, 138 S. Ct. 1348, 1359–60 (2018)). The Board ex- plained that, by muddling those grounds together, Innovex failed to “address with specificity any particular one of the six combinations of references it proposes.” Id. at *14. For example, the Board stated it was unclear “how the teach- ings of each particular combination [of] references . . . are mapped to the tool limitation.” Id. at *13. The Board fur- ther explained that “Petitioner lumps its arguments to- gether without clearly indicating why one of skill in the art would modify one particular reference based on the teach- ings of another particular reference.” Id. Accordingly, the Board stated it would not “sift through [Innovex’s] argu- ments and evidence in order to piece together its best ar- guments for each of its proposed combinations of references.” Id. at *14. But in its final written decision, the Board did just that. It devoted forty pages—the majority of its analysis—to parsing the different theories that Innovex confusingly lumped together in Ground 3. Board Decision, 2020 WL 1862460, at *32–49. The Board explained it “was able to discern Petitioner’s obviousness arguments, even if the Pe- tition was less focused than desirable.” Id. at *33. We hold that the Board’s conduct violated the APA. Despite instituting on Ground 3, the Board unequivocally stated it would not “sift through [Innovex’s] arguments and evidence in order to piece together its best arguments for each of its proposed combinations of references.” Institu- tion Decision, 2019 WL 1749214, at *14; see also id. at *14 n.5 (noting obligation under SAS to consider all challenges in the petition). Under the circumstances, it was reasona- ble for Baker to rely on the Board’s initial position. Other- wise, in its Patent Owner Response, Baker would need to use its allotted pages to rummage through Innovex’s peti- tion “to divine an obviousness theory.” J.A. 528. Baker’s sur-reply explains that Innovex’s attempt to detail its var- ious obviousness combinations in its reply “comes too late to rectify the initial lack of particularity.” J.A. 647. Case: 20-1932 Document: 58 Page: 7 Filed: 09/16/2021

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Moreover, in its sur-reply, Baker could not have offered new evidence on the new theories. 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 witness.”). Baker expressly requested an op- portunity to address those theories and adduce new evi- dence if the Board were inclined, contrary to its statements in the Institution Decision, to “sift through” the arguments and evidence in Ground 3. J.A. 649; Institution Decision, 2019 WL 1749214, at *14. 2 The Board ignored Baker’s re- quest and, without prior notice, did what it said it would not do, i.e., untangle the six separate obviousness theories wound together in Ground 3. Although the Board did in- stitute on Ground 3, as SAS required, given its statements in the Institution Decision, it needed to provide Baker rea- sonable notice of its changed position. See Belden, 805 F.3d at 1080. Because the Board failed to do so, it violated the APA. The Director argues that Baker had notice of the six obviousness combinations jumbled together in Ground 3. The question, however, is not whether Baker had notice of those combinations; it is instead whether Baker had notice that the Board would delve into their substance after stat- ing it would not. Under these unusual circumstances, the Board needed to provide adequate notice and an oppor- tunity for the submission of evidence regarding

2 Baker repeated this request at oral argument be- fore us. Oral Arg. at 33:10–30, 34:05–36, available at http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20- 1932_09012021.mp3 (“We would’ve liked the opportunity to have our expert offer opinions about those particular new mappings that were offered by the petitioner and any other evidence. There’s definitely a lot of evidence in the art that may have shown why these combinations were not susceptible to being combined . . . .”). Case: 20-1932 Document: 58 Page: 8 Filed: 09/16/2021

obviousness. Accordingly, we vacate the Board’s decision holding claims 1–23 would have been obvious. 3 IV Because the Board did not err in construing the claim term “tool,” we affirm its decision finding that claims 1 and 7–23 of the ’439 patent were anticipated. But because the Board violated the APA in holding claims 2–6 would have been obvious, we vacate that obviousness determination. On remand, the Board must afford Baker an opportunity to present additional arguments and evidence responding to the obviousness theories on which the Board relied. AFFIRMED-IN-PART, VACATED-IN-PART, AND REMANDED COSTS No costs.

3 We do not determine, at this stage, whether Inno- vex’s petition identified with particularity the evidence supporting the obviousness combinations on which the Board relied. See Intelligent Bio-Sys., Inc. v. Illumina Cambridge Ltd., 821 F.3d 1359, 1369 (Fed. Cir. 2016) (“It is of the utmost importance that petitioners in the IPR pro- ceedings adhere to the requirement that the initial petition identify with particularity the evidence that supports the grounds for the challenge to each claim.”); SAS Inst., 138 S. Ct. at 1356 (“[T]he petitioner’s petition, not the Di- rector’s discretion, is supposed to guide the life of the liti- gation.”).