USPTO Director Vacates PTAB Decision Over Expert Testimony Issues in U.S. Patent No. 11,488,451

USPTO Director Vacates PTAB Decision Over Expert Testimony Issues in U.S. Patent No. 11,488,451

Vacated PTAB Ruling on U.S. Patent No. 11,488,451 Highlights Importance of Credible Expert Testimony in IPR

In a significant decision issued on October 9, 2023, John Squires, Director of the U.S. Patent and Trademark Office, vacated a Final Written Decision from the Patent Trial and Appeal Board that had deemed all challenged claims of U.S. Patent No. 11,488,451 unpatentable due to obviousness. This revision followed a previous decision issued on October 1st, 2023, which granted Director Review and reversed the Board's ruling. The revised order has raised important questions regarding the role of expert testimony in inter partes review proceedings and the appealability of such decisions to the U.S. Court of Appeals for the Federal Circuit.

Patent Dispute and the Role of Expert Testimony

The case centres on the patentability of U.S. Patent No. 11,488,451, which was challenged through an IPR filed by Blackhawk Network Inc. The company argued that the patent was unpatentable as obvious based on a combination of two prior art references: Szrek and Llach. A critical component of this challenge was the expert testimony provided by Mr. Michael Hutton, an expert from Interactive Communications International, Inc.

In its initial ruling, the PTAB found that the claims of the '451 patent were unpatentable, crediting Hutton's testimony that a skilled artisan would have been motivated to combine the teachings of Szrek and Llach. However, Blackhawk Network Inc. raised concerns regarding the credibility of Hutton’s testimony, citing multiple contradictions in his statements.

The Alleged Contradictions in Expert Testimony

One of the pivotal issues raised by Blackhawk Network was the contradictory nature of Mr. Hutton’s testimony regarding how the two prior art references should be combined. Specifically, Hutton provided conflicting statements about whether a modified version of Szrek’s Figure 2, depicted in Exhibit 2050, accurately represented his proposal.

During cross-examination, Hutton first testified that the modified figure did not reflect his proposal, only to later reverse his stance and claim that it did. This inconsistency in his testimony was a central point in Blackhawk’s argument that the Board had abused its discretion by relying on Hutton’s testimony to support its finding of obviousness.

Director Squires’ Decision: Vacating the PTAB's Ruling

After considering Blackhawk Network's request for Director Review, Squires concluded that the PTAB had indeed abused its discretion in crediting Hutton’s testimony, which contained multiple material contradictions. Squires found that the Board had failed to appropriately assess the credibility of Hutton’s statements, particularly given that the PTAB itself had acknowledged issues with his explanation of how the prior art references were combined.

Key Reasons for Vacating the PTAB’s Decision

Squires’ decision to vacate the PTAB's ruling was based on the following key points:

Inconsistent Testimony: Squires emphasized that Hutton’s testimony was internally contradictory, which undermined its reliability as evidence in the IPR proceeding. Specifically, Hutton's conflicting statements about Exhibit 2050 and the modification of Szrek’s disclosure raised doubts about the accuracy of his analysis.

Credibility of Expert Witness: The decision further cited the lack of credibility in Hutton’s testimony regarding the motivation to combine the references. The Board had already acknowledged that Hutton’s explanation was not credible, which played a crucial role in vacating the PTAB’s Final Written Decision.

Legal Precedents: Squires cited previous case law, including the Federal Circuit’s decision in Finesse Wireless LLC v. AT&T Mobility LLC, which states that when a party relies on contradictory expert testimony, it may be deemed insufficient to meet the burden of proof. The decision also referenced N.L.R.B. v. Pittsburgh S.S. Co., which supports the principle that unreliable testimony on one issue can be disregarded when evaluating other related matters.

Implications of the Revised Order

While the decision to vacate the PTAB’s ruling has been welcomed by Blackhawk Network, it has raised questions about the broader implications of such actions, particularly concerning the appealability of the decision. The revised order, while it terminates the IPR proceeding, does not constitute a final written decision under 35 U.S.C. § 318(a), which means that it may not be subject to appeal under the typical provisions.

This aspect of the decision has drawn attention, with legal commentators noting that the USPTO may be using its discretion under Section 314(d) to issue policy-driven rulings that limit the ability of parties to appeal to the CAFC. As Dennis Crouch of Patently O suggests, this could signal a broader trend of the USPTO using its powers to shape policy outcomes in a way that may limit judicial review of its decisions.

Shift in PTAB Proceedings

Director Squires’ decision to vacate the PTAB’s ruling on the '451 patent marks a notable shift in how expert testimony is evaluated in IPR proceedings. By emphasizing the importance of credibility and consistency in expert analysis, the decision sends a clear message that contradictory or unreliable testimony will not be sufficient to uphold a finding of unpatentability.

This case also underscores the evolving role of Director Review in shaping the outcomes of patent disputes. While the decision to vacate rather than reverse the PTAB’s ruling raises important questions about its appealability, it also highlights the growing scrutiny of expert testimony in IPRs, which could have far-reaching consequences for future patent challenges.

As the legal landscape continues to evolve, stakeholders in the patent community will likely be paying close attention to the implications of this decision, particularly regarding its potential to influence the future handling of expert testimony and its impact on the broader patent policy debate.