Hunting Titan petitioned for an inter partes review (IPR) against DynaEnergetics’s patent for a perforating gun used when drilling for oil. In response, and as permitted in IPRs, DynaEnergetics argued against the challenges and exercised its option to submit proposed “substitute” claims. Quite successfully for Hunting Titan, the U.S. Patent Trial and Appeal Board (PTAB) found that Hunting Titan demonstrated that all claims of DynaEnergetic’s patent were invalid as anticipated by a prior art reference to Schacherer. It also held that the substitute claims were anticipated by the same Schacherer reference used to invalidate the original claims.

DynaEnergetic cried foul because it contended that Hunting Titan did not argue anticipation of the substitute claims based on that reference. Instead, Hunting Titan argued that the substitute claims were obvious, identifying as pertinent “several previously cited prior art references— including Schacherer—and [asserting] that each of these references discloses or teaches every claim limitation of the proposed substitute claims.” On that basis, DynaEnergetic convinced the USPTO to convene a “Precedential Opinion Panel” (POP) to address “[u]nder what circumstances and at what time during an inter partes review . . . the Board [may] raise a ground of unpatentability that a petitioner did not advance or insufficiently developed against substitute proposed claims in a motion to amend[.]”

The POP ruled in DyanEnergetic’s favor and reversed the PTAB's decision on the substitute claims, stating that “the better approach, in most instances, is to rely on the incentives the adversarial system creates, and expect that the petitioner will usually have an incentive to set forth the reasons why the proposed substitute claims are unpatentable,” while leaving open the possibility for the PTAB to sua sponte raise a ground of unpatentability, but “only . . . under rare circumstances.” Finding that Hunting Titan did not advance the anticipation ground based on Schacherer and that the rare circumstances were not present, the POP allowed issuance of the substitute claims after finding the obviousness presentation lacking.

The Federal Circuit affirmed the USPTO’s actions. In a seemingly contradictory explanation, the Federal Circuit disagreed that “the Board had an obligation to sua sponte identify patentability issues for a proposed substitute claim based on the prior art of record” while stating that its decision was narrow and did “not decide whether the Board has an independent obligation to determine patentability of proposed substitute claims.” The question decided—whether the Board could “confine the circumstances in which the Board should sua sponte raise patentability issues”—would seem to include as a predicate an “independent obligation” that can be “confined.” Further, the Federal Circuit noted that Hunting Titan did not preserve a challenge to how the POP applied its standard for when it would be appropriate for the Board to sua sponte raise patentability issues.

The practical effect of this decision is that petitioners in IPRs should raise all grounds to reject substitute claims rather than hope that the PTAB will raise grounds on their own accord. But there may be more action in this area of the law, especially considering the narrowness of the holding.