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IP Alert: List of PTAB Sanctions Under 37 CFR § 42.12(b) Is Non-Exhaustive

October 1, 2020

On September 25, in Apple Inc., v. Voip-Pal.com Inc., the Federal Circuit ruled that the Patent Trial and Appeal Board (PTAB) did not commit an Administrative Procedures Act (APA) violation when it issued a sanction not explicitly listed under 37 CFR § 42.12(b).

Voip-Pal sued Apple for infringement of two patents in February 2016. Apple initiated two IPR proceedings against Voip-Pal on several claims of the patents in June 2016. During the IPR proceedings, Voip-Pal former Chief Executive Officer Dr. Thomas E. Sawyer sent six letters to various parties that included members of Congress, the president, federal judges, and administrative patent judges at the PTAB. However, Dr. Sawyer did not send copies of these letters to Apple.

Apple moved for sanctions against Voip-Pal and argued that the APA and Apple’s due process rights were violated by Dr. Sawyer’s ex parte communications with the PTAB and the USPTO. Apple requested that PTAB sanction Voip-Pal by entering adverse judgment against Voip-Pal or, alternatively, by vacating the final written decisions and assigning a new panel of judges. The PTAB then entered a final written decision partially in favor of Voip-Pal. Apple then appealed, but the Federal Circuit stayed the appeals and remanded the cases to the PTAB to consider Apple’s sanction motions. The PTAB then determined that the ex parte communications of Dr. Sawyer were sanctionable. Instead of granting Apple’s request for an adverse judgment, the PTAB “fashioned its own sanction.” This sanction provided that a new panel of PTAB judges would preside over Apple’s petition for rehearing, a sanction that the PTAB stated “achieves the most appropriate balance when considering both parties’ conduct as a whole.” After the parties proceeded to panel rehearing briefing, the PTAB denied Apple’s petition for rehearing, reasoning that Apple had “not met its burden. . . .” Apple then moved the Federal Circuit to lift the stay.

On appeal, Apple argued that the PTAB’s sanctions order and denial of rehearing violated the APA and Apple’s due process rights “when the [PTAB] imposed non-enumerated sanctions for Voip-Pal’s ex parte communications.” In particular, Apple argued that PTAB had “exceeded its authority under its own sanction regulations” under 37 CFR § 42.12(b) by issuing a sanction that is “not explicitly provided by Section 42.12(b).” The court rejected Apple’s argument and reasoned that the use of the term “include” in Section 42.12(b) “signifies a non-exhaustive list of sanctions, . . . [which is] consistent with the context of the [PTAB’s] sanctioning regime” and further, in the plain reading of Section 42.12(b), “allows the [PTAB] to issue sanctions not explicitly provided in the regulation.” As such, the court held that PTAB ”did not commit an APA violation when it issued a sanction not explicitly listed under Section 42.12.”

Moreover, the Federal Circuit reiterated that a sanction that would terminate a party’s patent rights “should be used as a weapon of last . . . resort” and that “[a]s long as the tribunal’s choice falls within a reasonable range, it cannot constitute an abuse of discretion.”

This case is significant to Fitch Even’s PTAB clients because it confirms that the PTAB has some discretion to enter sanctions not specifically enumerated in the rules. The case further confirms that case-terminating sanctions should be rarely applied.

For more information, please contact Fitch Even attorney Jennifer V. Suarez, author of this alert.

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