Federal Circuit Demonstrates Willingness to Rein in PTAB’s Onerous Idle Free Rules Regarding Claim Amendments

cafc1Patentees have been generally frustrated with the Board’s unwillingness to grant motions to amend. The Board’s Idle Free case, and its progeny, have added a number of requirements to a motion to amend that are above and beyond the simple requirements set forth in the IPR implementing statute. While the Federal Circuit has, generally, stated that the Board can, via decisions like Idle Free, define the characteristics of IPR proceedings, some of those requirements are beginning to fall by the wayside. Another requirement was knocked down by the Court today in Veritas Techs. v. Veeam Software (August 30, 2016). No longer must a patentee show that added claim elements in a motion to amend are, individually, inventive over the known prior art.  The Federal Circuit’s rebuke of the Board on this point  gives patentees more hope for future amendments.

The Veritas IPR involved a patent covering systems and methods for restoring computer data.  As a first line of defense, the patentee argued for a narrow claim construction in an effort to avoid the prior art.  That argument was rejected by both the Board and the Federal Circuit, with citation to the broadest reasonable construction claim construction standard.  As a second line defense, the patentee presented a conditional motion to amend which explicitly added the patentee’s claim construction argument to the claims.  The Board also rejected that motion, a ruling the Federal Circuit characterized as “based on its insistence that the patent owner discuss whether each newly added feature was separately known in the prior art.”  Specifically, the Board had faulted the patentee for discussing only “the newly added features in combination with other known features.”  The Federal Circuit held that position to be arbitrary and capricious and thus in violation of the Administrative Procedure Act.

Specifically, the Court found several instances in the record where the patentee (or its expert) explained that prior art systems did not contain the newly added features.  The Court could “not see how the Board could reasonably demand more from Veritas,” particularly in light of the “long line of Supreme Court and Federal Circuit cases (including KSR) which note “that novel and nonobvious inventions often are only a combination of known individual features.”  In light of that precedent, the Court “fail[s] to see how describing a combination is meaningfully different from describing what is new about the proposed claims, even in comparison to the unamended claims.”

As a final note, the Court explained the recent grant of en banc rehearing in In re Aqua Products (concerning the allocation of burdens in IPR amendment practice) did not affect the issue in this case.  The Court thus remanded instead of waiting for the decision in Aqua Products.

Federal Circuit Reverses Because PTAB Relied Upon Argument First Raised at Oral Argument

cafc1In a decision today from the Federal Circuit, in Dell Inc. v. Acceleron, LLC, 2015-1513, -1514 (March 15, 2016), involving US Patent No. 6,948,021, the PTAB was reversed because its Final Written Decision relied upon a new argument that was first raised by Petitioner in oral argument.

In the underlying IPR, the PTAB determined that claims 14-17 and 34-36 of the ‘021 patent had not been shown to be unpatentable, but determined that claims 3 and 20 were unpatentable. In today’s Federal Circuit decision, the Court affirmed the Board’s determination that claims 14-17 and 34-36 were not shown to be unpatentable, but reversed and remanded relative to the unpatentability determinations of claims 3 and 20.

With regard to claim 20, the Court took the Board to task for failing to give meaning to all of a claim’s terms. The claim term at issue requires a microcontroller with a connection to remotely poll a CPU module. Decision at 11. The Board’s construction, in effect, ignored the “remotely poll” limitation from the claim, meaning that the Board’s claim construction was unreasonable. Id. at 13.

The more groundbreaking aspect of the Court’s decision, however, relates to the Court’s remand of claim 3. The Court held that, because the argument upon which the Board relied was first identified by Petitioner in the oral argument, Patent Owner was denied a fair opportunity to respond to the basis of cancellation. Id. at 13. As such, the Board’s decision was vacated and remanded. This holding is interesting because previous PTAB Final Written Decisions relied upon new evidence and argument advanced for the first time in reply or on appeal, but the Court did not take issue with those PTAB decisions.

More specifically, Patent Owner argued in its Patent Owner response that the “caddies” required by claim 3 were not shown by the “articulating door” from the prior art, that was identified in the Petition. In its reply brief, Petitioner presented the new argument that the caddies were also shown in the prior art’s power-supply mounting mechanisms. At the oral hearing, Petitioner expanded on this argument, arguing that unlabeled “slides” from the prior art mounting mechanisms constituted the claimed caddies. In the Final Written Decision, the Board relied upon this new argument from the oral argument, determining that claim 3 was unpatentable based on the disclosure from the prior art of the slides.

The Court noted the statutory and regulatory bases for the requirement that the Board put a Patent Owner on notice of the bases upon which it determines a claim to be unpatentable. Id. at 13-14. In view of those requirements, “the Board denied [Patent Owner] its procedural rights by relying in its decision on a factual assertion introduced into the proceeding only at oral argument, after [Patent Owner] could meaningfully respond.” Id. at 14.

Because the oral argument does not provide Patent Owner with any opportunity to supply evidence, Patent Owner had no opportunity to comprehensively address this contention. In its Final Written Decision, the Board had dismissed Patent Owner’s argument that this “slide” argument was new, by concluding that Petitioner pointed to the “slides” in its reply. The Federal Circuit disagreed, finding that the key factual assertion was only specifically made at the oral hearing. Thus, in its holding, the Court pointed to the fact that Petitioner has not shown “that there can be no genuine factual dispute” on the issue of anticipation and, as such, vacated the Board’s cancellation of claim 3 remanded the case for further proceedings. Id. 

The Federal Circuit’s decision is a glimmer of hope for Patent Owners. The relatively unfettered discretion the Court has otherwise been affording the Board has (at least temporarily) been limited.

Federal Circuit Issues a Rare Reversal on Behalf of Patent Owner in IPR

cafc1Yesterday, the Federal Circuit decided five appeals from as many IPR’s filed by Patent Owner PPC Broadband involving claim construction issues, most of which were decided in PPC’s favor. In a first appeal (2015-1364) taken from IPR2013-00342, the court agreed with PPC and held that the Board’s construction of “reside around” was unreasonably broad because the Board selected the broadest of several dictionary definitions (in the immediate vicinity of; near) and disregarded the definition (encircle or surround) that was consistent with the context provided by the claims, the specification, and the patented technology. This holding can be particularly useful to Applicants during prosecution when Examiners applying BRI select the broadest dictionary definition of a claim term and ignore the definition that is consistent with Applicant’s use of the term. The court also rejected the Board’s conclusion that the claim term “reside around” should be interpreted to mean something other than “encircle or surround” since the claim preamble recited a different term “surrounded” than the claim term “reside around.” The court clarified that such differentiation is less applicable where, as here, the preamble merely sets forth the general nature of the claimed invention and is not used to limit the claim.

Nonetheless, Appellee-Petitioner Corning argued that the Board’s interpretation should be upheld because it covers many of PPC’s embodiments. PPC’s numerous claims of varying scope, disclosure of various embodiments, and consistent use of the term “around” in the patent came to PPC’s rescue. Citing these facts, the court rejected Corning’s argument that the broadest reasonable construction is the one that covers the most embodiments. Instead, the court emphasized that the BRI must be reasonable in light of the claims and specification and that the construction covering more embodiments than another does not render that construction reasonable.

In other consolidated appeals (2015-1361, 2015-1366, 2015-1368, and 2015-1369), while the court affirmed some and rejected some of the Board’s interpretations, the court offered guidance regarding objective considerations, particularly commercial success, which can help patent owner. PPC alleged, and presented multiple declarations in support, that its connectors are commercial embodiments of the claimed connectors. Corning did not dispute the allegation. Yet the Board found that PPC did not present persuasive evidence of commercial success. The court held that where, as here, the patentee has presented undisputed evidence that its product is the invention disclosed in the challenged claims, it is error for the Board to find to the contrary without further explanation, which was missing here. The court held that since the evidence shows that PPC’s connectors are the invention disclosed and claimed in the patent, it presumed that any commercial success of these products is due to the patented invention. The court noted that while such a presumption won’t apply in ex parte context, where the PTO cannot gather evidence supporting or refuting the patentee’s evidence of commercial success, it applies in contested proceedings like IPRs, where the petitioner has the means to rebut the patentee’s evidence.

Supreme Court to Review Two Key IPR Issues

8345487_sThe Supreme Court granted certiorari today on Cuozzo Speed Technology’s petition to review In re Cuozzo Speed Tech., 793 F.3d 1268 (Fed. Cir. 2015). Cuozzo presented two questions, and the Court has accepted both of them:

(1)   Whether the court of appeals erred in holding that, in IPR proceedings, the board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning.

(2)   Whether the court of appeals erred in holding that, even if the board exceeds its statutory authority in instituting an IPR proceeding, the board’s decision whether to institute an IPR proceeding is judicially unreviewable.

If the Supreme Court reverses the Federal Circuit’s decision on either of those two grounds, the impacts on future IPR proceedings could be huge. Although there are certainly patent claims that are invalid regardless of whether the “broadest reasonable interpretation” (“BRI”) or the plain and ordinary meaning (the so-called “Philips” construction) is used, there are also claims where the choice of standard is itself outcome determinative. There are, therefore, numerous patentees who should prefer Philips, and potential challengers who should prefer BRI.

Perhaps even more intriguing, however, is the possibility of a reversal on the second question presented: whether the decision to institute is so completely unreviewable as the Federal Circuit has held in (e.g.)Cuozzo or more recently Achates Pub’g. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015). Although the AIA lists a variety of situations in which IPR, PGR, and CBM are not available (35 U.S.C. §§ 315 and 325), the Federal Circuit has effectively insulated the PTAB’s decision to institute a trial from review. As such, even if the PTAB explicitly violates these statutory prohibitions, there is no mechanism by which the procedural defect can be remedied. A decision by the Supreme Court that 35 U.S.C. § 314(d) does not shield IPR institution decisions from review would dramatically shift the relative power balance between challengers and patentees in these AIA trial procedures. This blog will continue to follow this story as it develops.

PTAB Declines to Limit Claim Based on Disclosure of Only One Embodiment

29673420_s (1)The effect of the Broadest Reasonable Interpretation claim construction standard in inter partes review proceedings, forcing a decision that may be different than what could have been expected in district court litigation, has proven tangible in several PTAB decisions. For example, in K-40 Electronics, LLC v. Escort, Inc., IPR2013-00240, the Board construed the challenged claims broadly, despite the fact that the specification only disclosed a single embodiment that may have otherwise dictated a more narrow claim construction. The decision involved US Pat. No. 6,670,905, directed to the combination of a radar detector and location positioning device.  Decision at 3.

Of interest in this proceeding was the Board’s construction of the claim terms “interface connector” and “communication circuitry.”  Patent Owner argued that the two terms should be construed to require a circuit supporting a wired, digital connection – the only embodiment disclosed in the ‘905 specification. More specifically, Patent Owner argued that the claim should be interpreted to exclude wireless interfaces. Id. at 8.

Indeed, the specification did only articulate specific, wired standards: “The interface connector used by the receiver may take other forms than the known USB standard. It may use any computer interface standard (e.g., IEEE 488), or an automotive wiring standard, the J1854, CAN, BH12 and LIN standards, or others.”

Although only specific embodiments of wired connections were discussed, the Board disagreed with Patent Owner and declined to narrow the construction of the limitations-at-issue, focusing on the italicized language above. Specifically, because the specification suggests that “other” connections were contemplated, wireless connections were covered by the claims. Id. at 8.  Further, the Board noted that it will not read additional limitations into a claim unless a special definition is set forth the specification of the patent.  Accordingly, with no special definition present, the Board declined to limit the claim based on the disclosure of only one embodiment in the ‘905 specification. Id. at 9.