Wasica Decision Reinforces Federal Circuit Guidance on Claim Construction

The Federal Circuit’s recent decision in Wasica Finance v. Continental Automotive Systems touched on a number of well-worn patent issues, but this article focuses on a few key claim construction principles discussed by the CAFC, including that the contents of the specification are highly relevant when performing claim construction, and a claim generally will not be construed in a manner that renders recited terms meaningless or superfluous.

Wasica is the result of the CAFC consolidating two appeals based on two IPRs arising from petitions filed with respect to Patent Owner’s U.S. Patent No. 5,602,524 (“the ‘524 patent”). The claims at issue were directed, generally, to a system for measuring tire pressure. In the system, each tire included a pressure measuring device and a transmitter, and each transmitter transmitted pressure data to a corresponding receiver. A transmission from a transmitter to a corresponding receiver also included an “identification signal” for identifying the transmitter that sent the transmission. A receiver receiving the identification signal stored the identification signal and processed transmissions only from the corresponding transmitter.

As to the first claim construction issue, Patent Owner argued that the PTAB erred in determining that a particular pressure sensor disclosed by the prior art taught a “pressure measuring device” because the pressure sensor only output a binary signal that indicated whether a measured pressure is abnormal. Patent Owner argued that the recited pressure measuring device, when properly construed, must output a tire’s pressure as a numerical value, and that such a numerical value cannot be represented by a single bit of a binary signal. The CAFC sided with the PTAB and rejected the claim construction presented by Patent Owner. The CAFC relied, in part, on the ‘524 patent, itself, which identifies a family of European patents as including examples of manners in which a sensor of the ‘524 patent may output a pressure signal. The CAFC decided that the family of European patents identified by the ‘524 patent disclose switch-based (e.g., binary) pressure sensors and non-numeric pressure signals. The CAFC pointed out that, in accordance with previous decisions, the CAFC generally does not interpret claim terms in a manner that excludes examples disclosed in the specification. Id. at 13.

As to the second claim construction issue, Petitioners argued that the proper claim construction for the term “bit sequence,” from claim 9, was a sequence of “one or more bits.” Patent Owner argued that the plain meaning of “sequence” implies at least two elements. The PTAB agreed with Patent Owner, but on appeal, the CAFC disagreed. The CAFC explained that the recited element required “at least a 4 bit sequence” which included 4 constituent bit sequences, and thus, interpreting a “sequence” as requiring at least two bits would result in a minimum size of 8 bits for the “at least 4 bit sequence.” The CAFC determined that such an interpretation would essentially rewrite “at least 4 bits” from claim 9 to “at least 8 bits.” The CAFC explained that it is highly disfavored to construe terms in a way that renders them void, meaningless, or superfluous. Id. at 28. As further support for reversing the PTAB’s decision regarding the patentability of claim 9, the CAFC pointed to a portion of the ‘524 patent interpreted by the CAFC as disclosing an embodiment in which a bit sequence included a single bit, thereby contradicting the at-least-two-bit interpretation of “bit sequence” sought by Wasica Finance.

In the end, the Patent Owner and Petitioner both took home partial victories, while the rest of us take home additional insight into the Court’s construction of claim limitations.

Novartis v. Noven: The PTAB is not Bound by Prior Decisions of District Courts

Novartis, together with LTS Lohmann Therapie-Systeme, owns a pair of patents covering rivastigmine transdermal patches. These patches are useful for treating Alzheimer’s disease. Noven Pharmaceuticals filed an abbreviated new drug application (ANDA) seeking FDA authorization to manufacture a generic version of the patch. When Novartis sued for infringement, Noven unsuccessfully defended in the ANDA litigation on the grounds of obvious over GB 2 203 040 A (“Enz”), JP 59-184121 (“Sasaki”), and a variety of other references. The Delaware court found that a person of ordinary skill would not have been motivated at the time of invention to add Sasaki’s antioxidant to Enz’s rivastigmine patch, because it was not known at that time that rivastigmine was subject to oxidative decay. Noven did not appeal this loss to the Federal Circuit (CAFC).

However, while the ANDA litigation was proceeding in Delaware district court, Noven had also lodged a series of IPR petitions arguing obviousness over Enz, Sasaki, and a variety of other references. The PTAB instituted four IPRs on these petitions, and held the challenged claims unpatentable as obvious. Novartis appealed from the adverse PTAB decisions. Novartis AG v. Noven Pharm., 2016-1678 (Fed. Cir. Apr. 4, 2017).

Novartis’ principal argument before the CAFC was that the PTAB improperly ignored the Delaware court’s conclusion that there was no motivation to combine Enz and Sasaki at the time of invention. Novartis believed that the Delaware court’s decision should bind the PTAB. The CAFC disagreed for two reasons: first, there were expert declarations in the IPRs that had not been presented to the Delaware district court; and second, the standard for proving obviousness is higher in district court (clear and convincing evidence) than in an IPR (preponderance of the evidence). Therefore, the CAFC concluded that the PTAB should not be bound by Delaware court’s conclusions. The CAFC affirmed the IPR holdings.

It is somewhat unclear how issue preclusion should have applied between the Delaware district court’s conclusions and the PTAB’s fact-findings. Indeed, the CAFC never uses the words “issue preclusion” or “collateral estoppel” in the appeal decision, as if this legal doctrine were not implicated. In contrast to the Delaware court’s finding of no motivation to combine, however, the PTAB found that the person of ordinary skill at the time of invention would have expected rivastigmine to be subject to oxidative decay because Sasaki reports amino groups in other drugs that are prone to oxidative decay and rivastigmine has an amino group. It would have been hard for the PTAB to reach a conclusion of obviousness if it had adopted Delaware’s fact-findings about what the person of ordinary skill would have known, but the CAFC never addresses why the PTAB was not obliged as a matter of issue preclusion to adopt the Delaware fact-findings.

In any event, this case is a solid holding that the PTAB is not bound by a contrary decision in a district court, at least where there is some evidence in the PTAB proceedings that was not part of the district court proceedings. In other words, a patent challenger who loses in the district court need not count on also losing in a parallel PTAB trial.

Federal Circuit is No Place to Make New Claim Construction Arguments

The Federal Circuit has consistently made clear that arguments not first made to the PTAB will not be considered on appeal. Google fell victim to this well-worn concept in Google Inc. v. SimpleAir, Inc., 2016-1901 (CAFC March 28, 2017), wherein the Federal Circuit decided, in a non-precedential opinion, that Google waived a claim construction argument that was not first presented to the Board. The Court also denied Google’s backup argument that, even under the Board’s claim construction, the art rendered the challenged claims unpatentable.

Regarding the waiver issue, the Court gave context to the dispute by noting that the term at issue, “central broadcast server,” had been construed in three prior district court litigations. In each instance, the courts adopted a definition of the term that was identical to the construction ultimately applied by the PTAB. Although Google filed its IPR against the backdrop of those district court constructions, Google provided the Board with the district court definitions of the term, without offering any other suggested construction. Id. at 5-6 (“Google did not…insist or even request that the PTAB apply a differing construction.”). Google further conceded, at oral argument, that the district court constructions constituted the broadest reasonable interpretation in the IPR proceeding. As such, the claim construction argument Google attempted on appeal was deemed waived.

Regarding Google’s backup plan, the Court quickly dispatched with Google’s arguments, describing them as a “mischaracterization of the PTAB’s ruling, in attempt to create legal error.” Id. at 10.

In sum, this decision reminds Petitioners of the need to carefully weigh the entire record and choose their claim construction positions wisely. While it is hard to know all the litigation considerations that were present in this case, the BRI standard could have been a helpful distinction from the insufficient district court constructions to defeat the challenged claims.

Patentee’s Teaching Away Argument Fails to Overcome Substantial Evidence of Unpatentability

An obviousness challenge can be overcome by showing the prior art teaches away from the claimed invention.  However, “teaching away” is a question of fact and thus subject to the substantial evidence standard in appeals from IPR decisions.  It is thus difficult to overcome a PTAB determination on this issue, as exemplified in Meiresonne v. Google, Inc., No. 2016-1755 (Fed. Cir. Mar. 7, 2017).

In Mereisonne, Google challenged four patent claims based on a two-reference obviousness argument.  The parties agreed that, together, the references taught every limitation of the claims.  The only issue on appeal was whether the secondary reference taught away from the claimed invention by criticizing an element of the invention.  The Federal Circuit affirmed the PTAB’s decision that it did not, finding substantial evidence supported the PTAB’s determination.

More particularly, the claims were directed to computer systems that users could use to identify suppliers of goods and services over the internet (basically, a directory).  The directory website included (1) a plurality of links to supplier websites, (2) a supplier description near the corresponding supplier link, (3) a title portion that describes the class of goods or services on the website, and (4) a rollover window that displays information about at least one of the suppliers corresponding to a link.

The rollover element was central to the dispute.  The prior art (Finseth) taught a visual index for a graphical search engine that provides “graphical output from search engine results or other URL lists.”  Finseth explained that many web directories included only cursory or cryptic text about the website in the results.  Finseth thus taught the use of thumbnail or other representational graphic information to accompany hyperlink results.  The primary reference, Hill, also explained that such abstract text was often “gibberish” and advocated visiting the actual site instead of relying on the abstract text accompanying the hyperlink.

The Federal Circuit agreed this criticism was not sufficient to teach away from the claimed rollover window (which corresponded to the prior art abstract test).  Despite the prior art’s criticisms, it did not that abstract text was useful in culling through results.  The Court also found that even if abstract text was often not useful, the prior art said that other links’ abstract text was useful.  Thus, the prior art did not sufficiently discourage the person of ordinary skill from following the path set out in the reference, and did not lead the person in a direction divergent from the path taken.

Troll Gets Rolled Because Its Disclaimer Statements Were Undersold

In MPHJ Tech v. Ricoh Corp., the Federal Circuit affirmed a conclusion of anticipation and obviousness from an IPR involving US 8,488,173 (‘173). The content of the art was not really in dispute. Rather, the focus of the disagreement concerned just how broad is the reach of the broadest reasonable interpretation of the claims.

The ‘173 patent claims a process by which a document can be scanned on one copy machine, and the reproduction printed at another location. Almost all copy machines used in modern offices have such functionality, but none of Ricoh, Xerox, or Lexmark had licensed the ‘173 patent from MPHJ. Therefore, MPHJ regarded every office that had such a copy machine as an infringer. MPHJ attracted quite a lot of publicity when it began sending demand letters to offices threatening lawsuits if payments of $1000 were not made for every worker in the office who uses the copy machine.

Ricoh, Xerox, and Lexmark requested IPR consideration of the ‘173. The claims at issue required that the process be instigated by the activation of a “Go button.” The two sides disagreed whether the claims read on processes in which a human user continued to intervene in the process after the “Go button” had been activated, or whether the claims were limited to processes in which all functions after the activation of the “Go button” continued automatically. Judges O’Malley and Lourie agreed with the PTAB that the claims read on processes with intervening human actions, while Judge Newman wrote a dissent to explain why she believes that even under the broadest reasonable interpretation, the claims only read on fully automated processes.

The real crux of the dispute was that the ‘173 patent derives from a provisional U.S. application, which is incorporated in the ‘173 patent by reference. The provisional explains that “[u]sing… Xerox’s Pagis, the user must first ‘import’ or scan paper in the capture application and then… direct the output to another location. With the [invention of ‘173], a single button (the Go button) directly copies paper… and places it with the third-party application.” Both the majority and the dissent appear to regard this language in the provisional as strong enough to disclaim processes—like Xerox’s—that require human intervention after the “Go button” activation.

However, this language was omitted from the non-provisional. The question, then, was what effect was accomplished by removing this limiting language between provisional and non-provisional applications. The majority concluded that a disclaimer can only be accomplished by clear and unambiguous statements, and the fact that the patent applicant removed the disclaiming language between provisional and non-provisional stages indicates that the patentee did not clearly intend to give up processes with intervening human actions. The dissent, by contrast, reasons that the provisional was incorporated by reference, and thus this limiting language is present in the non-provisional application.

It is worth noting that a similar situation (text found in provisional but not in non-provisional application) occurred in Columbia Univ. v. Symantec Corp., 811 F.3d 1359, 1365 (Fed. Cir. 2016). In that case, a narrow definition of a claim term appeared in a provisional application, but that narrow definition was omitted from the corresponding non-provisional. However, because the non-provisional incorporated the provisional by reference, the Symantec court held that the narrow definition in the provisional controlled and compelled a verdict of non-infringement.

Despite the precedent in Symantec, the MPHJ majority held that the narrowing language in MPHJ’s provisional did not effect a disclaimer of claim scope. In other words, the Symantec court was willing to use the provisional to narrow the claim construction when a narrow construction lead to non-infringement, but in MPHJ—where a narrow construction would support patentability—the court discounted the narrowing language from the provisional.

Likely, the disparate outcomes between these two cases reflects the difference between broadest reasonable interpretation applied in IPRs and Philips standards of claim construction applied by district courts like the court in Symantec. The take-home lesson from this case is that parties to an IPR need to consider carefully not only the patent specification when evaluating potential claim constructions, but also documents incorporated by reference.

Federal Circuit to Reconsider Achates Decision en banc

The Federal Circuit is set to reconsider one of its more controversial decisions en banc, when it decides whether the Achates Reference Publishing, Inc. v. Apple Inc. decision was correctly decided. Specifically, in Wi-Fi One, LLC v. Broadcom Corp., the Court requested supplemental briefing on the following issue:

“Should this court overrule Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015) and hold that judicial review is available for a patent owner to challenge the PTO’s determination that the petitioner satisfied the timeliness requirement of 35 U.S.C. § 315(b) governing the filing of petitions for inter partes review?”

There have been several justices who have suggested that the Achates decision should be revisited by the entire bench, especially in view of the Supreme Court’s Cuozzo decision. We’ll have an answer soon on whether the broad discretion that has been afforded the PTAB regarding issues related to a decision to institute will continue, or whether the Federal Circuit will allow itself more leeway to consider foundational IPR issues.

Federal Circuit Broadly Affirms PTAB’s Determinations on Analogous Art, Motivation to Combine References, and Obviousness of Claims

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The level of deference the Federal Circuit gives to the Board’s IPR decisions has been surprising to many practitioners, considering the Court’s reputation for reversing district court decisions.  The trend of deference to the Board continues, as illustrated in Unwired Planet, LLC v. Google Inc., 2015-1810, -1811, Nov. 15, 2016.

Unwired involved one patent, U.S. 7,024,205.  The Board nullified the patent twice over, finding the claims obvious in an IPR, and lacking written description in a CBM proceeding.  Unwired involved a consolidated appeal of both.  The Federal Circuit affirmed the Board’s obviousness finding, and thus did not reach the CBM decision.

The ‘205 patent involved a system and method for providing cell phone users with prioritized search results based either on the user’s location, or based on other criteria chosen by the network administrator (the point of the latter is to allow search providers to prioritize results based on whether, for example, a restaurant has paid to be listed).  More particularly, the patent claims a scheme wherein the search results list a further-away provider before listing a different, closer provider (called “farther-over-nearer ordering” in the opinion).

Google presented a variety of prior art including basic references on providing search results in an electronic setting and also a 1997 book by Galitz discussing principles for interface design, including various techniques for ordering text information and menus.  On appeal, Unwired presented 3 arguments:  (1) Galitz was non-analogous art; (2) the prior art does not teach farther-over-nearer ordering; and (3) there was inadequate motivation to combine Galitz with the other art.

The Federal Circuit rejected all three arguments.  As to non-analogous art, the Court first noted that the field of endeavor of a patent is not limited to the point of novelty, the narrowest conception of the field, or the particular focus within a given field.  Because both Galitz and the patent dealt, broadly speaking, with the field of interface design, the Court determined a person of ordinary skill would have looked to Galitz.

Second, as to the prior art’s alleged lack of teaching, the evidence was clear that the prior art sometimes would have returned results with farther-over-nearing ordering, even though that wasn’t necessarily the goal of that prior art.  Nonetheless, that was legally sufficient:  “We reject this argument because combinations of prior art that sometimes meet the claim elements are sufficient to show obviousness.”  Lastly, the Court found sufficient evidence (including in the form of expert testimony) to believe that a person of ordinary skill in the art would have combined the references.  Here too, the Court presented a relatively broad (and challenger-friendly) reading of the law:  “Google also argues that it does not need to show that there was a known problem with the prior art system in order to articulate the required rational underpinning for the proposed combination.  We agree.”  This final point is consistent with KSR, as the opposite position (that the problem need to have been known) would seem perilously close to the TSM test rejected in KSR.

The Federal Circuit’s deference to the Board, and challenger-friendly reading of the law, in IPR appeals continues to encourage parties to pursue their positions through IPR petitions.

In re NuVasive Brings the Administrative Procedure Act to IPRs

45686244_sNuVasive owns US 8,187,334, which claims certain spinal implants. Medtronic filed a petition challenging various claims of the ‘334 patent as obviousness over US 2002/0165550 (Frey) in view of US 5,860,973 (Michelson). Medtronic also filed a second petition challenging other claims over a promotional brochure for the Synthes Vertebral Spacer-PR (SVS-PR) in view of Michelson. Medtronic specifically mentioned Michelson figure 18 in its argument for obviousness over Frey, but not in its argument about obviousness over SVS-PR. The PTAB instituted two separate IPR proceedings on these two petitions. The proceedings were not consolidated, but there was a single oral hearing held for both proceedings.

In its patent owner response, NuVasive argued that its claimed implant was long and narrow, but that the cited art taught long and wide implants, for larger surface area to stabilize. Medtronic responded by noting that Michelson’s figure 18 shows a long and narrow implant. NuVasive attempted to have Medtronic’s response stricken as a new ground of rejection not present in the petition, or alternatively to be allowed to file a surreply. The PTAB denied both requests, and cut NuVasive off when it tried to make arguments on this point during the oral hearing.

Both IPRs ended with a determination that all challenged claims but one were unpatentable. Both final decisions relied on Michelson figure 18 to establish prima facie obviousness.

On appeal, the Federal Circuit (CAFC) affirmed the first IPR (in which figure 18 was cited in the petition). However, the CAFC vacated the second IPR, and remanded for the PTAB to give NuVasive a chance to respond to Medtronic’s argument about figure 18. The CAFC concluded that this result was compelled by the Administrative Procedures Act (APA), which requires (5 U.S.C. § 706) that a reviewing court “set aside agency action… not in accordance with law [or]… without observance of procedure required by law.” This case constitutes only the second time (after Dell Inc. v. Acceleron LLC, 818 F.3d 1293 (Fed. Cir. 2016)) that an IPR appellant has successfully challenged a PTAB defeat on APA grounds.

There are a few points to pause and notice about this outcome. First, the argument here is not about introducing a new reference into the mix, but rather about whether NuVasive was sufficiently on notice about one figure in Michelson. Second, there is no question that NuVasive actually knew about Michelson figure 18 at the time that it was writing its response to the argument about SVS-PR, because figure 18 was cited in the Frey petition. In other words, the APA failure here lay in not calling out figure 18 in the other of the pair of IPR petitions. It requires a very rigorous application of the APA to find reversible error in this argument about figure 18.

Other appellants have made APA arguments after a PTAB loss, and the NuVasive court was careful to distinguish from the cases in which APA arguments failed. In particular, the NuVasive court distinguished Genzyme Therapeutic Prods. v. Biomarin Pharm., 825 F.3d 1360 (Fed. Cir. 2016) and Belden Inc. v. Berk-Tek LLC, 805 F.3d 1064 (Fed. Cir. 2015). While the PTAB decisions in those cases had cited references or portions of references not specifically mentioned in the petition, the “new” material was merely cited as background, but not relied upon for part of the prima facie rejection.

There are a few take-home lessons to learn from this. First, if you are challenging a patent, be careful about citing to any portion of a reference in the challenger’s reply that was not cited in the petition. Similarly, if you are defending a patent, pay careful attention to what is cited in the challenger’s reply, compared to the original petition, and do not be shy about insisting on a right to make additional replies to anything that is cited for the first time in the reply. Finally—and more broadly—this case shows that the APA can provide a successful basis for an appeal from the PTAB.

Federal Circuit Weighs in on Evidentiary Challenge in IPR, Reversing PTAB

34447773_sMore often than not, evidentiary issues in IPR proceedings fail to make headlines because the Board will structure its Final Written Decision to avoid evidentiary challenges. Findings that a party’s motion to exclude is denied as moot are common. That makes the Federal Circuit’s decision in REG Synthetic Fuels, LLC v. Neste Oil Oyj (November 8, 2016) all the more interesting. In that decision, the Court reversed the Board’s decision to exclude certain evidence submitted by Patent Owner during the trial.

More specifically, Patent Owner sought to swear behind one of the prior art references presented in the Petition. Among the evidence provided for this purpose was test data from third parties, communications between the inventor and third parties, and minutes from a meeting that the inventor had attended. Id. at 5. Petitioner moved to exclude this evidence on the basis of lack of authentication, hearsay, or as improper reply evidence. The Board granted the motion to exclude.

On appeal, the Court first clarified that priority issues, including conception and reduction to practice, are questions of law predicated on subsidiary factual findings. Id. at 6. The Court addressed the Board’s finding that two emails between the inventor and a third party (Exhibit 2061 in the case) provided necessary corroboration of the patented invention. Id. at 16. Petitioner argued that the emails were hearsay because they contain out of court statements by a third party. Patent Owner responded by arguing that it did not offer the emails to prove the truth of the matter asserted. The Court agreed with Patent Owner, finding that the emails were offered for the non-hearsay purpose to show that the inventor thought he had achieved a quality claimed in the patent-at-issue. “The act of writing and sending the email is, by itself, probative evidence on whether [the inventor] recognized–at the time that he had written the email–” the claimed property. Id. at 17. In short, the exhibit was legally significant because it showed that the inventor communicated the conception of the invention to the third party.

Because the Board excluded relevant evidence in the trial, the case was remanded for further consideration.

Federal Circuit Rejects Patentee’s Effort to Narrow Claim Scope

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One wrinkle of IPR practice is that patentees are often in the position of advocating a narrower claim scope than the challenger—just the opposite of what is usually seen in district court litigation.  The narrowing strategy is logical—particularly where there is very close prior art, a patentee may need to seek a narrow construction in the IPR to avoid the prior art, and then worry about infringement later.  However, the Federal Circuit decisions that restrict efforts by district court defendants to limit a claim to the preferred embodiment also functions to limit patentees in IPRs.  The Federal Circuit’s November 9, 2016 decision in Schoeller-Bleckmann Oilfield Equipment AG v. Churchill Drilling Tools US, Inc. is a good example of that dynamic.

Schoeller was an appeal from the PTAB’s decision that the challenged claims were anticipated and obvious.  The technology involved drilling apparatuses, and specifically a mechanism for allowing and restricting the flow of liquid through a drill string to activate and deactivate a downhole tool.  The only issue on appeal was whether the Board properly construed “ball-like portion.”  In the claim, that limitation was a part of a “deformable activator” that restricts fluid flow when engaged with a seat.

The issue presented was whether the Board properly construed the term as “a structure with at least one outer curve” (which would encompass a deformable ball), or whether the term was limited to the “deformable ring” shown in the patent’s figures (as advocated by the patentee).

The Federal Circuit affirmed the Board, finding the patentee’s narrowing effort was contrary to the Court’s repeated teaching that claim terms should not be limited to a preferred embodiment without a clear intent to redefine the term or a clear disavowal of claim scope, citing Thorner v. Sony as an example.  Looking particularly to the patent, the Court determined the specification allowed a ball as a species of the “ball-like portion” based on a specification passage stating “the dart can pull the ball downwardly.”  This case serves as a good reminder that a broad specification can actually hurt a patentee in an IPR.