Unreasonable Claim Construction Causes PTAB Reversal

 

In a fairly case-specific claim construction analysis, the Federal Circuit reversed the PTAB today in D’Agostino v. Mastercard, Int’l, 2016-1592, -1593 (Fed. Cir. Dec. 12, 2016), finding that the Board erred in determining the challenged claims to be unpatentable because, as a matter of logic, the prior art could not anticipate or render those claims.

The patent at issue involved methods of effecting secure credit-card purchases by minimizing merchant access to credit card numbers. In those methods, a limited-use transaction code is given to the merchant in the place of the credit card number. Of particular importance to the Court’s decision was a “single-merchant” limitation that required that, when such a transaction code is requested, the request limits the number of authorized merchants to one, but does not then identify the merchant because the claims required that such identification occurred only later. Id. at 7.

In its claim construction during the inter partes review trial, the PTAB adopted a construction that did not recognize the separation in time of the communication of the transaction code and the communication of the merchant’s identity. Id. at 5-6. As might be expected, the Court relied upon the specification of the subject patent, as well as its file history, to support this claim construction. See, e.g., id. at 6 (“The prosecution history reinforces the evident meaning of the single-merchant limitation…”).

In general, this decision represents another decision that patent owners can point to in support of the notion that the Board is not flawless in all of its decisions. This particular Board panel made errors that, according to the Federal Circuit, were fairly obvious in nature helping to undercut any notion of Board infallibility.

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.

Supreme Court Hears Arguments in Cuozzo Case

8345487_sWe should soon find out whether the Federal Circuit will again face reversal at the hands of the Supreme Court in a patent case. Today, the Court heard oral arguments in the case of In re Cuozzo, the first IPR decision to reach the highest court. The transcript of the proceeding can be found HERE. Reading the reaction of judges in oral argument can be a very dangerous game, but a few key observations can be noted:

First, while there were two issues on appeal, the issue of whether the Broadest Reasonable Interpretation claim construction standard is appropriate in IPR proceedings garnered almost all of the attention of the Court. Only Justices Ginsburg and Sotomayor briefly touched upon the second issue of whether the Board’s decision to institute can be reviewed by an appellate court.

Second, Chief Justice Roberts seemed troubled by the use of BRI in PTO proceedings. More specifically, Chief Justice Roberts was particularly concerned that the PTAB and a district court could come to different conclusions regarding the meaning of a claim limitation. Among his questions that indicated his seeming posture against BRI include: “It’s a very extraordinary animal in legal culture to have two different proceedings addressing the same question that lead to different results” and “It just seems to me that that’s a bizarre way to…decide a legal question.” Also, after the Solicitor explained how a district court and the PTAB may come to different conclusions, the Chief Justice asked: “And this is under a statute designed to make the patent system more reasonable and more expeditious in reaching judgments?” If an opinion comes out against BRI, we would expect the Chief Justice to author it.

Third, Justices Kennedy and Breyer seemed more favorable to BRI, framing the issue as the PTO taking a second look at questionable patents that should not have issued in the first place. As such, BRI might be appropriate for this second look in IPR. For example, Justice Kennedy asked “Well, if the patent is invalid under its broadest, reasonable interpretation, doesn’t that mean the PTO should never have issued the patent in the first place, and doesn’t that give very significant meaning and structure to this process?” Relatedly, Justice Breyer commented that “what we’re trying to do with this process is to tell the Office, you’ve been doing too much too fast. Go back and let people who are hurt by this come in and get rid of those patents that shouldn’t have issued.” These questions were less clear on their intent than Chief Justice Roberts’ questions, but indicated an understanding of why BRI had been adopted.

Fourth, regarding the issue of judicial review of PTAB decisions to institute, Justice Ginsburg indicated agreement with the Federal Circuit’s reading of 35 USC 314(d), while Justice Sotomayor seemed skeptical. Justice Ginsburg asked about the purpose of that statute if not to prevent all review of the Board’s decisions. Petitioner argued that it was to preclude mandamus and prevent review of the denial to such a hearing. At the end of the hearing, Justice Sotomayor returned to this issue, and asked why Congress would tell the PTO not to institute trial except in limited circumstances “but nobody’s going to ever watch you to make sure that’s what you’re doing.” This latter exchange was more involved and left the listener with the distinct impression that Justice Sotomayor was troubled by the lack of judicial oversight of the PTO’s decisions to institute.

Lastly, seven of the eight sitting justices asked at least one question. As is typical in such arguments, Justice Thomas did not question counsel for either Petitioner or the Solicitor.

 

PTAB Finds Different Claim Terms Have the Same Meaning

20670078_sOne of the classic canons of claim construction is that different claim terms in a patent are presumed to have different meanings.  The Board found an exception to that general rule in Air Liquide Large Indus. v. Praxair Technology, IPR2015-01075, Paper 11.  The technology involved storing hydrogen in a salt cavern. The issue involved the broadest reasonable interpretation of “substantially impermeable barrier” and “permeation barrier,” two terms used in separate independent challenged claims.  Petitioner argued, with specification and expert support, that permeation barrier meant something formed in the cavern walls to reduce the permeation of the cavern after it is formed.

“Substantially impermeable barrier” was not defined in the specification. Petitioner’s expert found it simply meant the walls of the cavern. The PTAB criticized this because it ignored the claim language required the barrier to be “formed” by maintaining a certain pressure. The PTAB thus construed found the term also meant a barrier formed in the cavern from sufficient pressure to become substantially impermeable to hydrogen.

In doing so, the PTAB recognized it was “construing two terms, used in different independent claims…, to refer essentially to the same thing.”  Mindful of the canon against this, the Board found some saving grace:  “We understand there may be a slight difference between the terms, but, on the present record, this distinction does not come into play and, as such, it is proper to construe these terms to be the same insofar as they are both directed to a formed barrier as construed above.”

Federal Circuit Issues Second Reversal in Favor of a Patent Owner

cafc1The Federal Circuit has picked up the pace of issuing actual written opinions regarding PTAB decisions, instead of its previous, steady diet of Rule 36 Judgments. Today, the Court issued its second opinion reversing a Board decision canceling various claims in an inter partes review based on a claim construction issue in Straight Path IP Group, Inc. v. Sipnet EU S.R.O. (Fed. Cir. Nov. 25, 2015). In general, the decision comprises two key parts: 1) a fact-intensive claim construction analysis that turned on the fact that the claim language-at-issue had a plain meaning and the specification was deemed too limited to change that plain meaning; and 2) a warning that the Court will not hear new arguments on appeal.

Claim Construction Analysis: The crux of the claim construction dispute related to a claim limitation that requires “a query as to whether the second process is connected to computer network.”  (emphasis added). Patent Owner argued that the proper claim construction required a present-tense status. Id. at 6. Petitioner argued, and the Board agreed, that the proper claim construction “simply requires being registered with the server.” Id. As characterized by the Court: “what the Board meant was that, to come within the query claim language, all the query from the first unit need do is request whatever the connection server has listed about a second unit’s on-line status, even if the listed information is not accurate at the time of the query, i.e., even if it lists the second unit as online when, at the time, it is in fact not online.” Id. 

The Court’s reversal of the Board’s decision had two components. First, the Court found that the plain language of the claims undermined the Board’s determination. That plain language, “is connected to the computer network” was deemed to plainly seek a determination of whether the unit was connected at that timeId. at 7. As such, it was unreasonable for the Board to conclude that the subject query was satisfied, regardless of its current accuracy. Id. 

Second, the Court faulted the Board for failing to address that “facially clear meaning,” and instead turning immediately to the specification; which analysis of the specification was also incorrect. Id. at 8. The Court instructed that, when the claim language has a plain meaning, “the specification plays a more limited role than in the common situation where claim terms are uncertain in meaning in relevant respects.” Id. Thus, the Board’s analysis, that relied on a single passage from the patent to redefine the claim terms, was inaccurate given that there was no express or implicit redefinition of what “is connected” should mean. Id. at 9.

It is noteworthy that Judge Dyk filed a dissenting opinion, arguing that the majority erred in requiring absolute currency with regard to the real-time limitation of the challenged claims. Instead, Judge Dyk would have relied on the specification, as the Board did, because it is “always highly relevant to the claim construction analysis,” per Phillips. Dissent at 2.

New Argument on Appeal: The Court noted that the second challenge by Patent Owner to the Board’s decision rested on the Board’s failure to construe the term “process.” The Court refused to hear that challenge, though, finding that Patent Owner did not preserve the contention. Specifically, Patent Owner failed to request a construction for that term in its Patent Owner Preliminary Response, Patent Owner Response, or at the Oral Hearing. Failing to do so, the Board could not be found to have committed error in failing to construe the limitation.

Thus, this case is a rare win for a Patent Owner at the Federal Circuit, but more importantly more guidance from the Court on the ever-evolving IPR landscape.

PTAB Addresses Antecedent Basis Issues in IPR

34108250_sClaims that have terms lacking antecedent basis can present an opportunity for defendants in litigation, including creating a potential invalidity defense under 35 USC §112. It is interesting, therefore, to review the Board’s treatment of these issues in the context of an inter partes review, such as its decision to institute in Google Inc. v. At Home Bondholders’ Liquidating Trust, IPR2015-00662, involving US Patent No. 6,014,698.

In the Decision to Institute Trial, the Board dealt with two antecedent basis issues. In the first instance, the Board considered a claim limitation that required “said banner location signal,” where the claim from which it depended only referred to a “location signal.” Because a person of ordinary skill in the art would read the claim in view of the specification, and the language was similar, the Board concluded that the person of skill would understand “said banner location signal” to refer to the “location signal” of the parent claim.

A later claim in the patent presented a tougher issue for the Board, however. In that case, the dependent claim required that “said banner includes an advertisement.” The parent claims, however, did not recite a “banner” at all. Petitioner suggested that perhaps the claim contained a drafting flaw, and should have depended from a different claim altogether. Alternatively, Petitioner assumed that the “banner” limitation corresponded to the “second portion of information” recited in the parent claim.

The Board declined to adopt either interpretation of the claim, deciding instead that the claim was indefinite and not susceptible to interpretation. Regarding the theory that the claim contained a drafting error, the Board found no basis on which to interpret it to depend from a different claim. Regarding the alternative theory, the Board was not persuaded that a person of skill would have understood the “banner” to refer to the “second portion of information.” In contrast to the above example involving “location signal,” here the terms were substantially different and the Board was unwilling to assume that they corresponded.

Because the Board was unable to determine the scope of the claim, it denied the Petition relative to that claim.

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.

Board Disagrees with Claim Construction of Prior Proceeding Before the PTO

22227585_sOne of the more disheartening trends to Patent Owners in inter partes review proceedings is the strong willingness of the PTAB to give little or no deference to prior Patent Office proceedings relative to the patent-at-issue. This creates considerable uncertainty relative to these important assets. This issue arose again in Toshiba Corp. v. Intellectual VenturesIPR2014-00317, US Patent No. 5,687,132, wherein the PTAB disagreed with a claim construction adopted in an earlier reexamination proceeding. The ‘132 patent relates to multiple-bank computer memories.

In the prior reexamination proceeding, the Examiner found that the claims at issue each included a requirement for a single memory, as opposed to two separate memories. Importantly, this feature was not found in the prior art and, thus, Patent Owner argued that the IPR Petition should be denied.

Pursuant to 35 U.S.C. § 325(d), in deciding whether to institute inter partes review, the “Director may take into account whether, and reject the petition or request because, the same or substantially the same prior art or arguments previously were presented to the Office.”  Under this provision, the Board was within its authority to deny the Petition based on the Examiner’s reasoning in the reexam.  However, the Board opted not to take this route, as it disagreed with the Examiner’s claim construction.

At issue was the claim term “a memory.”  As mentioned, the Examiner found that “a memory” required there be a single memory, not two separate memories.  The Board, however, disagreed, noting that established precedent holds that articles “a” and “an” are construed to mean “one or more” absent clear intent to limit to “one.”  In the ‘132 patent, Patent Owner showed no clear intent to limit the scope of the claims to only one memory, and further explicitly stated that the invention is not limited to such an embodiment.  Therefore, the Board disagreed with the Examiner in the reexamination and construed “a memory” to mean “one or more memories.”

Because on this construction by the Board, Patent Owner’s arguments against anticipation failed and the Board granted the petition for inter partes review.

Failure to Identify Structure of Means-Plus-Function Limitation Results in Denial of Ground

Reference booksParties have tried different strategies in addressing claim construction in inter partes review petitions. Some have relied strictly on a generic “broadest reasonable interpretation” argument; others have followed a more traditional Phillips analysis – both strategies having achieved varying levels of success.  What is clear, however, is that when a challenged claim is in means-plus-function format, the IPR rules require that a Petitioner set forth the structure that corresponds to the recited function of the challenged claims.  Panel Claw, Inc. v. SunPower Corp., IPR2014-00388.

Among the limitations at issue in Panel Claw were “means for interengaging adjacent photovoltaic assemblies into an array of photovoltaic assemblies.” and “means for interlocking one said photovoltaic assembly to another said photovoltaic assembly.”  Of course, recitation of the term “means” in a claim limitation creates a rebuttable presumption that 35 U.S.C § 112, ¶ 6 governs construction of the claim. Further, when the presumption is that a limitation is a means-plus-function limitation, under 37 C.F.R. § 42.104(b)(3), Petitioner is required to identify the structure in the specification that corresponds to the recited function.

In Panel Claw, however, Petitioner argued first that the limitations which recited the term “means” were purely functional and therefore cover any suitable means for accomplishing the stated function. This argument contradicted a determination in a related lawsuit (SunPower Corp. v. Sunlink Corp., Case No. 08-Case IPR2014-00388 cv-2807 (N.D. Cal.)) which deemed the limitations at issue to be means-plus-function limitations. Further, Petitioner then failed to assert a back-up argument identifying any corresponding structure to the limitations-at-issue.

The Board found that limitations at issue were means-plus-function limitations, the constructions of which were governed by 35 U.S.C § 112, ¶ 6. By failing to identify corresponding structures, Petitioner violated 37 C.F.R. § 42.104(b)(3) and, as such, the challenged claims containing the means language were deemed patentable.

Patent Expiry During IPR Means Phillips, not BRI, Applies

Reference booksWe previously discussed one Patent Owner’s attempt to avoid the “broadest reasonable interpretation” (BRI) claim construction standard by disclaiming the remainder of the patent-at-issue’s term.  While some uncertainty about that technique remains, what is clear is that when a patent in an IPR expires during the pendency of the proceeding, the limitations of that patent’s claims are construed pursuant to the Phillips claim construction standard.  That is, claim terms are given their ordinary and customary meaning as understood by a person of ordinary skill in the art. In Square, Inc. v. Carl Cooper (IPR 2014-00157), an example of this principle is seen in action, as the patent at issue (U.S. Pat. No. 7,828,207) was set to expire prior to the Board issuing the final written decision.

Both parties to the proceeding filed a Joint Stipulation stating that the broadest reasonable interpretation of the claims did not apply given this pending expiration. Previously, the Board had construed the claim terms according to their broadest reasonable interpretation, as is the case with all IPR proceedings of unexpired patents.  In the end, though, it was a distinction without a difference because, despite this shift from BRI to Phillips, the Board found that no changes to previous claim constructions were necessary.