Apple filed two petitions for inter partes review (IPR) against DSS's U.S. Patent No. 6,128,290.  The Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office instituted the IPRs and issued final written decisions holding claims 1-4 and 9-10 of the '290 patent obvious.  DSS appealed.

Claim 1 of the patent recites:

A data network system for effecting coordinated operation of a plurality of electronic devices, said system comprising:
    a server microcomputer unit;
    a plurality of peripheral units which are battery powered and portable, which provide either input information from the user or output information to the user, and which are adapted to operate within short range of said server unit;
    said server microcomputer incorporating an RF transmitter for sending commands and synchronizing information to said peripheral units;
    said peripheral units each including an RF receiver for detecting said commands and synchronizing information and including also an RF transmitter for sending input information from the user to said server microcomputer;
    said server microcomputer including a receiver for receiving input information transmitted from said peripheral units;
    said server and peripheral transmitters being energized in low duty cycle RF bursts at intervals determined by a code sequence which is timed in relation to said synchronizing information.

As described by the Federal Circuit, the claimed invention involves "bidirectional wireless data communications between a host or server microcomputer" and "a plurality of peripheral devices."  Furthermore, "the transmitters within the host or server microcomputer and the peripheral units in the data network operate in a low duty cycle pulsed mode of operation."  While in this mode, "when a peripheral unit is neither receiving nor transmitting, its reception and transmission circuitry may be powered down."  According to the specification, doing so significantly reduces power consumption of the system.

The only claim element under dispute is italicized above.  Particularly, both the server and peripheral transmitters are required to be able to operate in the low duty cycle mode.  The PTAB concluded that one of ordinary skill in the art would be led to this element by the teachings of U.S. Patent No. 5,241,542 (Natarajan).

The Natarajan reference is directed to mobile units communicating wirelessly with a base station.  Natarajan explicitly states that its focus is on reducing the battery consumption of mobile units.  Like DSS's system, when the transmitters and receivers of these mobile units are not actively transmitting or receiving, they are configured to not consume power.

Apple argued before the PTAB that "because the mobile unit transmitters in Natarajan operated in low duty cycle RF bursts, it would have been plainly obvious to a person of ordinary skill in the art to have the base station operate in an analogous manner."  Apple further contended that "because the base and mobile stations have the same physical structure, it would have been no more than using a known technique to improve similar devices in the same way."

DSS countered by observing that "Natarajan says nothing about [reducing power consumption] for the base station transmitter," and that "the stated goal of the Natarajan reference is to provide energy savings for the mobile units, not the base station."  DSS further stated that "the base station in Natarajan uses a different communications scheme than the mobile units [in which it] cannot be turned off at any point during [a critical] period."

The PTAB sided with Apple, asserting that "Natarajan describes only the mobile units as battery-powered devices," but "the base units also are conventional microcomputers and contain similar wireless communication components as the mobile units."  Based on this observation, the PTAB held that "that a person of ordinary skill in the art would have been motivated by Natarajan to apply the same power-conserving techniques to base units as it is disclosed with respect to mobile units, as well as that it would have been within the skill of the ordinarily skilled artisan to do so."  The PTAB continued, remarking that there was "no persuasive evidence of record that it would have been uniquely challenging or difficult for one of ordinary skill in the art to do so."

On review, the Federal Circuit noted that a "patent can be obvious in light of a single prior art reference if it would have been obvious to modify that reference to arrive at the patented invention."  The Court considered the PTAB's reasoning to be based on an invocation of "common sense" -- that the skilled artisan would have used such an attribute to apply the power-saving features of Natarajan's mobile units to a base station (or, in this case, the claimed server).  The Court, however, raised three considerations that would limit such reasoning:

First, common sense is typically invoked to provide a known motivation to combine, not to supply a missing claim limitation . . . .

Second, we have invoked common sense to fill in a missing limitation only when the limitation in question was unusually simple and the technology particularly straightforward . . . .

Third, our cases repeatedly warn that references to 'common sense'—whether to supply a motivation to combine or a missing limitation—cannot be used as a wholesale substitute for reasoned analysis and evidentiary support, especially when dealing with a limitation missing from the prior art references specified.

Applying this framework, the Court observed that the technology at issue was not unusually simple or particularly straightforward.  The Court pointed to the PTAB's own difficulties with claim construction to support this notion.

But the Court's primary issue with the PTAB was the latter body's conclusory reasoning:

After acknowledging that Natarajan does not disclose a base unit transmitter that uses the same power conservation technique, the Board concluded that a person of ordinary skill would have been motivated to modify Natarajan to incorporate such a technique into a base unit transmitter and that such a modification would have been within the skill of the ordinarily skilled artisan.  In reaching these conclusions, the Board made no further citation to the record.  It referred instead to the "ordinary creativity" of the skilled artisan.  This is not enough.

Apple's expert opined that "a person of skill in the art applying the exact design disclosed in Natarajan to an application exactly as described in Natarajan, . . . would have conceived a system in which . . . the transmitter and the receiver of the base station . . . operate in low duty cycle RF bursts."  But the Court found this testimony, like that of the PTAB, to lack supportive reasoning.  The Court went on to point out that Natarajan's mobile units and base station have different transmission requirements, and Apple and the PTAB both failed to explain how applying the mobile unit's duty cycle to the base station would work in practice.

Finally, the Court stated that "this is not a case where a more reasoned explanation than that provided by the Board can be gleaned from the record."  Therefore, Apple failed to establish a prima facie case that the challenged claims were obvious, and the Court reversed the PTAB's ruling.

Writing in dissent, Judge Newman took issue with two aspects of the decision.  First, she would have found that the PTAB did explain its reasoning regarding the obviousness of the claims in a sufficient fashion.  Essentially, Judge Newman believed that the PTAB incorporated parts of Apple's arguments by reference, and that these arguments were uncontested by DSS.  (At the end of the day, the majority seems to object to the PTAB's conclusion that the duty cycle of the mobile units would also work for the base station, while Judge Newman found such an outcome plausible.)  Second, she asserted that the proper remedy for finding the PTAB's reasoning to be inadequate was to vacate and remand the case for further review by the PTAB.

DSS Technology Management, Inc. v. Apple Inc. (Fed. Cir. 2018)
Panel: Circuit Judges newman, O'Malley, and Reyna
Opinion by Circuit Judge O'Malley; dissenting opinion by Circuit Judge Newman