The PTAB Does Not Have to Consider New Arguments Raised in IPR Reply Briefs

In Intelligent Bio-Systems, Inc. v. Illumina Cambridge Ltd., Appeal No. 2015-1693, the Federal Circuit upheld a PTAB decision finding of non-obviousness in an IPR for lack of motivation to combine references.

IBS petitioned for inter partes review of Illumina’s patent directed to a method of labeling nucleotides in DNA.  The PTAB instituted review on obviousness grounds and ultimately found that IBS failed to prove the claims were obvious because it did not establish a motivation to combine references with a reasonable expectation of success of developing the claimed invention.   In reaching its decision, the PTAB refused to consider IBS’s reply brief and accompanying expert declaration, determining that IBS ran afoul of 37 C.F.R. § 42.23(b) and § 42.6(a)(3) by presenting a new argument in its reply brief. 

The Federal Circuit affirmed the PTAB’s finding of non-obviousness, ruling that although the PTAB improperly conflated the separate concepts of motivation to combine and reasonable expectation of success, it nevertheless made sufficient factual findings to support a judgment that there was no motivation to combine the references.  Further, the Federal Circuit found that the PTAB did not err in refusing the reply brief as improper under § 42.23(b).  Because the expedited nature of IPRs bring with it an obligation for petitioners to make their case in their petition to institute, IBS could not rely on an entirely new rationale to explain motivation to combine in its reply brief.

Federal Circuit Finds Software Patent Claims are Patent-Eligible Under § 101

In Enfish, LLC v. Microsoft Corp., Appeal No. 2015-1244, the Federal Circuit held that claims directed to computer-database software technology were patent-eligible under § 101.

Enfish brought suit against Microsoft claiming that Microsoft’s ADO.NET product infringed patents directed to a logical model for storing data in a computer database.  The district court granted Microsoft’s motion for summary judgment and found all asserted claims invalid under § 101.  Enfish appealed.

In the first step of its § 101 analysis under Alice, the Federal Circuit found that the claims at issue were not directed to an abstract idea because the claims were “directed to a specific improvement to the way computers operate.” The court stated that where the focus of the claims is on a “specific asserted improvement in computer capabilities” rather than on “a process that qualifies as an ‘abstract idea,’” a claim can be found to not be directed to an abstract idea without proceeding to the second step of the Alice analysis.

Federal Circuit Upholds Dismissal for Lack of Standing when Plaintiff Lacked Substantial Rights in the Patents

In Diamond Coating Techs., LLC v. Federal-Mogul Corp., Appeal Nos. 2015-1844, -1861, the Federal Circuit affirmed the district court’s dismissal for lack of standing because Diamond failed to obtain all substantial rights in the patents-in-suit from the original patentee, Sanyo.

Diamond and Sanyo entered into a Patent Assignment and Transfer Agreement (“PATA”) to transfer certain rights to the patents at issue. Diamond then filed suit, alone, alleging infringement of two patents. The district court held that the PATA did not convey all substantial rights in the patents to Diamond and that Diamond therefore lacked standing.  Diamond appealed.

The Federal Circuit affirmed.  It explained that, under the agreement, Sanyo retained a license to make, use, and sell products covered by the patents and that “the PATA does not even grant Diamond a right to practice the patents-in-suit.”  The Court also noted that the PATA (1) conditioned Diamond’s litigation and enforcement activities on Sanyo’s best interests, (2) limited Diamond’s authority to license the patents-in-suit, and (3) limited Diamond’s discretion to refrain from suing certain companies. The Court therefore held that Diamond did not receive “substantial rights” in the patents-in-suit.

Diamond and Sanyo also executed nunc pro tunc (“having retroactive legal effect”) agreements after the district court’s decision in an attempt to cure Diamond’s standing problem.  Diamond relied on these agreements on appeal, but the Federal Circuit held that such agreements cannot repair standing retroactively.

Federal Circuit Confirms that, Under PTAB Procedure, Patent Holders in IPR Proceedings Have the Burden of Demonstrating that Amended Claims are Patentable Over the Prior Art

In In re Aqua Products, Inc., Appeal No. 2015-1177, the Federal Circuit affirmed the PTAB’s denial of a motion to amend claims in an IPR proceeding because the patent owner did not demonstrate that the amended claims would be patentable over the art of record.

After an IPR was instituted, patentee Aqua filed a motion to amend its claims.  In the motion, Aqua argued only that the new claims were not obvious because the cited combination of references failed to suggest one of the four new limitations added in the new claims.  The PTAB denied Aqua’s motion to amend and Aqua appealed.

On appeal, the Federal Circuit affirmed.  The court declined to revisit its precedent upholding PTAB procedures requiring patent owners to show that proposed amended claims would be patentable over the art of record.