Netflix, Inc. v. DivX, LLC, Appeal Nos. 2022-1203, -1204 (Fed. Cir. Oct. 25, 2023)

In its only precedential patent opinion this week, the Federal Circuit issued a cautionary note to petitioners in inter partes reviews. Specifically, the Court affirmed a decision by the Patent Trial and Appeal Board that ruled a patent not invalid based on arguments as the Board understood them. Netflix asserted the Board had misunderstood the arguments. The Federal Circuit, however, found that the Board made no errors in understanding the Petition as framed, and thus found against Netflix.

The patents in this case concerned methods for adaptive bitrate streaming of content on playback devices (mobile phones or computers). The details of the patents are beyond what is necessary to understand the import of the Board’s decision. For present purposes, one of the claims at issue recited a “filtering” step, which involves filtering a list of assets (media streams), followed by a “generating” step, wherein a top-level index file is generated. Netflix argued in its petition that the “filtering” limitation was satisfied by a piece of prior art’s (“Pyle’s”) reference to a pre-existing manifest, and that the “generating” step was satisfied by Pyle’s reference to a new manifest.

The Board perceived a disconnect in how Netflix used Pyle to teach the “filtering” and “generating” limitations. The way the pre-existing manifest and the new manifest work in Pyle was inconsistent with how the filtering and generating steps were described in the patent claims.

The Federal Circuit noted several cases in which an IPR petitioner contends that a particular argument was properly raised, but was overlooked or otherwise incorrectly interpreted by the Board. The Court noted that this poses a challenge for the Board, because the failure to consider an argument violates the APA; but just the same, a finding that claims are un-patentable based on arguments not presented in the Petition is also subject to reversal. The Court provided this helpful guidance to the Board, and the patent bar:

While the Board should not take an overly mechanistic view of a petition and decline to address an argument because the petitioner did not present it with ideal vigor and clarity, the Board should also not have to decode a petition to locate additional arguments beyond the ones clearly made. A petitioner may not rely on a vague, generic, and/or meandering petition and later fault the Board for failing to understand what the petition really meant. Ultimately, it is the petitioner’s burden to present a clear argument. … The Board is entitled to discretion in how it interprets petitions. … And we have rejected, many times, post-hoc attempts on appeal to include additional, new arguments not contained in the petition. … Any argument not raised to the Board is forfeited, and we decline to consider it for the first time on appeal.

Given that framework, the Court found no error in the Board’s interpretation of Netflix’s position concerning the “filtering” step. Netflix argued that its petition included argument that the “filtering” step referred to Pyle’s new manifest. But the Court could “see no discussion in the petition’s ‘filtering’ section … of how Pyle’s creation of a new manifest meets this limitation.” “Netflix’s petition plainly explained how the ‘filtering’ limitation corresponded to Pyle’s selection of a pre-existing manifest.” After reviewing Netflix’s various attempts to invoke the new manifest in relation to the “filtering” step, the Court concluded “while the petition explained that Pyle disclosed two embodiments—a new manifest and a pre-existing manifest—the petition’s explanation for how Pyle taught the filtering limitation was limited to just Pyle’s pre-existing manifest.”

Judge Dyke issued a 9-page dissent, in which he identified portions of the petition that supported Netflix’s arguments, and explained why he thought the Board’s institution decision supported Netflix’s arguments. The majority, however, disagreed.

The same general argument was repeated with respect to additional limitations and combinations of prior art. The parties (and the judges) disputed whether Netflix’s arguments had been clearly and cogently raised. In each instance, the majority agreed with the Board’s interpretation of the petition. Because the arguments on appeal were not presented in the petition (as interpreted by the Board and the majority), they were deemed to have been forfeited. The Court thus affirmed the Board’s decision upholding the patentability of the challenged claims.

The opinion can be found here.

By Nika Aldrich