In a precedential decision last week, the Federal Circuit held that CBS will not have to pay a $1.3 million infringement award because a podcasting patent was invalidated in an inter partes review (IPR) at the Patent Trial and Appeal Board (PTAB).
In 2013, Personal Audio sued CBS, among several other podcast producers, for infringement of U.S. Patent No. 8,112,504 (the ’504 patent), which describes a system for organizing audio files into “program segments.” Later that year, a third party, Electric Frontier Foundation, petitioned for an IPR of the ’504 patent. The PTAB instituted review, but the district court case proceeded to trial. A jury found CBS liable for infringement and awarded $1.3 million in damages to Personal Audio.
After the jury found CBS liable, the PTAB issued a final written decision in the IPR concluding that the claims at issue in the infringement suit were unpatentable. Personal Audio and CBS agreed to stay proceedings in the district court while Personal Audio appealed the IPR decision. The Federal Circuit affirmed the final written decision and the U.S. Supreme Court refused to hear the appeal. The district court then requested a joint status report from the parties in which Personal Audio stated it “continue[d] to believe that overturning the verdict of the jury with a later IPR proceeding violates the Seventh Amendment of the Constitution” and that “the outcome of the IPR should not be given collateral estoppel effect, since it was filed by a third party under a different standard.” Even though Personal Audio conceded that the current authority supported judgment in favor of CBS since the claims were invalidated by the IPR, Personal Audio appealed to the Federal Circuit.
On appeal, Personal Audio continued to lodge challenges to the constitutionality of the PTAB’s final written decision. More specifically, Personal Audio argued that, by issuing its final decision, the PTAB had violated the Seventh Amendment by reexamining jury findings. However, the court held that it did not have jurisdiction to hear this challenge. The court explained that, by establishing a path for direct appellate review of IPR decisions to the Federal Circuit, Congress precluded district court jurisdiction to review those decisions. As such, the district court, and subsequently the Federal Circuit, did not have jurisdiction to hear Personal Audio’s collateral attack on the IPR decision in this appeal.
Personal Audio also challenged whether the district court was required to rule in favor of CBS following the PTAB’s decision. In affirming the district court’s judgment in favor of CBS, the court directed its attention to the joint status report filed by the parties and, more specifically, Personal Audio’s concession of judgment in favor of CBS. Because Personal Audio made no argument for distinguishing its case from other cases in which the court held that district court actions must terminate when a PTAB ruling is affirmed on appeal, the court found that Personal Audio forfeited any argument that the IPR decision was not determinative in this case. The court went on to further note that, in any event, only the en banc court could reconsider the precedent at issue.
So what are the key takeaways from this decision? If a party faces an adverse collateral IPR decision, it is important to include any constitutional attacks on the IPR scheme at the time that the IPR is appealed to the Federal Circuit. As we see from this opinion, a party cannot use an appeal from the district court litigation to attack any aspects of the IPR final written decision. However, the application of a final written decision may still be appealable (assuming that one argues that the case is distinguishable from past precedent or, as discussed below, that past precedent should be reconsidered and overturned).
In the joint status report, Personal Audio agreed to judgment against it because “current authority supports rendering a judgment in favor of the Defendant CBS.” Without any argument from Personal Audio as to why its case was distinguishable from the precedent or that the precedent needed reconsideration, the court had nothing to work with (even if it wanted to tackle the issue). However, what if, instead, Personal Audio had argued that current authority on this issue was much in need of reconsideration by the Federal Circuit, provided rationale therefor, and then merely provided in the joint status report that “if current precedent is not reconsidered and overturned by the Federal Circuit (as it should be), current authority supports rendering a judgment in favor of the Defendant CBS.” Would this have adequately preserved the issue for appeal? Likely yes. Would the Federal Circuit have reconsidered and overturned the precedent? Maybe not. But, based on the dissenting views in this line of precedent, it would have at least been an interesting conversation.