Federal Circuit Review - May 2020

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IPR Petitioners May Not Raise Appointments Clause Challenges Under Arthrex

In CIENA CORPORATION v. OYSTER OPTICS, LLC, Appeal No. 19-2117, affirmatively petitioning for IPR waived the petitioner’s Appointments Clause challenge, such that the petitioner could not request remand and a new panel under Arthrex.

Ciena petitioned for IPR of Oyster’s patents. The PTAB instituted review and held that Ciena failed to establish that any of the claims were unpatentable. Ciena appealed based on the Federal Circuit’s Arthrex decision. Ciena argued that, under Arthrex, the PTAB’s decision must be vacated and remanded for a new hearing before a different panel because the original panel was not appointed in conformity with the Appointments Clause.

The Federal Circuit distinguished Arthrex because Ciena affirmatively petitioned for IPR, unlike the patent owner in Arthrex. Accordingly, the Federal Circuit held that Ciena waived its Appointments Clause challenge. The court noted it could forgive waiver in certain circumstances, but declined to do so because Ciena affirmatively sought both IPR and a stay in related district court proceedings pending the outcome of the IPR.

Remands Under Arthrex Limited to Final Written Decisions Issued Prior to Arthrex

In CATERPILLAR PAVING PRODUCTS v. WIRTGEN AMERICA, INC., Appeal No. 20-1261, the Federal Circuit held that remand of an IPR based on Arthrex is not justified where the final written decision issued after the Arthrex decision.

Wirtgen America, Inc. petitioned the Patent Trial and Appeal Board for inter partes review (“IPR”) of Caterpillar Paving Products Inc.’s (“Caterpillar”) patent, and the Board instituted review. Caterpillar appealed the final written decision issued in November 2019, arguing the decision should be vacated and remanded for a new hearing before a differently constituted panel in light of the Federal Circuit’s decision in Arthrex v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019), regarding the constitutionality of Board judges.

The Federal Circuit found Arthrex expressly limited to final written decisions issued prior to the issuance of Arthrex. Although most of the IPR proceedings in the case took place before Arthrex, the final written decision was issued by a constitutionally appointed panel following Arthrex. Thus, a remand based on Arthrex was not justified.

Unconstitutionally Appointed Patent Judges Cannot Decide Appeals From Inter Partes Reexaminations

In VIRNETX INC. v. CISCO SYSTEMS, INC. and VIRNETX INC. v. CISCO SYSTEMS, INC., Appeal No. 19-1671, the Federal Circuit held that, when administrative patent judges are unconstitutionally appointed, their decisions in appeals from inter partes reexamination must be vacated, just like their decisions in inter partes review.

Appellee Cisco and Intervenor Andrei Iancu, the Director of the U.S. Patent and Trademark Office, petitioned for panel rehearing and rehearing en banc to challenge the Federal Circuit’s decision extending the holding of Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019), beyond the context of inter partes review (IPR). Arthrex held that an IPR decision issued by a panel of administrative patent judges (APJs) who were unconstitutionally appointed had to be vacated. The original panel decision in VirnetX extended the holding of Arthrex to inter partes reexamination.

The rehearing petitions argued that, based on differences between IPRs and inter partes reexaminations, APJs should be deemed constitutionally appointed with respect to their duties reviewing appeals from inter partes reexamination. In response to the rehearing petitions, the panel issued an order “for the purpose of more fully explaining our rationale.”

The panel analyzed Freytag v. Commissioner, 501 U.S. 868 (1991), where the Supreme Court held that the constitutionality of an appointment is based on all of the appointee’s duties and not just the authority exercised in a particular case. Because the APJs who decide appeals from inter partes reexaminations also conduct IPRs, their appointments were unconstitutional under Arthrex. Further, the panel found that even if inter partes reexaminations were analyzed on their own, they were similar enough to IPRs that they would raise the same constitutional problems identified in Arthrex. Thus, the petitions for panel rehearing were denied.

In a separate order, the Federal Circuit also denied the petitions for rehearing en banc, without comment.

Shop ’Til You Drop (That Claim)

In ELECTRONIC COMMUNICATION TECHNOLOGIES, LLC v. SHOPPERSCHOICE.COM, LLC., Appeal No. 19-1587, the Federal Circuit held that claims directed to longstanding commercial practices do not pass step one of the § 101 test.

Electronic Communication Technologies, LLC (“ECT”) sued ShoppersChoice.com, LLC (“SC”) for patent infringement of U.S. Patent No. 9,373,261 (“the ’261 patent”). SC moved for judgment on the pleadings that claim 11 of the ’261 patent was invalid under 35 U.S.C. § 101. The district court granted the motion. ECT appealed to the Federal Circuit, which affirmed the invalidity of claim 11.

The ’261 patent recited a delivery notification system for goods. Claim 11 specifically recited the delivery notification system in terms of its hardware and software components and their function. The district court found claim 11 invalid under Section 101 because “claim 11 is directed to the abstract idea of providing advance notification of the pickup or delivery of a mobile thing” and “does not include an inventive concept.” The Federal Circuit agreed, applying the two-step Alice/Mayo test. The Federal Circuit reiterated that claims directed to longstanding commercial practices do not pass step one of the test, and found that the idea of providing advance notification of the pickup or delivery of a mobile thing was a longstanding commercial practice. The court also found that Claim 11 failed step two of the test because it “did not include an inventive concept sufficient to transform the claimed abstract idea into a patent eligible application.”

ECT argued that the enhanced security protocols of its delivery notification system, the speed with which the ’261 patent received allowance from the USPTO, and ECT’s good faith in requesting that the USPTO check § 101 eligibility during prosecution should have made claim 11 patent eligible. The Federal Circuit found these arguments unpersuasive. Finally, ECT argued that the district court erred in finding Claim 11 ineligible without engaging in claim construction. The Federal Circuit also rejected this argument, because ECT did not propose a single term that it believed required construction. Thus, the Federal Circuit affirmed the invalidity of Claim 11 of the ’261 patent.

Not All § 112 ¶ 6 Indefiniteness Prevents Prior Art Analysis By PTAB

In COCHLEAR BONE ANCHORED SOLUTIONS AB V. OTICON MED. AB, Appeal No. 19-1105, the Federal Circuit held that the PTAB can analyze anticipation and obviousness when some but not all claimed alternatives are indefinite under 35 U.S.C. § 112 ¶ 6.

The PTAB instituted Oticon’s petition for inter partes review of Cochlear Bone Anchored Solutions’ (“Cochlear”) patent relating to rehabilitating a patient with unilateral hearing loss. The PTAB determined that because claims 7–10 contain means-plus-function limitations without a corresponding structure disclosed in the specification, it could not construe the claims in order to compare the claim requirements with the prior art. The PTAB thus declined to invalidate those claims. Oticon appealed this decision.

The Federal Circuit affirmed in part and vacated in part. The Federal Circuit agreed that claims 7–9 were indefinite under § 112 ¶ 6 because each contained at least one required means-plus-function claim element for which the specification provided no corresponding structure. Thus, “it [wa]s impossible to conduct a prior-art analysis” and the “necessary course of action was to conclude that unpatentability of claims 7–9 could not be shown.” The Federal Circuit, however, vacated the PTAB’s decision with respect to claim 10. Unlike claims 7–9, claim 10 did not contain a required claim element in means-plus-function form. Claim 10 recited “directivity means comprising at least one directivity dependent microphone and/or signal processing means in the electronic circuitry.” The Federal Circuit held that the use of the “and/or” disjunctive created three alternative subsets of claim coverage. And although the PTAB correctly held that “signal processing means” was indefinite, “directivity-dependent-microphone” was “clear structure” for performing the claimed function. It was error for the PTAB to rely entirely on the indefiniteness of some of the alternatives to conclude that a prior art analysis was impossible for every alternative. The Federal Circuit remanded for determination of whether the “directivity-dependent-microphone” alternative was subject to § 112 ¶ 6 and whether this alternative was anticipated or rendered obvious by the prior art.

Intrinsic Evidence Establishing the Context of a Claim Term Can Limit Claim Scope

In MCRO, INC. v. BANDAI NAMCO GAMES AMERICA, Appeal No. 19-1557, the Federal Circuit held that the scope of a claim term may be limited when intrinsic evidence establishes that the context of the patent is narrowly focused.

McRO sued a number of game developers (“Developers”) for infringement of a patent related to a method of automatically animating lip movement and facial expression in three-dimensional characters. The district court initially granted the Developers’ motion for summary judgment of patent ineligibility of the asserted claims under 35 U.S.C. § 101. The Federal Circuit reversed, finding the claims patent eligible. On remand, the district court construed the claim term “morph set weight” to require three-dimensional vectors, and granted the Developers’ motion for summary judgment of non-infringement and invalidity for non-enablement. McRO appealed.

On appeal, the parties did not dispute that when “morph set weight” is construed to require three-dimensional vectors, the Developers do not infringe. McRO argued that the district court erred in construing the term “morph set weight” by narrowly construing “vector” to require three-dimensional vectors, rather than adopting McRO’s broader construction of “vector” which included any ordered set of numbers. The Federal Circuit rejected McRO’s argument, finding that spatial terms such as “vertex” and “topology” in the specification and “three-dimensional characters” in the preamble of the asserted claims “strongly favor[ed] the narrow geometric meaning of ‘vector’.” The Federal Circuit also found support in an equation summarizing the claimed process. Because the equation required addition of a three-dimensional vector with a sum of the vectors at issue, the court concluded the summed vectors must also be three dimensional. The Federal Circuit concluded that the meaning most appropriate in the context of the patent was that “vector” required three-dimensional vectors and affirmed the district court’s claim construction and finding of non-infringement.

The Federal Circuit also addressed the district court’s finding of invalidity for lack of enablement. The Federal Circuit explained that a determination of enablement requires the identification of at least some embodiments that are or may be within the scope of the claim that is not enabled. However, the only specific embodiments identified by the district court and the Developers were the accused products and a second embodiment, all of which were outside the scope of the claims when construed to require the “vector” be a three-dimensional. The Federal Circuit declined to depart from the existing requirement that the challenger identify specific embodiments that are or may be within the claim but are not enabled. Without “concrete identification of matter that is not enabled” but within the claim scope, the Developers could not meet the burden to show non-enablement by clear and convincing evidence. The Federal Circuit vacated the district court’s summary judgment of invalidity for lack of enablement and remanded for further proceedings.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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