Last Week in the Federal Circuit (July 27-31): Gambling on an APA Challenge

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It was a moderately eventful week at the Federal Circuit as the judges geared up for their August argument session and perhaps returned from their summer vacations. The Court issued 13 opinions and 2 orders on petitions for a writ of mandamus (1 grant and 1 denial). And the Court finally acted on a petition for rehearing that had been pending since December (and that we previously mentioned). The original panel modified its opinion to order further proceedings on a claim it previously held ineligible under Section 101, and an evenly divided en banc Court denied en banc rehearing. That denial drew 2 concurring opinions, 3 dissenting opinions, and 1 dissent without opinion. Below we provide our other usual statistics and our case of the week—our highly subjective selection based on whatever case piqued our interest.

Precedential opinions: 7

Non-precedential opinions: 6

Rule 36: 0

Longest pending case from argument: Australian Therapeutic Supplies Pty. Ltd. v. Naked TM, LLC, No. 19-1567 (199 days)

Shortest pending case from argument (non-Rule 36): Tie between Takeda Pharmaceuticals U.S.A., Inc. v. Mylan Pharmaceuticals Inc., No. 20-1407, and Takeda Pharmaceuticals U.S.A., Inc. v. Alkem Laboratories Limited, No. 20-1545 (53 days each)

Case of the week: FanDuel, Inc. v. Interactive Games LLC, No. 19-1393 (July 29, 2020)

Panel: Judges Dyk, Moore, and Hughes, with Judge Hughes writing the majority opinion and Judge Dyk concurring in part and dissenting in part.

You should read this case if: You have an IPR appeal involving a procedural challenge under the APA.

As our readers likely know, one important difference between district court litigation and Patent Trial and Appeal Board proceedings is that PTAB proceedings like IPRs are subject to the requirements of the Administrative Procedure Act. In our case of the week, a patent owner took a gamble on an APA challenge at the Federal Circuit but went bust.

FanDuel petitioned for an inter partes review of a patent owned by Interactive Games related to remote gambling. It asserted that the challenged claims were unpatentable for obviousness based on a combination of three references. In Interactive Games’s preliminary patent owner response, it defended the validity of a dependent claim (claim 6) only by arguing that the reference on which FanDuel relied for claim 6’s additional limitations did not qualify as prior art. The Board instituted an IPR, finding a reasonable likelihood that FanDuel would prevail on its challenge to claim 6 but only expressly discussing the prior-art issue. But the Board’s final written decision ultimately upheld claim 6. It did not discuss whether the disputed reference qualified as prior art; instead, it found that FanDuel had not demonstrated a motivation to combine that reference with the other asserted references.

On appeal, FanDuel argued that the Board violated the APA by “changing theories midstream” and adopting a “new theory” that Interactive Games never raised in its submissions, all without giving FanDuel notice and an opportunity to respond to this supposedly new theory. The Federal Circuit rejected that contention, observing that “FanDuel’s argument that it lacked notice that the Board might address and reject the obviousness arguments made in FanDuel’s own petition strains credulity.” The Court gave “two somewhat overlapping reasons” for its conclusion.

First, the Court pointed to “the different standards of proof required to institute versus to invalidate.” At institution, the Board need only find a reasonable likelihood that a petitioner will succeed, whereas in a final decision, the Board must find invalidity by a preponderance of the evidence. Those differing standards “permit the Board to adopt different views of the sufficiency of a petitioner’s asserted obviousness arguments in its initial versus final decisions without first alerting the parties to that possibility.” In fact, the Court recognized, “[t]his happens with some frequency.”

Second, the Court observed that “the burden of proving invalidity in an IPR remains on the petitioner throughout the proceeding.” Indeed, the Court explained, “a patent owner carries no obligation to raise any objection to the petitioner’s challenges at all.” Thus, the petitioner’s contentions, rather than a patent owner’s response, “define the universe of issues the Board may address in its final written decision.” Applying those principles, the Court noted that the “central question” throughout the IPR was whether FanDuel proved its theory as to how the asserted references combined to make claim 6 obvious. FanDuel was “on notice that the Board would decide” that issue “[f]rom the moment FanDuel filed its petition.” And that was “exactly what the Board ultimately did” in its final written decision. The Court concluded that “[n]o APA violation results from such a course.”

The Court went on to reject FanDuel’s challenge to the substance of the Board’s non-obviousness determination. Judge Dyk dissented from that part of the majority’s opinion but agreed with the majority in rejecting FanDuel’s procedural challenge.

[View source.]

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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