Portion of PTAB’s Facebook Decision Addressing Pre-Institution Statutory Disclaimers Designated as Precedential

by Buchanan Ingersoll & Rooney PC

True to its ongoing effort to increase the number of precedential decisions, the Patent Trial and Appeal Board (“P.T.A.B.”) designated, on December 21, 2017, a portion of its Decision on Petitioner’s Request for Rehearing in CBM2016-00091 as precedential. See Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 12 (P.T.A.B. Sept. 28, 2017); see also P.T.A.B. Standard Operating Procedure 2 (“SOP 2”). The portion designated as precedential, Section II.B.2, addresses the impact of pre-institution statutory disclaimers on decisions to institute, and the remainder of the decision provides P.T.A.B. litigants additional guidance on panel expansion and Covered Business Method (“CBM”) Review eligibility.

The Underlying Dispute

On June 15, 2016, Facebook, Inc. and Instagram LLC filed a Petition for CBM Review of U.S. Patent No. 9,037,502. See Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 1 (P.T.A.B. June 15, 2016). Petitioners alleged three grounds of unpatentability: (1) that Claims 1-11 of the ’502 Patent were invalid under 35 U.S.C. § 101; (2) that Claims 1-11 of the ’502 Patent were invalid for failure to comply with the “regards” clause of 35 U.S.C. § 112; and (3) that Claims 1-11 of the ’502 Patent were invalid for failure to comply with the written description requirement of 35 U.S.C. § 112. Id. at 27, 32-65. In terms of eligibility for CBM review, the Petition specifically addressed Claim 1, the sole independent claim, as well as Claims 6 and 8-11. Id. at 4-8.

On September 14, 2016, just three days before the deadline and but one day before actually filing its Preliminary Response, Patent Owner statutorily disclaimed Claims 6 and 8-11 of the ’502 Patent – leaving Claims 1-5 and 7 at issue. See Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 6, at 4 (P.T.A.B. Sept. 15, 2016). Petitioner’s request to file a Reply to address the impact of the disclaimer was denied, but a conference call with the Board did occur during which the parties “brought [to the Board’s] attention various non-precedential decisions made by other panels of the Board that have dealt with disclaimed claims as they related to alleged CBM eligibility.” See Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 12, at 3-4 (P.T.A.B. Sept. 28, 2017); see also Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 7, at 7 (P.T.A.B. Nov. 23, 2016).

On November 23, 2016, the Board, via a panel of Judges Arbes, Perry, and Cherry, issued its Decision denying institution. Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 7, at 3, 8-15 (P.T.A.B. Nov. 23, 2016). The panel, after reiterating the definition of a “covered business method patent” under the America Invents Act (“AIA”) § 18(d)(1) and 37 C.F.R. § 42.301(a) and noting that a “patent is eligible for review if it has at least one claim directed to a covered business method,” concluded that “the ’502 patent is not a ‘covered business method patent.’” Id. at 5-7. The panel’s Decision noted that the “majority of Petitioner’s briefing is devoted to arguing that claims 6 and 8-11 are financial in nature and thus subject the ’502 patent to CBM review” but that, due to the disclaimer, only Petitioner’s arguments regarding Claim 1 remained open for analysis. Id. at 7, 10. In reaching that conclusion, the panel noted that several previous, non-precedential, non-binding decisions had already confronted the issue of “alleged CBM eligibility on the basis of disclaimed claims” – some concluding that the disclaimed claims should be disregarded (such as CoreLogic, Inc. v. Boundary Solutions, Inc., CBM2016-00016, Paper 9, at 6-7 (P.T.A.B. May 24, 2016), AT&T Mobility LLC v. Intellectual Ventures II LLC, CBM2015-00185, Paper 10, at 10 (P.T.A.B. May 4, 2016), Great West Casualty Co. v. Intellectual Ventures II LLC, CBM2015-00171, Paper 10, at 7 (P.T.A.B. Feb. 9, 2016), and Google Inc. v. SimpleAir, Inc., CBM2015-00019, Paper 11, at 14-15 (P.T.A.B. May 19, 2014)) and some concluding that “a disclaimed dependent claim that includes finance-related subject matter may be considered for purposes of CBM eligibility when assessing the scope of the claimed subject matter in the parent (non-disclaimed) independent claim.” Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 7, at 8-9 (P.T.A.B. Nov. 23, 2016) (citing J.P. Morgan Chase & Co. v. Intellectual Ventures II LLC, CBM2014-00157, Paper 11, at 2-3 (P.T.A.B. Feb. 18, 2015)).

The panel stated that it “treats the disclaimed claims as if they never existed, [which is] consistent with the majority of cases cited [in its Decision] dealing with the issue and Federal Circuit case law.” Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 7, at 9 (P.T.A.B. Nov. 23, 2016) (citing Vectra Fitness, Inc. v. TWNK Corp., 162 F.3d 1379, 1383 (Fed. Cir. 1998); Guinn v. Kopf, 96 F.3d 1419, 1422 (Fed. Cir. 1996); Genetics Inst., LLC v. Novartis Vaccines & Diagnostics, Inc., 655 F.3d 1291, 1299 (Fed. Cir. 2011)).

On December 22, 2016, Petitioners filed a Request for Rehearing pursuant to 37 C.F.R. § 42.71(c), stating that they felt compelled to do so “because of a fundamental legal error committed by the panel . . . that, if not corrected, threatens to undermine the efficacy of the CBM patent review procedure as envisioned by Congress.” Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 8, at 1 (P.T.A.B. Dec. 22, 2016). According to Petitioners, who sought rehearing by either “the original or an expanded panel,” that fundamental error “was the Board’s decision to allow the Patent Owner to unilaterally strip the Board of its authority to institute a CBM patent review by filing a statutory disclaimer after the filing of the CBM petition.” Id.

Approximately nine months later, an expanded panel – including Chief Judge Ruschke, Deputy Chief Judge Boalick, and the original panel – issued its Decision on Petitioner’s Request for Rehearing. Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 12 (P.T.A.B. Sept. 28, 2017). Section II.B.2 of that Decision now offers precedential guidance on the impact of pre-institution statutory disclaimers. The remainder of the decision provides P.T.A.B. litigants additional guidance on panel expansion and CBM eligibility.

Panel Expansion – Made at the Chief Judge’s Discretion

The Decision notes that the Board’s governing statutes and regulations “do not provide for parties to request, or panels to authorize, an expanded panel” but that under the Board’s Standard Operating Procedure 1 (“SOP 1”), “the Chief Judge [has] discretion to expand a panel to include more than three judges.” Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 12, at 2 (P.T.A.B. Sept. 28, 2017) (citing 35 U.S.C. § 6, 37 C.F.R. §§ 41.1-42.412, P.T.A.B. SOP 1 (Rev. 14), at 1-3 (§§ II, III), In re Alappat, 33 F.3d 1526, 1532 (Fed. Cir. 1994)). An expanded panel may be suggested by a judge, panel, or party and SOP 1 provides examples of reasons for which the Chief Judge may expand a panel, including when the issue is “of exceptional importance” and when “consideration by an expanded panel is necessary to secure and maintain uniformity of the Board’s decisions.” Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 12, at 2-3 (P.T.A.B. Sept. 28, 2017) (citing P.T.A.B. SOP 1 (Rev. 14), at 3 (§§ III.A, III.A.1, 2)). Because the effect of a pre-institution statutory disclaimer on CBM patent review had been at issue in many cases before the Board, with differing results, the “Chief Judge . . . determined that an expanded panel [was] warranted to provide guidance regarding the effect of such disclaimers on CBM patent review eligibility.” Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 12, at 3 (P.T.A.B. Sept. 28, 2017).

Statutory Disclaimer

Petitioner urged that the Board should adopt a “time-of-filing” rule for assessing the impact of post-Petition-filing disclaimers on CBM patent review eligibility. Id. at 4-5. Petitioner argued that a “time-of-filing” rule is used for determining federal court jurisdiction and that adopting such a rule would prevent Patent Owners from conducting a “postfiling salvage operation” that divests the Board of its CBM patent review jurisdiction. Id. at 5.

The Board declined to adopt a time-of-filing rule. Id. In so doing, the Board noted that it is “not a federal court, but an administrative agency whose authority to act has been granted by Congress” and that any and all authority pursuant to which an agency may act ultimately must be grounded in an express grant from Congress. Id.

The Board noted that the AIA permits the Director to institute “a transitional proceeding only for a patent that is a covered business method patent.” Id. at 5-6 (citing Pub. L. No. 112-29, 125 Stat. 284 § 18(a)(1)(E) (2011)) (emphasis original). The Board explained that “the statute permits institution only for a patent that is a covered business method patent, and requires a patent that claims a particular type of method or apparatus.” Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 12, at 6 (P.T.A.B. Sept. 28, 2017) (emphasis original) (citing Secure Axcess, LLC v. PNC Bank Nat’l Ass’n, 848 F.3d 1370, 1381 (Fed. Cir. 2017); Unwired Planet, LLC v. Google Inc., 841 F.3d 1376, 1382 (Fed. Cir. 2016); Blue Calypso, LLC v. Groupon, Inc., 815 F.3d 1331, 1340 (Fed. Cir. 2016)). The Board summarized its analysis by stating:

The decision whether to institute a CBM patent review is based on whether a patent “is” a covered business method patent, which in turn is based on what the patent “claims” at the time of the institution decision, not as the claims may have existed at some previous time.

Facebook, Inc. v Skky, LLC, CBM2016-00091, Paper 12, at 6 (P.T.A.B. Sept. 28, 2017). The Board stated that adopting Petitioner’s requested time-of-filing rule would “ignore 35 U.S.C.      § 253(a) and its effect, as interpreted by the Federal Circuit.” Id. at 7. The Board noted that the “Federal Circuit has held consistently that claims disclaimed under § 253(a) should be treated as though they never existed.” Id. at 8 (citing Vectra Fitness, 162 F.3d at 1383; Guinn, 96 F.3d at 1422; Genetics Inst., 655 F.3d at 1299).

Take-Home Messages from the Facebook Decision

P.T.A.B. litigants facing an issue treated differently by several panels should consider suggesting panel expansion. Study SOP 1 and align your reasons for requesting an expanded panel with those exemplified.

Recognize that the Patent Owner has the option to disclaim any of its claims, including after the Petition is filed and before the determination on whether to institute is made. If the Patent Owner does so, the Board will treat those disclaimed claims “as though they never existed.”

When drafting a Petition, consider the impact of Patent Owner disclaiming one or more of the claims. Addressing each claim separately, to the extent possible in view of word limits, can insulate a Petitioner from having its alleged grounds for review evaporate. When drafting a Preliminary Response, consider whether disclaimer of one or more claims could defeat the Petition yet retain sufficient protection for the invention. Should a trial be instituted, revisit the potential disclaimer analysis prior to filing the Patent Owner Response.

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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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