Substitute Claims Proposed in an IPR are Subject to Patent Eligibility Review Under Section 101

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In Uniloc 2017 LLC v. Hulu, LLC, Netflix, Inc. (July 22, 2020), the Federal Circuit held that the Patent Trial and Appeal Board (“the PTAB”) may consider, in its review of substitute claims proposed in an inter partes review (“IPR”), the patentability of the claims under 35 U.S.C. § 101.

Hulu, LLC and Netflix, Inc. (together “Hulu”) filed a petition for an IPR, challenging claims 1-25 of U.S. Patent No. 8,566,960 (“the ’960 patent”) owned by Uniloc 2017 LLC (“Uniloc”). During the IPR proceeding, Uniloc filed a motion to amend the ’960 patent, asking the PTAB to enter the substitute claims 26-28 if the PTAB found claims 1, 22, and 25 of the ’960 patent unpatentable. Hulu opposed the motion by arguing, inter alia, that the substitute claims are patent ineligible under § 101. Uniloc replied to the opposition, arguing that Hulu was not permitted to raise § 101 in opposition to the substitute claims. Uniloc, however, did not make any substantive arguments that the substitute claims are patent-eligible under § 101. The PTAB issued its final written decision (i) finding that the challenged claims are unpatentable and (ii) denying Uniloc’s motion to amend solely on the ground that Hulu had shown by a preponderance evidence that the substitute claims are directed to non-statutory subject matter under § 101. Uniloc requested a rehearing of the PTAB’s denial of its motion to amend. The PTAB denied Uniloc’s request for rehearing, concluding that, in determining patent eligibility of substitute claims submitted during the IPR proceeding, the PTAB may consider patent eligibility under § 101. Uniloc appealed.

35 U.S.C. § 311(a) allows any person who is not the owner of a patent to file a petition to institute an IPR of the patent, and 35 U.S.C. § 311(b) allows the petitioner to request cancelling one or more claims as being unpatentable “only on a ground that could be raised under section 102 or 103.”

Uniloc argued that the PTAB is limited in its review of substitute claims proposed in an IPR to anticipation or obviousness, as disclosed in § 311(b). The Federal Circuit disagreed and held that the text, structure, and legislative history of the IPR Statutes confirm that the PTAB may review substitute claims proposed during an IPR under § 101.

First, the Federal Circuit pointed out that “[t]he IPR Statutes plainly and repeatedly require the PTAB to determine the ‘patentability’ of proposed substitute claims,” and that “a § 101 analysis constitutes a ‘patentability’ determination.” The Federal Circuit also held that “section 311 is confined to review of existing patent claims, not proposed ones” as it limits a request to cancel as unpatentable one or more claims of a patent to ‘a ground that could be raised under sections 102 and 103,’” and that substitute claims are not claims of a patent.

Second, the Federal Circuit held that the legislative history of the IPR Statues confirms that the PTAB is allowed to review proposed substitute claims for patentability outside of anticipation and obviousness. The Federal Circuit pointed out that the scope of reexamination proceedings is limited to substantial new question of patentability, and “[p]roposed substitute claims in an IPR proceeding have not undergone a patentability review by the USPTO.” The Federal Circuit concluded that “[p]rohibiting the PTAB from reviewing patent eligibility would indeed ‘strip … [the PTAB] of a critical legal tool[.]’”.

Third, the Federal Circuit agreed with the comment the USPTO made as intervenor — that “‘if a patent owner seeking amendments in an IPR were not bound by § 101 and § 112, then in virtually any case, it could overcome prior art and obtain new claims simply by going outside the boundaries of patent eligibility and the invention described in the specification[,]’ … allowing patents with otherwise invalidated claims ‘to return from the dead as IPR amendments.’”

It is clear from this opinion that the PTAB’s review of patentability of substitute claims proposed during an IPR proceeding is not bound by § 102 and § 103. Thus, while the owner of a patent that is subject to an IPR may avoid, by submitting substitute claims, the possibility of having its patent invalidated under § 102 and/or § 103, it should bear in mind that the substitute claims will need to withstand scrutiny under § 101 (and probably § 112), not just § 102 and § 103.

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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