Last week, in Uniloc 2017 LLC v. Hulu, LLC, the Federal Circuit ruled that the Patent Trial and Appeal Board may consider patent eligibility under 35 U.S.C. § 101 for substitute claims. The appeal raises issues of finality as well as the Board's authority. Judge O'Malley filed a dissenting opinion—nearly as long as the majority opinion—on both issues, which may signal that this case could be headed for rehearing. Judge O'Malley stated that as a result of the Court's decision, "when it comes to substitute claims, the Board can engage in full-blown examination."
The parties were involved in parallel district court litigation and IPR related to U.S. Patent No. 8,566,960 (the '960 patent). In the IPR appealed from here, the Board issued a Final Written Decision, concluding that all of the granted '960 claims were unpatentable and denying Uniloc's motion to amend because the proposed substitute claims were patent ineligible. Hulu opposed the proposed substitute claims on multiple grounds, including § 101.
Meanwhile, the District Court dismissed Uniloc's complaint under Federal Rule of Civil Procedure 12(b)(6), concluding that the '960 claims were invalid for lack of patentable subject matter. The Federal Circuit summarily affirmed and Uniloc did not file a cert. petition in the Supreme Court.
The Board's final written decision predated the Federal Circuit's affirmance in the district court litigation by about a week. However, after the Federal Circuit affirmance, Uniloc sought rehearing on the IPR at the Board. The Board denied rehearing on the merits rather than concluding that the IPR was moot because of the District Court invalidity judgment.
On appeal, Uniloc challenged the Board's authority to consider § 101 in resolving a motion to amend. While Hulu defended the Board's authority, it also argued that the appeal was moot because of the District Court judgment. The PTO intervened, arguing that the appeal was not moot and the Board had authority to consider § 101 for proposed substitute claims.
The majority (Judges Wallach and Taranto) addressed mootness both procedurally and substantively. To begin, the majority found that Hulu waived the mootness argument. Hulu never raised it with the Board on rehearing and never filed a cross-appeal with the Court seeking vacatur of the Board's decision. In any event, the majority rejected Hulu's argument on the merits, noting that Uniloc can receive relief on appeal if the Court agrees that the Board erred in considering § 101.
Judge O'Malley dissented on mootness. She explained that once the District Court's invalidity judgment became final, the '960 patent ceased to exist. Because the '960 patent was a nullity, Uniloc could not substitute claims into it. Put another way, after the '960 patent was invalidated, Uniloc had nothing to give up for the substitute claims.
The majority disagreed with Judge O'Malley's understanding of a substitute claim. Rather, the majority explained that substitute claims exist whether or not the original claims do.
Although the Board's authority to consider § 101 for substitute claims is the bigger issue here, it will be interesting to see how the impact of a district court judgment on motions to amend and substitute claims in IPR develops. Judge O'Malley's concerns with finality in this appeal echo her disagreement with the Federal Circuit's Fresenius line of cases. The Supreme Court denied a cert. petition on that issue last month—Chrimar Systems, Inc. v. Ale USA Inc., 19-1124.
The Board's Authority to Consider § 101
The majority concluded that the text, structure, and legislative history of the America Invents Act confirm the Board's authority. The majority and dissent engaged in dueling statutory construction of §§ 311, 316(d), and 318 in regard to this question. In short, the majority concluded that § 311's limit of IPR petitions to certain §§ 102 and 103 unpatentability grounds does not apply to motions to amend and substitute claims.
The majority also explained that Federal Circuit case law on inter partes reexamination supported the Board's authority. In this regard, the majority relied on In re NTP, 654 F.3d 1268 (Fed. Cir. 2011), where the Court held that priority under § 120 could be considered in reexamination. In dissent, Judge O'Malley distinguished reexamination from IPR. She noted that unlike reexamination conducted by a patent examiner, IPR is an adjudication conducted by an APJ. With respect to NTP, Judge O'Malley noted that unlike § 101, § 120 is not a patentability provision, and that the NTP Court acknowledged that in reexamination original claims cannot be challenged on § 101 grounds.
Further, the majority rejected Uniloc's argument that Aqua Products, Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017) (en banc), forecloses the Board's authority to consider § 101 for substitute claims. The majority explained that while Aqua Products stands for the petitioner bearing the burden of proof on unpatentability of substitute claims, that case is silent on whether a petitioner, like Hulu, can raise a § 101 challenge to such claims. In dissent, Judge O'Malley explained that the plurality opinion in Aqua Products (joined by five of the eleven judges rehearing that appeal) addressed a question closely related to the majority's and dissent's disagreement about the statutory interpretation of § 318 in this appeal.
Going forward, it will be interesting to see how often § 101 is used to oppose and deny motions to amend in IPR and whether resolving motions to amend becomes "full-blown examination" as Judge O'Malley predicts.
Uniloc 2017 LLC v. Hulu, LLC (Fed. Cir. 2020)
Panel: Circuit Judges O'Malley, Wallach, and Taranto
Opinion by Circuit Judge Wallach; dissenting opinion by Circuit Judge O'Malley