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Ignore PTAB Precedent At Your Peril

Ignore PTAB Precedent At Your Peril

Given the popularity of AIA post-grant proceedings, many patent litigators have been newly drawn into proceedings before the Patent Trial and Appeal Board (“PTAB”).  However, parties and attorneys involved in such proceedings should be aware that the PTAB has its own set of precedential decisions, and the PTAB is required to follow its precedential decisions.  In fact, there are currently seventy-three precedential decisions listed on the Patent & Trademark Office’s website.

On May 25, 2018, the PTAB issued a Final Written Decision in Dell Inc., v. Realtime Data LLC[1], applying its precedential decision in Ex Parte Schulhauser[2] even though the claim construction framework set forth in Schulhauser was not argued in the Petition.  Rather, the Petitioner first raised the issue of whether claims including conditional limitations should be given patentable weight pursuant to Schulhauser in the Reply.  Nevertheless, the PTAB held that it was bound to follow its precedent and the Patent Owner’s arguments based on Administrative Procedure Act (hereinafter, “APA”) concerns, due process concerns, sufficiency of notice and potential prejudice were insufficient because the PTAB granted supplemental briefing to both parties and “because Patent Owner should have been aware of Schulhauser.”[3]

As background, the PTAB’s precedential decision in Schulhauser provides the following guidance and relies on, inter alia, the following Federal Circuit decisions:

A proper interpretation of claim language, under the broadest reasonable interpretation of a claim during prosecution, must construe the claim language in a way that at least encompasses the broadest interpretation of the claim language for purposes of infringement. “[I]t is axiomatic that that which would literally infringe if later anticipates if earlier.” Bristol-Myers Squibb Co. v. Ben Venue Labs, Inc., 246 F.3d 1368, 1378 (Fed. Cir. 2001). Based on the manner in which claim 1 is written, the modified method of Kramer would literally infringe claim 1 by virtue of its performance of only the “collecting,” “comparing,” and “triggering” steps. See, e.g., Appelera Corp. v. Illumina, Inc., 375 Fed. Appx. 12, 21 (Fed. Cir. 2010) (unpublished) (affirming a district court’s interpretation of a method claim as including a step that need not be practiced if the condition for practicing the step is not met); Cyber settle, Inc. v. Nat’l Arbitration Forum, Inc., 243 Fed. Appx. 603, 607 (Fed. Cir. 2007) (unpublished) (“It is of course true that method steps may be contingent. If the condition for performing a contingent step is not satisfied, the performance recited by the step need not be carried out in order for the claimed method to be performed.”).

Id. at *5.

The Patent Owner made numerous arguments that Schulhauser was inapplicable and inapposite

The Patent Owner argued that the PTAB was legally foreclosed from finding unpatentability based on Schulhauser for various reasons.  First, it argued that Petitioner did not timely present an argument or theory based on Schulhauser and therefore waived the argument.  Patent Owner argued that Schulhauser’s precedential designation predated the Petition, but the Petition did not raise the issue.  Further, the Patent Owner argued that it did not have a full and fair opportunity to develop responsive evidence or argument.  Additionally, Patent Owner argued that applying Schulhauser in the context of the inter partes review (hereinafter, “IPR”) proceeding would be arbitrary and capricious, and unconstitutional because the Schulhauser decision arose in the context of a pending prosecution during which a patent applicant can address Schulhauser by simply amending claims to avoid limitations that will not be given patentable weight.

Furthermore, Patent Owner argued that during prosecution it had no notice from the Office of Schulhauser or the prospect that certain limitations of its claims would be given no patentable weight.  Patent Owner argued that during reexamination of the patent at issue, the Office gave the limitations at issue patentable weight.  Patent Owner argued that it maintained the limitations on that basis, and made significant investments and expenditures to enforce and defend the claims.  Patent Owner argued that the Office must undertake notice and comment rulemaking to apply the rule of Schulhauser to IPRs, and that the Office has not issued any rule, regulation, or policy complying with the requirements of the APA that extends Schulhauser to issued claims later challenged in an IPR.

Patent Owner argued that Schulhauser is directed to prosecution, not IPRs. Patent Owner also argued that there is no express Congressional grant to support such retroactive rulemaking, and it is thus foreclosed by the APA and United States Supreme Court precedent.[4]  And Patent Owner argued that applying Schulhauser in this case would violate the Due Process Clause because Schulhauser only arose here after the time to bring a motion to amend had passed.  Further, Patent Owner argued that depriving it of the weight that the Office once afforded to its issued claim limitations would constitute an unlawful taking.

Patent Owner also argued that Schulhauser rests entirely on two non-precedential Federal Circuit decisions that do not support its holding, and it is legally incorrect. Patent Owner argued that the Board should, instead, direct its attention to Applera v. Illumina, 375 F. App’x. 12, 21 (Fed. Cir. 2010) (hereinafter, “Applera”).  Patent Owner argued that Applera held that all limitations were practiced, not that the claim could be met even if some limitations were never practiced.

Patent Owner also argued that the broadest reasonable interpretation under Federal Circuit standards prohibits a construction that reads out limitations explicitly recited in a claim, or that causes the claim to read onto prior art approaches expressly taught away from in the specification.[5]

The PTAB found Patent Owner’s arguments unconvincing and that precedent must be followed

The PTAB held that its Standard Operating Procedures (“SOP”) require it to follow its precedential decisions. PTAB SOP No. 2, Rev. 9, 3 (Sept. 22, 2014) (“A precedential opinion is binding authority in subsequent matters involving similar facts or issues.”).  To address APA concerns, due process concerns, the sufficiency of notice and potential prejudice, the PTAB explained that it allowed the parties the additional opportunity to brief the issue.  In view of the additional briefing, the PTAB found that the Patent Owner did not identify any Federal Circuit cases that overruled Schulhauser.  The PTAB found it informative that Petitioner cited another IPR decision in which the panel, in reliance on the PTAB’s SOP, authorized additional briefing in a sua sponte post-hearing order to resolve whether Schulhauser applies to the conditional method limitations recited in the claims.[6]

With regard to Patent Owner’s argument that Schulhauser arose in the context of prosecution, such that a patentee could have worked around Schulhauser by simply amending claims to avoid limitations that would not be given patentable weight, the PTAB held that nothing in Schulhauser explicitly or implicitly limits its holding only to prosecution, that Patent Owner should have been aware of Schulhauser since at least the time of Petitioner’s Reply, and that Patent Owner was free to seek leave to file a late motion to amend the claims.  The PTAB pointed out that the motion to amend deadline is not a statutory deadline and can be adjusted by the panel, but the Patent Owner did not contact the PTAB regarding amending the claims.

Accordingly, the PTAB held that because Schulhauser is precedential and applies to IPRs, it should apply given its potential applicability to the construction of the claims at issue.

The PTAB applied Schulhauser in construing the claims and found them to be obvious

Having found that Schulhauser was applicable in an IPR setting and to this IPR in particular, despite not having been raised in the Petition, the PTAB applied the broadest reasonable construction in light of the specification.  It analogized the claims involved in the IPR to those in Schulhauser, in which illustrative method claim 1 recited if A, then perform step X; if not A, then perform step Y.  The PTAB found that both of the challenged claims required that only one condition be satisfied in the prior art to render the challenged claims anticipated or obvious.

Patent Owner argued that interpreting the claims to be met by ignoring the conditional clauses would be exactly what the Specification teaches against and cannot be correct under the broadest reasonable interpretation standard.  The PTAB disagreed, finding that the Background of the Specification described “limitations” with using content dependent compression, but did not teach away because it merely expresses a general preference for an alternative invention but does not “criticize, discredit, or otherwise discourage” investigation into the invention claimed.[7]   The PTAB explained that even if the broadest reasonable construction in light of the specification were not dictated by Schulhauser, construing claims 104 and 105 based on the Specification would have led to the same construction because certain flow charts in Figures 14A-D illustrated a logical path that did not use the conditional part of the claimed method.  Accordingly, the PTAB held that because the broadest reasonable construction in light of the specification specifically teaches that one aspect of the invention logically includes a method as construed by the PTAB, then the Specification cannot be said to teach against that construction.

Finally, with regard to Patent Owner’s argument that the only expert testimony of record demonstrates that all of the limitations of the claims must be met under Petitioner’s obviousness theory, or else obviousness cannot be found, the PTAB held that the application of Schulhauser to claim construction is a matter of law, whereas expert testimony is used to aid a judge’s comprehension of claim language that is unknown to a judge rather than such matters of law.

Accordingly, the Board applied Schulhauser to determine that only one of the bolded conditions needed to be satisfied in the prior art to render the claims anticipated or obvious:

  1. A computer implemented method for compressing data, comprising:

analyzing data within a data block of an input data stream to identify one or more data types of the data block, the input data stream comprising a plurality of disparate data types;

performing content dependent data compression with a content dependent data compression encoder if a data type of the data block is identified; and

performing data compression with a single data compression encoder, if a data type of the data block is not identified;

wherein the analyzing of the data within the data block to identify one or more data types excludes analyzing based only on a descriptor that is indicative of the data type of the data within the data block.

  1. A computer implemented method comprising:

receiving a data block in an uncompressed form, said data block being included in a data stream;

analyzing data within the data block to determine a type of said data block; and

compressing said data block to provide a compressed data block;

wherein if one or more encoders are associated to said type, compressing said data block with at least one of said one or more encoders, otherwise compressing said data block with a default data compression encoder, and

wherein the analyzing of the data within the data block to identify one or more data types excludes analyzing based only on a descriptor that is indicative of the data type of the data within the data block.

Applying the prior art to the foregoing claim interpretations, the PTAB found that the Petitioner had established by a preponderance of the evidence that the claims were unpatentable because they would have been obvious over the prior art.

Takeaways and conclusions

As discussed here, the U.S. Patent & Trademark Office has proposed to change the claim construction standard used in America Invents Act (“AIA”) reviews to the standard applied in the federal district courts and International Trade Commission (“ITC”) proceedings. Under the proposed revision, the PTAB would no longer use the “broadest reasonable interpretation” standard and would instead construe patent claims in accordance with the principles that the Federal Circuit articulated in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc).  If the new rule is adopted, it will be interesting to see how the PTAB reconciles the changed standard with its precedent in Schulhauser.  The PTAB may seek to avoid an argument as to a conflict between its Schulhauser precedent and the Phillips standard by instead relying on the Federal Circuit decisions cited in Schulhauser (and their progeny) rather than the Schulhauser decision itself.

More generally, parties in AIA proceedings should be aware of the PTAB’s precedential decisions and carefully consider whether any of those decisions may be impactful given the PTAB’s SOP to follow its precedent even when the issue is not raised in the Petition.  Otherwise, parties may be surprised by the emergence of detrimental precedent that the PTAB will dutifully follow.

[1] Case IPR2017-00176, Paper 35 (P.T.A.B. May 25, 2018).

[2] 2016 WL 6277792, No. 2013-007847 (PTAB 2016) (precedential) (hereinafter, “Schulhauser).

[3] Dell Inc., v. Realtime Data LLC, Paper 35 at p. 12.

[4] citing Bowen v. Georgetown Univ. Hospital, 488 U.S. 204, 208–09 (1988).

[5] citing In re Suitco Surface, 603 F.3d 1255, 1260–61 (Fed. Cir. 2010); In re Smith, 871 F.3d 1375, 1382–84 (Fed. Cir. 2017); In re NTP, Inc., 654 F.3d 1279, 1287–88 (Fed. Cir. 2011).

[6] Reactive Surfaces LTD., LLP, v. Toyota Motor Corp., IPR2016-01914, Paper 60 (PTAB Jan. 12, 2018).

[7] Quoting DePuy Spine, Inc. v. Medtronic Sofarmor Danek, Inc., 567 F.3d 1314, 1327 (Fed. Cir. 2009).