In a precedential opinion issued last month, the Court of Appeals for the Federal Circuit (“Federal Circuit”) held that when the single issue presented on appeal is whether a prior art reference teaches a particular claim element, that is a factual question that the Federal Circuit reviews for substantial evidence. Addressing only this issue in its decision, the Federal Circuit implicitly held that there is no requirement that it also review the ultimate legal question of obviousness. Judge Newman dissented, disagreeing with the majority’s decision.
In Roku, Inc. v. Universal Elecs, Inc., No. 22-1058 (Fed. Cir. Mar. 31, 2023), the Federal Circuit affirmed the Patent Trial and Appeal Board’s (“PTAB”) final written decision that Roku failed to demonstrate that the challenged claims of U.S. Patent No. 9,716,853 would have been obvious.
In its appellant brief, Roku asserted that the issue before the Federal Circuit was “[w]hether the Board’s finding that [the prior art] fails to render obvious the claimed ‘listing comprised of at least two different communication methods’ lacks substantial evidence, where it is undisputed that (i) [the prior art’s] remote-control system creates protocol-specific listings of CEC command codes and IR command codes for each detected device; (ii) CEC and IR were well-known communication protocols; and (iii) a communication protocol is a ‘communication method’ within the meaning of the claims.” Dkt. 12 at 4.
In its decision, the court explained that the appeal turned on a single question – “whether a person of ordinary skill in the art would have understood the prior art’s disclosure of a listing of remote command codes formatted for transmission via two different communication methods to be listing comprised of at least a first communication method and a second communication method different thank the first communication method.” Dkt. 40 at 2. Because the question involved the scope and content of the prior art, the court held that it is a purely factual question that the court reviews for substantial evidence. Id. The court viewed the question “as a Graham factor underlying obviousness- not as a question of the ultimate conclusion of obviousness” so de novo review was not required. Id. at 11 n.1.
The court noted that the factual dispute in this case was “highly contested and closely decided” and that the PTAB was entitled to weigh the evidence in making its ruling. The court emphasized that as an appellate court, its role is not to step into the PTAB’s place and issue new findings. Rather, its role requires the court to review the PTAB’s findings and determine whether substantial evidence supports those findings. The court noted that while it could have decided this issue differently than the PTAB, “it is not the province of this court to do so.” Id. at 12-13.
In her dissent, Judge Newman disagreed with the majority’s reading of the issue before the court on appeal. Judge Newman disagreed with the majority’s approach to only review the PTAB’s specific fact-finding and not the ultimate legal question of obviousness. The majority perceived Judge Newman’s dissent as suggesting that the Federal Circuit should apply de novo review to the question of whether the prior art teaches a particular claim element. Id. at 11 n.1. However, Judge Newman clarified that she does not assert that de novo review should apply to this factual issue, but rather that the actual question on appeal is the legal issue of obviousness for which the court should apply de novo review. Judge Newman’s concern with the majority’s implicit holding is that “if the underlying findings of fact are supported by substantial evidence, then [the court] do[es] not review the ultimate legal question of non-obviousness.” Dkt. 40 at 15. In Judge Newman’s view, de novo review was appropriate for the questions of law presented during the appeal along with review of any underlying facts to determine whether they are supported by substantial evidence. Based on her analysis, Judge Newman concluded that the claims would have been obvious in view of the prior art.
This decision could present potential ramifications for both patentees and petitioners in the future. This decision opened the door to the Federal Circuit giving considerable deference to the PTAB’s obviousness holdings. While underlying factual questions in the obviousness analysis are entitled to some deference, the ultimate conclusion of obviousness is not. As Judge Newman noted, by not reviewing the PTAB’s obviousness conclusion, the Federal Circuit suggests that if substantial evidence supports the underlying factual findings then it need not review the ultimate conclusion unless the legal basis for that conclusion is a separate issue on appeal.
Given the uncertainty following this decision, a party appealing a PTAB decision should carefully consider what issues it wants the Federal Circuit to review and be aware of what standard of review will be applied. Parties should also be mindful of how those questions are presented to the court during briefing.