On June 18, 2020, the Federal Circuit granted JHO Intellectual Property Holdings, LLC’s (“JHO”) motion to vacate the PTAB’s final written decision and remand the case in light of the court’s decision in Arthrex. In an ex parte reexamination proceeding, the PTAB denied JHO’s request for rehearing of its decision affirming the Examiner’s rejections of all pending claims of JHO’s U.S. Patent No. 8,445,466.

In its motion, JHO argued that Arthrex applies because the duties of administrative patent judges (“APJs”) are similar in both inter partes review (“IPR”) and ex parte reexamination proceedings. JHO argued that in both proceedings APJs hear oral argument, review pro hac admissions and issue final written decisions containing fact findings and legal conclusions relating to the patentability of the claims at issue. JHO also argued that in ex parte reexamination when the APJs issue a final written decision the only recourse available is to appeal the decision to the Federal Circuit.

The USPTO argued that the issue of constitutional appointment of APJs is not present for ex parte reexamination proceedings because the Director has substantially greater control over such proceedings and may make unilateral decisions concerning the examination of the claims at issue. The Federal Circuit rejected the USPTO’s argument and relying on its reasoning in VirnetX Inc. v. Cisco Systems, Inc., instead held that Arthrex applied in the context of ex parte reexaminations.

Last month, in VirnetX Inc. v. Cisco Systems, Inc., 958 F.3d 1333 (Fed. Cir. May 13, 2020), the Federal Circuit denied the USPTO and Cisco Systems, Inc.’s petitions for rehearing and again held that Arthrex applied to inter partes reexaminations. The USPTO had argued that APJs should at least be considered constitutionally appointed officers when it comes to hearing appeals of inter partes reexaminations. Relying on Freytag v. Commissioner, 501 U.S. 868 (1991), the Federal Circuit held that they “look not only to the authority exercised in [an appellant]’s case but to all of that appointee’s duties when assessing an Appointments Clause challenge.” See id. at 1335.  According to the Federal Circuit, if in light of Arthrex, APJs are unconstitutionally appointed principal officers with respect to their duties in IPRs, then under Freytag, “vacatur would be appropriate for all agency actions rendered by those APJs regardless of the specific type of review proceeding on appeal.” Id.  However, the Federal Circuit noted that although Freytag would appear to apply to all Board proceedings, it declines to go that far. The Federal Circuit held that the analysis applies here to appeals of inter partes reexaminations because they are similar to IPRs in that both involve “third-party challenges to the claims of an issued patent” and in both “APJs exercise significant authority on behalf of the government by issuing final decisions that decide the patentability of the challenged claims.” Id.

Applying this reasoning to the present case, the Federal Circuit held that although the appeal arises out of an ex parte reexamination, there is no relevant distinction between that proceeding and an inter partes reexamination proceeding such that the reasoning of Virnetx should not apply.


The Federal Circuit’s decision here joins a long line of recent decisions issued in response to Arthrex. We previously reported on some of these decisions here. We can expect to see more Federal Circuit decisions analyzing the boundaries and applications of Arthrex in the near future. However, because the PTAB issued an order suspending all activity in the remanded cases, the PTAB will not be issuing any decisions until the Supreme Court decides the issue.

Earlier this month, the U.S. government, Smith & Nephew, Inc. and ArthroCare Corp. filed briefs in opposition to Arthrex’s petition for certiorari. Arthrex submitted its reply brief on June 19, 2020. The Supreme Court is set to discuss the briefs at conference on September 29, 2020.

The Supreme Court also already considered three other petitions for certiorari raising the same issue: Collabo Innovations, Inc. v. Sony Corp., No. 19-601 (filed Nov. 4, 2019); Celgene Corp. v. Peter, No. 19-1074 (filed Feb. 26, 2020); and Enzo Life Sciences, Inc. v. Becton, Dickinson & Co., No. 19-1097 (filed Mar. 3, 2020). On June 22, 2020, the Supreme Court denied all three petitions. It is worth noting that the questions presented in each of these petitions did not directly address the constitutional appointment of APJs. Rather, the appointment issue was merely hinted at or noted somewhere in the petition. As such, the Supreme Court may not have analyzed the merits of the issue when deciding those three petitions.

Thus, until the Supreme Court makes a decision in September, the Federal Circuit will have to continue to navigate the minefield of appeals left behind by Arthrex while the rest of the patent world waits.

The Patent Trial and Appeal Board (“the PTAB”) for the United States Patent and Trademark Office recently published a decision on appeal which overturned an Examiner’s rejection in application number 15/322,059. The PTAB held that the Examiner failed to adequately explain how a disputed reference taught the claimed subject matter. Ex parte Kensuke Matsumura, Masayiki Watanabe, and Yusaku Miyazaki, No. 2019-004113, at 3 (P.T.A.B. May 13, 2020) (hereinafter Kensuke).

The claims at issue concern a mold cleaning system which include a laser oscillator, a laser head, an arm, a control device, and a camera. The camera is “configured to acquire three-dimensional image data” to guide the laser head in irradiating the molding surface with the laser beam. Page 3 of PTAB Decision on Appeal.

The Examiner rejected claims 1, 3, and 5 under 35 U.S.C. 102 as allegedly anticipated by Soska (US 6,369,353 B1) and rejected claim 4  under 35 U.S.C. 103 as allegedly unpatentable over Soska in view of Tokura (US 2010/0038560). Soska relates to a cleaning system for removing residual material from a mold. In some examples, Soska provided a robot which “optionally include[s] a machine vision system provided by, for example, video cameras … so that the robot 14 can recognize the location of the end effector and adjust its position to ensure that the cleaning device 10 performs as desired during a cleaning operation.” Soska, column 4, line 65 through column 5, line 4. The Examiner argued:

“[A] camera, such as the video camera of Soska[,] is inherently capable of acquiring image data, and if the subject matter in the visual field of the camera is a three-dimensional object, that image data would necessarily be three-dimensional image data (for example, objects at differing distances from the camera’s lens would appear in different degrees of focus[)].”

 Examiner’s Answer dated February 28, 2019, page 8.

The Yokohama Rubber Co., LTD. (hereinafter Yokohama), the Appellant in the present case, presented several arguments against the cited portions of Soska, including: (1) Soska failed to disclose a camera acquiring any image data of the mold, (2) the camera of Soska was incapable of acquiring image data, and (3) Soska failed to disclose movement of the arm carrying the laser being controlled based on 3D image data of the molding surface. Kensuke, at 5.

The PTAB agreed with the Appellant, stating that the claimed language, under a broadest reasonable interpretation, required “that the camera is positioned and includes hardware and software necessary to acquire 3D image data of the molding surface … sufficient to enable the control device to control motion of the arm on the basis of the image data.” Id., at 6. The PTAB disagreed with the Examiner, who argued that the claim term “configured to” was equivalent to “capable of.” Id. Rather, the PTAB held that “configured to” generally “supports a narrower meaning … to require that the camera is designed such that it is able to perform the particular use, purpose or situation recited in claim 1.” Id.

Furthermore, the PTAB responded to the Examiner’s arguments that the disputed limitations were solely an intended use or intended function. The PTAB held the claimed structure was defined, both in the claims and in the specification, by its actual functionality, not by its possible functionality. Id., at 7. By contrast, the Examiner did not establish that Soska could possibly perform the required three-dimensional functionality because the robotic arm of Soska moved through only predetermined movement sets, and, generally, the Examiner failed to explain how focus differences in a captured two-dimensional image equated to three-dimensional image data. Id., at 7-8.

Altogether, Kensuke provides guidance regarding the acceptable level of detail required in the claims and the specification to overcome a cited reference, which includes similar components but different functionality than the claimed limitations. Applicants can use functional claim language, so long as the language is reliant on the actual design of the claimed element and not just a possible use.

On May 27, 2020, the U.S. Patent and Trademark Office (“USPTO”) proposed amendments to its rules governing post-grant proceedings, addressing three topics.  First, petitions for post-grant proceedings would require institution of all claims or denial of the petition. Second, patent owners would be permitted to file sur-replies to principal briefs. Third, the rules would eliminate the presumption in favor of the petitioner for a genuine issue of material fact created by testimonial evidence submitted with a patent owner’s preliminary response.

Petitions Are Instituted on All Claims or Denied Entirely

In SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018), the Supreme Court held that the Patent Trial and Appeal Board (“the Board”) must address all claims in the IPR petition if the proceeding is instituted. Shortly after this decision, the USPTO updated its guidance that the Board would institute a trial on all claims and all grounds or deny the petition in IPR, PGR, and CBM proceedings. Some of the proposed rules would codify that guidance by amending 37 C.F.R. §§ 42.108 and 42.208 to require the Board to either institute review on all of the challenged claims and grounds of unpatentability presented in the petition or deny the petition.

Patent Owners May File Sur-replies

The USPTO proposes to amend the rules to allow the patent owner to file sur-replies to the principal briefs. Specifically, 37 C.F.R. § 42.23 would be modified to permit a sur-reply to a reply to a patent owner response or to a reply to an opposition to a motion to amend. A sur-reply would be limited to the same page and word limits as the corresponding reply and could only address arguments raised in the corresponding reply.

Eliminating a Presumption in Favor of Petitioners

The USPTO also proposes an amendment to eliminate the presumption in favor of the petitioner when considering testimonial evidence during the institution decision of IPR, PGR, or CBM proceedings. Instead, the Board will consider the evidence in the context of the applicable standard for institution for the proceeding. The proposed changes to 37 C.F.R. §§ 42.108(c) and 42.208(c) would replace the current rule language creating the presumption, “but a genuine issue of material fact created by such testimonial evidence will be viewed in the light most favorable to the petitioner solely for purposes of deciding whether to institute,” with a more neutral instruction for the Board to consider all the evidence.

These proposed rule changes are available in the federal register (available here). The public may provide comments on the rulemaking until June 26, 2020.

The Halloween 2019 decision, Arthrex v. Smith & Nephew,[1] created a new right to rehearing in the Patent Trial and Appeal Board (“PTAB”), and has sent ripples through the judiciary and legislative branches that will continue to be felt for the foreseeable future.  In the case, the Federal Circuit opinion announced that the appointment of the PTAB’s administrative patent judges (“APJs”) – who preside over the inter partes review (“IPR”) proceedings at the United States Patent & Trademark Office – violated the Appointments Clause of the Constitution.[2]  The decision resolved that violation by striking down APJ removal protections from the Patent Act;[3] found that its resolution could not cure PTAB decisions such as the one at issue and that a remand for rehearing was required;[4] and that this and other such future rehearings must be conducted by a new panel of APJs.[5]

Although the Federal Circuit limited the availability of Arthrex rehearings to those cases that had both been pending appeal at the time of the Arthrex decision and where the appealing party had raised the Appointments Clause during appeal briefing, the court has faced a steady stream of Arthrex-type appeals.  The list below represents a number of pertinent developments regarding the Arthrex appeals, as well as further attempts by the court to elaborate on them:

  1. Customedia Tech., LLC v. Dish Network Corp., 941 F.3d 1173 (Fed. Cir. 2019), decided November 1, 2019: This case, decided the day after Arthrex, denied the availability of the Arthrex rehearing to a party who had failed to raise the Appointments Clause issue in its opening brief or in a motion filed prior to opening briefs. Instead, Customedia had attempted to raise the challenge on a notice of supplemental authority.
  2. Bedgear, LLC v. Fredman Bros. Furniture Co., Inc., 783 Fed. Appx. 1029 (Fed. Cir. Nov. 7, 2019): The decision itself was a one-page grant of the Arthrex rehearing, but Judge Dyk’s concurrence raised a number of points that have been used in future discussions criticizing the Arthrex Judge Dyk addressed the extra burden the Arthrex decision could place on the PTAB by requiring rehearings.  In Judge Dyk’s view, the severance of the removal provisions that cured the Appointments Clause issue could have been retroactively applied, so no rehearings would be necessary.  At the heart of Judge Dyk’s concurrence was his view on the judiciary’s role of interpreting what the law is, not making the law; and that retroactive application is a natural characteristic of this role.
  3. Ciena Corp. v. Oyster Optics, LLC, No. 2019-2117, 2020 WL 2124762 (Fed. Cir. May 5, 2020): Originally decided as a nonprecedential order on January 28, 2020, this case was redesignated the previous month. In the opinion, the Federal Circuit held that IPR petitioners do not have the right to raise the Appointments Clause issue on appeal unless the issue was first raised before the PTAB.   That is, because a petitioner affirmatively requests that the Board adjudicate through its petition, it forfeits any Appointments Clause challenge.  The court rejected the argument that structural constitutional concerns, such as separation of powers, require that a court forgives a party’s waiver or forfeiture of claims, instead concluding that such forgiveness is up to the court’s discretion.  In choosing not to exercise its discretion, the court noted that petitioners have an alternative forum to challenging patent claims – the district court.  The Court redesignated the opinion upon the Patent Office’s request, which argued that since the Ciena decision petitioners have repeatedly appealed on the Appointments Clause issue without raising it with the PTAB.
  4. Caterpillar Paving Products Inc. v. Wirtgen Am., Inc., No. 2020-1261, 2020 WL 2176034 (Fed. Cir. May 6, 2020): The Federal Circuit reiterated that the window of eligibility for an Arthrex rehearing is quite narrow. The Federal Circuit denied appellant Caterpillar’s motion to vacate and remand the case, concluding that Arthrex did not compel a remand in this case because the opinion in Arthrex issued before the PTAB’s final written decision.  Caterpillar argued that even though the Arthrex decision had issued before the PTAB had issued its final written decision, the Board’s “thinking and conclusions” throughout the proceeding up until the Arthrex decision remained uncured.  The court was unconvinced, and noted that this argument had also been rejected by the Arthrex  Thus, the Arthrex rehearing remains limited to those cases where the final written decision has already been issued and where the party raised the Appointments Clause challenge in its appeal brief.

A number of events in the Arthrex proceeding itself have determined the current status of these rehearings.  In the months following, the Federal Circuit has refused to reconsider the decision en banc, although four of the judges dissented.  It has also refused to stay its mandate requiring the PTAB to proceed on the rehearings while the Arthrex parties await the Supreme Court’s decision on Arthrex’s petition for certiorari, despite both parties supporting such a stay.  The pending April 9, 2020 petition involves a separate patent and proceeding and does not address the constitutionality of the Federal Circuit’s Appointments Clause decision, but Arthrex is expected to file a separate petition on the Appointments Clause issue sometime soon.  The petition does, however, address a relevant issue of whether forfeiture should apply when there has been an intervening change in law while an appeal is pending.

In the meantime, Chief Administrative Patent Judge Scott R. Boalick of the PTAB issued a general opinion at the start of the month holding all the rehearings in abeyance until the Supreme Court has the chance to consider the constitutional questions raised in Arthrex.  In view of Judge Boalick’s order, remanded cases will now be delayed for several months or even a year until the Supreme Court resolves this issue.  In turn, this means that even if the Federal Circuit grants a party’s motion for vacatur and remand, there is no guarantee as to when a party may get a date for a second hearing thereby putting both petitioners and patent owners in limbo.

On the legislative side, although a House IP Subcommittee hearing was held on the Arthrex case in the weeks following the decision, Congress has preferred to focus on other (understandably) pressing issues and let the situation in the judiciary play out.

The next chapter in the Arthrex story unquestionably lies with the Supreme Court.  While the Court could close the book on the whole issue with a definitive ruling, anything less may mean that the legislative branch has to step in.  Not only are hundreds of IPR cases currently hanging in limbo, the job security of the APJs – who are now fireable at will – remains uncertain.  Until the Supreme Court makes a move, however, it appears that nothing further will be done.

[1] 941 F.3d 1320 (Fed. Cir. 2019).

[2] Id. at 1335.

[3] Id. at 1338.

[4] Id. at 1340.

[5] Id.

The United States Patent and Trademark Office (USPTO) recently published a decision on petition stating that an inventor must be a natural person, and denied Petitioner’s request to name an artificial intelligence entity as the inventor.

The inventor at issue is an artificial intelligence (AI) system named “Device for the Autonomous Bootstrapping of Unified Sentience” (DABUS).  DABUS was created by Dr. Stephen Thaler, and is described as a “Creativity Machine” that contains two artificial neural networks.  The first network is trained with general information from various knowledge domains and generates novel ideas.  The second network acts as a “critic,” monitoring the first network for new ideas and identifying ideas that are sufficiently novel.  The critic net also generates an affective response used to form and ripen ideas that have the most novelty, utility, or value.

DABUS was named as the inventor in an application data sheet (ADS) filed July 29, 2019, for U.S. Patent Application No. 16/524,350.  The applicant asserted “it was the machine, not a person, which recognized the novelty and salience of the instant invention.”

In response, the Patent Office issued a Notice to File Missing Parts of Nonprovisional Application on August 8, 2019, noting that the ADS does not identify each inventor by his or her legal name.  The applicant filed a petition requesting supervisory review, which was dismissed, and the applicant subsequently filed a request for reconsideration of the decision denying to vacate the notice to file missing parts.

The decision on petition, written by Robert Bahr, Deputy Commissioner for Patent Examination Policy, notes that the patent statutes preclude construing “inventor” to cover machines because Title 35 of the United States Code consistently refers to inventors at natural persons.  See, e.g., 35 U.S.C. § 101 (“Whoever inventors or discovers any new and useful process, machine, manufacture, or composition of matter . . . may obtain a patent therefore, subject to the conditions and requirements of this title”); 35 U.S.C. § 115 (refers to individuals and uses pronouns specific to natural persons –“himself” and “herself”—when referring to the “individual” who believes himself or herself to be the original inventor or joint inventor).  The decision also highlights decisions from the Federal Circuit, which hold that the patent laws require an inventor to be a natural person.  See Univ. of Utah v. Max-Planck-Gesellschaft zur Foderung der Wissenschaften e.V., 734 F.3d 1315 (Fed. Cir. 2013) (holding a state could not be an inventor); Beech Aircraft Corp. v. EDO Corp., 990 F.2d 1237, 1248 (Fed. Cir. 1993) (“only natural persons can be ‘inventors,’” and finding corporations cannot be inventors).  The decision further notes that Title 37 of the Code of Federal Regulations contains numerous references to the inventor as a “person,” and that the Manual of Patent Examining Procedure (MPEP) defines conception as “the complete performance of the mental part of the inventive act,” and it is “the formation in the mind of the inventor of a definite and permanent idea of the complete and operative invention as it is thereafter to be applied in practice.”  The decision explains that the use of terms such as “mental” and “mind” in the MPEP indicates that conception must be performed by a natural person.  (The European Patent Office and UK Intellectual Property Office have similarly refused the respective counterpart DABUS patent applications for naming a non-human inventor.)

Notably, the decision leaves open the possibility of naming a human inventor, explaining that the “USPTO has not made any determination concerning who or what actually created the invention claimed” in the application.  In fact, there are a number of ways a natural person can contribute to the conception of an AI invention, such as: developing techniques for obtaining and formatting training data, selecting the AI system for a task, obtaining inputs, utilizing the outputs of the AI system, designing the algorithm used by the AI engine, or applying new training data obtained in an inventive manner to an AI engine.

Stay tuned for future updates from the USPTO, as the USPTO has actively been studying and seeking public guidance in the area of AI inventions.

The Court of Appeals for the Federal Circuit issued its decision in Bozeman Financial LLC v. Federal Reserve Bank Of Atlanta, Case No. 19-1018 (Fed. Cir. Apr. 10, 2020) [hereinafter Bozeman], holding that Federal Reserve banks (hereinafter “the Banks”) are people under the AIA, capable of petitioning for post-issuance review. The Court further affirmed the PTAB’s prior holding that the appealed patent claims are unpatentable under 35 U.S.C. § 101.

The dispute involves U.S. Patent Nos. 6,754,640 (“the ’640 patent”) and 8,768,840 (“the ’840 patent”), which are owned by Bozeman Financial, the respondent-appellant. The petitioner-appellee, the Federal Reserve Bank of Atlanta, challenged the validity of these patents in a CBM proceeding. The PTAB previously held claims 1–20, 25, and 26 of the ’640 patent unpatentable under 35 U.S.C. § 112, and claims 21-24 of the ’640 patent and claims 1-20 of the ’840 patent unpatentable under 35 U.S.C. § 101. Bozeman, at 3 and 10. Bozeman appealed the decision with respect to claims 21-24 of the ’640 patent and claims 1-20 of the ’840 patent. Bozeman, at 10.

For the first time on appeal, Bozeman Financial alleged that the Banks did not have the right to petition for post-issuance review under the AIA, arguing that the Banks are not people. Bozeman, at 3-4. The Federal Circuit exercised discretion to review this issue (which would normally be waived) because the question of whether the Banks constitute people under the AIA is “an issue of statutory interpretation, a purely legal question.” Bozeman, at 4.

The Federal Circuit identified differences between operation of the Banks and a conventional government agency, including, for example, that the Banks “do not receive congressionally appropriated funds,” do not have governmentally appointed officials, control their operations by a board of directors, and “cannot promulgate regulations with the force of law.” Bozeman, at 7 (citing 12 U.S.C. §§ 244, 301, 341 and Scott v. Fed. Reserve Bank, 406 F.3d 532, 535 (8th Cir. 2005)). Accordingly, the Federal Circuit held, for the purposes of the AIA, that the Banks constitute people because they “were established as chartered corporate instrumentalities of the United States” and can “be sued in any court of law or equity.” Bozeman, at 6 (citing 12 U.S.C. § 221 et seq.).

Further, the Federal Circuit examined the subject matter eligibility of claims 21-24 of the ’640 patent and claims 1-20 of the ’840 patent under the two-step framework set forth in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208, 216 (2014) [hereinafter Alice]. Bozeman, at 11. Under Alice step 1, the Federal Circuit held the claims “are directed to the abstract idea of collecting and analyzing information for financial transaction fraud or error detection.’” Bozeman, at 14. The Federal Circuit supports this holding by explaining that the claimed invention is “a fundamental business practice” which is a “long-standing commercial practice,” and has no meaningful distinction against the claims of recent precedential holdings in Solutran, Inc. v. Elevon, Inc., 931 F. 3d 1161 (Fed. Cir. 2019). Bozeman, at 12-14.

Under Alice step 2, the Federal Circuit holds that “there is nothing additional in the claims of the ’840 patent that would render the claims patent-eligible.” Id., at 14. Although Bozeman Financial argued that “the ordered combination of the elements … is a specific implementation of an invention that was not routine or conventional,” the Federal Circuit agrees with the PTAB’s prior holding that the ordering of the claims recites a logical sequence and does not offer an inventive sequence. Id. at 15. Regarding the machine-or-transformation test, the Federal Circuit holds that the claims do not satisfy the test because the claims provide for using “a digital-image scanner to create a digital electronic record of a check” which is “merely using a general-purpose computer and scanner to perform conventional activities in the way they always have.” Bozeman, at 15-16 (citing DDR Holdings, LLC v. Hotels.com L.P., 773 F.3d 1245, 1256 (Fed. Cir. 2014); Content Extraction & Transmission LLC v. Wells Fargo Bank, National Assoc., 776 F. 3d 1343, 1348-49 (Fed. Cir. 2014); and Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 716-17 (Fed. Cir. 2014).

Altogether, the Federal Circuit’s holdings in Bozeman allow Federal Reserve Banks to petition for post-issuance review under the AIA, which cements post-issuance review as a valuable tool for protesting a patent’s validity. Additionally, the Federal Circuit affirms previous holdings and provides another example of business method patent claims which are invalid under Alice.

On March 30, 2020, the Federal Circuit denied the federal government’s unopposed motion to stay a mandate of the court’s final judgment in Arthrex v. Smith & Nephew, meaning the United States Patent Office’s Patent Trial and Appeal Board (“PTAB”) must reopen and rehear up to 81 cases decided by the PTAB before the Arthrex final judgment issued.  The earlier opinion, issued on October 31, 2019, deals with the constitutionality of the appointment of the Administrative Patent Judges (“APJs”) who are responsible for presiding over adjudicative proceedings.  The final judgment resulted in providing constitutional grounds to challenge the decisions of the PTAB’s APJs to those with pending appeals with the Federal Circuit, provided those appeals were pending at the time of the Arthrex judgment and that the constitutional issue had been raised during the appeal’s briefing stage.  With its motion to stay, the government attempted to receive temporary relief during the pendency of petitions for writ of certiorari of the Arthrex opinion, but the denial marks the Federal Circuit’s consistent position[1] that the PTAB must start the rehearing process.

The Arthrex opinion held that APJs were appointed in violation of the Appointments Clause of the U.S. Constitution because, while the Patent Act provided for APJs to be appointed by the Secretary of Commerce, in consultation with the Director of the USPTO (consistent with being an “inferior officer” under the Appointments Clause), APJs were shielded from removal by their superiors (reserved only for “principal officers” under the Appointments Clause).  Among the significant repercussions following the Federal Circuit’s Arthrex decision was the uncertain legal status of PTAB decisions invalidating patent claims, given that the APJs presiding over such decisions were deemed to have been unconstitutionally appointed.  While the Federal Circuit stated in Arthrex that severing the removal provisions from the Patent Act reestablished the PTAB judges as constitutional officers, it remanded that case, requiring the PTAB to grant a new hearing with a new panel of APJs presiding.  The court thus opened the door for other PTAB cases to receive a second hearing with a new panel of APJs, provided that the decision was pending appeal with the Federal Circuit before the October 31, 2019 opinion, and that the requesting party had raised the constitutional issue in its appeal brief.

The government moved to stay the remand proceedings for ninety days or final disposition of any petition for writ of certiorari on the basis of practicality, arguing that the PTAB should be able to defer conducting the Arthrex rehearings while Supreme Court review of the case was pending.  The stay of remand was supported by all of the parties.   However, the Federal Circuit concluded that public interest would favor denying such a stay, pointing to the harm that would result from the continuing existence of patent claims that were deemed unpatentable by the PTAB in the relevant proceedings.  Those claims would continue to have legal force, as well as potentially obligate the payment of fees under license agreements that require payment until a final adjudication of invalidity – an event the Federal Circuit alleged to be common.  In addition, the court commented that the remand proceedings did not seem especially burdensome, given the maximum number of 81 cases to be reheard and the fact that the PTAB “has more than 250 members” who can adjudicate them.

Significantly, the Federal Circuit left considerable discretion as to the rehearings up to the PTAB.  The recent order explicitly states that the timing of the proceedings, at least as an initial matter, is in the PTAB’s hands, and did not opine on the availability of review of the remand proceedings.  It also noted the “limited remand proceedings” required by the October 31, 2019 decision, which specified that a new panel of APJs must be used but left the decision of whether to rehear using the existing record or to allow additional briefing up to the PTAB.

It remains to be seen how the PTAB will carry out the remand proceedings or when the PTAB will commence doing so.  A significant factor in all of the proceedings will be the extent to which the PTAB will allow new evidence or arguments to the record, if at all, and what standard it will use when deciding to do so.  The coronavirus pandemic and its effect on PTAB administration will also certainly play a role in when the rehearings occur.  However, given the fact that adverse parties will frequently want additional evidence and briefing, and the Federal Circuit’s no-comment on the availability of review of rehearing decisions, the burden on the PTAB will likely be greater than the Federal Circuit’s estimation.

[1] The Federal Circuit had, the previous week, denied petitions for rehearing en banc filed by appellees Smith & Nephew, Inc. and Arthrocare Corp.; appellants Arthrex, Inc.; and the federal government.  This decision was accompanied by four dissents.

On March 18, 2020, in Facebook, Inc. v. Windy City Innovations, LLC, the Federal Circuit held that 35 U.S.C. § 315(c) does not authorize same-party joinder and does not authorize joinder of new issues.

Windy City Innovations, LLC (“Windy City”) brought a patent infringement suit against Facebook, Inc. (“Facebook”) in a district court. Exactly one year after being served with Windy City’s complaint, Facebook timely petitioned for inter partes review (“IPR”), challenging several claims of Windy City’s patents. At that time, Windy City had not identified the claims asserted in the infringement suit. The Patent Trial and Appeal Board (“the Board”) instituted IPRs of some claims of Windy City’s patents. After the one-year time bar of 35 U.S.C. § 315(b) passed, Windy City identified claims it was asserting in the infringement suit. Some of the claims asserted in the infringement suit were not included in the instituted IPRs. Thus, Facebook filed two additional petitions for IPR of the missing claims along with motions for joinder to the already instituted IPRs. The Board instituted Facebook’s two additional IPRs and granted Facebook’s motions for joinder. Later, the Board found that some of the challenged claims were unpatentable as obvious while some were not. Facebook appealed and Windy City cross-appealed.

35 U.S.C. § 315(c) authorizes the Director to “join as a party to that [existing] inter partes review any person who” meets certain requirements. On appeal, Windy City argued that § 315(c) does not authorize (1) same-party joinder in an IPR proceeding – allowing a party to be joined to an existing IPR proceeding in which it was already a party – and (2) joinder of new issues material to patentability to an existing IPR proceeding.

Same Party Joinder

The Federal Circuit agreed with Windy City and ruled that § 315(c) does not authorize a person to be joined as a party to a proceeding in which it is already a party. The Court noted that its decision conflicts with the decision of the Board’s Precedential Opinion Panel (“POP”) in Proppant Express Investments, LLC v. Oren Technologies, LLC, No. IPR2018-00914 (PTAB Mar. 13, 2019) in which the POP concluded that § 315(c) permits a petitioner to be joined to a proceeding in which it is already a party. In that case, the Board broadly interpreted the phrase “any person” within the meaning of § 315(c) to cover “every person who properly files a petition that warrants institution,” including oneself. The Court disagreed with the Board’s interpretation and held that the phrase “join as a party to that inter partes review” included in § 315(c) limits the range of “any person” to be “those who … are capable of being joined as a party to proceeding.” The Federal Circuit thus concluded that § 315(c) does not authorize a person to be joined as a party to a proceeding in which it is already a party.

Joinder of New Issues

The Federal Circuit also agreed with Windy City and ruled that § 315(c) does not authorize “the joined party to bring new issues from its new proceeding into the existing proceeding, particularly when those new issues are otherwise time-barred.” On appeal, Facebook argued that § 315(c) does not expressly prohibit introduction of new issues in the joinder proceedings. The Court, however, held that the lack of an express prohibition does not make § 315(c) ambiguous as to whether it permits joinder of new issues, and explained that the statute “simply permits the Director, at his or her discretion, to join any person as a party to an already-instituted IPR” which “is governed by its own petition and is confined to the claims and grounds challenged in that petition” (emphasis added). The Court also held that no deference to the PTO’s interpretation of § 315(c) under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984) is due because the statutory language of § 315(c) is unambiguous and clear.

Additional Views

Chief Judge Prost, Judge Plager, and Judge O’Malley provided additional views in which they opined that even if the statutory language was ambiguous, no Chevron deference would be given to the POP opinion. The panel noted the lack of “any congressional authorization, for either the Director or the Board to undertake statutory interpretation through POP opinions.”

It is clear from this opinion that neither same-party joinder nor joinder of new issues is permitted through § 315(c). Thus, if there is a co-pending patent infringement suit in a district court and the district court does not require the patent owner to identify claims asserted in the patent infringement suit until after the one-year bar date of the IPR proceeding, the alleged infringer should consider including all claims in the IPR petition that could be asserted as infringed in the litigation.

In Customedia Techs., LLC v. DISH Network Corp., the Federal Circuit affirmed the Patent Trial and Appeal Board’s final written decisions holding that claims 1-6, 8, 17, and 23 of U.S. Pat. No. 8,719,090 (the “’090 Patent”) and claims 1-4, 6-7, 16-19, 23-24, 26-28, 32-36, and 41 of U.S. Pat. No. 9,053, 494 (the “’494 Patent”) are invalid under 35 US.C. 101 as being directed to patent ineligible subject matter.  While perhaps a straightforward application of the two-step patent eligibility framework articulated in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208 (2014) to the advertising claims at issue, the decision includes potential guideposts under step one of Alice regarding where abstract ideas end and patent eligible technological improvements begin.

Claim 1 of the ’090 Patent recites:

  1. A data delivery system for providing automatic delivery of multimedia data products from one or more multimedia data product providers, the system comprising:

a remote account transaction server for providing multimedia data products to an end user, at least one of the multimedia data products being specifically identified advertising data; and

a programmable local receiver unit for interfacing with the remote account transaction server to receive one or more of the multimedia data products and for processing and automatically recording the multimedia data products, said programmable local receiver unit including at least one individually controlled and reserved advertising data storage section adapted specifically for storing the specifically identified advertising data, said at least one advertising data storage section being monitored and controlled by said remote account transaction server and such that said specifically identified advertising data is delivered by said remote account transaction server and stored in said at least one individually controlled and reserved advertising data storage section.

Notably, under step one of Alice, Customedia had argued that by “providing a reserved and dedicated section of storage, the claimed invention improves the data delivery system’s ability to store advertising data, transfer data at improved speeds and efficiencies, and prevent system inoperability due to insufficient stores.”  Slip Op. at 7.  “In short, by dedicating a section of the computer’s memory to advertising data, the claimed invention ensures memory is available for at least some advertising data.”  Id.  But the Court explained that “[e]ven if we accept Customedia’s assertions, the claimed invention merely improves the abstract concept of delivering targeted advertising using a computer only as a tool.” Id.   The Court repeated throughout the opinion that patent-eligible improvements to computer functionality must be directed to an improvement in the functionality of the computer itself, not just any improvement.  Id. at 7, 8, 11.

The Court went on to explain that “improving a user’s experience while using a computer application is not, without more, sufficient to render the claims directed to an improvement in computer functionality.”  Id. at 10.  The Court analogized the claims at issue to those found ineligible in Trading Techs. Int’l, Inc. v. IBG LLC, 921 F.3d 1084 (Fed. Cir. 2019) and Trading Techs. Int’l, Inc. v. IBG LLC, 921 F.3d 1378 (Fed. Cir. 2019), and distinguished them from those found eligible in other user experience cases such as Data Engine Techs. LLC v. Google LLC, 906 F.3d 999 (Fed. Cir. 2018) and Core Wireless Licensing S.A.R.L. v. LG Elecs., Inc., 880 F.3d 1356 (Fed. Cir. 2018).   Ultimately, the Court explained that the claims “merely recite reserving memory to ensure storage space is available for at least some advertising data,” and the only “improvements identified in the specification are generic speed and efficiency improvements inherent in applying the use of a computer to any task.”  Id. at 11.   Accordingly, the claims are directed to the abstract idea of using a computer to deliver targeted advertising, and at most improve the abstract concept of targeted advertising where a computer is merely used as a tool.  Id. at 6, 11.

Under step two of Alice, the Court found that the claim recites only generic computer components, including a programmable receiver unit, a storage device, a remote server, and a processor.  Id. at 12.

The Court’s step one analysis may be particularly helpful to defendants in further clarifying, or even narrowing, what constitutes patent-eligible technological improvements with respect to transmission of digital data.  For example, will this decision be extended to support patent-eligibility challenges of claims directed to purported improvements in storage, speed, and efficiency in the delivery of digital content more broadly, as opposed to just advertisements?  Stay tuned.

The United States Patent and Trademark Office (“USPTO”) announced that it considers the effects of COVID-19 (“the Coronavirus”) to be an “extraordinary situation.” Under 37 CFR 1.183, in extraordinary situations, the Director may suspend or waive any requirement of the regulations which is not a statutory requirement. Accordingly, as of the time of this writing, the Director has waived the requirement for certain petition fees and an original handwritten signature.

The “extraordinary situation” notice does not grant waivers or extensions of dates or requirements set by statute, including the following:

  1. the period set forth in 35 U.S.C. § 119(a)-(d) to file a nonprovisional patent application claiming the benefit of a prior filed foreign application;
  2. the period set forth in 35 U.S.C. § 119( e) during which a nonprovisional application claiming the benefit of a prior filed provisional application must be filed in order to obtain benefit of the provisional application’s filing date;
  3. the copendency requirement of 35 U.S.C. § 120 between a parent application which issues as a patent and a later filed child application, which requires that the child application be filed prior to issuance of the parent application;
  4. the three-month time period to pay the issue fee set forth in 35 U.S.C. § 151; and
  5. the 35 U.S.C. § 304 two-month time period from the date of patentee service, for a requester to file, in an ex parte reexamination, a reply to a statement filed by the patentee.

However, the USPTO will waive the petition fee in 37 CFR l.17(m) for applicants or patent owners who were unable to timely reply to an Office communication due to the effects of the Coronavirus outbreak, which resulted in the application being held abandoned or the reexamination prosecution terminated or limited. Upon filing a petition to revive under 37 CFR 1.137(a), applicant or patent owner must include a statement that the delay in filing the reply was because the practitioner, applicant, or at least one inventor, was personally affected by the Coronavirus outbreak such that they were unable to file a timely reply.

The USPTO additionally waived the requirements of 37 CFR 1.4(e)(1) and (2) for an original handwritten signature for certain correspondence with the Office of Enrollment and Discipline and certain payments by credit card. In both instances, the USPTO will accept copies of handwritten signatures in lieu of the “wet ink” signature.

Until further notice, all USPTO offices are closed to the public.  Any in-person meeting, including examiner and examining attorney interviews and Patent Trial and Appeal Board (PTAB) oral hearings, are to be conducted remotely by video or telephone.

Additional information regarding the USPTO’s COVID-19 notices may be found here.

We will continue to track and report on changes made to UPSTO operation.