Federal Circuit to Rethink Whether an Applicant has to Pay the USPTO’s Lawyers

In Nantkwest, Inc. v. Matal, [2016-1794](August 31, 2017) the Federal Circuit sua sponte granted rehearing en banc of the panel decision discussed here on the issue of whether 35 U.S.C. § 145’s “[a]ll the expenses of the proceedings” provision authorizes an award of the United States Patent and Trademark Office’s attorneys’ fees?

Not part of this review is its most unfair aspect — that a successful applicant still must pay the USPTO’s “expenses” (whatever that means).

Not Every Instance of an Agency Reaching Inconsistent Outcomes in Similar, Related Cases will Necessarily be Erroneous

In Vicor Corp. v. Synqor, Inc., [2016-2283] (August 30, 2017) the Federal Circuit affirmed in part, vacated in part, and remanded the Board’s decisions in two reexaminations, one in which the Board found that certain claims of U.S. Patent No. 8,023,290 are patentable; and one in which the Board found certain claims of U.S. Patent No. 7,272,021 unpatentable as anticipated or obvious.

The Federal Circuit found that despite sharing a common panel and having opinions issued on the same date, the decisions in the respective reexaminations contain inconsistent findings on identical issues and on essentially the same record. With respect to the ‘290 patent reexamination, the Federal Circuit said that the
Board improperly analyzed the obviousness arguments under only one of the four Graham factors when it looked exclusively at the objective evidence, without considering the remaining factors and the relative strength of the factors. The Federal Circuit further said that the Board reached inconsistent conclusions as to the evidentiary weight to be given to the secondary considerations evidence presented in the respective reexaminations of the ’290 and ’021 patents, without any explanation to justify such inconsistency.

The Federal Circuit said that the Board’s legal error with respect to the ‘290 patent is underscored by its opinion issued on the same day in the related reexamination of the ’021 patent, where the Board applied all four Graham factors in the ’021’s reexamination and stated that “[t]he Federal Circuit has determined that only after considering the four Graham criteria together can the decision maker make the legal determination of whether the invention is nonobvious.”

The Federal Circuit said that in the ’290’s reexamination, the Board found the objective
evidence to be so persuasive that it approved of the examiner’s decision to withdraw rejections without analyzing the remaining Graham factors and without considering
Federal Circuit decisions on related claims.  In the ’021’s reexamination, however, the Board determined that the objective evidence principally related to features of the
claims that were found to be anticipated in other cases and, therefore, found that there was no nexus between the objective evidence and the claims of the ’021 patent. The Federal Circuit concluded that Board’s decisions do not evince any explanation or justification for these inconsistent findings, given the similarity between the claims at issue in the respective reexaminations.

The Federal Circuit said that not every instance of an agency reaching inconsistent outcomes in similar, related cases will necessarily be erroneous, but concluded that the inconsistent application of the Graham factors in two cases reaching different results, required that the cases be vacated and remanded,

“A Reasonable Adjudicator Would have Wanted to Review this Evidence.”

In Ultratec, Inc. v. Captioncall, LLC., [2016-1706, 2016-1707, 2016-1708, 2016-1709, 2016-1710, 2016-1712, 2016-1713, 2016-1715, 2016-2366] (August 28, 2017), the Federal Circuit vacated and remanded Board decisions invalidating Ultratec’s patents relating to systems for assisting deaf or hard-of-hearing users to make phone calls, in a group of IPRs, finding that the Board failed to consider material evidence and failed to explain its decisions to exclude the evidence.

Caption call submitted the testimony of an expert, Benedict Occhiogrosso, in the IPR’s.  Ultratec attempted to introduce conflicting trial testimony Occhiogrosso.  Ultratec moved to supplement the record with the conflicting Occhiogrosso trial testimony, but because Ultratec did not first request authorization to file the motion, the Board expunged the motion from the record.

Within a week of the jury trial in which Occhiogrosso testified, Ultratec requested authorization to file a motion to submit portions of Mr. Occhiogrosso’s trial testimony to the Board. Ultratec alleged that Mr. Occhiogrosso’s trial testimony addressing a prior art reference was inconsistent with his IPR declarations.  The Board held a conference call to consider Ultratec’s request for authorization to file a motion to supplement the IPR record with Mr. Occhiogrosso’s trial testimony, but did not review the testimony when deciding whether it could be admitted. The Board denied the request, promising a written order that was never provided.

After refusing to admit Occhiogrosso’s trial testimony, the  oard issued final written decisions, holding that every challenged claim was either anticipated or would have been obvious, relying heavily on the Board’s belief that Occhiogrosso was a credible witness, citing his declaration more than thirty times, at least once as to each of the eight patents.

Under the PTO’s regulations, a party seeking to submit supplemental information more than one month after the date an IPR is instituted must request authorization to file a motion to submit the information.  37 C.F.R. § 42.123(b). The request to submit new
information must show: (1) why the supplemental information reasonably could not have been obtained earlier, and (2) that consideration of the supplemental information would be in the interests of justice.  The PTO considers the interests of justice as slightly higher than good cause:

Good cause and interests-of-justice are closely related standards, but the interests-of-justice standard is slightly higher than good cause.  While a good cause standard requires a party to show a specific factual reason to justify the needed discovery, under the interests-of-justice standard, the Board would look at all relevant factors.  Specifically, to show good cause, a party would be required to make a particular and specific demonstration of fact. Under the interests-of-justice standard, the moving party would also be required to show that it was fully diligent in seeking discovery and that there is no undue prejudice to the non-moving party.

The Federal Circuit said that the ercord affords but one reasonable conclusion: Ultratec satisfied both of § 42.123(b)’s requirements for allowing Ultratec to file a motion to
admit Mr. Occhiogrosso’s trial testimony. First, the evidence could not have been obtained earlier. Ultratec emailed the Board requesting authorization to file a motion to supplement the record the week after the jury trial concluded. This is not evidence that could have been located earlier through a more diligent or exhaustive search; it did not exist during the IPR discovery period.

The Federal Circuit said that the fact that Ultratec could have, but did not, depose and obtain inconsistent testimony from Mr. Occhiogrosso during the IPR itself is not a basis for concluding otherwise. Ultratec argues that during cross examination at trial in front of the jury Mr. Occhiogrosso offered testimony that is inconsistent with his IPR testimony. That inconsistent testimony did not exist sooner and thus could not have been proffered to the Board sooner.

The Federal Circuit said that:

The Board offers no reasoned basis why it would not be in the interest of justice to consider sworn inconsistent testimony on the identical issue. Ultratec sought to offer
recent sworn testimony of the same expert addressing the same patents, references, and limitations at issue in the IPRs.  A reasonable adjudicator would have wanted to
review this evidence.

The Federal Circuit noted that conflicting testimony by Mr. Occhiogrosso would be highly relevant to both the Board’s analysis of the specific issues on which he gave inconsistent testimony and to the Board’s overall view of his credibility. His testimony was critical to the Board’s fact findings, and under such circumstances, no reasonable fact finder would refuse to consider evidence of inconsistent sworn testimony.  The Federal Circuit further noted that admitting and reviewing Mr. Occhiogrosso’s trial testimony would have placed minimal additional burden on the Board.

A number of problems with the Board’s procedures contributed to its errors in this case. First, the Board lacked the information necessary to make a reasoned decision.  Second, the Board’s procedures allowed it to make significant evidentiary decisions without providing an explanation or a reasoned basis for its decisions.  Third, the Board’s procedures impede meaningful appellate review of the agency decision-making.

The Federal Circuit noted a significant difference between court proceedings and proceedings before the Board:

In district court litigation, a party dissatisfied with a ruling excluding evidence is allowed to make an offer of proof to preserve error. Fed. R. Evid. 103. Parties in IPRs are not
given similar protections.

The Federal Circuit concluded that the Board abused its discretion when it refused to admit and consider Mr. Occhiogrosso’s trial testimony and when it refused to explain its decision.

Preemption is “Part and Parcel” of the §101; But Lack of Preemption Does Not Necessarily Establish Patentability

In Return Mail, Inc. v. United States Postal Service, [2016-1502] (August 28, 2017), the Federal Circuit affirmed the PTAB’s decision that the US Postal Service had standing to challenge Return Mails patents in an CBMR, and that as a result of that challenge the patents were not patentable subject matter under 35 USC §101.

The Federal Circuit held that it had authority to review the standing issue, concluding that Cuozzo and Achates are distinguishable and do not dictate the availability of judicial review in this case.  The Federal Circuit distinguished Cuozzo, finding that whether a party is statutorily allowed to petition for CBM review does not amount to “little more than a challenge to the [PTO’s] conclusion” about the petition’s likelihood of success on the merits.  The Federal Circuit distinguished Achates based on differences in the statutory framework for IPR and CBM review, CBM review being reserved only to parties who have have been sued for or charged with infringement of the underlying patent.  The Federal Circuit further noted that unlike the IPR time bar at issue in Achates, which is simply a procedural requirement that rights be exercised in a timely manner, § 18(a)(1)(B) relates to a party’s right to seek CBM review in the first instance.  The Federal Circuit held that § 324(e) does not bar judicial review of the Board’s decision that a party satisfies § 18(a)(1)(B)’s requirements to petition for CBM review.

On the standing issue, the Federal Circuit found that Return Mail made several cogent arguments why a §1498(a) suit is not one for “infringement,” but despite the important differences between §1498(a) suits against the government and suits for infringement against private parties, these differences, along with Return Mail’s other arguments,
were insufficient to compel a conclusion that Congress intended to exclude a government-related party sued under § 1498(a) from being able to petition for CBM review.

On the patentable subject matter issue under 35 USC 101, Return Mail argued that the claims may involve the abstract idea of “relaying mailing
address data” but are not directed to such an abstract idea.  Return Mail first argued that the claims do not preempt other systems for relaying mailing address data; and second, that the claims are directed to a specific improvement to technology for relaying mailing address data.  The Federal Circuit disagreed, finding that the claims were directed to an abstract idea, much like the claims in Content Extraction and  FairWarning.  The Federal Circuit further found the argument that the claims were directed to a specific improvement was also unavailing, noting that limiting the abstract idea to a particular environment such as a mail processing system with generic computing technology, “does not make the claims any less abstract for the Alice Step 1 analysis.

On the Alice Step 2 analysis, the Federal Circuit said that the
claims at issue were not analogous to claims “directed to a specific implementation of a solution to a problem in the software arts,” which it has held not to be directed to an abstract idea.  The Federal Circuit found that the claims only recite routine, conventional activities such as identifying undeliverable mail items, decoding data on those mail items, and creating output data.

At Return Mail’s instance, the Federal Circuit expounded on the role of preemption in the  §101 analysis.  The Federal Circuit noted that preemption is the underlying concern that drives the §101 analysis.  The Federal Circuit said that monopolization of the basic tools of scientific and
technological work  would thwart the primary object of the patent laws to promote future innovation, concluding that “[p]reemption is therefore part and parcel with the §101 inquiry.”  The Federal Circuit noted that while it has often cited the lack of preemption concerns to support a determination that a claim is patent-eligible under § 101, it has consistently held that claims that are otherwise directed to patent-ineligible subject matter cannot be saved by arguing the absence of complete preemption.

Applicants Claims “Configured” to be Vague and Unclear

In Ex Parte McAward, [Appeal 2015-006416 (Application 13/435,655)] (August 25, 2017), the Board of Appeals considered in definiteness under 35 U.S.C. § 112 in a rare precedential decision.  Applicant was claiming a water leakage detector that is easily connectable to flexible water hoses to monitor leakage from hot and cold water supply lines.  The claim included language that the detector is “configured to be reliably installed by an untrained installer or a homeowner and to not require the services of a plumber or electrician to perform installation, thereby permitting widespread and cost effective adoption.”

The Board began with an explanation of the rationale for the Office’s application of the Broadest Reasonable Interpretation to claims pending before the Office, one consequence of which is a lower threshhold for ambiguity than in the courts.  The Board explained that it did not understand that the Supreme Court’s Nautilus decision required any change in the Office’s approach to indefiniteness.  Thus the Board applied the approach for assessing indefiniteness approved by the Federal Circuit in Packard, i.e., “[a] claim is indefinite when it contains words or phrases whose meaning is unclear.”  The Board acknowledged that this requirement is not a demand for unreasonable precision, and does not contemplate in every case a verbal precision of the kind found in mathematics, and invokes some standard of reasonable precision in the use of language in the context of the circumstances.

The Board then turned to the “configured” limitation of the claim, noting that it is unusual because, rather than further defining the water detector’s structure, including by reference to a function that the water detector is capable of performing, the claim language attempts to further define the water detector’s structure by the skill level required to install the water detector.  The Board found that this language “fails to provide adequate clarity to the required structure because the skill level of ‘an untrained installer or a homeowner’ is ambiguous and vague, and thus, the meaning of a structure configured to be “reliably installed” by such an installer is unclear.

While the applicant argued that a person having ordinary skill in the art would understand the “configured” limitation to mean “capable of being installed without special knowledge or tools,” the Board observed that the specification did not support this definition.  The Board found that the Specification contains no description of, for example, the knowledge or tools required for installation of the claimed water detector, nor does the Specification define the skill level of an “untrained installer” or a “homeowner.”  The Board concluded that the claim “the claim suffers from general vagueness and ambiguity.”

The Board went on to point out that even if the applicant’s definition was correct the “configured” limitation, when read in light of the Specification, fails to further clearly define the structure encompassed by the limitation.  In other words, the Board said, neither the claim language or specification delineates how a person of ordinary skill would determine whether a water detector that includes each of the structural limitations of claim 1 further satisfies the “configured” limitation.

For these reasons, the Board agreed with the Examiner that the claimed “configured” limitation, under the broadest reasonable interpretation when read in light of the Specification, is vague and unclear, and a person having ordinary skill in the art would not be able to discern the metes and bounds of the claimed invention in light of this claim language.

Routine Optimization Cannot Make Invention Obvious Without A Reasonable Expectation for Success

In In re Stepan Co., [2016-1811] (August 25, 2017), the Federal Circuit vacated the PTAB’s affirmance of the Examiner’s rejection of claims 1–31 of U.S. Patent Application No. 12/456,567 on herbicidal formulations containing glyphosate salt with a surfactant system.

The Examiner found that the prior art contained the preferred surfactants, and further taught glycols as an optional ingredient, and concluded that “it is routine optimization to select and adjust the surfactants to the undisclosed range.  The Board affirmed.

The Federal Circuit began with the premise that an obviousness determination requires finding both “that a skilled artisan would have been motivated to combine  the teachings of the prior art . . . and that the skilled
artisan would have had a reasonable expectation of success in doing so.” The Federal Circuit said that the Board failed to explain why it would have been “routine optimization” to select and adjust the claimed surfactants and achieve the claimed results.  The Federal Circuit said that an  agency tribunal must make findings of relevant facts, and present its reasoning in sufficient detail that the court may conduct meaningful review of the agency action, and that relying on routine optimization falls short of this standard.  Specifically, the Federal Circuit said the Board did not explain “why it
would have been routine optimization to arrive at the claimed invention.”

The Federal Circuit said that just like cases where the Board has characterized the invention as “intuitive” or “common sense,” the Board must provide some rational underpinning explaining why a person of ordinary skill in the art would have arrived at the claimed invention
through routine optimization.

The Federal Circuit also noted the absence of a reasonable expectation of success.   The Federal Circuit said that to have a reasonable expectation of success, one must be motivated to do more than merely to vary all parameters or try each of numerous possible choices until one possibly arrived at a successful result.

Finally the Federal Circuit said the Board improperly placed the burden of proving patentability on the applicant.  The claim required the composition have a “cloud point above 70°” and it was the USPTO’s burden to show that achieving this would have been obvious to a person of ordinary skill
in the art.

The Board’s decision was vacated, and the application remanded for further examination.



In NIDEC Motor Corp. v. Zhongshan Broad Ocean Motor Co. Ltd., [2016-2321] (August 22, 2017), the Federal Circuit affirmed the Board’s determination that claims 1–3, 8, 9, 12, 16, and 19 of U.S. Patent No. 7,626,349 are invalid as anticipated or obvious.

The Board instituted review on the ground of obviousness over Bessler and Kocybik, but declined to institute review on the ground of anticipation
by Hideji, because Broad Ocean had failed to provide an affidavit attesting to the accuracy of the submitted translation of Hideji as required by 37 C.F.R. § 42.63(b).

Broad Ocean filed a second petition again asserting that the challenged claims are anticipated by Hideji, including the required affidavit, and requesting that the Board join the Second Petition with Broad Ocean’s already-instituted IPR involving the First Petition.  The Board again declined to institute review, this time on the grounds that the Petition was time-barred.

Broad Ocean requested a rehearing of the panel’s decision, which was granted by an expanded panel of five Administrative Patent Judges.  The expanded administrative panel set aside the original panel’s decision and
concluded that § 315(c) permits the joinder with the original IPR.

On appeal the parties agreed that, if the Federal Circuit affirmed as to obviousness, it need not address Nidec’s challenges to the procedural aspects of the Board’s joinder decision and its holding concerning anticipation by Hideji.  Because the Federal Circuit affirmed as to invalidity for obviousness, it did not have to reach the Board’s joinder decision.

Judges Dyk and Wallach wrote separate to express their concerns as to the United States Patent and Trademark Office’s position on joinder and expanded panels.  Although the panel did not decide the  propriety of joinder, the judges had “serious questions” as to the Board’s (and the Director’s) interpretation of the relevant statutes and current practices.  Judges Dyk and Wallach think it unlikely that Congress intended that petitioners could employ the joinder provision to circumvent the time bar
by adding time-barred issues to an otherwise timely proceeding.

Of greater note is Judges Dyk and Wallach’s concern about the PTO’s practice of expanding administrative panels to decide requests for rehearing.  Broad Ocean requested rehearing and further requested that the rehearing be decided by an expanded panel.  While Judges Dyk and Wallach recognized the importance of achieving uniformity in PTO decisions, they questioned whether the practice of expanding panels
where the PTO is dissatisfied with a panel’s earlier decision is the appropriate mechanism of achieving the desired uniformity.

It is difficult to image a practice more offensive to fair adjudication then adding judges to a panel to achieve a desired outcome.  It is outrageous to make parties participate in an adjudication where the outcome is predetermined by court packing.


A Foolish Consistency may be the Hobgoblin of Little Minds, but it is the Hallmark of a Successful Applicant/Patent Owner

In In re Walter, [2016-2256] (August 21, 2017), the Federal Circuit affirmed the PTAB’s decision in ex parte reexamination of U.S. Patent No. 7,513,711 that all twelve claims of the patent lack adequate written description and are indefinite under 35 U.S.C. § 112.

While the opinion is non-precedential, it still has a simple, but valuable lesson for applicants and patent owners.  During the reexamination Walter amended the claims (directed to artificial reefs for cultivating marine life) to require a “support structure” that was “block-like.”  The Examiner found this use of “block-like indefinite because Walter’s proposed construction conflicted with the dictionary meaning of the term “block.”  During the appeal to the PTAB and during the appeal to the Federal Circuit, Walter alternated between two different meanings of the claim term “block-like,” and therein is the lesson of the case.  If the applicant/patent owner can’t decide what a claim term means, then it is hard for the Board or a court to conclude that the term is sufficiently definite.

No-one can say whether one of the possible constructions would have satisfied 35 USC §112, but presenting two possible constructions certainly does not.

You Can Ignore Claim Language As Long As it is Before the Colon

In Georgetown Rail Equipment Company v. Holland L.P., [2016-2297] (August 1, 2017), the Federal Circuit affirmed judgment of infringement and the award of lost profits and enhanced damages for infringement of U.S. Patent No. 7,616,329 on a system and method for inspecting railroad tracks.

Holland challenged the district court’s conclusion that the claim language “mounted on a vehicle for movement along the railroad track” was not a claim limitation.  The Federal Circuit noted that whether to treat a preamble as a limitation is a determination resolved only on review of the entire patent to gain an understanding of what the inventors actually invented and intended to encompass by the claim, add that there is no simple test for understanding the import of the preamble.

Generally the preamble does not limit the claims, however, a
preamble may be limiting if:

  • it recites essential structure or steps;
  • claims depend on a particular disputed preamble phrase for antecedent basis.
  • the preamble is essential to understand limitations or terms in the claim body.
  • the preamble recites additional structure or steps underscored as important by the specification.
  • there was clear reliance on the preamble during prosecution to distinguish the claimed invention from the prior art.

On the other hand a preamble is not a claim limitation if the claim body defines a structurally complete invention and uses the preamble only to state a purpose or intended use for the invention.

The Federal Circuit agreed with the district court that the preamble was not a limitation, noting In the context of the entire patent, it is apparent that the term “mounted on a vehicle for movement along the railroad track” is meant to describe the principal intended use of the invention but not to import a structural limitation or to exclude from the reach of the claims an assembly that does not include a vehicle mount.

Holland argued that it did not infringement the patent  because some of the processing of the acquired data was performed by a third party.  However, the Federal Circuit none-the-less found that Holland used the claim system despite the fact that third parties operated parts of the system.

With respect to damages, the Federal Circuit found that there was a legally sufficient evidentiary basis in the record from which a reasonable
jury could have found that Georgetown would have received business from Union Pacific for data collection services if Holland’s infringing product was not in the market, supporting an award of lost profits.

Finally with respect to enhanced damages, the Federal Circuit  found substantial evidence supports the jury’s finding that subjective recklessness led to willful infringement.  While Holland disputed many of the facts, the Federal Circuit said that the jury was free to decide whose evidence it found more compelling on the question of willfulness and found in Georgetown’s favor.

While the Federal Circuit has long held that in many if not most cases, the preamble of a claim is a not limitation, the reason to ignore words that the inventor selected to describe the invention has never been clear.   Given the strictness with which other words in the claim are construed, giving a fee pass for some words simply because they appear before the colon seems inconsistent.


Clarity in §101: Half of the Judges Considering the Question Find Plaintiff’s Computer Memory System to be Patentable Subject Matter

In Visual Memory LLC v. NVIDIA Corp., [2016-2254](August 15, 2017), the Federal Circuit reversed the district court’s determination that Visual
Memory’s U.S. Patent No. 5,953,740, on a memory system with programmable operational characteristics that can be tailored for use
with multiple different processors, was drawn to patent ineligible subject matter.

Claim 1 states:

   1. A computer memory system connectable to a processor and having one or more programmable operational characteristics, said characteristics
being defined through configuration by said computer based on the type of said processor, wherein said system is connectable to said processor
by a bus, said system comprising:
a main memory connected to said bus; and
a cache connected to said bus;
wherein a programmable operational characteristic of said system determines a type of data stored by said cache.

The Federal Circuit said that the framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts comprises two steps.  The first step requires courts to determine whether the claims at issue are directed to one of those patent-ineligible concepts.  If they are, the court must then analyze whether the claim elements, either individually or as an ordered combination, contain an “inventive concept” that transforms the nature of the claim into a patent-eligible application.

At step one, the Federal Circuit asked whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea.  Analogizing to Enfish (self-referential table for a computer
database) and Thales (unique configuration of inertial sensors), the Federal Circuit  found that the claims were directed to an improved computer memory system, not to the abstract idea of categorical data storage.

The Federal Circuit noted the many benefits explained in the specification; the elimination of the one-size-fits-all approach of the prior art, which resulted in trade-offs; interoperability with multiple different processors; and improved performance over prior art systems with even larger caches.  The Federal Circuit said that the claims were directed a technological improvement: an enhanced computer memory system.  The Federal Circuit said this was not a case where the claims merely recite the “use of an abstract mathematical formula on any general purpose computer,” “a purely conventional  computer implementation of a mathematical formula,” or “generalized steps to be performed on a computer using conventional computer activity.”

The Federal Circuit went on to distinguish Content Extraction which merely employed a computer, and TLI Communications which used conventional hardware and were “not directed to a specific improvement to computer

The opinion addressed the dissent’s contention that the claimed programmable operational characteristic is “nothing more
than a black box” by pointing out there was a microfiche appendix of computer code, that enablement was a §112 issue not a §101 issue, and finally by pointing out that the innovative effort was not in the programminer required, but in the creation of the memory system.

The Federal Circuit conceded that the concept of categorical data storage underlies the patent’s claims, but said that this is not enough to doom a claim under § 101 because the claims are not so limited, and “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature,
natural phenomena, or abstract ideas.”  The Federal Circuit ended the inquiry at Step 1 and remanded the case.

In the end the finding of patentable subject matter was 2 judges for and 2 judges (the dissent and the district court judge) against.  If only all patentability determinations were as certain as 50-50.

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