PTAB Departure from Agreed Claim Construction Required Notice and Opportunity to be Heard

In Qualcomm Inc. v. Intel Corp., [2020-1589, 2020-1590, 2020-1591, 2020-1592, 2020-1593,
2020-1594] (July 27, 2021), the Federal Circuit vacated and remanded six inter partes review final written decisions determining that claims 1–15, 17–25, and 27–33 of U.S. Patent
No. 9,608,675 would have been obvious.

The ’675 patent relates to techniques for generating a power tracking supply voltage for a circuit that processes multiple radio frequency signals simultaneously, using one power amplifier and one power tracking supply generator. During the IPR’s the parties never disputed that the signals were required to increase user bandwidth, and in the International Trade Commission, the Commission’s construction of the term also included the increased
bandwidth requirement.

The Board issued six final written decisions concluding that all challenged claims were unpatentable. In reaching its conclusion, the Board construed the term “a plurality of carrier aggregated transmit signals” in each asserted claim to mean “signals for transmission on multiple carriers,” omitting any requirement that the signals increase or extend bandwidth.

Qualcomm argued that it was not afforded notice of, or an adequate opportunity to respond to, the Board’s construction of “a plurality of carrier aggregated transmit signals,” and the Federal Circuit agreed. The Federal Circuit began by noting that “[a] patent owner in [an IPR] is undoubtedly entitled to notice of and a fair opportunity to meet the grounds of rejection,”
based on due process and Administrative Procedure Act (APA) guarantees.

The Board may adopt a claim construction of a disputed term that neither party proposes
without running afoul of the APA. Parties are well aware that the Board may stray from disputed, proposed constructions, however, but in the instant case the issue of whether increased bandwidth was a required part of the claim construction was not in dispute. The Federal Circuit noted that the patent owner owner agreed with the increased bandwidth requirement proposed by the petitioner. While the Board did not change theories midstream or depart from a construction it previously adopted, it is still difficult to imagine either party anticipating that this agreed-upon matter of claim construction was a moving target. The Federal Circuit said that unlike with disputed terms, it is unreasonable to expect parties to brief or argue agreed-upon matters of claim construction. Thus the Federal Circuit found that in the
the circumstances of this case, the Board needed to provide notice of, and an adequate opportunity to respond to, its construction. The Federal Circuit further found that Qualcomm did not receive notice or an opportunity to be heard regarding the Board’s construction that departed from the agreed-upon increased bandwidth requirement, and thus, the Board violated Qualcomm’s procedural rights under the APA.

It is not Obvious to Ignore the Teachings of the Prior Art

In Chemours Company FC, LLC v. Daikin Industries, LTD., [2020-1289, 2020-1290] (July 22, 2021), the Federal Circuit concluded that the Board’s decision on obviousness is not supported by substantial evidence and that the Board erred in its analysis of objective indicia of nonobviousness, and reversed.

U.S. Patent No. 7,122,609 relates to a unique polymer for insulating communication cables formed by pulling wires through melted polymer to coat and insulate the wires, a process
known as “extrusion.”

Chemours argues that the Board’s final written decision on obviousness is erroneous because its factual findings on motivation to combine were unsupported by substantial evidence, and specifically that Daikin did not meet its burden of proof because it failed to show that a person of ordinary skill in the art would modify the polymer of the prior art reference to achieve the claimed invention. However the reference also taught that a narrow distribution of molecular weights was important, while the claimed invention did not use the narrow distribution of molecular weights.

The Federal CIrcuit found that Board’s obviousness findings are not supported by substantial evidence. The Federal Circuit said the Board appears to have ignored the express disclosure in the reference that teaches away from the claimed invention and relied on teachings from other references that were not concerned with the particular problems the reference sought to solve. More specifically, the Board did not explain why one would be motivated to increase the melt flow rate to the claimed range, when doing so would necessarily involve altering the inventive concept of a narrow molecular weight distribution polymer. The Federal Circuit cited Trivascular, Inc. v. Samuels, 812 F.3d 1056, 1068 (Fed. Cir. 2016) where it found no motivation to modify the prior art where doing so “would destroy the basic objective” of the prior art).

The Federal Circuit found that this was particularly true in light of the fact that the reference appears to teach away from broadening molecular weight distribution and the known methods for increasing melt flow rate. The Federal Circuit said that the Board relied on an inadequate evidentiary basis and failed to articulate a satisfactory explanation that is based on substantial evidence for why one would have been motivated to modify the reference.

The Federal Circuit also agreed that the Board erred in its analysis of objective indicia. The Board found no nexus between the claimed invention and the alleged commercial success because all the features were disclosed in the prior art. The Federal Circuit instructed that contrary to the Board’s decision, the separate disclosure of individual limitations, where the invention is a unique combination of three interdependent properties, does not negate a nexus, explaining that concluding otherwise would mean that nexus could never exist where the claimed invention is a unique combination of known elements from the prior art.

The Federal Circuit also agreed that the Board erred in its demand that market share evidence is necessary to sustain a finding of commercial success. Chemours contended that sales data
alone should be enough for commercial success, and the Federal Circuit agreed. The Federal Circuit said that market share data, though potentially useful, is not required to show commercial success. While the Board was entitled to weigh evidence and find, if appropriate, that Chemours’s gross sales data were insufficient to show commercial success without market
share data, the Board, erred in its analysis that gross sales figures, absent market share data, “are inadequate to establish commercial success.”

Lastly, the Federal Circuit agreed that the Board erred when it found that the patents in suit were blocking patents. A blocking patent is an earlier patent that prevents practice of a later invention—the invention of the patent-in-dispute. The Board concluded that the evidence proffered to establish commercial success was weak because the patent-in-suit blocked others
from entering the market. The Federal Circuit said that the challenged patent, which covers the claimed invention at issue, cannot act as a blocking patent.

A Patent Infringement Complaint Simply Must State a Plausible Claim to Relief

In Bot M8 LLC v. Sony Corporation of America, [2020-2218] (July 13, 2021), the Federal Circuit found no error in the district court’s “directing” Bot M8 to file a first amended complaint, or in dismissing Bot M8’s claims of infringement of U.S. Patent Nos. 8,078,540 and 8,095,990 for failure to state a plausible claim of infringement. However, the Federal Circuit held that the district court erred in finding Bot M8’s allegations as to U.S. Patent Nos. 7,664,988 and 8,112,670 were insufficient. The Federal Circuit found that the district court acted within its discretion in denying Bot M8’s motion to file a second amended complaint, as well as the subsequent order denying leave to move for reconsideration. Finally the Federal Circuit affirmed the granting summary judgment as to the invalidity of the U.S. Patent No. 7,338,363 under 35 USC 101. The asserted patents all relate to gaming machines and are directed to casino, arcade, and video games generally.

To survive a motion to dismiss under Rule 12(b)(6), the Federal Circuit said a complaint must “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. The district court instructed counsel for Bot M8 that it must explain in the complaint every element of every claim that you say is infringed and/or explain why it can’t be done. The Federal Circuit disagreed with the district court’s approach and reiterate that a plaintiff need not ‘prove its case at the pleading stage. The Federal Circuit said a plaintiff is not required to plead infringement on an element-by-element basis. Instead, it is enough that a complaint place the alleged infringer on notice of what activity is being accused of infringement.

The relevant inquiry under Iqbal/Twombly is whether the factual allegations in the complaint are sufficient to show that the plaintiff has a plausible claim for relief. The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. In other words, a plausible claim must do more than merely allege entitlement to relief; it must support the grounds for that entitlement with sufficient factual content.

The Federal Circuit agreed with the district court that Bot M8’s allegations as to the ’540 and ’990 patents were conclusory and at times contradictory, but found that the court erred in dismissing the allegations as to the ’988 and ’670 patents. With respect to the ’988 and ’670 patents, the court simply required too much.

With respect to the ‘363 Patent, and Federal Circuit agreed that the claims recite the abstract idea of increasing or decreasing the risk-to-reward ratio, or more broadly the difficulty, of a multiplayer game based upon previous aggregate results. The Federal Circuit further found that the claims leave open how to accomplish this, and the specification provides hardly any more direction. The district court said, and the Federal CIrcuit further found that the claim merely recites result-oriented uses of conventional computer devices and that, at bottom, nei-ther the patent specification, patent owner, or patent owner’s experts articulate a technological problem solved by the ’363 patent.” After careful consideration, the Federal Circuit discerned no error in the district court’s § 101 analysis, and found no need to discuss that analysis in any detail.