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Federal Circuit: Go whole-hog on validity below if you want to contest an independent determination of invalidity on appeal

Think you’ve won on validity at the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) and your claims are safe on appeal? “Not so fast,” says the Federal Circuit in Software Rights Archive, LLC v. Facebook Inc., Nos. 2015-1649 through 2015-1563 (Fed. Cir., Sep. 9, 2016) (nonprecedential) (per curiam).

In Software Rights, patentee Software Rights Archive appealed an Inter Partes Review (IPR) decision finding four independent claims across two patents invalid (two claims in each patent). Facebook, LinkedIn, and Twitter cross-appealed, arguing that further claims should not have been held patentable.

The Federal Circuit panel majority, performing its own analysis of the prior art, agreed with Facebook that several additional claims in the patents were anticipated and rendered obvious over the cited prior art.

Case Highlights

Although most claims were held to be anticipated by the cited references, the Federal Circuit had no problem combining references for purposes of obviousness as all of the relevant documents were by the same author (and several had originally been a single thesis later published as three separate papers).

The Federal Circuit also suggested in passing that the fact that a patentee’s characterization of a claimed step as “simple” or “routine” in the specification may make the step easier to invalidate on the basis of closely related prior art:

As an initial matter, we note that the specification of the ’494 patent describes the step of deriving actual cluster links as “simple” or routine. ’494 patent, col. 24 l. 2. It explains that “[o]nce the candidate cluster link set has been generated, deriving the actual cluster links is a simple matter of selecting or choosing the . . . top rated candidate links, and eliminating the rest.” Id. col. 24 ll. 1–4 (diagram numbering omitted). Nothing in the specification suggests that deriving actual cluster links from the set of candidate cluster links is a novel or inventive aspect of the claimed invention.

However, the panel majority nevertheless proceeded to perform an in-depth analysis and found anticipatory disclosures in the cited prior art. Thus, appellants seeking invalidation may be well-advised not to place too much weight on this bit of otherwise-appealing dictum in an attempt to split claims into “hard” and “soft” steps.

Putting Patentees Between a Rock and a Hard Place

The Federal Circuit’s extensive de novo review of the contents of the prior art and its reversal of the PTAB’s finding of validity doubtless came as a rude shock to the patentees, who may reasonably have hoped that given the PTAB’s penchant for invalidating patents, claims that survive IPR are likely to survive appeal, too.

Presumably a factor in the jarring outcome for patentee Software Rights was the panel majority’s holding on waiver. The Federal Circuit had no sympathy for Software Rights’ attempt to argue for the patentability of the challenged claims using new arguments on appeal:

Software Rights attempts to salvage the board’s decision upholding the patentability of claims 1, 5, 15, and 16 by seeking affirmance on grounds not raised before the board. As a general rule, however, arguments not raised before the board are waived on appeal. See Redline Detection, LLC v. Star Envirotech, Inc., 811 F.3d 435, 450 (Fed. Cir. 2015); see also Camp v. Pitts, 411 U.S. 138, 142 (1973) (per curiam) (emphasizing that “the focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court”); In re Lee, 277 F.3d 1338, 1345 (Fed. Cir. 2002) (explaining that “review of an administrative decision must be made on the grounds relied on by the agency”).

The Federal Circuit’s rigorous enforcement of the waiver holding of RedLine Detection is notable for holding the patentees accountable not just for arguments that were sufficient to win before the PTAB, but also for alternative arguments sufficient to win in the event of reversal.

Validity in this case was indeed a very close call.  Both the majority and dissent provided detailed analyses of the prior art in view of the claimed limitations, with the difference of opinion based on a dissonance in what is disclosed inherently by the prior art.  It’s hard to say whether the waived arguments would have tipped the scales in Software Rights’ favor, but in such a close case the additional arrows in the quiver would have seemingly increased the chances of the cross-appealed claims remaining patentable.

Considering the stringency of PTAB review, the strict page limits before the PTAB, and the fact that prior art-based invalidity arguments are entitled to a searching de novo appellate review of the cited prior art that may include interpretations of the prior art that differ on appeal from the interpretations employed by the PTAB, the Federal Circuit’s approach potentially puts patentees into the difficult position of having to address arguments to two audiences: the PTAB below and the Federal Circuit above. Faced with PTAB page limits, patentees may be better advised to pitch their best arguments to the Federal Circuit and hope that the PTAB agrees. Otherwise, they may find themselves trying to address two different understandings of the prior art between the PTAB and the Federal Circuit.

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Michael C. Newman represents Mintz clients in intellectual property disputes, with a focus on Section 337 investigations before the US International Trade Commission. His experience spans all phases of litigation. Michael successfully represents patent owners in inter partes review proceedings.