Amazon.com, Inc. v. Personalized Media Communications, LLC, IPR2014-01530, Final Written Decision, Paper 55 (P.T.A.B. Mar. 24, 2016).

In IPR2014-01530, Amazon.com and Amazon Web Services, LLC (“Petitioner”) filed a Petition to institute an inter partes review of claim 6 of U.S. Patent No. 7,864,956 (“the ’956 patent”). (Final Written Decision at 2.) The ’956 patent is titled “Signal Processing Apparatus and Methods” and relates generally to a unified system of programming communication. (See ’956 patent, Abstract.) Claim 6 is directed to a method for transmitting a signal including a “module” to a plurality of subscriber stations, which results in communicating a recommendation regarding a problem to a plurality of subscribers. (Final Written Decision at 5.)

The Board instituted review of this claim on two grounds under 35 U.S.C. § 103. (Final Written Decision at 2.) After institution, Patent Owner Personalized Media Communications filed a Patent Owner Response and a Contingent Motion to Amend. (Id. at 2-3.) The Contingent Motion to Amend included a single proposed substitute claim. (Id. at 42-44.)

In its Final Written Decision, the Board held that Petitioner had shown by a preponderance of the evidence that claim 6 of the ’956 patent was obvious. (Final Written Decision at 13-41.) Having found claim 6 unpatentable, the Board next turned to Patent Owner’s Contingent Motion to Amend. (Id. at 42-54.) After finding that the proposed substitute claim met the requirements of 37 C.F.R. § 42.121 (i.e., the amendment responds to a ground of unpatentability, does not broaden the claim, proposes a reasonable number of substitute claims, has written description support), the Board next focused on “whether Patent Owner has met its burden of proof to show that proposed substitute claim 30 encompasses patentable subject matter under 35 U.S.C. § 101.” (Id. at 42-45.)

The Board noted that although “inter partes review cannot be instituted using 35 U.S.C. § 101 as the basis for a challenge brought by a petitioner, . . . [in a motion to amend], the patent owner has the burden of demonstrating the patentability of the claims.” (Final Written Decision at 45.) The Board’s subsequent analysis demonstrates that a patent owner’s burden may not be limited to showing patentability of substitute claims over the prior art. Rather, in some instances, the patent owner’s burden may extend to showing that substitute claims recite patentable subject matter under Section 101.

In this case, a district court had previously determined that original claim 6 was invalid under 35 U.S.C. § 101. (Final Written Decision at 45.) Patent Owner did not address the patent-eligibility of the proposed substitute claim in its Contingent Motion to Amend and instead provided arguments only as to how the claim was patentable over the prior art. (See Paper 21.) The Section 101 issue was first raised by the Petitioner in its Opposition to Patent Owner’s Motion to Amend. (See Paper 31.) Petitioner argued in its Opposition that Patent Owner was on notice of the Section 101 issues, based on the district court’s holding, but failed to establish patent-eligibility in its Motion to Amend. (Id. at 4-5.) Petitioner further argued that Patent Owner’s proposed amendments “clearly do not impart any inventive concept that would convert [Patent Owner’s] abstract claim into eligible subject matter.” (Id. at 1.) Patent Owner filed a Reply to Petitioner’s Opposition in which it briefed the Section 101 issue. (See Paper 38.)

In determining whether Patent Owner had met its burden of demonstrating the patentability of the claim, the Board considered “whether Patent Owner has explained how the proposed amendments address the District Court’s concerns regarding the validity of the claims and whether the Patent Owner has shown that its proposed amended claim encompasses patent eligible subject matter.” (Final Written Decision at 45.) To support its analysis, the Board cited Ariosa Diagnostics v. Isis Innovation Ltd., IPR2012-00022, Paper 166 at 51-52 (P.T.A.B. Sept. 2, 2014), a Final Written Decision from another IPR proceeding in which the Board analyzed substitute claims under Section 101.

In its Section 101 analysis, the Board utilized the two-step framework set forth by the Supreme Court in Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014). (Final Written Decision at 46-54.) In the first step of its analysis, the Board determined that the substitute claim was directed to the abstract idea of “generating personalized recommendations for acquiring a product or service.” (Id. at 47-52.) In the second step, the Board found that the computer hardware elements recited in the claim amounted to mere instructions to implement the abstract idea on a computer, and that the claim did not recite an inventive concept to transform the claimed abstract idea into patent-eligible subject matter. (Id. at 52-54.)

Based on its analysis, the Board held that Patent Owner had not demonstrated the patentability of the proposed substitute claim under 35 U.S.C. § 101. (Final Written Decision at 54.) The motion to amend was denied without consideration of whether the proposed substitute claim was patentable in view of the prior art. (Id.)

Summary – At least in instances where a district court has held original claims to be invalid under Section 101, an IPR panel may require a patent owner to show that proposed substitute claims recite patent-eligible subject matter. This is true even despite the fact that inter partes review cannot be instituted based on Section 101 challenges.