SightSound Tech., LLC v. Apple Inc.

Addressing the bar on appellate reviewability of the Patent Trial and Appeal Board’s (PTAB or Board) decisions, the U.S. Court of Appeals for the Federal Circuit concluded that § 324(e) bars review of the Board’s decision to institute a Covered Business Method (CBM) patent review, even when the Board relies on grounds not alleged in the CBM petition. SightSound Tech., LLC v. Apple Inc., Case Nos. 15-1159, -1160 (Fed. Cir., Dec. 15, 2015) (Dyk, J.).

Apple filed petitions seeking CBM review of two SightSound patents relating to methods for selling digital audio over telecommunications lines. Apple’s petition was limited to multiple anticipation grounds under § 102 but did not specifically include obviousness grounds under § 103. Nevertheless, the Board determined that the petition showed a reasonable likelihood that the challenged claims were anticipated or obvious and instituted review accordingly.

In its institution decision, the Board stated that it was exercising its “discretion to institute a covered business method review” on § 103 obviousness grounds, even though they had not been raised in the petition. The Board pointed to the “references themselves” as providing the necessary motivation to combine. After SightSound argued that the Board’s institution on § 103 obviousness grounds improperly deprived it of a fair opportunity to respond to those new grounds, the Board authorized SightSound to file a sur-reply along with a new declaration addressing obviousness. In its final written decision, the Board held that the patents were invalid as obvious under § 103. SightSound appealed.

On appeal, SightSound argued that Board exceeded its authority to issue a final decision based on a ground that had not been raised by the petitioner in the initial petition. The Federal Circuit characterized the argument as an appellate challenge to the Board’s decision to institute CBM review, a challenge that is specifically barred by § 324(e). Equating § 324(e) (applicable to CBMs and post-grant reviews) with § 314(d) (applicable to inter partes reviews, or IPRs), the Court reiterated its reasoning from In re Cuozzo Speed Technologies, 793 F.3d 1268 (Fed. Cir. 2015) (IP Update, Vol. 18, No. 2) and applied the same interpretation to CBM appellate review as it had previously applied to IPRs: nothing in the statute limits the Board’s authority to base its final decision on grounds not raised in the petition, and the statute bars appellate review of the grounds on which the Board instituted review. The Federal Circuit therefore concluded that it did not have jurisdiction to review the Board’s decision to institute under § 103.

The Court also rejected SightSound’s argument that the patents did not qualify as “covered business method” patents under the statute. Even though the challenged claims admittedly required technical components, the Court agreed with the Board that merely using known technology to perform financial activities nature does not transform the method into a “technological invention” that could escape CBM review. Ultimately, the Court agreed with the essence of the Board's claim construction and affirmed the Board’s final determination that the challenged claims were unpatentable as obvious.