The Patent Trial and Appeals Board (Board) recently gave credence to the proverbial second-bite at the apple strategy, underscoring the value that post grant proceedings can provide to district court defendants. In Interthinx, Inc. v. CoreLogic Solutions, LLC, CBM2012-00007, the Board invalidated claims challenged in a covered business method (CBM) review, despite the fact that the Petitioner lost its invalidity case in District Court and the fact that the Petitioner had removed itself from the CBM proceeding. Interthinx highlights a tension playing out between the Board and districts courts, and further demonstrates that, while district courts historically have honored invalidity decisions from the USPTO, the Board does not appear to be reciprocally bound.

In April 2010, CoreLogic Information Solutions (Patent Owner) filed a lawsuit against Interthinx, Inc. (Petitioner) and others asserting infringement of US Patent No. 5,361,201 (the ’201 patent) in the Eastern District of Texas. On September 28, 2012, a jury rendered its verdict that the asserted claims of the ’201 patent were not infringed and that the asserted claims were not invalid as anticipated or obvious. A judgment reflecting the jury’s verdict was entered on October 3, 2012. After extensive briefing, the Court denied all post-trial motions on September 30, 2013, leaving the judgment intact. 

On September 18, 2012, just prior to the jury trial in the District Court, Petitioner filed a petition for CBM patent review of the ’201 patent. Just more than a year later, the parties entered into a settlement agreement to resolve their disputes, including the underlying litigation, any appeals, and the CBM proceeding. In accordance with that agreement, the parties moved the Board to terminate the CBM review on October 25, 2013. As discussed in a previous Steptoe Alert, on November 12, 2013, the Board terminated the involvement of the Petitioner pursuant to that settlement agreement, but decided that it would nonetheless proceed to a final written decision. Interthinx, Inc. v. CoreLogic Solutions, LLC, CBM2012-00007, Paper No. 47; see also AIA Post-Grant Proceedings: Joint Motion to Terminate May Not Stop the Board from Proceeding to a Final Written Decision, November 19, 2013.

At oral argument in front of the Board, Patent Owner argued that res judicata/collateral estoppel and/or issue preclusion barred Petitioner’s invalidity challenges to the ’201 patent under §§ 101, 102 and 103. In rejecting the res judicata/collateral estoppel argument, the Board stated that the District Court applied the clear and convincing standard to the § 101 defense while the Board “reviews the patentability of a claim, rather than its validity, and applies a preponderance of the evidence standard to the underlying factual determinations.” Paper No. 58 at 6. Because of these different standards, the “issue decided by the Board is not identical to the one decided or litigated in the first action and could not have been essential to the final judgment” in the District Court, and thus, the challenge was not barred by res judicata or collateral estoppel. Id.

Turning to the §§ 102 and 103 defenses, the Board again relied on the differing standards of proof: “[T]he jury’s finding that Petitioner had not proved invalid any claim of the ’201 patent under the clear and convincing evidence standard is not binding on the Board, which evaluates claim patentability and applies a preponderance of the evidence standard.” Id. at 7. In an interesting twist, Patent Owner argued that since the ’201 patent already had expired, and thus the claims at issue could not be amended, the Board should apply the higher standard of proof. Lacking any support in the statute for an expired patent exception, the Board rejected the argument. Id.

Regarding the merits of the CBM review, the Board found that since the claims of the ’201 patent merely recited abstract concepts and did not transform those ideas into patent eligible applications of those abstractions, the claims were not patentable subject matter under § 101. Id. at 8-11. Additionally, the Board found certain prior art rendered the claims unpatentable as anticipated or obvious under §§ 102 and 103. Id. at 12-17. Therefore, on January 30, 2014 (almost a year to the day from institution) in its final written decision, the Board ordered that the ’201 patent claims were cancelled as unpatentable. Id. at 18.

Interthinx displays a tension between the Board and district courts. While the Board did adopt the claim construction applied by the District Court, the Board did not give deference to the jury’s verdict or the District Court’s ruling when it came to whether the ’201 patent was invalid. This tension is similar to that displayed in the Fresenius v. Baxter, 721 F.3d 1330 (Fed. Cir. 2013). In that case, the PTO’s ruling that the claims were unpatentable ultimately prevailed over the District Court’s earlier finding that the claims were not invalid. That is the preliminary result in the Interthinx case, and barring any appeal, is likely to be the ultimate result as well. Therefore, patent owners should be aware that an earlier victory in a district court on validity does not mean necessarily a later victory at the Board.