The US Court of Appeals for the Federal Circuit affirmed a decision that a patent challenger at the Patent Trial and Appeal Board (PTAB) must prove invalidity by a preponderance of evidence and must establish anticipation within the four corners of a single prior art reference. Microsoft Corporation v. Biscotti, Inc. Case Nos. 16-2080; -2082; -2083 (Fed. Cir., Dec. 29, 2017) (O’Malley, J) (Newman, J, dissenting).

Biscotti owns a patent directed to “real-time video conferencing . . . over a network, in a conference that includes video and audio of each participant.” The patented system includes “components such as video communication devices, the internet, video sources, display devices, and set-top boxes.”

After Biscotti sued Microsoft for patent infringement, Microsoft filed three inter partes review (IPR) petitions challenging the independent asserted claims based on anticipation, and dependent claims for anticipation and obviousness. Microsoft primarily relied on Kenoyer, prior art that disclosed a “multi-component videoconferencing system” that “may include a camera, microphones, speakers, and a codec possibly used in conjunction with a computer system.” In its final written decision, the PTAB found that that Microsoft failed to prove by a preponderance of evidence that Kenoyer anticipated the challenged claims or rendered those claims obvious. Microsoft appealed.

At issue at the PTAB was whether the portions of Kenoyer relied upon by Microsoft should be viewed in their “totality” or be more narrowly interpreted in the context of the disclosure. Microsoft urged a broad interpretation, while Biscotti’s expert argued that the portions relied on by Microsoft only applied to one figure discussed in Kenoyer. The PTAB concluded that several of the portions of the reference relied on by Microsoft were “unrelated to each other in [the Kenoyer] disclosure” and moreover (even though found in a single reference) amounted to “multiple, distinct teachings that the artisan might somehow combine to achieve the claimed invention.” Microsoft appealed to the Federal Circuit.

After reiterating that anticipation is a question of fact subject to substantial evidence review, the Federal Circuit analyzed whether the PTAB’s findings on anticipation were supported by substantial evidence. The Court found that the PTAB had accurately and correctly applied the proper anticipation standard.

The Federal Circuit acknowledged that the PTAB was presented with a “close question.” Nonetheless, the Court found that the PTAB’s determination and fact findings were supported by substantial evidence, both as to anticipation and obviousness. With regard to the method of use claims under appeal, the Court noted that Microsoft had presented new arguments in its appeal brief that it had not presented in the IPR petition, and declined to entertain the new arguments, holding that they had been waived and citing Redline Detection, LLC v. Star Envirotech, Inc. (IP Update, Vol. 19, No. 1) and 37 CFR § 42.104(b)(5)).

Judge Newman dissented, arguing that two of the challenged claims “recite no new components or functions or technology” but “directly read on” Kenoyer. As viewed by Newman, Biscotti’s claims were anticipated, as they recite “the same components, having the same function, combined in the same way for the same purpose” as those found in Kenoyer.

Practice Note: Even if a challenger’s primary invalidity position is based on anticipation, it may be advisable to also present a position based on obviousness.