In Droplets, Inc. v. E*TRADE Bank, No. 2016-2504, 2016-2602 (Fed. Cir. Apr. 19, 2018), the Federal Circuit affirmed the PTAB’s decision that the challenged patent was obvious, holding that incorporation by reference is insufficient to satisfy a patentee’s burden of providing notice of the asserted priority date under 35 U.S. § 120.

E*TRADE and other financial entities filed an IPR challenging Droplets’ ’115 Patent. The PTAB found all claims of the ’115 Patent invalid as obvious over a PCT application. Droplets argued that the ’115 patent claimed priority to through an incorporation by reference. The ’115 patent included a specific reference to two priority applications and incorporated the disclosure of each by reference. It did not specifically enumerate the PCT application, although it was included within the disclosure of one of the priority applications. The PTAB found this an insufficient priority claim, and invalidated the challenged claims based on the PCT application.

On appeal, the Federal Circuit affirmed that 35 U.S.C. § 120 requires “a specific reference to [an] earlier filed application” for a priority claim to an earlier application. The “specific reference” requirement under § 120 does not contemplate incorporation by reference.