The Patent Trial and Appeal Board has designated as precedential a decision holding that the Board may consider § 101 when evaluating the patentability of a patent owner’s proposed substitute claims in a motion to amend. The decision clarifies the impact of the Federal Circuit’s Aqua Products decision on the issue of subject matter eligibility of substitute claims.

Patent owner Uniloc sued a number of content streaming services – including Amazon, Hulu, and Netflix – in federal court in the Eastern District of Texas for alleged infringement of Uniloc’s U.S. Patent Number 8,566,960 entitled “System and method for adjustable licensing of digital products.” The defendants filed a petition for inter partes review (IPR) to assert that the claims of the 960 Patent were anticipated and/or rendered obvious by a number of prior art references. While the IPR proceeded, the defendants separately alleged in the Texas court that the claims of the 960 Patent were directed to ineligible subject matter. The Texas court agreed, and on appeal the Federal Circuit affirmed the Texas court’s holding that the claims of the 960 Patent were invalid under § 101.

In the IPR, Uniloc filed a motion to amend that proposed a number of substitute claims. The defendants/petitioners opposed the substitute claims on the ground that they were directed to ineligible subject matter. In a final written decision, the Board found the originally-issued claims of the 960 patent to be invalid as anticipated and/or obvious. Turning to the substitute claims, the Board found those claims invalid under § 101.

Uniloc then filed a motion for rehearing, arguing that Aqua Products had fundamentally altered the scope of a Board’s review of substitute claims. Prior to Aqua Products, patent owners had the burden of proof to demonstrate that substitute claims complied with all statutory requirements for patentability (i.e. §§ 101, 102, 103, and 112). In Aqua Products, the Federal Circuit shifted that burden of proof to a petitioner, requiring that a petitioner demonstrate unpatentability of substitute claims. Since a petitioner in an IPR proceeding is limited to requesting cancellation of claims of a patent under only §§ 102 and 103 (35 U.S.C. § 311(b)), Uniloc reasoned that Aqua Products “foreclosed review of [substitute] claims under §101.”

In a decision denying rehearing that is now precedential, the Board disagreed with Uniloc’s argument and held that the Board is not precluded from considering §101 when evaluating substitute claims. The Board cited to several statutory provisions – including 35 U.S.C. § 318(a) and (b) – as demonstrating that challenges to substitute claims are not limited to §§ 102 and 103 rejections, but instead petitioners may challenge substitute claims proposed by patent owners in a motion to amend as directed to ineligible subject matter under § 101.