The US Court of Appeals for the Federal Circuit reversed a finding of obviousness by the Patent Trial and Appeal Board (PTAB), concluding that the finding was based on a reference that was included only in a non-instituted ground. In re: IPR Licensing, Inc., Case No. 18-1805 (Fed. Cir. Nov. 22, 2019) (O’Malley, J).

IPR Licensing (IPRL) owns a patent directed to a mobile device that can dynamically connect to both a WiFi network and a cellular network, and automatically selects the best network for use. The claims of the patent require that (1) the mobile device maintains a connection with a cellular network even when it is not in use (e.g., when the device is also connected to WiFi), and (2) that the cellular network is CDMA-based. At the time the patent was filed, this type of always-on cellular connection feature was only included in competing cellular networking protocols (e.g., GPRS and UMTS).

In response to patent infringement suits brought by IPRL, ZTE and Microsoft filed petitions for inter partes review (IPR) of IPRL’s patent. The PTAB consolidated the petitions and instituted review on only one of three proposed grounds. The instituted ground was based on a combination of a prior art patent that disclosed a CDMA network, the GPRS standard and the IEEE 802.11 protocol. The PTAB found all challenged claims to be obvious.

IPRL appealed the obviousness finding, and the Federal Circuit remanded as to one of the challenged claims after finding that the record was insufficient to support the PTAB’s finding that a skilled artisan would have been motivated to combine a GPRS feature (i.e., always-on cellular connection) with a CDMA network. On remand, the PTAB, hearing no additional arguments from the parties, reached the same conclusion as in the initial decision. In its remand decision, the PTAB included a new motivation-to-combine reason that included reference to the UMTS protocol, which had only been asserted in a non-instituted ground. The citation to UMTS was the only additional evidentiary support provided by the PTAB. IPRL appealed.

The Federal Circuit found the PTAB’s reliance on UMTS improper. The Court reiterated that non-instituted grounds are not a part of the ensuing IPR proceeding and thus IPRL did not have notice that evidence outside of the record might be relied upon, and further did not have an opportunity to be heard on the non-instituted grounds. The Court noted that the reference to UMTS was not simply used to support the notion that a skilled artisan would have known that the always-on feature could be used with CDMA. Instead, the issue of whether the UMTS always-on feature could be used with CDMA was the critical question on remand, and the record did not include any argument that UMTS could be combined with CDMA.

The Federal Circuit also addressed the procedural issue of whether remand was necessary to consider the two non-instituted grounds under SAS Inst., Inc. v. Iancu (IP Update, Vol. 21, No. 5). The Court found that ZTE’s failure to file a cross-appeal did not mean that the Court lacked authority to remand as to the non-instituted grounds. However, ZTE’s withdrawal from the appeal pursuant to a settlement agreement constituted a waiver of its request to institute on the other two grounds. The Court thus reversed the PTAB’s finding of obviousness and vacated the judgment.