Where Parties Raise an Actual Dispute Regarding Claim Scope, the Court Must Resolve It

In Nobelbiz, Inc. v. Global Connect, L.L.C., Appeal Nos. 2016-1104, 2016-1105, the Federal Circuit held that where parties raise an actual dispute regarding the scope of the claim language—rather than merely the meaning of the words—the district court must determine the scope of the asserted claims.

Nobelbiz sued Global Connect, alleging infringement of certain patents. The parties asked the district court to construe several claim terms. For instance, NovelBiz argued that a claim required modifying caller identification, such that no original telephone number is necessary. Conversely, Global Connect asserted that the claim required changing caller data by replacing an original number with a replacement number. The district court found that the disputed terms should be given their plain and ordinary meaning. After trial, the jury found the asserted claims infringed. Defendant Global Connect appealed.

On appeal, the Federal Circuit held that the district court had the responsibility to determine the scope of the asserted claims. The Federal Circuit cited its previous decision in O2 Micro, which held “a determination that a claim term … has the plain and ordinary meaning may be inadequate … when reliance on a term’s ordinary meaning does not resolve the dispute.” Here, the Federal Circuit found that the parties raised an actual dispute regarding the scope of the claim language, and that the district court had the responsibility to resolve the dispute. Accordingly, the Federal Circuit reversed the district court’s decision and remanded for a new trial. Nobelbiz petitioned for rehearing en banc, which the Federal Circuit denied.

The Federal Circuit Reaffirms That Inherency Cannot Be Established by Possibilities

In HTC Corporation v. Cellular Communications Equipment, LLC, Appeal No. 2016-1880, the Federal Circuit reiterated that inherent anticipation cannot be proved by showing that a claim limitation is possible in a prior art reference.

Ten parties filed a petition for IPR challenging certain claims in a patent owned by Cellular Communications Equipment, LLC (CCE). The Board instituted review and concluded that the petitioners had failed to show that any of the challenged claims were unpatentable. Two of the petitioners appealed the Board’s decision, challenging the Board’s construction of the term “message” and its conclusions on anticipation and obviousness.

Despite the absence of an express construction of “message” by the Board, the Federal Circuit reviewed the Board’s expression of its understanding of the scope of the claim term. The Federal Circuit rejected Appellants’ arguments that the Board’s application of “message” improperly excluded certain embodiments, noting that Appellants conceded at oral argument that the Board made no such exclusion. Accordingly, the Federal Circuit concluded that the Board’s application of the term “message” was correct.

The Federal Circuit also found that substantial evidence supported the Board’s finding that a prior art reference did not inherently anticipate the claims at issue, declining to consider an argument by Appellants based on CCE’s expert declaration because the argument had not been raised before the Board. The Federal Circuit found that Appellants failed to show inherent anticipation because they only showed that it was possible for the prior art reference to meet the claim limitation at issue, reiterating prior holdings that the mere fact that a certain thing may result is insufficient to establish inherency.

Finally, the Federal Circuit affirmed the Board’s finding that Appellants had failed to show that combinations of prior art references rendered the challenged claims obvious. The Federal Circuit found no error in the Board’s decision to afford little weight to the second declaration of HTC’s expert because his second declaration was inconsistent with his first. In particular, the Federal Circuit found that Appellants failed to point to any evidence in the record that would undermine the Board’s findings on the scope and content of the primary prior art reference.

Third Party’s Actions May Be Attributable to the Accused Infringer When the Third Party Must Perform the Patented Steps to Receive Value from the Accused Infringer

In Travel Sentry, Inc., v. David A. Tropp, Appeal Nos. 2016-2386, -2387, -2714, 2017-1025, the Federal Circuit held that a third party’s acts may be attributed to an accused infringer, for purposes of divided infringement under § 271(a), when the third party must perform patented steps to receive the benefit of the relevant activity. An accused infringer does not avoid liability merely because the third party is not obligated to perform the patented steps.

Tropp’s patent claims a method for using a dual-access lock in an airline luggage inspection system. The patented method includes steps to be performed by a luggage screener, e.g., TSA. Travel Sentry and the TSA have a written memorandum of understanding concerning TSA’s handling of Travel Sentry’s locks. Travel Sentry provides master keys to the TSA and trains the TSA on how to identify Travel Sentry’s locks.

The district court granted Travel Sentry’s motion for summary judgment of no direct infringement, finding that “there is simply no evidence that Travel Sentry had any influence whatsoever on . . . the method carried out by the TSA . . . .” The district court determined that because the TSA faces no consequences for ignoring direction from Travel Sentry, TSA’s voluntary compliance with instructions could not be attributed to Travel Sentry.

The Federal Circuit vacated and found that a reasonable jury could conclude that TSA’s performance of the patented steps is attributable to Travel Sentry. The court applied its holding in Akamai V that liability under § 271(a) could be found when an alleged infringer “conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method” and “establishes the manner or timing of that performance.” The court emphasized the importance of identifying the relevant “activity,” the types of “benefits” that can satisfy Akamai V, and what is required for one to “condition” a third party’s participation in an activity. The court held that a reasonable jury could find a) the TSA derived a benefit from employing Travel Sentry’s luggage system (namely, not having to break consumer’s locks); b) this benefit was conditioned upon the TSA’s performance of the patented method; and c) the written agreement between Travel Sentry and the TSA indicates that Travel Sentry established the manner or timing of the performance by the TSA.

IPR Petitioner Bears Burden of Proving That Proposed Amended Claims are Unpatentable

In Bosch Automotive Service Solutions, LLC v. Matal, Appeal No. 2015-1928, the Federal Circuit held that, in inter partes review, the patent challenger bears the burden of proving that proposed amended claims are unpatentable. This burden applies equally to indefiniteness challenges.

The Board instituted an inter partes review of Bosch’s patent on grounds of anticipation and obviousness. Bosch argued the claims were not obvious over the prior art of record, and simultaneously filed a contingent motion to amend with proposed amended claims to be added if the Board found the challenged claims unpatentable. The Board found all challenged claims unpatentable as anticipated or obvious and denied Bosch’s motion to amend. In denying the motion, the Board found that some of the proposed amended claims were indefinite, and that Bosch had failed to demonstrate that the proposed amended claims were patentable over the prior art of record. The Board cited its own 2013 decision where it allocated the burden of proof of patentability to the patent owner in motions to amend claims during inter partes review. The IPR petitioners did not participate in the appeal and the Director of the USPTO intervened to defend the Board’s decision.

The Federal Circuit affirmed the Board’s decision that the original claims were unpatentable and vacated the Board’s denial of Bosch’s motion, finding that the Board had impermissibly shifted the burden of proof to Bosch. The Federal Circuit applied its recent holding in Aqua Products v. Matal, 872 F.3d 1290 (Fed. Cir. 2017), which held that “the patent owner does not bear the burden of proof on the patentability of its proposed amended claims.” Instead, the petitioner must prove the unpatentability of proposed amended claims by a preponderance of the evidence. In its final judgment, the Board must justify its findings of unpatentability based on the evidence of record. The Federal Circuit added that the “burden of proof allocation applies for questions of indefiniteness, as with other questions of unpatentability.” Because the Board’s written decision expressly stated that Bosch had failed to carry a burden of proof with regard to both indefiniteness and obviousness of the proposed amended claims, the Federal Circuit found that the Board had impermissibly shifted this burden to the patent owner and remanded for further consideration consistent with the Aqua Products decision.

Combinations Do Not Anticipate if a Skilled Artisan Would Not Envision the Claimed Arrangement

In Microsoft Corporation v. Biscotti, Inc., Appeal Nos. 2016-2080, -2082, -2083, the Federal Circuit held that multiple, distinct teachings in a single prior art reference do not anticipate a claimed invention if a skilled artisan would not envision the claimed combination.

Microsoft requested three inter partes reviews of a patent owned by Biscotti directed to video communication systems. Microsoft argued that a prior art patent anticipated the challenged independent claims and rendered the challenged dependent claims unpatentable for anticipation or obviousness. The Board’s final written decision found Microsoft did not prove the challenged claims unpatentable. With respect to the anticipation grounds, the Board concluded that Microsoft improperly mixed embodiments in the prior art patent to account for the independent claim limitations. With respect to the obviousness grounds, the Board noted that Microsoft did not argue that the prior art patent rendered the independent claims obvious based on the teachings located in different parts of the specification. Accordingly, the Board concluded that Microsoft did not prove that the dependent claims would have been obvious because of the deficiencies in the underlying independent-claim analysis.

On appeal, the Federal Circuit confirmed that the Board applied the correct anticipation standard: a prior art reference anticipates if 1) within its four corners, it discloses all elements arranged as in the claim; or 2) when it does not expressly disclose all the limitations arranged as in the claim, a person of skill in the art reading the reference nevertheless would “at once envisage” the claimed arrangement. As to whether the Board’s anticipation analysis was factually correct, the Federal Circuit recognized that the disclosure in the asserted reference lended itself to more than one reasonable interpretation. But the Federal Circuit stated that, as an appellate court, it defers to the Board’s factual findings on technical issues and held that substantial evidence supported the Board’s interpretation of the reference’s disclosure. Thus, because the Federal Circuit found substantial evidence to support the Board’s finding that the various portions of the reference were “unrelated to each other,” the Federal Circuit affirmed the Board’s decision that the reference did not anticipate the claims and that the claims were patentable.

In dissent, Judge Newman argued that, because the asserted reference “shows the same components, having the same function, combined in the same way for the same purpose,” the Board erred in its decision, and the asserted reference anticipated the claims of the patent.