Square, Inc. v. REM Holdings 3, LLC

In a rare decision granting a petitioner’s rehearing request, the Patent Trial and Appeal Board (PTAB or Board) reversed its earlier position in a final written decision where it found that the petitioner had not shown that certain dependent claims of a challenged patent were unpatentable, explaining that its earlier decision overlooked a material fact and found that the petitioner had shown by a preponderance of evidence and that two challenged dependent claims would have been obvious. In granting the rehearing request, the Board explained that when overlooking a material statement in a petition is sufficient grounds to grant rehearing. Square, Inc. v. REM Holdings 3, LLC, Case IPR2014-00312 (PTAB, Nov. 20, 2015) (Bisk, APJ.)

After filing its petition for inter partes review (IPR) of a REM patent directed to magnetic card readers used with cellular phones, the Board instituted review of all claims (1-17) of the patent on grounds of obviousness. After the trial, the Board issued its final written decision in which it found that claims 1, 2, 6-7 and 10-17 had been shown to be unpatentable. The Board found, however, that the petitioner had failed to meet its burden of proof that dependent claims 3-5 and 8-9 were unpatentable. Square filed a request for rehearing, explaining that the Board had overlooked a prior art teaching that the petitioner cited showing the feature the Board found to be missing in the art.

In its initial final written decision, the Board concluded that claims 4 and 9 had not been demonstrated to be unpatentable, further noting that review of claims 3 and 8 had been instituted based on a combination of the same two prior art references asserted against claims 4 and 9 but also a third prior art reference. The Board initially agreed with the patent owner that, for the asserted ground of invalidity against claim 4 and 9, the petition referred only to a figure in one of the two primary references for a teaching of the limitation “the read head and said one or more resistors are contained within a housing,” and the Board was not persuaded that the primary references taught that limitation. In its rehearing request, the petitioner explained that the Board had failed to discern that the original petition provided an independent description regarding the third reference and its teaching of the feature recited in claims 4 and 9.

In the rehearing decision, the Board agreed that it had indeed overlooked the portion of the claim chart in the petition where the petitioner had specifically stated that the third reference taught the subject limitation. Summarizing the testimony given at the oral hearing, the Board noted that it had agreed with the petitioner that the third reference taught a housing for enclosing components, but it had concluded that it was constrained by “insufficient facts in the record to support that claims 4 and 9 are unpatentable” over the three-reference combination proposed by petitioner. Responding to this point, in a reply authorized by the Board, the patent owner argued that the original petition failed to describe that the third reference taught the subject limitation, not that the reference did not actually teach it. The Board, acknowledging it had overlooked the specific claim chart statement about the third reference, concluded that the petitioner had met its burden for granting rehearing with respect to claims 4 and 9. However, the Board left undisturbed its initial decision regarding claims 3, 5 and 8.

Practice Note: In denying rehearing for claims 3 and 8, the Board noted that petitioner had, for the first time in the proceeding, advanced the argument in the rehearing request that the patent owner had acquiesced that the subject matter of those claims was found in the prior art. The petitioner acknowledged that these arguments were new but urged the Board to waive its rule against such a new argument in “the interests of justice” and “to prevent the Federal Circuit from being forced to reverse and remand this case.” The Board declined, noting that it had not instituted review of those claims on the ground including the third reference, so its decision regarding claims 4 and 9 was left undisturbed.