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Federal Circuit’s third reversal of PTAB patent validity determination is also based on legal error

Posted on December 3, 2015

In its third reversal on a PTAB determination of patent invalidity in an AIA review proceeding, the Court of Appeals for the Federal Circuit based the decision on claim construction.  Since the first two reversals were also based on findings of legal error, a trend line is emerging for patent owners and petitioners alike.

As with appeals from Article III courts, legal error provides the lowest hurdle in seeking reversal on appeal.  In the course of several dozen reviews of Patent Trial and Appeal Board patent validity determinations in AIA review proceedings, the Federal Circuit has only reversed the Board three times, to date.  Two reversals were on determinations of invalidity based on claim construction, an issue of law reviewed de novo by the Federal Circuit.  The remaining reversal was on a rare Board determination of validity, also on a legal issue regarding the how the teachings of a prior art references are applied during a validity determination.

Claim construction appears to be the most likely source of legal error for patent owners to exploit and petitioners to defend.  In a decision last June on Microsoft’s challenge of patents owned by Proxyconn, the Federal Circuit noted that the “broadest reasonable interpretation” standard of claim construction adopted in regulations by the Board had been previously upheld.  (A Supreme Court decision on whether to grant certiorari on that issue is pending, in In re Cuozzo Speed Techs., LLC).  The Board’s construction of Proxyconn’s claims, however, was held to violate even that broadest reasonable interpretation standard:

As we have explained in other contexts, “[t]he protocol of giving claims their broadest reasonable interpretation . . . does not include giving claims a legally incorrect interpretation.”

The claims at issue recited a gateway connected to a packet-switched network “in such a way that network packets sent between at least two other computers pass through it.”  Proxyconn argued that the limitation required the gateway to forward packets from a sender to a receiver, while Microsoft asserted that a caching computer could suffice as one of the “two other computers.”  Since the claim explicitly recited a caching computer in addition to the “two other” computers, the Federal Circuit held that the Board legally erred in adopting the construction urged by Microsoft. 

Similarly, in a decision last week on a challenge by Sipnet EU of a patent owned by Straight Path IP Group, the Federal Circuit held that the Board’s claim construction required reversal.  In interpreting claim language requiring “a query as to whether” a particular system “is connected to the computer network,” the Board held that initial registration of the system with the network was sufficient, and that current connection status (i.e., “is connected”) was not required.  The Federal Circuit found no ambiguity in what the meaning of “is” is:

[W]e conclude that the Board adopted a claim construction that is erroneous even under the broadest-reasonable-interpretation standard.

We start with the claim language—which has a meaning that can only be called plain.  The present tense “is” in “is connected to the computer network” plainly says that the query transmitted to the server seeks to determine whether the second unit is connected at that time, i.e., connected at the time that the query is sent.  The question asked by the query is whether the device “is” connected, not whether it was connected or whether it is still registered as being connected even if that registration information is no longer accurate. It is not a reasonable interpretation of the claim language, considering its plain meaning, to say that it is satisfied by a query that asks only for registration information, regardless of its current accuracy.

Finally, in an early November decision on a challenge by Ber-Tek of a patent owned by Belden, the Federal Circuit reversed a Board determination that two challenged claims were valid.  The legal issue in that matter involved what meaning to ascribe to a prior art reference that taught the need for wire alignment in one embodiment but not—or at least not explicitly—in connection with another embodiment in which the wires were insulated:

The alignment problem and solution do not depend on whether the wires are insulated.  The Board’s disregard of the insulation-independent alignment teaching of JP ’910 violates the principle that “[a] reference must be considered for everything it teaches by way of technology and is not limited to the particular invention it is describing and attempting to protect.”

Legally, the Federal Circuit held, prior art must be considered for all that it suggests to those skilled in the art, not just for what it expressly describes.                      

It comes as no surprise that legal issues dominate reversal of administrative decisions.  However, the three reversals provide hope for both patent owners and petitioners that victory may be salvaged on appeal from an unfavorable Board decision.