Thomas Brown | December 17, 2015
SightSound Technologies, LLC v. Apple Inc.
December 15, 2015
Precedential Opinion by Dyk, joined by Lourie and Hughes.
Apple filed petitions with the PTAB seeking CBM review of patents owned by SightSound under AIA. In the petitions, Apple argued that certain claims of the patents were invalid as anticipated under 35 U.S.C. § 102. The Board instituted CBM review finding that there was a reasonable likelihood that the asserted claims were anticipated or rendered obvious by prior art. However, while Apple’s petitions included alleged facts to support obviousness, the petitions did not specifically allege obviousness over the prior art. The Board initiated review on obviousness grounds anyway. During the CBM proceedings the Board gave SightSound extra time to respond to the obviousness grounds, but SightSound argued that it has been deprived due process to respond to the obviousness grounds on which the CBM review had been instituted. The PTAB entered a final decision based on the obviousness grounds from which SightSound appeals to the CAFC, but the CAFC rules that they are barred under 35 USC 314(d) and 35 USC 324(e) from reviewing the decision to initiate the CBM proceedings.
SightSound owns US Patent No. 5,191,573 and 5,966,440, which disclose methods for the electronic sale and distribution of digital audio and video signals. Each of the relevant claims requires (1) forming a connection, through telecommunications lines, between a first party’s first memory and a second party’s second memory; (2) selling the desired digital video or digital audio signals to the second party for a fee through telecommunications lines; (3) transmitting the desired signal from the first memory to the second memory via telecommunications lines; and (4) storing the transmitted signal in the second memory.
Apple filed petitions with the PTAB seeking CBM review of the ’573 and ’440 patents owned by Sightsound under AIA § 18. In the petitions, Apple argued that certain claims of the patents were invalid as anticipated under 35 U.S.C. § 102. The PTAB instituted CBM review finding that there was a reasonable likelihood that the asserted claims were anticipated or rendered obvious by a series of disclosures relating to a computer system developed by CompuSonics in the 1980s. However, while Apple’s petitions included alleged facts to support obviousness, the petitions did not specifically allege obviousness over CompuSonics. The PTAB initiated review on obviousness grounds anyway.
The PTAB found that that the ’573 and ’440 patents are CBM patents because they recite the electronic movement of money between financially distinct entities, an activity that is “financial in nature,” and do not include novel and non-obvious technological features that would otherwise excluded them from CBM treatment.
During the CBM proceedings SightSound argued that it had been deprived of a fair opportunity to respond to the obviousness grounds on which the CBM review had been instituted. The Board granted SightSound additional time for argument and authorized it to file sur-replies and new declaration testimony on the issue of obviousness to ensure that SightSound had a full and fair opportunity to be heard on the issue of obviousness.
The PTAB enterd a final decision based on the obviousness grounds over CompuSonics and rejected SightSound’s position that the term “second memory” is limited to non-removable media and instead found that the term encompasses any second storage space. Specifically, the PTAB found that the petitions provided detail arguments of how the CompuSonics publications taught every limitation and that the reason to combine was manifested by the references themselves.
SightSound appeals the final decision of the PTAB to the CAFC. SightSound argues that the CBM proceedings were improperly initiated since the petitions did not explicitly raise the issue of obviousness. SightSound relies on 35 U.S.C. § 322(a)(3), which requires that a petition must recite “in writing and with particularity, each claim challenged, the grounds on which the challenge to each claim is based, and the evidence that supports the grounds for the challenge to each claim,” and 37 C.F.R. § 42.204(b), which requires a petition to include the “specific statutory grounds . . . on which the challenge to [each] claim is based.
CAFC found that 35 USC 314(d), which mirrors the bar on appeal in 35 USC 324(e), and its prior decision In re Cuozzo Speed Technologies bars the CAFC from reviewing whether the PTAB properly initiated review when obviousness was not explicitly raised in the petitions.
324 (e)No Appeal. The determination by the Director whether to institute a post-grant review under this section shall be final and nonappealable. (CBM)
314 (d) No Appeal. The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable. (IPR)
In Cuozzo, on appeal the Patentee argued that the PTO improperly instituted a IPR with respect to certain claims because it relied on prior art references not identified by the petitioner in its petitions contrary to the requirements of 35 U.S.C. § 312(a)(3). However, the CAFC found that it barred by 314(d) from considering the issue, and that only final decisions are subject to review.
The CAFC also cited In Achates Reference Publishing. Inc. v. Apple, where the Patentee argued that the PTAB improperly instituted an IPR because the underlying petitions were time-barred under 35 U.S.C. § 315(b).
The CAFC explained:
that just as the pleading in Cuozzo could have been made “sufficient by the inclusion of the missing prior art reference . . . the [alleged] timeliness issue here could have been avoided if Apple’s petition had been filed a year earlier or if a petition identical to Apple’s were filed by another party.
SightSound also contends that the ’573 and ’440 patents are not CBM patents, and therefore the PTAB lacked authorization to review them.
Here, while the CAFC ruled that they do have authority to review the PTAB’s determination on whether the ’573 and ’440 patents are CBM patents, the CAFC agreed with the PTAB that the ’573 and ’440 patents are CBM patents and found that the PTAB’s reasoning was not arbitrary or capricious and supported by substantial evidence.
Finally, the CAFC agreed with the PTAB’s claim construction of the term “second memory” and affirmed the PTAB’s final decision.
Even if an IPR or CBM is initiated by the PTAB based on a deficient petition, the PTAB’s decision to institute is final and non-appealable.