WALKING DEAD PATENT CLAIMS IN AN IPR
| July 31, 2020
UNILOC 2017 LLC v. HULU, LLC, NETFLIX, INC
July 22, 2020
This precedential decision is made particularly interesting based on the dissenting opinion by Judge O’Malley pointing out that the CAFC’s affirmance of a district court’s ineligibility determination in a related district court proceeding makes the case moot, as there are no remaining challenged claims to replace with substitute claims. More specifically, when Uniloc did not seek Supreme Court review of the district court’s ineligibility determination, the appeal should have been dismissed as moot (“[A]n appeal should … be dismissed as moot, when, by virtue of an intervening event, a court of appeals cannot grant any effectual relief whatever in favor of the appellant.” Calderon v. Moore, 518 U.S. 149, 150 (1996) (quotation marks omitted). The majority opinion, however, treats the merits of the case (since Hulu had not filed anything contending that the PTAB had lost authority) and finds that §101 can be considered in an IPR with respect to substitute claims.
Background
To better understand the issues surrounding this case, it is necessary to piece together the complete background from both the majority and dissenting opinions. In 2016, Uniloc filed several lawsuits in the Eastern District of Texas alleging infringement of the claims of its U.S. Patent No. 8,556, 960 (the ‘960 patent). In March 2017, the district court dismissed the cases for failure to state a claim, holding all claims patent ineligible under §101. Uniloc appealed and the CAFC summarily affirmed the district court decision on August 9, 2018. Uniloc did not seek Supreme Court review.
The PTAB had instituted an inter partes review (IPR) of claims 1-25 of the ‘960 patent in August 2017. On August 1, 2018, the PTAB issued a final written decision (FWD) finding claims 1-8, 18-22, and 25 unpatentable over prior art. Prior to the FWD, Uniloc had filed a Motion to Amend asking the PTAB to enter substitute claims 26-28 for claims 1, 22 and 25 if the PTAB found the latter unpatentable. Hulu opposed the motion, arguing among other things that the substitute claims were directed to patent-ineligible subject matter. Uniloc replied that Hulu was not permitted to raise §101 in an IPR and did not respond substantively to the §101 issue.
The PTAB concluded that it could analyze the §101 issue with respect to the substitute claims. The PTAB denied Uniloc’s Motion to Amend concluding that Hulu had shown by a preponderance of the evidence that the substitute claims were directed to non-statutory subject matter under §101, which was the sole ground for denying the motion to amend. Uniloc had opposed the motion merely by arguing that §101 cannot be considered without addressing the merits of §101.
Uniloc requested rehearing of the PTAB’s decision on August 31, 2018, as to only the proposed amended claims, which was denied on January 18, 2019. At the time of this denial, the time for seeking Supreme Court review of the August 9, 2018 CAFC decision had run. It could be said that at this point all claims of the ‘960 patent were dead. As such, by treating the merits of the case, these dead claims have the possibility of being resurrected by entry of substitute claims.
The panel consisted of Wallach, Taranto and O’Malley. Wallach filed the opinion for the majority and O’Malley filed the dissenting opinion.
The Majority Opinion
The majority opinion noted that Hulu had filed nothing as of August 31, 2018, contending that the PTAB had lost any authority to consider the substitute claims “given the final federal-court invalidation of the original claims – a contention that would have called for vacatur of the Final Written Decision rather than a denial of rehearing.” The majority opinion held that the case is not moot as it is possible to “grant effectual relief”, reasoning that if Uniloc is correct that the PTAB is statutorily barred from rejecting a substitute claim based on §101, then it is entitled to adding those claims because §101 was the only ground for finding unpatentability. The majority further pointed out that Hulu had waived its arguments that the final federal-court judgment of invalidity of the claims took the authority away from the USPTO to consider the substitute claims. Hulu did not argue to the PTAB in response to Uniloc’s petition for rehearing (which was filed after the federal-court invalidity judgment became final) that the PTAB had lost authority.[1] The majority noted that Congress did not carry forward pre-AIA § 317(b) concerning the termination of inter partes reexamination based on parallel judicial proceedings.
Having concluded that the CAFC had jurisdiction, the majority concluded that the PTAB was authorized by statute to assess substitute claims for eligibility under §101. The majority held that the PTAB correctly concluded that it is not limited by §311(b) in its review of proposed substitute claims in an IPR. The majority explained that the “determination is supported by the text, structure, and history of the IPR Statutes, which indicate Congress’s unambiguous intent to permit the PTAB to review proposed substitute claims more broadly than those bases provided in §311(b).” Among the reasoning noted in the opinion, “if a patent owner seeking amendments in an IPR were not bound by § 101 and §112, then in virtually any case, it could overcome prior art and obtain new claims simply by going outside the boundaries of patent eligibility and the invention described in the specification.”
O’Malley’s Dissent
O’Malley began her dissent by pointing out:
Typically, when this court has finally adjudged a patent claim as invalid, it also refuses to consider any appeal that demands relief dependent on that claim and vacates any such relief that has been awarded by another tribunal.
As such, O’Malley considers that the majority breathes life into a dead patent “and uses the zombie it has created as a means to dramatically expand the scope of inter partes review”. As such, O’Malley considers the PTAB to have been estopped from issuing substitute claims in place of the invalidated claims, and that even if the PTAB could issue such claims, it is improper to consider §101.
O’Malley first points out that the case is moot based on an intervening event (the final federal-court decision of unpatentability of all claims). O’Malley explains, contrary to the majority, that relief is only possible in the event of a remand to allow the PTAB authority to issue substitute claims.
After our affirmance of the district court’s ineligibility determination, and once the time expired for Uniloc to seek Supreme Court review of that affirmance, it did not possess any patent rights that it could give up in exchange for a substitute claim.
As such, the question is whether the Board can consider a request for substitute claims where, in a parallel proceeding with a final judgment, the original claims have been held invalid.
O’Malley further considers that the patent owner can only propose narrowed claims that address the issues raised in the petition, and therefor IPRs are limited to §§ 102 and 103. The language of the statute clearly prohibits consideration of patentability challenges other than §§ 102 and 103.
O’Malley further notes that IPRs were intended to be an efficient, cost-effective means of adjudicating patent validity. The majority opinion “opens substitute claims to an examination equivalent to that undertaken during patent prosecution, in an inter partes environment.”
One last notable quote:
This case was dead on arrival—there were no live claims remaining in the ’960 patent. I see the dead patent for what it is—a legal nullity incapable of supporting any further proceedings. I would end the case with that revelation. The majority, however, views the ’960 patent as an opportunity and takes it. It declares that dead patents can walk, at least as far as needed to die again on the same § 101 sword that killed it two years ago. That sword, however, does not exist in the IPR context. The Board can cancel claims and find proposed substitute claims unpatentable, certainly. It simply does not have statutory authority to do so based on § 101. Accordingly, I dissent.
Takeaways
This case likely would have been considered moot had Hulu at least filed some argument when the federal-court decision had become final and therefore the PTAB no longer had authority to act. Furthermore, Uniloc could have placed itself in a better position during the IPR by responding substantively that its substitute claims meet the standards for eligibility even though it was not yet clear whether § 101 could be considered. A different outcome is certainly possible had the timing of the related proceedings had been different.
[1] In inter partes reexamination (pre-AIA), a petition to dismiss the proceeding can be filed upon a final judgment in a concurrent federal proceeding. The author had successfully ended two inter partes reexaminations by filing such petitions.
