Federal Circuit Allows Reconsideration of Non-Instituted Ground in IPR

Judge Kara Stoll

The Federal Circuit on January 9 affirmed a Patent Trial and Appeal Board (PTAB) decision finding AC Technologies, S.A.’s U.S. Patent No. 7,904,680 (the ’680 patent) unpatentable in an inter partes review (IPR) initiated by Amazon.com (Amazon) and Blizzard Entertainment, Inc. (Blizzard). See AC Techs., S.A. v. Amazon.com, Inc., No. 2018-1433 (Fed. Cir. Jan. 9, 2018) (Before Moore, Schall, and Stoll, J.) (Opinion for the court, Stoll, J.).

The claims at issue related to data access and management, namely, storing copies of data across a network to improve data integrity and reduce network lag. Amazon and Blizzard challenged the ’680 patent based on a single prior art reference. They presented three grounds in their petition, all centered on the construction of the term “computer unit.”

The first ground for invalidity argued that a single prior art reference rendered the ’680 patent obvious when “computer unit” was construed narrowly (Ground 1). The second and third grounds were based on a broader construction of “computer unit,” and argued that the same single prior art reference anticipated (Ground 2) and also rendered the claims obvious (Ground 3) the challenged claims. In its institution decision, the PTAB adopted the broad construction of “computer unit” and instituted review on Ground 1 and Ground 2 but found that Ground 3 was mooted by the other grounds. The PTAB ultimately instituted review on whether all claims of the challenged patent were obvious over the prior art and whether some claims were anticipated.

In its final written decision, the PTAB concluded that the prior art did not render any claims obvious under the narrow construction of “computer unit,” but found all but three claims anticipated by the prior art under the broader construction of “computer unit.” The PTAB’s final decision did not discuss whether the remaining three claims would have been obvious as argued by Amazon and Blizzard in Ground 3 under the broad construction of “computer unit.” Amazon moved for reconsideration, and the PTAB reconsidered in light of Ground 3, which had previously not been an instituted ground. The PTAB found that under Ground 3, the remaining three patent claims were invalid, and AC Technologies appealed.

On appeal, AC Technologies argued that the PTAB erred when it invalidated claims based on Ground 3, which was not an instituted ground in the PTAB’s institution decision, because it: (1) exceeded its statutory authority and (2) denied AC Technologies of due process. The Federal Circuit disagreed, affirming the PTAB’s decision. The Court noted that the decision to institute an IPR is a “binary choice,” in that you either institute review or you do not. See SAS Inst. Inc. v. Iancu, 138 S. Ct. 1348, 1355 (2018). If review is instituted, then Federal Circuit precedent requires the PTAB to address all grounds of unpatentability raised by the petitioner. See, e.g., Adidas AG v. Nike, Inc., 894 F.3d 1256, 1258 (Fed. Cir. 2018). Therefore, AC Technologies’ argument that the PTAB exceeded its statutory authority by addressing non-instituted Ground 3 was incorrect; in fact, it would have violated the statutory scheme for the PTAB not to consider Ground 3.

With respect to due process, the Court noted that due process dictates “that parties before the PTAB must receive adequate notice of the issues the PTAB will decide as well as an opportunity to be heard on those issues.” After the PTAB decided to consider Ground 3, AC Technologies was allowed to take discovery and submit additional briefing. Further, AC Technologies could have, but did not, request a hearing specific to Ground 3. Therefore, there was no violation of due process.

The Federal Circuit ultimately affirmed the PTAB’s findings of anticipation and obviousness of the ’680 patent.

Image Source: Gene Quinn © 2018
Judge Kara Stoll speaking at the AIPLA Annual Meeting, October 2018