IP Law Daily PTAB erred by changing claim construction without giving parties chance to respond
Friday, June 10, 2016

PTAB erred by changing claim construction without giving parties chance to respond

By Thomas Long, J.D.

The Patent Trial and Appeal Board erred by adopting a construction of a claim term in its decision to institute inter partes review (IPR) of a patent, and then changing its construction of the term in its final written decision, without giving the petitioner and patent owner the opportunity to respond to the change, the U.S. Court of Appeals for the Federal Circuit has held (SAS Institute, Inc. v. ComplementSoft, LLC, June 10, 2016, Stoll, L.). The court vacated and remanded the Board’s decision finding that a challenged patent claim was valid, although it affirmed the Board’s constructions of other claim terms and determination that seven claims were invalid for obviousness, based on those constructions.

IPR proceeding. Complement Soft, LLC, held U.S. Patent No. 7,110,936 ("the ’936 patent"), which was directed to an "Integrated Development Environment for generating and maintaining source code … in particular, programmed in data manipulation languages." SAS Institute, Inc., petitioned for IPR of the ’936 patent, asserting that all 16 claims were unpatentable as anticipated under 35 U.S.C. §102 or as obvious under 35 U.S.C. §103. The Board instituted IPR for claims 1 and 3-10 on obviousness grounds, but did not institute IPR on the other claims. The Board construed certain key terms in claim 1 that were at issue on appeal: "data manipulation language" was construed as "a programming language used to access data in a database, such as to retrieve, insert, delete, or modify data in the database," and "graphical representations of flows within the retrieved source code" was construed as "a diagram that depicts a map of the progression (or path) through the source code." The Board, in its institution decision, also interpreted the term "graphical representations of data flows" to mean "a depiction of a map of the path of data through the executing source code."

Based on its claim constructions, the Board concluded that claims 1, 3, and 5-10 were invalid for obviousness, but claim 4 was deemed patentable over the prior art. With respect to claim 4, the Board determined that the prior art did not satisfy the limitation "graphical representations of data flows," which it interpreted narrowly in its final decision to mean "a graphical representation comprised of icons depicting data processing steps and arrows to depict the movement of data through source code." This construction differed from the interpretation in the Board’s institution decision.

SAS and ComplementSoft both appealed, challenging some of the Board’s claim constructions. SAS also argued on appeal that the Board erred by not addressing claims 2 and 11-16 in its final decision.

Claim construction—claim 4. SAS argued that the Board’s construction of "graphical representations of data flows" in claim 4 in its final written decision was erroneous. SAS also argued that it was improper for the Board to change its interpretation of this claim term in the final written decision without giving the parties a chance to respond to the new construction. The court agreed with the Board’s construction of the term as meaning "a graphical representation comprised of icons depicting data processing steps and arrows to depict the movement of data through source code," based on the language in the specification and the structure of the claims. The construction was not too narrow, in the court’s view.

Claim construction—claim 1. ComplementSoft contended that the Board erred in its construction of "data manipulation language" and "graphical representations of flows within the retrieved source code." The court affirmed the Board’s constructions of the terms. Nothing in the prosecution history suggested that the term should exclude object-oriented languages altogether, as ComplementSoft argued, even when implemented with embedded data manipulation code using Structured Query Language (SQL). Although ComplementSoft added certain language during prosecution to distinguish the ’936 patent from a prior art patent, that patent did not disclose or suggest embedded data manipulation coding. The specification did not limit data manipulation languages to those providing direct access to a database.

Board’s procedure in adopting construction. The court agreed with SAS, however, that the Board should not have adopted a new construction of "graphical representations of data flows" in claim 4 in its final decision without allowing the parties to respond to the change. IPR proceedings are formal administrative adjudications subject to the procedural requirements of the Administrative Procedure Act (APA). Under the APA, SAS, as the petitioner, was entitled to timely notice of the matters of law and fact asserted in connection with the IPR hearing. The procedural protections of the APA were not limited, in the context of IPR proceedings, to patent owners. IPR petitioners were interested parties; they stood to lose significant rights in an instituted IPR proceeding because of the estoppel effects of a final written decision. Therefore, the court said, the Board was not authorized to "change theories in midstream" without giving SAS reasonable notice of the change and the opportunity to present argument under the new theory. The Board’s decision upholding the patentability of claim 4 was vacated, and the case was remanded so that the parties could address the new construction.

Claims not under IPR. SAS argued that the Board erred by not addressing in the final written decision every claim of the ’936 patent that SAS challenged in its IPR petition. However, the court said, the Board was not required to address claims for which the Board had not instituted IPR. The Board was authorized to institute IPR with respect to some of the challenged claims and not others, in its discretion.

Concurring and dissenting opinion. Circuit Judge Pauline Newman concurred with the majority on claim construction, as well as its determination that the APA required that the parties have the opportunity to address the Board’s change in claim construction. Judge Newman disagreed, however, with the majority’s decision that the Board was not required to address every claim challenged by SAS in its petition. According to Judge Newman, the Board’s practice of deciding the validity of only some of the patent claims challenged in the petition did not conform to the America Invents Act (AIA).

"The exclusion of some of the challenged claims from the statutory procedures and estoppels of the AIA, accomplished by accepting some of the claims for which review is sought while ignoring others, in the PTO’s absolute discretion, serves no purpose other than to negate the intended legislative purpose of the AIA," Judge Newman wrote. The Board’s practice of reviewing only some challenged claims meant that the parties were left with unaddressed claims to the same patented invention, which could then be litigated as if no post-grant proceeding had occurred. This thwarted the purpose of the AIA, which was to allow parties to resolve post-grant disputes regarding claim validity via an agency proceeding rather than district court litigation. Incorrect implantation of the AIA’s provisions for an alternative dispute resolution mechanism, Judge Newman opined, distorted the statutory framework and resulted in "protracted litigation grinding against administrative obstinacy."

The case is Nos. 2015-1346 and 2015-1347.

Attorneys: John Marlott (Jones Day) for SAS Institute, Inc. Matthew Topic (Loevy & Loevy Attorney at Law) for ComplementSoft, LLC. Joseph Gerard Piccolo, Office of the Solicitor, United States Patent and Trademark Office.

Companies: SAS Institute, Inc.; ComplementSoft, LLC

MainStory: TopStory Patent FedCirNews

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