By Cheryl Beise, J.D.
Panel further opines that PTAB precedential decisions are not entitled to Chevron deference.
The Patent Trial and Appeal Board erred by granting social media company Facebook’s motions to join to existing petitions for inter partes review (IPR) two later petitions challenging additional claims after the one-year time bar for filing petitions under 35 U.S.C. § 315(b) had passed, the U.S. Court of Appeals for the Federal Circuit has ruled. The plain language of Section 315(c) does not permit a party to join itself to a proceeding in which it was already a party; nor does it allow new issues to be added to an existing IPR through joinder, including issues that would otherwise be time-barred. The Board’s decisions concerning the obviousness of the claims challenged in the improper petitions were reversed and vacated. Substantial evidence otherwise supported the Board’s rulings concerning the obviousness or nonobviousness of several properly challenged claims of four communications patents owned by Windy City Innovations. Chief Judge Sharon Prost, joined by the other panel judges, wrote separately to explain the panel’s view that even if the language of the statute were ambiguous, the panel would find that no deference is due a prior precedential PTAB holding that Section 315(c) permits a petitioner to be joined to a proceeding in which it is already a party (Facebook, Inc. v. Windy City Innovations, LLC, March 18, 2020, Prost, S.).
In June 2015, Windy City Innovations, LLC filed a complaint accusing Facebook, Inc. of infringing U.S. Patent Nos. 8,458,245 ("the ’245 patent"); 8,694,657 ("the ’657 patent"); 8,473,552 ("the ’552 patent"); and 8,407,356 ("the ’356 patent"). The ’245, ’657, ’552, and ’356 patents share a common specification and claim priority to a patent application filed on April 1, 1996. The patents generally relate to methods for communicating over a computer-based network.
On June 3, 2016, the last day of the one-year window to file a petition for IPR, Facebook petitioned for review of several claims of the four asserted patents. The Patent Trial and Appeal Board instituted IPR of each patent, on all but two challenged claims. In January 2017, after Windy City had identified the specific claims it was asserting in the district court litigation, Facebook filed two additional petitions for IPR of additional claims of the ’245 and ’657 patents, along with motions to join the new proceedings to the already instituted IPRs on those patents under Section 315(c). By the time of that filing, the one-year time bar of Section 315(b) had passed. The Board nonetheless instituted Facebook’s two new IPRs, and granted Facebook’s motions for joinder. The Board reasoned that the substance of the new claims was similar to the instituted claims and the joinder was not likely to significantly affect the scope of the trial. The Board also found that under the circumstances of the district court litigation, Facebook could not have reasonably determined which claims were asserted against it within the one-year time bar. Two Administrative Patent Judges on the panels in concurring opinions raised "concerns with permitting a party to, essentially, join to itself."
The Board ultimately concluded that Facebook had shown by a preponderance of the evidence that some of the challenged claims were unpatentable as obvious but failed to show that others were unpatentable as obvious. Many of the claims the Board found unpatentable were claims only challenged in the later-joined proceedings. Both sides appealed the Board’s obviousness determinations, and Windy City additionally challenged the Board’s joinder decisions.
IPR joinder. On appeal, Windy City presented two issues of statutory interpretation for the appeals court to resolve: (1) whether 35 U.S.C. § 315(c) permits a person to be joined as a party to a proceeding in which it was already a party ("same-party" joinder); and (2) whether it permits new issues to be added to an existing IPR through joinder ("new issue" joinder), including issues that would otherwise be time-barred.
35 U.S.C. § 315 governs the relationship between IPRs and other proceedings. Subsection (c) provides:
Joinder.—If the Director institutes an inter partes review, the Director, in his or her discretion, may join as a party to that inter partes review any person who properly files a petition under section 311 that the Director, after receiving a preliminary response under section 313 or the expiration of the time for filing such a response, determines warrants the institution of an inter partes review under section 314.
The parties disputed whether Section 315(c) authorizes same-party joinder and joinder of new issues. Citing the clear and unambiguous text of Section 315(c), the Federal Circuit agreed with Windy City on both points. According to the court, the plain language indicated that the "exception to the time bar offered by the joinder provision only applies if there is an instituted IPR, meaning that a first petition must have been timely under Section 315(b), among other requirements." When it joined Facebook, the Board did not purport to be joining anyone as a party, the court said. Instead, the Board incorrectly assumed that two proceedings could be joined.
Even assuming that the Board intended to add Facebook as a party, essentially, to join itself to the existing IPRs, the plain meaning of the statute foreclosed such an interpretation, according to the Federal Circuit. "We are not aware of any legal context in which a person is permitted to join ‘as a party’ to a proceeding in which it is already a party," the court said. Explaining that legal terms in a statute must be construed "to have their customary, ordinary meaning in law unless there is a strong reason to infer a departure from that meaning," the appeals court saw "no basis for inferring a departure in the present context." The court concluded that the Board erred by allowing same-party joinder. This conclusion effectively overruled a precedential Board decision holding that "§ 315(c) permits a petitioner to be joined to a proceeding in which it is already a party." Proppant Express Investments, LLC v. Oren Technologies, LLC, No. IPR2018-00914, Paper 38 (P.T.A.B. March 13, 2019). Because "the clear and unambiguous language of § 315(c) does not authorize same-party joinder or joinder of new issues, we need not defer to the PTO’s interpretation of § 315(c)," the Federal Circuit added.
The Federal Circuit found the Board’s decision to be contrary to the meaning of the statute for another reason. There is nothing in the statute to indicate that the joined party may bring new issues from a new proceeding into the existing proceeding, particularly when those new issues are otherwise time-barred. "We therefore conclude that the unambiguous meaning of § 315(c) is that it allows the Director discretion to join a person as a party to an already instituted IPR but does not permit the joined party to bring new issues from the newer proceeding into the existing proceeding," the court said.
Finally, the court said that its reading of Section 315(c)—as allowing a nonparty to join an already-instituted IPR as a party but not to bring with it its new issues—was both consistent with the statutory scheme of Section 315 as a whole and supported by the legislative history.
Facebook pointed to important policy rationales supporting the Board’s interpretation. In particular, the Federal Circuit’s interpretation would incentivize a patent owner to file suit for infringement of patents with hundreds of claims and simply run out the clock, leaving the patent owner with no choice but to file IPRs for review of all of the patent’s claims. The Federal Circuit was sympathetic to an accused infringer’s preference to use IPR proceedings to speedily resolve validity issues. However, the court noted that an accused infringer was not without recourse, because district courts are capable of addressing invalidity contentions.
Obviousness. The Federal Circuit next reviewed the Board’s obviousness determinations that were not vacated by the court’s holding on joinder. The court found each of the Board’s determinations were supported by substantial evidence, with the exception of two claims of the ’356 patent, the consideration of which was moot.
Substantial evidence supported the Board’s assessment and weighing of the evidence to find that claims 1-5, 17, and 18 of the ’245 patent were not unpatentable as obvious in view of relevant prior art. Facebook’s position, which was based on attorney argument rather than evidence in the record, did not persuade the that the Board’s understanding of the system disclosed in U.S. Patent No. 6,608,636 ("Roseman"), the court said.
The court next addressed the Board’s decision regarding claims 189, 334, 342, 348, 465, 580, 584, and 592 of the ’657 patent. The claims recite a "database" that stores "tokens" (e.g., user identity information) to control the dissemination of information among participator computers. The court found substantial evidence of record supporting the Board’s finding that the use of a database "would be a straightforward and predictable choice for storing Roseman’s keys."
Facebook appealed the Board’s determination that claims 1, 4, 6, 8, 9, and 18–58 of the ’552 patent were not unpatentable as obvious. Facebook argued the Board erred by narrowly construing the authorization limitations to require determining what a user can do in a conference room, not just whether they should be admitted. The Federal Circuit disagreed with Facebook, finding that substantial intrinsic evidence supported the Board’s construction, including Figure 3, which describes checking the user’s per- mission prior to authorizing the user to send multimedia data. The Board did not err in finding that Roseman did not satisfy this limitation. Rejecting Windy City’s arguments, the court also affirmed the Board’s holding that claims 2, 3, 5, 7, 10–17, 59, and 64 of the ’552 patent are unpatentable as obvious over the asserted prior art.
In its final written decision on the ’356 patent, the Board held that Facebook had shown by a preponderance of the evidence that claims 1–9, 12, 15–28, 31, and 34–37 are unpatentable as obvious but had failed to show that claims 14 and 33 are unpatentable as obvious. However, claims 14 and 33 were found unpatentable by the Board in a separate IPR from which Windy City voluntarily dismissed its appeal. Windy City argued that Facebook’s appeal regarding claims 14 and 33 of the ’356 patent was moot. The court agreed, and dismissed the appeal as to claims 14 and 33. The court affirmed the Board’s decision that claims 1–9, 12, 15–28, 31, and 34–37 of the ’356 patent are unpatentable as obvious over the asserted prior art.
Additional views. Chief Judge Sharon Prost, joined by the other members of the panel, Circuit Judges S. Jay Plager and Kathleen M. O’Malley, wrote separately to address the parties’ perceived ambiguity in the language of Section 315(c). If the statute were found to be ambiguous, Judge Prost explained that the panel would find that no deference is due the PTAB’s opinion in Proppant and that the most reasonable reading of Section 315(c) is the one the panel adopted in its majority opinion.
The panel rejected the arguments advanced by Facebook and the government that the court should defer to the Board’s Precedential Opinion Panel (POP) decision in Proppant under the standard set forth in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), or, alternatively, under Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).
In its principal briefing in the appeal, Facebook asked the court to give Chevron deference to the Board’s interpretation of Section 315(c) in this case. At that time, the Board’s Proppant decision was not designated as precedential and there is no precedent for the Federal Circuit to defer to a nonprecedential Board decision.
While the AIA expressly delegated rulemaking authority to the Director to promulgate regulations governing the conduct of IPRs, the statute did not authorize adjudicative decisions to interpret the statute, according to the Judge Prost. "There is no indication in the statute that Congress either intended to delegate broad substantive rulemaking authority to the Director to interpret statutory provisions through POP opinions or intended him to engage in any rulemaking other than through the mechanism of prescribing regulations," Judge Prost said. "Thus, just as we give no deference to nonprecedential Board decisions, we see no reason to afford deference to POP opinions."
To the extent Facebook and the government were arguing that POP onions are comparable to notice-and-comment rulemaking, Judge Prost disagreed. For example, the PTAB’s announcement that a POP has been convened and the issues it will review is not published in the Federal Register. Instead, it is issued as an order in the docket of the case and the solicitation of amicus briefs is not equivalent in form or substance to traditional notice-and- comment rulemaking. Moreover, POP opinions, once decided, are not published in the Federal Register, but are "posted to the Board’s Precedential Decisions Web page."
Just as the Director has no substantive rule making authority with respect to interpretations of the Patent Act, "[t]he Director’s new delegation of authority in the AIA to establish procedures by regulation for the conduct of IPRs does not confer new statutory interpretive authority to the Board or change the standard under which we review their conclusions," the Judge Prost explained.
Attorneys: Heidi Lyn Keefe (Cooley LLP) for Facebook, Inc. Vincent J. Rubino (Brown Rudnick, LLP) for Windy City Innovations, LLC.
Companies: Facebook, Inc.; Windy City Innovations, LLC
MainStory: TopStory Patent TechnologyInternet FedCirNews GCNNews
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