Fresh From the Bench: Precedential Patent Cases From the Federal Circuit
Veritas v. Veeam – Dealing yet again with the Board’s harsh application of its rules in denying claim amendments in IPR proceedings, the Circuit holds that the patentee’s disclosure was “so clear as to be beyond dispute” despite the Board’s conclusion that the support for the amended claims was inadequate. This decision does not bode well for the PTO in the Aqua Products case, recently accepted for en banc review by the Circuit to consider the Board’s application of its rules relating to claim amendments.
Veritas sued Veeam for infringement of four patents directed to its network backup products. In response to Veeam’s petition for IPR on all four patents, the Board cancelled all of the challenged claims based upon obviousness. Veritas moved to amend claims in two of the IPRs and its motions were denied.
On appeal here, the Circuit affirms the obviousness rejection of the asserted claims but takes the Board to task for the way it applied the PTO rule regarding claim amendments. According to the opinion, Veritas specifically described how the prior art did not disclose the invention set forth in the amended claims. The Board denied the motion based on its insistence that the patent owner discuss whether each newly added feature was separately known in the prior art. The Board concluded that the motion and the declaration of Veritas’s expert do not discuss the features separately but discuss only the newly added feature in combination with other known features, and therefore is inadequate. According to the panel, that conclusion, the sole basis for denying the motion to amend, is unreasonable and hence must be set aside as arbitrary and capricious.
Interestingly, the opinion also stated that the Board’s decision on the motion to amend was in error regardless of how the Aqua Products case is decided by the full court.
Veritas Technologies LLC v. Veeam Software Corp., Fed. Cir. 2015-1894 (August 31, 2016)
At issue here is a Veritas’s ’527 patent that claims systems and methods for restoring computer data. Veeam petitioned for IPR, challenging a number of claims of the patent. The Board instituted the IPR after which Veritas filed a conditional motion to amend, seeking to add two new proposed claims if the Board ultimately concluded that the challenged existing claims are unpatentable.
In its petition for IPR, Veeam requested cancellation of existing claims as anticipated by and obvious over several prior art references. The Board instituted the IPR upon finding a reasonable likelihood that the system and method of the ’527 patent’s claims are unpatentable because they would have been obvious over Ohran and other prior art references. Veritas argued in its response that the claims were limited to file level background restoration. Veritas also filed a conditional motion to amend the existing claims, asking that, if the Board found the existing claims unpatentable, it allow two new proposed claims, which attempt to claim more expressly what Veritas was urging as the proper construction of the existing claims.
We first address the Board’s claim construction and its obviousness determination. Although the ’527 patent gives indications that the contemplated restore application operates at the file level, the indications here are not enough under the broadest reasonable interpretation standard to exclude block level restoration. For example, the patent does not state that it is restricted to file level background restorers; nor does it explain aspects of the contemplated process that make sense only for a file level restorer, not by a block level restorer, and so fairly imply such a restriction. Without those or other bases for limiting the claims to file level restoration, it would not be unreasonable for a relevant skilled artisan to read the claims also to cover block level restoration, as the Board concluded. We therefore uphold the Board’s construction under the broadest reasonable interpretation standard. Under that construction, we find no error in the Board’s obviousness analysis and conclusion.
Our affirmance of the Board’s obviousness determination as to the unamended claims requires that we proceed to address the Board’s denial of Veritas’s contingent motion to amend by adding two new proposed claims. We review that denial under the Administrative Procedure Act and will set aside the Board’s action if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. We conclude here that the Board erred on its sole ground for denying Veritas’s motion.
It appears to be undisputed that Veritas submitted the two new proposed claims to state more expressly the file level restoration limitation that it urged as a construction of the unamended claims. The Board denied the motion based on its insistence that the patent owner discuss whether each newly added feature was separately known in the prior art. The Board concluded that the motion and the declaration of Veritas’s expert, Dr. Levy, do not discuss the features separately but discuss only “the newly added feature in combination with other known features,” and therefore is inadequate. That conclusion, the sole basis for denying the motion to amend, is unreasonable and hence must be set aside as arbitrary and capricious.
The Board quoted statements in Veritas’s motion and Dr. Levy’s declaration that on their face satisfy the requirement of discussing whether the newly added features are in the prior art. We do not see how the Board could reasonably demand more from Veritas in this case. What would it have added that was not already so clear as to be beyond dispute, including based on the patent itself, for Veritas to say that the prior art recognized that restoration can be done at the file level or that a “set of files can be a subset of a plurality of already backed up files” or that an application requests part of a “particular file” on primary storage? Here, we have been shown no reason to doubt that it is only the combination that was the “new feature,” a scenario recognized in a long line of Supreme Court and Federal Circuit cases noting that novel and nonobvious inventions often are only a combination of known individual features. In this case, we fail to see how describing the combination is meaningfully different from describing what is new about the proposed claims, even in comparison to the unamended claims.
For that reason, we conclude that the Board erred in its sole reason for denying the motion to amend. The Board rationale here is erroneous independently of any resolution of this court’s recently initiated en banc proceeding in In re Aqua Products, Inc. We therefore vacate the Board’s decision on the motion to amend and remand the matter to allow for a determination of the patentability of the proposed substitute claims.