Commil – This case returns to the Circuit on remand from the Supreme Court. The panel now concludes that substantial evidence does not support the jury’s finding that Cisco’s devices, when used, perform the “running” step of the asserted claims. The district court’s judgment is therefore reversed. This should mark the end of a litigation lasting almost 10 years. The original $3.7 million verdict was thrown out by the district court due to Cisco’s counsel repeatedly reminding the predominantly Christian jury that the owners of Commil were Jewish. In a second trial, Commil won $63.7 million for induced infringement, supplemented by $10 million of interest. That judgment was remanded by the Circuit but reinstated by the Supreme Court, which held that a good faith belief in the invalidity of a patent is not a defense to induced infringement. See my report of May 26, 2015, for a full discussion of the Supreme Court decision.

Redline Detection – Redline appeals a decision on inter partes review in which the PTAB denied a motion by Redline to submit supplemental information under 37 C.F.R. § 42.123(a) because Redline gave no reason for not submitting its expert declaration and additional prior art with its initial petition, other than cost savings. The rule permits supplemental filings within one month of the petition being granted, but the panel determines that the PTO must be given deference in interpreting its rules and therefore affirms the denial of Redline’s motion. In so ruling, the panel distinguishes cases cited by Redline where the supplemental material had previously been accessible to the patentee and merely expanded on or responded to arguments and evidence submitted with the petitions or with patentee’s responses.

The panel further affirms the decision that the claims at issue are not invalid as being obvious, ruling that Redline had waived an argument presented for the first time on appeal regarding the level of ordinary skill in the art. Also, there was substantial evidence to support the PTAB’s determination that there was no motivation to combine the cited references. The panel’s obviousness rulings are not the focus of the appended discussion, as there is nothing unusual in those determinations.

Commil USA, LLC. v. Cisco Systems, Inc.
,Fed. Cir. Case 2012-1042
(December 28, 2015)

Upon remand from the Supreme Court, Cisco contends that Commil cannot prevail on its infringement charges because neither Cisco nor its customers directly infringe by performing both method steps.

Claim 1, the sole independent claim of the ‘395 patent, contains two steps: a “dividing” step and a “running” step. Specifically, Claim 1 reads:

In a wireless communication system comprising at least two Base Stations, at least one Switch in communication with the Base Stations, a method of communicating between mobile units and the Base Stations comprising:

dividing a short-range communication protocol into a low-level protocol for performing tasks that require accurate time synchronization and a high-level protocol which does not require accurate time synchronization; and

for each connection of a mobile unit with a Base Station, running an instance of the low-level protocol at the Base Station connected with the mobile unit and running an instance of the high-level protocol at the Switch.

We begin with the running step. The district court construed the running step as requiring “for each connection of a mobile unit with a Base Station, running at the Base Station a copy of the low-level protocol supporting only that connection and running at the Switch a corresponding separate copy of the high level protocol supporting only that connection.” Cisco contends that this step is never performed when its system is used, because its system employs a single copy of the protocol to support all the connected devices.

We agree with Cisco. First, Cisco’s engineer testified that Cisco’s system runs only one copy of the protocol to support multiple connected mobile devices. Specifically, he testified that Cisco’s system “needs and uses only one copy of the protocol to support all 2,000 of those mobile devices. The standard was written in a fashion that only one copy of the protocol is necessary to implement the standard.”

Although Commil sought to establish otherwise through expert testimony, that testimony falls far short of supporting the jury verdict here. Specifically, Commil’s expert testified that, at most, Cisco’s devices track separate state information for each connected device. He opined that: “The instructions, the protocol . . . it’s a state machine. So this communication state that it is invoking in that communication represents a copy of the protocol that’s unique to that one device that it’s communicating with.” But tracking separate state information for each device does not provide substantial evidence to satisfy a limitation that requires running a separate protocol copy for each device. Moreover, when pressed, Commil’s expert conceded that Cisco’s system supports multiple connected devices at the same time, but only runs one copy of the protocol at any one time. In light of this testimony, a reasonable jury could not have found that Cisco’s devices run a separate copy of the protocol for each connected device.

Nor is the jury’s verdict supported by Commil’s additional contentions. Commil argues that overturning the verdict requires reading a “simultaneity requirement” into the claims that is not there. Not so. In finding for Cisco, we do not require simultaneity; rather, we simply adhere to the construction of the district court, which requires a separate copy of the protocol to be run for each connected device. Commil also contends that discarding its expert’s testimony about state information requires improperly presuming that “protocol” and “information” are mutually exclusive. But in making this argument, it is Commil who departs from the governing constructions in this case. Specifically, the district court construed “short-range communication protocol” to mean “a set of procedures required to initiate and maintain short-range communication between two or more devices.” In all of Commil’s expert testimony, nowhere does Commil’s expert provide evidence or reasonable support for his opinion that tracking separate state information for each device is the same as running, for each connected device, a separate “set of procedures required to initiate and maintain short-range communication between two or more devices.”

We conclude that substantial evidence does not support the jury’s necessary finding that Cisco’s devices, when used, perform the “running” step of the claims. Because this conclusion precludes liability under either of Commil’s direct or inducement theories, we reverse the judgment of the district court.

Redline Detection, LLC v. Star Envirotech, Inc.
, Fed. Cir. Case 2015-1047 (December 31, 2015)

Star owns the ‘808 patent, which describes methods for generating smoke that “enables the presence and location of leaks in a fluid system (e.g. the evaporative or brake system of a motor vehicle) to be accurately and visually detected depending upon rate of the air flow through the fluid system under test and whether smoke escapes from the system.” The prior art discloses various methods to generate smoke—e.g., combusting smoke-producing fluid with a heating element, vaporizing mixtures of oil and CO2 gas, and vaporizing small droplets of oil dispersed in a stream of inert gas. Each of these methods advance smoke generating technology, but these methods are not suitable for leak testing closed systems that have volatile hydrocarbons. The ‘808 patent generates smoke that can be used to test closed and potentially explosive systems for leaks.

This IPR was instituted on July 1, 2013. On July 30, 2013, Redline filed a Motion for Supplemental Disclosure, requesting submission of a sixty page expert declaration with two additional prior art patents. That motion was denied. The PTAB subsequently issued its Final Decision, finding Redline failed to prove by a preponderance of the evidence that claims 9 and 10 of the ‘808 patent would have been obvious.

I. PTO’s Interpretation of its Regulations Accords With Law

First, Redline argues the regulatory history of 37 C.F.R. § 42.123 demonstrates the PTO has already incorporated its statutory mandate into the three tier scheme of subsections (a) through (c) of that regulation and, thus, the PTAB cannot “mix and match” these requirements at its discretion. Second, Redline argues the language of § 42.123(a) precludes the imposition of any additional criteria beyond the plain language of the regulation. Finally, Redline argues the PTAB’s decision was arbitrary and capricious because Petitioners in other IPR proceedings were allowed to submit supplemental information.

A. Deference Is Accorded to the PTAB’s Interpretation of PTO Regulations

This court accepts the PTAB’s “interpretation of PTO regulations unless that interpretation is ‘plainly erroneous or inconsistent with the regulation,” or conflicts with the PTO’s “intent at the time of the regulation’s promulgation,” We review the PTAB’s decision of how it manages its permissive rules of trial proceedings for an abuse of discretion.

B. Relevant Legal Authority

The AIA authorized the PTO to promulgate regulations governing the administration of IPR proceedings. The AIA also requires consideration of “the effect of any such regulation on,” among other things, “the efficient administration of the Office and the ability of the Office to timely complete proceedings instituted under this chapter.” The PTO promulgated general regulations that encourage Petitioners “to submit all of the evidence that supports the ground of unpatentability asserted in the petition” within the time period proscribed in 37 C.F.R. § 42.123(a), (b), or (c). Office Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,763 (Aug. 14, 2012) (“A petitioner must identify each claim that is challenged and the specific statutory grounds on which each challenge to the claim is based, provide a claim construction for the challenged claims, and state the relevance of the evidence to the issues raised.” (citing in part 37 C.F.R. § 42.104)).

The AIA authorizes the filing of supplemental information with the PTAB during the course of an IPR, 35 U.S.C. § 316(a)(3), and the PTO promulgated regulations. Section 42.123(a) states:

Motion to submit supplemental information. Once a trial has been instituted, a party may file a motion to submit supplemental information in accordance with the following requirements:

(1) A request for the authorization to file a motion to submit supplemental information is made within one month of the date the trial is instituted.

(2) The supplemental information must be relevant to a claim for which the trial has been instituted.

Subsection (b) provides for submitting supplemental information later than one month after the date the trial is instituted. § 42.123(b). Subsection (c) provides for the submission of supplemental information that is not relevant to an instituted claim. § 42.123(c). Under subsections (b) and (c), the party must show “why the supplemental information reasonably could not have been obtained earlier, and that consideration of the supplemental information would be in the interests-of-justice.” § 42.123(b), (c).

The PTAB’s decision to admit supplemental information is also informed by 37 C.F.R. § 42.100(a) (“An IPR is a trial subject to the procedures set forth in subpart A of this part.”). Subpart A requires PTO regulations “be construed to secure the just, speedy, and inexpensive resolution of every proceeding.” § 42.1(b); 35 U.S.C. § 316(b). Consistent with this regulation, the PTO has authorized the PTAB to “determine a proper course of conduct in a proceeding for any situation not specifically covered by this part and may enter non-final orders to administer the proceeding.” § 42.5(a). The PTAB may also “waive or suspend a requirement and may place conditions on the waiver or suspension.” § 42.5(b).

C. The PTAB’s Interpretation of 37 C.F.R. § 42.123 Is
Consistent with the Regulatory History and Is Not Plainly Erroneous

1. Section 42.123(a) Does Not Preclude Consideration of
Additional Criteria Beyond Timing and Relevance

Redline’s IPR Petition did not rely on an expert declaration in support of its position. In denying Redline’s Motion, the PTAB noted that Redline did not make “any attempt to justify the submission of an expert declaration after filing its petition and after a decision to institute has been made except to note that the move was cost effective.” The PTAB also found that Redline did not allege “any of the arguments or evidence in the newly submitted declaration was information that reasonably could not have been submitted with the Petition.” Redline admitted to the PTAB it intentionally delayed filing this information because submission of the declaration after institution of the IPR makes things far less complex than had Redline had an expert opine as to all 12 grounds as originally submitted in our petition.” The PTAB concluded Redline did not establish a sufficient basis for submitting new evidence and its “‘supplemental evidence’ is in essence something more than just supplemental evidence.”

The PTAB determined “nothing in 37 C.F.R. § 42.123 requires that a request to submit supplemental information satisfying these two criteria [, i.e., timeliness and relevance,] automatically be granted no matter the circumstance.” Rather, the PTO regulations dictate “a party filing a motion has the burden of proof to establish that it is entitled to the requested relief.” 37 C.F.R. § 42.20. “This is so, no matter the requested relief.” The PTAB emphasized “the Board decides such motions in view of its mandate to ensure the efficient administration of the Office and the ability of the Office to complete IPR proceedings in a timely manner.” The PTAB also stated whether the Board grants a motion to submit supplemental information also “depends upon the Board’s determination that, in its discretion, the action sought by the movant is consistent with the Board’s statutory mandate.”

On appeal, Redline argues “the regulatory history of [37 C.F.R.] § 42.123 shows that the [USPTO] has already incorporated its statutory mandate into the three tier scheme of subsections (a)–(c)” of that regulation. Redline contends the PTO cannot consider factors articulated in subsections (b) and (c) if the timeliness and relevance conditions in subsection (a) are satisfied. According to Redline, this tiered rule “reflects a balance of interests expressed in agency notice-and-comment rule-making.” Redline alleges Comments 91-93 of the regulatory history “presumptively established that the timeliness and relevance requirements of §42.123(a) alone were sufficient to meet the [PTAB’s] statutory mandate for economy, integrity, efficient administration, and timely consideration of IPRs.” Id. at 45-46 (citing 35 U.S.C. § 316(b)). Redline also argues the omission of the 37 C.F.R. § 42.123(b) and (c) limitations from § 42.123(a) offers further support for its hierarchical interpretation of the regulation. According to Redline, this arrangement “clearly evidences an intent on the part of the rulemaking body that those factors were not meant to be considered for submissions under § 42.123(a), and instead the sole criteria for admission were those in the plain language of the regulation.” Because all three subsections were adopted in the same rulemaking session, Redline argues this lends “strength to the inference . . . [that] timeliness and relevance formed the sole basis for evaluating submissions under § 42.123(a).”

The PTAB’s interpretation of its governing regulations is not plainly erroneous. Its interpretation of § 42.123(a) is consistent with the regulation’s plain language and the PTO’s intent in promulgating § 42.123. The plain language of § 42.123(a) does not exclude the application of other general governing regulations. The guiding principle for the PTAB in making any determination is to “ensure efficient administration of the Office and the ability of the Office to complete IPR proceedings in a timely manner.” 35 U.S.C. § 316(b). Requiring admission of supplemental information so long as it was timely submitted and relevant to the IPR proceeding would cut against this mandate and alter the intended purpose of IPR proceedings. Nothing in § 42.123 or its regulatory history expressly states or implies that all elements of the PTAB’s mandate are incorporated into § 42.123(a) and that it must be read to the exclusion of the remaining subsections in that regulation and 37 C.F.R. Part 42, Subpart A.

2. Section 42.123(a) Does Not Prohibit the PTAB from
Exercising Discretion

Redline next argues the plain language of 37 C.F.R. § 42.123(a) “establishes a comprehensive scheme that leaves no room for the PTAB to impose its own discretionary requirements.” Rather, it says, the regulation permits “consideration of two and only two requirements: timeliness and relevance. If the regulation permitted the Board to consider or impose additional criteria, it would by its plain language have said so.”

Redline’s regulatory interpretation fails for the same reasons discussed above. Its interpretation requires the PTAB to exclude all other regulations governing PTAB proceedings and admit supplemental information so long as the request was timely made and the information is relevant to the proceeding. The plain language of § 42.123(a) does not support such a reading. Nothing within subsection (a) excludes application of other PTAB regulations. Rather, timeliness and relevancy provide additional requirements that must be construed within the overarching context of the PTAB’s regulations governing IPR and general trial proceedings. Additionally, the PTAB has discretion to grant or deny motions as it sees fit. 37 C.F.R. § 42.5(a), (b).

3. The PTAB’s Decision Comports with Other PTAB
Decisions Allowing Supplemental Information and Is Not
Arbitrary and Capricious

Redline contends the PTAB’s decision deviates from its previous decisions allowing supplemental information, relying on Palo Alto Networks and Pacific Market International. These decisions do not support Redline’s argument that the PTAB must accept supplemental information so long as it is timely and relevant.

In Palo Alto Networks, the Petitioner sought to submit supplemental information that would establish the cited prior art within the Petition did in fact qualify as a prior art printed publication. The PTAB found the information was not intentionally withheld nor did allowing this information limit the PTAB’s ability to timely complete the proceeding. It also held that the supplemental information would not prevent it from fulfilling its mandate since the “Patent Owner already had possession of the supplemental information” because it was served “in response to Patent Owner’s objections.” Redline has not provided any evidence to indicate Star possessed the supplemental information it seeks to admit. The PTAB in Palo Alto Networks also determined the supplemental information “Petitioner seeks to submit does not change the grounds of unpatentability authorized in this proceeding, nor does it change the evidence initially presented in the IPR Petition to support those grounds of unpatentability.” That is not what Redline did. The PTAB determined, in its Decision on Redline’s Request for Rehearing, that Redline’s supplemental information “relates to a ground for which the trial was instituted, rather than only to a claim of the patent, for which the trial was instituted.”

In Pacific Market International, the IPR Petition was a sixty-page document that relied heavily on its expert declaration, which was a separate sixty-eight page document with claim charts comparing the claims to prior art. The Supplemental Declaration was a ten-page declaration that supplements the Petitioner’s claim of obviousness that was first argued in its IPR Petition. The PTAB accepted the supplemental information as evidence within the proceeding and determined the Patent Owner had sufficient time to address the new information submitted by the Petitioner in its request made one month from the institution date. This information was also found not to change grounds instituted on nor did it change evidence presented in the IPR Petition.

II. The PTAB Did Not Err in Finding that Redline Failed
to Prove the ‘808 Patent Would Have Been Obvious over
the Cited Prior Art

A. Redline Waived Its Arguments Regarding PTAB’s
Determination of the PHOSITA’s Skill Level

The PTAB rejected Redline’s unsupported oral argument that a PHOSITA “must have experience, education, and knowledge specific to the United States.” Instead, the PTAB adopted the PHOSITA definition offered by Star’s expert, Dr. M. David Checkel. Redline declined to rebut Star’s definition of a PHOSITA by submitting rebuttal expert testimony in its reply, after it reviewed Star’s expert declaration.

Now on appeal, Redline is arguing for the application of a different PHOSITA standard. These arguments are based upon information appended to Redline’s Motion for Supplemental Disclosure that the PTAB excluded. They were thus not made to the PTAB and are improper on appeal. Because this court’s review of the PTAB’s decision “is confined to the ‘four corners’ of that record, it is important that the applicant challenging a decision not be permitted to raise arguments on appeal that were not presented to the PTAB.” We hold Redline’s arguments waived and need not address them.

B. Substantial Evidence Supports the PTAB’s Determinations as to Obviousness

The panel proceeded to decide that substantial evidence supported the PTAB’s factual determinations, including that there was no motivation to combine the references properly of record.

Comment: The panel’s deference to the PTAB’s interpretation of 37 C.F.R. § 42.123 is typical of what the Circuit has been doing of late, not only in connection with AIA cases but really as to all administrative body statutes and rules interpretation. Redline undoubtedly relied on even though it did not cite Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837 (1984), which is the basis for such deference. Chevron held that a court may not substitute its own construction of a statutory provision for a reasonable interpretation of a statutory scheme made by the administrator of an agency. Id. at 844. Moreover, if Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.

In the past year alone, this has resulted in the Circuit deferring to the ITC’s interpretation of Section 337 (19 U.S.C. §1337) in preventing importation of products that may induce infringement after they are imported even though they do not infringe U.S. patents at the time of importation. Suprema, Inc. v. ITC, 796 F.3d 1338 (Fed. Cir. 2015) (en banc). In Mohsenzadeh v. Lee, 790 F.3d 1377 (Fed. Cir. 2015) and Gilead Scis., Inc. v. Lee, 778 F.3d 1341 (Fed. Cir. 2015), the Circuit deferred to the PTO’s interpretation of the statute and pertinent PTO rules in calculating the appropriate patent term adjustment. 

Only in ClearCorrect Operating, LLC v. ITC, 2015 U.S. App. LEXIS 19558 (Fed. Cir. Nov. 10, 2015) did the Circuit overturn an administrative agency’s interpretation of the pertinent statutes or rules. In that case, a divided panel reversed the ITC’s holding that the importation of “articles” as described in 19 U.S.C. § 1337(a) should be construed to include electronic transmission of digital data. The majority opinion discussed Chevron but determined that the unambiguously expressed intent of Congress is that “articles” means “material things” and does not extend to electronically transmitted digital data.

Given the reluctance of the Circuit to overrule an agency’s interpretation of the pertinent statutes and rules, it will be helpful as an appellee to couch the ITC’s or PTO’s decision as one interpreting the statutes and rules, and to take a contrary approach if you are the appellant.

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