Uniloc 2017 LLC v. Hulu, LLC, Appeal No. 2019-1686 (Fed. Cir. July 22, 2020)

In this appeal, the Federal Circuit held for the first time that in inter partes review (“IPR”) proceedings, when substitute claims are proposed, the Patent Trial and Appeal Board (“Board”) may consider patent eligibility issues under Section 101. For substitute claims, the Board is not limited by 35 U.S.C. § 311(b) to the grounds that govern its review of issued claims—i.e., “section 102 or 103 and only on the basis of prior art consisting of patents or printed publications.” This decision may dramatically reshape strategies concerning the proposal of substitute claims in IPRs.

As background, when the AIA was enacted in 2011, it included a provision that created IPRs, allowing a person to file with the Board a petition to institute IPR of an issued patent. IPRs allow a person to request that the Board cancel as unpatentable one or more claims of a patent “only on a ground that could be raised under [Section] 102 or 103.” During an IPR, the patent owner is allowed to file a motion to amend the patent at issue by cancelling any challenged patent claim and proposing a reasonable number of substitute claims. Those proposed substitute claims must not enlarge the scope of the claims of the patent or introduce new matter. When an IPR is completed, the Board issues a final written decision with respect to the patentability of the challenged claims and any new substituted claim. New substituted claims are incorporated into the patents, and they are given the same effect as that which reissued patents have on certain intervening rights under 35 U.S.C. § 252.

The patent at issue in this appeal, U.S. Patent No. 8,566,960 (“the ’960 patent”), owned by Uniloc, is directed to the problem of using digital products on multiple devices, and teaches a method for adjusting the number of devices allowed to use a digital product under license, i.e., an “adjustable license.” Hulu filed a petition for IPR of the ’960 patent, which was instituted by the Board. The Board issued a final written decision finding certain claims, including independent claims 1, 22, and 25, unpatentable over the prior art. Earlier in the IPR, Uniloc had filed a motion asking the Board to enter substitute claims for the independent claims should the Board find them unpatentable. Hulu opposed that motion, arguing, among other things, that the substitute claims were directed to patent-ineligible subject matter under § 101. Uniloc’s reply went into detail about why Section 101 arguments were impermissible in IPRs, but did not discuss why its substitute claims met the standards for eligibility under § 101. The Board ultimately denied the substitute claims because Hulu showed that they were directed to non-statutory subject matter. The Board rejected Hulu’s other objections to the substitute claims, which included obviousness in violation of § 103, enlargement of claim scope in violation of § 316(d), and indefiniteness in violation of § 112(a). Uniloc’s request for rehearing was denied, and that decision was designated as precedential by the Director of the USPTO.

On appeal, Uniloc argued that the Board erred as a matter of law by basing its denial of its motion to amend (substitute) its claims on a § 101 determination because, according to Uniloc, the PTAB is limited in its review of proposed substitute claims to anticipation or obviousness.

The Court disagreed, explaining that the text, structure, and history of the IPR statutes allow the Board to review proposed substitute claims on a broader basis than that allowed when reviewing issued patent claims.

First, the IPR statutes “plainly and repeatedly require the Board to determine the ‘patentability’ of proposed substitute claims.” Proposed substitute claims are to be analyzed as to their patentability and have the same effect as if they had been originally granted. Since a § 101 analysis is a patentability determination, it is clear that Congress’s intent is for the Board to review proposed substitute claims for their overall patentability, including under § 101. The Court thus disagreed with Uniloc’s argument that Congress intended to constrain the Board’s review of substitute claims to anticipation and obviousness. The restriction on grounds for review to anticipation and obviousness is only for existing patent claims, not proposed claims. Further, the IPR statutes make clear that petitions for IPRs are requests to cancel claims “of a patent”—they do not so limit the Board’s evaluation of proposed substitute claims because such claims have never been reviewed, are not part “of a patent,” do not have any prior “force, effectiveness, or validity,” and thus cannot be “cancelled.”

Second, the Court explained that the structure and legislative history of the AIA supports its conclusion. For example, reexamination proceedings, which were the predecessors to IPRs, were limited to substantial new questions of patentability regarding an issued patent’s original claims on the basis of new information about preexisting technology that “escaped review” at the time of the initial examination. Reexaminations expressly prohibited “other challenges to the patentability of original claims” such as patentable subject matter under § 101. But proposed substitute claims in an IPR proceeding have not undergone a patentability review by the USPTO, and so “substantial new questions of patentability” that “have not previously been considered” by the USPTO necessarily include all questions of patentabilty. The Court thus explained that prohibiting the Board from reviewing patent eligibility would indeed strip the Board of a critical legal tool.

Finally, as the USPTO pointed out in a brief filed as intervenor, “if a patent owner seeking amendments in an IPR were not bound by § 101 and § 112, then in virtually any case, it could overcome prior art and obtain new claims simply by going outside the boundaries of patent eligibility and the invention described in the specification.” Uniloc did not here identify any other context in which the USPTO is required or authorized to issue a patent claim without ever having determined that the claim meets the statutory requirements for eligibility. Indeed, the Court explained that the result suggested by Uniloc would be “grossly out of keeping with the statutory regime as a whole.”

Judge O’Malley issued a dissenting opinion, wherein she explained that the majority’s opinion, which allows the Board to “engage in a full-blown examination,” “runs contrary to the plain language of the statute and the policy of efficiency that underlies the IPR system.” She explained that § 316, which governs instituted IPRs, expressly states that substitute claims “may not enlarge the scope of the claims of the patent or introduce new matter,” and the Board may deny a motion to amend if the amendment (substitute claim) does not satisfy the statutory requirements—i.e., if it expands claim scope, introduces new matter, or does not respond to a ground of unpatentability involved in the trial. That is, because the patent owner may only propose narrowed claims that address the issues raised in the petition, analysis of patentability under § 101 is not appropriate. Finally, she explains that the majority opinion opens substitute claims to an examination equivalent to that undertaken during patent prosecution, which in turn shifts the “mammoth task of examining claims” to an inter partes, litigation-driven proceeding that is overseen by an Administrative Patent Judge rather than a patent examiner.

The opinion can be found here.

By Erin M. Forbes


Gensetix, Inc. v. Bd. of Regents of Univ. of Texas, Appeal No. 2019-1424 (Fed. Cir. July 24, 2020)

In this case, the Federal Circuit considered whether the Eleventh Amendment precludes involuntary joinder under Fed. R. Civ. P. 19 of a state patent owner as plaintiff in an infringement suit brought by its exclusive licensee. Here, Gensetix was the exclusive licensee of patents owned by the University of Texas, who was a required party in light of the secondary right to sue it retained under the license agreement, but refused to participate in Gensetix’s lawsuit. The district court found that UT’s sovereign immunity prohibited coercive joinder of UT under Rule 19(a), found that the lawsuit could not proceed in UT’s absence under Rule 19(b), and dismissed the case.

The Federal Circuit affirmed-in-part, reversed-in-part, and remanded, with a splintered majority as to the judgment only. Judge O’Malley delivered the opinion of the Court, affirming the lower court’s determination that it could not compel joinder of UT as a plaintiff under Rule 19(a), but finding that the district court abused its discretion by dismissing the case without properly considering the factors enumerated in Rule 19(b). Because Gensetix was required by the agreement in this case to fully represent UT’s interest in the validity of the patents and was left without remedy if the suit was dismissed, the Court found that Rule 19(b) favored allowing the lawsuit to proceed in UT’s absence, and that the district court erred by apparently considering UT’s immunity from suit to be the overriding consideration.

Judge Newman concurred in the judgment but opined that UT should have been joined as a plaintiff, having agreed to “cooperate fully” in any lawsuit initiated by Gensetix, and that the Eleventh Amendment did not release UT from that contractual obligation. Judge Taranto dissented and would have affirmed the judgment of the district court.

The opinion can be found here.

By Jason A. Wrubleski

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