Facebook, Inc. v. Windy City Innovations, LLC, Appeal Nos. 2018-1400, et al. (Fed. Cir. Mar. 18, 2020)

This week’s Case of the Week deals with issues relating to joinder of parties and issues to an inter partes review (“IPR”). Specifically, the Court addressed whether, under 35 USC § 315(c), a party can later join itself to instituted IPRs it filed previously, and whether a party can add new claims to an existing IPR through joinder when those claims would otherwise be time-barred.

As background, in June 2015, Windy City filed a complaint in the U.S. District Court for the Western District of North Carolina against Facebook, alleging infringement of several patents, which included 830 total claims. In March 2016, the case was transferred to the Northern District of California, whose local patent rules did not require Windy City to identify the specific claims it was asserting until after Facebook’s one-year window to file for IPR on the asserted patents would have passed. With the IPR filing deadline looming, in May 2016, Facebook filed a motion for the district court to order Windy City to identify its asserted claims early. The court denied the motion. In June 2016, Facebook timely filed petitions for IPR of several, but not all, claims of each patent asserted at the district court.

In January 2017, after the PTAB had instituted each IPR, and after Windy City had finally identified its asserted claims in the district court litigation, Facebook filed two more petitions for IPR, challenging additional claims asserted in the district court litigation that were not included in its previous IPRs. Because those petitions would have otherwise been time-barred, Facebook included with its petitions motions to join the two new IPRs to the already-instituted IPRs on the same patents. The PTAB instituted the new IPRs and granted the motions for joinder, despite the time bar, reasoning that because the substance of the newly challenged claims was “very similar” to those originally challenged, joinder would “not likely [ ] affect the scope of the trial significantly,” nor would it significantly disrupt the schedule. The PTAB further reasoned that Windy City’s complaint generally asserting infringement of the “claims” of the asserted patents “cannot reasonably be considered an allegation that [Facebook] infringes all 830 claims of the several patents asserted,” and thus, Facebook could not have reasonably determined what claims were asserted against it during the one-year period between the filing of the complaint and the statutory deadline to file petition for IPR. Because Facebook did not delay in challenging the newly asserted claims, and because Facebook had established good cause for joining the proceedings with the existing IPRs, the PTAB allowed the joinder.

Notably, two of the three Administrative Patent Judges on the PTAB panel issued concurring opinions that raised concerns with permitting a party to join itself because 35 USC § 315(c) does not authorize same-party joinder. These opinions were issued as concurrences because “the Director repeatedly has taken the position … that such same-party joinder is permitted.”

The PTAB issued final written decisions finding many of the claims challenged in the later-joined proceedings to be unpatentable as obvious, but finding that Facebook had failed to show that others were unpatentable. Both parties appealed, and Windy City challenged the PTAB’s decisions allowing Facebook to join its new IPRs to its own existing IPRs. For the reasons following, the Court ultimately held that the PTAB erred in allowing Facebook to join itself to a proceeding in which it was already a party, and erred in allowing Facebook to add new claims to the IPRs through that joinder.

First, the Court addressed the interpretation of 35 USC § 315(c) and held that the “clear and unambiguous text” of the statute does not authorize same party joinder or joinder of new issues. 35 USC § 315(b), the “time-bar” statute, allows one exception to the one-year period of time for which a party may file a petition for IPR: requests for joinder under section 315(c). The joinder provision states that the Director “may join as a party to that inter partes review any person who properly files a petition under section 311 that the Director … determines warrants the institution of an inter partes review under section 314.”

The Court found that, as an initial matter, the PTAB was not purporting to join a “person” as “a party” to the IPRs Facebook had already filed. Rather, when the PTAB instituted Facebook’s later-filed petitions and granted its joinder motions, the PTAB understood Facebook to be requesting that its later proceedings be joined to its earlier proceedings. Thus, the premise of the PTAB’s decision was that section 315(c) authorized two proceedings to be joined rather than joining a person as a party to an existing proceeding. The Court explained that no part of section 315(c) provides the Director or the PTAB with the authority to join two proceedings together—indeed, that is the subject of section 315(d), which allows for “consolidation” when multiple proceedings involving the same patent are before the PTO. Moreover, construing § 315(c) to permit joinder of proceedings, and all the new issues therein, would render § 315(d) superfluous, which is disfavored in statutory interpretation.

Recognizing that the parties and the Board may have been intending to convey that the Board was joining Facebook as a party to its previously instituted IPRs, rather than joining the IPRs themselves, the Court also explained that the clear language of § 315(c) does not authorize a party to be joined as a party to its own existing IPRs. The Court explained that it would be “an extraordinary usage of the term ‘join as a party’ to refer to persons who were already parties.” As with the Federal Rules of Civil Procedure, joinder of a person as a party is uniformly about adding someone who is not already a party. The Court further held that the PTAB’s previous precedential opinion in Proppant Express Investments, LLC v. Oren Technologies, LLC, No. IPR2018-00914, Paper 38 (PTAB Mar. 13, 2019) was incorrect under the unambiguous meaning of the statute.

The Court next explained that the PTAB’s interpretation of § 315(c) was contrary to the unambiguous meaning of the statute for a second reason: the language of the statute does no more than authorize the Director to join (1) a person (2) as a party (3) to an already instituted IPR. It does not authorize the joined party to bring new issues from its proceeding into the existing proceeding. Facebook argued that the statute does not expressly prohibit such introduction of new issues, but the Court explained that the lack of an express prohibition does not make the statute ambiguous as to whether it permits joinder of new issues. Moreover, citing SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1356 (2018), the Court explained that the already-instituted IPR to which a person may join as a party is governed by its own petition and is confined to the claims and grounds challenged in that petition. Therefore, under § 315(c), the joined party is not permitted to bring new issues from the newer proceeding into the existing proceeding.

The Court further reasoned that its statutory interpretation is supported by the legislative history of § 315(c), which explained that the Director “may allow other petitioners to join an inter partes … review.” The Court found that this language contemplates allowing a person to join an already instituted IPR as a party, but not to bring with it new issues.

The Court also disagreed with Facebook’s purported policy rationales for allowing its joinder. Facebook argued that it was appropriate for the PTAB to permit joinder given the unique facts of the case—specifically, that at the end of the one-year time bar, Windy City had not yet identified which of the 830 claims of the patents-in-suit it was asserting against Facebook. Facebook argued that the Court’s view leaves a dangerous incentive for patent owners to sue on patents containing hundreds of claims and then delay the litigation such that the asserted claims are not identified until after the time-bar period. While the Court did not disagree with Facebook that the result in this particular case may seem in tension with the objective for IPRs to provide quick and cost effective alternatives to litigation, it explained that petitioners like Facebook, faced with an enormous number of asserted claims on the eve of an IPR filing deadline, are not without options. For instance, challenging all claims is still an available option. Further, accused infringers are not obligated to challenge every, or any, claim in an IPR, and they retain the ability to challenge the validity of claims ultimately asserted in the district court. And finally, regardless of how valid any policy consideration may be, the Court held that “policy considerations cannot create an ambiguity when the words on the page are clear.”

Finally, the Court held that because the clear and unambiguous language of § 315(c) does not authorize same-party joinder or joinder of new issues, it need not defer to the PTO’s previous interpretation of the statute in Proppant Express.

For those reasons, the Court held that the PTAB’s joinder decisions, which allowed Facebook to add otherwise time-barred issues to its already-instituted IPRs, were improper under § 315(c), and vacated the PTAB’s final written decisions with respect to the claims improperly added. The Court also held that substantial evidence supported the PTAB’s obviousness determinations as to the properly-instituted claims.

Chief Judge Prost and Judges Plager and O’Malley offered additional concurring views relating to whether deference is owed to the PTAB’s interpretation of § 315(c) as stated in Proppant Express, based on the implication that the statute is actually ambiguous given the parties’ dramatically opposing views of how the provision operates. The concurring judges explained that deference is applied to an agency’s implementation of a particular statutory provision only when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority. Here, because nothing in the AIA authorizes the PTAB or the Director of the PTAB to undertake statutory interpretation through Precedential Opinion Panel (“POP”) opinions, the concurring judges saw no reason to afford deference to the POP opinions such as in Proppant Express, especially where, as here, the issue was a pure question of law that is not within the specific expertise of the agency. Thus, even if § 315(c) were ambiguous, deference to the PTAB’s interpretation of the statute set forth in the POP opinion in Proppant Express was not required.

The opinion can be found here.


Illumina, Inc. v. Ariosa Diagnostics, Inc., Appeal No. 2019-1419 (Fed. Cir. Mar. 17, 2020)

In a case concerning methods for preparing plasma to isolate extracellular fetal DNA, the Federal Circuit reversed a district court’s summary judgment determination that the claims were patent-ineligible as being directed to a natural phenomenon. The claimed methods were based on the inventors’ discovery that fetal DNA strands in maternal plasma are relatively short compared to the far more prevalent maternal DNA. Because the claims recited concrete process steps, including size-discriminating and selectively removing DNA fragments above a specified size threshold, the Court found that the claims were not directed to the natural phenomenon of shorter fetal DNA fragments, but rather to a patent-eligible method that utilizes it. The Court distinguished cases in which diagnostic methods were found to be patent-ineligible, noting that “a method for determining whether a fragment of cell-free DNA is fetal or maternal based on its length” would not have been patentable. The Federal Circuit also rejected appellee’s argument that the recited size-discrimination and removal processes were well-known in the art. The Court held that while such considerations may be relevant to obviousness or the second step of an Alice/Mayo inquiry—concerning whether limitations apart from the natural phenomenon transform the claims into a patent-eligible application—they did not affect the first step as to whether the claims are “directed to” a natural phenomenon to begin with.

Judge Reyna dissented, arguing that the patents claimed no advance in the art other than the discovery of the natural phenomenon to which they were directed, and were not patent-eligible merely because they claimed a method of sample preparation rather than a diagnostic method.

The opinion can be found here.

Hafco Foundry and Machine Co., Inc. v. GMS Mine Repair and Maintenance, Inc., Appeal No. 2018-1904 (Fed. Cir. Mar. 16, 2020)

In a case involving a design patent for a rock dust blower, the Federal Circuit discussed the ordinary observer standard applicable to claims of design patent infringement. Defendant GMS appealed from a jury verdict of willful infringement. On appeal, GMS argued that the district court’s jury instructions failed to accurately state the ordinary observer test under the Supreme Court’s Gorham decision, and also failed to explain that the patented and accused design are to be viewed in the context of the prior art. The Federal Circuit affirmed the jury’s infringement verdict, finding that GMS had failed to present evidence of any prior art at trial, mooting that issue, and finding that there was no error in the district court’s Gorham instruction that the ordinary observer is to view the differences between the accused and patented designs as a whole, and not by comparing individual elements taken in isolation.

The opinion can be found here.

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