Source: https://www.schwabe.com/newsroom-publications-13672
Timestamp: 2019-04-26 02:29:47+00:00

Document:
Papst – In the first claim construction case since Teva, the Circuit determines that the district court decided construction based entirely upon the intrinsic evidence despite expert tutorials being presented on the technology at issue. Therefore, pursuant to Teva, the panel accords no deference to the construction below and decides de novo that the construction of five different terms were all improper. The Circuit therefore vacates summary judgment of noninfringement based on the faulty construction and remands the case.
Cuozzo – The majority holds that it lacks jurisdiction to review the PTO's decision to institute Inter Partes Review. Holding for the first time that the "broadest reasonable interpretation" (BRI) standard of claim construction applies to Inter Partes Reviews, the majority affirms the Board's claim construction under the BRI standard, its obviousness determination, and its denial of the patentee's motion to amend. Judge Newman dissents, arguing that these rulings are contrary to the intent of the AIA.
The patents in suit disclose a device designed to facilitate the transfer of data between a host computer and another device on which data can be placed or from which data can be acquired. The interface device of the invention uses a host's own familiar driver, which often will have been designed to work fast and reliably. The result, says the written description, is to allow data transfer at high speed without needing a new set of instructions for every host—to provide an interface device for communication between a host device and a data transmit/receive device whose use is host device independent and which delivers a high data transfer rate.
Papst filed infringement suits against camera manufacturers in multiple district courts across the country. A multi-district litigation panel then consolidated all cases and transferred them to the D.C. district court.
Expert Tutorials Were Presented to the District Court, but Expert Testimony Regarding the Terms at Issue was not Admitted.
In preparation for claim construction, the district court received a "tutorial" from the parties' experts, whom the court asked to be "neutral" and who addressed the background of the technology, how the claimed inventions work, and other technical understandings, but not whether any particular term in the patent or the prior art has a particular meaning in the relevant field. The district court did, however, rely on an IEEE dictionary definition of "virtual record," one of the terms at issue. The court heard extensive argument from counsel, but declined to admit expert testimony or to rely on an expert declaration from Papst, stating that "the intrinsic evidence—the claims, the specification, and the prosecution history—provide the full record necessary for claims construction." Based upon its narrow claim construction, the district court granted summary judgment of noninfringement.
The panel first notes that it is "reviewing the district court's claim constructions de novo, because intrinsic evidence fully determines the proper constructions. See Teva Pharm. U.S.A. Inc. v. Sandoz, Inc., 135 S. Ct. 831, 840-42 (2015). As we have noted, the district court relied only on the intrinsic record, not on any testimony about skilled artisans' understandings of claim terms in the relevant field, and neither party challenges that approach."
While the panel noted that "neither party challenges that approach," quickly after Teva was decided, counsel for Nikon, one of the defendants, wrote the panel pursuant to Rule 28(j), which permits the parties to bring recent decisions to the panel's attention. Counsel urged the panel to apply the "clear error" standard of review since the district court's construction was based on expert witness testimony: "The District Court heard from and questioned the parties' experts under oath, at an all-day presentation held prior to its three-day Markman hearing; appointed a technical advisor to assist it in understanding the patents' technology and terminology; and resolved numerous subsidiary factual disputes based on extrinsic evidence." Counsel then compared this case to Teva, "where the Supreme Court held that the district court's crediting of one expert's reading of a figure in the patent over another expert's reading should be given clear-error deference."
Counsel for Papst responded, quoting from the district court's opinion that it was not relying on any extrinsic evidence: "Because the intrinsic evidence – the claims, the specification, and the prosecution history – provide the full record necessary for claims construction, the [District] Court did not admit expert testimony at the Markman hearing."
The panel rejects the district court's construction of all five terms at issue. We do so following our familiar approach to claim construction. We generally give words of a claim their ordinary meaning in the context of the claim and the whole patent document; the specification particularly, but also the prosecution history, informs the determination of claim meaning in context, including by resolving ambiguities; and even if the meaning is plain on the face of the claim language, the patentee can, by acting with sufficient clarity, disclaim such a plain meaning or prescribe a special definition."We apply, in particular, the principle that the construction that stays true to the claim language and most naturally aligns with the patent's description of the invention will be, in the end, the correct construction. On remand, this case will proceed in light of our claim-construction reversals. For that reason, it is worth reiterating that a district court may (and sometimes must) revisit, alter, or supplement its claim constructions (subject to controlling appellate mandates) to the extent necessary to ensure that final constructions serve their purpose of genuinely clarifying the scope of claims for the finder of fact. That determination is to be made as the case moves forward.
Comment: This case demonstrates that use of expert testimony for background tutorials on the technology in general is not going to mean that extrinsic evidence has been considered and deference is to be accorded. According to the panel, to be considered, the testimony must be as to the construction of the specific terms at issue. Here, the district court did a good job of making clear in its construction opinion that it was not relying on extrinsic evidence, even though it did reference the IEEE dictionary.
Hopefully all such rulings will be accompanied by a similar clear statement. As long as this is the case, the path forward set by Teva should be a smooth one. The problematic cases will be the ones where the district court is not so clear in its ruling. In these cases, especially where a ruling has been contrary to your client's position, counsel should ask the district court to supplement its written claim construction opinion to state that it is not relying on extrinsic evidence so that, like the present case, the de novo standard will be applied on appeal. By the same token, if a ruling is consistent with your client's position and you think the district court relied on extrinsic evidence, you want the court to say so, in order for the "clear error" standard of review to be applied.
Another issue might be raised where the district court explicitly considers extrinsic evidence in order to assure a deferential review. It is conceivable in such cases that if the Circuit feels the construction could have been decided on the intrinsic evidence, it will examine only the intrinsic evidence on a de novo basis and rule that there is no need to refer to extrinsic evidence.
There are many other claim construction cases in the queue so we'll undoubtedly hear more from the Circuit on this issue in the coming weeks.
Cuozzo argues that the PTO improperly instituted IPR because it relied on prior art that Garmin did not identify in its petition as grounds for IPR as to those two claims (though the prior art in question was identified with respect to another claim). Under the statute, any petition for IPR must identify with particularity the grounds on which the challenge to each claim is based. 35 U.S.C. § 312(a)(3). Cuozzo argues that the PTO may only institute IPR based on grounds identified in the petition because "[t]he Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition . . . and any response . . . shows that there is a reasonable likelihood that the petitioner would prevail . . . ." Id. § 314(a).
This threshold issue here is whether a decision to institute IPR is appealable. Section 314(d) is entitled "No appeal" and provides that "[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable." Cuozzo argues that § 314(d) does not completely preclude review of the decision to institute IPR, but instead merely postpones review of the PTO's authority until after the issuance of a final decision by the Board.
The majority disagrees, concluding that § 314(d) prohibits review of the decision to institute IPR even after a final decision. On its face, the provision is not directed to precluding review only before a final decision. Moreover, given that § 319 and § 141(c) already limit appeals to appeals from final decisions, § 314(d) would have been unnecessary to preclude non-final review of institution decisions.
After determining that under the BRI, the Board properly interpreted the claim language, the panel turns to whether the claims at issue were obvious. The Board's factual findings are reviewed for substantial evidence and its legal conclusions are reviewed de novo.
Even under its own claim construction, Cuozzo agrees that the mechanical embodiment with a red colored filter is within the claim scope. It is a long-established rule that 'claims which are broad enough to read on obvious subject matter are unpatentable even though they also read on nonobvious subject matter. Thus if the mechanical embodiment is obvious, the claim is obvious. The Board determined that the mechanical embodiment was obvious over the prior art, and the majority sees no error in that determination.
Finally, the panel considers whether the Board properly denied Cuozzo's motion for leave to amend. The statute and PTO regulation bar amendments which would broaden the scope of the claims. 35 U.S.C. § 316(d)(3); 37 C.F.R. § 42.221(a)(2)(ii). In the past, we have construed this requirement in the context of reissues and reexaminations. In both contexts, we have applied the test that a claim is broader in scope than the original claims if it contains within its scope any conceivable apparatus or process which would not have infringed the original patent. The same test applies in the context of IPRs. Therefore, we inquire whether Cuozzo's proposed substitute claims would encompass any apparatus or process that would not have been covered by the original claims. The Board held that claim 21 was broadening because it would encompass a single-LCD embodiment wherein both the speedometer and the colored display are LCDs, which was not within the original claims. The panel agrees with that finding so the motion to amend was properly denied.
Second, and as a further departure from the legislative plan, the panel majority holds that the "final and nonappealable" statutory provision relating to whether to institute Inter Partes Review means that "§ 314(d) . . . must be read to bar review of all institution decisions, even after the Board issues a final decision." Does this mean that such decisions can never be judicially reviewed, even if contrary to law, even if material to the final appealed judgment? This ruling appears to impede full judicial review of the PTAB's final decision, further negating the purpose of the AIA to achieve correct adjudication of patent validity through Inter Partes Review in the administrative agency.
Comment: It is no surprise, but is still significant, that the majority affirms use of the broadest reasonable interpretation standard, even though IPR's involve issued patents. This will of course make it easier to invalidate claims in IPR's, which are showing phenomenal success on the part of petitioners. Presently, as many as 90% of the challenged claims have been found invalid, although amended claims have been allowed as to over half of those. Now that it is clear that the BRI standard will be applied to all such proceedings, we can expect even more IPR actions to be filed. The same will be true as to Post Grant Reviews once patents having filing dates of March 16, 2013 and later begin to issue.

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 § 312
 § 314
 § 314
 § 314
 § 319
 § 141
 § 314
 § 316
 § 42