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Federal Circuit Confirms PTAB's Ability to Consider Subject Matter Eligibility of Proposed Substitute Claims in IPR Proceedings

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Sterne, Kessler, Goldstein & Fox

On July 22, 2020, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) issued an opinion in Uniloc 2017 LLC v. Hulu, LLC & Netflix, Inc., No. 2019-1686 (Fed. Cir. 2020) authorizing the U.S. Patent Trial & Appeals Board (PTAB), in inter partes review (IPR) proceedings, to consider patent eligibility challenges to substitute claims presented in motions to amend.  The opinion clarifies whether substitute claims should be analyzed for invalidity under the same limited framework as the original claims petitioned on—namely analyzed only under §§ 102 and 103 and only on the basis of prior art consisting of patents or printed publications, as required under 35 U.S.C. § 311(b), which sets forth the general scope of IPR proceedings—and is significant because it expands the invalidity arguments available to petitioners and the PTAB in IPRs.

Background and Summary
 
In response to an IPR petition filed by Hulu, LLC and Netflix, Inc. (collectively Petitioners) challenging claims of U.S. Patent No. 8,566,960 (’960 patent), patent owner Uniloc 2017 LLC (Uniloc) filed a motion to amend requesting the PTAB to enter substitute claims for the independent claims.[i]  Petitioners opposed the motion arguing, among other things, that the substitute claims are directed to patent-ineligible subject matter under § 101.[ii]  In its Final Written Decision, the PTAB, in addition to explaining why the challenged original claims were unpatentable, denied Uniloc’s motion to amend the substitute claims, concluding that the substitute claims were unpatentable because they didn’t meet the standards for eligibility under § 101.[iii]  Uniloc filed a motion to rehear the case, arguing that the PTAB misapprehended the law in concluding it is permissible in an IPR proceeding for the PTAB to consider a § 101 challenge.[iv] The PTAB denied Uniloc’s motion for rehearing concluding that it is authorized to analyze proposed substitute claims under § 101 patent eligibility.[v]  Uniloc appealed the decision.
 
Determining if the issues were moot
 
At the outset, the Federal Circuit had to address whether it could even reach the question of whether the PTAB can deny a motion to amend based on the substitute claims not meeting the § 101 threshold, in light of a district court invalidating all the original claims of the ’960 patent and the Federal Circuit’s affirmance of that decision after the Final Written Decision was issued in the IPR.[vi] 
 
Holding that the issues in the current appeal were not moot in light of the invalidation of the original claims, the Federal Circuit reasoned: (1) Petitioners had waived any arguments in this respect because Petitioners “did not argue that the PTAB could not reach the motion to amend because the motion had to be read as resting on a contingency (finding the specified original claims unpatentable) that would already have ended the IPR,”[vii] and (2) “it would be unprecedented, and contrary to the established practice of considering contingent motion to amend, to treat the contingency (finding original claims unpatentable) as ending the IPR so that the proposed substitute claims could no longer be considered.”[viii] The Federal Circuit held that the issues related to the substitute claims were detached from the issues related to the original claims and if Uniloc prevailed on those would provide Uniloc with “effectual relief”.[ix]
 
Authorizing the PTAB to consider patent eligibility challenges to substitute claims
 
In authorizing the use of § 101 to analyze substitute claims, the Federal Circuit held that the “text, structure, and history” of the IPR statutes did not limit the PTAB’s ability to review proposed substitute claims in an IPR under § 101.[x]
 
First, the Federal Circuit held that the IPR statutes “plainly and repeatedly require the PTAB to determine the ‘patentability’ of the proposed substitute claims,” and “patentability” includes “a § 101 analysis.”[xi] The court further held that a review of § 311 indicates that that section is “confined to the review of existing patent claims, not proposed ones” because “it limits ‘[a] request to cancel as unpatentable [one] or more claims of a patent,”[xii] but “does not so limit the PTAB’s evaluation of proposed substitute claims.”[xiii]
 
Second, relying on the structure of the IPR statutes, the Federal Circuit reasoned that § 311, “as a provision appl[ies] to the petition phase of the proceedings, [and] should not [ ] bind a separate adjudication-state provision, such as § 316”—the section regarding motions to amend.[xiv]
 
Third, the Federal Circuit held that proposed substitute claims in an IPR proceeding have not undergone a patentability review by the U.S. Patent & Trademark Office (USPTO) and so “‘substantial new questions of patentability’ that ‘have not previously been considered by the [US]PTO’ includ[ing] all patentability questions, including § 101 patent eligibility”, are outstanding and “[p]rohibiting the PTAB from reviewing patent eligibility would indeed ‘strip[] [the PTAB] of a critical legal tool[.]’”[xv]
 
The Federal Circuit went on to affirm the PTAB’s decision invalidating the substitute claims.
 
Takeaway
 
The Uniloc 2017 decision further expands the scope of IPR proceedings by giving petitioners and the PTAB more tools to invalidate patents.  Motivating the Federal Circuit’s decision was the notion that because the proposed substitute claims have not been assessed for patentability by the USPTO, they need to be reviewed comprehensively by the PTAB as if they were being examined for the first time.[xvi]  This comprehensive examination includes at least a § 101 analysis. 


[i] Uniloc 2017, No. 2019-1686, slip op. at 8.

[ii] Id.

[iii] Id.

[iv] Id. at 2-3.

[v] Id.

[vi] Id. at 8 n. 4.

[vii] Id. at 11-12.

[viii] Id. at 13.

[ix] Id. at 12.

[x] Id. at 15.

[xi] Id.

[xii] Id. at 16 (italics and insertions in original).

[xiii] Id.

[xiv] Id. at 17.

[xv] Id. at 18.

[xvi] Id. at 19-20


This article appeared in the July 2020 issue of PTAB Strategies and Insights. To view our past issues, as well as other firm newsletters, please click here.