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Commentary Federal Circuit Comment First Amendment

The PTAB, on appeal, must restrict its reasoning to using materials addressed by the Examiner so to give parties proper notice.

Honeywell Int’l Inc. v. Mexichem Amanco Holding S.A. De. C.V., No. 2016-1996 (Fed. Cir. Aug. 1, 2017).

The United States Court of Appeals for the Federal Circuit overturned a Patent Trial and Appeal Board (“PTAB”) finding that a patent was obvious. In so doing, the Court made three important holdings. First, the Court held that a composition’s unknown inherent properties may be nonobvious. Second, the Court held that Examiners bear the burden of proving one with ordinary skill can reasonably expect success of a composition. Third, the Court held that the Administrative Procedures Act (“APA”) requires PTAB to provide prior notice of all questions of fact and law, effectively prohibiting PTAB from upholding an Examiner’s decision on other grounds.

Mexichem and Daikin Industries filed for inter partes reexamination of Honeywell’s U.S. Patent 7,534,366. The ’366 patent claimed the use of unsaturated hydrofluorocarbon (“HFC”) refrigerant, 1,1,1,2-tetrafluoropropene (“HFO-1234yf”) refrigerant, and polyalkylene glycol (“PAG”) in heat transfer systems. Mexichem submitted prior art reference Japanese Patent H5-85970A (“Omure”) for consideration. Omure states that one skilled in the art would have neither expected failure nor success in stably combining HFOs with PAGs.

During reexamination, the Examiner found the ‘366 patent obvious because prior art references suggested using PAG lubricants with saturated HFC refrigerants. Thus, the composition of PAG and unsaturated HFO-1234yf refrigerant an obvious conclusion for one of ordinary skill in the art.

Honeywell appealed to PTAB, arguing the Examiner incorrectly relied on the prior art references, which did not suggest combining PAG with HFO-1234yf. Instead, the patents suggested combining saturated HFCs, unlike HFO-1234yf, with immiscible lubricants, unlike PAG. Honeywell also argued that its composition was unexpectedly stable as supporting a finding of non-obviousness.

PTAB nevertheless affirmed the Examiner’s finding. It held that prior art disclosed HFO-1234yf was compatible with known lubricants, held that the patented composition’s surprising stability was an inherent property and thus was not patentable, and found that because of Omure, it was predictable that some combination HFO and PAG would have yielded a stable composition.

The Federal Circuit vacated and remanded PTAB’s finding. The Court found the Board erred in using the composition’s inherent properties to find that its stability was predictable. Indeed, unknown inherent properties may nonetheless be unexpected and therefore nonobvious. Second, the court found that the Board wrongly placed the burden on Honeywell to show that one of ordinary skill in the art would have expected failure and wrongly mandated that Honeywell show it succeeded in producing the stable composition despite this expectation of failure. The Court clarified in asserting obviousness, the burden rests on the Examiner to show one of ordinary skill would have reasonably expected success when combining the two substances.

Finally, the Court found that the Board improperly raised Omure as grounds for rejecting Honeywell’s evidence that its results were unexpected. Pursuant to the APA, PTAB must provide prior notice on “all matters of fact and law asserted prior to an appeal hearing before [it].” Because the Examiner never addressed Mexichem’s comments that raised Omure, the Board’s use of Omure on appeal grounded its finding in new facts and rationales not previously raised to the applicant. Accordingly, Honeywell was deprived the opportunity to respond to Omure in violation of the APA.

Visual Memory’s computer Memory System with “programmable operational characteristics” was an improvement on computer memory systems and so is patent-eligible.

Visual Memory LLC v. Nvidia Corp., No. 2016-2254 (Fed. Cir. Aug. 15, 2017).

The United States Court of Appeals for the Federal Circuit reversed an order from the U.S. District Court for the District of Delaware granting a motion to dismiss pursuant to FRCP Rule 12(b)(6). The district court granted the motion, finding that the disputed patent claims were patent-ineligible under Alice. The Federal Circuit disagreed and reaffirmed its recent cases that claims directed toward specific technology improvements are patentable.

Visual Memory sued NVIDIA for infringing U.S. Patent No. 5,953,740. The ’740 patent purports to create a superior computer memory system with “programmable operational characteristics,” allowing the system to optimize for different computer processors without compromising performance. NVIDIA moved to dismiss for failure to state a claim arguing that the ’740 patent attempted to patent an “abstract idea of categorical data storage” applied to computer hardware and thus was not patent-eligible under 35 U.S.C. § 101.

The district court granted NVIDIA’s motion on the basis that the disputed claims were patent-ineligible. In determining patent-eligibility, the district court followed the Alice two-step analysis, laid out in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014). The first step requires determining whether the contested claim is directed towards one of three patent-ineligible subject matters: laws of nature, natural phenomena, or abstract ideas. If it is, the court then must determine if the claim contains an inventive concept that would then credit eligibility to the claims that otherwise would be patent-ineligible.

The district court found that Visual Memory’s disputed claims were patent-ineligible under the Alice analysis. It found that these claims were directed toward abstract ideas but did not contain inventive concepts.

The Federal Circuit reversed the lower court, holding that the ’740 patent claims targeted improving computer memory systems and was not an abstract idea of categorical data storage. It relied on two recent Federal Circuit cases, Enfish LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016), and Thales Visionix Inc. v. United States, 850 F.3d 1343 (Fed. Cir. 2017), which demonstrate that claims are patent eligible if directed towards specific technology improvements. Here, the Court held that the specifications in the ’740 patent detailed that the “programmable operational characteristics” provided direct improvements on computer memory systems and were not abstract ideas “to be performed by a computer.”

Dissenting, Circuit Judge Hughes contended that Virtual Memory’s claims of combining “the black box of a ‘programmable operational characteristic’ with conventional computer equipment” were too abstract to be patentable. In implementing the system, someone must additionally provide the innovative programming efforts to realize the abstract idea. He further argued that Virtual Memory’s claims also failed on step two of the Alice analysis. The claims disclose routine components and functions and thus lack the inventive concept to be credited patent-eligibility.

PTAB must provide constructions for all disputed claim terms.

Homeland Housewares, LLC v. Whirlpool Corp., No. 2016-1511 (Fed. Cir. Aug. 4, 2017).

The Federal Circuit reversed the Patent Trial and Appeal Board (“PTAB”), finding that the patent-at-issue was anticipated. In so holding, the Court found that the Board erred in failing to construe a disputed claim term.

Homeland Housewares petitioned the Patent Trial and Appeal Board (“PTAB”) for an inter partes review of Whirlpool’s U.S. Patent No. 7,581,688. The ’688 patent claims a pre-programmed, automated blending cycle where the blender blades run in cycles between a higher, operational speed and a lower, “settling speed.” When blended at settling speeds, contents in the blender settles to the bottom to be caught by the blades.

PTAB determined that patent ’688 was not anticipated by prior art reference U.S. Patent No. 6,609,821 and thus remained valid. The ’821 patent discloses a process for blending powdered drinks where the blades moved between states of “high speed” for 15 to 20 seconds, and “low speed” for 5 seconds. Relying on Whirlpool’s unrebutted expert testimony, PTAB ultimately found this prior art reference did not anticipate the patent at issue. The expert distinguished “low” speeds cited in ’821 from “settling speed” in ’688 by claiming there was no reason to maintain a settling speed for as long as 5 seconds; thus, the two speeds had to be distinct. PTAB did not interpret the claim term “predetermined settling speed.”

On appeal, the Federal Circuit reversed PTAB’s decision, finding that ’821 anticipated ’688. The Court held that PTAB erred by not construing “predetermined settling speed.” The Court discarded both parties’ proposed claim constructions and adopted the “broadest reasonable interpretation consistent with the written description.” It construed “predetermined settling speed” to be “a speed that is slower than the operating speed and permits settling of the blender contents.”

In light of this construction, the Federal Circuit held that the ’821 prior art was anticipatory: its specifications made clear that pulsing the motor between high and low speeds was intended to allow the contents to settle.

Circuit Judge Newman dissented. She argued that the majority disregarded the “substantial evidence” standard in reviewing fact findings and instead set aside PTAB’s findings in favor of its own construction. Judge Newman also argued the majority’s construction itself was broader than what the patentee intended: the specifications in ’688 taught that the blades were to decelerate to the settling speed but not necessarily operate at that speed as suggested by both the majority and in the prior art reference. Judge Newman found issue with the majority’s treatment of references to “high” and “low” speeds in the prior art reference. She credited the expert’s testimony that asserts when blending powdered drinks, even very low speeds may not allow the contents to settle and thus the “low speeds” in ’821 cannot be equated with “settling speed” in ’688. Judge Newman argued that, in equating the two terms, the majority wrongly found the prior art reference to have anticipated the ’688 patent.

IPWatchdog also reported on this case.