Typos and Magic Words: The Federal Circuit’s Recent Rulings in Apple’s and Netflix’s Inter Partes Review Challenges

In two separate rulings involving Apple and Netflix, the Court of Appeals for the Federal Circuit (CAFC) held that the Patent Trial and Appeal Board (PTAB) acted in error in the two Inter Partes Review proceedings. In Apple Inc. v. Corephotonics, Ltd., the CAFC held that PTAB’s rejection of Apple’s attack on Corephotonics primarily based on a typo in Apple’s expert declaration failed to satisfy the notice requirement of the Administrative Procedure Act (APA). In Netflix v. DivX, the CAFC clarified what constitutes “analogous art” in obviousness inquiry and held that the PTAB abused its discretion in requiring Netflix to explicitly identify the “field of endeavor” of the prior asserted “art” using specific language.

Introduction to Inter Partes Review

Inter Partes Review (IPR) is a trial proceeding conducted at the PTAB, allowing private parties to challenge the patentability of one or more claims in an existing patent. IPR became available in September 2012 as part of the America Invents Act and replaced the “inter partes reexamination” first established in 1999. Compared with the previous procedure, IPR requires a petition to show a “reasonable likelihood” that the challenger would prevail — the so-called “broadest reasonable standard” — rather than a “substantial new question of patentability.” IPR is viewed as an “efficient, low-cost alternative to traditional patent litigation.” Unlike the traditional Post-Grant Review (PGR) in which patents can be challenged on all grounds, an IPR only allows anticipation (35 U.S.C. § 102) and obviousness (35 U.S.C. § 103) challenges based on patents and printed publications.

Apple Inc. v. Corephotonics, Ltd.

The Israel-based Corephotonics owns U.S. Patent No, 10,225,479B2, which covers a way of using dual apertures to create "portrait photos" that have blurry backgrounds. Since 2017, Corephotonics has filed several suits, alleging that several Apple products, including iPhone 7, iPhone 8 Plus, iPhone X, and iPhone Xs infringed on patents owned by Corephotonics, including the ‘479 patent in question.

In 2020, Apple filed two petitions for IPR, each challenging various claims of the ‘479 patent as obvious in view of multiple prior art references. In one of the petitions, Apple relied on an expert opinion to argue that a skilled artisan could combine two prior art references and arrive at the lens parameters disclosed in the challenged claims. The expert declaration, however, contained a typographical error in scaling calculations and resulted in some inaccurate data in the combined lens parameters. Corephotonics only mentioned the typo once in its non-obviousness arguments, and none of the inaccurate data were claimed or affect the camera parameters that were claimed.

The PTAB issued a final written decision in May 2021 and held that Apple failed to meet its burden to show that the claims were unpatentable. Instead of focusing on the manufacturing and scalability arguments raised by the parties, the PTAB based its decision on typographical error in the declaration, along with additional errors that the PTAB identified for the first time in the final written decision.

On appeal, the CAFC vacated and remanded the decision. The CAFC noted that the PTAB assigned too much weight to the alleged typo and violated the APA by failing to provide Apple with the proper notice of its determination. According to the CAFC, the PTAB is entitled to set aside expert testimony that is “not scientifically reliable,” but such determinations must be supported by substantial evidence and “must be reached only after the parties have been provided fair notice and an opportunity to be heard.” Apple was afforded no such opportunity in this case.

While the decision mostly emphasizes the need for the PTAB to follow the APA and afford parties fair notice in IPR proceedings, a takeaway for patent owners and petitioners is that they should make sure to address in detail any arguments on which they want the PTAB to base its decision.

Netflix v. DivX

In 2020, Netflix also challenged a patent owned by DivX as obvious in view of prior art in a IPR proceeding. The patent at issue, U.S. Patent No. 8,472,792B2, is a “multimedia distribution system” that allows streaming media viewers to jump to desired locations without having to watch an entire video. In its response to Netflix’s challenge, DivX argued that Netflix’s secondary prior art reference was non-analogous art, i.e., from a field or fields of endeavor that are so remote or diverse from a claimed invention that it does not qualify as prior art with respect to that invention. In a written final decision issued in September 2021, the PTAB sided with DivX and held that Netflix failed to identify the field of endeavor for either the patent in question or the prior art and thus failed to establish analogous art under the field of endeavor test.

On appeal, the CAFC issued a decision vacating-in-part and remanding the written final decision for the PTAB to reconsider whether Netflix had sufficiently identified the field of endeavor. The CAFC reiterated the test for analogous art: (1) whether the art is from the same field of endeavor, regardless of the problem being addressed, and (2) if the reference is in a different field of endeavor, whether the reference still is reasonably pertinent to the particular problem at issue. Examining the decision of PTAB in this case, the CAFC found that the PTAB abused its discretion in requiring Netflix to explicitly identify the field of endeavor, when in this case, Netflix has already communicated, in its briefing and description of the prior art, its position that the field of endeavor of the prior art included AVI files or multimedia files. The CAFC noted that although Netflix’s brief “did not formulaically articulate a field of endeavor using those exact words,” CAFC’s precedent “does not require the use of magic words.”

The decision clarified for practitioners that for the purpose of the first prong of the analogous art test, the use of the exact term “field of endeavor” is not required. Instead, general language in a party’s briefing could be sufficient to present an argument on the issue that the PTAB could consider.

Conclusion

These cases, taken together, help to clarify the requirements for argumentation in IPR. Fair notice per the APA is underscored in the IPR process, and explicit guidance is provided with respect to proving analogous art. Going forward, these cases may impact IPR case argumentation and future PTAB decisions.