Recapping a Busy Summer for Director Review

United States Patent and Trademark Office (USPTO) Director Kathi Vidal had a busy end to her summer, issuing six decisions as part of the Director Review process between July 10 and August 22. In the six decisions, the Director vacated four decisions denying institution, vacated one finding of adverse judgment, and generally upheld a grant of a motion for sanctions, modifying the order in part. The six decisions spanned a wide variety of topics. We offer a summary of each decision below.

Shenzhen Xinzexing E-Commerce Co., LTD., v. Shenzhen Carku Technology Co., LTD., IPR2024-00222 (PTAB July 10, 2024)

The Director disagreed with the Board’s finding that the patent owner requested adverse judgment, determining that the patent owner’s failure to timely file mandatory notice information or to respond to the Board’s emails was not an unequivocal abandonment of the contest.

Summary

In IPR2024-00222, the patent owner did not submit mandatory notice information or timely file a preliminary response to the petition. After the deadline for filing the preliminary response, the Board emailed the patent owner’s counsel stating that “[n]o notices have been filed” and advising that “[n]otices are well past due in this case.” As the statutory due date for the institution decision approached and, having received no response from the patent owner, the Board entered adverse judgment, citing 37 C.F.R. § 42.73(b)(4) and finding that the patent owner’s failure to file mandatory notices or respond to the Board’s email is consistent with abandonment of the contest. After the Board’s entry of adverse judgment, the patent owner filed mandatory notices.

Two days after the patent owner filed mandatory notices, the Director granted sua sponte Director Review and vacated the Board’s entry of adverse judgment as premature. Neither the Board’s email nor the earlier filing date notice articulated sufficiently that failure to file mandatory notices as required under 37 C.F.R. § 42.8 may be considered abandonment of the contest and result in adverse judgment. The Director remanded the proceeding to the Board to determine whether the petition met the threshold for institution.

Hesai Technology Co. LTD. et al. v. Ouster, Inc., IPR2023-01458 (PTAB July 25, 2024)

The Director vacated the Board’s decision denying institution, finding that the Board misapplied Federal Circuit precedent by improperly discounting the petitioner’s reliance on a figure from the prior art to teach a challenged claim limitation.

Summary

In IPR2023-01458, the challenged patent claimed an “optical system” with “a first set of pixels arranged in a first column and a second set of pixels arranged in a second column horizontally and vertically offset from the first column.” To address this feature, the petitioner relied, in part, on prior art Figure 22, which depicts 36 small circles within cavity 170. In the figure, the petitioner added numerals “1” and “2” to delineate two columns. The prior art’s specification included a textual sentence describing “32” detectors within cavity 170 versus the 36 shown in Figure 22, yet the prior art’s provisional application (incorporated by reference) noted the quantity as being “36” detectors. The Board initially denied institution because the petitioner “d[id] not explain this discrepancy in the Petition.”

The Director granted Director Review to consider whether it was proper for the Board to discount the teachings of Figure 22 in their entirety due to an alleged discrepancy in the “quantity” of detectors, even though the “arrangement” of the detectors was depicted in a straightforward manner. The Director found that the discrepancy resulted from a typographical error in one sentence and, because the discrepancy relates to the quantity of detectors, not their arrangement in an offset manner, the Board erred in not considering Figure 22’s teaching for the arrangement of detectors. Even if the number of detectors depicted in Figure 22 was questioned by the patent owner, the Director explained that the remainder of Figure 22 was pertinent prior art for all that it teaches, including the prior art offset arrangement of the detectors. The Director remanded to the Board for further consideration of the prior art disclosure.

Spectrum Solutions LLC v. Longhorn Vaccines & Diagnostics, LLC, IPR2021-00847, IPR2021-00850, IPR2021-00854, IPR2021-00857, IPR2021-00860 (PTAB July 11, 2024)

The Director affirmed the Board’s grant of sanctions in the form of adverse judgement against all 183 claims at issue across five proceedings. The Director further affirmed the Board’s determination that the patent owner engaged in sanctionable misconduct in violation of 37 C.F.R. §§ 42.11(a), 42.11(c), 11.18(b)(2), and 42.51(b)(1)(iii), but determined that 37 C.F.R. § 1.56 does not apply directly to America Invents Act (AIA) proceedings.

Summary

Petitioner Spectrum had filed five inter partes review (IPR) petitions against patent owner Longhorn, challenging a total of 183 claims. The patents at issue related to Covid-19 testing. In its response, the patent owner used a third-party lab to perform testing that allegedly showed why the key prior art failed to satisfy certain claim limitations. The petitioner subsequently learned, through deposition of the patent owner’s expert and additional discovery, that the patent owner had withheld certain test results that were inconsistent with its desired outcome.

The patent owner argued that it was justified in withholding the test data because (1) it was not inconsistent with its own arguments/claim construction and thus was not required to be disclosed under 37 C.F.R. 42.51(b)(iii), and (2) it was properly withheld as work product. The Board concluded that the patent owner’s actions did not comply with the duty of candor as required by USPTO rules, specifically rules 37 C.F.R. § 1.56, § 11.106(c), § 11.303, § 42.11(a), and § 42.51(b)(1)(iii). As a result, the Board granted the petitioner’s motion for sanctions and entered adverse judgment against the patent owner to find all challenged claims unpatentable. The Board found separately that all but seven of the 183 challenged claims were also unpatentable based on the merits.

In the Director’s decision following sua sponte review, the Director affirmed, for the first time ever, that the unprecedented action taken by the Board of cancelling all claims based on sanctionable misconduct was justified, noting that the Board’s sanction of entry of judgment against the patent owner was appropriate given the “egregious misconduct.” The Director also determined that the sanctions are not based on violations of 37 C.F.R. § 1.56, 11.106(c), or 11.303, noting that AIA proceedings involve issued patents, not patent applications, and, as such, Rule 56 does not pertain to AIA proceedings.

Samsung Electronics Co., LTD., et al. v. Slyde Analytics, LLC, IPR2024-00040 (PTAB August 2, 2024)

The Director vacated the Board’s decision denying institution, finding that the Board relied on an overly narrow construction of the term “processor” by focusing too heavily on extrinsic evidence over the intrinsic record.

Summary

In IPR2024-00040, the patent being challenged claimed a “wristwatch” with “an inertial sensor comprising an accelerometer and a processor,” where “the processor [is] arranged for discriminating between gesture and no gesture based on a direction of said acceleration signal.” To address this feature, the petitioner relied on prior art that showed an accelerometer (blue) and a trigger circuit (green).

Neither party construed the term “processor,” but the Board decided construction was necessary. The Board found that the specification did not offer a definition of the term “processor” or show that the inventor acted as a lexicographer. The Board then turned to the “definition for ‘processor’ in The Authoritative Dictionary of IEEE Standards Terms” and construed “processor” to require that “a ‘processor’ has to execute code, program, or instructions, and cannot be met simply by any electrical circuit.” Because the Board found that the alleged prior art processor did not execute code, it denied institution.

In granting Director Review, the Director held that the Board erred in construing the claimed “processor” based solely on extrinsic evidence without first thoroughly considering all of the intrinsic evidence. The Board did not consider the claim as a whole by focusing on only the term “processor” without evaluating the function attributed to the processor later in the claim — “discriminating between gesture and no gesture based on a direction of said acceleration signal.” The Board also did not adequately consider the specification, which described a processor “for executing programmable software code for analyzing the accelerations values delivered by the accelerometer, and for generating signals or values when certain conditions are met.” The Director found that the claim language does not include the specification’s description of “executing programmable software code,” suggesting that the term is broader than the embodiment in the specification. Given the intrinsic evidence, the Director found that the Board relied too heavily on the dictionary definition in a manner divorced from the intrinsic record and remanded for proper consideration of the term processor and the other issues involved in the proceeding.

Luminex International Co., Ltd. v. Signify Holdings B.V., IPR2024-00101 (PTAB August 20, 2024)

The Director vacated the Board’s decision denying institution due to the petitioner’s time bar, finding that a customer of the petitioner was not a real party in interest of the petitioner and, thus, a complaint against the customer more than one year before the petition did not create a time bar.

Summary

In IPR2024-00101, Luminex International Co., Ltd. (“Luminex”) filed a petition requesting IPR of claims of a patent owned by Signify Holdings B.V. (“Signify”). Signify initially asserted its patent against Menard, Inc. (“Menard”), a customer of Luminex. Two months after Signify’s complaint against Menard, Menard filed a third-party complaint in the litigation asserting a count of indemnification against Luminex, thereby bringing its supplier, Luminex, into the litigation. Luminex filed a petition for IPR of Signify’s patent within one year of the third-party complaint filed against it by Menard, but more than one year after Signify’s initial complaint against Menard. The Board denied institution, finding that Menard was a real party in interest of Luminex and that Luminex’s petition was time-barred because it was filed more than one year after Signify’s complaint against Menard.

The Director vacated the institution decision and remanded to the panel to determine whether the grounds in the petition raised a reasonable likelihood of success. The Director disagreed with the Board’s determination that the facts of record establish that Menard is a real party in interest to Luminex’s petition. The Director also found that the evidence does not establish Menard to be a privy of Luminex and that 35 U.S.C. § 315(a)(1) does not apply to the “cross-claims” asserted by Luminex in the litigation, two issues raised by Signify but not reached by the panel due to the panel’s finding on real party in interest. To avoid delay, the Director remanded to the panel for a determination on the merits of Luminex’s petition without providing reasoning for her decisions, indicating that she will issue a subsequent opinion in due course that details the reasoning for her determinations.

PLR Worldwide Sales Ltd. v. Flip Phone Games Inc., IPR2024-00133 (PTAB August 22, 2024)

The Director vacated the Board’s decision denying institution because the Board relied on a claim construction that was improperly based on the subjective views of the user.

Summary

In IPR2024-00133, the Board issued a split decision denying institution based on an implicit construction of the claim term “non-promotional background object.” The specification did not define or even use the phrase “non-promotional background object” or “background object,” but it was discussed in the prosecution history. Specifically, during prosecution, the applicant argued that “‘non-promotional background objects’ are not game components, i.e., ‘featured objects that a user manipulates in order to play the game,’ but are rather ‘outside of the primary focus of game play’ and ‘are not themselves needed or required in order to play the game.’” The majority relied on these statements to determine that “non-promotional background objects” required objects that were “outside the primary focus of game play and as unexpectedly interactive components.” Relying on this interpretation, the Board denied institution because the objects in the prior art did not meet these requirements.

The Director agreed with the dissent that the majority’s consideration here of what a user would expect (“unexpectedly interactive”) was improperly based on the subjective perspective of a user. Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1353 (Fed. Cir. 2001) (“We are not prepared to assign a meaning to a patent claim that depends on the state of mind of the accused infringer.”) Because of the error in claim construction, the Director vacated the institution decision and remanded to the panel to issue a new decision on institution resolving the claim construction of “a non-promotional background object” consistent with Phillips v. AWH Corp., 415 F.3d 1303, 1313–14 (Fed. Cir. 2005) by first assessing the intrinsic evidence and then consulting extrinsic evidence if necessary.

In other Director Review news, on October 1, the Office published a final rule on Director Review of Patent Trial and Appeal Board decisions that is scheduled to take effect on October 31. The final rule replaces the current interim Director Review process and makes several changes to the proposed rule of April 2024. We are reviewing the final rule to determine its implications for post-grant practitioners and parties to post-grant proceedings and will issue an update soon.