Fanduel loses appeal at CAFC

The outcome:



This is a patent case involving a system for remote
gambling. FanDuel, Inc., appeals the final written decision
of the Patent Trial and Appeal Board in an inter partes review of claims 1,
6–9, and 19 of U.S. Patent No. 8,771,058,
which found unpatentable all challenged claims except
claim 6. FanDuel, Inc. v. Interactive Games LLC,
No. IPR2017-01491, 2018 WL 6112966 (P.T.A.B. Nov. 20,
2018) (Board Decision). The Board found that FanDuel, as
petitioner, had failed to prove that claim 6 was obvious in
view of the asserted prior art. On appeal, FanDuel argues
that the Board violated the Administrative Procedure Act
by basing this finding on obviousness issues that the patent
owner did not raise in its responses. FanDuel also challenges the Board’s
factual findings regarding claim 6. Because the Board complied with the APA and its obviousness
findings are supported by substantial evidence, we affirm.




Within the decision:


Following institution, Interactive Games submitted a
patent owner response. As in its preliminary response, Interactive Games’s only argument specific to claim 6 was
that claim 6 could not be obvious over any combination including the Slot Payouts Webpage, because it was not prior
art. Interactive Games also submitted an expert declaration, but it did not rely on that declaration to rebut FanDuel’s arguments and evidence specific to claim 6.
FanDuel then filed a reply. As to the obviousness of
claim 6, FanDuel’s reply argued exclusively that the Board
should maintain its institution decision view that the Slot
Payouts Webpage is prior art.1




Footnote 1 is of interest:


After FanDuel filed its reply, the Board modified
its institution decision to comply with SAS Inst., Inc. v.
Iancu, 138 S. Ct. 1348 (2018). The parties filed supplemental papers on the initially non-instituted grounds, one
of which challenged claim 6 as obvious over the Slot Payouts Webpage in combination with two different references. In its final written decision, the Board concluded
that FanDuel did not establish the unpatentability of
claim 6 on this additional ground, Board Decision at *20,
and FanDuel has not appealed that determination.


Part of the APA issue:


To comply with the APA in an IPR proceeding, the
Board must “timely inform[]” the parties of “the matters of
fact and law asserted,” 5 U.S.C. § 554(b)(3); it must give the
parties an opportunity to submit facts and arguments for
consideration, id. § 554(c); and it must permit each party
to present oral and documentary evidence in support of its
case or defense, as well as rebuttal evidence, id. § 556(d).
See Hamilton Beach Brands, 908 F.3d at 1338; Rovalma,
S.A. v. Bohler-Edelstahl GmbH & Co. KG, 856 F.3d 1019,
1029 (Fed. Cir. 2017); Belden Inc. v. Berk-Tek LLC,
805 F.3d 1064, 1080 (Fed. Cir. 2015). “Pursuant to these
provisions, the Board may not change theories midstream
without giving the parties reasonable notice of its change.”
Hamilton Beach Brands, 908 F.3d at 1338 (citing Belden,
805 F.3d at 1080 (interpreting § 554(b)(3) in the context of
IPR proceedings)).




Of relevance:




There is nothing inherently inconsistent about the
Board instituting IPR on obviousness grounds and then ultimately finding that the petitioner did not provide preponderant evidence that the challenged claim was obvious.
This happens with some frequency. Indeed, we have encouraged the Board to “change its view of the merits after
further development of the record, . . . if convinced its initial inclinations were wrong.” TriVascular, 812 F.3d at
1068; see Magnum Oil, 829 F.3d at 1377 (“[T]he Board has
an obligation to assess the question anew after trial based
on the totality of the record.”). FanDuel does not argue that
the Board is bound by its institution decision findings, but
it contends, based on this statement from Trivascular, that
some further record development on a given issue must occur post-institution in order for the Board to change its
view.
TriVascular cannot be read so narrowly. For one thing,
the court in TriVascular was not reviewing an IPR proceeding that lacked record development. After institution in
that case, both parties submitted expert reports regarding
the petitioner’s obviousness challenge. TriVascular, 812
F.3d at 1060. Our statements regarding the added benefits
the Board might gain from a fully developed record postinstitution simply reflected the circumstances of that case.
See id. at 1068 (explaining that at institution the Board is
considering matters “preliminarily without the benefit of a
full record” and remains “free to change its view of the merits after further development of the record”). We did not
thereby announce a condition precedent that the Board can
only change its view of the record when additional argument or evidence relevant to that change is added after institution.


Judge Dyk agreed on the procedural point, but disagreed on the substantive point:



I join Part II-A of the majority opinion rejecting FanDuel’s procedural challenge, but I respectfully dissent from
the majority’s affirmance of the Board’s obviousness determination. I would hold that the Board erred when it determined that FanDuel failed to show that claim 6 of the ’058
patent would have been obvious because the Board used an
incorrect standard for obviousness.



Yes, "common sense" appears:



The Board’s view of what was required is simply wrong.
KSR requires an “expansive and flexible approach.” KSR
Int’l Co. v. Teleflex Inc., 550 U.S. 398, 415 (2007). “The
combination of familiar elements according to known methods is likely to be obvious when it does no more than yield
predictable results.” Id. at 416. We have repeatedly
acknowledged this aspect of KSR. See Uber Techs., Inc. v.
X One, Inc., 957 F.3d 1334, 1338 (Fed. Cir. 2020); CRFD
Rsch., Inc. v. Matal, 876 F.3d 1330, 1347 (Fed. Cir. 2017);
Wyers v. Master Lock Co., 616 F.3d 1231, 1238 (Fed. Cir.
2010). In Uber, we explained that, when the record shows
“‘a finite number of identified, predictable solutions’ to a
design need that existed at the relevant time, which a person of
ordinary skill in the art ‘ha[d] a good reason to pursue,’” “common sense” can supply a motivation to combine.
Uber, 957 F.3d at 1339–40 (alteration in original) (quoting
KSR, 550 U.S. at 421). In CRFD, we explained that “a person of
ordinary skill [provided] with a simple design choice”
to address a problem is presumed to “‘ha[ve] a good reason
to pursue the known options within his or her technical
grasp.’” CRFD, 876 F.3d at 1347 (quoting KSR, 550 U.S.
at 421).

Obviousness is particularly apparent where “the alleged novelty of the . . . patent is not related to the differences between” “‘a finite number of identified, predictable
solutions,’” identified in the prior art. Uber, 957 F.3d at
1339 (quoting KSR, 550 U.S. at 421). Because the use of a
look-up table and an ordered list was only one of a number
of finite, “predictable solutions,” it would have been obvious
to “us[e] a technique that was known to one of ordinary
skill in the art.” Id. at 1340. The Board erred by requiring
FanDuel to supply a specific motivation to use a look-up
table and ordered list in this particular context when that
choice would have been a simple alternative design choice
to a skilled artisan.

Because, as a matter of law, the Board incorrectly concluded that FanDuel failed to show that claim 6 of the ’058
patent would have been obvious, I would reverse the
Board’s obviousness determination.