Friday, May 05, 2017

In IN RE: AFFINITY LABS OF TEXAS, LLC, case, CAFC emphasizes that estoppel provisions of pre-AIA section 317(b) are CLAIM-CENTRIC and PARTY-CENTRIC

The CAFC decision related to cases merged from different patent challenges at the PTAB level:

This appeal arises from two inter partes reexaminations
and an ex parte reexamination of U.S. Patent No.
7,324,833 (the ’833 patent), owned by Affinity Labs of
Texas, LLC (Affinity). Richard King requested ex parte
reexamination of all original claims of the ’833 patent,
based on multiple asserted grounds of unpatentability.
Volkswagen Group of America, Inc. (Volkswagen) requested
inter partes reexamination of all claims based on
additional, different asserted grounds of unpatentability.
And Apple Inc. (Apple) requested inter partes reexamination
of all claims based on still different asserted grounds
of unpatentability. The United States Patent and Trademark
Office (PTO) granted all three requests and sua
sponte merged these three reexaminations into a single

Volkswagen subsequently received an adverse final
judgment in a parallel district court proceeding, upholding
the validity of claims 28 and 35 of Affinity’s ’833
patent. In response, Affinity petitioned the PTO to vacate
the entire merged reexamination proceeding, arguing that
the estoppel provision in pre-America Invents Act (AIA)
35 U.S.C. § 317(b)1 extends to all parties, not just
Volkswagen, and all claims challenged in the three reexaminations,
not just litigated claims 28 and 35. The PTO
denied Affinity’s termination request, but it severed the
Volkswagen reexamination from the merged proceeding
and held that no rejection could be maintained in that
reexamination as to the claims at issue in the district
court action. The Examiner then evaluated the
Volkswagen reexamination separately from the merged
King/Apple reexamination and ultimately issued a Right
of Appeal Notice in each proceeding, rejecting numerous
claims of the ’833 patent as unpatentable. The Patent
Trial and Appeal Board (Board) affirmed the Examiner’s
rejections. See Apple Inc. v. Affinity Labs of Tex., LLC,
No. 2015-004281, Reexamination Nos. 95/001,264 and
90/010,333, 2015 WL 4038964, at *1 (P.T.A.B. June 30,
2015) (-4281 Board Decision); Apple Inc. v. Affinity Labs
of Tex., LLC, No. 2015-006122, Reexamination No.
95/001,223, 2015 WL 5092841, at *1 (P.T.A.B. Aug. 26,
2015) (-6122 Board Decision). Affinity appealed to this
court and the Director of the United States Patent and
Trademark Office (Director) intervened. We have jurisdiction
under 28 U.S.C. § 1295(a)(4)(A).

Affinity first argues that the PTO erred in maintaining
the reexaminations in light of the final decision that
Volkswagen failed to prove invalidity of two of the patent’s
claims, which were asserted in the co-pending
litigation and, therefore, the Board’s decisions in the
reexaminations should be reversed pursuant to the section
317(b) estoppel provision. Affinity also asserts that,
assuming the reexaminations were properly maintained,
the Board’s decisions are based on misreadings of the
asserted prior art and a misevaluation of Affinity’s objective
indicia evidence of nonobviousness. Because the
plain language of pre-AIA section 317(b) precludes Affinity’s
estoppel argument and because we see no error in the
-4281 Board Decision upholding the Examiner’s findings
of unpatentability as to all claims at issue, we affirm.
therefore, dismiss as moot Affinity’s appeal of the -6122
Board Decision upholding the unpatentability of a subset
of claims affirmed as unpatentable in the -4281 Board

As to legal standards:

We review the PTO’s decisions under the standards
set forth in the Administrative Procedure Act (APA), 5
U.S.C. § 706. Pride Mobility Prods. Corp. v. Permobil,
Inc., 818 F.3d 1307, 1313 (Fed. Cir. 2016). We set aside
the agency’s actions if they are “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with
law” or “unsupported by substantial evidence.” 5 U.S.C.
§ 706(2). We review its legal conclusions de novo and its
factual findings for substantial evidence. In re Gartside,
203 F.3d 1305, 1316 (Fed. Cir. 2000). A finding is supported
by substantial evidence if a reasonable mind might
accept the evidence as adequate support for the finding.
Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938).

The termination component of Affinity's argument:

We first address Affinity’s argument that the PTO
improperly maintained all three reexaminations over the
estoppel provision of pre-AIA 35 U.S.C. § 317(b). Affinity
argues that § 317(b) requires the PTO to terminate the
Volkswagen reexamination in its entirety after
Volkswagen received an adverse ruling as to the asserted
claims—claims 28 and 35—in the co-pending litigation.

The CAFC observed:

A few notable features of the inter partes reexamination
statutory estoppel provision stand out from its plain
language: (1) it applies to the party in the civil action that
loses its validity attack against “any patent claim” as well
as the party’s privies; (2) it applies to validity issues
raised in the civil action or that could have been raised in
that action; (3) unlike section 317(a), it speaks in terms of
any “patent claim,” as opposed to the “patent;” (4) it
prohibits the losing party and its privies from requesting
an inter partes reexamination “of any such patent claim;”
and (5) “on the basis of such issues,” it prohibits the PTO
from “maintain[ing]” any inter partes reexamination
requested by the losing party.

Affinity urges that we order the PTO to terminate all
three reexamination proceedings—even though they
involve several claims beyond the litigated claims 28 and
35, the other inter partes reexamination requester had no
involvement or relationship to that prior litigation, and
the third proceeding was an ex parte reexamination—
based on its reading of section 317(b).

The PTO offers a
counter reading of this statutory estoppel provision, which
follows its established practice set forth in Manual of
Patent Examining Procedure (MPEP) § 2686.04(V)(A).
“Our first step in interpreting a statute is to determine
whether the language at issue has a plain and
unambiguous meaning with regard to the particular
dispute in the case. Our inquiry must cease if the statutory
language is unambiguous and the statutory scheme
is coherent and consistent.” Pennzoil–Quaker State Co. v.
United States, 511 F.3d 1365, 1373 (Fed. Cir. 2008) (quoting
Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997)).
“Absent a clearly expressed legislative intention to the
contrary, [the statute’s plain] language must ordinarily be
regarded as conclusive.” Wyeth v. Kappos, 591 F.3d 1364,
1369 (Fed. Cir. 2010) (quoting Consumer Prod. Safety
Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980))
(alteration in original).

[Note Chevron is NOT cited!]

The problem with Affinity's argument:

The crux of Affinity’s argument is that the statute operates
differently and has a much broader impact against
a losing party’s active, pending inter partes reexamination
compared to a losing party’s request for an inter partes
reexamination. According to Affinity, if a patent challenger
conclusively loses its validity challenge in court
against, say, claims 1–5 of a 20-claim patent, section
317(b) prevents that party from requesting an inter partes
reexamination on just claims 1–5 (and not claims 6–20) of
that patent on issues that had been raised or could have
been raised in the civil action. No one disagrees there.
But, in Affinity’s view, section 317(b) requires termination
of a pending inter partes reexamination that had been
requested by the losing party, regardless of which claims
of the patent are being reexamined in the proceeding: it
could be claims 1–10, or 1–20, or even 6–20.

As to the scope of estoppel:

We disagree with Affinity’s proposed
interpretation and instead see the estoppel provision’s
claim-based approach applying in the same way to
both a request for inter partes reexamination and the
maintenance of a pending inter partes reexamination.
The structure of pre-AIA section 317(b) contemplates
a parallel and consistent approach to limiting a party’s
ability to request a reexamination and to maintain a
reexamination once a final decision has been entered
against the party in a civil action. The statute first
explains that the party may not request reexamination on
“any such patent claim on the basis of issues which that
party or its privies raised or could have raised in such
civil action.” This language limits the scope of estoppel in
two ways: (i) to the specific claims that were actually at
issue in the district court proceeding; and (ii) to challenges
to those claims that were raised or could have been
raised. In other words, the “issues that could have been
raised” are necessarily bounded by the preceding reference
to “any such patent claim.”


Thus, as
with section 317(b), the statute in section 315(c) similarly
estops the requester from challenging again, in a different
venue, the validity of claims that were actually decided
against the requester. Nothing in section 315(c), however,
estops the requester from challenging at a later time the
validity of a claim that was not previously requested
pursuant to section 311 and reexamined pursuant to
section 313.


We also find no basis in the statute for Affinity’s argument
that the final decision in the Volkswagen litigation
should have preclusive effect on the reexaminations
requested by King or Apple. By its plain and unambiguous
terms, pre-AIA section 317(b) extends only to inter
partes reexaminations—not ex parte reexaminations. The
estoppel effect of the statute, therefore, has no bearing on
the ex parte King reexamination. Moreover, the statute
also imposes the aforementioned limitations only on a
requester that was a party to the civil action or its privies.
Because Apple was neither a party to the Volkswagen
litigation nor was there any evidence Apple was
Volkswagen’s privy, we also find no error in the PTO’s
decision not to terminate the inter partes reexamination
requested by Apple.

As to policy arguments:

Affinity’s invocation of the general policy goal of preventing
abusive reexamination practices cannot override
the statute. “It is a bedrock canon of statutory construction
that our judicial inquiry ends where statutory language
is plain and unambiguous.” Pfizer, Inc. v. Lee, 811
F.3d 466, 471 (Fed. Cir. 2016) (quoting White v. United
States, 543 F.3d 1330, 1337 (Fed. Cir. 2008)). “[O]nly a
‘most extraordinary showing of contrary intentions’ by
Congress justifies a departure from the plain language of
a statute.” Wyeth, 591 F.3d at 1371 (quoting Garcia v.
United States, 469 U.S. 70, 75 (1984)). The plain language
of the statute does not permit extending the reach
of estoppel as far as Affinity suggests.

Footnote 4 is of interest as to time-logic:

We also find meritless Affinity’s argument that by
merging the proceedings the PTO “effectively created an
inter partes review.” Affinity Opening Br. at 25. Affinity
provides no statutory, regulatory, or rule-based support
for its allegation, nor can we comprehend how it could do
so, given the PTO merged the proceedings on June 14,
2010—more than two years before inter partes review was
We are also unaware of any justification
supporting Affinity’s suggestion that the PTO’s sua sponte
decision to merge the proceedings somehow modifies the
scope of the statutory estoppel applied against the requester.

Footnote 5 should be noted:

We reject the Director’s alternative argument that
dismissal of Affinity’s petitions to terminate the reexaminations
was not a “final” agency action pursuant to the
Manual of Patent Examining (MPEP) § 1002.02 (“A
dismissal of a petition, a denial of a petition without
prejudice, and other interlocutory orders are not final
agency action.”). To the extent the Director argues the
refusal to terminate the proceeding under section 317(b)
is unreviewable under 5 U.S.C. § 704, we have previously
held that such a decision is reviewable once the Board
issues a decision on the merits. See Automated Merchandising
Sys., Inc. v. Lee, 782 F.3d 1376, 1381 (Fed. Cir.
2015). We also reject the Director’s argument that Affinity
was required to first seek reconsideration under the
circumstances of this case. There was no indication in the
PTO dismissal of Affinity’s petitions that further action
was required by Affinity to receive the PTO’s final an
swer. Indeed, the PTO’s dismissal—a fifteen-page decision
from the Office of Patent Legal Administration—had
all the hallmarks of a final action marking the consummation
of the agency’s decision-making process. In that
decision, the PTO did not reference MPEP § 1002.02, nor
did it inform Affinity that it was required to seek reconsideration
in the dismissal. We, therefore, think it would
be unnecessary to have required Affinity to have done

**As to anticipation, the CAFC determines that reasonable inferences
constitute substantial evidence:

A claim is unpatentable as anticipated “if each and
every limitation is found either expressly or inherently in
a single prior art reference.” King Pharm., Inc. v. Eon
Labs, Inc., 616 F.3d 1267, 1274 (Fed. Cir. 2010) (citation
omitted). Anticipation is a question of fact we review for
substantial evidence. REG Synthetic Fuels, LLC v. Neste
Oil Oyj, 841 F.3d 954, 958 (Fed. Cir. 2016).


Given the disclosure above, the Board was reasonable
to conclude that Dwyer’s portable electronic device necessarily
displays name information on the graphical interface
to allow the user to meaningfully navigate the digital
files stored on the device. Substantial evidence supports
the Board’s finding that this limitation is disclosed by


Based on this disclosure, the Board’s finding that Dwyer
teaches soft buttons (comprised of the icon 220 and name
222 information found in field 218) linked to respective
audio information sources (as stored in the portable
digital recorder) is eminently reasonable. We, therefore,
conclude that substantial evidence supports the Board’s
finding that claims 1–27, 39, and 45 are unpatentable
based on the asserted Dwyer rejections.

As to obviousness,

Obviousness is a question
of law based on underlying findings of fact. Harmonic
Inc. v. Avid Tech., Inc., 815 F.3d 1356, 1363 (Fed. Cir.
2016). The underlying findings of fact include the scope
and content of the prior art, the differences between the
prior art and the claimed invention, whether there is a
motivation to combine prior art references, the level of
ordinary skill in the art, and relevant secondary considerations.
Merck & Cie v. Gnosis S.P.A., 808 F.3d 829, 833
(Fed. Cir. 2015), cert. denied, 137 S. Ct. 297 (2016).


From this, it was reasonable for the
Board to find that Naim discloses communicating the
claimed information from the portable electronic device 2
to the external communications device, PC 11. We therefore
conclude substantial evidence supports the Board’s
finding that this limitation is disclosed by Naim.

As to secondary considerations to refute obviousness:

Finally, we are not persuaded that the Board erred in
its analysis of Affinity’s proffered objective indicia of
nonobviousness. Affinity pointed to (i) a $25 billion
industry developed around in-vehicle device integration,
which it says is covered by the claims of the ’833 patent;
and (ii) Affinity’s licensing of the ’833 patent and its
siblings to a number of entities in excess of $50 million.
Upon review, however, we agree with the Examiner that
this evidence, at best, establishes a tenuous connection
with the claimed invention.

Evidence of commercial success is only relevant to the
obviousness inquiry “if there is a nexus between the
claimed invention and the commercial success.” Ormco
Corp. v. Align Tech., Inc., 463 F.3d 1299, 1312 (Fed. Cir.
2006). There is no nexus unless the evidence presented is
“reasonably commensurate with the scope of the claims.”
See Rambus Inc. v. Rea, 731 F.3d 1248, 1257 (Fed. Cir.
2013). Here, the Board correctly recognized that Affinity
provided no explanation or analysis that corroborates the
relationship between the claims of the ’833 patent and the
market for in-vehicle device integration technology generally.
Affinity’s argument that the claims of the ’833
patent are directed to the general field of device connectivity
and interoperability, without more, does not establish
a meaningful connection with the asserted
commercial success.


Moreover, the mere fact of licensing alone cannot be
considered strong evidence of nonobviousness if it cannot
also be shown that the licensees did so out of respect for
the patent rather than to avoid the expense of litigation.
See Iron Grip Barbell Co. v. USA Sports, Inc., 392 F.3d
1317, 1324 (Fed. Cir. 2004) (“Our cases specifically require
affirmative evidence of nexus where the evidence of
commercial success presented is a license, because it is
often ‘cheaper to take licenses than to defend infringement
suits.’”). To support its licensing argument, Affinity
did not enter the actual licenses into the record but,
rather, submitted the unsupported declaration of Affinity’s
President that it “has generated revenues of over
$50,000,000 for licensing the ’833 patent and related
patents.” J.A. 10488 (emphasis added).

The outcome

For the foregoing reasons, we affirm the -4281 Board
Decision that claims 1–27, 37–42, and 45–46 are unpatentable.
Because claim 36 was rejected by the Examiner
and Affinity has made no independent argument that
claim 36 was improperly rejected apart from those arguments
made with respect to the independent claims, we
remand to the Board for the limited purpose of correcting
the record to reflect that claim 36 is rejected as unpatentable
before issuing a reexamination certificate. Because
we affirm the -4281 Board Decision, we need not resolve
Affinity’s appeal relating to the -6122 Board Decision
upholding the unpatentability of claims 1–5, 8–20, and
22–27, and dismiss that appeal as moot.

**Separately, from blawgsearch on 5 May 2017:


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