Addressing whether the Patent Trial and Appeal Board (PTAB) ran afoul of the Administrative Procedure Act (APA) in finding that a dependent claim was valid despite the patent owner's lack of validity arguments beyond those advanced for the corresponding and invalid independent claim, the US Court of Appeals for the Federal Circuit affirmed the PTAB's ruling and found no APA violation. FanDuel, Inc. v. Interactive Games LLC, Case No. 19-1393 (Fed. Cir. July 29, 2020) (Hughes, J.) (Dyk, J. concurring in part and dissenting in part).
Interactive Games owns a patent directed to a method for allowing users to gamble remotely via a mobile device, according to certain game configurations. Specifically, the independent claim is directed to altering a user's game outcome based on the gaming configuration associated with the location of a user's mobile gaming device. A dependent claim adds the additional limitation of "accessing a lookup table which contains an ordered list of locations and associated game configurations."
FanDuel petitioned for inter partes review (IPR) of the patent as obvious based on three references. The first reference (Carter) disclosed a mobile wagering system capable of determining a gambler's location and restricting access based on the location. Carter's system used a database that correlated various locations with applicable access levels. Importantly, the reference generally indicated that the system may employ various components such as "memory elements, processing elements, logic elements, look-up tables, and the like." The second reference (Walker) disclosed enabling or disabling certain features on a mobile gaming device based on a user's location. And the third reference (the webpage) included a list of slot payouts by casino, city and state, alphabetically organized by state. FanDuel also submitted an expert declaration that the use of look-up tables was well known in the art and that it would have been an obvious design choice to store Carter's jurisdictional information in an "ordered list" similar to the webpage.
In its Preliminary Patent Owner Response, Interactive incorporated its validity arguments for the independent claim into its arguments for the dependent claim, but did not otherwise advance any substantive arguments specific to the dependent claim. The PTAB instituted IPR for all challenged claims. Following institution, Interactive submitted a patent owner response, which again did not advance any substantive arguments specific to the dependent claim. While Interactive did submit an expert declaration, the statements made by FanDuel's expert specific to the dependent claim were uncontested. Ultimately, the PTAB found the independent claim invalid, but found the dependent claim valid. FanDuel appealed.
FanDuel argued that the PTAB's decision with respect to the dependent claim violated the APA because the PTAB changed its obviousness theory midstream. FanDuel alleged that no further record development was presented regarding the dependent claim after institution, and therefore a finding of validity in light of the PTAB's decision to institute amounted to a changed position by the PTAB, to which FanDuel was entitled notice and an opportunity to respond.
The Federal Circuit disagreed and affirmed the PTAB's decision. In finding that the PTAB did not violate the APA, the Court noted that the PTAB said nothing in its institution decision that specifically adopted FanDuel's arguments regarding the dependent claim. The Court also noted that "to the extent the Board changed theories," the PTAB was not required to provide notice to FanDuel for two reasons. First, the Court noted that the standard of proof required to institute an IPR (reasonable likelihood that the petitioner will succeed) is different than the proof required to actually invalidate a claim (preponderance of the evidence). FanDuel attempted to counter this argument by citing to the Federal Circuit's 2016 decision in TriVascular, Inc. v. Samuels, which it claimed stands for the proposition that some additional record development on a particular issue must occur post-institution for the PTAB to change its view. The Court disagreed, stating that TriVascular does not create a condition precedent that the PTAB can only change its view of the record when additional argument or evidence relevant to that change is added after institution.
Second, the Court emphasized that the burden of proving invalidity in an IPR remains on the petitioner throughout the proceeding. A patent owner is not required to file any responses in an IPR proceeding. Requiring further post-institution development on whether the references render the dependent claim obvious in order for the PTAB to reach that question in its final decision would "effectively and impermissibly shift the burden to the patent owner to defend its claim's patentability." Failure to put forth rebuttal evidence regarding the substance of a reference's disclosure does not limit the PTAB's ability to decide for itself what a reference does or does not teach to one of skill in the art. Accordingly, the Court found that no APA violation had occurred and upheld the PTAB's validity finding regarding the dependent claim.
Judge Dyk agreed with the majority that no APA violation had occurred but dissented on the substance of the non-obviousness determination. He argued that the majority and the PTAB held an "impermissibly rigid view of the prior art requiring a specific motivation to combine look-up tables and ordered lists to implement Carter's jurisdictional profiles." Judge Dyk further noted that both the majority and the PTAB agreed that there is no dispute in the record that look-up tables and ordered lists were well-known design choices, yet these well-known design choices were insufficient to show a motivation to combine. Reiterating that KSR requires an "expansive and flexible approach," Judge Dyk stated that "[t]he Board's view of what was required is simply wrong."
Originally published by McDermott, August 2020
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