On Wednesday, the Federal Circuit issued its opinion in Uniloc 2017 LLC v. Hulu, LLC, a case we have been tracking because it attracted an amicus brief. In the opinion, Judges Wallach and Taranto affirmed the denial of a motion for rehearing by the U.S. Patent Trial and Appeal Board. In particular, they confirmed that the Board may consider § 101 eligibility challenges to proposed substitute claims in inter partes review proceedings. Judge O’Malley filed a dissenting opinion based on her view that the case is moot. Here is a summary of the opinion and dissent.

As explained in our argument preview, in this case Uniloc contends that the Patent Trial and Appeal Board “erred in denying, based only on a § 101 patent eligibility challenge, Uniloc’s motion to amend the patent.” In particular, Uniloc’s position is that § 101 challenges are not permissible in IPRs, even with respect to proposed new claims. It further contends, however, that “if the Court determines that the Board may consider a § 101 eligibility challenge in IPR proceedings, Uniloc should be allowed on remand to dispute the Board’s substantive determination on § 101, particularly under the PTO’s 2019 Revised Patent Subject Matter Eligibility Guidance.” On appeal, an amicus brief was filed in opposition to Uniloc’s position.

Judge Wallach wrote the opinion for the panel, which as mentioned affirmed the Board’s decision to deny Uniloc’s motion for rehearing on its amended patent claim. In the introduction, Judge Wallach described the relevant facts:

Appellees Hulu, LLC and Netflix, Inc. (together, “Hulu”) filed a petition with the PTAB to institute an IPR of claims 1–25 of Uniloc’s ’960 patent. . . . On August 1, 2018, the PTAB issued a final written decision finding claims 1–8, 18–22, and 25 unpatentable over the prior art. . . . Eight months earlier in the IPR, in January 2018, Uniloc had filed a Motion to Amend, within the PTAB-specified due date, asking the PTAB to enter the Substitute Claims (claims 26–28) for independent claims 1, 22, and 25 if the PTAB found the latter unpatentable. . . . Hulu opposed the Motion to Amend in February 2018, arguing, among other things, that the Substitute Claims are directed to patent-ineligible subject matter under § 101. . . . Uniloc replied in March 2018 that Hulu was not permitted to raise a § 101 argument in opposition to the Substitute Claims, but did not respond with substantive arguments that its Substitute Claims meet the standards for eligibility under § 101. . . . In its Final Written Decision, the PTAB . . . denied Uniloc’s Motion to Amend the claims . . . . Uniloc requested a rehearing . . . . The PTAB denied Uniloc’s Request for Rehearing, concluding that § 101 eligibility may be considered by the PTAB in determining proposed substitute claim patentability in IPR proceedings.

The primary issue on appeal was whether the PTAB “is permitted to review and deny proposed substitute claims during IPR proceedings for patent ineligibility pursuant to § 101. Additionally, the court addressed an argument presented by Hulu that the Federal Circuit lacked jurisdiction in this case on the ground of mootness.

The court rejected Hulu’s mootness argument, and then found that the PTAB did not err in denying the motion to add substitute claims.

The court began with the mootness argument. Hulu contended that a final judgment finding that the claims were unpatentable ended the IPR. Because Uniloc’s motion was contingent on a finding that the original claims were unpatentable, Hulu argued that the motion was rendered moot by the final judgment on those original claims. According to Hulu, “the USPTO lacked statutory authority to consider the proposed substitute claims.”

The court rejected this argument, concluding that “the PTAB was authorized by statute to assess Uniloc’s proposed Substitute Claims for eligibility under § 101 and, finding the claims ineligible, to deny the motion to amend.” First, it pointed out that Hulu waived its arguments because Hulu did not make the argument to the PTAB during the IPR, Hulu did not make the argument in response to Uniloc’s petition for rehearing, Hulu made no cross-appeal attempting to secure a vacatur and dismissal from the Federal Circuit, and Hulu didn’t present any such argument in its brief as an appellee, a brief which only sought affirmance. The court likewise rejected Hulu’s argument on the merits, explaining that “it would be unprecedented, and contrary to the established practice of considering contingent motions to amend, to treat the contingency (finding original claims unpatentable) as ending the IPR so that the proposed substitute claims could no longer be considered.” Further, the court found “no statutory language that provides a basis for concluding that, once original claims no longer present a live dispute, the PTAB and the USPTO lose authority to consider proposed substitute claims that were presented in a contingent motion timely filed during the IPR when the original claims did present a live dispute.”

The court then addressed the merits, finding that “[t]he PTAB correctly concluded that it is not limited by [35 U.S.C.] § 311(b) in its review of proposed substitute claims in an IPR, and that it may consider § 101 eligibility.”

In drawing this conclusion, the court primarily turned to the text of the IPR statute. The court found that the IPR statutory sections “plainly and repeatedly require the PTAB to determine the ‘patentability’ of proposed substitute claims.” In particular, 35 U.S.C. § “318 requires the PTAB to ‘issue a final written decision with respect to the patentability of . . . any new claim added under [35 U.S.C. §] 316(d).’” According to the court’s precedent, the court explained, “a § 101 analysis constitutes a ‘patentability’ determination,” and therefore “[t]he plain language of the IPR [statutory provisions] demonstrates Congress’ intent for the PTAB to review proposed substitute claims for overall ‘patentability’—including under § 101—of the claims.”

The court rejected Uniloc’s claim that Congress intended § 311 to constrain the PTAB’s review of proposed substitute claims only to anticipation and obviousness, statutory grounds for rejection recited in 35 U.S.C. §§ 102 and 103. The court concluded that § 311 “is confined to the review of existing patent claims, not proposed ones.” The court explained that § 311 limits a “request to cancel” to § 102 and § 103, and, since a proposed substitute claim has not been approved or issued by the USPTO and has no prior force or effect, it cannot be “canceled.”

The court also looked to the structure and legislative history of the IPR statutes to support its conclusion. Because § 311 is a provision applying to the petition phase of the proceedings, the court found that it should not bind the adjudication stage provisions, such as § 316, which guides trial conduct. Further, the court found it was Congress’s intent “to permit the PTAB to address issues that ‘have escaped review at the time of initial examination.’” The court also maintained that, “if a patent owner seeking amendments in an IPR were not bound by § 101 and § 112, then in virtually any case, it could overcome prior art and obtain new claims simply by going outside the boundaries of patent eligibility.”

The court found Uniloc’s remaining arguments unpersuasive, “including its argument that it should be given a second chance to address § 101 on the merits in the USPTO, having bypassed the full opportunity it already had.” Thus, the court affirmed the PTAB’s denial of rehearing.

In her dissent, Judge O’Malley maintained that the case is in fact moot. She asserted that ordinarily the court refuses to consider any appeal when it has finally adjudged a patent claim to be invalid. But, she claimed, “[h]ere, rather than follow that usual procedure, the majority breathes life into a dead patent and uses the zombie it has created as a means to dramatically expand the scope of inter partes review.” According to Judge O’Malley, the majority is mistaken that there is some possibility of relief available to Uniloc. She asserts that “relief is possible only if, in the event of a remand, the Board has authority to issue substitute claims.” The court’s affirmance of a district court’s previous ineligibility determination, however, meant that Uniloc “owned nothing and could not, therefore, substitute its old claims for new ones.” Further, she said, the majority “misses the point” by focusing largely on the authority of the Board in an ongoing IPR.

Judge O’Malley also argued that allowing the Board to “engage in a full-blown examination [of substitute claims] runs contrary to the plain language of the statute and the policy of efficiency that underlies the IPR system.” She first criticized the majority for its heavy textual focus, which she claimed was “cherry picking provisions out of context.” She also criticized it for declaring Congress’ intent while “notably citing no legislative history.” Turning to the statute’s framework, Judge O’Malley pointed out that substitute claims only come into existence after § 311 sets the scope of IPR proceedings. She explained that “Congress did not need to rearticulate a parameter already expressed in prior provisions: IPRs are limited to §§ 102 or 103.” Thus, she concluded that the “overall structure indicates that Congress intended to limit the Board’s authority to a review of the specified patentability grounds.” Finally, she concludes that IPRs are meant to be an efficient, cost-effective means for determining patent validity, and allowing for “full-blown examination” undermines this goal.