Federal Circuit Affirms PTAB’s Obviousness Decision And Finds Challenge To “Real Party In Interest” Requirement Non-Appealable
On May 19, 2020, the Court of Appeals for the Federal Circuit (CAFC) issued an opinion affirming the obviousness decision of the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB), and finding non-appealable the PTAB’s decision to institute inter partes review (IPR) notwithstanding a challenge that Petitioner-Appellee failed to identify “all real parties in interest.” ESIP Series 2, LLC v. Puzhen Life USA, LLC, __ F.3d __ (Fed. Cir. May 19, 2020). The CAFC found that substantial evidence supported the PTAB’s finding that a skilled artisan would have been motivated to combine the teachings of each prior art reference to arrive at the claimed invention, and that Patent Owner-Appellant’s challenge to the PTAB’s “real parties in interest” determination was not appealable.
The challenged ’130 patent relates to “vaporizers” or “diffusers,” and purports to overcome a number of problems in the prior art that stem from the diffusion of overly large particles. The ’130 patent explains that overly large particles cause waste and reduce effectiveness because “rather than remaining in the air until they have evaporated or been incorporated into the atmosphere, they may settle out relatively quickly, onto surfaces, furniture, floors, into HVAC systems, or the like.” To avoid these problems, the claimed invention describes a “micro-cyclone” that promotes the diffusion of ultra-fine droplets. The micro-cyclone causes larger particles in the stream of air to smash and coalesce against the inside of the outer wall of a spiral channel, leaving only the smallest range of droplets to be passed out of the nozzle. The ’130 patent explains that the larger droplets, after coalescing, drip back into the atomizer to be re-atomized.
In 2017, Petitioner-Appellee filed a petition for IPR of the ’130 patent, alleging that certain claims were obvious in view of three prior art references. The PTAB found that the first reference (“Sevy”) disclosed all of the limitations of the claims except for one, that the other two references (“Cronenberg” and “Giroux”) disclosed the missing limitation, and that a skilled artisan would have been motivated to combine the teachings of either Cronenberg or Giroux with Sevy in order to arrive at the claimed invention.
Obviousness is a question of law with underlying factual findings relating to the scope and content of the prior art, the differences between the prior art and the claims, the level of ordinary skill in the pertinent art, the presence or absence of a motivation to combine or modify the prior art with a reasonable expectation of success, and any objective indicia of non-obviousness.
On appeal, Patent Owner-Appellant’s substantive challenge related to four of the PTAB’s factual findings relating to obviousness.
First, with respect to a claim limitation requiring separating droplets by passing the flow through an orifice in a wall, Patent Owner-Appellant argued that Sevy’s orifice did not function as a “separator” because it could not discriminate with regard to the size of the particles passing through. In rejecting this argument, the CAFC found that substantial evidence supported the PTAB’s finding that Sevy discloses that droplets with too large a size and mass would not be able to quickly turn to follow the flow of air, and that Petitioner-Appellee’s expert was credible when he testified that Sevy’s separator plate segregates atomizer droplets.
Second, with respect to this same claim limitation, Patent Owner-Appellant argued that Giroux did not disclose a vortex that separates large droplets from the air flow, relying on expert testimony that Giroux’s vortex, allegedly, did not result in the larger droplets being separated from the vortex or separated from the air flow. In rejecting this argument, the CAFC again found that substantial evidence supported the PTAB’s decision, explaining that the PTAB found Patent Owner-Appellant’s expert’s testimony conclusory and unsupported, and, instead, credited Petitioner-Appellee’s expert’s testimony, which relied on Giroux’s teachings that its vortex sends the larger droplets to the outside rings and keeps the smaller droplets in the air stream for a longer period of time.
Third, Patent Owner-Appellant argued that the PTAB erred in finding that a skilled artisan would have been motivated to replace the aperture in Sevy with the arcuate passageway of Cronenberg to arrive at the claimed invention. In rejecting this argument, the CAFC found that substantial evidence supported the PTAB’s finding that Sevy and Cronenberg teach two alternative methods for achieving the separation of droplets from the mixed droplet-air flow, and that a skilled artisan would have been motivated to substitute one method for the other. The CAFC explained that the PTAB, in reaching its finding, properly relied on the disclosures of Sevy and Cronenberg, and the testimony of Petitioner-Appellee’s expert.
Fourth, Patent Owner-Appellant argued that the PTAB erred in finding that a skilled artisan would have been motivated to replace the straight orifice in Sevy’s plate with the channel defined by Giroux’s helical baffle to arrive at the claimed invention. Again, the CAFC found that substantial evidence supported the PTAB’s finding, which credited Petitioner-Appellee’s expert’s testimony as opposed to Patent Owner-Appellant’s.
In addition to its substantive arguments regarding obviousness, Patent Owner-Appellant further argued that the PTAB’s threshold decision to institute IPR was incorrect because Petitioner-Appellee failed to identify certain “real parties in interest” as is required by 35 U.S.C. § 312(a).
Supreme Court precedent has interpreted 35 U.S.C. § 314(d) to preclude review of PTAB decisions concerning questions that are closely tied to the application and interpretation of statutes related to the PTAB’s decision to institute IPR. See Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016); Thryv, Inc. v. Click-To-Call Techs., LP, 140 S. Ct. 1367 (2020).
In light of these decisions, the CAFC found “no principled reason why preclusion of judicial review under 314(d) would not extend to a [PTAB] decision concerning the ‘real parties in interest’ requirement of § 312(a)(2).” The CAFC explained that Patent Owner-Appellant’s contention that the PTAB failed to comply with § 312(a)(2) is “a contention that the agency should have refused to institute an inter parties review.” And, thus, the CAFC held that Patent Owner-Appellant’s challenge to the PTAB’s real party in interest determination raised an ordinary dispute about the application of an institution-related statute, and that § 314(d) therefore precludes review of that determination.
The CAFC’s opinion in this regard further extends the doctrine of non-appealability of institution-related decisions by the PTAB.