Federal Circuit Limits Scope Of IPR Estoppel, And Vacates Claim Construction That Was Based On Expert Testimony
On September 24, 2020, the Court of Appeals for the Federal Circuit (CAFC) issued an opinion affirming-in-part, reversing-in-part, vacating, and remanding a final judgment of the United States District Court for the Eastern District of Texas that Appellant’s patent claims are not infringed; that Cross-appellant is estopped from raising certain validity challenges based on its joinder to an inter partes review (“IPR”) before the Patent Trial and Appeal Board (“PTAB”); and that asserted claim 6 was not improperly broadened during reexamination. Network-1 Technologies, Inc. v. Hewlett-Packard Co., __ F.3d __ (Fed. Cir. Sept. 24, 2020). In its decision, the CAFC vacated the district court’s judgment of non-infringement as based on incorrect claim construction, vacated the district court’s judgment as a matter of law (“JMOL”) on validity for improperly applying statutory estoppel, and affirmed the district court’s decision with respect to improper claim broadening.
The asserted ’930 patent is directed to methods for automatically determining if remote equipment on an Ethernet network is capable of accepting power over the network. According to the asserted claims, a “low level current” is sent from a network switch powered by a “main power source” to a remote device and, if a preselected varying voltage level is detected in response, a “secondary power source” increases the current so as to power the remote device.
After Appellant filed its complaint in the district court against Cross-appellant and others, another defendant in the district court action petitioned for IPR of the ’930 patent, which was instituted. Following institution, and more than a year after the complaint had been served, cross-appellant filed its own IPR petitions and motions to join the instituted IPR. Cross-appellant’s first petition included grounds different from those that had already been instituted and was denied. Cross-appellant’s second IPR petition and motion to join included only the grounds already instituted, and joinder was granted. In its final written decision on the instituted IPR, the PTAB found the challenged claims not unpatentable.
The ’930 patent was also reexamined twice before the U.S. Patent and Trademark Office. In the first reexamination the patentability of claims 6, 8, and 9, was confirmed and claims 15 and 16 were added which depended from original claim 6. The second reexamination confirmed the patentability of these claims.
Ultimately, in the district court, a jury found that Cross-appellant’s Power over Ethernet switches did not infringe any asserted claim of the ’930 patent and that all asserted claims of the ’930 patent are invalid. The district court then denied Appellant’s motion for a new trial on infringement and granted Appellant’s motion for JMOL that Cross-appellant should have been estopped under 35 U.S.C. § 315(e) from raising certain obviousness challenges that “reasonably could have been raised” in the IPR.
On appeal, Appellant argued that the district court incorrectly construed the claim terms “low level current” and “main power source,” and that this error entitled Appellant to a new trial on infringement.
The CAFC concluded that the district court correctly construed “low level current” as “a non-data-signal current that is sufficient to begin start up of the access device but that is not sufficient to sustain the start up.” Relying on extrinsic evidence, Appellant argued on appeal that the district court erred by construing the phrase “low level current” to have a lower bound. The CAFC disagreed, finding the intrinsic evidence, including the express language of claim 6, requires that at least some level of current is delivered and that the specification of the ’930 patent discloses the lower boundary of current.
The CAFC, however, agreed with Appellant that the district court erred in its construction of “main power source” as “a DC power source,” based on Cross-appellant’s expert testimony that receipt of AC power by a network device would render it inoperable. Specifically, the CAFC concluded that the correct construction of “main power source,” consistent with ordinary meaning, includes both AC and DC power sources and that neither the claims nor the specification of the ’930 patent required a departure from this ordinary meaning or excluded AC power sources. The CAFC consequently ruled that Appellant was entitled to a new trial on infringement.
In dismissing Cross-appellant’s expert testimony on claim construction, the CAFC noted that even though the network device cannot receive AC power, the record establishes that “data nodes” or network switches were commonly used to convert AC power to DC power as needed to power the network devices and that nothing in the claims of the ’930 patent precludes this conversion. The CAFC also found that the district court erred by adding a limitation to the claims to carve out certain inoperable embodiments because it excluded other operable embodiments.
With respect to the district court’s decision granting appellant’s JMOL, Cross-appellant argued that the district court misapplied 35 U.S.C. § 315(e)(2) in barring invalidity arguments not presented in the IPR Cross-appellants had joined. Specifically, Cross-appellant argued that no invalidity ground that it raised at trial “reasonably could have [been] raised” through its joinder to that IPR. The CAFC agreed.
Citing its decision in Facebook, Inc. v. Windy City Innovations, LLC, the CAFC noted that the joinder provision, 35 U.S.C. § 315(c), does not permit a joining party to bring into the proceeding new grounds that were not already instituted. So, reasoned the CAFC, because a joining party cannot bring with it grounds other than those already instituted, the estoppel provision, 35 U.S.C. § 315(e)(2), barring assertion of invalidity grounds that “reasonably could have [been] raised” in the IPR, did not apply. Accordingly, the CAFC vacated the district court’s JMOL decision on validity and remanded to the district court for further proceedings consistent with its opinion.
The CAFC’s opinion concluded by addressing Cross-appellant’s argument that independent claim 6 of the ’930 patent is invalid under 35 U.S.C. § 305 because Appellant improperly broadened claim 6 through the addition of claim 15 and 16 in the ’401 reexamination.
Prior to reexamination, claim 6 of the ’930 patent was construed in two separate district court actions to require the “secondary power source” to be physically separate from the “main power source.” Subsequently, during the ’401 reexamination, Appellant added claims 15 and 16, which depended from claim 6 and respectively added the limitations that the secondary power source “is the same source of power” and “is the same physical device” as the main power source.
After claims 15 and 16 issued at the conclusion of the ’401 reexamination, Cross-appellant moved in district court for summary judgment of invalidity under 35 U.S.C. § 305 for improper claim broadening of claim 6 based on the new dependent claims 15 and 16. The district court denied Cross-appellant’s motion. The CAFC affirmed.
The CAFC explained that the broadening inquiry begins and ends with claim 6, which was not itself amended during the ’401 reexamination. The CAFC also cited its precedent establishing that dependent claims cannot broaden an independent claim from which they depend. Therefore, even were dependent claims 15 and 16 broader than unamended, independent claim 6, the remedy, according to the CAFC, would not be to find claim 6 invalid as broadened, but to invalidate added claims 15 and 16.