Ericsson Prevails on Appeal in Its Efforts to Invalidate a Frequency Hopping Patent

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Appealed PTAB decisions are generally accorded a deferential “substantial evidence” standard by the Federal Circuit. However, this deference did not prevent Ericsson from prevailing in its appeal to the Federal Circuit to reverse the PTAB’s finding of patentability of a patent owned by Intellectual Ventures, Inc. (IV). In a split decision from the Federal Circuit on Tuesday (2016-1671), the majority concluded that the PTAB erred in upholding the validity of a single analyzed claim of the IV patent, reversed the PTAB with respect to that claim, and ordered the PTAB to analyze the remaining claims for patentability.

The IV patent (U.S. Patent No. 6,952,408) covers what is known in the wireless industry as frequency hopping, which generally provides for altering radio frequency channels during communications between base stations and mobile subscribers or other similar entities in an effort to reduce interference. After a number of Ericsson’s customers were accused of infringing the IV patent, Ericsson filed a petition for Inter Partes Review asking the PTAB to institute trial on the claims of the IV patent. Ericsson’s challenge included anticipatory and obviousness arguments based on an earlier patent (owned by the previous assignee of the IV patent (AirNet Communications Corp.) that also disclosed the technology claimed in the IV patent. Trial was instituted on all claims (IPR2014-00963). However, the PTAB analyzed only what it considered to be the broadest claim in the IV patent (claim 1) and did not separately analyze the remaining claims of the IV patent (dependent claims 2-16). Despite its recognition that the AirNet patent and the IV patent shared significant disclosure, the PTAB ultimately adopted the position of the IV expert, i.e., that the AirNet patent did not support frequency hopping, and found that claim 1 was not anticipated by or obvious over the cited references. The PTAB proceeded to uphold the remaining claims of the IV patent valid.

On appeal, the majority of the Federal Circuit panel (Judges Prost and Newman) disagreed with the PTAB on its anticipation ruling. The majority explained that, while the IV patent describes additional components used in frequency hopping as compared to the AirNet patent, “[c]laim 1 of the [IV  patent] is directed to the shared disclosure; any differences in the disclosures are not in claim 1.” It also pointed out that the PTAB erred in focusing on subordinate figures as showing differences in the IV patent and the AirNet patent because those differences are not reflected in claim 1. The majority was also critical of the PTAB’s assessment that Ericsson’s expert lacked credibility and cautioned that “this is not a matter of credibility but of technological evidence.” The court further indicated that the opinion of IV’s expert was an unsupported opinion that must be disregarded as plainly inconsistent with the record. As such, in addressing the PTAB’s decision on anticipation, the majority opined that the PTAB’s decision “is contrary to the evidence.” The criticism from the majority continued as it reviewed the obviousness finding by the PTAB and found that it also was not supported by substantial evidence. And, as previously indicated, the patentability of dependent claims 2-16 will be decided on remand by the PTAB because the record did not adequately analyze those claims.

Judge Wallach dissented and took umbrage at what he considered to be the majority’s substitution of its own factual findings for those of the PTAB. He argued that “the majority errs by conducting a more exacting review than substantial evidence requires” and expounded that “[t]he proper inquiry . . . is not how [the Federal Circuit] would have interpreted the evidence in the first instance; it is whether substantial evidence supports the PTAB’s findings.” More specifically, Judge Wallach challenged the majority’s lack of explanation as to why the PTAB’s consideration of the AirNet patent and the expert testimony did not constitute substantial evidence to support the PTAB’s finding. He further opined that the majority elected to reweigh the evidence, which is contrary to the Federal Circuit’s established precedent.

While the dueling opinions certainly make for a thought-provoking read, unless IV successfully petitions for rehearing and obtains a different result, it is left holding a patent with an invalid independent claim and dependent claims with an uncertain future. To be clear, since the Federal Circuit reversed the PTAB’s finding on claim 1, it reached a decision on the ultimate issue of patentability of that claim without the need for further development of the factual record or involvement from the PTAB. As such, the PTAB’s only business on remand is to decide on the patentability of claims 2-16 in the IV patent. 

Once the Federal Circuit issues its mandate, according to recently issued remand procedures from the USPTO, the PTAB will strive to issue its remand decision within six months. However, the remand procedures still leave much flexibility in whether additional briefing will be allowed, what the subject matter and length of such briefing will be, and what the briefing schedule will look like. Moreover, supplementation of the evidentiary record is highly dependent on the circumstances of the remand. As a result, the procedures on remand necessarily vary based on the remand itself, the panel, and the parties. However, it remains rare for parties to be given an opportunity to appear before the PTAB again in a second oral hearing. In fact, the PTAB may issue its remand decision without any input from the parties and on the same record if, for example, the remand scenario is one where the PTAB failed to consider evidence and the evidence was fully briefed on the record. 

Is there anything that IV or Ericsson could have done differently during the IPR to avoid the uncertainty that it now faces with the remand? The short answer is maybe. The difference in a reversal and a remand stems from whether the Federal Circuit finds the factual record to be complete enough that it can reach a decision on patentability. Here the factual record was incomplete with regard to the PTAB’s treatment of dependent claims 2-16. As such, remand may have been avoided if the parties had developed a more robust record with regard to these claims. In any event, this decision serves as a helpful reminder for those currently in or planning to initiate a post-grant proceeding that it is important to develop a PTAB record that is as complete as possible on all factual issues, even if it means pleading with the PTAB to allow you to do so.