Sightsound Techs., LLC v. Apple Inc.

• Decision Date: 15 December 2015
• Docket Number: 2015–1160.,Nos. 2015–1159,s. 2015–1159
• Citation: 809 F.3d 1307
• Parties: SIGHTSOUND TECHNOLOGIES, LLC, Appellant v. APPLE INC., Appellee
• Court: U.S. Court of Appeals — Federal Circuit

809 F.3d 1307

SIGHTSOUND TECHNOLOGIES, LLC, Appellant

v.APPLE INC., Appellee

Nos. 2015–1159

2015–1160.

United States Court of Appeals, Federal Circuit.

Dec. 15, 2015.

Matthew Wolf, Arnold & Porter LLP, Washington, DC, argued for appellant. Also represented by Jennifer Sklenar, Los Angeles, CA.

Douglas Hallward–Driemeier, Ropes & Gray LLP, Washington, DC, argued for appellee. Also represented by Jon Steven Baughman, Sharon Lee, Megan Freeland Raymond, Paul Michael Schoenhard, Darrell Stark ; Ching–Lee Fukuda, New York, N.Y.; James Richard Batchelder, Lauren Nicole Robinson, East Palo Alto, CA.

Benjamin T. Hickman, United States Patent and Trademark Office, Office of the Solicitor, Alexandria, VA, argued for intervenor Michelle K. Lee. Also represented by Nathan K. Kelley, Scott C. Weidenfeller.

Before LOURIE, DYK, and HUGHES, Circuit Judges.

DYK, Circuit Judge.

SightSound Technologies, LLC ("SightSound") is the owner of U.S. Patent No. 5,191,573 (the "'573 patent") and 5,966,440 (the " '440 patent"). Apple Inc. ("Apple") petitioned the United States Patent and Trademark Office ("PTO") for covered business method ("CBM") review of claims 1, 2, 4, and 5 of the '573 patent and claims 1, 64, and 95 of the '440 patent. The PTO granted Apple's petition and instituted CBM review. The Patent Trial and Appeal Board ("the Board") issued a final decision finding all the challenged claims would have been obvious. SightSound appealed.

We hold that we lack jurisdiction to review the PTO's decision to consider issues not explicitly raised in the petitions. We do, however, have jurisdiction to review whether the patents qualify as CBM patents. We affirm the Board's determination that the '573 and '440 patents qualify as CBM patents. Finally, we affirm the Board's final decision with respect to claim construction and obviousness.

BACKGROUND

The '573 and '440 patents owned by SightSound disclose methods for the electronic sale and distribution of digital audio and video signals. Each of the relevant claims requires (1) forming a connection, through telecommunications lines, between a first party's first memory and a second party's second memory; (2) selling the desired digital video or digital audio signals to the second party for a fee through telecommunications lines; (3) transmitting the desired signal from the first memory to the second memory via telecommunications lines; and (4) storing the transmitted signal in the second memory. E.g., '440 patent col. 8 ll. 44–64; '573 patent col. 6 ll. 4–24. Dependent claim 2 of the '573 patent adds the step of searching for and selecting a signal from the first memory after the signal has been transferred. '573 patent col. 6 ll. 25–29. Claims 4 and 5 of the '573 patent are the same as claims 1 and 2 respectively, but substitute digital video for audio signals. Id. col. 6 ll. 36–59. Claims 64 and 95 of the ' 440 patent recite additional limitations, including storing digital signals "in the second party hard disk." U.S. Patent No. 5,966,440 C1 (re-examination certificate) ("'440 C1 patent") col. 8 ll. 14–44, col. 13 ll. 14–51.

On May 6, 2013, Apple filed petitions with the Board seeking CBM review of the '573 and '440 patents under AIA § 18. See Leahy–Smith America Invents Act ("AIA"), Pub.L. 112–29, 125 Stat. 284, 329–31 (2011).¹ Apple argued that claims 1, 2, 4, and 5 of the '573 patent and claims 1, 64, and 95 of the '440 patent were invalid as anticipated under 35 U.S.C. § 102. The Board instituted CBM review. In instituting review, the Board applied the definition of CBM in the statute and regulations. See AIA § 18(d); 37 C.F.R. § 42.301. The Board first determined that the '573 and '440 patents are CBM patents because they recite the electronic movement of money between financially distinct entities, an activity that is "financial in nature," and do not include novel and non-obvious technological features that would otherwise excluded them from CBM treatment. J.A. 556–59, 987–94. The Board then determined that there was a reasonable likelihood that the asserted claims were anticipated or rendered obvious by a series of disclosures relating to a computer system developed by CompuSonics in the 1980s. Although Apple's petitions included the grounds on which the PTO instituted review with respect to anticipation and alleged facts to support obviousness, the petitions did not specifically allege obviousness over CompuSonics. The Board nonetheless held that it was appropriate to initiate review on obviousness grounds: "[I]n addition to Petitioner's asserted ground of anticipation ... we exercise our discretion to institute a covered business method review ... on the ground of unpatentability over the CompuSonics publications under 35 U.S.C. § 103(a)." J.A. 571.

During the CBM proceedings SightSound argued that it had been deprived of a fair opportunity to respond to the obviousness grounds on which the CBM review had been instituted. The Board granted SightSound additional time for argument and authorized it to file sur-replies and new declaration testimony on the issue of obviousness, "to ensure that Patent Owner has a full and fair opportunity to be heard on the issue of obviousness." J.A. 709, 1003.

In its final decision on the merits, the Board rejected SightSound's contention that the term "second memory" is limited to non-removable media, relying on the claim language, specification, and prosecution history to conclude that under the broadest reasonable interpretation standard the term encompasses any second storage space in a computer medium that is capable of retaining data or instructions and is not limited to hard disks. The Board reaffirmed the initiation decision that the Board did not exceed its jurisdiction when it initiated CBM review, explaining that, while Apple's petitions did not assert obviousness explicitly, they nevertheless "supported [such] a ground" based on their detailed explanation of the various CompuSonics references. J.A. 25–27, 92–94. The Board held claims 1, 2, 4, and 5 of the ' 573 patent and claim 1 of the '440 patent invalid as obvious. It found that "Apple explains in detail in its Petition[s] how the CompuSonics publications teach every limitation" of the claims, J.A. 31, 98, and that the reason to combine was manifested by the references themselves. The Board also held claims 64 and 95 of the '440 patent invalid as obvious, finding that the CompuSonics publications would have suggested to an ordinary artisan the desirability of using a hard disk in connection with the other claimed aspects of the invention. SightSound appealed. The PTO intervened. We have jurisdiction to review the Board's final decision under 28 U.S.C. § 1295(a)(4)(A) and 35 U.S.C. § 329.

DISCUSSION

I

We first address the question of jurisdiction. CBM patents are governed by the special provisions of AIA § 18. For purposes of conducting proceedings and appellate review, section 18 is considered part of the broader chapter 32 provisions of title 35 of the U.S.Code, governing post-grant review ("PGR").² Decisions relating to the institution of CBM review are not reviewable. "The determination by the Director whether to institute a post-grant review under this section shall be final and nonappealable." 35 U.S.C. § 324(e). As noted, this provision is applicable to both PGR and CBM proceedings; the Board acts for the Director in deciding whether to institute a review. See AIA § 18(a)(1); 37 C.F.R. § 42.4. After CBM review is instituted, CBM review proceeds before the Board, and concludes with the Board's "final written decision" pursuant to 35 U.S.C. § 328(a). Section 329 provides for appeal of that decision to this court. Thus the decision whether to initiate is not appealable, but the final decision is subject to review. See In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 1273 (Fed.Cir.2015).

A

SightSound contends that we should set aside the final decision because the proceedings were improperly initiated since Apple did not explicitly raise the issue of obviousness in its petitions.³ The Board rejected this argument, explaining that Apple's petitions supported review for obviousness because they explained in detail how the CompuSonics disclosures "teach every limitation of the claims ... and describe similar features and relate to each other." J.A. 26. Because the CompuSonics references described various advantages of a system that would enable electronic music processing, "the references themselves demonstrate that a person of ordinary skill in the art would have been led to create a system for users to purchase and download music." Id. at 40. The PTO and Apple argue that the statute and our prior decision in In re Cuozzo Speed Technologies., 793 F.3d at 1268, bars this Court from reviewing whether the Board properly initiated review when obviousness was not explicitly raised in the petitions. We agree.

In Cuozzo we considered § 314(d), applicable to inter partes review proceedings, which mirrors the bar on appeal in § 324(e). It provides that "[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable." 35 U.S.C. § 314(d). There, Cuozzo argued that the PTO improperly instituted inter partes review with respect to certain claims because it relied on prior art references not identified by the petitioner in its petitions contrary to the requirements of 35 U.S.C. § 312(a)(3). Cuozzo, 793 F.3d at 1272. We rejected Cuozzo's challenge as barred by the statute. Id. at 1274. We held that § 314(d)"bar[s] review of all institution decisions, even after the Board issues a final decision." Id. at 1273. We explained that generally institution decisions are not reviewable, and in particular a challenge based on a defect in the initiation that could have been cured by a proper pleading is not reviewable. Id. at 1274. Only limitations on the Board's authority to issue a final decision are subject to review.

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