TQ Delta, LLC v. Cisco Sys., Inc.

• Decision Date: 22 November 2019
• Docket Number: 2018-1766, 2018-1767
• Citation: 942 F.3d 1352
• Parties: TQ DELTA, LLC, Appellant v. CISCO SYSTEMS, INC., Dish Network LLC, Comcast Cable Communications, LLC, COX Communications, Inc., Time Warner Cable Enterprises LLC, Verizon Services Corp., ARRIS Group, Inc., Appellees
• Court: U.S. Court of Appeals — Federal Circuit

942 F.3d 1352

TQ DELTA, LLC, Appellant

v.CISCO SYSTEMS, INC., Dish Network LLC, Comcast Cable Communications, LLC, COX Communications, Inc., Time Warner Cable Enterprises LLC, Verizon Services Corp., ARRIS Group, Inc., Appellees

2018-1766, 2018-1767

United States Court of Appeals, Federal Circuit.

Decided: November 22, 2019

Peter J. McAndrews, McAndrews, Held & Malloy, Ltd., Chicago, IL, argued for appellant. Also represented by Andrew B. Karp, James P. Murphy.

Theodore M. Foster, Haynes & Boone, LLP, Dallas, TX, argued for all appellees. Appellee Cisco Systems, Inc. also represented by David L. McCombs, Debra Janece McComas.

Heidi Lyn Keefe, Cooley LLP, Palo Alto, CA, for appellee DISH Network LLC. Also represented by Jennifer Volk-Fortier, Reston, VA.

John Matthew Baird, Duane Morris LLP, Washington, DC, for appellees Comcast Cable Communications, LLC, Cox Communications, Inc., Time Warner Cable Enterprises LLC, Verizon Services Corp., ARRIS Group, Inc. Also represented by Christopher Joseph Tyson.

Before Reyna, Hughes, and Stoll, Circuit Judges.

Circuit Judge Hughes dissents without opinion.

Stoll, Circuit Judge.

In a pair of inter partes review proceedings, the Patent Trial and Appeal Board invalidated all claims of two related patents. TQ Delta, LLC, the patent owner, appeals the Board’s determination that all claims of the challenged patents would have been obvious in view of the prior art asserted by Cisco Systems, Inc., and the other appellees (collectively, "Cisco"). TQ Delta also raises several other challenges to the IPR proceedings relating to the admissibility of evidence, claim construction, and due process. Because fact findings underlying the Board’s obviousness determinations are not supported by substantial evidence, we reverse the Board’s decisions on that ground.

BACKGROUND

This is a consolidated appeal from the final written decisions in a pair of IPRs, IPR2016-01020 and IPR2016-01021,¹ in which the Board invalidated all claims of two related patents, U.S. Patent Nos. 9,014,243 and 8,718,158, respectively. The Board held each claim unpatentable as obvious in view of various prior art combinations that include the two references at issue on appeal, U.S. Patent Nos. 6,144,696 (Shively) and 6,625,219 (Stopler).

I

The challenged patents relate to certain improvements to electronic communications systems that lower the peak-to-average power ratio (PAR) of the transmitted signals. PAR is the ratio of the maximum value of a parameter (e.g., voltage) to the time-averaged value of that parameter. Lowering the PAR of a communications system is desirable because it reduces power consumption and the likelihood of transmission errors.

The challenged patents specifically address a PAR problem that arises in the transmission of digital data using multicarrier communications systems, such as digital subscriber line (DSL) systems. See, e.g., ’243 patent col. 3 ll. 25–37.² In a multicarrier communications system, multiple bits are transmitted simultaneously across a series of narrow frequency bands called "carriers" in an approach known as "Discrete Multitone Modulation" (DMT). See id . at col. 1 ll. 33–47. Each carrier is independently modulated in accordance with its assigned bit, and the carriers are then combined into a single multicarrier signal for transmission of the data. See id.

PAR problems can arise when the carriers are combined into a single signal for transmission of the data. Typically, the transmitted bits are randomly distributed, so they tend to counterbalance each other when summed into the multicarrier transmission signal. But when many of the bits have the same value (i.e., mostly 0 or mostly 1) at or near the same time, they can sum to create multicarrier waveforms with a high amplitude. This situation can arise when multiple carriers are each used to transmit the same data in parallel. As a general matter, high amplitude waves are problematic because the equipment required to deal with them is costlier. But an extremely high amplitude wave also presents a risk of "clipping," a phenomenon in which the peak of the transmitted signal is truncated at the maximum range of the equipment, leading to transmission failure and potential data loss. In the context of DMT systems, when one reduces the probability of these problematic "clipping" events, one is said to have reduced the PAR of the signals transmitted by the system.

The inventors purport to reduce PAR in DMT systems using a new technique. The crux of the invention is to "scramble" the phases of the parallel carriers such that the carriers will not peak at the same time, even if the transmitted bits have mostly the same value. See id. at col. 2 l. 34–col. 3 l. 3. The phase of each carrier is shifted in accordance with a value that is determined independently of the bit value carried by that carrier. Id. at col. 2 ll. 36–43. The resulting transmission signal has a "substantially minimized" PAR. Id. at col. 4 ll. 35–38. The challenged patents disclose a variety of scrambling algorithms that shift the phase of each carrier by some independent amount, thereby reducing PAR. See id. at col. 6 l. 58–col. 8 l. 22, col. 9 l. 53–col. 10 l. 44 (Phase Shifting Examples #1–4).

II

Shively is the primary prior art reference asserted by Cisco in the IPRs. Shively is directed to an improvement to the use of DMT by DSL modems—the same field of technology at issue in the challenged patents. Shively col. 1 ll. 5–8. But Shively addresses a different problem: how to increase transmission capacity by efficiently allocating bits across the various carriers in long-loop systems. See id. at Abstract. In relevant part, Shively increases data throughput by utilizing carriers in combination that would each be inadequate to transmit data independently. See id. at col. 3 l. 54–col. 4 l. 34. Specifically, Shively spreads the transmission of a single bit across several carriers at reduced power levels, and then "despread[s]" the transmission on the receiving end to overcome what would otherwise be unacceptable noise levels in each carrier. Id. at col. 3 ll. 58–67. Shively does not discuss PAR or clipping. The parties’ experts debated the extent to which PAR and clipping would change under Shively’s system.

Stopler is the secondary prior art reference asserted by Cisco in the IPRs. Like the challenged patents and Shively, Stopler is directed to digital data communication systems, including DMT. See Stopler col. 1 ll. 7–11, 42–64. But Stopler is focused on a different problem: improving the efficiency of transmission by mitigating noise and other interference. See id. at Abstract. Specifically, Stopler discloses a "diagonalization" scheme for interleaving the assignment of bits across the various carriers over time, which mitigates the effect of interference on any particular data stream by spreading its impact across different carriers. See id. at col. 5 ll. 10–43, col. 8 ll. 28–53. Like Shively, Stopler never mentions PAR or clipping. Toward the end of its disclosure, Stopler briefly suggests applying a phase scrambling sequence "to randomize the overhead channel symbols" that it sends alongside the transmitted data. Id. at col. 12 ll. 24–26. In order "to simplify implementation," however, Stopler also suggests applying its phase scrambler to all of the transmitted data. Id. at col. 12 ll. 26–28.

III

TQ Delta sued a number of telecommunications companies, including the appellees, for infringement of the ’158 and ’243 patents (among others) in parallel lawsuits in the U.S. District Court for the District of Delaware. In May 2016, Cisco filed two IPR petitions challenging all claims of the ’158 and ’243 patents, which the other appellees joined after institution. Every ground in the petitions was based on the combination of Shively and Stopler, either standalone or in combination with other prior art references not at issue on appeal.

In October 2017, the Board issued its final written decisions. The Board’s decisions invalidated all of the challenged claims as obvious in view of Shively and Stopler, along with other references not at issue on appeal. In doing so, the Board accepted Cisco’s positions as its own findings and conclusions. The Board also relied almost exclusively on the testimony of Cisco’s expert, Dr. Tellado, to rebut TQ Delta’s arguments that a person of ordinary skill would not have been motivated to combine Shively and Stopler. In the final written decisions, the Board also rejected TQ Delta’s proffered claim construction and dismissed as moot TQ Delta’s motion to exclude certain portions of Cisco’s expert testimony. TQ Delta appeals, and we have jurisdiction under 28 U.S.C. § 1295(a)(4)(A).

DISCUSSION

On appeal, TQ Delta raises a variety of issues, including the admissibility of evidence, the Board’s claim construction, the Board’s obviousness determinations, and certain due process concerns. We focus on the Board’s obviousness determinations, and in particular, its factfinding regarding motivation to combine. We hold that the Board’s factfinding is based on conclusory testimony and is therefore unsupported by substantial evidence. Because the Board’s obviousness determinations are not supported by substantial evidence, we reverse the Board’s decisions on that ground.

I

A patent is invalid as obvious "if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains." 35 U.S.C. § 103(a) (2012).³ Obviousness is a question of law based on multiple underlying factual determinations, including "whether a [person of ordinary skill in the art] would have been motivated to combine the prior art to achieve the claimed invention and whether there would have been a reasonable expectation of success in doing so." In re Warsaw Orthopedic, Inc. , 832 F.3d 1327, 1333 (Fed....