Uniloc 2017 LLC v. Hulu, LLC

• Decision Date: 22 July 2020
• Docket Number: 2019-1686
• Parties: UNILOC 2017 LLC, Appellant v. HULU, LLC, Netflix, Inc., Appellees Andrei Iancu, Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, Intervenor
• Court: U.S. Court of Appeals — Federal Circuit

966 F.3d 1295

UNILOC 2017 LLC, Appellant

v.HULU, LLC, Netflix, Inc., Appellees

Andrei Iancu, Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, Intervenor

2019-1686

United States Court of Appeals, Federal Circuit.

Decided: July 22, 2020

Brian Matthew Koide, Etheridge Law Group, Southlake, TX, argued for appellant. Also represented by James Etheridge, Ryan S. Loveless, Brett Mangrum.

Nathan K. Kelley, Perkins Coie, LLP, Washington, DC, argued for appellees. Also represented by Dan L. Bagatell, Hanover, NH; Andrew Dufresne, Madison, WI; Matthew Cook Bernstein, San Diego, CA; Bobbie J. Wilson, San Francisco, CA; Daniel T. Shvodian, Palo Alto, CA.

Farheena Yasmeen Rasheed, Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA, argued for intervenor Andrei Iancu. Also represented by Joseph Matal, Thomas W. Krause ; Melissa N. Patterson, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC. Also argued by Jeffrey Eric Sandberg, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC.

Adam Howard Charnes, Kilpatrick Townsend & Stockton LLP, Dallas, TX, for amicus curiae Askeladden L.L.C. Also represented by John Steven Gardner, Chris William Haaf, Winston-Salem, NC.

Before O'Malley, Wallach, and Taranto, Circuit Judges.

Dissenting opinion filed by Circuit Judge O'Malley.

Wallach, Circuit Judge.

Appellant Uniloc 2017 LLC ("Uniloc") appeals the U.S. Patent and Trademark Office's ("USPTO") Patent Trial and Appeal Board's ("PTAB") denial of its motion for rehearing in the inter partes review ("IPR") of Uniloc's U.S. Patent No. 8,566,960 ("the ’960 patent"), arguing that "[t]he PTAB misapprehended the law in concluding it is permissible in an IPR proceeding for the [PTAB] to consider a § 101 challenge" to Uniloc's proposed substitute claims ("the Substitute Claims"). J.A. 597; see J.A. 596–602 (Uniloc's Request for Rehearing). In denying Uniloc's request, the PTAB concluded that it may analyze § 101 patent eligibility for proposed substitute claims. see Amazon.com, Inc. v. Uniloc Lux. S.A. ("Rehearing Denial "), No. IPR2017-00948, 2019 WL 343802, at *5 (P.T.A.B. Jan. 18, 2019). The USPTO Director designated the Rehearing Denial as precedential. See id.

Uniloc timely appealed under 35 U.S.C. §§ 141(c), 142, and 319. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(4)(A). We affirm.

BACKGROUND

I. The Statutory Framework

Congress enacted the Leahy-Smith America Invents Act ("AIA"), Pub. L. No. 112–29, 125 Stat. 284, in 2011 to "improve patent quality and limit unnecessary and counterproductive litigation costs[,]" H.R. REP. No. 112-98, pt. I, at 40 (2011). The AIA included changes to the inter partes reexamination provisions. See 35 U.S.C. §§ 311 – 319 (together, the "IPR Statutes"). Specifically, Congress replaced inter partes reexamination with IPR, which "was designed to improve on the inter partes reexamination process." Regents of the Univ. of Minn. v. LSI Corp. , 926 F.3d 1327, 1335 (Fed. Cir. 2019), cert. denied , ––– U.S. ––––, 140 S. Ct. 908, 205 L.Ed.2d 458 (2020). "Although Congress changed the name from ‘reexamination’ to ‘review,’ nothing convinces us that, in doing so, Congress wanted to change its basic purposes, namely to reexamine an earlier agency decision." Id. (quoting Cuozzo Speed Techs., LLC v. Lee , ––– U.S. ––––, 136 S. Ct. 2131, 2137, 195 L.Ed.2d 423 (2016) ).

Under the AIA, "a person who is not the owner of a patent may file with the [USPTO] a petition to institute an [IPR] of the patent[,]" 35 U.S.C. § 311(a), but may "request to cancel as unpatentable [one] or more claims of a patent only on a ground that could be raised under [§] 102 or 103[,]" id. § 311(b) ; see id. §§ 102(a)(1) (2006) (providing that "[a] person shall be entitled to a patent unless the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before [its] effective filing date"), 103 (2006) ("A patent may not be obtained ... 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.").¹ The USPTO Director may institute an IPR if the petition "shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least [one] of the claims challenged in the petition." Id. § 314(a); see Oil States Energy Servs. v. Greene's Energy Grp., LLC , ––– U.S. ––––, 138 S. Ct 1365, 1371, 200 L.Ed.2d 671 (2018) ("The decision whether to institute [IPR] is committed to the Director's discretion."). The PTAB "shall ... conduct each [IPR] instituted[,]" 35 U.S.C. § 316(c), where "the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence[,]" id. § 316(e).

"During an [IPR] ..., the patent owner may file [one] motion to amend the patent" by "[c]ancel[ing] any challenged patent claim" and "[f]or each challenged claim, propose a reasonable number of substitute claims." Id. § 316(d)(1). The proposed substitute claims "may not enlarge the scope of the claims of the patent or introduce new matter." Id. § 316(d)(3). When an IPR is completed, "the [PTAB] shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner and any new claim added under [§] 316(d)." Id. § 318(a). Moreover, "the Director shall issue and publish a certificate ... incorporating in the patent by operation of the certificate any new or amended claim determined to be patentable." Id. § 318(b). "Any proposed amended or new claim determined to be patentable and incorporated into a patent following an [IPR]" will "have the same effect as" reissued patents have on certain intervening rights under 35 U.S.C. § 252. Id. § 318(c).

II. The ’960 Patent

Entitled "System and Method for Adjustable Licensing of Digital Products," the ’960 patent is directed to the "problem ... that consumers of software ... use ... digital products on multiple devices[,]" where consumers have "a legitimate need to install and use the software on every computer." ’960 patent col. 1 ll. 31–34, 40–41. The ’960 patent teaches the "adjust[ment] [of] the number of devices allowed to use a digital product (e.g., software) under a license." Id. , Abstract. To enable the communication involving the adjustable license, the ’960 patent discloses computer components, such as a "processor module" and a "memory module." Id. col. 7 ll. 46–47; see id. col. 7 ll. 36–47.

Independent claim 26, proposed as a substitute to independent claim 1, is illustrative of the Substitute Claims, and recites:

A system for adjusting a license for a digital product over time, the license comprising at least one allowed copy count corresponding to a maximum number of devices authorized for use with the digital product, comprising:

a communication module for receiving a request for authorization to use the digital product from a given device, the request comprising:

license data associated with the digital product; and

a device identity generated at the given device at least in part by sampling physical parameters of the given device;

a processor module in operative communication with the communication module;

a memory module in operative communication with the processor module and comprising executable code for the processor module to:

verify that the license data associated with the digital product is valid;

in response to the license data being verified as valid, determine whether the device identity is currently on a record;

in response to the device identity already being on the record allow the digital product to be used on the given device;

in response to the device identity not currently being on the record, temporarily adjust the allowed copy count from its current number to a different number by setting the allowed copy count to a first upper limit for a first time period, the first upper limit corresponding to the maximum number of devices authorized to use the digital product during the first time period;

calculate a device count corresponding to total number of devices currently authorized for use with the digital product; and

when the calculated device count is less than the first upper limit, allow the digital product to be used on the given device.

J.A. 339–40.²

III. Procedural History

Appellees Hulu, LLC and Netflix, Inc. (together, "Hulu") filed a petition with the PTAB to institute an IPR of claims 1–25 of Uniloc's ’960 patent. J.A. 89; see J.A. 89–164 (Petition for IPR).³ The PTAB instituted the IPR in August 2017.

Amazon.com, Inc. v. Uniloc Lux. S.A. ("Institution Decision "), No. IPR2017-00948, 2017 WL 3484959 (P.T.A.B. Aug. 14, 2017). On August 1, 2018, the PTAB issued a final written decision finding claims 1–8, 18–22, and 25 unpatentable over the prior art. see Amazon.com, Inc. v. Uniloc Lux. S.A. ("Final Written Decision "), No. IPR2017-00948, 2018 WL 3695200, at *30 (P.T.A.B. Aug. 1, 2018).⁴

Eight months earlier in the IPR, in January 2018, Uniloc had filed a Motion to Amend, within the PTAB-specified due date, asking the PTAB to enter the Substitute Claims (claims 26–28) for independent claims 1, 22, and 25 if the PTAB found the latter unpatentable. see id. at *1 ; J.A. 310–51 (Motion to Amend); J.A. 313. Hulu opposed the Motion to Amend in February 2018, arguing, among other things, that the Substitute Claims are directed to patent-ineligible subject matter under § 101. J.A. 386; see J.A. 381–413 (Opposition to Motion to Amend). Uniloc replied in March 2018 that Hulu was not permitted to raise a § 101 argument in opposition to the Substitute Claims, but did not respond with substantive arguments that its Substitute Claims meet the standards for eligibility under § 101....