Ericsson Inc. v. Intellectual Ventures I LLC , 901 F.3d 1374 ( 2018 )

United States Court of Appeals
for the Federal Circuit
______________________
ERICSSON INC., TELEFONAKTIEBOLAGET LM
ERICSSON,
Appellants,
v.
INTELLECTUAL VENTURES I LLC,
Appellee
______________________
2017-1521
______________________
Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. IPR2015-
01367.
______________________
Decided: August 27, 2018
______________________
STEVEN GARRETT SPEARS, Baker & Hostetler LLP,
Houston, TX, argued for appellants. Also represented by
GREGORY MATTHEW MCCLOSKEY, Cesari and McKenna,
LLP, Boston, MA.
BYRON LEROY PICKARD, Sterne Kessler Goldstein &
Fox, PLLC, Washington, DC, argued for appellee. Also
represented by LORI A. GORDON.
______________________
Before REYNA, TARANTO, and CHEN, Circuit Judges.
2 ERICSSON INC. v. INTELLECTUAL VENTURES I LLC
REYNA, Circuit Judge.
Ericsson Inc. and Telefonaktiebolaget LM Ericsson
appeal the final written decision of the U.S. Patent and
Trademark Office’s Patent Trial and Appeal Board,
finding that claims 1–3, 6–9, and 12–14 of U.S. Patent No.
5,602,831 are not unpatentable under 35 U.S.C. § 103.
Because we conclude that the Board improperly did not
consider portions of Ericsson’s Reply, we vacate and
remand.
I. THE ’831 PATENT
Appellee Intellectual Ventures I LLC (“Intellectual
Ventures”) owns U.S. Patent No. 5,602,831 (“the ’831
patent”), entitled “Optimizing packet size to eliminate
effects of reception nulls.” The ’831 patent expired on
March 31, 2015.
The ’831 patent is directed to increasing the reliability
of a wireless communications system when a wireless
receiver is moving by minimizing the effects of burst
errors that occur at the receiver. ’831 patent, Abstract; id.
col. 1 ll. 5–8. The moving wireless communications devic-
es disclosed in the ’831 patent transmit information via
packets containing bits of information. Signal fading or
signal drop-outs result in transmission errors in which
some or all of the bits in the packet are not successfully
received by the receiver. The ’831 patent refers to these
transmission errors as “burst errors” or “nulls.” Id.
col. 1 ll. 23–29. Although nulls occur randomly, they can
be predicted based on various signal drop characteristics,
such as the speed the receiver is moving. For instance, at
slow speeds, nulls are generally wider and the amount of
time between nulls is longer, whereas at higher receiver
speeds, the nulls are narrower and occur more frequently.
See id. col. 2 ll. 24–28.
The ’831 patent describes various techniques in the
prior art for reducing the effects of burst errors and nulls,
ERICSSON INC. v. INTELLECTUAL VENTURES I LLC 3
including error correction techniques, retransmission,
transmitting over multiple frequencies, and using multi-
ple transmitter stations in various locations. Id. col. 1
l. 35–col. 2 l. 11. The patent further notes that “[a]nother
technique for reducing the effects of burst errors involves
interleaving multiple message packets together thus
creating better burst error correction capabilities.” Id.
col. 2 ll. 4–6. Interleaving is a coding technique by which
data is read into a two-dimensional register (e.g., columns
of characters) column-by-column, and then read out of the
register row-by-row. J.A. 4. Interleaving multiple pack-
ets spreads out the effect of errors due to signal drops,
such that any dropped signal will, at most, create only a
loss of a small portion in each packet, rather than the loss
of an entire packet. Regarding the prior art, the ’831
patent notes that the efficacy of interleaving in reducing
the effects of burst errors for portable receivers is limited
when the size of the interleaved packet does not change:
“transmitting a single interleaved packet size for varying
signal drop-out conditions is not completely effective in
minimizing burst error effects.” ’831 patent col. 2 ll. 4–11.
The ’831 patent discloses new methods of mitigating
the effects of signal drops, specifically by encoding packets
into packet blocks by interleaving the packets together
into a register, and varying the number of packets encod-
ed into each packet block according to signal drop charac-
teristics, such as the speed at which the receiver is
moving. Id. col. 2 ll. 17–21, 34–48. Because of the inter-
leaving, any burst errors are distributed between all
packets in the packet block, which can then be decoded
more easily. Id., Abstract; id. col. 7 ll. 17–38. The ’831
patent makes clear that the technique of “interleaving”
was known in the art:
Interleaving packets together is known in the
art. However, varying the number of bytes in
each packet interleaved together according to re-
4 ERICSSON INC. v. INTELLECTUAL VENTURES I LLC
ceiver speed is novel and provides substantial ad-
vantages over existing interleaving techniques.
Explaining further, the interleaving process
discussed above increased the number of bytes in
each packet successfully received by the receiver.
However, if the speed of motion of the receiver
changes, the signal drop-out characteristics also
change as previously shown in FIGS. 3-5. Thus,
the packet block size shown in FIG. 9 (9 packets)
may not improve reception reliability at a new re-
ceiver travel speed.
....
To prevent more than one burst error (null)
from occurring in any one packet block, the
transmitter again adjusts the packet block size
according to the new travel speed of the receiver.
Id. col. 6 l. 42–col. 7 l. 26 (emphasis added).
Claims 1 and 9 are the independent claims and, for
purposes of this appeal, are illustrative:
1. A method for transmitting a message packet to
a receiver, comprising:
identifying changes in signal drop-out characteris-
tics each associated with the receiver;
encoding packets into packet blocks;
transmitting each packet block to the receiver;
and
varying the number of packets encoded in the
packet block according to the changes in the sig-
nal drop-out characteristics.
9. A system for transmitting messages, compris-
ing:
ERICSSON INC. v. INTELLECTUAL VENTURES I LLC 5
a receiver having a variable speed of motion, the
receiver receiving packet blocks containing the
messages;
a transmitter for transmitting the packet blocks to
the receiver; and
an encoder for combining and varying the number
of packets transmitted in each of the packet blocks
according to the variable speed of the receiver.
Id. col. 8 ll. 47–55, col. 9 ll. 27–34.
II. PRIOR ART
A. Reed
U.S. Patent No. 4,939,731 (“Reed”) describes a data
transmission protocol in which data signals are transmit-
ted as a data packet. Each packet includes one or more
blocks of data, called “send blocks” or “S-blocks,” each
encoded with an error correcting code, or “codeword.” The
exact number of S-blocks within each data packet depends
on the baud rate in use—i.e., as baud rate increases, the
number of S-blocks increases, as shown in Figure 7 below:
J.A. 906.
The codewords are further divided into numbered
“Repetition blocks,” referred to as R-blocks. R-blocks can
be concatenated with additional codewords to create an
S-block. Reed describes how, during transmission, a data
6 ERICSSON INC. v. INTELLECTUAL VENTURES I LLC
bit interleaving scheme is employed over each S-block.
For instance, Figure 4 shows a diagram of a packet of
data comprised of a plurality of concatenated S-blocks,
each S-block being formed of a plurality of interleaved
R-blocks:
J.A. 904.
Reed describes how “further protection against burst
errors may be provided by interleaving two or more blocks
of data within each packet of data so that should burst
errors occur these will be spread equally over the inter-
leaved blocks so that the blocks may nevertheless be
recoverable.” Reed, col. 2 ll. 62–68 (J.A. 907).
B. Mahany
U.S. Patent No. 5,425,051 (“Mahany”) describes a
“Radio frequency communication network having adap-
tive parameters,” and teaches that changing the size of
data packets can reduce the amount of data loss caused
by fluctuations in signal energy and signal fading in RF
communication.
III. PTAB PROCEEDING
Appellants Ericsson Inc. & Telefonaktiebolaget LM
Ericsson (collectively, “Ericsson”) petitioned for inter
partes review of the ’831 patent on June 10, 2015. Alt-
ERICSSON INC. v. INTELLECTUAL VENTURES I LLC 7
hough the ’831 patent had expired prior to Ericsson’s
Petition, Ericsson proposed constructions in the Petition
for various terms under the broadest reasonable interpre-
tation standard, rather than the standard elucidated in
Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en
banc).
The Board instituted inter partes review of the ’831
patent on two grounds: (1) that claims 1–3, 6, 7, 9 and 12–
14 were likely obvious over Reed and Mahany, and (2)
that claim 8 was likely obvious over Reed, Mahany, and
Webb. Webb is not relevant to this appeal. J.A. 2, 19. In
its Institution Decision, the Board concluded that inde-
pendent claims 1 and 9, which recite “encoding packets
into packet blocks” and an “encoder for combining and
varying the number of packets transmitted in each of the
packet blocks,” respectively, do not require interleaving,
and that Intellectual Ventures did not explain in its
Preliminary Response why the Board should construe
“encode” as requiring interleaving. J.A. 35. The Board
additionally construed the terms “interleaving portions of
each of the packets together,” and “common portions of
each message packet are interleaved together” in explain-
ing why it did not institute review on dependent claims
10, 11, and 15. Although neither party requested con-
struction of these terms, the Board construed these terms
under the broadest reasonable interpretation standard to
require interleaving portions from each of the packets in
the packet block together, but not interleaving within a
packet. J.A. 30–31. In finding that Ericsson had not
established a reasonable likelihood of success in showing
claims 10 and 11 to be unpatentable over the combination
of Reed and Mahany, the Board explained that Reed
teaches interleaving R-blocks, which involves interleaving
portions of the same packet together, and not a portion of
a first packet with a portion of a second packet, as re-
quired by the Board’s construction. The Board further
found that S-blocks are concatenated, and not interleaved.
8 ERICSSON INC. v. INTELLECTUAL VENTURES I LLC
Following institution, Intellectual Ventures argued
for the first time in its Response that the claims must be
construed under Phillips because the patent expired prior
to the filing of the present proceeding. J.A. 256. Intellec-
tual Ventures proposed, and Ericsson did not dispute,
that under the Phillips standard, the term “encoding
packets into packet blocks” in claim 1 should be construed
as “forming blocks by interleaving packets together,” and
that claim 9’s “an encoder for combining . . .” limitation
means “an encoder for forming blocks by interleaving
packets together and varying the number of packets
transmitted in each of the blocks.” J.A. 248. The adop-
tion of these constructions would mean that both inde-
pendent claims include a limitation requiring the
formation of blocks by “interleaving packets together.”
After adopting the new constructions, the Board “re-
visit[ed] whether the combination of Reed and Mahany
teaches ‘encoding packets into packet blocks,’ . . . and ‘an
encoder for combining and varying the number of packets
transmitted in each of the packet blocks.’” J.A. 13–14.
Specifically, the Board focused on “whether the prior art
teaches interleaving packets together to form packet
blocks in a way that results in varying the number of
packets encoded in the packet blocks.” J.A. 15.
Ericsson’s Reply discussed how interleaving is known
in the prior art, that Reed alone teaches interleaving
packets together, and that Reed and Mahany together
teach the “interleaving packets together” limitation.
In the Final Written Decision, the Board found that
Ericsson had not proven the challenged claims obvious in
light of Reed and Mahany. The Board’s decision relied
entirely on its conclusion that Reed taught only one type
of interleaving, interleaving of R-blocks within an S-block
(or a “packet,” in the nomenclature of the ’831 patent), as
opposed to the interleaving of packets with other packets
within a packet block (i.e., S-blocks with S-blocks) as
ERICSSON INC. v. INTELLECTUAL VENTURES I LLC 9
required in the ’831 patent. In characterizing the issue,
the Board conceded that “the issue is not whether the
general concept of interleaving was known in the prior
art—it was.” J.A. 15. “Rather, the issue is whether the
prior art teaches interleaving packets together to form
packet blocks in a way that results in varying the number
of packets encoded in the packet blocks.” Id. In conclud-
ing that Reed did not teach this limitation, the Board
rejected the portions of Ericsson’s Reply that argued that
to a person of ordinary skill, given that interleaving
packets together was known in the art, “[t]he difference
between interleaving R-blocks together and interleaving
S-blocks together is insubstantial at best,” holding that
this was a new theory beyond the scope of a proper reply
as defined in 37 C.F.R. § 42.23(b). The Board stated that
the reply is “not an opportunity for Petitioner to identify,
for the first time, new and different prior art elements
that are alleged to satisfy the claim requirements,” and
declined to consider pages 13–14 of Ericsson’s Reply. J.A.
18–19. The Board then concluded that Reed taught only
the interleaving of R-blocks with R-blocks, and thus did
not teach the required interleaving of S-blocks with
S-blocks disclosed in claim 1 of the ’831 patent. In light of
its conclusion as to claim 1, the Board decided that Erics-
son had not shown claims 1–3, 6–9, and 12–14 to be
unpatentable. Ericsson appeals. We have jurisdiction
under 28 U.S.C. § 1295(a)(4)(A).
IV. DISCUSSION
Obviousness is a question of law with underlying fac-
tual findings relating to “the scope and content of the
prior art, differences between the prior art and the claims
at issue, the level of ordinary skill in the pertinent art,
and any objective indicia of non-obviousnes.” Randall
Mfg. v. Rea, 733 F.3d 1355, 1362 (Fed. Cir. 2013); see
Graham v. John Deere Co. of Kan. City, 383 U.S. 1, 17–18
(1966). We review the Board’s underlying factual findings
for substantial evidence and its legal conclusion on obvi-
10 ERICSSON INC. v. INTELLECTUAL VENTURES I LLC
ousness de novo. HTC Corp. v. Cellular Commc’ns
Equip., LLC, 877 F.3d 1361, 1369 (Fed. Cir. 2017); In re
Mouttet, 686 F.3d 1322, 1330–31 (Fed. Cir. 2012). Deci-
sions related to compliance with the Board’s procedures
are reviewed for an abuse of discretion. Bilstad v. Waka-
lopulos, 386 F.3d 1116, 1121 (Fed. Cir. 2004). “An abuse
of discretion is found if the decision: (1) is clearly unrea-
sonable, arbitrary, or fanciful; (2) is based on an errone-
ous conclusion of law; (3) rests on clearly erroneous fact
finding; or (4) involves a record that contains no evidence
on which the Board could rationally base its decision.” Id.
Under PTO regulations, the Board is entitled to strike
arguments improperly raised for the first time in a reply.
See 37 C.F.R. § 42.23(b) (“All arguments for the relief
requested in a motion must be made in the motion. A
reply may only respond to arguments raised in the corre-
sponding opposition, patent owner preliminary response,
or patent owner response.”).
Ericsson argued on pages 13 and 14 of its Reply that,
given the admitted state of the art regarding interleaving
disclosed in the ’831 patent, Reed’s teachings regarding
interleaving rendered obvious the interleaving of packets
described in the ’831 patent. Specifically, the Reply
argued that “[t]he difference between interleaving
R-blocks together and interleaving S-blocks together is
insubstantial at best,” and that Reed “suggests that an
added benefit would be obtained from interleaving larger
data portions.” J.A. 325–26. The Board characterized
this portion of Ericsson’s Reply as raising a new theory of
obviousness, one that was not addressed in the Petition or
responding to arguments raised in the Patent Owner
Response. J.A. 19. We disagree.
Given the admissions within the ’831 patent itself, the
arguments raised in Ericsson’s Petition, and the Board’s
own evolving understanding of whether claim 1 requires
the formation of blocks by “interleaving packets together,”
ERICSSON INC. v. INTELLECTUAL VENTURES I LLC 11
the Board’s decision not to consider portions of Ericsson’s
Reply was error. As an initial matter, the ’831 patent
discusses how interleaving was known in the prior art. In
addition, Ericsson’s Petition describes how one of skill in
the art would be familiar with the concepts of interleav-
ing. See ’831 patent col. 2 ll. 4–6, col. 6 l. 42–col. 7 l. 26;
J.A. 105–06, 108, 109. For instance, the Petition charac-
terizes the description of interleaving in the ’831 patent
as “simply a recitation of a textbook block interleaving
technique well-known to a POSA at the time the ’831
Patent was filed.” J.A. 105–06. Similarly, the Petition
identifies a person of ordinary skill in the art relative to
the ’831 patent as someone having “an understanding
of . . . coding and interleaving, and the reverse processes
of deinterleaving and decoding as used for wireless com-
munications.” J.A. 109. The Petition expressly contem-
plated the possibility that “[t]o the extent that
interleaving can also be considered encoding packets into
blocks, this is also disclosed by [Reed].” J.A. 126. The
portions of the Reply the Board declined to consider
expressly follow from these contentions raised in the
Petition—namely, that there is no substantial difference
between interleaving R-blocks within S-blocks, and inter-
leaving S-blocks with S-blocks.
The Board’s error was parsing Ericsson’s arguments
on reply with too fine of a filter. Given the acknowledg-
ment in the patent that interleaving was known in the
art, Ericsson was entitled to argue on reply that the
distinction in the specific type of interleaving between
Reed and the ’831 would have been insubstantial to a
person of skill in the art. The error was exacerbated by
the fact that the significance of interleaving arose after
the Petition was filed, in that the Board adopted a differ-
ent construction of the “encoding” terms after the Petition
instituting inter partes review was granted. Additionally,
as the missing interleaving limitation was the essential
basis of the Board’s decision in concluding that claim 1
12 ERICSSON INC. v. INTELLECTUAL VENTURES I LLC
had not been shown unpatentable, Ericsson should have
been given an opportunity to respond. See 5 U.S.C.
§ 554(b)(3), (c) (The agency must “timely inform[ ]” the
patent owner of “the matters of fact and law asserted,”
and must provide “all interested parties opportuni-
ty . . . for the submission and consideration of facts [and]
arguments . . . [and] hearing and decision on notice.”).
Undoubtedly, this was a special case in which Petitioner,
Patent Owner, and the Board all initially applied the
broadest reasonable interpretation claim construction
standard, and only after institution applied Phillips
instead. In light of these changed circumstances, the
Board revisited its approach to the claims in light of this
error, and Ericsson likewise deserved an opportunity to do
the same.
Our decision should not be viewed as changing or
challenging the Board’s practice of limiting the scope of
replies pursuant to its regulations. This court’s precedent
supports the Board’s discretion to reject arguments raised
for the first time in a reply. Under the PTO’s regulations,
the Board has discretion to determine whether a petition
for inter partes review identified the specific evidence
relied on in a reply and when a reply contention crosses
the line from the responsive to the new. Ariosa Diagnos-
tics v. Verinata Health, Inc., 805 F.3d 1359 (Fed. Cir.
2015). In Ariosa, this court upheld the Board’s rejection
of a reply that relied on previously unidentified portions
of a prior art reference to make a meaningfully distinct
contention, because the cited portions of prior art were
not identified or discussed in the petition or accompany-
ing declarations. Id. at 1364, 1367–68. In contrast,
Ericsson does not identify a previously unidentified piece
of prior art to make a meaningfully distinct contention,
but instead expands the same argument made in its
Petition: that Reed discloses that its S-blocks (i.e., “pack-
ets”) are further encoded into packet blocks through
interleaving. Nor does Ericsson’s arguments in its Reply
ERICSSON INC. v. INTELLECTUAL VENTURES I LLC 13
constitute an “entirely new rationale” worthy of being
excluded, as in Intelligent Bio-Systems, Inc. v. Illumina
Cambridge Ltd., 821 F.3d 1359. 1370 (Fed. Cir. 2016). In
Intelligent Bio-Systems, the petitioner supported its new
theory of invalidity by reference to new evidence, citing “a
number of non-patent literature references which were
not relied upon to support unpatentability in the Peti-
tion.” Id. at 1366. This court upheld the Board’s decision
refusing the reply because the petitioner “relied on an
entirely new rationale to explain why one of skill in the
art would have been motivated to combine” the relevant
prior art references. Id. at 1370. Here, Ericsson cites no
new evidence and merely expands on a previously argued
rationale as to why the prior art disclosures are insub-
stantially distinct from the challenged claims.
We vacate the Board’s decision below and remand for
the Board to consider all of the arguments in Ericsson’s
Reply and the dependent claims.
VACATED AND REMANDED
COSTS
No costs.