Major Funai TV Patent, Once Held Valid by CAFC, Brought down in Reexamination

The potential use of reexamination by an accused infringer to reverse, in essence, a CAFC holding of patent validity was demonstrated anew this past week in the PTO Board’s decision, Ex parte Funai Electric Co., Ltd.

Funai filed a complaint in 2007 at the U.S. International Trade Commission alleging that Vizio and a number of other manufacturers had violated Section 337 through the importation into the United States of digital television sets that infringed Funai’s U.S. Patent No. 6,115,074. The ITC found the ‘074 patent to be valid and infringed, and issued a limited exclusion order prohibiting the importation of infringing television sets into the United States. In May of this year the CAFC affirmed the ITC’s ruling, including its determination that the ‘074 claims were “not invalid” over the combination of prior art references asserted by Vizio and the other Respondents.

Shortly before the CAFC affirmed the ITC’s ruling, the parties settled the case on the basis of a settlement agreement and moved the ITC to terminate its investigation. The parties also stipulated to dismissal of a series of parallel District Court actions for infringement of the ‘074 patent that had been stayed pending completion of the ITC’s investigation.

While the ITC was in the initial stages of its investigation, the PTO granted two ex parte requests for reexamination of the ‘074 patent. In the ensuing reexamination proceeding, the examiner rejected the ‘074 claims as being obvious over essentially the same combination of prior art references that both the ITC and the CAFC would find to be wanting.

Funai appealed the examiner’s rejection to the PTO Board which conducted oral argument on August 18th. The CAFC’s earlier decision in favor of Funai was mentioned in passing, but the Judges seemed largely indifferent to it. Counsel for Funia remarked that “at this point the Examiner has adopted our claim construction, which was also adopted by the [ITC], which I know is not [binding] on this Board, and affirmed by the Federal Circuit.” One of the Judges spoke up “…did you say it was affirmed by the Federal Circuit?” Yes, replied counsel, “[i]t should be in the record….” The Judges and counsel then proceeded to discuss the merits of the appeal without further mention of the earlier appellate decision.

This past Friday the Board affirmed the examiner’s rejection of the ‘074 claims, discussing in detail the disclosure of the prior art and its application to the ‘074 claims. The Board decision mentions the ITC investigation and states that the Respondents “have appealed to the Federal Circuit Court of Appeals,” but never again refers to the CAFC.

Friday’s Board decision in Ex parte Funai ranks with In re Swanson where the CAFC affirmed the rejection of claims in reexamination, despite its own earlier decision affirming the District Court’s judgment of validity, both cases involving essentially the same prior art. It also must be compared with Judge James Cohn’s decision in Flexiteek Americas v. PlasTEAK to withdraw a permanent injunction of the basis of an advisory action in a reexamination finding the patent, on which the injunction was based, to be invalid, as a demonstration of the power of reexamination. For more see Trial Judge Terminates Injunction After PTO Issues Advisory Action in Reexamination.

The case raises a number of questions. For instance, are the ITC Respondents pleased with the outcome? Did their license agreements take into account the possibility of the Board’s affirmance of the examiner’s rejection? Or are Respondents’ interests as licensees now aligned with those of Funai?

On the same day as the Board’s decision regarding the ‘074 patent, the Board affirmed the reexamination rejection of claims 1-18 of Funai’s U.S. Patent No. 5,329,369. The ‘369 patent was also part of the ITC investigation, but was not at issue in the appeal at the CAFC.