Alleged Due Process, APA Violations by PTAB Rule 36ed by Federal Circuit

Alleged Due Process, APA Violations by PTAB Rule 36ed by CAFCOn Monday, December 17th, the Court of Appeals for the Federal Circuit issued a Rule 36 summary judgment in Chart Trading Development, LLC v. Interactive Brokers LLC, affirming the invalidation of patent claims owned by Chart Trading in covered business method (CBM) proceedings instituted at the Patent Trial and Appeal Board (PTAB). In issuing the summary affirmance of the PTAB, the Federal Circuit panel of Circuit Judges Pauline Newman, S. Jay Plager and Kimberly Moore declined the opportunity to comment on Chart Trading’s arguments on the PTAB’s alleged due process violations by changing the construction of a key term in its final written decision.

Chart Trading’s appeal focused on claims of two patents invalidated by the PTAB in the CBM reviews:

  • U.S. Patent No. 7113190, titled Systems and Methods for Providing an Interactive Graphical Representation of a Market for an Electronic Trading System. It claims a method for providing an interactive graphical representation of a market that allows a user to place a trade directly from the graphical representation. All 42 claims of this patent were invalidated at the PTAB for being directed to an abstract idea under Section 101 and for being obvious in light of prior art combinations under Section 103.
  • U.S. Patent No. 8380611, titled Graphical Order Entry User Interface for Trading System. It covers a method on a display terminal of an electronic trading system including the steps of displaying a graph having a curve corresponding to a range of values of a financial instrument, allowing a user to select a portion of the graph, and displaying a trading box on the workstation display in response to a user selection of a portion of the graph. All 22 claims of this patent were also invalidated under 101 and 103.

Arguing for appellant Chart Trading Development, James Barney, a partner at Finnegan and a well-known and highly regarded appellate advocate, argued that the PTAB committed two procedural violations in determining the claims of the ‘611 patent to be invalid, including the decision to change the construction of the term “interactive graphical representation of a market” in the final written decision on the ‘611 patent claims. Barney argued that changing the construction in the final decision deprived Chart Trading of both notice and an opportunity to respond as required under the Administrative Procedure Act (APA) and that the original construction of the claim term wasn’t disputed by either side during the CBM review on the ‘190 patent claims. Barney argued that this particular error required the PTAB’s decision to be vacated and remanded under the Federal Circuit’s precedent in SAS Institute v. ComplementSoft (2016).


Clearly, changing the claim construction for the first time in the final written decision is fundamentally unfair and unjust. How is the patent owner, or the petitioner for that matter, supposed to competently and correctly fashion arguments about the government franchise right in question if the PTAB hasn’t defined what the government franchise covers? Allowing the case to proceed based on one definition of the government franchise and then suddenly and without explanation a new, unknown, untested and not argued definition of the government franchise being adopted to decide the case by the PTAB panel is not appropriate and violates the APA.

Barney furthered argued that the PTAB employed an erroneous construction of “interactive graphical representation of a market.” Under the Board’s construction, “interactive” only required that a user can take action using the graph which was not the ordinary meaning of “interactive” in the art, which Barney contended meant an exchange of information between a user and the computer, nor did it reflect how the term was used throughout the ‘611 patent. Judge Moore noted that, while interactivity for conducting trades was certainly a focus of the ‘611 patent, the patent’s specification discussed zoom options and date range inputs that could be indicative of interactivity. Barney countered that those functions weren’t covered by the claims and that the graph in and of itself was a trading interface as the PTAB correctly determined in its initial construction of the term.

Barney then moved on to argue against the PTAB’s decision to not accept amended claims submitted for the ‘611 patent, contending that the PTAB’s obviousness analysis improperly shifted the burden of proof onto the patent owner and away from the petitioner. “There are limitations in the amended claims that really were not addressed by the petitioner,” Barney said, giving as an example that the amended claims disclosed a dialog box with buy and sell options that pops up after a user selects a portion of the graph. This amendment showed that the first interaction with the graph was a trading interaction as opposed to prior art showing buy or sell options prior to graph interactions and the petitioners’ expert testimony revealed that it would be “dangerous” to offer a buy or sell option after a trader had already indicated a desire to buy or sell prior to graph interaction.

Arguing for the appellees was Danielle Healey, senior principal at Fish & Richardson, who understandably and predictably said there was no reversible error in the PTAB’s final written decision on the ‘611 patent. “In the 101 analysis, the focus was on whether or not these were just claims that at the end of the day were, ‘I wish I had a system that did this,’ or ‘I wish I had a system that looked like this’ as opposed to the specific implementations that were shown in Enfish, BASCOM, DDR Holdings and CQG,” Healey said. Whereas Barney had argued that the interactive trading graph had no analog in a pre-electronic world, Healey argued that what Chart Trading was claiming as an invention was essentially an analog of how trading has always been accomplished. “People are interacting with the graph, albeit sometimes with a slip of paper, sometimes screaming from a pit, but they’re working off of the graph,” Healey said.

As to Chart Trading’s arguments on the PTAB’s improper shift of the burden of proof, Healey countered that Section 706 of the APA requires a look at the totality of circumstances involved in an agency action and that those circumstances showed nothing that unduly harmed the patent owner as the PTAB’s decision in the ‘611 patent CBM was based on an analysis conducted during the CBM on the ‘190 patent. Judge Newman said that the PTAB struck a “not so happy medium” by finding that the amended claims weren’t patentably distinct from the original claims but Healey contended that the law surrounding the PTAB allows the Board to decide if an amended claim is allowable, not that a patent owner had a right to amend the claim. Healey also argued that Chart Trading’s expert was unsuccessful in an attempt to support secondary indicia of nonobviousness. “It wasn’t that they failed in their burden of proof in putting that in, it was that they failed to put in competent evidence,” Healey said. She argued that, when reading the actual text of the final written decision on the ‘611 patent, there was no misallocation of the burden of proof because the Section 101 invalidity finding should be affirmed.

During a rebuttal period, Barney pushed back against what Healey called “harmless error” under the APA because the amended claims in the ‘611 patent included a number of limitations that weren’t at issue in the ‘190 patent. “It’s not correct that you can simply lift, if you will, the Board’s analysis for the ‘190 patent claims and drop them into the ‘611 amended claims and say, ‘Well, the burden of proof was satisfied there’ because there’s a bunch of limitations that weren’t addressed.” Barney said. While Barney argued that the burden was clearly misapplied in the 103 analysis, he conceded that the burden of proof was more ambiguous in the 101 analysis but reiterated that Chart Trading should have an opportunity to address the PTAB’s change in claim construction under the ComplementSoft standard.

The failure of petitioners to address each and every limitation is a frequent and concerning theme in PTAB appeals brought to the Federal Circuit, particularly so in this case where the PTAB has shifted the burden and moved the goal posts in the final written decision. Perhaps the panel of Newman, Plager and Moore disagreed and thought the definition given for the government franchise did not change in the final written decision, but we will never know because the decision simply says: “Affirmed.”

It is equally disappointing that an oral argument that spent so much time addressing the Administrative Procedures Act, and dealing with a case that so directly queues up the question about a direct and clear violation of the APA, would result in a Rule 36 summary affirmance without an opinion.

If the government can award a franchise and that franchise can be taken away in a manner that violates the APA, what is the point in seeking the government franchise in the first place? If the Court charged with making sure the agency that strips government franchises is following the rules is going to decide cases of such importance with only one word — Affirmed — one has to question whether a government franchise is at all a worthwhile pursuit. Obviously, the government agency that issues the franchise and the primary Court charged with interpreting the rights of that government franchisee do not seem to find the franchise valuable enough to stand behind. If that is the case, and franchise rights can be discarded so easily and literally without any explanation, the franchise rights obviously aren’t treated as valuable or held in any high regard by the government.

Finally, it is extremely disappointing that our written treatment of these important issues here on IPWatchdog far exceeds the treatment the Federal Circuit gave to these important issues. Would it have been that difficult or time consuming to draft an opinion that was at least a few pages long? No. Would it have taken much time to cut and paste and edit together a statement of the facts of the case, and then quote from the oral arguments as we did here? No. This is why Rule 36 is so offensive.

We are told that the Federal Circuit spends 90% of the time it regularly spends on a case even when using Rule 36. That is simply not believable. Rule 36 is a docket management tool. Its use is causing the Federal Circuit to punt critically important issues, allowing them to go unaddressed, including in areas of law where there is little to no development.



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Join the Discussion

15 comments so far.

  • [Avatar for B]
    January 3, 2019 01:54 pm

    @ Anon “I have to chuckle B, as I am rarely accused of sugar-coating anything”

    And yet you choose to understate w.e.t. Schestowitz. Schestowitz’s ignorance is the fuel for his criticisms spewed under the guise of *hands fluttering* “How dare you criticize a judge.”

    Me, I’m offended he used my article to accuse Gene Quinn, Meredith Addy and others of lying. Everyone was hopeful after Berkheimer. Now Berkheimer is dead-letter law and, given Judge Mayer’s frightening lack of understanding of the concept of judicial notice as was demonstrated in last Friday’s decision, things will only get worse.

    Mayer isn’t alone. He’s merely the first to formally announce what the Federal Circuit has been doing for the last four years. Taking judicial notice of what they think happened in history under FRE 201(c)(2) in a most general sense while ignoring important details, then denying an opportunity to be heard under FRE 201(e).

  • [Avatar for Anon]
    January 3, 2019 11:02 am

    I have to chuckle B, as I am rarely accused of sugar-coating anything.

  • [Avatar for B]
    January 1, 2019 07:48 pm

    Darn, Anon, don’t sugar-coat it

  • [Avatar for Anon]
    December 27, 2018 10:42 am


    I reviewed the site a bit and found it rather horrible for a number of reasons. When a site launches into accusations that others merely use ad hominem attacks at the same time that it renames IPWatchdog as WatchTroll, and accuses those interested in full patent protection (to include the area of software innovations) as a cabal of “patent agents who became accustomed to profiting from low-quality patents.” — sorry, but I have a low tolerance for that type of duplicity,

    Additionally, they mischaracterize Lofgren as some type of “champion” for science and technology (in bashing those who would bash her): “Last but not least, Watchtroll is also attacking Lofgren again, as it did just weeks ago. Lofgren’s ‘crime’ is that she cares about science and technology — a serious offense by Watchtroll’s poor taste and standards.

    Mr. Schestowitz claims ten years of Slashdot contributions (along with his “Free Software” advocacy) as his basis of expertise. (see ) This is not a basis in anything except an overindulgence in Kool-Aid drinking of the anti-patent variety. The site makes no bones about its bias, and in fact rather boldly states: “Techrights opposes software patents and actively discourages their use and legitimacy in law.

    They then have the nerve to try to control the spin of what they are doing with a self-description of ““Boycott Novell” is not a blog; rather, it strives to become a community where readers and contributors share their thoughts and interpretation. This is not a hate site. This is neither a crusade nor any type of propaganda front. We have our mind set on a single goal: finding out the truth.

    Their admitted one-sidedness cannot reach their goal. What they want is not the truth. What they want is their view to be labeled as “the truth.”

    Such is the epitome of propaganda.

    Additionally, they claim “site aims to look at these newly-introduced issues and resolve those that are fuelled and funnelled through disinformation and manipulation.” – and again, this is nothing but their own disinformation and manipulation in order to reach their own professed goal of “actively discourage [ software patents] use and legitimacy in law.”

    I have to wonder if the main blight of that other patent blog (Malcolm Mooney) is related to the efforts of the techrights site — the same type of dissembling appears to run rampant with both.

  • [Avatar for B]
    December 26, 2018 11:46 pm

    FYI, I found a knuckle-headed article that attacks this website on the s101 and R36 issues.

    I’m mentioned with some prominence, but the author, Dr. Roy Schestowitz (a “software specialist based in the UK”), doesn’t quite get everything right due to lack of context. Not about me – about everyone else. Schestowitz calls many people on this site “liars” because of the enthusiasm Berkheimer instilled in many of us, and uses my article “No Light at the End of the Tunnel” to justify it. Hey, an evidentiary standard. Who thought the CAFC would ignore an en banc decision they decided the previous week.

    A personal message to Dr. Roy Schestowitz – if you’re reading this, I most respectfully state that criticism of the PTAB and CAFC are warranted. I know that you think you’re the expert on U.S. patent law, but I most respectfully suggest that you should write about something you actually know about.

  • [Avatar for Eric Berend]
    Eric Berend
    December 24, 2018 08:34 pm

    @9., ‘Jeff Lindsay’:

    No doubt, Alphabet/Google will be only too happy to supply the AI for said artificial judges. They’ll probably start the pilot replacement program with their junior league of already captive PTAB so-called “judges” (as was so aptly skewered by Chief Justice Roberts at oral arguments).

    /NOT sarc/

  • [Avatar for Jeff Lindsay]
    Jeff Lindsay
    December 19, 2018 10:32 pm

    Forgive me if I’m overly optimistic about the power of technology, but now that artificial intelligence can easily beat world champions in the games of go and chess, the time may soon come when AI is smart enough to issue Rule 36 affirmations on its own, sparing us the cost of human judges on the Federal Circuit.

  • [Avatar for David Boundy]
    David Boundy
    December 19, 2018 04:12 pm

    Gene, do you have the briefs? If so, could you send them? From your writeup, this sounds like a case I could help with. (This is not necessarily a comment that ought to go into the blog transcript. I’m fine either way.)

  • [Avatar for Pro Say]
    Pro Say
    December 19, 2018 03:51 pm

    “There have been other appeals from IPR decisions where due process arguments have obtained remands.”

    Paul — could you please name a few cases? And/or how to locate them?

    Thanks for the help.

  • [Avatar for Paul Morgan]
    Paul Morgan
    December 19, 2018 03:25 pm

    If a party cannot even convince Judge Newman of a due process violation [or its effect on the outcome] in an IPR proceeding, it is not very persuasive. There have been other appeals from IPR decisions where due process arguments have obtained remands.

  • [Avatar for Peter Corcoran]
    Peter Corcoran
    December 19, 2018 12:19 pm

    The message is that patents are worthless and inventors should stop wasting their time and money pursuing them. And all that have dedicated their professions to advancing patents are fools.

  • [Avatar for Disenfranchised Patent Owner]
    Disenfranchised Patent Owner
    December 19, 2018 10:43 am

    Rule 36 sucks!
    CAFC is simply a rubber stamp for the PTAB.

  • [Avatar for Jonathan R Stroud]
    Jonathan R Stroud
    December 19, 2018 08:07 am

    James is a really great advocate, and not afraid of the tough cases.

  • [Avatar for step back]
    step back
    December 18, 2018 04:47 pm

    Due process? Procedural fairness?
    What are those?
    Never heard of them.

    /end sarcasm/

  • [Avatar for Anon]
    December 18, 2018 03:59 pm

    Time for Rule 36 to be 86’d…?