Examining USPTO Director Review Decisions in the Second Half of 2024

With the process for requesting Director Review formally codified as of October 31, 2024, the evolving landscape of intellectual property law continues to be shaped by another avenue of decision-making from the United States Patent and Trademark Office (USPTO). Among the developments in the second half of 2024, USPTO Director Review decisions addressed issues ranging from obviousness determinations and claim construction to procedural considerations under 35 U.S.C. § 325(d). These decisions not only refine the parameters of inter partes review (IPR) but also illuminate broader implications for patent practitioners and stakeholders navigating the patent system. This article explores Director Review decisions from the second half of the year, providing insights into their practical consequences for practitioners.

Obviousness

In a pair of decisions, Director Vidal granted Director Review of two decisions denying institution of inter partes review. Both cases focus on obviousness determinations, where Director Vidal reversed the Board’s findings.

Beginning with Prime Time Toys LLC v. Spin Master, Inc., No. IPR2023-01339, 2024 WL 3340025 (P.T.A.B. July 9, 2024), Petitioner argued before the Board that it would have been obvious to combine two references, Peev and Spitballs, to create a safer air gun. In response, Patent Owner admitted that the proposed combination of references would teach each and every element of the claimed invention if combined, but argued that a person of ordinary skill in the art would not have been motivated to combine the references as proposed because (1) airsoft guns are meant to replicate real guns, and as such, those skilled in the art would not have been concerned with reducing the injury risk associated with traditional hard plastic ammunition; (2) Petitioner failed to show that “super-absorbent polymer ammunition, such as Spitballs, would reduce a specific injury risk associated with Peev’s airsoft gun;” and (3) that the specific absorbent ammunition disclosed in Spitballs was not “an identified solution to any alleged injury problem with airsoft guns.” See Id. at *3. The Board agreed with Patent Owner, finding that those skilled in the art would consider the risk of injury while using airsoft guns an accepted function, not a problem, and that “Petitioner failed to show that super-absorbent polymer ammunition would solve any injury problem.” Id.

Upon review, Director Vidal vacated the Board’s decision, finding that the Board abused its discretion in overlooking certain evidence and the decision “puts too high a burden on Petitioner to establish not only an expectation of success, but absolute success.” Id. Director Vidal reinforced the “expansive and flexible approach” to assessing obviousness, where “any need or problem known in the field of endeavor at the time of invention and addressed by the patent can provide a reason for combining the elements in the manner claimed.” Id. at *4 (citing KSR Int’l Co. v. Teleflex, Inc., 550 U.S. 398, 420 (2007)). Director Vidal also likened “expert testimony supported only by personal, anecdotal stories” to “expert declarations that merely offer conclusory assertions,” in that they do not inform an understanding of a person of ordinary skill in the art and therefore should not be given weight in the obviousness analysis. Turning to evidence of simultaneous invention, Director Vidal first noted that references which postdate the claimed invention, and thus do not qualify as prior art, can nevertheless be relied upon to show the level of ordinary skill in the art at or around the time the invention was made. In view thereof, Director Vidal found that two references that did not qualify as prior art were considered evidence of simultaneous invention, one of which spoke “directly to the modification and rationale proposed by Petitioner” and therefore supported its asserted motivation to combine. Id. at *7. Based upon the rationale above, Director Vidal found that Petitioner had “shown a reasonable likelihood of prevailing in showing that at least one of the challenged claims is unpatentable as obvious” and reversed the Board’s decision denying institution of inter partes review. Id. at *9.

Next, in Hesai Tech. Co. Ltd. v. Ouster, Inc., ., No. IPR2023-01458, 2024 WL 3565649 (P.T.A.B. July 25, 2024), Petitioner alleged that a combination of Hall and Borowski rendered obvious certain challenged claims, relying specifically on Figure 22 of Hall to disclose the claimed optical imaging receive module comprising columns of horizontally and vertically offset pixels. Petitioner annotated Figure 22 of Hall, highlighting 36 small circles and identifying them as “detectors” according to Hall, while also arguing that each detector is a pixel as recited in the claims of the patent at issue. In reply, Patent Owner argued that the specification described 32 detectors within the cavity of Figure 22, which contradicted the 36 small circles actually shown in Figure 22, and therefore it was “improper for Petitioner to assume that each dark red circle is a detector.” Id. at *2. The Board agreed with Patent Owner, concluding that because of the discrepancy between the description in the specification and the depiction in the figures, Petitioner did not meet its burden to show that the 36 circles highlighted in annotated Figure 22 were detectors.

Upon review, Director Vidal agreed with Petitioner that the Board erred in discounting the teachings of Figure 22 of Hall in its entirety due to the discrepancy in the number of detectors described and shown. More specifically, Director Vidal found that the discrepancy appeared on its face to be a typographical error, and only concerned “the quantity, not arrangement, of detectors disclosed.” Id. at *3. Since the number of detectors (i.e., pixels) was not recited in claim 1, Director Vidal determined that the discrepancy in the quantity of detectors in Hall was immaterial to the obviousness arguments at hand (i.e., the depicted offset of the detectors shown in Figure 22). Thus, Director Vidal found that Hall taught detectors in the claimed offset arrangement and the Board erred in failing to consider at least this aspect of Hall.

Both decisions serve as a reminder of the latitude afforded in making an obviousness determination. This is particularly true with respect to motivation to combine, where there are very few limitations on the rationale that can be used in support thereof.

Claim Construction

In a separate pair of decisions, Director Vidal granted Director Review of two decisions denying institution of inter partes review after finding that the petitioners failed to establish a reasonable likelihood of prevailing based on the Board’s claim construction.

In Samsung Electronics Co., Ltd. v. Slyde Analytics, LLC, No. IPR2024-00040, 2024 WL 3665378 (P.T.A.B. Aug. 2, 2024), Petitioner argued that the Board issued an erroneously restrictive construction of the term “processor” by requiring the term to “to execute code, program, or instructions,” and not construing it such that it could be met by “any electrical circuit.” Petitioner argued that the construction was not supported by the intrinsic evidence, such as the patent claims and Specification. The Director agreed with Petitioner that the Board erred by construing “processor” based solely on extrinsic evidence, which included an outdated IEEE dictionary. The Board also failed to consider the entire claim, noting that the Board limited its analysis to one claim limitations when others provided context for understanding the processor’s function. The Director also criticized the Board’s failure to consider the specification’s description of the processor, explaining that the Board seemingly disregarded the description because the specification did not expressly define “processor” and that this analysis was inconsistent with the guidance that the specification is the single best guide to the meaning of a disputed term—whether or not it includes an express definition. In light of these errors, the Director vacated the Board’s decision, instructing the Board to reconsider the construction of “processor” in light of the intrinsic evidence.

Just a few weeks later, in PLR Worldwide Sales Ltd. v. Flip Phone Games Inc., No. IPR2024-00133, 2024 WL 3934712 (P.T.A.B. Aug. 22, 2024), the Director again reviewed the Board’s claim construction in a split decision denying the institution of inter partes review. The patent at issue involved systems and methods for providing hot spots in mobile video games, with specific claims about “non-promotional background objects.”

In denying institution, with respect to the “background” element, the Board majority determined that “background” refers to objects other than primary game objects.” The Board agreed with Patent Owner that Ho’s interactive elements are not “background objects” because there was nothing to indicate that the interactive elements were outside the primary focus of game play and as unexpectedly interactive components. With respect to the “non-promotional” element, the Board majority rejected Petitioner’s argument that Sturman’s ad units were non-promotional as conclusory. The Board explained that Sturman did not describe its ad units as non-promotional objects and that Sturman identifies a number of objects that a person having ordinary skill in the art would understand are or could be promotional objects such as billboard or storefront signs.

Upon review, the Director agreed with the dissent that the Board majority’s claim construction improperly considered the subjective views of the user. The Director vacated the Board’s decision denying institution and ordered the Board to issue a new decision on institution resolving the claim construction issue without reference to the user’s subjective perspective but, rather, first assessing the intrinsic evidence, and then consulting extrinsic evidence if necessary.

Both these decisions reaffirm that the Board should be focused on intrinsic evidence first to construe the meaning of a term.

Adverse Judgement

In the only sua sponte initiated Director Review to this point in the year, Shenzhen Xinzexing E-Com. Co., Ltd. v. Shenzhen Carku Tech. Co., Ltd., No. IPR2024-00222, 2024 WL 3356961 (P.T.A.B. July 10, 2024), Director Vidal vacated the Board’s Adverse Judgement against Patent Owner and remanded to the Board to determine whether the Petition demonstrated that there was a reasonable likelihood that at least one of the claims challenged in the Petition is unpatentable. Petitioner filed a Petition requesting inter partes review on November 21, 2023, after which Patent Owner failed to submit mandatory notice information within 21 days of service of the petition, failed to file a preliminary response within three months from the date of the Notice of Filing Date, and failed to respond to a Board communication indicating Patent Owner’s mandatory notices were past due. In view thereof, “before the statutory due date for the Board to determine whether to institute trial, the Board entered Adverse Judgment sua sponte against Patent Owner.” Id. at *1. A month and a half later, Patent Owner filed Mandatory Notices and a Power of Attorney.

Upon review, Director Vidal determined that “the Board’s entry of an adverse judgment was premature.” Id. at *2. As support for this determination, Director Vidal stated that none of the communications from the Board, including the Notice, “articulated sufficiently that failure to file mandatory notices as required under 37 C.F.R. § 42.8 may be considered abandonment of the contest and result in adverse judgment against Patent Owner under 37 C.F.R. § 42.73(b).” Id.

In short, this decision indicates that entry of adverse judgement for failure to respond or file mandatory notices is improper without sufficient articulation that such failure may be considered abandonment of the contest and result in adverse judgement. However, in general, failing to file mandatory notices by set deadlines and ignoring communications from the Board is not recommended.

Instituting Proceedings Under 35 U.S.C. § 325(d)

The Director twice reviewed the Board’s decisions denying institutions of petitions filed by Nokia for review of three related patents.

In the first decision, Nokia of America Corporation v. Soto, Nos. IPR2023-00680, IPR2023-00681, IPR2023-00682 (P.T.A.B. Mar. 28, 2024), the Board had denied institution under 35 U.S.C. § 325(d), which allows denial if the same or substantially the same prior art or arguments were previously presented. Petitioner argued that the Board’s analysis improperly focused on the similarity of claim limitations rather than the differing content of the references or the substance of the arguments. Director Vidal concluded the Board did not sufficiently explain its findings, citing the Advanced Bionics framework. The framework involves a two-part analysis: assessing whether the same or substantially the same art or arguments were previously presented, and if so, whether the petitioner has demonstrated a material error by the Office. The Director concluded that the Board did not adequately address Petitioner’s arguments that there were material differences between the art at issue in the proceedings and those presented to the Office. Simply stating that the Board was “unpersuaded” by Petitioner’s arguments was insufficient. In light of the Board’s failure to explain in detail the basis for its decision, the Director vacated and remanded, directing the Board to consider and explain its findings under the Advanced Bionics framework.

After the remand, the Director again considered the denial of institution in Nokia of America Corporation v. Soto, Nos. IPR2023-00680, IPR2023-00681, IPR2023-00682. 2024 WL 4972644 (P.T.A.B. Dec. 3, 2024). Director Vidal concluded that the Board erred in equating Brede with Agazzi references, noting material differences not accounted for by the Board. In light of this conclusion, the Director also concluded that Petitioner’s obviousness arguments relying on the Agazzi references were not substantially the same as the Examiner’s anticipation rejection based on Brede. Under Advanced Bionics, neither the prior art references nor the arguments thus were the same.

The Director also reviewed the Board’s denial of institution based on parallel proceedings under the Fintiv factors. Director Vidal explained that a “holistic view” of the Fintiv factors was required to determine whether efficiency and integrity of the system are best served by denying or instituting review. Taking such a holistic view, the Director declined to exercise discretion in denying the petitions in light of the parallel district court proceedings. The Director thus vacated and remanded to assess the likelihood of success on the merits and decide on instituting inter partes review.

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