Squires’ Revised Director Review Decision Raises Broader Questions for PTAB Petitioners

In a revised order issued October 9, John Squires, Director of the U.S. Patent and Trademark Office (USPTO), vacated a Final Written Decision from the Patent Trial and Appeal Board (PTAB) that determined all challenged claims of U.S. Patent No. 11,488,451 unpatentable as obvious. Squires terminated the inter partes review (IPR) proceeding after deciding that the Board abused its discretion by improperly crediting expert testimony that had multiple material contradictions.

The October 9 revised order supersedes an October 1 decision, where Squires granted Director Review, reversed the Board’s Final Written Decision, and terminated the proceeding. The revised order changed the disposition from reversing to vacating the Board’s Final Written Decision, though the grant of Director Review and termination of the proceeding remained the same.

Blackhawk Network Inc. filed a request for Director Review of the Final Written Decision determining all challenged claims of ‘451 patent unpatentable as obvious based on the combination of Szrek and Llach. In its request, Blackhawk Network Inc. argued that the Decision should be reversed because the Board abused its discretion in crediting the contradictory testimony of Interactive Communications International, Inc.’s expert.

In particular, Blackhawk Network Inc. contended that the Board improperly concluded there would have been a reason to combine the teachings of Szrek and Llach based on contradictory testimony from Interactive Communications International, Inc.’s expert, Mr. Michael Hutton.

In its authorized response, Interactive Communications International, Inc. acknowledged that Mr. Hutton’s testimony is “not the model of clarity,” but maintained it is not inconsistent. Interactive Communications International, Inc. argued that the allegedly inconsistent statements “concern different, alternative configurations,” and that the Board’s decision to credit, and partially rely on, Mr. Hutton’s testimony was correct.

Squires found that “the Board abused its discretion by improperly crediting expert testimony that has multiple material contradictions and that the Board found lacked credibility at least in certain respects,” according to the decision. The decision noted that the Board agreed with Blackhawk Network Inc. that Mr. Hutton’s explanation as to how his declaration supports the combination of Szrek and Llach is not credible.

Among other concerns, Mr. Hutton gave conflicting testimony about how he proposed that the ordinarily skilled artisan would have modified Szrek’s disclosures to include Llach’s transaction computer. During cross-examination, Mr. Hutton testified that Exhibit 2050, which depicts Szrek’s Figure 2 modified to incorporate Llach’s transaction computer as rendered during Mr. Hutton’s deposition, does not represent the modification described in his declaration. However, Mr. Hutton later reversed and claimed that it does represent his proposal.

The Board’s determination that there was a reason to combine was based on the contradictory testimony of Mr. Hutton. That testimony played a central role in Interactive Communications International, Inc.’s analysis, which concluded that an ordinarily skilled artisan would have been motivated to combine the disclosures of Szrek and Llach. As a result, the Board’s finding of unpatentability on the Szrek-based grounds has been vacated.

Squires cited the U.S. Court of Appeals for the Federal Circuit (CAFC) in Finesse Wireless LLC v. AT&T Mobility LLC, noting that “when the party with the burden of proof,…rests its case on an expert’s self-contradictory testimony, we may conclude the evidence is insufficient to satisfy that standard.”

The Petition also raised other grounds based on the Irwin reference that rely on Mr. Hutton’s testimony that the Board’s decision did not reach. Having determined that Mr. Hutton is not credible as to multiple material aspects of his testimony, Squires found it would be inappropriate in this instance to rely on this testimony for the other grounds. The decision additionally cited N.L.R.B. v. Pittsburgh S.S. Co., stating that “in the determination of litigated facts, the testimony of one who has been found unreliable as to one issue may properly be accorded little weight as to the next.” For this reason, Squires terminated the proceeding, with the decision also citing Sling TV, L.L.C. v. Realtime Adaptive Streaming LLC, and BioDelivery Scis. Int’l, Inc. v. Aquestive Therapeutics, Inc. However, Squires also noted that the October 9 decision “does not constitute a final written decision under 35 U.S.C. § 318(a).”

According to commentary since the revised decision was issued, Squires’ decision to revise the ruling from a reversal to vacatur now calls into question whether it is appealable to the CAFC. Dennis Crouch of Patently O said the decision indicates a broader and developing Trump Administration-wide trend:

“The pattern here is clear and undisputed that USPTO leadership is using the cloak of § 314(d)’s nonappealability to achieve policy ends. The question though is whether the aggressive approach crosses some yet-undefined line.”