Federal Circuit Reverses PTAB on Issue Preclusion, Finds Smart Mobile Patent Claims Unpatentable

The U.S. Court of Appeals for the Federal Circuit (CAFC) on Wednesday reversed in part, vacated in part, and remanded a final written decision from the Patent Trial and Appeal Board (PTAB) in an inter partes review (IPR) proceeding filed by Apple, Inc. The court concluded that the Board was precluded from finding the challenged claims of a patent owned by Smart Mobile Technologies LLC patentable, where a related patent with substantially similar claims had been found unpatentable in a prior IPR.

Apple challenged U.S. Patent No. 8,472,936, along with related U.S. Patent Nos. 8,761,739 and 8,442,501, related to a mobile device that is dynamically software configurable for a variety of environments. The mobile device communicates with a server that stores functional instruction sets and software. When the mobile device moves to a new environment, it can “switch itself for optimal performance” by downloading a functional instruction set from the server, as the key term at issue was “dynamically configurable.”

In prior IPRs, specifically IPR2022-00980 and IPR2022-00808, Apple challenged the ‘739 and ‘501 patents. In those proceedings, the Board found all challenged claims unpatentable as obvious, and Smart Mobile did not appeal those decisions, thus the deadline to do so has now expired. In the present case, IPR2022-00981, Apple argued that issue preclusion should prevent the Board from reaching a different conclusion, as the claims of the ‘936 patent were substantially similar to the invalidated claims of the ‘739 patent. The Board disagreed and found that Apple failed to prove the challenged claims were unpatentable.

The Federal Circuit, in an opinion authored by Judge Reyna, reversed the Board’s decision on issue preclusion. The court explained that a party seeking to prevail on issue preclusion must show that the issue sought to be precluded is the same as that involved in a prior action, the issue was actually litigated, the determination was essential to the final judgment, and the party against whom estoppel is invoked had a full and fair opportunity to litigate. The court found all four factors were met.

The court first determined that the issue was the same, as it noted that while the claims of the ‘936 and ‘739 patents did not recite identical language, a side-by-side, limitation-by-limitation comparison revealed their “marked similarity.” The respective claim limitations, including the “dynamic conversion” and “dynamically configurable” limitations, had only minor differences.

The court also observed that the arguments regarding patentability and claim construction indicated that Apple and Smart Mobile understood the claim language to carry the same meaning. The court concluded that the differences did not “materially alter the question of invalidity.”

The court rejected Smart Mobile’s argument that the issue was different because the Board in the prior IPRs had relied on different prior art for different claim limitations. Under its precedent in Ohio Willow Wood Co. v. Alps S., LLC, issue preclusion can apply when the issue is the invalidity of an entire patent claim, rather than specific elements or factual details. The court stated that Smart Mobile’s “narrower factual focus is irrelevant, and we reject it.”

The court next found that the issue was “actually litigated” in the prior IPRs. The record showed that Smart Mobile and Apple disputed whether claim 1 of the ‘739 patent was unpatentable, and the Board drew a “final conclusion”. The court also determined that Smart Mobile had a “full and fair opportunity to litigate” the issue, finding no evidence of significant procedural limitations and noting that Smart Mobile had not “presented, let alone supported, any allegation of a legally significant disparity in incentives” between the IPRs.

Having found all elements of issue preclusion satisfied, the Federal Circuit held claim 1 of the ‘936 patent unpatentable (the court seems to have referred to “the ‘968 patent” in error). The court noted that “to conclude otherwise would allow a patentee to assert a claim substantially similar to a claim previously found unpatentable by the PTAB.” Given that the Board’s decision as to the dependent claims rested entirely on its conclusion that claim 1 was not unpatentable, the court vacated its decision as to those claims and remanded for further consideration.

The court also addressed the Board’s claim construction of “dynamically configurable,” which the Board construed to mean “configurable when and as needed and in real time, without the need for user intervention.” Apple argued that this construction improperly imports limitations from the specification. The court disagreed, finding that the specification “repeatedly and consistently characterizes the switching as occurring without user intervention.” The prosecution history of the ‘936 patent’s great-grandparent patent also supported this construction, as the applicant had distinguished prior art by characterizing it as “manual” and “not enabled for dynamic sensing nor conversion.”

For these reasons, the Federal Circuit reversed the Board’s judgment regarding claim 1 of the ‘936 patent, vacated the judgment regarding dependent claims 8 through 11, 13, 15, 17, and 19, and remanded for consideration of the patentability of those claims.

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Author: almoond