Published 10/06/2020 by CIONCA IP TEAM (SG)
On September 25, 2020, the United States Court of Appeals for the Federal Circuit made decision in Apple, Inc., v. Voip-Pal.com, Inc. In February 2016, Voip-Pal.com, Inc. (“Voip-Pal”) sued appellant Apple, Inc. (“Apple”) for infringement of U.S. Patent Nos. 8,542,815 and 9,179,005 (collectively, the “Asserted Patents”), owned by Voip-Pal. The Asserted Patents generally describe and claim methods and apparatus for routing communications between public and private networks. In June 2016, Apple filed a petition to initiate inter partes review (“IPR”) against several claims of the Asserted Patents in two separate proceedings before the Patent Trial and Appeal Board (“Board”). In the IPR petitions, Apple argued that the claims in question were obvious over a combination of U.S. Patent No. 7, 486,684B2 (“Chu ‘684”) and U.S. Patent No. 8,036,366 (“Chu ‘366”), relying on the combined teachings of call classifying, infrastructure, call routing, and dialed digit reformatting. Subsequently, the Board instituted the requested inter partes reviews. During both IPR proceedings, Voip-Pal’s former Chief Executive Officer, Dr. Thomas E. Sawyer, sent six letters to various parties, including administrative patent judges at the Board. Dr. Sawyer did not copy or send Apple the letters. The letters criticized the IPR system and requested judgment in favor of Voip-Pal. On decision on November 20, 2017, the Board found that Apple failed to demonstrate that all claims were unpatentable as obvious over Chu ‘864 and Chu ‘366. Apple subsequently moved for sanctions against Voip-Pal based on Dr. Sawyer’s letters and timely appealed the Board’s final written decision to the United States Court of Appeals for the Federal Circuit (“Federal Circuit”). The Federal Circuit affirms in part, and vacates and remands in part the Board’s determination.
Naturally, the Federal Circuit performed an analysis of all the Board’s final determinations, as described below:
1. Suggestion of Mootness. In the move for sanctions against Voip-Pal, Apple argued that Voip-Pal’s ex parte communications violated its due process rights and the Administrative Procedures Act. Apple requested that the Board either sanction Voip-Pal by entering adverse judgment against Voip-Pal, or by vacating the final written decisions and assigning a new panel (“Final Panel”) to preside over new proceedings. The Federal Circuit stayed the appeals and remanded the cases for the limited purpose of allowing the Board to consider Apple’s sanctions motions. The Final Panel rejected Apple’s request for a directed judgment and Apple’s alternative request
for new proceedings. Apple then moved the Federal Circuit to lift the limited stay. The Federal Circuit lifted the stay and proceeded to briefing and oral argument.
a. Overlapping Claims. On June 8, 2020, prior to oral argument, Apple filed a post-briefing document in both appeals in which Apple contended that the Federal Circuit’s recent ineligibility determination in Voip-Pal.com, Inc. v. Twitter, Inc. (“Twitter”) renders the instant appeals moot, and that the Federal Circuit must therefore vacate the Board’s underlying final written decisions and sanctions orders. In Twitter, the Federal Circuit affirmed the California district court’s finding that two representative claims were patent ineligible. At oral argument, Apple argued that the appeals are moot as to nineteen “overlapping claims” at issue in the underlying IPR proceedings and in Twitter. The Federal Circuit agrees that these overlapping claims are rendered moot in these appeals in light of Twitter. Thus, the Federal Circuit vacates-in-part the Board’s final decisions only as to the overlapping claims and directs the Board to dismiss Apple’s petitions as to these claims.
b. Nonoverlapping Claims. The Federal Circuit then made decision regarding whether the appeals are moot as to the “nonoverlapping claims,” which pertain to the fifteen remaining claims at issue in the underlying IPR proceedings. Apple argues that the question of obviousness regarding the nonoverlapping claims appears to be moot in light of Twitter because Apple faces no liability for infringing these claims. According to Apple, Voip-Pal cannot assert the fifteen nonoverlapping claims against Apple because they are “essentially the same” as the claims held patent ineligible in Twitter. The Federal Circuit disagrees with Apple’s assertion of claim preclusion (res judicata).
Under the doctrine of claim preclusion, “a judgment on the merits in a prior suit involving the same parties bars a second suit based on the same cause of action.” Apple acknowledges that any res judicata effect of a first proceeding/suit can only be resolved by a future court. Thus, any preclusive effects that Twitter could have against the same or other parties must be decided in any subsequent action brought by Voip-Pal. The Federal Circuit concludes that the question of obviousness as to the nonoverlapping claims is thus not moot. The Federal Circuit therefore denies Apple’s request that the Board’s sanctions order be vacated as moot.
2. Merits of the Appeals
a. APA and Due Process. In the appeals before the Federal Circuit, Apple argues that the Board violated the Administrative Procedures Act (“APA”) and its due process rights when the Board imposed non-enumerated sanctions for Voip-Pal’s letters. Apple argues
that the Board, upon determining that Voip-Pal’s letters were sanctionable, violated the APA when the Board exceeded its authority by issuing a sanction not explicitly provided under 37 CFR 42.12(b). The Federal Circuit rejects such an argument. The Federal Circuit notes that Section 42.12(b) uses the term “include,” which signifies an open-ended list of sanctions. Thus, contrary to Apple’s argument, Section 42.12(b) does not limit the Board to the eight listed sanctions. The Federal Circuit therefore holds that the Board did not commit an APA violation when it issued a sanction not explicitly stated under Section 42.12.
Apple also argues that the Board violated Apple’s due process rights by refusing to order a de novo proceeding before a new panel. The Federal Circuit does not find Apple’s arguments persuasive. The Federal Circuit points out that Apple did not identify any property interests in the course of its due process arguments, and that the property interests identified for the first time on appeal are therefore waived. The Board introduced Voip-Pal’s letters into the record and gave Apple an opportunity to respond to those letters, an opportunity Apple chose not to take. Thus, because Apple failed to raise these arguments before appeal, the Federal Circuit holds that the Board did not commit a due process violation.
b. Non-Obviousness. In the appeals before the Federal Circuit, Apple also argues that the Board wrongly concluded that the challenged claims were not invalid as obvious. Apple specifically argues that the Board erred in its determination that Apple failed to establish a motivation to combine Chu ‘684 with Chu ‘366. Apple posits that a person of ordinary skill in the art would have viewed the network interface in Chu ‘684 as less “intuitive” and less “user-friendly” than that of Chu ‘366, and thus would be motivated to improve Chu ‘684’s system. Apple faults the Board for rejecting its expert testimony that Chu ‘684’s teachings were deficient for failure to provide evidence suggesting that Chu ‘684’s teachings are deficient. Voip-Pal’s expert, Dr. Mangione-Smith, explained that Chu ‘684’s operation was not “inadequate or unintuitive.” The Federal Circuit thus supports the Board’s decision to credit the opinion of Voip-Pal’s expert over Apple’s.
For the reasons above, the Federal Circuit affirms in part the Board’s non-obviousness determinations and the Board’s sanctions order. The Federal Circuit vacates and remands in part to the Board to dismiss the appeals pertaining to the “overlapping claims” as moot.
It is important to realize and understand the implications of the decision made in Apple, Inc., v. Voip-Pal.com, Inc. As evidenced by the outcome, there are numerous considerations to be made when dealing with the topics of threshold jurisdictional issues and sanction orders. As discussed above, Apple attempted to render the instant appeals moot based on the Federal Circuit’s recent determination in a previous case (Twitter) involving the same party (i.e., Voip-Pal). While the overlapping claims involved in the instant appeals and Twitter were found to be moot based on the patent ineligibility determination in Twitter, the nonoverlapping claims, i.e., the remaining claims at issue in the instant appeals, were not found to be moot. Apple attempted to rely on principles of claim preclusion (res judicata), positing that the overlapping claims are essentially the same as the nonoverlapping claims. However, as the Federal Circuit stated, any res judicata effect of a first proceeding is only an issue that a future court can resolve. Thus, the determination in Twitter is advisory in nature and is therefore not controlling in the current case. Regarding sanction orders, the Board may impose a sanction against a party for misconduct, which in this case involved Voip-Pal’s ex parte communications. 37 CFR 42.12 lists eight possible sanctions; however, Section 42.12(b) uses the term “include,” which signifies a non-exhaustive list. Thus, as concluded by the Federal Circuit, the plain reading of Section 42.12(b) provides the Board with discretion to issue sanctions not explicitly listed under Section 42.12.
Full Apple, Inc., v. Voip-Pal.com, Inc. decision can be read here: http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/18-1456.OPINION.9-25-2020_1659104.pdf
Disclaimer: The views and opinions expressed throughout this blog are the views and opinions of the individual author(s) and/or contributor(s) and do not necessarily reflect the views and opinions of our firm, CIONCA IP Law. P.C.
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