July 30, 2020

Institution Decision Not Carved in Stone; Final Written Decision Can Differ

In FanDuel, Inc. v. Interactive Games LLC, [2019-1393] (July 29. 2020), the Federal Circuit affirmed the PTAB’s determination that FanDuel had failed to prove that claim 6 of U.S. Patent No. 8,771,058 was obvious in view of the asserted prior art. FanDuel argued that the Board violated the APA by adopting in its final written decision a “new theory” — that the combination of Walker, Carter, and the Slot Payouts Webpage failed to disclose the claimed combination — after instituting on that ground.

The Federal Circuit said that the critical question for compliance with the APA and due process is whether the patent owner received adequate notice of the issues that would be considered, and ultimately resolved, at that hearing. The Federal Circuit added that FanDuel’s argument lacked notice that the Board might address and reject the obviousness arguments made in FanDuel’s own petition.

Moreover, the Federal Circuit failed to see how the Board changed theories at all in this case. The Federal Circuit said that by finding at institution that FanDuel had a reasonable likelihood of succeeding in its obviousness challenge to claim 6, despite one reference’s contested prior art status, the Board was not adopting a position on the ultimate import of the three references. The Federal Circuit said that the Board said nothing in its institution decision endorsing FanDuel’s arguments such that later rejecting these arguments would have been a change in theory.

The Federal Circuit said that there is nothing inherently inconsistent about the Board instituting IPR on obviousness grounds and then ultimately finding that the petitioner did not provide preponderant evidence that the challenged claim was obvious. The Federal Circuit observed that this happens with some frequency, and that is has encouraged the Board to “change its view of the merits after further development of the record, if convinced its initial inclinations were wrong.

The Federal Circuit also rejected FanDuel’s suggestion that the patent owner’s failure to put forth rebuttal evidence regarding the substance of the references’ disclosures in any way limited the Board’s ability to decide for itself what the references would teach or suggest to a person of skill in the art.  The Federal Circuit noted that the Petitioner always has the burden of showing invalidity, and that the patent owner does not even have to file a response, and thus, a patent owner’s response, alone, does not define the universe of issues the Board may address in its final written decision.

The Federal Circuit concluded that from the moment FanDuel filed its petition, it was on notice that the Board would decide whether those references taught what FanDuel claimed they taught. That is exactly what the Board ultimately did. No APA violation results from such a course. The Board’s purported new theory in this case was merely an assessment of the arguments and evidence FanDuel put forth in its petition.

On the substantive issues, the Federal Circuit agreed with Board that FanDuel failed to show that claim 6 was obvious.