Apple filed a successful petition for Inter Partes Review (IPR) of Personal Web Technologies' U.S. Patent No. 7,802,310.  In its final written decision, the Patent Trial and Appeal Board (PTAB) agreed with Apple's contention that the claims of the '310 patent were obvious.  On appeal, the Federal Circuit reversed.

Obviousness is one of the most common issues dealt with during prosecution and post-grant proceedings.  While the determination of whether a claim is obvious is ostensibly an objective matter, reasonable minds can differ.  Thus, there is often a gray area where the subjective opinion of a patent examiner or finder of fact can sway the decision one way or the other.  Ten years ago, in KSR Int'l Co. v. Teleflex Inc., the Supreme Court attempted to add some color to the obviousness inquiry by requiring that there is a clearly articulated rationale to support a determination of obviousness.  Still, many obviousness contentions, whether made in the USPTO or the courts, are conclusory in nature.

The '310 patent is directed to "locating data and controlling access to data by giving a data file a substantially unique name that depends on the file's content."  The patent describes generating the name through use of a hash function over the content.  When a user attempts to access the file, the invention requires "comparing that name with a plurality of values in a network, determining whether a user is authorized to access the data, and providing or denying access to the data based on that determination."

Apple alleged that various claims of the '310 patent were obvious over two references, Woodhill and Stefik.  According to the Court, "Woodhill discloses a system for using content-based identifiers in performing file management functions, such as backing up files," while "Stefik discloses an authentication system designed to control access to digital works stored in a repository."

The Court reviewed the PTAB's decision de novo for the determination of obviousness, and based on the substantial evidence standard for its findings of fact.  Under the latter, the Court asks "whether a reasonable fact finder could have arrived at the agency's decision, which requires examination of the record as a whole, taking into account evidence that both justifies and detracts from an agency's decision."

This required that the PTAB justify and explain (i) that all claim elements at issue could be found in Woodhill and Stefik, and (ii) that "a person of ordinary skill in the art would have been motivated to combine the prior art in the way claimed by the '310 patent claims at issue and had a reasonable expectation of success in doing so."  The Court particularly emphasized the requirement of explanation, stating that "the amount of explanation needed will vary from case to case, depending on the complexity of the matter and the issues raised in the record."

The Court further noted that its review of the PTAB in this fashion was also in accordance with administrative law.  Particularly, "the agency is obligated to provide an administrative record showing the evidence on which the findings are based, accompanied by the agency's reasoning in reaching its conclusions."  Thus, the PTAB "must articulate logical and rational reasons for decision."

The Court went on to point out how the PTAB failed to meet these requirements.  For one claim element, the PTAB stated that it relied on Stefik as disclosing the element, and referred to a specific part of Apple's petition in doing so.  But this part of the petition only referenced Woodhill, and the PTAB did not address this apparent discrepancy.  For another claim element, the PTAB did not address all features therein.

The Court also found that the PTAB did not properly articulate its reasoning as to why one of skill in the art would be motivated to combine Stefik and Woodhill in the manner recited by the claims.  The PTAB once again relied on reasoning from Apple's petition, but "that reasoning seems to say no more than that a skilled artisan, once presented with the two references, would have understood that they could be combined."  This, however, is insufficient, because "it does not imply a motivation to pick out those two references and combine them to arrive at the claimed invention."  The issue is not whether the references could be combined, but whether they would be combined by one of skill in the art.  Moreover, the PTAB failed to explain and provide evidence for "how the combination of the two references was supposed to work."

In the Court's view, the amount of explanation needed to support a conclusion of obviousness depends on the complexity of the technology at issue.  Here, the PTAB's explanation was lacking.  As a result, the Court remanded the case back to the PTAB to "reconsider the merits of the obviousness challenge, within proper procedural constraints."

In some measure, this opinion centers on whether the PTAB set forth a sufficient explanation to be sustainable upon judicial review, based on the PTAB's disposition under an administrative agency.  But it also provides a colorable argument that patent examiners need to live up to that standard as well.  It is all too common for a patent examiner or a challenger in a PTAB proceeding to identify claim elements that exist in the prior art, then state, in a wholly conclusory fashion, that it would be obvious to combine the prior art references.  But, as clearly called out in this opinion, this is insufficient.  Obviousness rests on whether one of skill in the art would have a reason to combine the references in a manner that would lead to the claims.  Such reasoning is all too frequently missing, and this case provides patentees with language to rebut such improper contentions.

Personal Web Technologies, LLC v. Apple, Inc. (Fed. Cir. 2017)
Panel: Circuit Judges Taranto, Chen, and Stoll
Opinion by Circuit Judge Taranto