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IP Alert: Substitute Claims in IPR Proceedings Can Be Rejected Under § 101

August 3, 2020

On July 22, in Uniloc 2017 LLC v. Hulu, Inc., the Federal Circuit ruled that the Patent Trial and Appeal Board (PTAB) may analyze 35 U.S.C. § 101 patent eligibility for proposed substitute claims in an inter partes review (IPR) proceeding.

Hulu initiated an IPR against a Uniloc patent that resulted in the original claims being found unpatentable over prior art. During the proceeding, Uniloc submitted a motion to amend to enter a set of substitute claims. Hulu opposed the motion to amend, arguing, among other things, that the substitute claims are directed to patent-ineligible subject matter. In its final written decision, the PTAB denied Uniloc’s motion to amend on the sole ground that the substitute claims are directed to patent-ineligible subject matter. Uniloc requested a rehearing, arguing that it is impermissible in an IPR proceeding for the PTAB to consider a section 101 challenge. The PTAB denied Uniloc’s request, and Uniloc appealed.

On appeal, the Federal Circuit agreed with the PTAB, finding that the text, structure, and legislative history of the IPR statutes confirm that the PTAB may review proposed substitute claims for patent eligibility. This was notwithstanding that 35 USC § 311(b) limits petitioners to grounds “that could be raised under section 102 or 103.” In the court’s view, section 311(b) relates only to cancellation of claims, and the review of substitute claims is governed by a separate adjudication-stage provision, section 316. The court reasoned that this interpretation parallels case law relating to the prior inter partes reexamination proceedings in which substitute claims were subject to patentability review, including section 101, by the USPTO.

In a colorful dissent, Judge O’Malley opined that section 311 sets the parameters of what may be considered throughout an IPR proceeding, and the legislative history is clear that substitute claims serve to preserve for the patentee the narrower patent right that is merited in view of the art. Since substitute claims are required to be narrower in scope than the original claims, Judge O’Malley argued that the substitute claims had been examined during the prosecution of the original claims, including on section 101 grounds. She further noted that moving a claim into patent ineligibility by narrowing it is so unlikely that it should not be of concern.

This case is an interesting companion to Hunting Titan, Inc. v. Dynaenergetics Europe GmbH, issued by the PTAB’s Precedential Opinion Panel (POP) merely 16 days prior. In Hunting Titan, the POP constrained the PTAB from asserting new grounds against amended claims only to situations where the petitioner has ceased to participate in the proceedings. The combined effect of these two cases is that the PTAB can reject substitute claims in an IPR proceeding under section 101 as long as the petitioner raises the ground first.

This decision is particularly relevant to parties involved in an AIA trial proceeding. Patent owners should be aware that substitute claims can be rejected under section 101 and should therefore draft substitute claims with potential patent-eligibility challenges in mind. Petitioners should be sure to assert section 101 grounds where applicable when opposing motions to amend.

For more information regarding this decision, please contact Fitch Even partner Karen J. Wang, author of this alert.

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