UNITED STATES PATENT AND TRADEMARK OFFICE
`________________________
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`________________________
`APPLE INC.,
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`Patent Owner.
`________________________
`Case CBM2015-00016
`Patent 8,033,458 B2
`________________________
`
`PATENT OWNER’S BRIEF ON
`PETITIONER’S ESTOPPEL UNDER 35 U.S.C. § 325(e)(1)
`
`
`
`
`
`
`
`
`
`
`________________________
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`________________________
`APPLE INC.,
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`Patent Owner.
`________________________
`Case CBM2015-00016
`Patent 8,033,458 B2
`________________________
`
`PATENT OWNER’S BRIEF ON
`PETITIONER’S ESTOPPEL UNDER 35 U.S.C. § 325(e)(1)
`
`
`
`
`
`
`
`
`
`
`
`
`
`TABLE OF CONTENTS
`
`INTRODUCTION ............................................................................................... 1
`I.
`II. ARGUMENT ....................................................................................................... 2
`A. 35 U.S.C. § 325(e)(1) Should Be Strictly Construed Such That Estoppel
`Attaches Upon Issuance Of A Final Written Decision ..................................... 2
`B. Under 35 U.S.C. § 325(e)(1), CBM2015-00015 and -00016 May Not Be
`Maintained ........................................................................................................ 3
`C. Enforcing § 325(e)(1) Estoppel Now Serves Congress’s Purpose Of
`Preventing Patent Owner Harassment .............................................................. 5
`III. CONCLUSION.................................................................................................... 7
`
`
`
`i
`
`
`
`I.
`
`INTRODUCTION
`Pursuant to the Board’s Order – Conduct of the Proceedings 37 C.F.R.
`
`§ 42.5 entered October 9, 2015 (Paper 42), Patent Owner submits this brief
`
`“regarding whether Apple is estopped from arguing claim 1 of the ’221 patent and
`
`claim 1 of the ’458 patent at the November 9 hearing.” Paper 42 at 3.
`
`As the Board notes, claim 1 of U.S. Patent 8,118,221 B2 (“the ‘221 Patent”)
`
`is at issue in CBM2015-00015 on a 35 U.S.C. § 101 patentable subject matter
`
`challenge based on Apple Inc.’s petition, and claim 1 of U.S. Patent 8,033,458 B2
`
`(“the ‘458 Patent”) is at issue in CBM2015-00016 on a § 101 challenge based on
`
`Apple’s petition. Paper 42 at 2. Both are set for hearing on November 9, 2015.
`
`Paper 36. Meanwhile, on September 25, 2015 the Board issued a Final Written
`
`Decision in CBM2014-00102 finding claim 1 of the ‘221 Patent unpatentable and
`
`in CBM2014-000106 finding claim 1 of the ‘458 Patent unpatentable under
`
`35 U.S.C. § 103 based on petitions also filed by Apple.
`
`Strict construction of 35 U.S.C. § 325(e)(1) and case law precedent requires
`
`that Apple may not maintain its CBM2015-00015 and -00016 proceedings with
`
`respect to claim 1 of the ‘221 Patent and claim 1 of the ‘458 Patent because § 101
`
`eligibility is a ground that Apple reasonably could have raised during the
`
`CBM2014-00102 and -00106 reviews. Apple is estopped from arguing claim 1 of
`
`the ’221 Patent and claim 1 of the ’458 Patent at the November 9, 2015 hearing.
`
`1
`
`
`
`Patent Owner respectfully requests that it be granted leave to file a Motion to
`
`Terminate CBM2015-00015 and -00016 with respect to claim 1 in light of this
`
`estoppel.
`
`II. ARGUMENT
`A.
`35 U.S.C. § 325(e)(1) Should Be Strictly Construed Such That
`
`Estoppel Attaches Upon Issuance Of A Final Written Decision
`
`The estoppel provision of 35 U.S.C. § 325(e)(1) provides:
`
`(e) Estoppel.—
` (1) Proceedings before the office.— The petitioner in a
`post-grant review of a claim in a patent under this
`chapter that results in a final written decision under
`section 328 (a), or the real party in interest or privy of the
`petitioner, may not request or maintain a proceeding
`before the Office with respect to that claim on any
`ground that the petitioner raised or reasonably could
`have raised during that post-grant review.
`
`35 U.S.C. § 325(e)(1) (emphasis added).
`
`This estoppel provision should be strictly construed to mean that the
`
`preclusive effect attaches as soon as a final written decision under § 328(a) has
`
`been rendered. Had Congress intended for the estoppel to attach later, such as after
`
`the time for all appeals has run, it could have said so explicitly.
`
`Case law supports this strict statutory construction. In Virginia Innovation
`
`Sciences, Inc., v. Samsung Electronics Co., Ltd., et al., 983 F.Supp.2d 713, 753
`
`(E.D. Va. 2014), the court discussed the impact of inter partes review proceedings
`
`on district court proceedings in the context of a motion for reconsideration. The
`
`2
`
`
`
`Court applied a strict construction and noted that “the preclusive effect of a PTAB
`
`final determination is triggered when the PTAB issues its final written decision—
`
`regardless of whether an appeal is taken to the Federal Circuit.” 983 F.Supp.2d
`
`753 (citing 35 U.S.C. § 315(e), the inter partes review analog to 35 U.S.C.
`
`§ 325(e) for post grant review, including covered business method reviews,
`
`consisting of identical language.) The fact that this interpretation of § 315(e) (and
`
`thus § 325(e)) is from the Eastern District of Virginia is significant, given that it is
`
`the court having jurisdiction and venue for legal actions challenging USPTO
`
`action. 28 U.S.C. § 1361 (“[D]istrict courts shall have original jurisdiction of any
`
`action in the nature of mandamus to compel an officer or employee of the United
`
`States or any agency thereof to perform a duty owed to the plaintiff”); 28 U.S.C.
`
`§ 1391(e) (“ [A] civil action in which a defendant is an officer or employee of the
`
`United States or any agency thereof acting in his official capacity or under color of
`
`legal authority, or an agency of the United States, or the United States, may, except
`
`as otherwise provided by law, be brought in any judicial district in which (A) a
`
`defendant in the action resides, (B) a substantial part of the events or omissions
`
`giving rise to the claim occurred…”).
`
`B.
`
`
`Under 35 U.S.C. § 325(e)(1), CBM2015-00015 and -00016 May
`Not Be Maintained
`
`Now that a Final Written Decision has been issued pursuant to 35 U.S.C.
`
`§ 328(a) in CBM2014-00102 on claim 1 of the ‘221 Patent, and in CBM2014-
`
`3
`
`
`
`00106 on claim 1 of the ‘458 Patent, Petitioner Apple may no longer maintain a
`
`proceeding before the Office with respect to either of those claims on any ground
`
`that Apple reasonably could have raised in CBM2014-00102 and -00106.
`
`In CBM2015-00015 Apple challenged claim 1 of the ‘221 Patent only on
`
`§ 101 grounds. CBM2015-00015, Corrected Petition, Paper 9 at 19. Similarly, in
`
`CBM2015-00016, Apple challenged claim 1 of the ‘458 Patent only on § 101
`
`grounds. CBM2015-00016, Corrected Petition, Paper 9 at 19. The Petition in
`
`CBM2015-00015, filed on October 30, 2014, was Apple’s third-filed covered
`
`business method challenge against claim 1 of the ‘221 Patent. Apple filed its first
`
`two petitions on March 28, 2014 (CBM2014-00102, Paper 2 and CBM2014-
`
`00103, Paper 2), more than 7 months before filing its initial petition in CBM2015-
`
`00015. CBM2015-00015, Paper 2. Similarly, the CBM2015-00016 Petition was
`
`Apple’s third-filed covered business method challenge against claim 1 of the ‘458
`
`Patent, Apple’s other two petitions having been filed on March 31, 2014
`
`(CBM2014-00106, Paper 2 and CBM2014-00107, Paper 2), 7 months before filing
`
`its initial petition in CBM2015-00016 on October 30, 2014. CBM2015-00016,
`
`Paper 2.
`
`Apple reasonably could have raised its § 101 challenges to claim 1 of the
`
`‘221 Patent when it filed its CBM petitions in CBM2014-00102/103, and to claim
`
`1 of the ‘458 Patent when it filed its petitions in CBM2014-00106/107. No
`
`4
`
`
`
`impediment existed that prevented Apple from raising its § 101 challenges in
`
`March 2014. The fact that Alice Corp. Pty, Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347
`
`(2014) was decided in the intervening time period does not excuse Apple’s failure
`
`to raise § 101 earlier. Indeed, in the related district court litigation, the Federal
`
`Circuit rejected essentially identical arguments, writing: “Alice did not create a
`
`new § 101 defense, but rather clarified § 101 jurisprudence. A party cannot wait to
`
`assert an available defense as litigation marches on. . . .” Exhibit 2103,
`
`Smartflash LLC v. Apple Inc., __ F. App’x __, 2015 WL 4603820, at *6 (Fed. Cir.
`
`July 30, 2015) (emphasis in original). As that recent, express reasoning makes
`
`clear, Apple reasonably could have raised the purely legal § 101 grounds in its
`
`March 2014 petitions in CBM2014-00102/103 and CBM2014-00106/107. As
`
`such, Apple is estopped under 35 U.S.C. § 325(e)(1) from arguing § 101 against
`
`claim 1 of the ’221 patent and claim 1 of the ’458 patent at the November 9, 2015
`
`hearing.
`
`C.
`
`
`Enforcing § 325(e)(1) Estoppel Now Serves Congress’s Purpose Of
`Preventing Patent Owner Harassment
`
`The post-grant review estoppel provisions in the Leahy-Smith America
`
`Invents Act (“AIA”) were intended by Congress to protect Patent Owners from the
`
`harassment of repetitive piecemeal challenges to the same patent claim on the basis
`
`of information that was known or reasonably could have been known at the time
`
`5
`
`
`
`the patent challenger brings its action. The legislative history of the AIA
`
`emphasizes the importance of the estoppel provisions to protect patent owners:
`
`In addition, the bill would improve the current inter
`partes administrative process for challenging the validity
`of a patent. It would establish an adversarial inter partes
`review, with a higher threshold for initiating a proceeding
`and procedural safeguards to prevent a challenger from
`using the process to harass patent owners. It also would
`include a strengthened estoppel standard to prevent
`petitioners from raising in a subsequent challenge the
`same patent issues that were raised or reasonably could
`have been raised in a prior challenge. The bill would
`significantly reduce the ability to use post-grant
`procedures for abusive serial challenges to patents.
`These new procedures would also provide faster, less
`costly alternatives to civil litigation to challenge patents.
`
`Ex. 2104, 157 Cong. Rec. S936-S953 at S952 (Senate Debate, February 28, 2011;
`
`Senator Grassely) (emphasis added).
`
`Here, enforcing the § 325(e) estoppel provisions protects Patent Owner from
`
`Apple’s piecemeal invalidity challenges to Patent Owner’s patent claims, an issue
`
`Patent Owner raised in its Preliminary Response. CBM2015-00015 Paper 19 at
`
`14; CBM2015-00016 Paper 19 at 14.
`
`The harassment of Patent Owner here is more than that theorized in the
`
`legislative history. Patent Owner has been subjected to a continuing barrage of
`
`Petitions. In total, the seven patents in the patent family under review have now
`
`been subject to 48 separate CBM petitions – 32 from Apple, 11 from Samsung, and
`
`5 from Google at a cost of nearly $1.5 million in USPTO filing fees alone. In this
`
`6
`
`
`
`instance, post-grant review has not met Congress’s goal of providing a faster, less
`
`costly alternative to civil litigation to challenge patents. As noted by the United
`
`States District Court for the Eastern District of Texas, where Smartflash and Apple
`
`are in patent infringement litigation over the same family of patents, denying
`
`Petitioner Apple’s motion to stay the litigation in light of the CBM’s Apple filed:
`
`At this late litigation stage, if the Court were to give
`credence to Apple’s arguments, this would serve to
`encourage parties to misuse CBM review in a manner
`completely opposite of what Congress intended, by
`making it into a cost-increasing, post-trial second
`chance at additional litigation, rather than a cost-
`effective alternative to litigation.
`
`Exhibit 2058 at 16.
`III. CONCLUSION
`For the forgoing reasons, Apple is estopped under 35 U.S.C. § 325(e)(1)
`
`from arguing § 101 against claim 1 of the ’221 patent and claim 1 of the ’458
`
`patent at the November 9, 2015 hearing. Patent Owner respectfully requests that it
`
`be granted leave to file a Motion to Terminate CBM2015-00015 and -00016 with
`
`respect to claim 1 therein in light of this estoppel.
`
`7
`
`
`
`
`
` /
`
` Michael R. Casey /
`
`
`Michael R. Casey
`Registration No. 40,294
`Davidson Berquist
`
`Jackson & Gowdey, LLP
`8300 Greensboro Drive
`Suite 500
`McLean, VA 22102
`Telephone: (571) 765-7705
`Fax: (571) 765-7200
`Email: mcasey@dbjg.com
`Attorney for Patent Owner
`
`Dated: October 21, 2015
`
`
`
`
`
`
`
`8
`
`
`
`
`
`CERTIFICATE OF SERVICE
`
`The undersigned hereby certifies that this PATENT OWNER’S BRIEF ON
`
`PETITIONER’S ESTOPPEL UNDER 35 U.S.C. § 325(e)(1) and Exhibits 2103
`
`and 2104 in CBM2015-00016 were served today, by agreement of the parties by
`
`emailing a copy to counsel for the Petitioner as follows:
`
`
`
`J. Steven Baughman (steven.baughman@ropesgray.com)
`Ching-Lee Fukuda (ching-lee.fukuda@ropesgray.com)
`Megan Raymond (megan.raymond@ropesgray.com)
`ApplePTABService-SmartFlash@ropesgray.com
`
`
` /
`
` Michael R. Casey /
`
`
`Michael R. Casey
`Registration No. 40,294
`Davidson Berquist
`
`Jackson & Gowdey, LLP
`8300 Greensboro Drive
`Suite 500
`McLean, VA 22102
`Telephone: (571) 765-7705
`Fax: (571) 765-7200
`Email: mcasey@dbjg.com
`Attorney for Patent Owner
`
`
`
`Dated: October 21, 2015
`
`
`
`
`
`9
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