Droplets, Inc. v. Etrade Bank
Opinion
E*TRADE Bank, E*TRADE Financial Corporation, E*TRADE Securities, LLC, Scottrade Financial Services, Inc., Scottrade, Inc., TD Ameritrade Holding Corp., and TD Ameritrade, Inc. (collectively, "E*TRADE") filed a petition for inter partes review ("IPR") of
By statute, a claim for benefit of the filing date of an earlier application must include "a specific reference to [an] earlier filed application."
I. BACKGROUND
A. The '115 Patent
The '115 Patent relates to a method and system "for delivering interactive links for presenting applications and second information at a client computer from remote sources in a network-configured computer processing system." '115 Patent at Abstract. In this appeal, the parties dispute the effective filing date of the '115 Patent. As depicted below, the '115 Patent was filed on January 26, 2009, and was the last of four patents filed in its lineage:
Board Decision
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• the '115 Patent was copending with the application leading toU.S. Patent No. 7,502,838 ("the '838 Patent"), filed on November 24, 2003;
• the '838 Patent was copending with the application leading toU.S. Patent No. 6,687,745 ("the '745 Patent"), filed on June 22, 2000;
• the '745 Patent was copending with the earliest-filed application, Provisional Application No. 60/153,917 ("the '917 Provisional"), filed on September 14, 1999; and
• a Patent Cooperation Treaty ("PCT") application ("the Franco PCT") was filed on September 14, 2000, and published on March 22, 2001.
The specification of the '115 Patent includes a priority claim that specifically refers to the '838 Patent and incorporates its disclosure by reference. '115 Patent, col. 1, ll. 5-12. The '115 Patent specification also includes a cross reference to the '917 Provisional. These sections read as follows:
CLAIM OF PRIORITY
The present application is a continuation of allowed U.S. patent application Ser. No. 10/720,728, entitled "SYSTEM AND METHOD FOR DELIVERING REMOTELY STORED APPLICATIONS AND INFORMATION" filed on Nov. 24, 2003 now U.S. Pat. No. 7,502,838, the di[s]closure of which is hereby incorporated by reference in its entirety.
*1313 CROSS REFERENCE TO RELATED DOCUMENTS
Priority is herewith claimed under35 U.S.C. § 119 (e) from copending Provisional Patent Application No. 60/153,917, filed Sep. 14, 1999, entitled "METHOD AND SYSTEM FOR DELIVERING APPLICATIONS IN CLIENT/SERVER ENVIRONMENT," by Louis M. Franco et al. The disclosure of this Provisional Patent Application is incorporated by reference herein in its entirety.
'115 Patent, col. 1, ll. 5-24.
It is undisputed that the '115 Patent properly claims priority from the earlier-filed, copending '838 Patent and thus is entitled to the benefit of the November 24, 2003 filing date of the '838 Patent.
Board Decision
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As noted, the application leading to the '115 Patent was filed on January 26, 2009. The applicant subsequently filed a preliminary amendment that added a reference claiming priority from the application that led to the '838 Patent. That priority claim statement listed only the 2003 application: "The present application is a continuation of allowed U.S. Patent Application Serial No. 10/720,728... filed on November 24, 2003, the disclosure of which is hereby incorporated by reference in its entirety." Joint Appendix ("J.A.") 3484. During prosecution, two documents (a filing receipt and a bibliographic information sheet from the PTO) initially reflected a priority claim not only to the '838 Patent, but also to the '745 Patent and the '917 Provisional. Prior to issuance, however, the PTO mailed a corrected filing receipt for the application that became the '115 Patent, dated July 19, 2012, which listed the priority claim solely to the '838 Patent. That document clarified the claimed priority date as follows: "This application is a CON of 10/720,728 11/24/2003 PAT 7502838." J.A. 3298. Although the applicant filed a subsequent amendment to correct a typographical error in the claims, it did not amend the priority claim. The '115 Patent issued on March 19, 2013.
B. Procedural History
In May 2011, while the application for the '115 Patent was pending, Droplets filed suit against E*TRADE in the United States District Court for the Southern District of New York, alleging infringement of the '838 and '745 patents. After the '115 Patent issued in 2013, Droplets amended its complaint to add that patent to the suit.
In December 2014, E*TRADE filed a petition for IPR challenging claims 1-25 of the '115 Patent. E*TRADE asserted that the '115 Patent claims priority only to the '838 Patent and thus is entitled to a priority date of November 24, 2003. Based on that priority date, E*TRADE relied on the related Franco PCT-published in March 2001-as prior art, and the Board instituted review. In its patent owner response, Droplets argued that the '115 Patent is entitled to the filing date of the '917 *1314 Provisional (September 1999) because the '115 Patent's priority claim incorporates the '838 Patent by reference. According to Droplets, because the '838 Patent claims priority from the earlier-filed '745 Patent and the '917 Provisional, the '115 Patent is entitled to the '838 Patent's priority claim, which antedated the Franco PCT reference.
The Board issued its final written decision on June 23, 2016. At the outset, the Board found that the '115 Patent is not entitled to the benefit of the September 14, 1999 filing date of the '917 Provisional. In reaching this conclusion, the Board found that: (1) the '115 Patent's incorporation by reference of the '838 Patent failed to qualify as a "specific reference" to either the '745 Patent or the '917 Provisional; and (2) a priority claim cannot be incorporated by reference under
The Board determined that the effective filing date of the '115 Patent is November 24, 2003, and that the Franco PCT, published in March 2001, qualifies as prior art. After a thorough analysis, the Board found claims 1-25 of the '115 Patent invalid as obvious over the Franco PCT and Moshfeghi,
Droplets timely appealed the Board's final written decision-specifically its decision that the '115 Patent failed to properly claim priority from the earlier provisional application. We have jurisdiction over Droplets' appeal pursuant to
E*TRADE timely cross-appealed, arguing that, if we disagree on the priority date issue, we can affirm the Board's invalidity decision as to some of the claims on alternative grounds. As discussed below, we lack jurisdiction to consider E*TRADE's cross-appeal, which, in any event, is rendered moot in light of our decision in the main appeal.
II. DROPLETS' APPEAL
On appeal, Droplets argues that the Board erred in holding that "Droplets failed on a technicality: it 'incorporated by reference' a critical link in the priority chain instead of mechanically reproducing the same exact words in the patent itself." Appellant Br. 8. According to Droplets, the Board incorrectly concluded that a priority claim falls outside the scope of material that can be incorporated by reference. Droplets also argues that inter partes review is invalid on two grounds: (1) non-Article III judges cannot revoke a patent without violating the Seventh Amendment; and (2) the Director cannot lawfully delegate authority to institute IPR proceedings to the Board.
E*TRADE responds that the Board correctly found that incorporation by reference is not sufficient to meet the "specific reference" requirement in establishing priority. E*TRADE also argues that this court's case law interprets
The Director intervened and defends the Board's priority decision on grounds that: (1) under § 120, a patent must contain a "specific reference" to a previously filed application to be entitled to that application's earlier filing date; (2) incorporation by reference cannot satisfy the specific reference requirement for claiming priority; and (3) this court has already considered and rejected Droplets' constitutional *1315 and administrative law challenges to IPR procedures. For the reasons explained below, we agree with the Director on each point.
A. A "Specific Reference" is Required to Claim Priority
"Determination of a patent's priority date is purely a question of law if the facts underlying that determination are undisputed."
Medtronic CoreValve, LLC v. Edwards Lifesciences Corp
.,
Priority claims are governed by statute. To claim the benefit of an earlier filing date in the United States, § 120 provides:
An application for patent for an invention [1] disclosed in the manner provided by the first paragraph of section 112 of this title in an application previously filed in the United States, ... [2] which is filed by an inventor or inventors named in the previously filed application shall have the same effect, as to such invention, as though filed on the date of the prior application, [3] if filed before the patenting or abandonment of or termination of proceedings on the first application or on an application similarly entitled to the benefit of the filing date of the first application and [4] if it contains or is amended to contain a specific reference to the earlier filed application.
Relevant to this appeal, the statute requires that the patent application "contain a specific reference to the earlier filed application" to which it purports to claim priority. Id . For the specific reference to have effect, the statute provides that the application must be copending with the first-filed application or a later-filed application "similarly entitled" to the benefit of the first application's filing date. Id .
Section 119(e)(1) recites parallel requirements to claim priority from an earlier-filed U.S. provisional application.
The PTO has issued a regulation implementing these statutes-
The regulation thus requires that the specific reference include each prior-filed application's: (1) application number; and (2) familial relationship. It further states *1316 that the reference "must be included in an application data sheet ..., or the specification must contain or be amended to contain such reference in the first sentence(s) following the title." Id .
Consistent with
Before the Board, Droplets and E*TRADE agreed that the '115 Patent properly claimed priority under § 120 and regulation 1.78 to the earlier-filed, copending '838 Patent.
Board Decision
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The Board correctly applied § 120 in finding that the '115 Patent claims priority only to the '838 Patent. The '115 Patent refers to the '838 Patent by its application number and indicates the relationship of the applications: the '115 Patent is a continuation of the '838 Patent. '115 Patent, col. 1, ll. 5-12. The '115 Patent does not contain a specific reference to either the intervening '745 Patent or the first-filed '917 Provisional. Because the '115 Patent contains the statutorily-required specific reference under § 120 and regulation 1.78 to the '838 Patent, the Board correctly concluded that the '115 Patent's effective filing date is November 24, 2003, the filing date of the '838 Patent.
Board Decision
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On appeal, Droplets argues that the Board invalidated its patent due to a "hypertechnical violation" and that this court has shown leniency where a "failure is only technical in nature and the public has received sufficient notice." Appellant Br. 25. We disagree.
"Although § 120 might appear to be a technical provision," courts have long-recognized that "it embodies an important public policy," and thus have required strict adherence to its requirements.
Sampson v. Ampex Corp
.,
Likewise, the Seventh Circuit has recognized that "Congress may well have thought that Section 120 was necessary to eliminate the burden on the public to engage in long and expensive search of previous applications in order to determine the filing date of a later patent."
Sticker Indus. Supply Corp. v. Blaw-Knox Co
.,
More recently, our court clarified that the "specific reference" requirement in § 120"mandates each [intermediate] application in the chain of priority to refer to the prior applications."
Medtronic
,
Medtronic argued that "the test for determining whether a priority claim contains the specific reference required by § 120 is whether a reasonable person reading the language of the claim would be able to determine the relationship between the priority applications." Id . at 1365. We rejected this so-called "reasonable person" test on grounds that it "runs afoul" of both § 120 and regulation 1.78, which require a specific reference to each prior-filed application in precise detail. Id . at 1366. Citing Sticker and Sampson , we explained that it would be improper to place the burden on the public to unearth and decipher a priority claim when the "patentee is the person best suited to understand the genealogy and relationship of her applications," and a "requirement for her to clearly disclose this information should present no hardship." Id .
That the '115 Patent fails to enumerate a priority claim sufficient to avoid Droplets' own fully-invalidating prior art is not a "hypertechnicality" that unfairly rendered the claims unpatentable. Section 120 places the burden on the patent owner to provide a clear, unbroken chain of priority.
Medtronic
,
The record reveals that Droplets had notice of the '115 Patent's limited priority claim prior to its issuance. Although Droplets submits that the PTO sent three filing receipts with its desired priority date, it sent a corrected filing receipt in July 2012 that set forth a priority claim solely to the '838 Patent. 4 The '115 Patent issued in March 2013, eight months later. During that eight-month window, Droplets submitted an amendment making certain changes to the '115 Patent application, as well as a request for continued examination and withdrawal of notice of allowance, but did not seek to amend the priority date. As the Board found, because the burden was on *1318 Droplets to read and understand the applicable laws, and the MPEP provided clear guidance as to how to claim the benefit of a prior-filed application, Droplets cannot claim any error on the part of the examiner. Id .
Because the '115 Patent contains the required specific reference only to the '838 Patent, the Board correctly concluded that the '115 Patent's earliest effective filing date is November 24, 2003, the filing date of the '838 Patent.
Board Decision
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B. Incorporation by Reference Cannot Satisfy the "Specific Reference" Requirement of § 120
Droplets' primary argument-both to the Board and on appeal-is that it satisfied the specific reference requirement of § 120 when it incorporated the '838 Patent by reference into the '115 Patent. Incorporation by reference "provides a method for integrating material from various documents into a host document ... by citing such material in a manner that makes clear that the material is effectively part of the host document as if it were explicitly contained therein."
Zenon Envtl., Inc. v. U.S. Filter Corp
.,
Here, Droplets maintains that it stated the full priority claim for § 120 purposes via incorporation by reference pursuant to
"Essential material" can be incorporated by reference, but only by way of a U.S. patent or U.S. patent application publication which "does not itself incorporate such essential material by reference."
*1319
Other "Nonessential material," by contrast, may be incorporated by reference to "U.S. patents, U.S. patent application publications, foreign patents, foreign published applications, prior and concurrently filed commonly owned U.S. applications, or non-patent publications."
Taken together,
Droplets does not contend that a priority claim qualifies as "essential material." Instead, it asserts that a priority claim must be "nonessential material" because essential and nonessential material are "mutually exclusive categories that cover 100% of the universe of potential material" that can be incorporated by reference. Appellant Br. 8. But nothing in regulation 1.57 authorizes making a priority claim under § 120 through an incorporated reference. Indeed, there is no reference to § 120 in
Consistent with this interpretation, MPEP § 608.01(p) describes essential and nonessential material as two categories that together serve to fulfill the invention disclosure requirements of § 112. It explains that "[a]n application as filed must be complete in itself in order to comply with
Droplets argues that, if incorporation by reference is adequate for § 112 purposes, it should also be adequate for § 120. Droplets cites two cases in support of this proposition:
Harari v. Hollmer
,
We conclude that § 120's "specific reference" requirement does not contemplate incorporation by reference. In reaching this conclusion, we note that Droplets' proposed reading of § 120 conflicts with the statute's purpose, which is to provide clear notice to the public of the patentee's claimed priority date.
See
Medtronic
,
C. Droplets' Other Arguments
Finally, Droplets argues that IPR proceedings are invalid because: (1) they allow third parties to litigate the validity of issued patents before Article I judges in violation of Article III and the Seventh Amendment; and (2) the Director cannot delegate the institution decision to the Board because
Droplets acknowledges, as it must, that this court has already considered these arguments and rejected them.
See
MCM Portfolio LLC v. Hewlett-Packard Co.
,
Droplets raises these arguments solely to preserve them for further review, and provides no compelling reason why this panel can or should revisit those decisions. Accordingly, we need not address them further.
III. E*TRADE'S CROSS-APPEAL
E*TRADE cross-appeals from the Board's final written decision, arguing that "an alternative ground exists to determine that '115 Patent claims 2-6, 8, 13-17, 19, and 24 are invalid." Cross-Appellant Br. 50-51. Specifically, E*TRADE submits that, if we reverse the Board's decision invalidating the '115 Patent due to its priority claim statement, we should find that the Board erred in its obviousness analysis when it: (1) improperly narrowed the scope of the '115 Patent claims; and (2) failed to consider the full scope of the Ferris prior art reference. Id . at 51. According to E*TRADE, correcting these errors would result in "13 of the 25 claims of the '115 Patent being found obvious over that prior art, and 3 of [the] 25 claims being remanded for further consideration." Id . at 10.
Because we agree with the Board's analysis of the priority issue, we need not address the merits of E*TRADE's arguments. In any event, as explained below, E*TRADE's cross-appeal is improper.
Both Droplets and E*TRADE seem to suggest that we have jurisdiction over E*TRADE's cross-appeal pursuant to
A party to an inter partes review or a post-grant review who is dissatisfied with the final written decision of the Patent Trial and Appeal Board under section 318(a) or 328(a) (as the case may be) may appeal the Board's decision only to the United States Court of Appeals for the Federal Circuit.
As we recently explained, there is no support for the proposition that "Congress intended the use of 'dissatisfied with' in conjunction with 'final decision' to broaden the appeal rights from Board decisions to include those of prevailing parties who are merely dissatisfied with the Board's reasoning."
SkyHawke Techs., LLC v. Deca Int'l Corp
.,
Here, E*TRADE is not dissatisfied with the Board's final judgment of invalidity based on the priority date issue, only with its alternative finding that some of the claims were nonobvious over a different prior art reference. See Oral Arg. at 25:15-22, *1322 available at http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2016-2504.mp3 ("Certainly we are satisfied with the ultimate outcome, but we disagree with one of the bases."). Indeed, counsel for E*TRADE conceded at oral argument that, if Droplets had not appealed the Board's decision, E*TRADE would have no grounds to appeal. Oral Arg. at 25:41-55.
"It is only necessary and appropriate to file a cross-appeal when a party seeks to enlarge its own rights under the judgment or to lessen the rights of its adversary under the judgment."
Bailey v. Dart Container Corp. of Mich.
,
Because E*TRADE is neither "dissatisfied with" nor adversely affected by the appealed judgment, we dismiss its cross-appeal as improper. E*TRADE was, however, permitted to raise the arguments in its cross-appeal as alternative grounds for affirming the Board's judgment. But because we affirm the Board's decision finding all claims of the '115 Patent invalid, we need not address E*TRADE's alternative arguments.
IV. CONCLUSION
For the foregoing reasons, we conclude that a patent must contain a specific reference to each prior-filed application to be entitled to those applications' earlier filing dates. Incorporation by reference cannot satisfy this statutorily mandated specific reference requirement. Because the '115 Patent contains a specific reference only to the '838 Patent, and not the earlier-filed '745 Patent or '917 Provisional, we affirm the Board's decision finding all claims of the '115 Patent invalid as obvious. We dismiss E*TRADE's cross-appeal as improper.
AFFIRMED; CROSS-APPEAL DISMISSED
COSTS
No costs.
Unless otherwise stated, citations to all statutes, regulations, and rules are to the versions in effect as of January 26, 2009, the filing date of the '115 Patent.
Although the Board and the parties cite
The MPEP also provides an example of a priority claim: "[T]his application is a continuation of Application No. C, filed ---, which is a continuation of Application No. B, filed ---, which claims the benefit of provisional Application No. A, filed ---." Id .
The Director explains that the three filing receipts appear to be duplicates mailed to three different addresses, with the first two returned to the PTO as undeliverable. Intervenor Br. 18 n.4.
At oral argument, counsel for the Director explained that the incorporation by reference regulation "specifically allows § 112 material as essential material that can be incorporated by reference. There is no other statutory requirement that then is listed. Nonessential material ... naturally is the complement of essential material and it's been in the MPEP since the 1960s to be state of the art, background of the invention, things that complement, that are nonessential but complement essential material." See Oral Arg. at 13:45-14:15, available at http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2016-2504.mp3.
At the same time the PTO enacted
Reference
- Full Case Name
- DROPLETS, INC., Appellant v. E*TRADE BANK, E*TRADE Financial Corporation, E*TRADE Securities, LLC, Scottrade Financial Services, Inc., Scottrade, Inc., TD Ameritrade Holding Corp., TD Ameritrade, Inc., Cross-Appellants v. Andrei Iancu, Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, Intervenor
- Cited By
- 10 cases
- Status
- Published