Droplets, Inc. v. E*Trade Bank et al. v. USPTO (Intervenor)


Docket No. 2016-2504, -2602 (IPR2015-00470)

DYK, O’MALLET, WALLACH
April 19, 2018

Brief summary: PTAB IPR decision finding Droplets’ ‘115 Patent invalid for obviousness based on its decision that the patent improperly claimed priority to an earlier provisional application affirmed (requirement for “a clear, unbroken chain of priority” cannot be satisfied by incorporation by reference under § 1.57).

Summary: E*Trade appealed PTAB decision that all the claims of Droplets’ US 8,402,115 invalid as obvious based on its determination “that: (1) the ‘115 Patent failed to enumerate a priority claim sufficient to aboid fully-invalidating prior art; and (2) incorporation by reference is insufficient to satisfy a patentee’s burden of providing notice of the asserted priority date under 35 U.S.C. § 120.” The USPTO “intervened to defend the Board’s decision on the priority date issue.” Here, “parties dispute[d] the effective filing date of the ‘115 Patent”, which issued with a filing receipt stating that the application leading to the ‘115 patent was a continuation of US 7,502,838 which was filed on November 24, 2003 (the effective filing date of the ‘115 Patent). Droplets unsuccessfully argued to the PTAB that the ‘115 Patent was entitled to an earlier-filed provisional application filed in 1999 (the ‘917 provisional) because the ‘838 Patent, which was incorporated by reference into the ‘115 Patent. The ‘838 Patent claimed priority to an earlier filed and copending patent (the ‘745 Patent filed on June 22, 2000) which itself was copending with the ‘917 provisional. The ‘115 Patent specification includes a “CLAIM OF PRIORITY” section claiming priority to the ‘838 patent and incorporating the same by reference, and a “CROSS REFERENCE TO RELATED DOCUMENTS” section claiming priority to the ‘917 provisional and incorporating the same by reference. However, the ‘115 Patent did not explicitly claim priority to the ‘745 Patent. The question here was whether the ‘115 Patent was entitled to priority to the ‘745 Patent and the ‘917 provisional by the incorporation by reference of the ‘838 patent. The prior art relied on in the obviousness conclusion is prior art only if the ‘115 Patent has the November 24, 2003 effective filing date (i.e., it does not properly claim priority to either the ‘745 Patent or the ‘917 provisional). The PTAB concluded that “Droplets failed on a technicality: it ‘incorporated by reference’ a critical link in the priority chain instead of mechanically reproducing the exact words in the patent itself.” The FC panel agreed with the PTAB, citing 37 CFR § 1.78 “which requires that an application contain a specific reference to each prior-filed application to which the application seeks to claim priority” (“each prior filed application’s: (1) application number; and (2) familial relationship”, either “in an application data sheet” or in specification “in hthe first sentence(s) following the title”; § 120, MPEP § 201.11 III.C). The FC panel explained that “[a]lthough § 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 requirement” (“a clear, unbroken chain of priority”; Sampson, 2nd Cir. 1972; Hovlid, 9th Cir. 1962; Sticker Indus., 7th Cir. 1968; Medtronic, FC 2014). The FC panel concluded that incorporation by reference (§ 1.57) cannot satisfy the ‘specific reference’ requirement of § 120 as § 1.57 only applies to “[t]wo categories of material…‘[e]ssential material’” (“expressly defined as material necessary to meet the requirements of § 112”) “and ‘[o]ther material (‘[n]onessential information’)” defined by MPEP § 608.01(p) as “subject matter referred to for the purposes of indicating the background of the invention or illustrating the state of the art”). E*Trade’s cross-appeal was dismissed as it was “neither ‘dissatisfied with’ not adversely affected by the appealed judgment”.

This entry was posted in Inter Parties Review (IPR), IPR, Obviousness, Priority. Bookmark the permalink.

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