In re Vivint, Inc.

14 F.4th 1342

IN RE: VIVINT, INC., Appellant

2020-1992

United States Court of Appeals, Federal Circuit.

Decided: September 29, 2021

William Milliken, Sterne Kessler Goldstein & Fox, PLLC, Washington, DC, argued for appellant. Also represented by Jason Daniel Eisenberg, Robert Greene Sterne.

Robert J. McManus, Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA, argued for appellee Andrew Hirshfeld. Also represented by Thomas W. Krause, Maureen Donovan Queler, Farheena Yasmeen Rasheed.

Before Moore, Chief Judge, Schall and O'Malley, Circuit Judges.

Moore, Chief Judge.

In 2011, Congress passed the Leahy-Smith America Invents Act (AIA), Pub. L. No. 112-29, 125 Stat. 284 (codified in scattered sections of title 35). Overhauling the patent system, Congress created new ways to reexamine the validity of issued patents. See id. "[I]n the post-AIA world, a patent can be reexamined either in federal court during a defense to an infringement action, in an ex parte reexamination by the Patent Office, or in the suite of three post-issuance review proceedings before the Patent Trial and Appeal Board." Return Mail, Inc. v. U.S. Postal Serv. , ––– U.S. ––––, 139 S. Ct. 1853, 1860, 204 L.Ed.2d 179 (2019). Often, parties use multiple path-ways to challenge validity. For example, an accused infringer may challenge validity both in district court and in an inter partes review (IPR), one of the three post-issuance review proceedings.

This case requires us to determine when one pathway, ex parte reexamination, is available to a requester who has repeatedly tried to use another pathway, IPR, to forward the same arguments. By statute, the Patent Office must find a "substantial new question of patentability" before ordering reexamination, 35 U.S.C. § 303(a), and it may deny reexamination when "the same or substantially the same prior art or arguments previously were presented to the Office," 35 U.S.C. § 325(d).¹ While the ex parte reexamination in this case was based on substantial new questions of patentability, the Patent Office abused its discretion and acted arbitrarily and capriciously under § 325(d). Thus, we vacate and remand with instructions for the Patent Office to dismiss.²

BACKGROUND

In 2015, Vivint sued Alarm.com for infringing four patents, including U.S. Patent No. 6,717,513. While defending itself in district court, Alarm.com requested the Patent Office institute a litany of post-issuance review proceedings. In total, Alarm.com filed fourteen IPR petitions. Three of those petitions—IPR2015-01997, IPR2016-00129, and IPR2016-01091—challenged the validity of claims in the ’513 patent, which is the only patent at issue here.

The Patent Office ultimately declined to institute IPR for the ’513 patent. For the ’997 and ’129 petitions, the Patent Office determined that Alarm.com failed to make the threshold showing for institution: a reasonable likelihood that it would prevail on at least one challenged claim. See 35 U.S.C. § 314(a). For the ’091 petition, however, the Patent Office declined institution on a different basis. It viewed the ’091 petition as an example of "undesirable, incremental petitioning." Alarm.com Inc. v. Vivint, Inc. , IPR2016-01091, Paper 11, at 12 (P.T.A.B. Nov. 23, 2016) (’091 Decision). Alarm.com had "used prior Board decisions as a roadmap to correct past deficiencies." Id. And the Patent Office reasoned that "allowing similar, serial challenges to the same patent, by the same petitioner, risks harassment of patent owners and frustration of Congress's intent in enacting the Leahy-Smith America Invents Act." Id. (internal quotation marks and alterations omitted). To discourage such petitioning, the Patent Office exercised its discretion to deny institution for the ’091 petition. Id.

More than a year later, Alarm.com requested ex parte reexamination of all claims of the ’513 patent. Largely, this request repackaged the arguments raised in the ’091 petition. Alarm.com presented four questions of patentability for the Patent Office to review:

SNQP No.	Claim(s)	Basis for Rejection
1	1-13, 15-21	Obviousness: Shetty and Joao
2	14	Obviousness: Shetty, Joao, and Cheng
3	8-13, 15-21	Obviousness: Shetty, Joao, and Garton
4	14	Obviousness: Shetty, Joao, Cheng, and Garton

J.A. 70. Two of those questions came directly from the ’091 petition. In fact, vast swaths of the ex parte reexamination request copied, almost word for word, the ’091 petition. Compare J.A. 84–125, 132–36, with Alarm.com Inc. v. Vivint, Inc., IPR2016-01091, Paper 1, at 16–57, 64–67 (P.T.A.B. May 24, 2016). For the two other questions, which related only to claim 14, Alarm.com replaced a reference cited in the ’091 petition, Britton, with another reference, Cheng. But it did so only after the Patent Office had addressed Britton in three related IPRs.

Based on Alarm.com's request, the Patent Office ordered reexamination for all claims of the ’513 patent. It concluded that Alarm.com had raised substantial new questions of patentability despite the prior IPRs:

[The Patent Office] notes that the Shetty, Joao, and Garton references are now presented in a new light compared to the earlier examinations and proceedings in view of the material new argument and interpretation presented in the Request. Accordingly, the use of these references in this reexamination is proper.

J.A. 982. The Patent Office did not, however, cite § 325 or discuss its discretion under that provision. See J.A. 976–84.

Vivint then petitioned the Patent Office under 37 C.F.R. § 1.181, seeking dismissal of the ex parte reexamination. It argued that the Patent Office has authority to deny reexamination under § 325(d) because that statute applies to ex parte reexaminations and IPRs with equal force. It also argued that each factor the Patent Office uses when exercising its discretion under § 325(d) counseled in favor of dismissal.³ Finally, in Vivint's view, the Patent Office could not decline to institute IPR based on abusive filing practices, yet grant reexamination on essentially the same facts.

The Patent Office dismissed Vivint's petition, holding that any § 1.181 petition raising 35 U.S.C. § 325(d) must be filed before reexamination is ordered. Based on §§ 304, 305, and 325(d), the Patent Office reasoned that it had no authority to consider petitions filed after reexamination was ordered. While that reasoning drove the Patent Office's dismissal, the Patent Office also "provide[d] additional comments ... in order to clarify [its] policy" on several points. J.A. 10847.

In a second petition under § 1.181, Vivint sought reconsideration of the § 325(d) issue. It argued that raising § 325(d) in a petition would have been impossible before ex parte reexamination was ordered, so the Patent Office should not have faulted Vivint for its timing. And Vivint argued that, even if the Patent Office generally lacks authority to terminate a reexamination, it had authority to do so in this case under the Administrative Procedure Act (APA). Vivint also claimed the Patent Office acted arbitrarily and capriciously by applying the same law to the same facts and reaching a different conclusion.

The Patent Office denied Vivint's second § 1.181 petition. It reasoned that, though Patent Office rules prevented Vivint from filing a § 1.181 petition before ex parte reexamination was ordered, Vivint could have sought waiver of those rules. Also, the Patent Office rejected Vivint's APA arguments, viewing them as an attempt to circumvent statutory limits. Likewise, the Patent Office explained how granting ex parte reexamination was not inconsistent with denying IPR. It contrasted the statutory frameworks used to make each decision. And it reasoned that, even if the IPR was denied based solely on § 325(d) considerations, the differences between ex parte reexamination and IPR could justify such an outcome. But, like the first petition, the Patent Office's ultimate decision focused on the timing of Vivint's petition as the basis for denying relief. J.A. 12217.

Ultimately, an examiner issued a final rejection for all claims of the ’513 patent, and Vivint appealed to the Board. The Board affirmed. In doing so, it held that Alarm.com's request raised substantial new questions of patentability, but it did not address § 325(d). Vivint appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(4)(A).

DISCUSSION

"We review the Board's decisions under the standard[s] set forth in the [APA]." Alacritech, Inc. v. Intel Corp. , 966 F.3d 1367, 1370 (Fed. Cir. 2020). Those standards require us to "decide all relevant questions of law" and to set aside agency actions that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706. Our review under the APA is not limited to the four corners of a final agency action; we may also review "preliminary, procedural, or intermediate agency action[s] or ruling[s]" that are "not directly reviewable" before a final action. 5 U.S.C. § 704.

I

To order reexamination, the Patent Office must identify a "substantial new question of patentability." 35 U.S.C. § 303(a). Vivint challenges the Patent Office's outcome on that score, which is a question of law that we review without deference. See In re Swanson , 540 F.3d 1368, 1381 (Fed. Cir. 2008) ("[T]he ultimate question of whether the reexamination is based on a substantial new question of patentability ... remains a question of law.").⁴ Vivint argues that, because the ex parte reexamination request repackaged arguments in the ’091 petition, it did not present a new question of patentability. We do not agree.

A

The text of § 303(a) provides little guidance on the meaning of the word new in the phrase "substantial new question of patentability":

Within three months following the filing of a request for reexamination under the provisions of section 302, the Director will determine whether a substantial new question of patentability affecting any claim of the patent concerned is raised by the

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