Ipr Licensing, Inc. v. Zte Corporation ( 2017 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
IPR LICENSING, INC.,
Appellant
v.
ZTE CORPORATION, ZTE (USA) INC., MICROSOFT
CORPORATION,
Appellees
______________________
2016-1374, 2016-1443
______________________
Appeals from the United States Patent and Trade-
mark Office, Patent Trial and Appeal Board in Nos.
IPR2014-00525, IPR2015-00074.
______________________
Decided: April 20, 2017
______________________
GABRIEL BELL, Latham & Watkins LLP, Washington,
DC, argued for appellant. Also represented by RICHARD P.
BRESS, JONATHAN D. LINK, MICHAEL J. GERARDI; JULIE M.
HOLLOWAY, San Francisco, CA.
CHARLES M. MCMAHON, McDermott, Will & Emery
LLP, Chicago, IL, argued for all appellees. Appellees ZTE
Corporation, ZTE (USA) Inc. also represented by BRIAN
ANDREW JONES; JAY REIZISS, NATALIE A. BENNETT,
WASHINGTON, DC.
2 IPR LICENSING, INC. v. ZTE CORPORATION
CONSTANTINE L. TRELA, JR., Sidley Austin LLP, Chi-
cago, IL, for Microsoft Corporation. Also represented by
RICHARD ALAN CEDEROTH; JOSEPH A. MICALLEF, SCOTT
BORDER, Washington, DC.
______________________
Before PROST, Chief Judge, LOURIE and TARANTO, Circuit
Judges.
TARANTO, Circuit Judge.
IPR Licensing, Inc. (IPRL) owns U.S. Patent No.
8,380,244, which describes and claims “dual mode” com-
munications devices that can use cellular networks as
well as Wi-Fi networks. After IPRL sued ZTE Corp. and
ZTE (USA) Inc. (jointly, ZTE) and Nokia Corp. for in-
fringement in separate actions in the District of Dela-
ware, ZTE filed a petition for inter partes review of claims
1–8, 14–16, 19–29, 36–38, and 41–44 of the patent under
35 U.S.C. §§ 311–312. The Patent Trial and Appeal
Board instituted a review of all of the challenged claims,
IPR2014-00525. After a subsidiary of Microsoft Corpora-
tion bought Nokia’s wireless-devices-and-services busi-
ness, Microsoft filed its own petition for inter partes
review of the patent, which the Board instituted as
IPR2015-00074. The Board then joined Microsoft’s IPR to
ZTE’s, and Microsoft agreed to “proceed solely on the
grounds, evidence, and arguments advanced” in ZTE’s
petition. J.A. 484. We hereafter refer simply to ZTE
when discussing the joint positions of ZTE and Microsoft.
In a final written decision covering both IPRs, the
Board determined that all of the challenged claims are
unpatentable for obviousness. ZTE Corp. v. IPR Licens-
ing, Inc., No. IPR2014-00525, 2014 WL 10405879, at *18
(P.T.A.B. Sept. 14, 2015). On appeal, IPRL contends that
the Board misconstrued the term “plurality of assigned
physical channels,” which is present in all of the chal-
IPR LICENSING, INC. v. ZTE CORPORATION 3
lenged claims, and relied on hindsight in its analysis of
claim 8. IPRL also contends that the Board violated the
Administrative Procedure Act by relying on arguments
made by ZTE for the first time in reply in the IPRs. We
have jurisdiction under 28 U.S.C. § 1295(a)(4)(A).
As to all claims except claim 8, we affirm. We agree
with the Board’s claim construction, and we hold that
IPRL suffered no prejudice from any change of position by
ZTE. We conclude, however, that substantial evidence
does not support the Board’s articulated motivation to
combine the asserted references to arrive at the invention
defined in claim 8. We therefore vacate the Board’s
decision holding claim 8 unpatentable, and we remand.
I
The ’244 patent describes a wireless access device that
can automatically switch from a long-range, low-speed,
cellular wireless network to a short-range, high-speed,
wireless local area network (W-LAN) when a W-LAN is in
range and can “revert[] to connecting to the long range
network only when out of range of the W-LAN base sta-
tions.” ’244 patent, col. 2, lines 63–67. When there is
“relatively low utilization of the [cellular] wireless chan-
nel,” such as when the device is connected to a W-LAN,
the device will release the physical layer wireless channel
of the cellular connection “while maintaining the appear-
ance of a network layer connection to the higher level
protocols.” Id., col. 4, lines 14–18. Such “spoofing,” id.,
col. 4, lines 29–30, “frees wireless channel bandwidth for
use by other subscriber units, without the overhead
associated with having to set up an end to end connection
each time that data needs to be transferred” and means
that “the bandwidth necessary to provide a temporary but
very high speed connection is available at critical times,”
id., col. 4, lines 19–26.
Claim 1 is representative of all claims except claim 8:
4 IPR LICENSING, INC. v. ZTE CORPORATION
1. A subscriber unit comprising:
a cellular transceiver configured to communicate
with a cellular wireless network via a plurality of
assigned physical channels;
an IEEE 802.11 transceiver configured to com-
municate with an IEEE 802.11 wireless local area
network; and
a processor configured to maintain a communica-
tion session with the cellular wireless network in
an absence of the plurality of assigned physical
channels while the IEEE 802.11 transceiver com-
municates packet data with the IEEE 802.11
wireless local area network.
’244 patent, col. 11, lines 6–16.
8. The subscriber unit of claim 1, wherein the cel-
lular wireless network is a code division multiple
access (CDMA) wireless network, and the cellular
transceiver is a cellular code division multiple ac-
cess (CDMA) transceiver.
Id., col 11, lines 39–42.
The Board held that all challenged claims are un-
patentable for obviousness over a combination of U.S.
Patent No. 6,243,581 to Jawanda (Jawanda); the General
Packet Radio Service Standards published by the Europe-
an Telecommunications Standards Institute in 1998
(GPRS Standards); and the IEEE 802.11 Standard (used
for Wi-Fi).
II
The Board construed “plurality of assigned physical
channels” to mean “plurality of physical channels made
available for use by the subscriber unit,” without a re-
IPR LICENSING, INC. v. ZTE CORPORATION 5
quirement that the subscriber unit select the channel for
use. ZTE, 2014 WL 10405879, at *8, 11. 1 IPRL challeng-
es the construction and the process leading to its adoption
by the Board. We discuss the process first, then the
merits of the construction.
A
IPRL complains that the Board relied on a new con-
struction presented by ZTE in its reply, thereby denying
IPRL an adequate opportunity to respond, in violation of
the APA. See Dell Inc. v. Acceleron, LLC, 818 F.3d 1293,
1301 (Fed. Cir. 2016) (describing notice and opportunity-
to-respond requirements of APA applicable to IPRs). Our
review under the APA is subject to a harmless-error rule
by virtue of the directive of 5 U.S.C. § 706 that “due
account shall be taken of the rule of prejudicial error.”
See Shinseki v. Sanders, 556 U.S. 396, 406, 409 (2009)
(explaining that § 706 requires the party challenging an
agency decision on appeal to demonstrate the harmful-
ness of the asserted error). Here, we need not decide
whether ZTE’s position on reply was a shift or a clarifica-
tion because IPRL has not shown that it suffered harm
from the process it challenges.
In its petition, ZTE proposed that the term “plurality
of assigned physical channels” should be construed to
mean “plurality of physical channels available for the
subscriber unit to select for use.” J.A. 296. The focus of
1 The Board also construed the term “maintain a
communication session with the cellular wireless network
in an absence of the plurality of assigned physical chan-
nels” to mean “maintain a logical connection with the
cellular wireless network when none of the plurality of
physical channels are in use by the subscriber unit.”
ZTE, 2014 WL 10405879, at *8. That construction is not
disputed on appeal.
6 IPR LICENSING, INC. v. ZTE CORPORATION
its claim construction argument appeared to be that the
specification uses “assign” to mean something different
from “allocate” and that “a subscriber unit cannot use
(allocate) a resource (physical channel) until it has been
made available (assigned) to the subscriber unit.” J.A.
297. In its response, IPRL agreed to the language pro-
posed by ZTE, explaining that, under that construction, it
is the subscriber unit that selects among the assigned
channels. On reply, ZTE “clarified” that, in using the
word “select,” it had not intended to limit the claims to
subscriber units that choose a subset of the available
channels or make any affirmative choice beyond the
decision to use or not to use the batch of assigned chan-
nels. While the petition might be read to assert that
“select for use” means that the subscriber unit must be
able to exercise discretion as to which channels it uses, we
doubt that the petition must be so read.
But we need not decide that question. Even if the re-
ply did contain a new argument, IPRL has not shown how
it was prejudiced by the Board’s refusal to allow it to
respond. Although it agreed with the language of ZTE’s
proposed construction, IPRL made detailed arguments to
the Board (in its patent owner’s response) in favor of that
construction and in support of interpreting the construc-
tion to require that the subscriber unit of claim 1 be
“selecting” channels for use. And this claim-construction
issue is decided de novo in this court, where IPRL has had
a full opportunity to argue for its preferred construction,
without any possible confusion about the position it is
opposing. There is no issue here about the application of
the construction, and so there is no prejudice from the
Board’s adoption of this construction even if we assume
that ZTE changed course. The only question we need
decide, therefore, is the correctness of the claim construc-
tion.
This court’s decision in SAS Institute, Inc. v. Comple-
mentSoft, LLC, 825 F.3d 1341 (Fed. Cir. 2016), is instruc-
IPR LICENSING, INC. v. ZTE CORPORATION 7
tive. There, after the Board adopted one construction in
its institution decision, which the parties subsequently
accepted, the Board adopted a new construction in its
final written decision. Id. at 1350–51. This court re-
viewed and affirmed the Board’s construction on appeal.
Id. at 1349–50. The court then held that a remand was
required for the parties (particularly, the losing petition-
er) to have the opportunity to apply the new construction,
i.e., to make patentability arguments based on the new
construction. Id. at 1352. But in the present case, IPRL
makes no argument that its claims are patentable under
the Board’s construction, either based on the existing
record or based on evidence that it would have developed
if it had known of the possibility that the Board would
interpret the claim as it did. Thus, we turn to the merits
of the Board’s claim construction.
B
The Board gives a claim its broadest reasonable in-
terpretation in light of the specification. 37 C.F.R.
§ 42.100(b); Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct.
2131, 2142 (2016). This is so regardless of whether a
district court has already construed the claims. PPC
Broadband, Inc. v. Corning Optical Commc’ns RF, LLC,
815 F.3d 747, 756 (Fed. Cir. 2016). While the Board in
the present case noted expert testimony put forth by ZTE,
it did not rely on any such testimony in construing the
claim. Therefore, we review the Board’s construction de
novo. See Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S.
Ct. 831, 841 (2015); D’Agostino v. MasterCard Int’l, Inc.,
844 F.3d 945, 948 (Fed. Cir. 2016).
We agree with the Board that its construction is the
broadest reasonable one. IPRL accepts that “the ‘sub-
scriber unit,’ which is ‘configured’ to communicate with a
cellular network, is ‘assigned’ a set of ‘physical channels’
by the base station.” Appellant’s Br. 26. IPRL contends,
however, that all the claims also require the subscriber
8 IPR LICENSING, INC. v. ZTE CORPORATION
unit to be able to “select for use” a certain subset of the
physical channels—in other words, that the subscriber
unit of the invention must be able not just to choose
whether to use the assigned channels or not, but to exer-
cise discretion over how many of the assigned channels to
use. See Appellant’s Reply 6 (“[T]he subscriber unit must
be able to decide which of the channels (some or all) to
use, rather than being required to use (or not use) all of
the channels assigned by the base station.”). We disagree.
The language of claim 1 speaks only of “assigned”
physical channels. It says nothing about allocation,
selection for use, or what happens to those channels after
they are assigned.
The specification does not compel IPRL’s allocation
position. One passage states: “For example a bandwidth
management function may make only a certain number of
channels 30 available at any time. A subset of the availa-
ble channels 30 is selected, and then the optimum num-
ber of bits for each subframe intended to be transmitted
over respective one of the channels, is then chosen.” ’244
patent, col. 7, lines 24–29. But there is no good enough
reason to read that sentence into the claims, under a
broadest-reasonable-interpretation standard, and require
that the subscriber units always can choose a subset of
channels. The sentence describes choosing a subset of
channels as a mere “example” of what the bandwidth
management function “may” do. Another passage dis-
cusses “allocation” at some length in describing Figure 6,
id., col. 9, line 64, through col. 10, line 43, but it does not
clearly speak of subscriber units’ choice to use only some,
not all, of the assigned channels; it contains no “present
invention requires” or comparably limiting language; and
the bottom of column 10 summarizes the written descrip-
tion as showing mere “preferred embodiments,” id., col.
10, lines 65–66. Another IPRL-cited passage, from ’244
patent, col. 4, lines 22–26, is similarly unpersuasive
because it appears in a description of “one preferred
IPR LICENSING, INC. v. ZTE CORPORATION 9
embodiment,” id., col. 4, line 5. The specification thus
does not demand a broadest reasonable interpretation, of
a claim not referring to allocation, that requires a sub-
scriber unit capable of exercising discretion in channel
allocation.
Claim 15 confirms that claim 1 does not require the
subscriber unit to exercise such discretion. That claim
reads: “The subscriber unit of claim 1, wherein the pro-
cessor is further configured to allocate and deallocate at
least one of the plurality of assigned physical channels.”
’244 patent, col. 12, lines 1–3. IPRL points to that claim
as showing that the subscriber unit must “select for use”
some of the assigned channels. But the doctrine of claim
differentiation would suggest the opposite: that if the
subscriber unit must be capable of allocating channels in
claim 15, it cannot be required to be so capable in claim 1
or the claims would be the same. IPRL has not argued for
the patentability of claim 15 separately from claim 1. At
oral argument, IPRL posited that claim 15 further limits
claim 1 not by requiring allocation, but by limiting what is
doing the allocating—namely, the processor as opposed to
the transceiver. See Oral Arg. 5:30–6:15,
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
16-1374.mp3. Not only is this argument new, it is uncon-
vincing: The specification does not refer to a processor,
but it describes the “bandwidth management functionali-
ty,” which does the allocating, as being part of the “proto-
col converter,” ’244 patent, col. 6, lines 23–29, which itself
is separate from the transceivers, id., col. 5, lines 6–8
(“The interface 24 in turn provides data to a protocol
converter 25, which in turn provides data to a multichan-
nel digital transceiver 26 and antenna 27.”). As the only
structures named in claim 1 are the processor and the
transceivers, and the specification does not show any
examples of the transceivers allocating bandwidth, the
natural reading of claim 15 is that it is further limiting
10 IPR LICENSING, INC. v. ZTE CORPORATION
claim 1 to include the ability to “allocate and deallocate at
least one of the plurality of assigned physical channels.”
We therefore affirm the Board’s construction of “plu-
rality of assigned physical channels” to mean “plurality of
physical channels made available for use by the subscrib-
er unit.”
III
We review the ultimate question of obviousness de
novo, and we review underlying factual findings, includ-
ing the “presence or absence of a motivation to combine or
modify with a reasonable expectation of success,” for
substantial evidence. Ariosa Diagnostics v. Verinata
Health, Inc., 805 F.3d 1359, 1364 (Fed. Cir. 2015).
A
As to all of the claims except claim 8, the parties
agree that the Board’s obviousness determination, based
on its finding that the prior art discloses a “plurality of
assigned physical channels,” stands if its claim construc-
tion is correct. Because we affirm the Board’s construc-
tion, we also affirm its holding that claim 1 and the
claims it represents—claims 2–7, 14–16, 19–29, 36–38,
and 41–44—are unpatentable for obviousness. 2
B
Claim 8 requires separate consideration. It claims
“[t]he subscriber unit of claim 1, wherein the cellular
wireless network is a code division multiple access
(CDMA) wireless network, and the cellular transceiver is
2 That disposition is unaffected by the several broad
challenges to the IPR scheme that IPRL has included in
its brief. As IPRL agrees, those challenges are foreclosed
by governing precedents.
IPR LICENSING, INC. v. ZTE CORPORATION 11
a cellular code division multiple access (CDMA) trans-
ceiver.” ’244 patent, col. 11, lines 39–42. As a dependent
claim, it incorporates all of the limitations of claim 1,
including the limitation that the subscriber unit “main-
tain a communication session with the cellular wireless
network in an absence of the plurality of assigned physi-
cal channels.” Id., col. 11, lines 12–14. The Board, in its
obviousness analysis for claim 1, held that Jawanda did
not disclose “maintain[ing] a communication session” as
that term was construed; rather, it concluded, the GPRS
standards disclosed that limitation in the form of the
Packet Data Protocol (PDP) Context feature, and Ja-
wanda and the GPRS standards would be combined along
with the IEEE 802.11 standard. ZTE, 2014 WL
10405879, at *12–15.
The Board then seemed to hold that claim 8 would
have been obvious because “Jawanda explicitly states that
the wireless data connections could be provided by a code
division multiple access (CDMA) network.” Id. at *18
(quoting Pet’r’s Reply 13) (internal quotation marks
omitted). The logic of the Board’s analysis is wanting.
As noted, the Board found earlier that Jawanda did
not disclose “maintain[ing] a communication session” at
all: the Board relied wholly on the GPRS standard for
that limitation. Moreover, the Board cited no prior-art
reference that discloses that CDMA networks at the time
of the invention could “maintain a communication ses-
sion” according to the claims. Accordingly, the Board
must have held that it would have been obvious to com-
bine the PDP Context feature of the GPRS standard that
enables the subscriber unit to “maintain a communication
session” with a CDMA network. We do not see the sup-
port for that inference. Jawanda’s disclosure that “[f]or
data connections, such wireless signals can be transmit-
ted according to any currently available or future wireless
data protocol such as code division multiple access
(CDMA), CDPD, or GPRS,” Jawanda, col. 3, lines 6–9
12 IPR LICENSING, INC. v. ZTE CORPORATION
(emphasis added), on its face discloses GPRS and CDMA
as alternative protocols; and it does not suggest that any
aspects of the GPRS standard (much less the specific
functions corresponding to the disputed ’244 patent
limitations) should be incorporated into a CDMA stand-
ard. In other words, the suggestion in Jawanda to com-
bine Jawanda with GPRS or CDMA is not a suggestion to
combine Jawanda and specific features of GPRS with
CDMA.
Aside from the cited passage in Jawanda, the only ev-
idence that the Board cited in its discussion of claim 8
that could be interpreted as a motivation to combine is
testimony by Dr. Stark, IPRL’s expert, admitting that
“the GPRS network layer protocols (such as the PDP
context) were eventually incorporated into CDMA air
interface systems, such as WCDMA.” ZTE, 2014 WL
10405879, at *18 (quoting Pet’r’s Reply 14) (internal
quotation marks omitted). While that testimony may
establish that, at some point, there was a reason to com-
bine the PDP Context feature with CDMA protocols, it
does not provide that reason or show why the references
cited or the knowledge of one of skill in the art at the time
of the invention would motivate a skilled artisan to alter
the standards with a reasonable expectation of success.
Nor does Dr. Stark’s testimony establish that, at the time
of the invention, the CDMA standard already included the
“maintain a communication session” limitation.
Finally, the Board reasoned that “Petitioner argues
persuasively that ‘Patent Owner has advanced no evi-
dence to suggest that employing the cited GPRS function-
ality in a CDMA-based system such as Jawanda discloses
would have been beyond the level of ordinary skill at the
relevant time.’” Id. (quoting Pet’r’s Reply 14). But in
addition to seeming to shift the burden of proof, that is a
statement about what skilled artisans could have done if
motivated, not what they would have been motivated to
do. Proof of the latter is needed. See Personal Web
IPR LICENSING, INC. v. ZTE CORPORATION 13
Techs., LLC v. Apple, Inc., 848 F.3d 987, 993–94 (Fed. Cir.
2017) (citing cases).
IPRL does not contend that the record is so clearly
devoid of any possible motivation to combine that outright
reversal is warranted. Oral Arg. at 12:00–13:40,
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
16-1374.mp3. Because the record might contain substan-
tial evidence to support a motivation to combine the PDP
Context feature of the GPRS standards with the CDMA
network referenced in Jawanda, we vacate the Board’s
decision with respect to claim 8 and remand for further
proceedings. 3
IV
For the foregoing reasons, we affirm the determina-
tions of unpatentability of claims 1–7, 14–16, 19–29, 36–
38, and 41–44. We vacate the determination of unpatent-
ability of claim 8 and remand for further proceedings.
No costs.
AFFIRMED IN PART, VACATED IN PART, AND
REMANDED
3 Because we remand as to claim 8 on the merits,
we need not decide whether the Board relied on new
arguments raised on reply. On remand, the Board should
evaluate whether the parties had notice and an oppor-
tunity to respond to the grounds it ultimately relies on.