Droplets, Inc. v. Etrade Bank ( 2018 )

United States Court of Appeals
for the Federal Circuit
______________________
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
______________________
2016-2504, 2016-2602
______________________
Appeals from the United States Patent and Trade-
mark Office, Patent Trial and Appeal Board in No.
IPR2015-00470.
______________________
Decided: April 19, 2018
______________________
2 DROPLETS, INC. v. E*TRADE BANK
DANIEL LUKE GEYSER, Stris & Maher LLP, Los Ange-
les, CA, argued for appellant. Also represented by
DOUGLAS D. GEYSER; TIMOTHY BECHEN, Bechen PLLC,
Richmond, VA.
MICHAEL T. ROSATO, Wilson, Sonsini, Goodrich &
Rosati, PC, Seattle, WA, argued for cross-appellants. Also
represented by ANDREW SWANSON BROWN; MATTHEW A.
ARGENTI, MICHAEL BRETT LEVIN, Palo Alto, CA; JOEL
CHRISTIAN BOEHM, Austin, TX; RICHARD TORCZON, Wash-
ington, DC.
SARAH E. CRAVEN, Office of the Solicitor, United
States Patent and Trademark Office, Alexandria, VA,
argued for intervenor. Also represented by NATHAN K.
KELLEY, THOMAS W. KRAUSE, PHILIP J. WARRICK.
______________________
Before DYK, O’MALLEY, and WALLACH, Circuit Judges.
O’MALLEY, Circuit Judge.
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 U.S. Patent No.
8,402,115 (“the ’115 Patent”), owned by Droplets, Inc.
(“Droplets”). The Patent Trial and Appeal Board (“the
Board”) instituted review and issued a final written
decision finding all claims of the ’115 Patent invalid as
obvious under 35 U.S.C. § 103. E*TRADE Fin. Corp. v.
Droplets, Inc., No. IPR2015-00470, 2016 WL 3476939(P.T.A.B. June 23, 2016) (“Board Decision”). In reaching
this conclusion, the Board found that: (1) the ’115 Patent
failed to enumerate a priority claim sufficient to avoid
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
DROPLETS, INC. v. E*TRADE BANK 3
U.S.C. § 120. Droplets appealed, and the Director of the
U.S. Patent and Trademark Office intervened to defend
the Board’s decision on the priority date issue. E*TRADE
filed what it characterizes as a conditional cross-appeal,
arguing that, if we disagree with the Board regarding the
priority issue, there is an alternative ground to determine
that at least some of the ’115 Patent claims are invalid.
By statute, a claim for benefit of the filing date of an
earlier application must include “a specific reference to
[an] earlier filed application.” 35 U.S.C. § 120. We agree
with the Board that incorporation by reference cannot
satisfy this statutory requirement. Because the ’115
Patent expressly claims priority only to an immediately
preceding application, and not the provisional application
before that, the Board correctly determined that an
earlier-filed reference—an international publication with
the same specification—invalidated all claims of the ’115
Patent. We therefore affirm the Board’s decision finding
all claims of the ’115 Patent invalid as obvious. We
dismiss E*TRADE’s cross-appeal as improper.
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:
4 DROPLETS, INC. v. E*TRADE BANK
Board Decision, 2016 WL 3476939, at *5. The other
applications relate as follows:
• the ’115 Patent was copending with the application
leading to U.S. Patent No. 7,502,838 (“the ’838 Pa-
tent”), filed on November 24, 2003;
• the ’838 Patent was copending with the application
leading to U.S. Patent No. 6,687,745 (“the ’745 Pa-
tent”), 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 Sep-
tember 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 incor-
porates 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 al-
lowed U.S. patent application Ser. No. 10/720,728,
entitled “SYSTEM AND METHOD FOR
DELIVERING REMOTELY STORED APPLICA-
TIONS 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
DROPLETS, INC. v. E*TRADE BANK 5
entirety.
CROSS REFERENCE TO RELATED DOCUMENTS
Priority is herewith claimed under 35 U.S.C.
§ 119(e) from copending Provisional Patent Appli-
cation No. 60/153,917, filed Sep. 14, 1999, entitled
“METHOD AND SYSTEM FOR DELIVERING
APPLICATIONS IN CLIENT/SERVER ENVIRO-
NMENT,” by Louis M. Franco et al. The disclo-
sure of this Provisional Patent Application is in-
corporated 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, 2016 WL
3476939, at *6. The ’838 Patent specification identifies
the patent as a “[c]ontinuation of application No.
09/599,382, filed on Jun. 22, 2000, now Pat. No.
6,687,745,” and expressly claims priority from the ’917
Provisional, which was filed on September 14, 1999. ’838
Patent, col. 1, ll. 5-18. As such, the parties agree that the
’838 patent is entitled to the benefit of the September 14,
1999, filing date of the ’917 provisional, because it: (1) was
copending with the ’745 patent; and (2) “contains the
specific references to the ’745 patent and ’917 provisional
required under 35 U.S.C. § 120 and 37 C.F.R. § 1.78.”
Board Decision, 2016 WL 3476939, at *6. The question on
appeal is whether the ’115 Patent is also entitled to the
’917 Provisional’s priority date by virtue of the language
in the ’115 Patent that incorporates the ’838 Patent by
reference.
As noted, the application leading to the ’115 Patent
was filed on January 26, 2009. The applicant subsequent-
ly filed a preliminary amendment that added a reference
claiming priority from the application that led to the ’838
6 DROPLETS, INC. v. E*TRADE BANK
Patent. That priority claim statement listed only the
2003 application: “The present application is a continua-
tion 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 entire-
ty.” Joint Appendix (“J.A.”) 3484. During prosecution,
two documents (a filing receipt and a bibliographic infor-
mation 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, how-
ever, 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 Provisional (September 1999) because the ’115 Pa-
DROPLETS, INC. v. E*TRADE BANK 7
tent’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 37 C.F.R. § 1.57. Board
Decision, 2016 WL 3476939, at *7-9.
The Board determined that the effective filing date of
the ’115 Patent is November 24, 2003, and that the Fran-
co 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, U.S. Patent No. 6,076,166. Id. at *20.
The Board also invalidated claims 1, 7, 9, 10, 12, 18, 20,
21, and 25 on other grounds. Id. at *20-30. Droplets does
not challenge those determinations on appeal.
Droplets timely appealed the Board’s final written
decision—specifically its decision that the ’115 Patent
failed to properly claim priority from the earlier provi-
sional application. We have jurisdiction over Droplets’
appeal pursuant to 28 U.S.C. § 1295(a)(4)(A) (2012) and
35 U.S.C. § 141(c) (2012).
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 jurisdic-
tion to consider E*TRADE’s cross-appeal, which, in any
8 DROPLETS, INC. v. E*TRADE BANK
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 ‘incorpo-
rated 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 Drop-
lets, the Board incorrectly concluded that a priority claim
falls outside the scope of material that can be incorpo-
rated 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 priori-
ty. E*TRADE also argues that this court’s case law
interprets 35 U.S.C. § 120 strictly, and that the governing
regulations and the Manual of Patent Examining Proce-
dure (“MPEP”) allow incorporation by reference only for
limited purposes.
The Director intervened and defends the Board’s pri-
ority 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 and administrative law challeng-
es to IPR procedures. For the reasons explained below,
we agree with the Director on each point.
DROPLETS, INC. v. E*TRADE BANK 9
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., 741 F.3d 1359, 1363 (Fed. Cir. 2014).
We review “the Board’s conclusions on questions of law
without deference.” Hewlett-Packard Co. v. Packard
Press, Inc., 281 F.3d 1261, 1265 (Fed. Cir. 2002).
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 appli-
cation 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 applica-
tion 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.
35 U.S.C. § 120 (numbering added). 1
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
1 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.
10 DROPLETS, INC. v. E*TRADE BANK
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 appli-
cation. 35 U.S.C. § 119(e)(1). That provision similarly
states that “[n]o application shall be entitled to the bene-
fit of an earlier filed provisional application . . . unless an
amendment containing the specific reference to the earlier
filed provisional application is submitted at such time
during the pendency of the application as required by the
Director.” Id.The PTO has issued a regulation implementing these
statutes—37 C.F.R. § 1.78—which requires that an appli-
cation contain a specific reference to each prior-filed
application to which the application seeks to claim priori-
ty. Specifically, regulation 1.78 provides that the applica-
tion claiming the benefit of one or more prior-filed
copending nonprovisional applications must include “a
reference to each such prior-filed application, identifying
it by application number (consisting of the series code and
serial number)” and indicating “the relationship of the
applications (i.e., whether the later-filed application is a
continuation, divisional, or continuation-in-part of the
prior-filed nonprovisional application or international
application).” 37 C.F.R. § 1.78(d)(3) (2009). 2
The regulation thus requires that the specific refer-
ence include each prior-filed application’s: (1) application
number; and (2) familial relationship. It further states
2 Although the Board and the parties cite 37 C.F.R.
§ 1.78(a)(2)(i), this language appears in § 1.78(d)(3) in the
version in effect as of January 2009.
DROPLETS, INC. v. E*TRADE BANK 11
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 35 U.S.C. § 120 and 37 C.F.R. § 1.78,
the MPEP provides detailed guidance on how to claim
priority from multiple prior-filed applications. It states
that “[t]he reference to the prior applications must identi-
fy all of the prior applications and indicate the relation-
ship (i.e., continuation, divisional, or continuation-in-part)
between each nonprovisional application in order to
establish copendency throughout the entire chain of prior
applications.” MPEP § 201.11 III.C. 3
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, 2016 WL 3476939, at *6. They also
agreed that the ’917 Provisional was not copending with
the ’115 Patent, as is required for a priority claim under
§ 119(e)(1). Id. And the parties agreed that the ’838
Patent’s specification contains a proper priority claim
from the ’745 Patent and the ’917 Provisional. Id. The
parties disputed, however, whether the ’115 Patent’s
incorporation by reference of the ’838 Patent was suffi-
cient to entitle it to the ’838 Patent’s priority claim from
the ’745 Patent and ’917 Provisional. Id. The Board
found that it was not.
The Board correctly applied § 120 in finding that the
’115 Patent claims priority only to the ’838 Patent. The
3 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 Appli-
cation No. A, filed ---.” Id.
12 DROPLETS, INC. v. E*TRADE BANK
’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, 2016 WL 3476939, at *12.
On appeal, Droplets argues that the Board invalidat-
ed 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 provi-
sion,” courts have long-recognized that “it embodies an
important public policy,” and thus have required strict
adherence to its requirements. Sampson v. Ampex Corp.,
463 F.2d 1042, 1045 (2d Cir. 1972) (finding that the
appellant could not claim the benefit of the 1961 filing
date because the 1964 application did not contain a refer-
ence to it, “to say nothing of the ‘specific reference’ to
serial number, and filing date, and a statement of the
relationship between the two applications”); see Hovlid v.
Asari, 305 F.2d 747, 751-52 (9th Cir. 1962) (“Having failed
to state the serial number, filing date and the relationship
of the second patent to the abandoned application, there
seems to be a complete failure to comply with Rule 78 and
Section 120, and consequently, a waiver of the benefits
afforded by the latter section.”). As the Second Circuit
explained in Sampson, the information that must be
disclosed is information that would “enable a person
searching the records of the Patent Office to determine
with a minimum of effort the exact filing date upon which
a patent applicant is relying to support the validity of his
DROPLETS, INC. v. E*TRADE BANK 13
application or the validity of a patent issued on the basis
of one of a series of applications.” 463 F.2d at 1045.
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., 405 F.2d
90, 93 (7th Cir. 1968). Because the “inventor is the per-
son best suited to understand the relation of his applica-
tions,” it is “no hardship to require him to disclose this
information.” Id.More recently, our court clarified that the “specific
reference” requirement in § 120 “mandates each [inter-
mediate] application in the chain of priority to refer to the
prior applications.” Medtronic, 741 F.3d at 1363 (quoting
Encyclopaedia Britannica, Inc. v. Alpine Electronics of
Am., Inc., 609 F.3d 1345, 1352 (Fed. Cir. 2010)). In Med-
tronic, we held that, because two intermediate applica-
tions failed to specifically reference the earlier-filed
applications in the priority chain, the later-filed, asserted
patent was not entitled to the filing date of the first-filed
application. Id. at 1363-64.
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 regula-
tion 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
14 DROPLETS, INC. v. E*TRADE BANK
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 ren-
dered the claims unpatentable. Section 120 places the
burden on the patent owner to provide a clear, unbroken
chain of priority. Medtronic, 741 F.3d at 1366. As the
Board explained, moreover, the “burden was on [Droplets]
to read and understand the applicable patent laws and
rules.” Board Decision, 2016 WL 3476939, at *11 (citing
Medtronic, 741 F.3d at 1366).
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
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
4 The Director explains that the three filing receipts
appear to be duplicates mailed to three different address-
es, with the first two returned to the PTO as undelivera-
ble. Intervenor Br. 18 n.4.
DROPLETS, INC. v. E*TRADE BANK 15
concluded that the ’115 Patent’s earliest effective filing
date is November 24, 2003, the filing date of the ’838
Patent. Board Decision, 2016 WL 3476939, at *12.
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 re-
quirement of § 120 when it incorporated the ’838 Patent
by reference into the ’115 Patent. Incorporation by refer-
ence “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 explic-
itly contained therein.” Zenon Envtl., Inc. v. U.S. Filter
Corp., 506 F.3d 1370, 1378 (Fed. Cir. 2007) (quoting Cook
Biotech Inc. v. Acell, Inc., 460 F.3d 1365, 1376 (Fed. Cir.
2006)). “To incorporate material by reference, the host
document must identify with detailed particularity what
specific material it incorporates and clearly indicate where
that material is found in the various documents.” Id.(quoting Cook Biotech, 460 F.3d at 1376). Whether and to
what extent a patent incorporates material by reference is
a question of law we review de novo. Advanced Display
Sys., Inc. v. Kent State Univ., 212 F.3d 1272, 1283 (Fed.
Cir. 2000).
Here, Droplets maintains that it stated the full priori-
ty claim for § 120 purposes via incorporation by reference
pursuant to 37 C.F.R. § 1.57. That regulation provides
that a claim for the benefit of a prior-filed application
under 37 C.F.R. § 1.78 “shall also be considered an incor-
poration by reference of the prior-filed application as to
[any] inadvertently omitted portion of the specification or
drawing(s).” 37 C.F.R. § 1.57(a). By its terms, however,
37 C.F.R. § 1.57 requires a proper claim under regula-
tion 1.78 as a prerequisite; it allows a later application,
which enumerates a valid priority claim from an earlier
16 DROPLETS, INC. v. E*TRADE BANK
application consistent with regulation 1.78, to cure any
inadvertently omitted portion of the specification or
drawing(s). Id. Regulation 1.57(b) provides that an
incorporation by reference must include the root words
“incorporate” and “reference” and must “[c]learly identify
the referenced patent, application, or publication.” Two
categories of material may be incorporated by reference
into an application: “[e]ssential material” and “[o]ther
material (‘[n]onessential material’).” 37 C.F.R. § 1.57(c)-
(d).
“Essential material” can be incorporated by reference,
but only by way of a U.S. patent or U.S. patent applica-
tion publication which “does not itself incorporate such
essential material by reference.” 37 C.F.R. § 1.57(c).
“Essential material” is defined as material “that is neces-
sary to:” (1) provide a written description of the claimed
invention as required by the first paragraph of 35 U.S.C.
§ 112; (2) describe the claimed invention as required by
the second paragraph of § 112; or (3) describe the struc-
ture, material, or acts that correspond to a claimed means
or step for performing a specified function as required by
the sixth paragraph of § 112. Id. Accordingly, “essential
material” is expressly defined as material necessary to
meet the requirements of § 112.
Other “Nonessential material,” by contrast, may be
incorporated by reference to “U.S. patents, U.S. patent
application publications, foreign patents, foreign pub-
lished applications, prior and concurrently filed commonly
owned U.S. applications, or non-patent publications.” 37
C.F.R. § 1.57(d). Regulation 1.57(d) does not define
“nonessential material” explicitly. The MPEP defines
“nonessential material” as “subject matter referred to for
purposes of indicating the background of the invention or
illustrating the state of the art.” MPEP § 608.01(p) I.A.
The MPEP also explains that claim amendments during
prosecution can transform nonessential material into
essential material, triggering a § 112 rejection if the
DROPLETS, INC. v. E*TRADE BANK 17
incorporation fails to satisfy § 1.57(c). MPEP § 608.01(p)
I.A.2 (Example 2).
Taken together, 37 C.F.R. §§ 1.57(c) and (d) define in-
formation—essential and other (nonessential) material,
respectively—that can be incorporated by reference into
an application. While 37 C.F.R. § 1.57(c) provides that
limited materials may be incorporated solely for purposes
of satisfying § 112, 37 C.F.R. § 1.57(d) provides that a
broader set of materials may be incorporated for purposes
of providing background of the invention or illustrating
the state of the art. 5
Droplets does not contend that a priority claim quali-
fies as “essential material.” Instead, it asserts that a
priority claim must be “nonessential material” because
essential and nonessential material are “mutually exclu-
sive categories that cover 100% of the universe of poten-
tial material” that can be incorporated by reference.
Appellant Br. 8. But nothing in regulation 1.57 authoriz-
es making a priority claim under § 120 through an incor-
porated reference. Indeed, there is no reference to § 120
in 37 C.F.R. § 1.57. 6 Instead, the focus of the incorpora-
5 At oral argument, counsel for the Director ex-
plained 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, availa-
ble at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
16-2504.mp3.
18 DROPLETS, INC. v. E*TRADE BANK
tion by reference procedure set forth in § 1.57 is to help a
patent applicant satisfy the requirements of 35 U.S.C.
§ 112 under 37 C.F.R. § 1.57(c), and to provide back-
ground for the invention or to illustrate the state of the
art under 37 C.F.R. § 1.57(d).
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 35 U.S.C. § 112. Material nevertheless may
be incorporated by reference.” MPEP § 608.01(p). In
other words, essential and nonessential material cover
100% of the universe of potential material that can be
incorporated by reference to satisfy the applicant’s obliga-
tion to disclose the invention under § 112. But a recita-
tion of priority is not part of the “written description of
the invention” described in § 112. Instead, a priority
6 At the same time the PTO enacted 37 C.F.R.
§ 1.57, it amended 37 C.F.R. § 1.78 to permit the “re-
quired reference to the prior application(s) to be in multi-
ple sentences, forming a continuous string, at the
beginning of the specification, rather than being limited
to the first sentence of the specification.” Changes to
Support Implementation of the United States Patent and
Trademark Office 21st Century Strategic Plan, 69 Fed.
Reg. 56,482, 56,508 (Sept. 21, 2004). The PTO noted that,
“[i]n some situations, it would be easier and clearer to set
forth the relationship between prior applications if more
than one sentence were permitted.” Id. As the Director
points out, this amendment suggests that the PTO “never
contemplated that its new incorporation-by-reference
regulation could substitute for the specific-reference
sentences under the newly amended § 1.78.” Intervenor
Br. 23-24.
DROPLETS, INC. v. E*TRADE BANK 19
claim appears in its own separate section of the specifica-
tion and provides information distinct from sections
describing “the invention.” 37 C.F.R. § 1.77(b). The
words of a priority claim are thus separate from the
materials necessary to satisfy § 112. Accordingly, while
37 C.F.R. § 1.57 authorizes an applicant to incorporate by
reference essential and nonessential material to satisfy
§ 112, nothing contained therein permits incorporating a
priority claim by reference.
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, 602 F.3d 1348 (Fed. Cir.
2010) (“Harari I”) and Hollmer v. Harari, 681 F.3d 1351(Fed. Cir. 2012) (“Harari II”). Neither case supports
Droplets’ position, however. Harari I did not interpret
§ 120, and instead focused on the sufficiency of the incor-
poration by reference language at issue. 602 F.3d at
1352-53. In Harari II, we addressed § 120’s continuity
requirement, noting that, “if any application in the priori-
ty chain fails to make the requisite disclosure of subject
matter, the later-filed application is not entitled to the
benefit of the filing date of applications preceding the
break in the priority chain.” 681 F.3d at 1355. The
question was whether statements in two intervening
applications sufficiently incorporated by reference a prior
application without identifying the serial number and
filing date. Id. at 1354-56. Because the incorporation
language was ambiguous, and did not “identify with
detailed particularity what specific material it incorpo-
rate[d]” to a person of ordinary skill, we concluded that
the application was not entitled to claim the benefit of the
filing date of the earlier application. Id. at 1358 (quoting
Zenon Envtl., 506 F.3d at 1378). Accordingly, neither
case supports Droplets’ suggestion that a priority claim
under § 120 can be incorporated by reference.
20 DROPLETS, INC. v. E*TRADE BANK
We conclude that § 120’s “specific reference” require-
ment 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 patent-
ee’s claimed priority date. See Medtronic, 741 F.3d at
1366. To require the public to search for an unstated
priority claim through incorporated materials would
create uncertainty and would require the type of guess-
work that the statute is meant to avoid. Id. Accordingly,
Droplets cannot invoke incorporation by reference to
rewrite the priority claim statement in the ’115 Patent.
C. Droplets’ Other Arguments
Finally, Droplets argues that IPR proceedings are in-
valid because: (1) they allow third parties to litigate the
validity of issued patents before Article I judges in viola-
tion of Article III and the Seventh Amendment; and
(2) the Director cannot delegate the institution decision to
the Board because 35 U.S.C. § 314(b) (2012) provides that
the “Director shall determine whether to institute an
inter partes review under this chapter.”
Droplets acknowledges, as it must, that this court has
already considered these arguments and rejected them.
See MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d
1284, 1292 (Fed. Cir. 2015) (“Governing Supreme Court
and Federal Circuit authority require rejection of MCM’s
argument that inter partes review violates Article III.”),
cert denied, 137 S. Ct. 292 (2016); Ethicon Endo-Surgery,
Inc. v. Covidien LP, 812 F.3d 1023, 1033 (Fed. Cir. 2016)
(“[T]he Director had authority to delegate the institution
decision to the Board. There is nothing in the Constitution
or the statute that precludes the same Board panel from
making the decision to institute and then rendering the
final decision.”), cert. denied, 137 S. Ct. 625 (2017).
Droplets raises these arguments solely to preserve
them for further review, and provides no compelling
DROPLETS, INC. v. E*TRADE BANK 21
reason why this panel can or should revisit those deci-
sions. Accordingly, we need not address them further.
III. E*TRADE’S CROSS-APPEAL
E*TRADE cross-appeals from the Board’s final writ-
ten 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 pri-
ority 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 35 U.S.C. § 141(c). Section 141(c) provides that:
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 un-
der section 318(a) or 328(a) (as the case may be)
may appeal the Board’s decision only to the Unit-
ed States Court of Appeals for the Federal Circuit.
35 U.S.C. § 141(c) (2012). The parties suggest that,
because the statute uses the phrase “dissatisfied with the
final written decision”—not just the outcome—Droplets
can challenge on cross-appeal the Board’s alternative
invalidity findings. We disagree.
22 DROPLETS, INC. v. E*TRADE BANK
As we recently explained, there is no support for the
proposition that “Congress intended the use of ‘dissatis-
fied 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., 828 F.3d 1373, 1377 (Fed. Cir. 2016) (involving an
appeal from inter partes reexamination under pre-AIA
§ 141). This is consistent with the well-established rule
that, as an appellate tribunal, we review judgments, not
opinions. See Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d
1530, 1540 (Fed. Cir. 1983) (“We sit to review judgments,
not opinions.”).
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 refer-
ence. See Oral Arg. at 25:15-22, available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
16-2504.mp3 (“Certainly we are satisfied with the ulti-
mate 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.,
292 F.3d 1360, 1362 (Fed. Cir. 2002). As such, we have
said that a cross-appeal is only proper when acceptance of
the argument advanced “would result in a reversal or
modification of the judgment rather than an affirmance.”
TypeRight Keyboard Corp. v. Microsoft Corp., 374 F.3d
1151, 1157 (Fed. Cir. 2004) (quoting Bailey, 292 F.3d at
1362). Where, as here, the Board has entered a judgment
DROPLETS, INC. v. E*TRADE BANK 23
of invalidity as to all claims, there is no basis for a cross-
appeal as to additional grounds for invalidity. See id.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 appli-
cation 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.