2025 is off to a rip-roaring start in the world of patent law!
The post Obvious Disagreement appeared first on Above the Law.
Welcome to 2025, which I hope will be a year of accomplishment and good health for the entire ATL readership. As patent litigation aficionados, is there a better way to start the year than to take a close look at the first Federal Circuit decision released? I can’t think of one, especially when the decision in question was deemed precedential — and had a dissenting opinion as well. Add in that the decision reiterated some important considerations on one of patent law’s cardinal issues, obviousness, and it is clear that this first effort from the CAFC in 2025 is worth our attention. So let’s dive in.
To start, it helps to know the backstory of the patent that the CAFC considered on appeal. The patent owner and appellee, 3G Licensing S.A., is a subsidiary of Sisvel, a well-known player in the patent monetization space. While the “3G Joint Licensing Programme” that 3G Licensing managed “is no longer active” according to Sisvel’s website, Sisvel claims to still have over a dozen “active licensing programmes” and over 1,500 patents owned. At issue in the appeal was the PTAB’s 2022 decision upholding the validity of 3G’s ‘718 patent, which 3G had acquired from LG Electronics in February 2020. As is often the case with experienced patent monetization outfits, that acquisition was swiftly followed by assertion, in the form of a May 2020 complaint against Honeywell.
In response, Honeywell and other 3G licensing targets filed an IPR against the ‘718 patent, arguing that there was “nothing inventive about the encoding scheme claimed in the ’718 patent; rather, the basis sequences and mathematical operations claimed by LGE are a trivial, and obvious, modification of a prior art proposal by Koninklijke Philips N.V.” According to the IPR petition, “the only difference between the prior art and the ’718 patent is that the last two bits of the last row of the basis sequences are flip-flopped,” so that 98 out of 100 bits were identical between the basis sequences disclosed in the prior art and the ‘718 patent. Still, the PTAB refused to find the ‘718 patent obvious, leading to the CAFC appeal under discussion.
As characterized by the majority, the thrust of the ‘718 patent involved methods for optimizing the accuracy of the information based from a cellphone to a base station regarding signal strength, characterized in the art as the Channel Quality Indicator or CQI. The more accurate the CQI information, the better the performance of the communication system. As with many other aspects of wireless communication, a standard formed around CQI transmission. In support of that effort, a decision was taken to extend the encoder length by four bits, raising the question of how best to handle that extension in a way that “would reduce the probability that transmission errors would result in large errors in the received channel quality value.”
The initial solution to the question of how to avoid errors in CQI transmission was suggested by Philips, whose submitted proposal became the key prior art reference to the ‘718 patent. For its part, LG filed a Korean application that led to the ‘718 patent shortly after the publication of the Philips reference, whereby LG, “two days after filing the Korean patent application … proposed a modification to the Philips reference flipping the last two digits in the table, as disclosed in the Korean patent application.” That proposal was approved, so that the ‘718 patent “effectively claimed the TGPP standard for encoding CQI.” Needless to say, patents that claim standards are valuable, unless they are invalid.
With that background, the majority turned to its review of the PTAB’s decision upholding the ‘718 patent’s validity, even as it “acknowledged that the only difference between the Philips reference and the claim 1 was that the 1 and 0 in the last row of the basis sequences table were switched.” In reversing the PTAB, the majority identified “multiple legal errors” starting with the conclusion that one of skill in the art “would not have been motivated to modify the Philips reference to swap the bits to improve protection for the MSB because the ’718 patent’s main objective was to maximize entire system throughput.” Citing the seminal obviousness decision, KSR, the majority upbraided the PTAB for forgetting “that the motivation to modify a prior art reference to arrive at the claimed invention need not be the same motivation that the patentee had.” Next, the majority focused on the fact that even 3G’s expert “did not dispute that swapping the last-row digits would increase protection to the MSB and instead simply disputed whether it was understood that doing so would have been desirable.” As a result, the majority found that the PTAB’s decision was “not supported by substantial evidence” as it ignored the unrebutted expert opinion “that swapping the two digits in the basis sequence would repeat the MSB an additional time and provide increased protection to the MSB.”
In addition, the majority took issue with the fact that the PTAB appeared to apply the stricter anticipation invalidity standard to the petition, rather than considering the arguments based on the obviousness standard that was actually argued. Likewise, the majority also criticized the PTAB’s decision upholding validity to the the extent that it failed to “recognize that the claimed modification needed only to be desirable in light of the prior art and not the ‘best’ or ‘preferred’ approach” — with the Philips reference itself disclosing the motivation for the modification claimed in the ‘718 patent.
In dissent, Judge Stoll agreed with the majority that the PTAB “erroneously conflated obviousness with anticipation” in evaluating the import of the Philips reference’s failure to propose the two-bit swap disclosed in the ‘718 patent. For Stoll, the proper disposition of the appeal would have been a remand to the PTAB, not the reversal entered by the majority. In her view, the majority’s reversal overstepped the role of the appellate court, as the underlying case “presents a close factual dispute of whether Honeywell proved by preponderant evidence that a skilled artisan would have been motivated to swap the last two bits in Philips’ basis sequence table without making other changes to the table” — and the CAFC is not a fact finder. Instead, it is the job of the PTAB “to make fact findings about what a person of ordinary skill in art would understand a prior art reference to teach in this case” — a mandate that the majority took away with its reversal.
Ultimately, this decision highlights the continued importance of the CAFC in terms of policing the PTAB and making sure that its precedents are being followed on key issues like obviousness. At the same time, the dissent raises the question — not for the first time, as any CAFC watcher knows — of whether CAFC panels are too quick to make factual findings that support their desired conclusions, even when those actions conflict with principles of appellate review. We are just getting started in 2025 and there is already a strong example of obvious disagreement to digest.
Please feel free to send comments or questions to me at [email protected] or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.
Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at [email protected] or follow him on Twitter: @gkroub.
