Affirming a Patent Trial and Appeal Board (Board) non-obviousness determination, the US Court of Appeals for the Federal Circuit found that the Board did not abuse its discretion in sanctioning a patent owner who engaged in ex parte communications by having a new panel hear the merits of the petition. Apple Inc. v. Voip-Pal.com Inc., Case Nos. 18-1456, -1457 (Fed. Cir. Sept. 25, 2020) (Reyna, J.).

Voip-Pal sued Apple for allegedly infringing two of its patents directed to routing communications between two different types of networks: public and private. Apple then petitioned for inter partes review (IPR) of several claims from both patents, arguing they were invalid as obvious. The Board ultimately found the claims were not invalid because Apple did not provide evidentiary support as to the motivation to combine multiple references.

During the IPR proceedings, Voip-Pal’s former CEO sent six letters to various parties, copying members of Congress, the President, federal judges and administrative patent judges at the Board criticizing the IPR system, complaining about the cancellation rate and requesting judgment in favor of Voip-Pal. The letters did not discuss the underlying merits of Apple’s petitions. In view of Voip-Pal’s conduct, Apple requested that the Board sanction Voip-Pal by entering adverse judgment against Voip-Pal or by vacating the final written decisions and assigning a new panel to preside over “constitutionally correct” new proceedings going forward.

For the sanctions proceeding, a new panel replaced the initial panel and determined that Voip-Pal had engaged in sanctionable conduct, and further determined that it  would preside over Apple’s petition for rehearing. The new panel found that Apple failed to show the initial panel had misapprehended or overlooked any matter, and even if the final panel were to accept Apple’s view of the prior art, it would not reach a different conclusion. Apple appealed.

On appeal, the Federal Circuit first addressed whether the appeal was moot. Before oral argument, the Court found in separate proceedings that some, but not all, of the claims at issue were invalid. Apple argued that this case mooted the entire appeal, even though the claims did not entirely overlap. Starting with the overlapping claims, the Court found that the appeal was moot in regards to these claims because Apple no longer had the potential for injury. However, the Court rejected Apple’s argument that the appeal was moot under a theory of claim preclusion in regards to the non-overlapping claims. The Court explained that any preclusive effect from the other appeal must be decided by a future court in any subsequent action brought by Voip-Pal. Thus, any discussion regarding claim preclusion would be advisory in nature and outside the scope of the Court’s Article III jurisdiction.

Turning to the merits, the Federal Circuit affirmed the Board did not violate the Administrative Procedure Act (APA) or Apple’s due process rights. The Board’s rules provide that “[t]he Board may impose a sanction” and explains that “[s]anctions include entry of one or more” of eight defined actions. Although the Board’s sanctions imposed in this case (by the new panel of administrative judges) did not appear in the enumerated list, the Court found the Board’s actions were nevertheless proper. The Court explained the words “include” and “may” signify that the list of sanctions is non-exhaustive, and thus, the Board’s actions did not violate the APA. Regarding Apple’s due process arguments, the Court found that Apple failed to identify any property interests in the proceedings and therefore waived these arguments on appeal. As a result, the Court affirmed the sanctions imposed against Voip-Pal by the Board.

Finally, the Federal Circuit affirmed the Board’s finding that Apple failed to establish a motivation to combine the asserted prior art references. In the IPRs, the Board found that “Apple’s expert provided no ‘adequate support’ and no ‘underlying evidentiary support’ for the proposition that a skilled artisan” would have been motivated to combine the prior art references. The Court explained that the rejection of expert testimony is not legal error because this is merely a finding that Apple failed to meet its evidentiary standard. The Board’s findings of obviousness were therefore affirmed.