SAS Gets Rehearing for Challenge to Software Patent

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By Tony Dutra

June 10 — The Federal Circuit ordered a rehearing June 10 for a software development platform patent after the Patent Trial and Appeal Board changed its interpretation of the patents' claims in the final decision ( SAS Inst., Inc. v. ComplementSoft, LLC , 2016 BL 185333, Fed. Cir., No. 2015-1347, 6/10/16 ).

The split decision today over SAS Institute Inc.'s challenge to ComplementSoft LLC's featured a rare criticism of Patent Trial and Appeal Board procedures by the court.

The board may have good reasons for setting “moving targets,” the court said. But it has to grant SAS's request for a rehearing to address the changes.

SAS challenged 16 patent claims. The PTAB instituted trial on nine, cancelling eight of those in the final decision. The court affirmed the eight cancellations and remanded only the single claim that was not cancelled.

But ComplementSoft still has seven claims to bring back to its litigation against SAS in the U.S. District Court for the Northern District of Illinois.

Judge Pauline Newman dissented in part because SAS can still contest the validity of the seven non-instituted claims. The bar against SAS raising arguments in court only applies to those disposed of in the final decision. Here, the PTAB followed its normal practice of ignoring the non-instituted claims in the final decision.

Source Material:

Case below (IPR2013-00226): Trial instituted (Aug. 12, 2013) Final decision (Aug. 6, 2014) Reh'g denied (Nov. 10, 2014)

U.S. Patent:No. 7,110,936

Change Midstream

U.S. Patent No. 7,110,936 covers a computing environment used by software developers. A developer writes code, tests it for bugs and then edits as appropriate. The patent claimed an integrated environment with a visual representation that could generate code and display execution of the data processing steps, with particular application to data manipulation tasks like SAS's statistical analysis programs.

The Federal Circuit affirmed the board's validity judgments on all but claim 4, which has the phrase “graphical representations of data flows.” That phrase is not in the patent specification.

At the trial institution phase, the PTAB distinguished the phrase from “data flow diagram,” which was used in the specification. SAS and ComplementSoft built their arguments on that construction, only to see the board equate the two phrases in the final written decision.

SAS's rehearing request featured arguments that the new construction was erroneous. But SAS also contended that it “was prevented from presenting evidence tailored to that new claim construction during the IPR.” The board's rehearing denial addressed the former but not the latter.

APA Applies to Petitioners Too

The Federal Circuit faulted the PTAB for procedural error under Section 554(b)(3) of the Administrative Procedure Act, 5 U.S.C. §554(b)(3).

That section typically applies to patent owners and applicants, the court conceded, to prevent their loss of rights before a government agency. But it also applies to petitioners challenging patents in America Invents Act proceedings, like the inter partes review challenge here.

“[P]etitioners stand to lose significant rights in an instituted IPR proceeding because of the estoppel effects that trigger against them if the Board issues a final written decision,” the court said. Under the AIA, the estoppel referenced is the bar against SAS trying again in court with arguments it raised or even “could have raised” at the PTAB.

The court ordered the PTAB to rule on claim 4 again “after hearing from the parties on the new construction.”

Judge Kara F. Stoll wrote the court's opinion. Newman and Judge Raymond T. Chen joined as to the rulings noted above.

Newman Even More Concerned Now

Newman registered the same dissent previously in Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309, 117 U.S.P.Q.2d 1753 (Fed. Cir. 2016) (28 PTD, 2/11/16). Her main concern is that the estoppel effects don't kick in as to claims not instituted.

The problem was more pronounced in this case, she said, because there were actually two “partial” decisions—not all claims instituted and, of those that were, not all cancelled. That means the board changed its view from a likelihood of invalidity at trial institution to the reverse in the final decision, which “adds to the uncertainty of the claims that the PTAB chose not to review,” she said.

SAS actually agreed in its brief, arguing that it will be put in an odd position of having arguments it can raise on the non-instituted claims that it can't raise as to claim 4.

However, the majority said that any other result was “foreclosed” by Synopsys.

Jones Day represented SAS. Loevy & Loevy represented ComplementSoft.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Mike Wilczek in Washington at mwilczek@bna.com

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