Federal Circuit Upholds PTAB’s Validity Finding Based On Arguments the Patent Owner Did Not Raise

The Federal Circuit held in FanDuel, Inc. v. Interactive Games LLC that the PTAB did not violate the Administrative Procedure Act when it found that the Petitioner failed to prove a claim obvious based on arguments the Patent Owner had not previously raised.

The patent at issue in FanDuel related to a gaming system in which a gaming service provider, such as a casino, wirelessly communicates with users’ mobile devices. Dependent claim 6 recited, among other elements, “accessing a lookup table which contains an ordered list of locations and associated game configurations[.]”

The Petitioner, FanDuel, challenged claim 6 as obvious in view of three asserted prior art references, alleging that it would have been “an obvious design choice” to modify the references in order to arrive at claim 6. In its Preliminary Response, the Patent Owner, Interactive Games, argued against instituting IPR on claim 6 because one of the asserted references allegedly did not quality as prior art. However, the PTAB rejected that argument and instituted IPR. Interactive Games then submitted its Patent Owner Response and, as it did in its Preliminary Response, argued that one of the references used to challenge claim 6 did not constitute prior art.

In its Final Written Decision, the PTAB upheld the validity of claim 6, holding that FanDuel had failed to prove the claim obvious. Specifically, the PTAB disagreed with FanDuel’s interpretation of the asserted references and found that FanDuel had not explained why it would have been obvious to modify the asserted references to arrive at the claim element. Moreover, the PTAB found that FanDuel’s asserted motivation-to-combine was conclusory and could not support an obviousness finding. Notably, Interactive Games did not raise these arguments during the IPR.

On appeal, Fanduel challenged the PTAB’s ruling on claim 6 as violating the Administrative Procedure Act for upholding the validity of claim 6 based on a “new theory” that Interactive Games had not previously raised. According to Fanduel, it was entitled to notice and an opportunity to respond before the PTAB rejected its obviousness challenge.

The Federal Circuit rejected FanDuel’s argument, stating “we fail to see how the Board ‘changed theories’ at all in this case.” Because the PTAB’s institution decision did not adopt a position on the ultimate import of the three references relied upon to challenge claim 6, the Final Written Decision’s findings on these references did not constitute a change in theory.

Additionally, the Federal Circuit stated, “[t]o the extent the Board changed theories … , the Board was not required to first notify the parties in this case for two somewhat overlapping reasons.” First, the Federal Circuit explained that the different burdens of proof that apply when instituting IPR versus when invalidating a claim permit the Board to adopt different views of the sufficiency of a petitioner’s asserted obviousness arguments.

Second, the Federal Circuit explained that FanDuel’s argument, which would require further post-institution record development on whether the three references rendered claim 6 obvious in order for the PTAB to reach that question in its final decision, “would effectively and impermissibly shift the burden to the patent owner to defend its claim’s patentability.” The fact that Interactive Games did not challenge FanDuel’s analysis, beyond arguing that a reference was not prior art, did not change that “the ‘sole issue’ throughout the Board proceedings was whether FanDuel proved its theory as to how [the references] combined to make claim 6 obvious.”

Accordingly, the Federal Circuit held that the PTAB did not violate the Administrative Procedure Act by upholding the validity of claim 6 based on arguments that the Patent Owner had not raised.