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Senate Judiciary Subcommittee Advances Two Patent Reform Bills

This post has been updated since its original publication date.

On November 15, 2024, the US Senate Judiciary Subcommittee on Intellectual Property advanced the Inventor Diversity for Economic Advancement (IDEA) Act, one of three significant bills it considered this year to reform the patent system. On November 21, 2024, that same subcommittee advanced the Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act. No action has been taken by the subcommittee yet regarding the Patent Eligibility Restoration Act (PERA). It is unlikely any of these bills will become law before the new Congress begins on January 3, 2025.

The IDEA Act, sponsored by Senator Mazie Hirono (D-HI) and garnering bipartisan support, would require the US Patent & Trademark Office to seek demographic data from patent inventors residing in the United States on a voluntary basis. The bill also includes safeguards to protect the confidentiality of the collected information and ensure it is not used as part of the examination process, with a report to be submitted to Congress biannually.

By the time of the November 21 action, the subcommittee sent the PREVAIL Act, sponsored by Senators Christopher Coons (D-DE) and Thom Tillis (R-NC), to the full US Senate. In the words of Coons, the PREVAIL Act is intended to make proceedings before the Patent Trial & Appeal Board “cheaper, swifter, more efficient alternatives to federal district court.” The PREVAIL Act would enact substantial changes to post-grant and inter partes review proceedings at the Board, including by introducing a standing requirement, aligning standards more closely with district court standards, and strengthening estoppel provisions to prevent re-litigation of validity issues.

The substance of PERA and the PREVAIL Act have been reported on previously here and here, respectively. PERA would revise the standards related to patent eligibility under 35 U.S.C. § 101, which have been broadly criticized as providing insufficient predictability and certainty. PERA would overturn Supreme Court precedent by establishing specific categories of exceptions to broad patent eligibility for inventions or discoveries.

At the November 15 hearing, Coons and Tillis explained that they continue to receive feedback on PERA, which has been unsuccessfully introduced in previous years. Coons and Tillis both telegraphed optimism that PERA was moving toward being voted out of the subcommittee. After the November 21 hearing, both sponsors indicated that they hoped PERA would be voted on soon.




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Patent by Secret Process: Perils of Pre-Patent Profiting

The US Court of Appeals for the Federal Circuit affirmed the International Trade Commission’s (ITC) determination that the asserted process patents were invalid under the America Invents Act (AIA) because products made using the patented process were sold more than one year before the patents’ effective filing dates. Celanese International Corporation, et al. v. International Trade Commission, Case No. 22-1827 (Fed. Cir. Aug. 12, 2024) (Reyna, Mayer, Cunningham, JJ.)

Celanese owns patents that cover a process for making the artificial sweetener acesulfame potassium (Ace-K). It was undisputed that Celanese’s patented process was in secret use in Europe and that Ace-K produced using this process had been sold in the United States before the patents’ effective filing dates. Under pre-AIA caselaw, such sales of products made using a secret process before the critical date would trigger the on-sale bar and invalidate any later-sought patent claims on that process. However, because Celanese’s patents had effective filing dates after March 15, 2013, the AIA rules applied. Thus, the case hinged on whether the AIA altered this rule.

In 2019, in Helsinn v. Teva, the Supreme Court addressed similar facts and confirmed that the Federal Circuit’s pre-AIA “on sale” case law, which established that “secret sales” could invalidate a patent, still applied. In Helsinn, the patentee had obtained a patent related to a fixed dose of palonosetron. Prior to the critical date, the patentee entered into a supply and purchase agreement with a third party that covered this same fixed dose of palonosetron. The Supreme Court concluded that Congress, by reenacting similar language in the AIA concerning the on-sale bar, appeared to have adopted the Federal Circuit’s pre-AIA interpretation of the on-sale bar. Accordingly, the Supreme Court held that, consistent with Federal Circuit pre-AIA precedent, an inventor’s prior sale of an invention to a third party can qualify as invalidating prior art even if the third party is obligated to keep the invention confidential.

However, unlike in Helsinn, where the claimed invention was the very subject of the commercial sale at issue, Celanese’s patents covered the secret process used to make Ace-K, and it was only the resulting Ace-K that was the subject of commercial sale – not the patented process itself. Although this distinction would not alter the outcome under pre-AIA law, Celanese averred that the AIA had revised the rules for this specific situation. To support its theory, Celanese referenced, among other things, the AIA’s use of the phrase “claimed invention” as opposed to simply “invention” as recited in pre-AIA discussion of the on-sale bar. According to Celanese, this change implied that the invention specifically “claimed” must be on sale to qualify as invalidating prior art.

The ITC rejected Celanese’s argument, concluding that the AIA did not alter the pre-AIA rule that “a patentee’s sale of an unpatented product made according to a secret method triggers the on-sale bar to patentability.” Accordingly, the ITC found that Celanese’s patents were invalid because Celanese sold Ace-K made using its secret process more [...]

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Beware Equitable Doctrine of Issue Preclusion in Multiparty, Multivenue Patent Campaigns

Addressing for the first time whether an invalidity order merges with a voluntary dismissal for purposes of finality, the US Court of Appeals for the Federal Circuit held that an interlocutory order merges with the final dismissal, rendering the interlocutory order final for purposes of issue preclusion. Koss Corp. v. Bose Corp., Case No. 22-2090 (Fed. Cir. July 19, 2024) (Hughes, Stoll, Cunningham, JJ.). As a consequence, the Federal Circuit found that the patent owner’s appeal from an adverse decision in an inter partes review (IPR) was moot under the doctrine of nonmutual collateral estoppel.

In July 2020, Koss filed a patent infringement lawsuit against Bose in the Western District of Texas, asserting three patents whose common specification discloses a “wireless earphone that communicates with a digital-audio source, such as an iPod, over an ad hoc wireless network like Bluetooth.” The same day, Koss asserted the same patents against Plantronics. Bose filed a motion challenging venue and also petitioned for inter partes review (IPR) of the three patents. Later in 2020, Bose filed a declaratory judgment action seeking a declaration of noninfringement in the District of Massachusetts on the three patents Koss asserted against Bose in the Texas litigation. The Massachusetts litigation was stayed pending the resolution of the venue motions in the Texas case.

In 2021, the Texas court dismissed Koss’s complaint against Bose for improper venue. Koss then asserted a counterclaim of infringement of the same three patents in the Massachusetts litigation. The Massachusetts court again stayed the litigation pending the resolution of the IPRs, which (by that time) the Patent Trial & Appeal Board had instituted. Meanwhile, Koss’s case against Plantronics was transferred to the Northern District of California, and Plantronics moved to dismiss the complaint on the ground that all the asserted claims (which included all the claims asserted against Bose) were invalid under 35 U.S.C. § 101. The California court granted Plantronics’s motion, rendering all the asserted claims invalid. However, that order did not finally dispose of the case.

Koss then moved for leave to amend its complaint, which the California district court granted. In the amended complaint, Koss asserted two additional patents. Plantronics moved to dismiss the asserted claims in those patents as invalid under § 101. The parties fully briefed Plantronics’s motion, but before the district court issued a decision on the merits of that motion, Koss voluntarily stipulated to dismissal with prejudice, disposing of the lawsuit in its entirety. Koss did not ask the district court to vacate its earlier order finding certain claims invalid under § 101. The California district court then issued an order dismissing the case with prejudice. The deadline for Koss to appeal the judgment came and went – Koss did not appeal.

Arguing that the patents had been finally adjudicated invalid in the Plantronics litigation, Bose moved to dismiss Koss’s appeal from the Board in the IPR proceedings as moot. Koss opposed the motion, arguing that its amended complaint rendered the invalidity decision on the prior complaint non-final because the [...]

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Struggling to Master the Alice Two-Step: Search Result Display Ineligible for Patent Protection

The US Court of Appeals for the Federal Circuit affirmed a district court’s dismissal of a lawsuit involving two software patents directed toward enhancements to search result displays, finding that both patents claimed subject matter that is ineligible under 35 U.S.C. § 101. IBM v. Zillow Group, Inc., Case No. 22-1861 (Fed. Cir. Jan. 9, 2024) (nonprecedential) (Prost, Hughes, JJ.) (Stoll, J., dissenting).

IBM sued Zillow for infringing five patents. Claims from two of the patents were dismissed. For the remaining three patents, Zillow filed a motion to dismiss, arguing that all three patents were ineligible under § 101. The district court granted Zillow’s motion to dismiss, finding the asserted claims ineligible. IBM appealed.

Only two of the patents were subject to the appeal. The first patent was directed to a graphical user interface that improves search and selection based on user input to produce better results, and the second patent was directed to improvements in how to display search results to users.

IBM raised two arguments on appeal:

  • The district court erred in dismissing both patents, because the complaint and IBM’s inventor declaration were enough to show patent eligibility and—at minimum—survive the pleading stage.
  • The district court failed to resolve a claim construction dispute over a term in the second patent.

The Federal Circuit began by providing a primer on the Alice two-step process for evaluating patent eligibility. For step one, courts must “determine whether a patent claim is directed to an unpatentable law of nature, natural phenomena, or abstract idea.” When the patent involves software, claims are ineligible where they merely describe a process or system that uses a computer as a tool applied to an otherwise abstract idea. For step two, courts must analyze whether the claims simply describe an abstract method. If the claims instead go further and transform an otherwise abstract idea into something new via an “inventive concept,” then the subject matter may be patentable.

Turning to the appeal, the Federal Circuit first addressed whether IBM’s complaint and inventor declaration should have been enough to establish subject matter eligibility at the pleading stage for either patent. Applying the Alice two-step test, the Court found that they were not and upheld the district court’s dismissal.

For the first patent directed to a graphical user interface, the Federal Circuit agreed with the district court’s conclusion that the patent had three clear indicia of abstractness. First, the process could be done with pen and paper. Second, the claim language was result-oriented. Third, the patent focused on intangible information. The Court also found that the claims did “not disclose any technical improvement” to computer software. Thus, the claims failed at Alice step one. The Court found that IBM fared no better at step two, explaining that IBM’s argument for an inventive process hinged on the inventor declaration, which made no reference to the patent’s actual claim language. The Court explained that “[s]imply including allegations of inventiveness in a complaint, detached from what is claimed or discussed in [...]

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Same Applicant, Similar Claims Support Obviousness-Type Double Patenting Rejection

The US Court of Appeals for the Federal Circuit affirmed a Patent Trial & Appeal Board obviousness-type double patenting rejection, finding that an unexpected mechanism of action does not render the known use of a known compound nonobvious. In re: Institut Pasteur, Case No. 22-1896 (Fed. Cir. Dec. 13, 2023) (Taranto, Clevenger, Stoll, JJ.) (nonprecedential).

Institut Pasteur filed a patent application directed to peptides derived from human basic proline-rich lacrimal protein and claimed, among other things, a method for treating pain comprising of administering 10 to 300 mg/day of the peptide for seven days. The examiner rejected the claims for obviousness-type double patenting over another patent application filed by Pasteur, which was directed to diagnostic and therapeutic uses of human basic proline-rich lacrimal protein and peptides derived therefrom.

Pasteur appealed to the Board, which affirmed the examiner’s rejection. Rather than appeal the Board’s decision to the Federal Circuit, Pasteur sought continued examination of the application and modified the claims to specify that the method of treatment was for human patients, was in a dose of 1 mg/kg to 2 mg/kg at 10 to 300 mg/day, and should not induce pharmacodependence or tolerance in the patient. The examiner rejected the amended claims for obviousness-type double patenting over the same application. On appeal, the Board issued another decision agreeing with the examiner. Pasteur appealed this decision.

Pasteur argued that the Board’s second decision was unsupported by substantial evidence because the Board applied a legally flawed prima facie obviousness analysis and disregarded the secondary indicia of nonobviousness presented in a declaration submitted by Catherine Rougeot, the named inventor of the application.

The Federal Circuit disagreed with Pasteur and affirmed the Board’s rejection. As for Pasteur’s argument that the Board disregarded the differences between the claims of the patent application and the claims of the other application, the Court noted that the Board “explained why each claim limitation was obvious in light of the [other application].” With respect to Pasteur’s argument that the Board improperly relied on inherency when finding one limitation of the filed application to be satisfied, the Court concluded that “[i]t is settled that inherency may supply a missing claim limitation in an obviousness analysis.”

As for Pasteur’s challenge to the Board’s consideration of the secondary indicia of nonobviousness presented in the Rougeot declaration, the Federal Circuit found that the Board’s analysis was supported by substantial evidence. The Court made clear that Pasteur failed to prove that the benefits claimed by the application were unexpected compared to the closest prior art since unexpected mechanisms of action do not ipso facto make the known use of known compounds nonobvious. The Court also noted that Federal Circuit precedent did not demand a finding of nonobviousness simply because one limitation was found to be satisfied through inherency. The Court was similarly unpersuaded by the long-felt need described in the Rougeot declaration because any need for the subject matter claimed by the patent application was already satisfied by the subject matter claimed by the other [...]

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Distinguishing Drinkware—Provisional Priority Determined Differently in Pre- and Post-AIA Patents

In a precedential final written decision, the Patent Trial & Appeal Board concluded that a patent does not need to contain a claim supported by a provisional application’s disclosure to draw priority to that provisional for prior art purposes post America Invents Act (AIA). Penumbra, Inc. v. RapidPulse, Inc., IPR2021-01466, paper 34 (PTAB Mar. 10, 2023) (designated precedential Nov. 15, 2023) (Melvin, Cotta, Wisz, APJs).

Penumbra filed an inter partes review (IPR) petition targeting a patent directed to a “thrombectomy system,” which is a system for removing blood clots in the brain. Penumbra challenged the claims on four different grounds, and each included the Tiegen reference. Therefore, the petition would fail if the Tiegen reference was not prior art.

The challenged patent was filed on July 18, 2019, and drew priority to a provisional application filed on October 24, 2018. Tiegen drew priority to two provisional applications—one dated December 12, 2018, and another dated July 24, 2018. Whether Tiegen was prior art thus depended on whether the challenged patent could draw priority to its provisional application, and whether Tiegen could draw priority to its July 24, 2018, provisional. RapidPulse challenged Tiegen on both bases.

First, the Board assessed the proper priority date for the challenged patent. The Board explained that in order for the patent to draw priority to its provisional application, that provisional application had to provide written support for the challenged patent’s claims. Penumbra argued that the challenged patent’s provisional application did not have written support for the claimed “prevent[ing] forward flow.” RapidPulse responded, arguing that the disclosure of a “minimal amount of momentum from the fluid column” disclosed the claimed “preventing forward flow.” Forward flow generates momentum from the fluid column, so minimizing momentum required preventing fluid flow, according to RapidPulse. RapidPulse also pointed to embodiments that had substantially no forward flow from the distal end of the system.

Penumbra responded by explaining that the provisional application required forward flow in some embodiments, and nothing in the specification stated that the flow should be prevented. The Board agreed, explaining that the provisional application included embodiments with forward flow, and while the provisional recited some embodiments with small amounts of forward flow, the provisional did not indicate that the low forward flow was significant. The Board observed that “one cannot disclose a forest in the original application, and then later pick a tree out of the forest.”

Having determined that the priority date of the challenged patent was July 18, 2019, the Board turned to the priority date of Tiegen. The Board distinguished the present case over Dynamic Drinkware, a 2015 US Court of Appeals for the Federal Circuit case. Dynamic Drinkware states that for prior art purposes, a prior art patent can only draw priority to a provisional application if the prior art patent contains a claim supported by that provisional application. The Board explained that Dynamic Drinkware does not apply post-AIA. Instead, the Board found that, based on the language of AIA 35 [...]

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New Claim Construction in Patent Owner’s Post-Initiation IPR Response? Sure, Charge Away

Addressing the issue of new claim constructions presented by a patent owner after the institution of inter partes review (IPR) proceedings, the US Court of Appeals for the Federal Circuit found that a petitioner is entitled to argue and present evidence under the new construction so long as it relies on the same prior art embodiments used in the petition. Axonics, Inc. v. Medtronic, Inc., Case No. 22-1532 (Fed. Cir. Aug. 7, 2023) (Dyk, Lourie, and Taranto, JJ.)

Medtronic owns two patents directed to the transcutaneous charging of implanted medical devices via inductive coupling between a primary coil in an external charger and a secondary coil in the implanted device. The relevant claims of each patent require the external charger’s power to be automatically varied based on “a value associated with the current passing through the internal power source” (the value limitation) and “a measured current associated with the current passing through the internal power source” (the measured current limitation).

Axonics filed two IPR petitions challenging Medtronic’s patents, arguing that the claims were anticipated by three prior art references. Axonics’s petitions did not propose any express claim constructions, but its claim charts stated that the measured current limitation simply narrows the “value” in the value limitation to “measured current” and does not require a separate measurement. Under this “one-input” construction, both limitations would be satisfied if the external power source automatically varied its power output based on the implanted device’s current. In its preliminary response, Medtronic agreed that while claim construction was not necessary, the prior art failed to anticipate the claimed device under the one-input construction. In its institutional decision, the Patent Trial & Appeal Board agreed that “no term requires express construction.”

In its patent owner response, Medtronic (for the first time) advanced a new claim construction, arguing that the value limitation and the measured current limitation required separate inputs (the two-input construction). In Axonics’ reply, it defended the one-input construction and further argued that the three prior art references also disclosed the claimed device under the two-input construction. In support of its reply, Axonics submitted a supplemental expert declaration citing additional disclosures in the prior art references pertaining to the same embodiments relied upon in the petition. Medtronic argued that it would be prejudicial for the Board to consider Axonics’ new reply arguments without providing Medtronic an opportunity to submit a supplemental expert declaration. Medtronic, however, did not seek leave to submit a new declaration.

In its final written decision, the Board adopted the two-input construction and declined to consider Axonics’ arguments and evidence under the new construction, considering them to be improper reply arguments. Axonics appealed.

The Federal Circuit acknowledged that a petition is required to identify “in writing and with particularity…the grounds on which the challenge to each claim is based, and the evidence that supports the grounds.” To that end, a petitioner may not submit new evidence or arguments in a reply that could have been raised earlier but may respond to new arguments [...]

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Reissue Boat Won’t Float: “Original Patent” Rule Sinks New Floating Grill Claims

Addressing the same invention requirement for reissue patents, the US Court of Appeals for the Federal Circuit affirmed a Patent Trial & Appeal Board decision to reject an overly broad reissue application. In re Float‘N’Grill LLC, Case No. 22-1438 (Fed. Cir. July 12, 2023) (Prost, Linn, Cunningham, JJ.)

Float‘N’Grill (FNG) owned a patent directed to a floating device that supports a grill so that users can grill food while in water. The patent’s specification lays out a single embodiment, illustrated in Figure 1 below, which includes a float (20) that has two supports (46, 48), each of which “includes a plurality of magnets” (60) so that the grill can be removably attached to the float:

FNG filed a reissue application that claimed new ways to “more generically” removably attach a grill to the float. In rejecting the reissue claims, the Examiner found that three of the new requested claims required zero magnets, three claims required one magnet, and one claim did not specifically require magnets but referred to a magnet in the preamble. This was in contrast to the issued patent’s only embodiment, which required multiple magnets. The Examiner, therefore, rejected the reissue claims for failure to meet the “original patent” requirement of 35 U.S.C. § 251. The Board affirmed. FNG appealed.

The question on appeal was whether FNG’s newly requested claims complied with § 251. The Federal Circuit explained that the only path to expanding the coverage of an issued patent is through a reissue application, which is subject to § 251’s limitations. Pertinent here, § 251 requires reissue claims to be directed to the same invention disclosed in the original patent. Citing Supreme Court and Federal Circuit decisions, the Court described the “original patent” requirement as a question of whether the issued patent’s disclosed invention “on its face, explicitly and unequivocally describe[s] the invention as recited in the reissue claims.”

Turning to FNG’s reissue claims, the Federal Circuit agreed with the Board, finding that the new claims were not directed to the same invention as the original patent and thus failed to satisfy § 251. The Court explained that the specification of FNG’s issued patent had just one embodiment, which featured “a plurality of magnets” to removably attach a grill to the floating device. The reissue claims, however, contemplated more general attachments without magnets.

FNG argued that its claims were acceptable under § 251 because the magnets were a “non-essential embodiment” of the invention. The Federal Circuit disagreed for four reasons:

  1. An element of a patent may be deemed essential even if the patent does not explicitly state as much. Thus, the magnets were essential to FNG’s original patent, even if not labeled so.
  2. It is irrelevant that a person of skill in the art may know to replace an original patent element with “some other undisclosed mechanism” to reach the same result. Here, a new way to attach a grill to the [...]

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Hanging Patentability on Written Description Cannot Be Truss-ted

The US Court of Appeals for the Federal Circuit upheld a Patent Trial & Appeal Board finding that the claims of a patent for a truss hanger were invalid for lack of written description because they claimed an undisclosed range despite the predictable nature of the technology. Columbia Insurance Company v. Simpson Strong-Tie Company Inc., Case Nos. 21-2145; -2157 (Fed. Cir. Mar. 31, 2023) (Prost, Hughes, JJ.) (Moore, C.J., dissenting) (non-precedential).

Truss hangers secure support beams to wall frames in buildings. These hangers normally accommodate layers of fire-resistant sheathing by cutting out the sheathing that overlaps with the hanger, but this can reduce fire resistance. Columbia owns a patent claiming a truss hanger that extends through the sheathing and does not decrease fire resistance. The extension for the sheathing, illustrated below, must be “sized large enough to permit two layers of ⅝ inch thick sheathing to be received between the rear edge plane and the back flange plane, but too small to permit three layers of ⅝ inch thick sheathing to be received.”

Simpson petitioned for a post-grant review of the patent at the Board. That proceeding resulted in a mixed decision. The Board found in favor of Simpson that certain original claims and certain substitute claims of the patent were unpatentable for lack of written description and that certain claims were obvious over the prior art. However, it found in favor of Columbia with regard to one claim. Both parties appealed.

The Federal Circuit affirmed the Board’s findings regarding written description. The claimed extension portion covered a range of extension sizes between the upper limit (three layers of five-eighths-inch-thick sheathing) and lower limit (two layers of five-eighths-inch-thick sheathing). The Court affirmed the Board’s finding that nothing in the specification covered the claimed upper limit. Columbia argued that a skilled artisan would read the claims to cover exactly two layers of five-eighths-inch-thick sheathing, but the Court found that this claim construction argument was forfeited because it was raised for the first time on appeal and, even if it weren’t, it was incorrect because it was akin to rewriting the claims.

The Federal Circuit also affirmed the Board’s finding that certain claims were obvious, concluding that the Board’s determination was supported by substantial evidence. The Court rejected Columbia’s argument that the Board’s claim construction violated the Administrative Procedure Act because the construction adopted by the Board was similar enough to Simpson’s proposed construction and not raised sua sponte.

Finally, the Federal Circuit affirmed the Board’s finding that the claim on which Simpson appealed was not indefinite because the term “large enough to permit the drywall to be received” informs a skilled artisan with reasonable certainty that the scope of this claim includes any extension portion sized larger than the smallest commonly known sheathing size. The Court also found that the claim was not obvious because the Board correctly interpreted the claim language “extend [...]

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Disclaiming Claim Scope: Could the Patentee Have Anticipated This?

In the most recent decision in the Apple/VirnetX saga, the US Court of Appeals for the Federal Circuit affirmed a remand ruling from the Patent Trial & Appeal Board finding the challenged claims of VirnetX’s patents unpatentable. VirnetX Inc. v. Mangrove Partners Master Fund, Ltd., Case No. 2020-2271 (Fed. Cir. Mar. 30, 2023) (Moore, C.J.; Hughes, Stark, JJ.) (nonprecedential).

VirnetX owns two patents relating to a “secure mechanism for communicating over the internet.” The patents relate to a system in which a DNS module “intercepts . . . and determines whether [a] request is for a secure site.” The system creates a VPN if the proxy determines that the request is for a secure site. If the proxy determines that the request is not for a secure site, it forwards the request to a conventional DNS.

Mangrove, Apple and Black Swamp (collectively, Mangrove) petitioned for inter partes review (IPR) challenging various claims of the patents. The Board found that all the challenged claims were unpatentable as anticipated by Kiuchi or obvious in view of Kiuchi and other references. VirnetX appealed to the Federal Circuit (Mangrove Appeal). In that appeal, the Federal Circuit determined that, contrary to the Board’s finding, when VirnetX distinguished Aventail during reexamination of one of the patents, VirnetX disclaimed “a system in which a client computer communicates with an intermediate server via a singular, point-to-point connection.” As a consequence of the prosecution disclaimer, the Court found that the claims “require[s] direct communication between the client and target computers.” The Court vacated the Board’s decision and remanded the case for the Board to determine further factual questions regarding Kiuchi because “substantial evidence does not support the Board’s finding that the C-HTTP name server of Kiuchi performs the functions of the claimed DNS proxy module.”

Following the Mangrove Appeal, the Board again found that Kiuchi—the only prior art reference at issue in the present appeal—discloses a “secure network” for the transfer of patient information in a hospital setting and teaches a “direct-communication VPN between the client and target.” As a result, the Board concluded that Kiuchi anticipates all the challenged claims. VirnetX again appealed.

The Federal Circuit first addressed the Board’s conclusion that “Kiuchi teaches a direct-communication VPN and is therefore within the scope of the claims of VirnetX’s … patent, and not an indirect-communication VPN, which would have brought Kiuchi within the scope of VirnetX’s disclaimer.” The Court agreed with the Board that “Kiuchi discloses direct communication that satisfies the claimed VPN.” Specifically, “Kiuchi’s user agent does not communicate with the client-side proxy using a singular, point-to-point connection because the user agent addresses the desired endpoint, and the VPN provides the required message routing for the user agent to receive a response from the desired endpoint.” Moreover, the Court reasoned that Kiuchi’s proxy servers forward data packets and that Kiuchi teaches “the ability to address data to a particular computer,” consistent with the scope of the claims.

Next, the Federal Circuit addressed the Board’s [...]

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