NetChoice, LLC v. Ken Paxton, Attorney General of Texas, 21A720 (Supreme Court 2022)

I previously wrote about the Texas Social Media Censorship Law known as HB20.  A portion of the case is pending before the Supreme Court on an emergency motion to vacate the 5th Circuit’s recent decision allowing the law to come into force even as it is being challenged.  After NetChoice filed its petition, Justice Alito requested responsive briefing from the state of Texas.

Those briefs have now been filed and provided below with a small excerpt or comment for each amicus brief.

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• Appendix containing lower court opinions.
• Party Briefs:
  • NetChoice: Petition to the Supreme Court to Vacate the 5th Circuit’s Stay of the District Court’s Preliminary Injunction against the State.
  • State of Texas: Brief in Opposition.
  • NetChoice: Reply Brief.
• Amicus Briefs Supporting NetChoice.
  • Rep Chris Cox: Amicus Brief Supporting NetChoice.  Cox is an author of Section 230 and provides its explanation of its importance and relevance to the case.
  • Prof. Eric Goldman: Amicus Brief Supporting NetChoice.  Goldman adds that the “editorial transparency requirements [of HB20] violate the First Amendment.”
  • EFF, Wikimedia, et al.: Amicus Brief Supporting NetChoice. “Allowing HB20 to go into effect will cause social media platforms to alter their content moderation practices in ways that will harm the public interest.”
  • Cato Institute, Amicus Brief Supporting NetChoice. “The public interest is harmed by allowing the law to go into effect because most users do not want to see animal abuse, terrorist recruitment material, or racial slurs when they go on Facebook, nor do Facebook and other social media platforms want to host such material.”
  • ACLU, Reporters Committee for Freedom of the Press, et al.: Amicus Brief Supporting NetChoice. The brief argues that editorial autonomy is critically important. Although HB20 applies to social media and not newspapers the brief suggests it will have a chilling effect.
  • FLOOR64: Amicus Brief Supporting NetChoice.  The owner of Techdirt.com.  HB20 “takes aim at the entire Internet ecosystem and its ability to facilitate any online expression at all.”
  • TechFreedom: Amicus Brief Supporting NetChoice. “The Fifth Circuit panel order is poised to unleash a torrent of awful content.”
  • Chamber of Progress, Anti-Defamation League, IP Justice, LGBT Tech, et al.: Amicus Brief Supporting NetChoice. The law would force publication of wasteful speech and would “render content moderation functionally impossible.”
• Amicus Briefs in Support of Texas.
  • State of Florida, Amicus Brief in Support of Texas. Social media platforms “have supplanted the telephone for interpersonal communication, traditional television for news consumption, and the 24-hour cable news cycle in the potential to swing an election.” They should be regulated as such.
  • Professor Philip Hamburger, et al.  Amicus Brief in Support of Texas. Hamburger explains that he has studied and written “on how governments, in the seventeenth century and again today, tend to privatize their censorship, leaving their dirty work to less accountable, private actors.”  He argues that common carrier style regulation is  an appropriate mechanism to promote speech.

CRFD Research v. Matal (Fed. Cir. 2017) (Iron Dome)
CRFD Research v. DISH Network (Fed. Cir. 2017)
Hulu, Netflix, and Spotify v. CRFD Research (Fed. Cir. 2017)

CRFD’s U.S. Patent  No. 7,191,233 has been challenged in four separate Inter Partes Review petitions – three of which were granted and reached final decision. Interestingly, the three decisions are somewhat different from one-another.

• Iron Dome – invalid: Claim 1 anticipated; Claims 4-6 and 8-11 obvious.
• DISH – invalid: Claims 1, 4, 23, and 25 anticipated; Claims claims 4 and 25 obvious.
• Hulu – valid: Claims 1–3, 23, and 24 not anticipated; Claims 1–6, 8–11, 13–15, 17–20, 23–25, 29–31, 34–36, and 38–41 not obvious.

The PTAB decisions here may seem inconsistent, but the differences can be explained by the fact that each IPR focused on different prior art references (or combinations thereof).  Note here that the patentee loses (claims are cancelled) if a claim is found invalid in any one of multiple IPR proceedings.  On appeal, the Federal Circuit consolidated the cases and has ruled against the patentee — affirming the Iron Dome and Dish cancellations, but reversing the Board’s nonobviousness decision from Hulu.

The patented invention here is designed to allow someone to start a “session” on a first device but then transferring the session to a second device (along with a session history) so that the user does not need to fully re-initiating the session.”

Claim 1. A method for redirecting an on-going, software based session comprising:

conducting a session with a first device;

specifying a second device;

discontinuing said session on said first device;

transmitting a session history of said first device from said first device to a session transfer module after said session is discontinued on said first device; and

resuming said session on said second device with said session history.

Broad Claims = Invalid: In reviewing the rejections, the Federal Circuit first noted that the key prior art (Phan) taught a somewhat different approach to transferring sessions than the patent at issue. However, anticipation does not involve a disclosure-to-disclosure comparison, but rather asks whether the prior art discloses the invention as claimed.

A patent is invalid for anticipation under 35 U.S.C. § 102 if a single prior art reference discloses all limitations of the claimed invention.

Here, the Board found several of the actual claims of the ‘233 patent were broad enough to encompass Phan’s disclosure – and thus were anticipated.  (Affirming Iron Dome).  Because anticipation is a question of fact, the PTAB’s determinations regarding this issue are reviewed with deference — PTAB findings will be affirmed if supported by more than an iota of evidence, as was done here. On the other hand, obviousness has been deemed “a question of law based upon subsidiary findings of fact.”  As such, the ultimate question of obviousness is reviewed de novo on appeal.

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The Hulu portion of the case is really about IPR procedure.  Hulu had raised several grounds for challenging the patent in its IPR petition, but the PTO selected only a few of the grounds for trial — finding the others redundant. One of the denied grounds argued obviousness, based on Bates alone, while a granted grounds involved a combination of Bates and Chan.  Both of these grounds agreed that Bates alone did not teach the timing of the “transmit session” limitation. Rather the arguments were respectively that (1) the limitation was obvious based upon Bates alone; and (2) the limitation was taught by Chan and the combination was obvious.  IPR was not instituted on the first ground, only the second. At trial, the PTAB found (1) Chan did not actually teach the limitation; and (2) that Hulu was barred from presented the obvious-based-upon-Bates argument since it was denied institution.

On appeal the Federal Circuit has rejected the PTAB’s approach holding that:

The Board, in its discretion, elected to not institute review on Bates alone for redundancy reasons, but instituted review on obviousness grounds that include the only reference—Bates—cited in that ground. To bar Hulu from pressing an argument it raised in a ground the Board found “redundant” and that it expressly incorporated into other proposed grounds of unpatentability on which the Board instituted would not only unfairly prejudice Hulu, but would also raise questions about the propriety of the Board’s redundancy decision.

The Federal Circuit then went on to consider this (and a few other) issues – eventually concluding that the claims were obvious and thus reversing the PTAB decision.

I’ll note here that two major failings of this portion of the Federal Circuit’s decision are (1) that the court offered no standard for its review of the PTAB’s refusal to allow certain arguments; and (2) the court appears to basically be reviewing the partial institution decision — but those are not reviewable under Cuozzo.

by Dennis Crouch

The level of estoppel was a sticking point a decade ago in the lead-up to the America Invents Act (AIA).  Patentee’s were concerned with repeat harassment by accused infringers; Accused infringers were concerned that IPRs would be ineffective and that they would then lose their right to challenge the patent in court. We now know that IPRs are very effective, but sometimes patent challengers would still like a second bite.  That is the situation in the pending petition for certiorari in Apple Inc. v. California Institute of Technology, 22-203 (U.S.).  Apple lost its IPRs against CalTech and now wants to bring additional invalidity challenges in court that it could have raised in its IPR petitions.

In the 2011 AIA legislation, Congress created two forms of petitioner estoppel, each of which attach only if the IPR petition is granted and the PTAB reaches a Final Written Decision, and only with respect the claims actually adjudged in the IPR final written decision.

315(e)(1) Estoppel of Further Proceedings Before the USPTO: The petitioner [or privy/RPI] may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

315(e)(2) Estoppel of Invalidity Arguments in Court: The petitioner [or privy/RPI] may not assert either … that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

35 U.S.C. 315(e). As you can see, both provisions create estoppel barring a petitioner from later raising “any ground that the petitioner raised or reasonably could have raised during that inter partes review.”  The question in

Apple v. CalTech: CalTech sued Apple and Broadcom for infringing its patents covering wireless communication chip logic. Apple responded with several IPR petitions. The petitions were granted initiating the IPR, but the USPTO eventually sided with patentee in its final written description. Apple is thus prohibited from re-challenging the validity of the already challenged claims “any ground that the petitioner raised or reasonably could have raised during that inter partes review.”

Back in district court, Apple attempted to raise additional invalidity challenges, but the district court barred those defenses. The district court concluded that Apple could reasonably could have included those as grounds in its IPR petition and thus barred under 315(e)(2). CalTech eventually won a $1 billion jury verdict.  On appeal, the Federal Circuit vacated the verdict on other grounds, but affirmed on the issue of estoppel. The Federal Circuit particularly held that estoppel extends to “all grounds not stated in the petition but which reasonably could have been asserted against the claims included in the [IPR] petition.” California Inst. of Tech. v. Broadcom Ltd., 25 F.4th 976 (Fed. Cir. 2022), overruling Shaw Industries Group, Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293 (Fed. Cir. 2016).

Apple’s new petition to the Supreme Court identifies what it sees as a fundamental flaw in the Federal Circuit’s textual analysis. The Federal Circuit concluded that Apple was estopped from later raising grounds that it reasonably could have raised in the inter partes review petition. But, the statute as written creates a slightly different test — asking what “reasonably could have raised during that inter partes review.” The following is Apple’s question presented to the Supreme Court:

Whether the Federal Circuit erroneously extended IPR estoppel under 35 U.S.C. § 315(e)(2) to all grounds that reasonably could have been raised in the petition filed before an inter partes review is instituted, even though the text of the statute applies estoppel only to grounds that “reasonably could have [been] raised during that inter partes review.”

Apple question presented.

The IPR process begins with an IPR petition. 35 U.S.C. § 311. The statute charges the USPTO Director the role of instituting the IPR, although that duty had been delegated tot he PTAB. 35 U.S.C. § 314.  After institution, the PTAB conducts a trial and issues its final written description.  Apple’s basic argument is that the statute’s use of “during” excludes potential actions that could have taken place prior to institution.  To wit, Apple recognizes that it reasonably could have made additional arguments in its IPR filings, but those took place prior to the IPR; And, once the IPR petition is granted, the challenger no longer has any opportunity to raise any other grounds to challenge the patents.  In this scenario, the statute is practically limited to cover only grounds actually raised.  Apple explains:

When “an inter partes review of a claim in a patent … results in a final written decision,” a petitioner is estopped from asserting in district court litigation only “any ground that the petitioner raised or reasonably could have raised during that inter partes review.” 35 U.S.C. § 315(e)(2) (emphasis added). By expanding statutory estoppel to cover any ground that could have been raised in a petition before an inter partes review even begins, the Federal Circuit effectively rewrote the statute. This Court’s review is urgently needed to restore Section 315(e) to its proper scope.

Apple Petition.

Apple’s petition relies heavily on the work of Cleveland-Marshall Prof. Christa Laser and her 2018 Florida Law Review article.  Christa Laser, The Scope of IPR Estoppel: A Statutory, Historical, and Normative Analysis, 70 Fla. L. Rev. 1127 (2018).  Laser suggested that the Supreme Court reinterpret the statute and “should hold that IPR estoppel applies narrowly only to grounds actually raised and instituted.” Id.  Baltimore Prof. Greg Dolin penned a responsive article concluding that Laser’s approach is too narrow. Gregory Dolin, Estopping Patent Harassment: A Response to Christa J. Laser, 70 Fla. L. Rev. F. 136 (2019). From my view, Dolin and the Federal Circuit have the better view on this one over Apple and Laser.  We’ll see this fall whether the Supreme Court agrees.

by Dennis Crouch

In Feb 2022, the Court of Appeals for the Federal Circuit released two separate opinions discussing the estoppel provisions of 35 U.S.C. § 315(e).

• California Inst. of Tech. v. Broadcom Ltd., — F.4th —, 2022 WL 333669 (Fed. Cir. Feb. 4, 2022)
• Intuitive Surgical, Inc. v. Ethicon LLC, — F.4th —, 2022 WL 414252 (Fed. Cir. Feb. 11, 2022)

Both decisions found that estoppel applied to bar certain post-IPR patent challenges.  That said, the two opinions are also in a amount of tension with regard to what claim challenges are estopped.  The decisions are important; Estoppel is a huge consideration of accused infringers as they consider how to structure their inter partes review (IPR) petition(s) and these are all multi-million-dollar cases.

Lets dig into the statute first, and then the decisions. The scope of estoppel was a major lobbying point during the passage of the America Invents Act of 2011 (AIA). Patentees raised concerns of harassment from multiple IPRs or IPRs followed by district court litigation. At the same time, Challengers were concerned that broad estoppel would leave them with no defense in court.

Under the 2011 statute, a patentee can challenge one or more claims of a patent via IPR. If an IPR is instituted, the IPR then typically ends with a final written decision determining whether to cancel the claims. Section 315(e) estoppel is triggered by that final written decision.  Once the final written decision issues, the IPR petitioner (or RPI/Privy) cannot do either of the following:

• [R]equest or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review.  315(e)(1).
• [A]ssert either in a civil action arising [under the Patent Act] or in a [Section 337] proceeding before the International Trade Commission . . . that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review. 315(e)(2).

You can see that these two subsections of 315(e) are substantially parallel and with only minor differences.  One commonality is that both tie estoppel to “the claim” or “that claim” — meaning the claim challenged by the petitioner.

In CalTech, Apple had filed several IPR petitions against CalTech’s patents.  Those were eventually won by the patentee.  Meanwhile, the infringement litigation was ongoing and Apple and Broadcom (the RPI) had raised several invalidity defenses.  However, the district court barred those defenses because they “reasonably could have [been] raised” in the IPR petition.  On appeal, the Federal Circuit affirmed that finding — particularly rejected the notion the “reasonably-could-have” expansion only applied to additional arguments that could have been raised post-institution.

[W]e take this opportunity to … clarify that estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all claims and grounds not in the IPR but which reasonably could have been included in the petition.

CalTech.  As you read this quote from CalTech, focus in on the portion of the statement applying to claims: “estoppel applies . . . to all claims and grounds . . .  which could have been included in the petition.”  The implication from this statement in CalTech is that an IPR that challenges one claim of a patent could create estoppel vis-a-vis all claims of the patent.  Now, this could be a sensible rule, but it doesn’t appear to be the rule codified by the statute.

The CalTech estoppel was being battled-out in district court infringement litigation and so Section 315(e)(2) was the focus.  The second case, Intuitive Surgical looks instead to the parallel PTO-focused provision of Section 315(e)(1).

Intuitive filed three IPR petitions against the claims of Ethicon’s U.S. Patent No. 8,479,969.  All three petitions were granted and the PTO proceeded toward final written decision. But along the way the timing of the three became a bit offset.  In January 2020, the PTO issued final written decisions in two of the IPRs — both siding with the patentee and concluding the challenged claims had not been proven unpatentable.  At that point, the estoppel of Section 315(e)(1) kicked in — Intuitive could no longer maintain an IPR against , and the PTAB ruled that Intuitive could no longer maintain an IPR against the claim already blessed as patentable.  On appeal, the Federal Circuit affirmed that judgment over some fairly weak arguments from Ethicon. (Ethicon argued, inter alia, it was too tough and thus not reasonable to put all the arguments in one 14,000 word IPR petition. Ever heard of choosing your best arguments?).

In its opinion, the Intuitive court suggested that an IPR petition might avoid the estoppel by filing “multiple petitions where each petition focuses on a separate, manageable subset of the claims to be challenged—as opposed to subsets of grounds.”  According to the court, this approach avoids estoppel because “§ 315(e)(1) estoppel applies on a claim-by-claim basis.”  This conclusion appears directly contrary to the statement issued by the CalTech court one week prior.

Prior to CalTech, a the Federal Circuit had already ruled that estoppel applied on a claim-by-claim basis. See, for example, Credit Acceptance Corp. v. Westlake Services, 859 F.3d 1044, 1052 (Fed. Cir. 2017). However, those cases were based upon pre-SAS understanding of IPR procedure the source of those determinations appears to be Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016).  The Shaw decision is important here because it was expressly overruled and rejected by CalTech.  All this give the CalTech approach some credential.  However, I believe that ultimately we’ll see the “all claims … which reasonably could have been included in the petition” to be an errant bit of dicta that will not be followed by the subsequent panels.  I call it dicta, because the patentee in CalTech requested and obtained estoppel only for claims that Apple actually challenged via IPR petition.  There was no decision regarding non-petitioned claims.

All that said, the CalTech panel may want to consider rewriting this critical sentence to make clear that estoppel applies only to claim challenged in the petition, but to any ground that reasonably could have been included in the petition.

Fall Line Patents, LLC v. Unified Patents, LLC (Fed. Cir. 2020) [FallLine]

In this case, the court begins with a lamentation that a Federal Circuit panel is “bound by the determinations of a prior panel, unless relieved of that obligation by an en banc order of the court or a decision of the Supreme Court.” Quoting Deckers Corp. v. United States, 752 F.3d 949 (Fed. Cir. 2014).*

Here, Fall Line appealed against the PTAB’s real party-in-interest determinations. That argument was recently foreclosed in ESIP Series 2, LLC v. Puzhen Life USA, LLC, 958 F.3d 1378 (Fed. Cir. 2020).  Fall Line attempted to skirt the decision by asking the court to use its “mandamus jurisdiction” to hear the case.  On appeal, the Federal Circuit concluded that would be improper in this case. Although mandamus may be proper to review “institution decisions that implicate constitutional or jurisdictional violations” — mandamus is not proper for an “ordinary dispute” over the construction of an “institution-related statute.”  Fall Line’s argument would have carried more weight – but for Thryv.

While we [previously held] that statutory prerequisites to the Director’s authority to institute an IPR were not related to institution within the meaning of § 314(d), the Supreme
Court disagreed with that conclusion in Thryv.

Slip Op.

Fall Line also argued that the Arthrex severance was inadequate to cure the appointments clause problem with PTAB judges. Here, the court concluded that argument was considered and rejected in the Arthrex decision itself. “As a panel, we are bound.”

Still, Fall Line will get a new trial at the PTAB under Arthrex.

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Note here that the opening line of the case doesn’t actually apply to this decision because it was issued with the following caveat: “This disposition is nonprecedential.”

The House recently passed H.R. 3 – the Elijah E. Cummings Lower Drug Costs Now Act — and the Bill has been received by the Senate for consideration.

The basic proposal is to require the U.S. Gov’t to negotiate on Medicare drug prices for insulin and >25 of the top-125 drugs (by national spending). The negotiation includes a price cap:

The negotiated maximum price may not exceed (1) 120% of the average price in Australia, Canada, France, Germany, Japan, and the United Kingdom; or (2) if such information is not available, 85% of the U.S. average manufacturer price.

If the manufacturer fails to comply then there will be civil/tax penalties. So, the word “negotiation” should be placed within quotation marks. The Congressional Budget Office predicts that price negotiation prevision would lower government spending by about $500 billion over the next decade.

This particular proposal spends most of the money – by adding dental, vision, and hearing to Medicare.

Current law includes a “noninterference” clause associated with Medicare Part D:

Noninterference.—In order to promote competition under this part and in carrying out this part, the Secretary—

(1) may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors; and

(2) may not require a particular formulary or institute a price structure for the reimbursement of covered part D drugs.

42 U.S.C. 1395w-111(i).

Although not a “patent” bill, the proposal would significantly impact the market for patented drugs and biologics. What is unclear at this point is how research would shift. PhRMA estimates that the US Bio / Pharma industry spent about $100 billion on research in 2017.

This Bill is likely to be blocked by Republican leaders in the Senate, although many Republicans have offered some support for “interference” in principle.

Oil States Transcript.  Commentary to follow.

Interesting quotes:

Justice Sotomayor: If I own something, which is what your basic position, I understand, is, that this is a personal right, how can a government agency take that right away without due process of law at all? Isn’t that the whole idea of Article III, that only a court can adjudicate that issue?

JUSTICE GORSUCH: [W]e have a number of cases that have arguably addressed this issue already, like McCormick, for example, in which this Court said the only authority competent to set a patent aside or to annul it or to correct it for any reason whatever is vested in the courts of the United States.

Question: Whether inter partes review, an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents, violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

The deciSion here is very big news for the IPR system because it has the potential of bringing down the entire AIA trial regime.  The conventional wisdom with Supreme Court cases is that they usually reverse the path set by the Federal Circuit. Here, that results may well be a holding that PTO cancellation of issued patents is a constitutional violation.