by Dennis Crouch
In Palo Alto Networks, Inc. v. Centripetal Networks, LLC, No. 2023-1636 (Fed. Cir. Dec. 16, 2024), the Federal Circuit vacated and remanded a Patent Trial and Appeal Board (PTAB) decision. Judge Stoll’s opinion identified two critical flaws in the PTAB’s obviousness analysis: (1) Failure to make clear findings on motivation to combine references; and (2) Analysis of prior art references in isolation rather than as a combined whole.
Background
The case involves Centripetal’s U.S. Patent No. 10,530,903, which claims methods for correlating network packets to identify potentially malicious activity. PAN challenged the claims as obvious based on two key references:
- Paxton: Taught correlating network packets across network boundaries using hashing techniques
- Sutton: Taught notifying administrators about potentially malicious network activity identified through darknet monitoring
The PTAB found PAN failed to prove obviousness, concluding it had:
- A correlation from Paxton with no specific post-correlation actions
- A transmission from Sutton unrelated to correlation
- No “necessary bridge” showing a skilled artisan would have made the transmission responsive to correlation as required by the claims.
On appeal, the Federal Circuit vacated and remanded:
1. Failure to Make Clear Motivation to Combine Findings
Citing In re Nuvasive, 842 F.3d 1376 (Fed. Cir. 2016), the court found the PTAB failed to address PAN’s specific arguments that:
- Paxton taught identifying infected nodes to help administrators identify malicious incidents
- Sutton provided complementary notification mechanisms
- Both references shared the goal of enhancing network security
The PTAB’s failure to evaluate these arguments violated Vicor Corp. v. SynQor, Inc., 869 F.3d 1309 (Fed. Cir. 2017), which requires express findings with adequate explanation when motivation to combine is disputed.
In NuVasive, the court vacated a PTAB obviousness determination because the Board failed to articulate a reason why a skilled artisan would have been motivated to combine the prior art references at issue. The court emphasized that while identifying motivation to combine “need not become [a] rigid and mandatory formula,” the PTAB must “articulate a reason why a PHOSITA would combine the prior art references.” The court rejected conclusory statements alone as insufficient, requiring instead that findings be supported by “reasoned explanation.” The court also explained that this duty to provide adequate explanation enables meaningful judicial review and helps ensure the grounds upon which the PTAB acts are “clearly disclosed and adequately sustained.” I see some small amount of daylight between NuVasive and PAN based upon the burdens of proving unpatentability. In NuVasive, the PTAB found claims obvious, meaning it determined the challenger had met its burden of proving unpatentability by a preponderance of the evidence. When making an affirmative finding that a patent is invalid, the PTAB needs to clearly explain how that burden was met, including articulating a specific motivation to combine references. The Federal Circuit vacated because the PTAB failed to provide this necessary explanation to support its finding of obviousness.
In PAN, the PTAB found the challenger failed to meet its burden of proving obviousness. While the PTAB still needs to provide a reasoned explanation for its decision, finding that a challenger failed to prove invalidity could potentially require less detailed explanation than finding a patent invalid, since the PTAB is essentially maintaining the presumption of validity. As I note below, this is the approach taken by the Federal Circuit itself — only issuing R.36 summary rulings without any explanation when affirming, but never when vacating or reversing a lower court decision.
In Vicor, the Federal Circuit vacated PTAB decisions that reached inconsistent conclusions about motivation to combine the same prior art references in related patents without adequate explanation. The court held that while not every instance of an agency reaching inconsistent outcomes in similar cases will necessarily be erroneous, when “a panel simultaneously issues opinions on the same [disputed] technical issue between the same parties on the same record, and reaches opposite results without explanation,” the findings must be vacated and remanded for further consideration. Particularly troubling to the court was that the same PTAB panel issued decisions on the same day reaching opposite conclusions about whether there was motivation to combine the same references, without explaining the inconsistency. The court emphasized that even if individual findings are supported by substantial evidence, they may still be arbitrary and capricious if the PTAB fails to provide a reasoned basis for reaching divergent outcomes on essentially identical issues. The court made clear that when the PTAB determines there is no motivation to combine references, it cannot simply make a conclusory finding – rather, “If the Board finds that there would have been no motivation to combine . . . , it must expressly say so with an adequate explanation.” This requirement ensures that the PTAB’s reasoning is transparent and enables meaningful judicial review of its decisions.
The Federal Circuit’s stringent requirements for PTAB explanation contrasts with its own frequent use of Rule 36 summary affirmances without opinion. As discussed in the pending Supreme Court cases of ParkerVision v. TCL and Island IP v. TD Ameritrade, the Federal Circuit regularly issues no-opinion judgments in a substantial percentage of its cases, including in complex patent appeals. This creates a peculiar asymmetry: while the court demands that the PTAB provide “reasoned explanation” and “expressly say” why it reaches certain conclusions, particularly regarding motivation to combine prior art references, the Federal Circuit itself often provides no explanation at all for its appellate decisions. This practice seems especially difficult to reconcile with the court’s emphasis in cases like Vicor on the importance of explanation for enabling meaningful judicial review and ensuring that the grounds for decisions are “clearly disclosed and adequately sustained.”
2. Improper Piecemeal Analysis
The Federal Circuit also found that the PTAB made a fundamental error in its obviousness analysis by examining each prior art reference in isolation rather than considering how they would work together from the perspective of a skilled artisan. This type of segmented analysis directly contradicts established precedent on how courts should evaluate obviousness.
In Game & Technology Co. v. Wargaming Group Ltd., 942 F.3d 1343 (Fed. Cir. 2019), the Federal Circuit emphasized that the key question in an obviousness inquiry is not whether each individual reference contains all the claimed elements, but rather whether a person of ordinary skill would have been motivated to combine the relevant disclosures of multiple references to arrive at the claimed invention.
The question in an obviousness inquiry is whether it would have been obvious to a person of ordinary skill in the art to combine the relevant disclosures of the two references, not whether each individual reference discloses all of the necessary elements.
Game & Tech. In other words, we have to allow for the creative addition of PHOSITA. This principle builds on the Supreme Court’s guidance in KSR International Co. v. Teleflex Inc., which rejected rigid, formalistic approaches to obviousness analysis. As the Federal Circuit elaborated in Randall Manufacturing v. Rea, 733 F.3d 1355 (Fed. Cir. 2013), KSR requires reading prior art references contextually, considering how their teachings might be combined, rather than taking a “blinkered focus” that examines each reference in artificial isolation.
Here, the PTAB first found that Paxton alone didn’t teach transmitting responses to correlation, and then separately concluded that “Sutton also fails to fill in this gap.” According to the Federal Circuit, this segmented approach missed the key question – whether the combination of references would have suggested the claimed invention to a person of ordinary skill. The proper approach would have been to consider how Paxton’s correlation techniques and Sutton’s transmission teachings might work together, taking into account the level of skill in the art and whether there would have been a reasonable expectation of success in combining them.
The Federal Circuit directed the PTAB to reconsider on appeal: Would a person of ordinary skill have been motivated to transmit host identity information (as taught by Sutton) responsive to packet correlation (as disclosed in Paxton) to improve network security?