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Droplets, Inc. v. E*Trade Bank

United States Court of Appeals, Federal Circuit

April 19, 2018

DROPLETS, INC., Appellant
v.
E*TRADE BANK, E*TRADE FINANCIAL CORPORATION, E*TRADE SECURITIES, LLC, SCOTTRADE FINANCIAL SERVICES, INC., SCOTTRADE, INC., TD AMERITRADE HOLDING CORP., TD AMERITRADE, INC., Cross-Appellants
v.
ANDREI IANCU, UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE, Intervenor

          Appeals from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No. IPR2015-00470.

          Daniel Luke Geyser, Stris & Maher LLP, Los Angeles, CA, argued for appellant. Also represented by Douglas D. Geyser; Timothy Bechen, Bechen PLLC, Richmond, VA.

          Michael T. Rosato, Wilson, Sonsini, Goodrich & Rosati, PC, Seattle, WA, argued for cross-appellants. Also represented by Andrew Swanson Brown; Matthew A. Argenti, Michael Brett Levin, Palo Alto, CA; Joel Christian Boehm, Austin, TX; Richard Torczon, Washington, DC.

          Sarah E. Craven, Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA, argued for intervenor. Also represented by Nathan K. Kelley, Thomas W. Krause, Philip J. Warrick.

          Before Dyk, O'Malley, and Wallach, Circuit Judges.

          O'MALLEY, CIRCUIT JUDGE.

         E*TRADE Bank, E*TRADE Financial Corporation, E*TRADE Securities, LLC, Scottrade Financial Services, Inc., Scottrade, Inc., TD Ameritrade Holding Corp., and TD Ameritrade, Inc. (collectively, "E*TRADE") filed a petition for inter partes review ("IPR") of U.S. Patent No. 8, 402, 115 ("the '115 Patent"), owned by Droplets, Inc. ("Droplets"). The Patent Trial and Appeal Board ("the Board") instituted review and issued a final written decision finding all claims of the '115 Patent invalid as obvious under 35 U.S.C. § 103. E*TRADE Fin. Corp. v. Droplets, Inc., No. IPR2015-00470, 2016 WL 3476939 (P.T.A.B. June 23, 2016) ("Board Decision"). In reaching this conclusion, the Board found that: (1) the '115 Patent failed to enumerate a priority claim sufficient to avoid fully-invalidating prior art; and (2) incorporation by reference is insufficient to satisfy a patentee's burden of providing notice of the asserted priority date under 35 U.S.C. § 120. Droplets appealed, and the Director of the U.S. Patent and Trademark Office intervened to defend the Board's decision on the priority date issue. E*TRADE filed what it characterizes as a conditional cross-appeal, arguing that, if we disagree with the Board regarding the priority issue, there is an alternative ground to determine that at least some of the '115 Patent claims are invalid.

         By statute, a claim for benefit of the filing date of an earlier application must include "a specific reference to [an] earlier filed application." 35 U.S.C. § 120. We agree with the Board that incorporation by reference cannot satisfy this statutory requirement. Because the '115 Patent expressly claims priority only to an immediately preceding application, and not the provisional application before that, the Board correctly determined that an earlier-filed reference-an international publication with the same specification-invalidated all claims of the '115 Patent. We therefore affirm the Board's decision finding all claims of the '115 Patent invalid as obvious. We dismiss E*TRADE's cross-appeal as improper.

         I. Background

         A. The '115 Patent

         The '115 Patent relates to a method and system "for delivering interactive links for presenting applications and second information at a client computer from remote sources in a network-configured computer processing system." '115 Patent at Abstract. In this appeal, the parties dispute the effective filing date of the '115 Patent. As depicted below, the '115 Patent was filed on January 26, 2009, and was the last of four patents filed in its lineage:

         (Image Omitted)

         Board Decision, 2016 WL 3476939, at *5. The other applications relate as follows:

• the '115 Patent was copending with the application leading to U.S. Patent No. 7, 502, 838 ("the '838 Patent"), filed on November 24, 2003;
• the '838 Patent was copending with the application leading to U.S. Patent No. 6, 687, 745 ("the '745 Patent"), filed on June 22, 2000;
• the '745 Patent was copending with the earliest-filed application, Provisional Application No. 60/153, 917 ("the '917 Provisional"), filed on September 14, 1999; and
• a Patent Cooperation Treaty ("PCT") application ("the Franco PCT") was filed on September 14, 2000, and published on March 22, 2001.

         The specification of the '115 Patent includes a priority claim that specifically refers to the '838 Patent and incorporates its disclosure by reference. '115 Patent, col. 1, ll. 5-12. The '115 Patent specification also includes a cross reference to the '917 Provisional. These sections read as follows:

         CLAIM OF PRIORITY

         The present application is a continuation of allowed U.S. patent application Ser. No. 10/720, 728, entitled "SYSTEM AND METHOD FOR DELIVERING REMOTELY STORED APPLICATIONS AND INFORMATION" filed on Nov. 24, 2003 now U.S. Pat. No. 7, 502, 838, the di[s]closure of which is hereby incorporated by reference in its entirety.

         CROSS REFERENCE TO RELATED DOCUMENTS

Priority is herewith claimed under 35 U.S.C. § 119(e) from copending Provisional Patent Application No. 60/153, 917, filed Sep. 14, 1999, entitled "METHOD AND SYSTEM FOR DELIVERING APPLICATIONS IN CLIENT/SERVER ENVIRONMENT, " by Louis M. Franco et al. The disclosure of this Provisional Patent Application is incorporated by reference herein in its entirety.

'115 Patent, col. 1, ll. 5-24.

         It is undisputed that the '115 Patent properly claims priority from the earlier-filed, copending '838 Patent and thus is entitled to the benefit of the November 24, 2003 filing date of the '838 Patent. Board Decision, 2016 WL 3476939, at *6. The '838 Patent specification identifies the patent as a "[c]ontinuation of application No. 09/599, 382, filed on Jun. 22, 2000, now Pat. No. 6, 687, 745, " and expressly claims priority from the '917 Provisional, which was filed on September 14, 1999. '838 Patent, col. 1, ll. 5-18. As such, the parties agree that the '838 patent is entitled to the benefit of the September 14, 1999, filing date of the '917 provisional, because it: (1) was copending with the '745 patent; and (2) "contains the specific references to the '745 patent and '917 provisional required under 35 U.S.C. § 120 and 37 C.F.R. § 1.78." Board Decision, 2016 WL 3476939, at *6. The question on appeal is whether the '115 Patent is also entitled to the '917 Provisional's priority date by virtue of the language in the '115 Patent that incorporates the '838 Patent by reference.

         As noted, the application leading to the '115 Patent was filed on January 26, 2009. The applicant subsequently filed a preliminary amendment that added a reference claiming priority from the application that led to the '838 Patent. That priority claim statement listed only the 2003 application: "The present application is a continuation of allowed U.S. Patent Application Serial No. 10/720, 728 . . . filed on November 24, 2003, the disclosure of which is hereby incorporated by reference in its entirety." Joint Appendix ("J.A.") 3484. During prosecution, two documents (a filing receipt and a bibliographic information sheet from the PTO) initially reflected a priority claim not only to the '838 Patent, but also to the '745 Patent and the '917 Provisional. Prior to issuance, however, the PTO mailed a corrected filing receipt for the application that became the '115 Patent, dated July 19, 2012, which listed the priority claim solely to the '838 Patent. That document clarified the claimed priority date as follows: "This application is a CON of 10/720, 728 11/24/2003 PAT 7502838." J.A. 3298. Although the applicant filed a subsequent amendment to correct a typographical error in the claims, it did not amend the priority claim. The '115 Patent issued on March 19, 2013.

         B. Procedural History

         In May 2011, while the application for the '115 Patent was pending, Droplets filed suit against E*TRADE in the United States District Court for the Southern District of New York, alleging infringement of the '838 and '745 patents. After the '115 Patent issued in 2013, Droplets amended its complaint to add that patent to the suit.

         In December 2014, E*TRADE filed a petition for IPR challenging claims 1-25 of the '115 Patent. E*TRADE asserted that the '115 Patent claims priority only to the '838 Patent and thus is entitled to a priority date of November 24, 2003. Based on that priority date, E*TRADE relied on the related Franco PCT-published in March 2001-as prior art, and the Board instituted review. In its patent owner response, Droplets argued that the '115 Patent is entitled to the filing date of the '917 Provisional (September 1999) because the '115 Pa- tent's priority claim incorporates the '838 Patent by reference. According to Droplets, because the '838 Patent claims priority from ...


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