The United States Court of Appeals for the Federal Circuit has overturned a decision by the Patent Trial and Appeal Board (PTAB) in a patent dispute between Centripetal Networks, LLC (Centripetal) and Palo Alto Networks, Inc. (Palo Alto Networks), Cisco Systems, Inc., and Keysight Technologies, Inc. The court found that the PTAB failed to adequately consider evidence of copying when determining whether certain claims in Centripetal’s patent were obvious. The court also addressed, but ultimately dismissed, Centripetal’s argument regarding the belated recusal of an administrative patent judge (APJ).
The Patent at Issue
The case revolves around U.S. Patent No. 9,917,856, owned by Centripetal. This patent is titled “Rule-Based Network-Threat Detection for Encrypted Communications” and covers methods and systems for identifying network threats within encrypted communications. Palo Alto Networks, along with Cisco and Keysight, challenged the patent, arguing that its claims were obvious and therefore not patentable.
The PTAB’s Decision and the Appeal
The PTAB sided with Palo Alto Networks, declaring claims 1, 24, and 25 of the ‘856 patent unpatentable. Centripetal appealed this decision to the Federal Circuit. The core of Centripetal’s argument was that the PTAB’s decision should be overturned for two main reasons:
* The belated recusal of an APJ, who had a financial interest in Cisco, one of the parties.
* The PTAB’s failure to properly consider evidence suggesting that Cisco had copied Centripetal’s technology.
The Recusal Issue: A Matter of Timing and Rules
The Federal Circuit addressed the recusal issue first. Centripetal argued that the PTAB’s decision was tainted because APJ McNamara, who was part of the panel that initially reviewed the case, owned stock in Cisco. Centripetal contended that this ownership created a conflict of interest, especially since Cisco was later joined as a party in the case.
The court, however, found that Centripetal’s recusal challenge was untimely. The court noted that Centripetal was aware of APJ McNamara’s stock ownership for several months before filing its motion for recusal. The court emphasized that Centripetal waited to see the outcome of its other pending motions before raising the recusal issue. According to the court, this delay was unreasonable, especially since the PTAB operates under a compressed timeline.
Furthermore, the court concluded that even if the recusal motion had been timely, it would not have changed the outcome. The court cited existing regulations that set a de minimis threshold for financial interests that are considered too small to affect the integrity of an employee’s services. APJ McNamara’s stock holdings fell below this threshold. The court also clarified that the ethics rules for Article III judges (federal judges) do not automatically apply to APJs.
The court also dismissed Centripetal’s due process arguments, stating that the PTAB’s criticism of Centripetal’s arguments was a reflection of the court’s independent judgment. The court also found no evidence to suggest that the public’s confidence in the judicial process had been undermined.
The Copying Evidence: A Critical Oversight
The more significant aspect of the Federal Circuit’s decision concerned the PTAB’s handling of evidence of copying. Centripetal presented evidence suggesting that Cisco had copied its technology. This evidence included:
* Testimony about meetings between Centripetal executives and Cisco representatives, where the ‘856 patent was discussed.
* Internal Cisco communications indicating an intent to study Centripetal’s patents.
* Expert testimony asserting that Cisco had plausibly copied Centripetal’s technology.
The Federal Circuit found that the PTAB had failed to properly consider this evidence. The PTAB acknowledged that it was aware of the evidence, but it stated that it was not in a position to evaluate the entire litigation record. The Federal Circuit disagreed, stating that the PTAB had an obligation to consider the specific evidence of copying that was presented to it. The court stated that all evidence must be properly considered when determining whether a patent is obvious.
The Ruling: Vacatur and Remand
Based on the PTAB’s failure to properly consider the evidence of copying, the Federal Circuit vacated the PTAB’s final written decision. The case was remanded back to the PTAB for further proceedings. The court directed the PTAB to conduct a proper analysis of the evidence of copying in the first instance.
In addition, the Federal Circuit noted that the appellees (Palo Alto Networks, Cisco, and Keysight) had stated at oral argument that they would not object to a new panel of APJs hearing the case on remand. The court instructed the Director of the USPTO to consider assigning the case to a new panel of APJs.
The court’s decision underscores the importance of a thorough and complete review of all relevant evidence by the PTAB when deciding patentability. It also highlights the significance of raising potential conflicts of interest promptly and within the context of the rules.