Last week, the U.S. Court of Appeals for the Federal Circuit issued an opinion in Netflix, Inc. v. DivX, LLC, No. 2022-1049 (Apr. 27, 2023), affirming in part, vacating in part, and remanding the Patent Trial and Appeal Board’s determination that Netflix had not established by a preponderance of the evidence that the claims of DivX’s patent were invalid.
DivX sued Netflix, alleging patent infringement. Netflix subsequently petitioned for inter partes review, contending that the asserted patent claims were invalid as obvious over the combination of two earlier patent applications (“Chen” and “Grab”). In its final written decision, the Board determined that Chen did not disclose video frames that were obtained on the receive side of a conditional access system prior to descrambling, as required by the patent claims.
Netflix appealed, arguing that the Board erred by (1) incorrectly construing the patent claims, (2) improperly narrowing the Chen disclosure, and (3) failing to adequately consider the Grab disclosure.
The Federal Circuit rejected Netflix’s first two arguments. As to the first argument, Netflix alleged that the Board should not have viewed the steps presented in the claim as an ordered sequence. The Court declined to reach the merits of this issue, instead noting that arguments must first be presented to the Board before they can be addressed on appeal. Because Netflix did not present its claim construction argument before the Board, it forfeited this argument on appeal. As to the second argument, the Court explained that the determination of what a piece of prior art teaches is a factual question reviewed for substantial evidence. Because the Board’s determination on the Chen teachings was based upon extensive declaration and documentary evidence, the Court affirmed the Board’s determination regarding those teachings.
The Court agreed with Netflix on its third argument, holding that the Board improperly failed to consider the Grab reference. In the Board’s analysis of the disputed claim element, it only considered the Chen teaching. However, Netflix had argued that this element was taught by both Chen and Grab. While DivX argued that Board need not have considered Grab because a skilled artisan would not have been motivated to combine Chen and Grab, the Court disagreed, vacating this portion of the final written decision, and remanding with instructions to consider the Grab disclosure and motivation to combine Grab with Chen.