Final Written Decision finding Four-Month Period of Inactivity Sufficient to Defeat Patent Owner’s Claim of Diligence IPR2014-01209


Takeaway: Arguments that disregard relevant parts of a prior art reference without sufficient explanation as to why a person of ordinary skill would do so may be found to be impermissible hindsight reasoning.

In its Final Written Decision, the Board found that Petitioner had shown by a preponderance of the evidence that claims 1, 2, 4, 5, 10, 11, and 13 of the ’147 patent are unpatentable. The ’147 patent “relates to a storage router and storage network where devices (e.g., workstations) connected to a Fibre Channel (“FC”) transport medium are provided access to storage devices connected to a second FC transport medium.”

Petitioner had challenged claims 1-13, but trial was instituted as to four alleged grounds of obviousness of claims 1, 2, 4, 5, 10, 11, and 13. Turning to claim construction, the Board had found in its Institution Decision that no terms required construction, and the Board maintained its position that construction was not necessary. The Board then addressed the grounds of unpatentability.

Regarding alleged obviousness of claims 1-4 and 6-13 based on Kikuchi and Bergsten, Patent Owner argued that Kikuchi, which was filed on August 18, 1997, does not qualify as prior art. The challenged ’147 patent claims priority to an application filed December 31, 1997, and Patent Owner argued an earlier conception as early as March 1997. In support of its alleged conception date, Patent Owner relied on “an abstract and drawing sent from the inventor to outside counsel on May 28, 1997, and a draft patent application returned by outside counsel on July 11, 1997, as evidence.” Patent Owner further argued that during the critical period, all of Patent Owner’s employees “were working to create a viable Verrazano product,” which was the precursor to the claimed invention and needed to be completed before commencing work on the invention.

The Board did not agree with “Patent Owner’s assertions that developing the Verrazano product was a necessary precursor to developing access controls.” Rather, Petitioner’s evidence indicated that “Patent Owner could have tested access controls” during the critical period but chose not to do so. “Petitioner’s evidence, in total, indicates Patent Owner made a business decision to develop and launch the Verrazano product, without access controls, because development of access controls would have lengthened the time to market for the Verrazano product.” Therefore, the Board found that “Patent Owner cannot rely on Thompson v. Dunn to excuse its inactivity in developing access controls.” Thus, the four-month gap of activity was found to be sufficient to defeat Patent Owner’s claim of diligence. Furthermore, the Board found unpersuasive Patent Owner’s arguments that minor changes made to the patent application over a period of time “do not represent reasonably continuous activity.” Thus, the Board concluded Kikuchi is prior art.

Regarding the substance of the parties’ arguments, the Board was persuaded by Petitioner that the combination of Kikuchi and Bergsten “was within the skill level of an ordinarily skilled artisan, and would not change the principles of operation of the respective references.” The Board was also persuaded by Petitioner’s arguments that one of ordinary skill in the art would have been motivated to combine the references in the manner proposed. Thus, the Board found that Petitioner demonstrated unpatentability by a preponderance of the evidence.

Regarding alleged obviousness of claim 5 over Kikuchi, Bergsten, and Smith, the Board was persuaded that Petitioner demonstrated unpatentability by a preponderance of the evidence.

As to the alleged obviousness of claims 1-4 and 6-13 based on Bergsten and Hirai, the Board found Patent Owner’s arguments persuasive. In particular, the Board was persuaded that Petitioner and its declarant “fail to account for the prior art as a whole and improperly pick and choose from the references in their reasoning to support their contention that the proposed combination of Bergsten and Hirai renders the claims obvious.” According to the Board, “[t]his type of reasoning—where relevant parts of the reference are disregarded for the proposed combination without sufficient explanation of why a person of ordinary skill would do so—is precisely the type of hindsight reasoning that must be rejected.” Thus, the Board found that Petitioner did not show by a preponderance of the evidence the unpatentability of claims 1, 2, 4, 10, 11, and 13 as obvious over Bergsten and Hirai.

As to the final ground of obviousness of claim 5 over Bergsten, Hirai, and Smith, the Board found that Petitioner had failed to show unpatentability by a preponderance of the evidence for the same reasons as with respect to the combination of Bergsten and Hirai. The Board then addressed Patent Owner’s alleged objective indicia of nonobviousnes related to long-felt need, commercial success, and licensing, finding Patent Owner’s arguments unpersuasive.

Regarding long-felt need, a patent owner must establish “that an art-recognized problem existed in the art for a long period of time without solution.” In this regard, the Board found that Patent Owner had relied upon “selected quotes from an article by an expert used by Petitioner in a co-pending lawsuit and citations to testimony by the same expert to the effect that before Crossroads’ invention, there was no such thing as a storage router and that the term storage router did not exist.” (quotations omitted). The Board also found that the cited testimony had addressed whether “storage router” was used in the art, but had not addressed “what the needs or problems of the art were at that time.” As to the cited article, the Board found that it suggested a problem may have existed, but did not establish a long-felt need for the claimed invention.

As to commercial success, Patent Owner cited evidence regarding the number of products sold, revenue, and relative sales of various products. The Board found that Patent Owner did not establish a nexus between its commercial product and features of the claimed invention, in light of the many technological features in Patent Owner’s technology. The Board also found that Patent Owner did not prove commercial success, stating that sales volume without market share information is “only weak evidence.”

Regarding licensing, Patent Owner argued that the amount of its licensees and how much they were will to pay was evidence of nonobviousness. However, the Board found there to be a lack of “information about the circumstances surrounding these licenses to be able to assess whether they truly weigh in favor of nonobviousness.” For instance, no evidence or testimony was provided as to why the licensees either took a license or how many entities refused a license. Also, Patent Owner admitted that the licenses are directed to a family of patents, and the Board was “unable to determine whether the claimed subject matter of the ’147 patent was the motivator for taking the license.”

The Board then dismissed as moot Petitioner’s Motion to Exclude because even considering the evidence subject to the motion, the Board still agreed with Petitioner’s arguments. The Board also dismissed-in-part and denied-in-part Patent Owner’s Motion to Exclude. Some objections were denied as going to the weight that should be given the evidence, while other objections were found to be moot as directed to evidence not relied upon or evidence related to issues where the Board found for Patent Owner.

Finally, the Board granted Patent Owner’s unopposed Motion to seal.

Oracle Corp. v. Crossroads Systems, Inc., IPR2014-01209
Paper 77: Final Written Decision
Dated: January 29, 2016
Patent: 7,051,147 B2
Before: Neil T. Powell, Kristina M. Kalan, J. John Lee, and Kevin W. Cherry
Written by: Kalan
Related Proceedings: Crossroads Systems, Inc. v. Oracle Corp., Case No. 1-13-cv-00895-SS (W.D. Tex.); Crossroads Systems, Inc. v. NetApp, Inc., Case No. 1-14-cv-00149-SS (W.D. Tex.); IPR2014-01207; and IPR2014-01544