FANDUEL, INC. v. INTERACTIVE GAMES LLC

Before Dyk, Moore, and Hughes. Appeal from the Patent Trial and Appeal Board.

Summary: The Board does not violate the Administrative Procedure Act (APA) if it institutes trial and then reconsiders the substantive merits of petitioner’s theories even in the absence of challenge by the patent owner.

FanDuel petitioned for inter partes review of a patent owned by Interactive Games, arguing that the claimed gambling system was obvious in view of a webpage and other prior art. The Board instituted IPR. Leading up to the final written decision, the sole dispute focused upon the webpage’s prior art status rather than the substantive merits of obviousness. In the final written decision, however, the Board rejected FanDuel’s argument for obviousness on its substantive merits rather than address the webpage’s prior art status.

On appeal, FanDuel argued that the Board violated the APA when, without notice, the Board revisited the substantive merits of FanDuel’s obviousness theory instead of addressing the sole dispute over prior art status. The Federal Circuit disagreed. The Court first noted that there is nothing inherently inconsistent about instituting trial and then determining that petitioner did not prove its theory by preponderant evidence. The Court then emphasized that a patent owner is not required to rebut (or even respond to) the substantive merits of petitioner’s invalidity theory because such a requirement would be tantamount to impermissibly shifting the burden to the patent owner to defend its claim’s patentability. Thus, the Court reasoned that the Board is not bound by its views at institution and may reconsider even if no additional argument or evidence is made of record after institution. Here, the Court determined that FanDuel’s petition framed the issues for the final written decision, FanDuel had notice of these issues, and patent owner’s choice to not challenge the merits of the obviousness theory in FanDuel’s petition did not limit the issues for the Board to determine. The Federal Circuit then affirmed the Board’s non-obviousness determination, noting that the Board did not have to defer to FanDuel’s unrebutted expert opinion.

Judge Dyk joined the majority in rejecting FanDuel’s argument that the Board violated the APA. However, Judge Dyk dissented from affirming the Board’s non-obviousness determination, asserting error in the Board’s requirement that FanDuel supply a specific motivation to use a claimed look-up table and ordered list when that choice would have been a simple alternative design choice to a skilled artisan.

Editor: Paul Stewart

Written by: Andrew Morrell, Ph.D. & Justin J. Gillett