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Microsoft Corporation v. Biscotti, Inc.

United States Court of Appeals, Federal Circuit

December 28, 2017

MICROSOFT CORPORATION, Appellant
v.
BISCOTTI, INC., Appellee

         Appeals from the United States Patent and Trademark Office, Patent Trial and Appeal Board in Nos. IPR2014-01457, IPR2014-01458, IPR2014-01459.

          Constantine L. Trela, Jr., Sidley Austin LLP, Chicago, IL, argued for appellant. Also represented by Richard Alan Cederoth, Douglas Lewis; Joshua John Fougere, Joseph A. Micallef, Washington, DC.

          John C. O'Quinn, Kirkland & Ellis LLP, Washington, DC, argued for appellee. Also represented by William H. Burgess; Adam R. Alper, San Francisco, CA; Michael W. De Vries, Los Angeles, CA; Amanda J. Hollis, Chicago, IL.

          Before Newman, O'Malley, and Reyna, Circuit Judges.

          O'MALLEY, CIRCUIT JUDGE.

         Microsoft Corporation ("Microsoft") appeals from decisions of the Patent Trial and Appeal Board ("Board") in three separate inter partes review ("IPR") proceedings, in which the Board found that Microsoft failed to show by a preponderance of the evidence that the challenged claims of U.S. Patent No. 8, 144, 182 ("'182 patent") were anticipated or obvious. See Microsoft Corp. v. Biscotti Inc., No. IPR2014-01457, 2016 Pat. App. LEXIS 7571 (P.T.A.B. Mar. 17, 2016); Microsoft Corp. v. Biscotti Inc., No. IPR2014-01458, 2016 Pat. App. LEXIS 7572 (P.T.A.B. Mar. 17, 2016); Microsoft Corp. v. Biscotti Inc., No. IPR2014-01459, 2016 Pat. App. LEXIS 7573 (P.T.A.B. Mar. 17, 2016). Because the Board's decisions are supported by substantial evidence and do not rely on an erroneous claim construction, we affirm.

         I. Background

         A. The '182 Patent

         The '182 patent is entitled "Real Time Video Communications System." The '182 patent discloses "tools and techniques for providing video calling solutions" and relates to real-time video conferencing where two or more users communicate, over a network, in a conference that includes video and audio of each participant. '182 patent, Abstract.

         The patent explains that there are various video calling technologies on the market, but it states that "there have been no satisfactory video calling options for consumers." Id. at col. 1 ll. 42-46. The '182 patent notes three different types of video calling systems available at the time of this patent: (1) professional-grade systems that require complex hardware and are expensive and difficult to use; (2) personal computer systems, such as web cams and video chat software like Skype, that have "far from optimal" call quality, require the use of a personal computer, and use confusing and error-prone software and hardware; and (3) dedicated video phones that are expensive, require multiple phones to communicate with others, and fail to provide adequate call quality because they use small screens and operate over a standard "plain old telephone system." Id. at col. 1 l. 46-col. 2 l. 4. The '182 patent claims that it provides a system that "solves these and other deficiencies found in current products." Id. at col. 2 ll. 5-6.

         The patented video communication system includes components such as video communication devices, the internet, video sources, display devices, and set-top boxes. Id. at col. 5 l. 40-col. 6 l. 13. The first video communication device captures a video or audio stream from a video source. Id. at col. 5 ll. 49-56. The second video communication device similarly captures a video or audio stream from a second video source. Id. The first and second video communication devices can output the video or audio stream they receive from their respective video source to the display devices. Id. at col. 5 ll. 56-62.

         Each video communication device also is connected to a set-top box. Id. at col. 5 ll. 62-65. This allows the video communication device to receive an audiovisual stream from the set-top box and transmit it to the display device. Id. at col. 5 l. 65-col. 6 l. 1.

         The video communication devices can send their video or audio streams to one another across the internet. Id. at col. 5 ll. 42-44; id. col. 6 ll. 1-13. For example, the first video communication device can receive a video or audio stream over the internet from the second video communication device. Id. The first video communication device then can display the video or audio stream from the second video communication device using its display device. Id. The second video communication device similarly can receive a video or audio stream over the internet from the first video communication device. Id. The second video communication device then can display the video or audio stream from the first video communication device using its display device. Id. This exchange might happen as part of a video call between the two video communication devices.

         In some embodiments, the video communication devices can simultaneously display the respective audiovisual streams from the respective set-top boxes so that the display device shows the video or audio stream (from either video communication device) and the audiovisual stream from the set-top box at the same time. Id. at col. 6 ll. 14-18. In this type of situation, the video or audio stream might be sent across the internet to another video communication device, but the audiovisual stream from the set-top box would not be sent over the internet to the other video communication device. This functionality would allow a user to participate in a video call while also watching television at the same time. Id. at col. 6 ll. 18- 20.

         Figure 4 of the patent shows that the video communication device includes an input video interface and an input audio interface through which the video communication device can receive video and audio from a set-top box. Id. at col. 10 ll. 19-22, 48-52. The video communication device also includes an output video interface and an output audio interface through which the video communication device can transmit video and audio to a display device. Id. at col. 10 ll. 19-22, 59-67. The video communication device has an audio capture device and a video capture device through which it can receive audio and video; for example, these features might include a microphone and a camera to capture speech and footage of a video call participant. Id. at col. 11 ll. 3-12. The video communication device also includes a network interface that allows a connection to a network, which can be used to communicate with a server or another video communication device. Id. at col. 11 ll. 25-31.

         The video communication device also includes a processor, codecs, and a storage medium. Id. at col. 9 ll. 64- 66, col. 10 ll. 11-18. The processor generally controls the operation of the video communication device. Id. at col. 9 ll. 64-66. The codecs provide the video communication device with encoding and decoding functionality. Id. at col. 10 ll. 11-14. The storage medium is "encoded with instructions executable by the processor, can provide working memory for execution of those instructions, [and] can be used to cache and/or buffer media streams, and/or the like." Id. at col. 10 ll. 14-18.

         The '182 patent has four independent claims, but only two are relevant to these appeals-claims 6 and 69. Independent claim 6 reads:

         A video communication system, comprising:

         a first video communication device, comprising:

[A]a video input interface to receive video input from a set-top box;
[B] an audio input interface to receive audio input from the set-top box;
[C]a video output interface to provide video output to a video display device;
[D] an audio output interface to provide audio output to an audio receiver;
[E] a video capture device to capture video;
[F] an audio capture device to capture audio;
[G] a network interface;
[H] at least one processor; and
[I] a storage medium in communication with the at least one processor, the storage medium having encoded thereon a set of instructions executable by the at least one processor to control operation of the first video communication device, the set of instructions comprising:
[i] instructions for controlling the video capture device to capture a captured video stream;
[ii] instructions for controlling the audio capture device to capture a captured audio stream;
[iii] instructions for encoding the captured video stream and the captured audio stream to produce a series of data packets; and
[iv] instructions for transmitting the series of data packets on the network interface for reception by a second video communication device.

Id. at col. 32 l. 62-col. 33 l. 25. Claim 6 and certain claims depending from claim 6 were at issue in the first two IPRs.

         Independent claim 69 reads:

         A method of providing video calling using a first video communication device comprising an audio capture device, a video capture device, a network interface, an audiovisual input interface, and an audiovisual output interface, the method comprising:

[A] receiving, on the audiovisual input interface, a set-top box audiovisual stream from a set-top box, the set-top box audiovisual stream comprising a set-top box video stream and a set-top box audio stream;
[B] receiving, on the network interface, a remote audiovisual stream via a network connection with a second video communication device, the remote audiovisual stream comprising a remote audio stream and a remote video stream;
[C] transmitting, on the audiovisual output interface, a consolidated output video stream comprising at least a portion of the remote video stream and a consolidated output audio stream comprising at least the remote audio stream;
[D] capturing a captured video stream with the video capture device;
[E] capturing a captured audio stream with the audio capture device;
[F] encoding the captured video stream and the captured audio stream to produce a series of data packets; and
[G]transmitting the series of data packets on the network interface for reception by the second video communication device.

Id. at col. 37 l. 63-col. 38 l. 23. Claim 69 and certain claims depending from claim 69 were at issue in the third IPR.

         B. The Kenoyer Reference

         U.S. Patent No. 7, 907, 164 ("Kenoyer"), entitled "Integrated Videoconferencing System, " was filed on April 17, 2006, and issued on March 15, 2011. Its invention "relates generally to conferencing and, more specifically, to videoconferencing." Kenoyer, col. 1 ll. 22-23. The reference explains that videoconferencing allows "two or more participants at remote locations to communicate using both video and audio." Id. at col. 1 ll. 25-27.

         Kenoyer discloses a "multi-component videoconferencing system" that "may include a camera, microphones, speakers, and a codec possibly used in conjunction with a computer system." Id. at col. 1 ll. 43-47. Kenoyer explains that it is "susceptible to various modifications and alternative forms." Id. at col. 3 ll. 17-18. The system's video and audio conferencing capabilities "may be implemented over various types of networked devices." Id. at col. 4 ll. 15-16. An embodiment of the invention implemented over a network is provided in Figure 1:

         (Image Omitted)

         Id. at Fig. 1. The video conferencing system includes a network (101) with endpoints (103A-103H), gateways (130A and 130B), a service provider (108), a public switched telephone network (120), conference units (105A-105D), and telephones from a "plain old telephone system" (106A and 106B). Id. at col. 3 l. 64-col. 4 l. 4.

         The endpoints (103A-103H) can be audio or videoconferencing systems. Id. at col. 3 ll. 66-67. Kenoyer explains that certain endpoints (103D-103H) may include audio and video communication capabilities to create video conferencing capability. Id. at col. 4 ll. 35-46. These endpoints also can include or be coupled to various audio devices, such as microphones, audio input devices, speakers, and audio output devices. Id. at col. 4 11. 35-39. And these endpoints can include or be coupled to various video devices, such as monitors, projectors, televisions, video output devices, or video input devices. Id. at col. 4 11. 44-46. The endpoints "may comprise various ports for coupling to one or more devices (e.g., audio devices, video devices, etc.) and/or to one or more networks." Id. at col. 4 11. 47-49.

         Figure 3 of Kenoyer shows a participant location with a multi-component video conferencing system:

         (Image Omitted)

         Id. at Fig. 3. Kenoyer explains that a participant can use the multi-component video conferencing system (300) to communicate with other participants in a video conference. Id. at col. 6 11. 1-4. The multi-component video conferencing system (300) includes the following components: a camera (303) with a camera base (363) and lens portion (375); a display (305); a keyboard (307); a codec (309); speakers (311a and 311b) with speaker attachments (371a and 371b); microphones (319); a network connection (351); a computer system (355); a remote control (361); and a remote sensor (365). Id. at col. 6 l. 4- col. 8 l. 49. A participant can use the camera to capture video, the microphone to capture audio while using the display to provide video from a local or remote conference participant, and the speakers to produce audio from remote conference participants. Id. at col. 6 ll. 4-9.

         Figure 5 of Kenoyer shows a side view of an embodiment of a codec:

         (Image Omitted)

         Id. at Fig. 5. Kenoyer explains that the codec can include multiple ports on one or more sides of the codec. Id. at col. 8 ll. 57-60. As shown in Figure 5, the codec can have ports for a camera, a microphone, a speaker, video input, video output, and an IP connector. Id. at col. 8 l. 66-col. 9 l. 17.

         Aside from Figure 5, Kenoyer includes other teachings regarding the codec. It states that "a codec (which may mean short [sic] for 'compressor/decompressor') may comprise any system and/or method for encoding and/or decoding (e.g., compressing and decompressing) data (e.g., audio and/or video data)." Id. at col. 4 l. 67-col. 5 l. 4. In different embodiments, the codec "may be implemented in software, hardware, or a combination of both." Id. at col. 5 ll. 9-10. The codec can be incorporated into other components, such as a camera base or a set-top box. Id. at col. 1 ll. 56-63. The codec also can be separated out to "an independent housing that is coupled to the set-top box, " which allows the codec to "act as a pass-through for the regular programming/games when a conference is not being held" or to "display at least a portion of the programming/games along with video for the videoconference." Id. at col. 10 ll. 25-30.

         Figure 22 of Kenoyer shows a method of video conferencing through the multi-component video conferencing system:

         (Image Omitted)

         Id. at Fig. 22. Kenoyer's description of Figure 22 notes that "in various embodiments of the methods described below, one or more of the elements described may be performed concurrently, in a different order than shown, or may be omitted entirely. Other additional elements may also be performed as desired." Id. at col. 15 ll. 2-7. Kenoyer then writes out the steps shown in Figure 22. Id. at col. 15 ll. 8-20.

         After writing out the steps shown in Figure 22, Kenoyer states, "[e]mbodiments of a subset or all (and portions or all) of the above may be implemented by program instructions stored in a memory medium or carrier medium and executed by a processor." Id. at col. 15 ll. 21-24. Kenoyer begins the next paragraph by stating, "[i]n some embodiments, a computer system at a respective participant location may include a memory medium(s) on which one or more computer programs or software components according to one embodiment of the present invention may be stored." Id. at col. 15 ll. 46-50. The next paragraph states, "[f]urther modifications and alternative embodiments of various aspects of the invention may be apparent to those skilled in the art in view of this description." Id. at col. 15 ll. 55-57. It also states that "[e]lements and materials may be substituted for those illustrated and described herein, parts and processes may be reversed, and certain features of the invention may be utilized independently, all as would be apparent to one skilled in the art after having the benefit of this description of the invention." Id. at col. 15 ll. 62-67.

         C. Procedural History

         In November 2013, Biscotti, Inc. ("Biscotti") sued Microsoft in the U.S. District Court for the Eastern District of Texas alleging that Microsoft infringed the '182 patent. Microsoft filed three separate IPRs in September 2014 challenging certain claims of the '182 patent on anticipation and obviousness grounds. As relevant here, the Board instituted review of claims 6 and 69 on anticipation grounds, and of claims that depend from claims 6 and 69 on anticipation and obviousness grounds. The first two IPRs, IPR2014-01457 ("57 IPR") and IPR2014-01458 ("58 IPR"), focused on independent claim 6 and claims that depend from claim 6. The third IPR, IPR2014-01459 ("59 IPR"), focused on independent claim 69 and claims that depend from claim 69. In each IPR, the Board ultimately found that Microsoft failed to prove by a preponderance of the evidence that Kenoyer anticipated the challenged claims or rendered those claims obvious.

         1. The 57 IPR

         The Board began its analysis in the 57 IPR by discussing Microsoft's assertion that Kenoyer anticipated claim 6 of the '182 patent. 57 IPR, 2016 Pat. App. LEXIS 7571, at *14-19. In support of its argument, Microsoft asserted that the "storage medium" limitation of claim 6 was disclosed by the following language from Kenoyer's specification: "[e]mbodiments of a subset or all (and portions or all) of the above may be implemented by program instructions stored in a memory medium or carrier medium and executed by a processor." Id. at *18-19 (citing Kenoyer, col. 15 ll. 21-24). Microsoft's expert, Dr. Houh, testified that this language "describes using computer programs to implement the codec and other functionality described in that patent." Id. at *19 (citing J.A. 2288 ¶ 100). Regarding the specific "instructions" sub-limitations, Microsoft and its expert argued that the specification, at various places, disclosed the functions described by the instructions. Id.

         Biscotti contended that the language cited by Microsoft referred only to the description of Figure 22, which immediately preceded the language on which Microsoft relied, rather than all of the disclosures made throughout the Kenoyer specification. See id. at *19-20. Biscotti and its expert, Dr. Bovik, argued that the language could not apply to all prior disclosures in the specification because the specification discussed certain components, such as cooling fans and handles to carry equipment, that could not have been implemented in a storage medium. Id. at *21. Biscotti argued that the more natural interpretation of the language was that it applied only to the discussion of Figure 22. Id. at *20. Biscotti asserted that the language's application was further supported by another portion of the description of Figure 22, which referred to the various "embodiments of the methods described below." Id. (quoting Kenoyer, col. 15 ll. 3-4) (emphasis added). This language applied to the textual description of the steps laid out in Figure 22, and Biscotti argued that the similar language relied upon by Microsoft-which stated "[e]mbodiments of a subset or all (and portions or all) of the above, " Kenoyer, col. 15 ll. 21-22 (emphasis added)-naturally applied to the description of Figure 22 as well. 57 IPR, 2016 Pat. App. LEXIS 7571, at *20.

         The Board found that Microsoft failed to prove that Kenoyer's disclosure anticipated the "storage medium" and "instructions" limitations of claim 6 of the '182 patent. Id. at *24-25. The Board noted that Microsoft's argument regarding the "storage medium" and "instructions" limitations relied on an interpretation of the disputed language of column 15 "referring to and tying together a number of disclosures in various portions throughout Kenoyer regarding functions that may be performed in various embodiments." Id. at *24 (citing J.A. 176-79). The Board found that "Kenoyer's program-instructions sentence does not make sense as a disclosure blanketing all of the preceding 34 pages, " and that the sentence "does not refer back specifically to the various other disclosures cited by [Microsoft]." Id. at *26. Instead, the Board found that Biscotti's argument and evidence regarding the meaning of the sentence was "at least as persuasive as [Microsoft's] argument and evidence" such that Microsoft had failed to meet its burden of proof. Id. at *27.

         The Board further noted that it "makes sense that a videoconferencing method would lend itself to implementation with program instructions, " and it "makes sense that the program-instructions sentence would refer specifically to the videoconferencing method disclosed" in the discussion of Figure 22. Id. at *27. The Board therefore "agree[d] with [Biscotti]" that Kenoyer's reference to "embodiments of the methods described below" and "[e]mbodiments of a subset or all (and portions or all) of the above" both refer to the description of Figure 22. Id. at *27-28. The Board accordingly found that Microsoft had not "demonstrated by a preponderance of the evidence that Kenoyer's program-instructions sentence and various other cited portions disclose the claimed 'storage medium' with its four specific 'instructions for, ' or that a person of ordinary skill in the art would 'at once envisage' a storage medium with the specific instructions claimed." Id. at *28-29.

         The Board explained that Kenoyer's alleged disclosures of a storage medium with instructions in accordance with the limitations of claim 6 "are unrelated to each other in [the] disclosure." Id. at *29. The Board compared this to a disclosure that amounted to "multiple, distinct teachings that the artisan might somehow combine to achieve the claimed invention, " which is insufficient to anticipate. Id. at *29-30 (citing Net MoneyIN Inc. v. VeriSign, Inc., 545 F.3d 1359, 1369 (Fed. Cir. 2008) (internal quotation marks omitted)). It also found that Microsoft failed to provide "persuasive evidence that the disclosure would be understood by one of ordinary skill in the art to mean that the storage medium with program instructions and the functions performed in the various embodiments are used together in Kenoyer." Id. at *30. The Board therefore found that Kenoyer did not anticipate claim 6 of the '182 patent. Id.

         Because claims 24-26, 28, 29, 31, 37, and 41 all depended on claim 6, the Board found that Microsoft failed to prove by a preponderance of the evidence that Kenoyer anticipated the claims. Id. at *32-33.

         Turning to the obviousness arguments for claims 36 and 37, the Board found that Microsoft failed to prove obviousness over Kenoyer and other references. Microsoft asserted that Kenoyer discloses the "storage medium" and "instructions" limitations, but the Board concluded that Microsoft failed to prove that Kenoyer taught the limitations, as discussed in the anticipation analysis. Id. at *33-34. Microsoft did not separately address whether Kenoyer rendered the limitations of claim 6 obvious based on the teachings located in different parts of the specification, so Microsoft failed to prove obviousness for claims 36 and 37. Id. at *34.

         One of the judges on the Board dissented from the Board's conclusions. The dissent argued that the majority erred when applying the law regarding § 102 to the teachings of Kenoyer because it failed to "take into account not only specific teachings of the reference but also the inferences which one skilled in the art would reasonably be expected to draw therefrom." Id. at *39 (Cherry, A.P.J., dissenting) (citing In re Preda, 401 F.2d 825, 826 (CCPA 1968)). "Even assuming that Kenoyer did not disclose expressly the use of program instructions, I am persuaded by the evidence presented that a person of ordinary skill would recognize its description as disclosing the use of program instructions (software) to enable the performance of these functions." Id. at *40 (citing J.A. 8422-23 ¶ 57; In re Alappat, 33 F.3d 1526, 1583 (Fed. Cir. 1994) (en banc) (Rader, J., concurring)). The dissent also asserted that the use of "embodiments" throughout Kenoyer's specification suggested that the disputed language was not as limited as Biscotti had argued. Id. at *41-42.

         The majority responded to the dissent by stating that Microsoft did not make the arguments relied upon by the dissent and that, even were they to agree with the dissent's reasoning, Microsoft had not met its burden of proving anticipation. Id. at *31-32.

         2. The 58 IPR

         Because the Board primarily considered claim 6 in the 58 IPR, as it did in the 57 IPR, the final written decision in the 58 IPR is very similar to the decision in the 57 IPR. Based on the same reasoning and underlying findings, the Board found that Kenoyer did not anticipate claim 6 of the '182 patent. 58 IPR, 2016 Pat. App. LEXIS 7572, at *25-33. The Board similarly found that Microsoft failed to prove Kenoyer anticipated the dependent claims. Id. at *33. The same administrative judge dissented from the Board's decision in the 58 IPR, and the dissent, like the majority, is similar to the dissent issued in the 57 IPR.

         In addressing obviousness, the Board again performed a similar analysis to that performed in the final written decision for the 57 IPR. The Board found that Microsoft failed to prove that Kenoyer taught the "storage medium" and "instructions" limitations of claim 6 and failed to provide additional argument as to how Kenoyer might render the limitation obvious when the anticipation challenge failed, so Microsoft failed to meet its burden of providing obviousness for these dependent claims. Id. at *33-35.

         3. The 59 IPR

         The Board began its analysis in the 59 IPR by discussing Microsoft's assertion that Kenoyer anticipated claim 69 of the '182 patent. Microsoft argued that Kenoyer disclosed receiving audio and video from the set-top box using an audiovisual input interface. 59 IPR, 2016 Pat. App. LEXIS 7573, at *17-18. Microsoft provided two statements to demonstrate disclosure: (1) "[t]he codec's audio and video processing may be incorporated in the set-top box and/or may be distributed (e.g., to other devices through a cable coupling the devices to the set-top box)"; and (2) "[t]he codec may also be in an independent housing that is coupled to the set-top box 705. The codec may act as a pass-through for the regular programming/games when a conference is not being held" (the "pass-through clause"). Id. The Board found, however, that Kenoyer does not expressly disclose an interface in either statement. Id. at *18. The Board further found that Microsoft did not explain any basis for finding that a person of ordinary skill in the art ("POSA") would understand the two statements as disclosing an "interface." Id. at *18-19. ...


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