CAFC Rules PTAB Must Revisit Netflix and Hulu’s IPR Challenge of Streaming Tech Patent

The U.S. Court of Appeals for the Federal Circuit (CAFC) ruled on March 1 that the Patent Trial and Appeal Board (PTAB) erred in its analysis of inter partes reviews (IPRs) filed by streaming giants Netflix and Hulu. Did. The CAFC dismissed the lawsuit, remanded it, and ordered the PTAB to reconsider her patent dispute filed against DivX.

“Because the Board has made a legal error in the obviousness analysis, and the error cannot be held harmless, we are dismissed and remanded,” the CAFC judge wrote in his ruling. there is

Netflix and Hulu petitioned the PTAB to implement an IPR of DivX’s US Patent No. 10,225,588 in February 2020. The petition argued that the ‘588 patent was unpatentable because of its obviousness.

The PTAB ruled that Netflix and Hulu failed to demonstrate patent obviousness. This was because it did not indicate that the craftsmen would have had a reasonable expectation that they would succeed in combining previously existing techniques to arrive at the same invention as the ‘588 patent.

Ultimately, the CAFC agreed with petitioners that the PTAB “made a fundamental legal error in defining the combinations it was evaluating.” Therefore, the CAFC sent the case back to the PTAB for review.

patent in question

DivX’s patent combines several streaming technologies to perform Adaptive Bitrate Streaming (ABS) while encrypting the streaming media frames.

In a 2020 petition, Netflix and Hulu cited three patents from other inventors, and the streaming company said “the right craftsmen” would “address piracy concerns and improve efficiencies.” He argued that it would have combined the technology with The three patents are referenced throughout the CAFC decision by their inventors’ surnames, Chen, Lindahl, and Hurst.

To demonstrate obviousness, a streaming company must demonstrate both an incentive to combine previous techniques and teachings, and a reasonable expectation of success in doing so. bottom.

In its final decision, the PTAB stated that petitioner “has established sufficiently that a skilled craftsman of ordinary skill would have had some motive for combining the teachings” of the relevant patents. However, the committee found that Netflix and Hulu failed to demonstrate that the artist would achieve reasonable success in the venture because he found two patents in which the scalability of one patent was incompatible with the technology of another patent. I decided.

Netflix vs Hulu debate

Importantly, Netflix and Hulu did not argue with the PTAB that the streaming company lacked substantial evidence to demonstrate a reasonable expectation of success under the PTAB’s interpretation of the various patent combinations. That’s it. Instead, petitioner challenged the Commission’s definition of her one combination of patent systems.

The companies succeeded in convincing the CAFC that the PTAB made a “fundamental legal error in defining the combination under evaluation.”

A CAFC judge wrote: It concludes that the error was prejudicial, so it reverses the Board’s decision and remands it. ”

The court ruled that the PTAB violated two legal principles at the heart of the Netflix and Hulu lawsuits. First, “Complainant’s allegations . . . define the scope of the action, from inception to conclusion.” Everything you do must be considered.

In the original petition, Netflix and Hulu argued that artisans would have combined Lindahl and Hurst’s patents with Chen’s “teachings.” The CAFC found that the PTAB violated the above principle by defining the combination as the Chen and Lindahl “system.”

The CAFC argued that the PTAB must base its ruling on plaintiffs’ original definition, which focused on Chen’s particular disclosure of teachings about “pre-Cheng art.”

“The Redefinition of the Commission broadly replaced the focus of the petition, which focused on specific Chen disclosures about pre-Chen art, with a focus on Chen’s own ingenious “system,” which is fundamentally legal error,” the CAFC judge wrote.

The Circuit Court also found that the PTAB’s misdeeds were not harmless and warranted removal.

long legal battle

The broader legal battle between DivX and streaming giants Netflix and Hulu came in 2019 when DivX filed lawsuits against the two companies, alleging infringement of eight patents, including the ‘588 patent. started.

In June 2022, the CAFC confirmed an IPR decision from the PTAB that found similar arguments from Netflix and Hulu regarding the unpatentability of DivX’s U.S. Patent No. 8,139,651 unconvincing.

However, Netflix and Hulu managed to win IPRs against DivX before the January 2022 PTAB. At that time, the board ruled that portions of the company’s US Patent No. 7,295,673 were clearly unpatentable.

Netflix is ​​also facing legal troubles with DivX in Germany, and an appeals court has dismissed three motions from the streaming company when DivX filed a patent injunction against Netflix. In January 2023, a Dutch court dismissed her injunction from DivX seeking the same judgment DivX received in Germany.

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