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Mr. Schultz.

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May it please the Court.

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My name is Ryan Schultz on behalf of the Patent Owner of Penny Labs of Texas LLC.

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With me today is my colleague, Emily Niles.

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There are several issues raised in our brief.

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There are a few that I want to focus in today.

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The first that I will address is the challenge of constitutionality of the IPR procedure that we've raised in our brief.

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There are just two main points that I would like to raise with the Court this morning.

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On that as the first, as the question I'm sure everyone's mind is, how does MCM not control and should that not be disposed of the issue?

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We would say there are at least two errors in that decision that would allow this panel to revisit the issue.

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Are you asking us to overrule it, MCM?

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Yes, Your Honor.

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I believe that there were two errors.

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Had the MCM court been brief with the proper framing of the issues,

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they would have reached a different conclusion.

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And I think the Federal Circuit case law does support that another panel can overturn another panel decision if it had the relevant precedent been in front of that prior panel.

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And so the issues there are one.

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What's the precedent that wasn't discussed in MCM?

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Thank you, Judge Seig.

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The precedent is that patent rights stem from the Constitution.

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They do not stem from some congressional framework.

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Article I, Section 8, Clause 8,

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provides that to promote the progress of science and useful arts by securing for a limited time to authors and mentors the exclusive right to their respective writings and discoveries.

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That is the right that is at issue here.

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That is a constitutional right.

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It is not one that has been created by Congress.

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Thus, it cannot be a public right.

[00:02:25] Speaker 02:
You're saying it's a property right, not a public right?

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That's correct, Judge Raina.

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It is a private property right that the Supreme Court in Brown back in 1857, I believe, said

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is a private property right.

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And because it is a private property right, it is subject to the separation of powers and can only be adjudicated by an Article III court.

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The other issue that we would address with this one relates to the Seventh Amendment Challenge.

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And there, I believe the MCM court made an error in that the right that was being analyzed was whether there was a right to a jury trial as to an IPR.

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That was an error in the analysis because the right cannot change between the separation of powers analysis and the Seventh Amendment right.

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It is one and the same right.

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And there is no such thing as a right to an IPR.

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There is a patent right.

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And the question is, were patent rights adjudicated to jury trials prior to 1789?

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And the cases that we cite support that that was the case.

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Thus, the Seventh Amendment should apply.

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And then any dispute regarding the patent rights should be adjudicated.

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to a jury trial and not to an administrative body.

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But I would like to move on to the substance in particular to this appeal.

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The fundamental error that was made by the board relates to its use of hindsight to support its finding that there was a reasonable expectation of success for using USB.

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The petitioners below invited the board to use hindsight

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The board adopted that and they have made the same argument here.

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Now the question is, as the petitioner has set forth, says there was a reasonable expectation, he says, to use the USB cable disclosed in board to recharge the batteries.

[00:04:19] Speaker 03:
My problem is that you seem to describe Bork as not dealing with recharging.

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And it's on the face of it.

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It says it's dealing with that.

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I just don't understand how you can argue that it's not concerned with that.

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Thank you, Judge Sykes.

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So that right walks right into the question I was analyzing was, Borg says, OK, use USB to recharge.

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Well, then one of Skill is going to say, OK, how?

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So you admit that it?

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It says recharging, yes.

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On the face, it says recharging.

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But when one of Skill takes that reference and says, OK, I'm now going to implement this method, how am I going to do that?

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And first, if we look at Borg,

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Bork has no description of the method for USB charging.

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All the sites that petitioners said below, that they cite to this court today, just simply say, recharging.

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There's no method of how you go about recharging.

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You connect it with a cable, right?

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Well, but there's more to it than that.

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And so then what Bork actually says is, how you would use this USB, you would look to USB specification 1.1.

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Is it the point where the USB cable can be used to recharge?

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And that's what BORC shows, correct?

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So yes, BORC says this is what you can do.

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But the question then is, well, how are you going to implement that?

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BORC perhaps provides the guidance and says, think about USB.

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But then when you actually look back in 2000, I think it's important to remember that we're talking 16 years ago, how do you use USB to recharge?

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And then BORC doesn't disclose it.

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What BORC says is look to USB specification 1.1.

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Which is found at 1837.

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What's your argument that using the USB cable to recharge it doesn't charge enough?

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Or it discourages memory within the battery, power memory?

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Our argument is that there was no known method for using USB to recharge.

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That you would have, Borg's disclosure would not be sufficient to establish that there was some known method for using USB to recharge.

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Whether there needed to be recharging circuitry,

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if there was even sufficient power for it, whatever it may be, there's not anything there.

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So what is your argument?

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That work's not enabled?

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Correct.

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But it doesn't have to be enabled to be considered for obviousness purposes, right?

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Right.

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But you still have to, when you're going with the analysis of having a reasonable expectation success, you have to have a known method to achieve predictable results.

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So why doesn't it disclose that?

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Because when there's no known method for using USB, it would be the same as simply picking up

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Script for Star Wars and saying well it talks about light speed But now I thus know how to create an engine to make a vehicle travel at light speed That's not the case you have to then Say what would one of skill be able to do with this reference?

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But that's where the important reference the purpose of the Bork reference in the way it worked in this case from my understanding is that it presents the idea that you can use a cable and

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for both for charging and communicating from the device.

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I mean, it's just the idea that you can do that.

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Then when combined that with the other references, then you have obviousness.

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Well, no, I don't believe that BORC is that broad.

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But how it goes about doing that concept is USB.

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And their expert admits it's USB.

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That's on A276.

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The BORCs, again, the USB specification only talks about power.

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So when one says, oh, I see

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Bork saying, use USB to recharge, and they say, well, how do I do that?

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They look to the standard specifications, and the standard specification is silent.

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But the evidence presented by the expert wasn't that the cable wouldn't work.

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It said it would reduce the battery's capacity and cycle time.

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Maybe it was inefficient, or it wasn't a perfect use.

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But it worked.

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I mean, it does recharge.

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Isn't that what?

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I don't believe that that, I don't believe the evidence supports that.

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I think that when you look at the totality of all the evidence, there might be a scintilla of evidence that it may or may not have worked, but there was no known method.

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And that is the fundamental error.

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It has to be a known method for obviousness.

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There wasn't one.

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And in fact, if we look... Well, didn't the board conclude that the evidence showed that there was a known method for recharging?

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But the no method was USB, which the standard documents, again, make no mention of it.

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And I think that if you look at how history plays out, it's critical to why this was simply hindsight.

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If you look, as this court said in the Leo Farmer case, that if there was a one of skill of having this reference.

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What's not hindsight because Bork discloses recharging?

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Bork doesn't disclose the how you go about it.

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And that's where you use hindsight to say, well, we could have fixed it.

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What aspect of it is not shown?

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There's no recharging circuitry.

[00:09:15] Speaker 00:
There's no method of using fast or slow charging, which I'll get to in a minute.

[00:09:20] Speaker 03:
Well, fast or slow charging is not a claim requirement.

[00:09:23] Speaker 00:
No, but it's how you implement this known method.

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There simply is no known method.

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It just says USB.

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Well, then one is always left with the question of, well, what is the known method?

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And again, I would say the evidence substantially supports that there was no known method.

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This was an area of further development and continuation.

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BORC was issued to assign to Texas Instrument.

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Texas Instrument didn't release any product

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shortly thereafter having Borg using USB to recharge.

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I think that's evidence to consider to demonstrate there was no known method.

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And in fact cellular phone companies facing the same motivations that are listed in Borg took several years after our priority date and after work to develop a device that utilized USB for recharging.

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And I think most critically was the standard for using USB changed in 2007 to finally implement

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Recharging.

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That is going to be a known method.

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To implement fast recharging.

[00:10:17] Speaker 00:
Well, just recharging in general.

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There was no disclosure one way or the other in USB standards of using USB to recharge.

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It wasn't until 2007 when the standard changed that then it became a known method.

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And that's why the board used hindsight to arrive at its decision.

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I would like to just move on to several issues here.

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We also think that the

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The decision should be reversed because the board improperly relied on the new evidence and arguments presented by petitioners in the reply brief regarding slow charging.

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Again, even if you were to assume that there was enough disclosure in board that USB should recharge, then the question was, well, how do you do it?

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And the petitioners in the reply for the first time said, you would use slow charging.

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That was how you could actually implement the invention in board in combination with Galinsky.

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That was not only needed to prove the case, that would have been needed for their prima facie case for evidence, to prove invalidity.

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Because they failed to present that in the petition, that evidence should have been stricken.

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And without that, there is no evidence to support the decision that there would have been a reasonable expectation of success that using USB would have worked.

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So for that reason, we think the decision should be reversed.

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Lastly, the issue I want to get to is, at a minimum, the decision needs to be remanded.

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This decision by the board, its final decision, is scant with any analysis.

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And as this court said in Cuts First, Inc.

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versus Mode of Power, Inc.

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2015-1316, the court said, when the board determines that modifications and combinations of art render a claim obvious, the board must fully explain why a person of ordinary skill in the art would find such changes obvious.

[00:12:04] Speaker 00:
This decision here fails woefully on that requirement.

[00:12:08] Speaker 00:
There is a paragraph

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on page, starting on page 12, where the board says, here's what the petitioner set forth, and then proceeds to refute all the arguments that patent owner had raised.

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But there is no analysis fully explaining why a person's skill in the art would have found such obvious combinations, or such changes obvious.

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There was no analysis of here's the prior art, here's the differences of the claim, and thus those differences are minor, thus the obviousness should be found.

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And because of that, at a minimum,

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This case should be remanded for the board to conduct the full analysis required.

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Petitioners rely on the progressive auto case, which petitioners, I'm sure, are well aware of.

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But in that case, the issue was simply the patent owner raised that the board did not fully analyze the motivation to combine.

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But this court said, well, given the significant amount of analysis in total, which exceeded 20 some odd pages per claim,

[00:13:06] Speaker 02:
one can see that the board did the proper now so is this argument that's wrapped up in your argument regarding the motion to strike?

[00:13:16] Speaker 00:
It's separate from that, it's just more that the board... Would you address that before you sit down?

[00:13:21] Speaker 00:
Yeah, so the motion to strike, we believe that the reply brief had significant amounts of new evidence and new arguments that should have been in the petition.

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We had asked the board

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for a motion to strike to demonstrate to the board, here is the new evidence, here's the no arguments, here's why it should be stricken from the record, and the board declined to even entertain the motion.

[00:13:47] Speaker 02:
We thought that that was error because there was... Well, no, they said we'll be able to address the new evidence in our final decision.

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The board said we're capable of separating between evidence that wasn't properly presented to us.

[00:14:03] Speaker 02:
That kind of raises a concern that I have.

[00:14:06] Speaker 02:
During the process of an IPR, there's evolution of argument going on.

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At what time does that close off?

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It seems to me parties have to have an opportunity to address all of the arguments.

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But is there something about the final decision, the final written decision that leads you to believe that the board did not

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undertake its analysis the way it said it would.

[00:14:33] Speaker 00:
Yeah, I think related to slow charging.

[00:14:36] Speaker 00:
The board adopted the petitioner's argument that you could use USB to slow charge.

[00:14:41] Speaker 00:
That was a new argument raised in the reply brief that I think the board not only failed to... But that's your main argument today.

[00:14:49] Speaker 02:
Your main argument is that slow charging is not an issue here.

[00:14:54] Speaker 00:
Well, my argument's not even having to reach that level of slow charging.

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I think even just from the beginning, there was no known method for using USB to recharge, much less that slow charging was even an option.

[00:15:07] Speaker 00:
But had we had the opportunity to address that issue, because it should have been properly presented in the petition and not in the reply brief, then we wouldn't have been able to address that problem.

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But the board made no analysis of this was new evidence.

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We're going to ignore that.

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We're only going to rely on that.

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They made no effort for that.

[00:15:24] Speaker 01:
Why don't we restore a couple of minutes for rebuttal on the other side.

[00:15:43] Speaker 01:
Board's decision has a full explanation, both of the motivation to combine and the reasonable expectation of success, which were the only issue that was contested before the board.

[00:15:58] Speaker 01:
The board set forth in its own findings, in fact, its description of Borg, both the fact that it disclosed USB cable with multiple conductive elements, allowing electronic device to simultaneously communicate with

[00:16:13] Speaker 01:
and recharge the battery of a portable device.

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That's the board's own finding on page A11.

[00:16:20] Speaker 01:
They come back to that on page A18.

[00:16:24] Speaker 01:
Again, this is the board's own finding with respect to Bork's disclosures and says Bork expressly discloses using USB 1.1 port and cable to both recharge and communicate with a portable device such as a cell phone.

[00:16:42] Speaker 03:
The suggestion that... Well, they seem to admit now that it discloses the recharging, but they are arguing that it doesn't disclose sufficiently how to do it so that there would be a reasonable expectation of success.

[00:16:55] Speaker 01:
Well, Your Honor, I think, first of all, it's worth noting that the claim language and indeed the disclosures in 390 patent are far less specific in this regard than the BORC patent is.

[00:17:11] Speaker 01:
And the Bork cites on page A17, for example, the fact that Bork discusses the voltage regulator that would be necessary to utilize the USB to recharge.

[00:17:24] Speaker 01:
There has to be a stepping down of the voltage coming out of the computer to a level that would be usable in the portable electronic device.

[00:17:33] Speaker 01:
And that's discussed at length in column seven of

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Bork, and the board cites that on page A-17.

[00:17:42] Speaker 01:
So, as Your Honor sort of, I think, the colloquy with counsel disclosed, their argument really is that Bork is not enabled.

[00:17:53] Speaker 01:
Now, they never made it in that fashion before the board because, of course, a prior art reference is presumed to be enabled.

[00:18:02] Speaker 01:
It would be

[00:18:03] Speaker 01:
the obligation and burden of the party challenging that to demonstrate that it was not enabled.

[00:18:11] Speaker 01:
They never made the argument in such terms, but clearly they presented some evidence and the petitioners submitted a responsive declaration that focused exactly on why that argument was mistaken.

[00:18:27] Speaker 01:
But the board cites to Bork itself in explaining that

[00:18:33] Speaker 01:
Bork discloses recharging and indeed discloses how recharging would happen in that language on column seven.

[00:18:41] Speaker 03:
What they're saying though is that, and I think the board denied the motion to strike because it came too late, so put aside the motion to strike, but what they're saying is that the board shouldn't have relied on the reply evidence that you submitted concerning slow charging because that was a new issue.

[00:19:02] Speaker 01:
Well, I think there are three responses to that, Your Honor.

[00:19:06] Speaker 01:
First is, and the board says in footnote six, that's on page A16, that really the patent owner is attempting to add additional limitations that are not in claim 16, such as the capacity of the battery or the rate of charging.

[00:19:25] Speaker 01:
Those are not limitations in claim 16.

[00:19:28] Speaker 01:
So in a sense, all of this is beside the point.

[00:19:32] Speaker 01:
So the board says that.

[00:19:33] Speaker 03:
So it's not perhaps beside the point if the first time that the ability to slow charge was disclosed was in the reply.

[00:19:41] Speaker 01:
Well, Your Honor, again, Bork teaches.

[00:19:45] Speaker 01:
This is not a combination of Galensky and the USB specs.

[00:19:50] Speaker 01:
This is a combination of Galensky and Bork.

[00:19:53] Speaker 01:
Bork says you can use the USB and the current that it allows to recharge

[00:20:00] Speaker 01:
the battery of a portable device.

[00:20:04] Speaker 01:
And Bork says you can do it, and indeed you can do it, exactly as Bork discloses.

[00:20:09] Speaker 01:
Bork even goes into some detail about how that happens, such as the circuitry that exists in the cable, that you have the two separate circuits, you have the voltage regulator.

[00:20:20] Speaker 01:
The board cites that disclosure of Bork.

[00:20:25] Speaker 01:
There was a specific argument it made by the patent owner

[00:20:30] Speaker 01:
in opposition that it could not charge.

[00:20:35] Speaker 01:
You would have had no expectation of success because it cannot work.

[00:20:40] Speaker 01:
Now, that assertion was false.

[00:20:43] Speaker 01:
And it was demonstrated to be false by our reply affidavit.

[00:20:48] Speaker 01:
You did not need our reply affidavit to make out the prima facie case.

[00:20:52] Speaker 01:
We had done so with Bork and the disclosures of Bork.

[00:20:57] Speaker 01:
But when they contested that Bork would not work as it claims, and again, it's presumed enabled, we properly submitted rebuttal evidence to prove that that assertion by them and their opposition was false.

[00:21:13] Speaker 01:
And the board, there was some other material that was in the supplemental declaration about the

[00:21:23] Speaker 01:
fact that some of the devices in 2003, and this is previous to the USB 3.0 spec in 2007, actually did provide for recharging with the USB cable.

[00:21:38] Speaker 01:
And that was under USB spec 2.0, which has the same current, the same voltage, the same watts as the USB 1.1, which is what Bork was discussing.

[00:21:49] Speaker 01:
So indeed,

[00:21:51] Speaker 01:
Devices did come on the market in 2003 that recharged precisely as board discloses.

[00:21:57] Speaker 01:
The board did not consider those in its decision.

[00:22:01] Speaker 03:
What did they say about the reply evidence?

[00:22:05] Speaker 03:
Did they rely on the slow charging evidence that you submitted?

[00:22:09] Speaker 01:
Well, I think they do rely on it.

[00:22:12] Speaker 03:
There's a reference at A16.

[00:22:14] Speaker 03:
They say,

[00:22:16] Speaker 03:
The charging method, a slow charging method would be not only acceptable but recommended.

[00:22:23] Speaker 03:
Is this stuff from the reply?

[00:22:25] Speaker 01:
This is stuff from the reply.

[00:22:27] Speaker 01:
The discussion of slow charging is in the reply.

[00:22:30] Speaker 01:
That was not necessary to conclude that we had made out our prima facie case, however.

[00:22:36] Speaker 01:
The prima facie case is established by BORC and its explicit teaching

[00:22:42] Speaker 01:
that you can use the USB 1.1 to recharge.

[00:22:46] Speaker 01:
As indeed, you can.

[00:22:48] Speaker 01:
The argument... So what did you put in the reply?

[00:22:51] Speaker 03:
A declaration from Dr. Zhong?

[00:22:54] Speaker 01:
We relied on Dr. Quackenbush.

[00:22:57] Speaker 01:
Dr. Zhong was the patent owner.

[00:23:01] Speaker 01:
Okay, so you put in a declaration from Dr. Quackenbush.

[00:23:04] Speaker 03:
Right.

[00:23:04] Speaker 03:
They had the opportunity to depose him, right?

[00:23:07] Speaker 01:
Your honor, you're absolutely correct.

[00:23:10] Speaker 01:
They had an opportunity to depose him.

[00:23:11] Speaker 01:
They had an opportunity, had they deposed him, to offer observations.

[00:23:15] Speaker 01:
They did not do that.

[00:23:17] Speaker 03:
And they could have submitted observations on the deposition.

[00:23:20] Speaker 01:
They could have submitted observations.

[00:23:22] Speaker 01:
They did not take advantage of those opportunities that were afforded them.

[00:23:26] Speaker 01:
Instead, they simply sought to strike the entirety of the declaration so that what the board would have been left with was

[00:23:34] Speaker 01:
an inaccurate statement by Dr. Zhang that you cannot charge, which is simply not true.

[00:23:41] Speaker 01:
And that is not due process.

[00:23:46] Speaker 01:
Certainly due process doesn't require that they be entitled to offer unrebutted, inaccurate testimony.

[00:23:53] Speaker 01:
The board limited its consideration of the Quackenbush reply declaration to the proper rebuttal

[00:24:04] Speaker 01:
testimony to specifically respond to and answer the assertions in the Zhong Declaration.

[00:24:13] Speaker 01:
So I think, as I said, there are really three responses.

[00:24:18] Speaker 01:
The first is I don't think this is necessary because this has to do with whether you can fast charge, whether you can charge a battery of a particular capacity.

[00:24:28] Speaker 01:
None of that is a limitation in

[00:24:32] Speaker 01:
the 3-9-0 patent.

[00:24:33] Speaker 01:
So I think for the reasons stated in footnote 6, this is really a sideshow.

[00:24:39] Speaker 01:
Secondly, the board relies on BORC itself and what it does disclose in column 7, which is part of our prima facie case.

[00:24:52] Speaker 01:
And finally, it was proper rebuttal testimony and the procedures of the board

[00:25:00] Speaker 01:
provide the opportunity of the patent owner to cross examine and offer observations, but the patent owner did not take advantage of that opportunity.

[00:25:10] Speaker 01:
So I don't think they can complain to this court that the board deprived them of their rights.

[00:25:18] Speaker 01:
If there are no further questions, you're on.

[00:25:20] Speaker 01:
Thank you.

[00:25:20] Speaker 01:
Thank you.

[00:25:32] Speaker 03:
You had the right to depose Dr. Quackenbush, right?

[00:25:35] Speaker 00:
We did have the right to depose him.

[00:25:37] Speaker 00:
Why didn't you do it?

[00:25:38] Speaker 00:
Because the issues that he had raised were heavily substantive ones, and one that we would not, even through a deposition, would not have been able to properly respond to those arguments and why they were insufficient, because all we would have been left with was simply his responses to questions.

[00:25:53] Speaker 00:
And I'm going to assume that Dr. Quackenbush is not all of a sudden going to flip his own opinion and say that what he said earlier was wrong.

[00:26:01] Speaker 00:
These were substantive technical issues that we needed an opportunity to be able to respond fully to with our own expert.

[00:26:09] Speaker 00:
Simply be able to take a deposition and get him to the mixer.

[00:26:11] Speaker 03:
Your expert had addressed the issues, right?

[00:26:14] Speaker 03:
Dr. Zong had addressed that issue.

[00:26:16] Speaker 00:
We had not specifically addressed why the slow charging, for instance, was still not an option for USB.

[00:26:22] Speaker 00:
We just said USB charging in general for USB would not have been one that we looked at.

[00:26:26] Speaker 00:
They then raised this idea, well, you could possibly slow charge.

[00:26:29] Speaker 00:
We didn't get an opportunity to subsequently respond to that.

[00:26:32] Speaker 00:
In motion for observations, as this court I'm sure is well aware, are simply single paragraphs where you say, this testimony here is relevant to here with no argument.

[00:26:41] Speaker 00:
I mean, you can't even explain to the board why that matters to it.

[00:26:45] Speaker 00:
So it doesn't truly solve or remove some of the unfair prejudice by having this new evidence.

[00:26:51] Speaker 03:
Did you ask to have the opportunity to submit a new affidavit from Dr. Zong?

[00:26:56] Speaker 00:
We did not because the rules don't permit that and I think having to require a party to think of other options or mechanisms that are not contemplated in the rules, I think, places an undue burden on the party.

[00:27:09] Speaker 00:
We had the rules set forth and we played within those and because our only option was the motion to strike.

[00:27:16] Speaker 02:
Well, you filed a motion to exclude and you're arguing timing in that motion, but yet you have the opportunity to

[00:27:25] Speaker 02:
submit evidence to rebut that new evidence, and he didn't take advantage of that.

[00:27:32] Speaker 00:
I'm not sure that we would have... we could have filed a motion to exclude the evidence, but there was no really evidentiary basis to exclude it.

[00:27:38] Speaker 00:
We disagreed substantively with it, which would not have been the proper vehicle for a motion to exclude under an evidentiary ruling.

[00:27:45] Speaker 02:
I'm referring to the opportunity to depose and maybe submit a new declaration in opposition to Dr. Quackenbusch's views.

[00:27:55] Speaker 00:
The rules don't provide you a mechanism to do that.

[00:27:58] Speaker 00:
All we could have done was taken the deposition, filed a motion for observation where I said the rules are pretty clear in the patent office.

[00:28:05] Speaker 03:
Well, you could ask them to waive the rules.

[00:28:08] Speaker 00:
Right, but the rules are what they are.

[00:28:11] Speaker 03:
The point is you have to raise the point before the board to give them an opportunity to grapple with it.

[00:28:17] Speaker 03:
And you didn't do that.

[00:28:21] Speaker 03:
I mean, you made a motion to strike, even though the rules don't provide for a motion to strike.

[00:28:25] Speaker 03:
So why shouldn't you be required to assert the need for a further rebuttal affidavit, if that's going to be the argument you make on appeal?

[00:28:35] Speaker 00:
Well, because the board has been consistently clear since the beginning that there is no such opportunity.

[00:28:42] Speaker 00:
So it seems like a fairly futile effort

[00:28:45] Speaker 03:
to to ask for something that will be futile at the board but if you want to raise the issue here you should raise it in before the board in the first place so that the board has the opportunity to speak to it.

[00:28:57] Speaker 00:
Well, Your Honor, I'm not sure if this necessarily falls into one of those categories when we're talking about things that are just outside the complete context of the rules that are set up for how the procedure is going to be handled.

[00:29:08] Speaker 00:
But I see that my time has run out.

[00:29:11] Speaker 00:
Thank you.

[00:29:12] Speaker 00:
We thank both parties and the cases submitted.