Netflix, Inc. v. Divx, LLC

• Court: Court of Appeals for the Federal Circuit
• Decided: June 27, 2022
• Docket: 21-1931
• Status: Unpublished

Opinion

Case: 21-1931 Document: 40 Page: 1 Filed: 06/27/2022

NOTE: This disposition is nonprecedential.

United States Court of Appeals for the Federal Circuit ______________________

NETFLIX, INC., HULU, LLC, Appellants

v.

DIVX, LLC, Appellee ______________________

2021-1931 ______________________

Appeal from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No. IPR2020- 00052. ______________________

Decided: June 27, 2022 ______________________

HARPER BATTS, Sheppard Mullin Richter & Hampton LLP, Menlo Park, CA, argued for appellants. Also repre- sented by JEFFREY LIANG, CHRISTOPHER SCOTT PONDER; MATTHEW G. HALGREN, San Diego, CA.

KENNETH J. WEATHERWAX, Lowenstein & Weatherwax LLP, Santa Monica, CA, argued for appellee. Also represented by PARHAM HENDIFAR, NATHAN NOBU LOWENSTEIN. ______________________ Case: 21-1931 Document: 40 Page: 2 Filed: 06/27/2022

Before LOURIE, BRYSON, and HUGHES, Circuit Judges. BRYSON, Circuit Judge. Appellants Netflix, Inc., and Hulu, LLC, (collectively, “petitioners”) petitioned for inter partes review of U.S. Pa- tent No. 8,139,651 (“the ’651 patent”), which is owned by appellee DivX, LLC. The Patent Trial and Appeal Board instituted an inter partes review, and in its Final Written Decision, the Board held that none of the challenged claims were unpatentable based on the grounds asserted in the petition. We affirm in part, vacate in part, and remand. I A The ’651 patent is directed to “methods of deblocking compressed video.” ’651 patent, col. 1, ll. 15–16. In gen- eral, digital videos consist of a series of frames, each of which contains numerous pixels. Id. at col. 1, ll. 17–19. Although digital video files in their native form are typi- cally very large, the file size of a video can be reduced using “compression schemes” that “achieve significant reductions in the amount of digital data required to encode a video se- quence.” Id. at col. 1, ll. 19–24. Some compression schemes, such as that used by the well-known “MPEG-4” encoding standard, divide each frame of a video into separately encoded blocks of pixels. Id. at col. 1, ll. 25–29. When a video frame is reconstructed from the separately encoded blocks, however, “artifacts” that reduce the overall quality of the image can appear at the boundaries between the blocks. Id. at col. 1, ll. 29–34. In their opening brief, petitioners illustrate that phenome- non with a photograph made up of a large number of blocks of pixels, each block consisting of a small square with de- fined edges. See Appellants’ Br. 5. Those edges are the “artifacts” described in the specification of the ’651 patent. The ’651 patent discloses that a deblocking filter can be Case: 21-1931 Document: 40 Page: 3 Filed: 06/27/2022

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applied to “smooth out [the] edges” created by the squares in the photograph. Id. at 5–6. Claim 1 is the only independent claim of the ’651 pa- tent. It recites: 1. A method of deblocking a reconstructed video frame, comprising: identifying a boundary between two blocks of the reconstructed video frame; determining the level of detail of the recon- structed video frame across a region in which the block boundary is located, wherein the region includes pixels from multiple rows and multiple columns of the reconstructed video frame that encompass pixels immediately adjacent to at least two sides of the block boundary and includes at least one pixel that is not immediately ad- jacent to the block boundary; selecting a filter to apply to predetermined pixels on either side of the block boundary based upon the determined level of detail. ’651 patent, claim 1. The dispute in this appeal relates to the second method step, which requires “determining the level of detail of the reconstructed video frame.” Id. The specification discloses the following formula for calculating the level of detail in several of the embodiments of the ’651 patent:

where i is the number of rows in the region and j is the number of columns in the region. Id. at col. 3, ll. 46–57. Case: 21-1931 Document: 40 Page: 4 Filed: 06/27/2022

That calculation is commonly referred to as the “sum of ab- solute differences” or “SAD” calculation. See id. at col. 8, ll. 61–63. As applied to a particular region having a hori- zontal block boundary, the SAD calculation would require determining the absolute difference between each pair of vertically adjacent pixels and summing those differences. 1 Id. at col. 9, ll. 6–10. What results is a measure that ap- proximates the level of variation among pairs of adjacent pixels within the region of interest. The SAD calculation is explicitly recited in dependent claims 2 and 4 of the ’651 patent. Those claims recite: 2. The method of claim 1, wherein the determina- tion of the level of detail of the reconstructed video frame in a region in which the block boundary is located further comprises taking the sum of the ab- solute difference of at least some of the pixels within a set of pixels surrounding the block bound- ary. 4. The method of claim 2, wherein the set of pixels is an 8x8 block that is evenly divided by the hori- zontal block boundary. B The petition for inter partes review of the ’651 patent raised three grounds of invalidity. First, petitioners as- serted that claims 1, 17, and 18 of the ’651 patent were an- ticipated by U.S. Patent No. 6,504,873 (“Vehviläinen”) and were therefore unpatentable under 35 U.S.C. § 102. Sec- ond, petitioners asserted that claims 1 and 17–19 of the ’651 patent would have been obvious in view of Vehviläinen

1 The numerical value that corresponds to each pixel typically represents either the “chrominance” or the “lumi- nance” of the pixel. See ’651 patent, col. 3, line 56; id. at col. 4, line 1. Case: 21-1931 Document: 40 Page: 5 Filed: 06/27/2022

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and were therefore unpatentable under 35 U.S.C. § 103. Third, petitioners asserted that claims 1, 2, 4, and 17–19 of the ’651 patent would have been obvious in view of the com- bination of Vehviläinen and U.S. Patent Pub. No. 2004/0076237 (“Kadono”) and were therefore unpatentable under section 103. Like the ’651 patent, the Vehviläinen reference dis- closes methods for deblocking compressed video files. The specification of Vehviläinen teaches that the choice of filter to be applied at a particular block boundary should be “based on the measurement of both edge variance [i.e., var- iance among a set of pixels closest to the block boundary] and variance inside the block [i.e., variance among a larger region of pixels within the block]. ” Vehviläinen, col. 9, ll. 8–10. Vehviläinen discloses two methods for calculating the variance across a region of pixels. First, Vehviläinen dis- closes a traditional formula for calculating variance:

Id. at col. 10, line 35. In that equation, N refers to the num- ber of pixels in the region, 𝑥𝑥𝑖𝑖 refers to the numerical value of a given pixel in the region, and 𝑥𝑥̅ refers to the mean nu- merical value of all the pixels in the region. Id. at col. 10, ll. 40–43. The variance calculation compares the value of each individual pixel in the region with the average value of all the pixels in the region. Vehviläinen notes that performing the “[n]ormal vari- ance calculation is an exhausting operation,” and therefore as an alternative it discloses the “min-max approximation,” which it asserts is a simpler method for estimating the var- iance. Id. at col. 10, ll. 32, 43–45. The min-max approxi- mation is defined by the following equation: Case: 21-1931 Document: 40 Page: 6 Filed: 06/27/2022

Id. at col. 10, line 47. In that calculation, 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 refers to the highest numerical value of all the pixels in the given re- gion, and 𝑥𝑥𝑚𝑚𝑚𝑚𝑚𝑚 refers to the lowest numerical value of all the pixels in the region. Id. at col. 10, ll. 52–55. That ver- sion of the variance calculation thus compares only the two pixels in the region that have the largest and smallest nu- merical values. Kadono also discloses methods for deblocking com- pressed video files. In one embodiment, Kadono discloses comparing a series of pixels using “the sum of the absolute values of the difference[s]” between the pixels to determine whether to apply a “deblocking operation,” and if so, which deblocking operation to apply. Kadono, ¶¶ 203–07. In addition to disclosing the use of the SAD calculation, Kadono discloses an “omega threshold,” which is a thresh- old that is used to determine whether a stronger filter can be applied once it is determined that a region is smooth. Id. at ¶ 125 (“[I]f the pixel difference is small . . . Ω is there- fore preferably set so that a stronger filter . . . is applied based on whether the pixel difference is extremely low (less than Ω) . . . .”). C In its Institution Decision, the Board construed the claim term “level of detail” to mean “level of variation in visual elements across adjacent pixels”; the Board reaf- firmed that construction in its Final Written Decision. Net- flix Inc. v. DivX, LLC, No. IPR2020-00052, 2021 WL 1582150, at *5 (P.T.A.B. Apr. 22, 2021). In adopting that construction, the Board relied upon a statement in the specification of the ’651 patent indicating that that the term “detail” refers to “visual elements of a video frame Case: 21-1931 Document: 40 Page: 7 Filed: 06/27/2022

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that vary significantly across adjacent pixels.” Id. (quoting ’651 patent, col. 1, ll. 55–57). Applying that construction, the Board found that Ve- hviläinen did not anticipate claim 1 of the ’651 patent be- cause Vehviläinen did not disclose the “determining the level of detail” step of the claim. The Board reasoned that the variance calculation disclosed in Vehviläinen does not determine “the level of variation in visual elements across adjacent pixels.” Id. at *9. In the Board’s view, to conclude that Vehviläinen discloses that limitation would “elimi- nate[] the requirement that detail be calculated across ad- jacent pixels, improperly broadening the limitation to a determination of variation in visual elements across the en- tire claimed region.” Id. The Board also found that there was no motivation to combine Vehviläinen with Kadono. The Board noted that “select[ing] a filter based on the differences between adja- cent pixels [as in Kadono] rather than variance across the region would have been understood by an ordinarily skilled artisan as changing the basic principle of Vehviläinen’s op- eration.” Id. at *14. The Board reached that conclusion by relying upon language in the specification of Vehviläinen stating that “adjacent video pixels as such are not filtered in comparison with each other.” Id. (quoting Vehviläinen, col. 2, ll. 41–45) (emphasis omitted). The Board did not ad- dress petitioners’ separate argument that the omega threshold disclosed in Kadono could be combined with Ve- hviläinen. See J.A. 129–36. II On appeal, petitioners raise three issues: (1) whether the Board properly construed the term “level of detail”; (2) whether substantial evidence supports the Board’s finding that Vehviläinen does not disclose the “determining the level of detail” step of claim 1; and (3) whether the Board erred in finding that a skilled artisan would not have been motivated to combine Vehviläinen with Kadono. Case: 21-1931 Document: 40 Page: 8 Filed: 06/27/2022

We review the Board’s claim construction de novo and the Board’s factual findings regarding anticipation and motivation to combine for substantial evidence. See Accel- eration Bay, LLC v. Activision Blizzard Inc., 908 F.3d 765, 769 (Fed. Cir. 2018). With regard to the claim construction issue, petitioners argue that the Board applied an unduly narrow construc- tion of the claim term “level of detail.” Specifically, peti- tioners allege that in its analysis of Vehviläinen the Board construed “level of detail” to require calculation of the var- iation between adjacent pixels rather than across adjacent pixels. According to petitioners, the Board’s construction had the effect of narrowing the method of determining “level of detail” to include only calculations based on the sum of absolute differences in the values between adjacent pixels. We agree with petitioners that in construing the claim limitation “determining the level of detail . . . across a re- gion in which the block boundary is located” the Board held that the method of claim 1 of the ’651 patent required com- parison of values between pairs of adjacent pixels. The Board’s construction excluded Vehviläinen’s calculation method because that method does not directly compare the value of any particular pixel to the value of an adjacent pixel. An examination of the language of claim 1 and the specification of the ’651 patent leads us to conclude that claim 1 is not limited in that fashion. By its terms, claim 1 is quite broad. The language of the claim is not specific as to the methodology to be used in the level-of-detail calculation, nor does it specify what type of filter should be applied based upon the determined level of detail. See ’651 patent, claim 1. Rather, claim 1 simply provides that the level of detail is calculated “across a re- gion in which the block boundary is located.” Id. Principles of claim differentiation indicate that the term “level of detail,” as used in claim 1, encompasses more Case: 21-1931 Document: 40 Page: 9 Filed: 06/27/2022

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than just the SAD calculation. The SAD calculation is re- cited in dependent claim 2 (and, by extension, in several other claims that depend from claim 2), which is strong ev- idence that claim 1 necessarily encompasses more subject matter than claim 2. See Littelfuse, Inc. v. Mersen USA EP Corp., 29 F.4th 1376, 1380 (Fed. Cir. 2022) (“By definition, an independent claim is broader than a claim that depends from it . . . .”); Intamin Ltd. v. Magnetar Techs., Corp., 483 F.3d 1328, 1335 (Fed. Cir. 2007) (“An independent claim impliedly embraces more subject matter than its narrower dependent claim.”). DivX suggested to the Board that claim differentiation does not apply in this case because there could be other methods for determining the level of variation between pairs of immediately adjacent pixels that do not use the SAD calculation. J.A. 3423. For instance, one might sum the squares of the differences between adjacent pixels or compute the sum of differences without taking the absolute value of those differences (as the SAD calculation requires). See id. Both of those alternative calculation methods would appear to fall within the scope of claim 1 even under the Board’s narrow interpretation of the scope of that claim. For that reason, DivX’s argument demonstrates that claim differentiation does not fully resolve the claim construction issue. Nevertheless, the difference between claims 1 and 2 provides guidance as to the scope of claim 1 because claim 2 prescribes a specific methodology for determining the level of detail across a region of a video frame, while claim 1 does not. The specification provides further insight into the meaning of the term “level of detail” as used in claim 1 of the ’651 patent. It explains that “detail” refers to “visual elements of a video frame that vary significantly across ad- jacent pixels.” Id. at col. 1, ll. 55–57. The specification of- fers that description in contrast to the term “smooth,” Case: 21-1931 Document: 40 Page: 10 Filed: 06/27/2022

which refers to “a region of a video frame where the [pixel values] either do not vary or vary gradually across adjacent pixels.” Id. at col. 1, ll. 53–55. Nothing in the specification indicates that the term “detail” was intended to require that the level-of-detail cal- culation involve a direct comparison between the values of immediately adjacent pixels. In light of the reference in claim 1 to determining the level of detail “across a region,” the use of the phrase “across adjacent pixels” in the speci- fication is best understood to refer to the degree of varia- tion in pixel values across a region of contiguous pixels (i.e., a region in which each pixel is adjacent to at least one other pixel in the region), rather than being limited to a determi- nation of variation based on direct comparisons of value be- tween adjacent pairs of pixels. The specification’s use of the phrase “vary gradually across adjacent pixels” is instructive in this regard, as it suggests that determining whether a region is “smooth” or “detailed” depends on the degree of variation across a re- gion of contiguous pixels. There is no reason that a system that does not rely on direct comparison of individual adja- cent pixels, but instead compares the pixels in the region to some other reference point (e.g., the mean pixel value), would not be at least as capable of determining whether pixel values vary gradually across a region of contiguous pixels as a system that relies on an aggregation of the dif- ferences in value between individual adjacent pixels. In light of the breadth of claim 1 and the discussion of the terms “detail” and “smooth” in the specification, we con- strue the claim term “level of detail” to mean “level of var- iation in visual elements across a region of pixels.” Because the Board’s construction of claim 1 was limited to a method that depended on determining the differences in value be- tween pairs of adjacent pixels, we hold that the Board’s in- terpretation of claim 1 was too narrow. We therefore vacate the Board’s ruling on the validity of claim 1 and Case: 21-1931 Document: 40 Page: 11 Filed: 06/27/2022

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remand this case for the Board to consider whether Ve- hviläinen discloses the “determining the level of detail” step of claim 1 under the proper construction of that step. III Petitioners also challenge the Board’s finding that a skilled artisan would not have been motivated to combine Vehviläinen with the SAD calculation disclosed in Kadono. We hold that the Board’s finding is supported by substan- tial evidence, and we therefore affirm the Board’s decision on that issue. Petitioners raise several objections to the Board’s rul- ing on the motivation-to-combine issue. First, petitioners argue that the Board violated the Administrative Proce- dure Act (“APA”) by relying on an argument not raised in the briefs. Second, they argue that the Board’s finding that applying Kadono’s SAD calculation would change the prin- ciple of operation of Vehviläinen is unsupported by sub- stantial evidence. Third, they argue that the Board erred in excluding its arguments regarding “SIMD instructions.” Fourth, they argue that the Board failed to address the pe- titioners’ argument regarding Kadono’s omega threshold. A In their APA argument, petitioners object to the Board’s statement that using Kadono’s SAD calculation would “chang[e] the basic principle of Vehviläinen’s opera- tion.” Netflix, 2021 WL 1582150, at *14. Petitioners argue that the principle-of-operation line of reasoning was raised for the first time in the Board’s Final Written Decision, and that they were denied an opportunity to respond to it. See Appellants’ Br. 52–54. Petitioners’ argument focuses too narrowly on the Board’s choice of language, and in particular the Board’s use of the phrase “principle of operation.” In its Patent Owner Response, DivX argued that there would be no mo- tivation to combine Kadono with Vehviläinen, in part Case: 21-1931 Document: 40 Page: 12 Filed: 06/27/2022

because “Vehviläinen expressly seeks to avoid even the general type of filtering (low pass filtering) that both the [’651] Patent and Kadono utilize.” J.A. 1779. DivX’s ex- pert, Dr. Chandrajit Bajaj, echoed that argument in his re- port, in which he noted that “Vehviläinen’s filter application decision process matches its filter application process, and also does not analyze adjacent pixels in com- parison with their adjacent pixels.” J.A. 2100, ¶ 62. Those arguments are consistent with the Board’s reasoning; the only difference is that they do not use the phrase “principle of operation.” Accordingly, we reject petitioners’ argument that the Board’s conclusions represent a new argument to which they were denied an opportunity to respond. B Petitioners next argue that the Board’s finding that Kadono would change Vehviläinen’s principle of operation is unsupported by substantial evidence. Petitioners argue that “the only portion of the evidentiary record that even discusses or references the principle of operation for the ‘level of detail’” is the testimony of their expert, Dr. Victor Michael Bove, in which he stated that replacing Ve- hviläinen’s variance calculation with Kadono’s SAD calcu- lation “would not have changed the principle of operation for either reference.” Appellants’ Br. 54–55 (quoting J.A. 1131–32, ¶ 144). The Board, however, found that testi- mony “unpersuasive” due to “the inconsistencies between Dr. Bove’s testimony and the teachings of Vehviläinen.” Netflix, 2021 WL 1582150, at *15. More generally, petitioners’ argument suffers from the same flaw as their APA argument, which is that it focuses too narrowly on the specific phrase “principle of operation.” Dr. Bajaj’s report provides support for the Board’s finding, as he notes that the filter selection approach in Ve- hviläinen (which relies on the variance calculation) is “ex- actly contrary” to the SAD calculation. J.A. 2100–2101, ¶ 62. We therefore hold that the Board’s finding that Case: 21-1931 Document: 40 Page: 13 Filed: 06/27/2022

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Kadono’s SAD calculation would have changed the princi- ple of operation of Vehviläinen is supported by substantial evidence. C Petitioners next argue that the Board improperly deemed their arguments regarding “single instruction mul- tiple data” (“SIMD”) instructions to be forfeited. Petition- ers argued in their petition that “Kadono teaches performance optimizations to accelerate SAD calculations . . . on SIMD . . . processors.” J.A. 128. In petitioners’ view, a skilled artisan therefore “would have been motivated to apply Kadono’s teaching to improve Vehviläinen[] . . . par- ticularly for use on SIMD computer platforms.” Id. Peti- tioners added in their reply brief before the Board that “[t]here are certain SIMD instruction sets that explicitly can calculate [SAD] in parallel on multiple pixels at on[c]e.” J.A. 2670. In its Final Written Decision, the Board held that DivX’s arguments regarding SIMD instruction sets were forfeited because they were raised for the first time in re- ply. Netflix, 2021 WL 1582150, at *15 n.11. The Board did not hold that petitioners’ arguments regarding SIMD pro- cessors in general were forfeited, as those arguments were raised in the petition. See id. at *15. We therefore do not agree with petitioners that the Board improperly excluded their specific arguments regarding SIMD instructions. In any event, the Board held that “[e]ven if not for- feited, we are not persuaded that the use of [SIMD] instruc- tions support a motivation to combine given our determination that use of Kadono’s SAD calculation would change Vehviläinen’s basic principle of operation.” Id. at *15 n.11. As noted above, the Board’s finding regarding Vehviläinen’s principle of operation is supported by sub- stantial evidence. In their briefing on appeal, petitioners have offered no reason to believe that the use of SIMD pro- cessors or instructions is enough to overcome the fact that Case: 21-1931 Document: 40 Page: 14 Filed: 06/27/2022

Kadono’s SAD calculation method would significantly change the operation of Vehviläinen. See Appellants’ Br. 61–62 (offering no argument other than that the Board’s conclusion relies on the principle-of-operation analysis that petitioners allege was erroneous). Accordingly, the Board did not err in its treatment of petitioners’ arguments re- garding SIMD instructions. D Petitioners’ final argument is that the Board failed to consider their alternative argument regarding the omega threshold disclosed in Kadono. In addition to their argu- ments regarding Kadono’s SAD calculation, petitioners ar- gue that Kadono’s omega threshold could be used to provide additional filtering in very smooth regions as part of Vehviläinen’s filter selection process. Petitioners cor- rectly point out that the Board did not address their omega- threshold argument in its Final Written Decision. See Net- flix, 2021 WL 1582150, at *14–16. The Board mentioned Kadono’s omega threshold argument in its Final Written Decision, but only as part of its summary of petitioners’ ar- guments. Id. at *12. Petitioners’ argument regarding Kadono’s omega threshold, however, is different on appeal from the argu- ment they raised before the Board. In their opening brief on appeal, petitioners argue that a skilled artisan could ap- ply “Kadono’s omega threshold, paired with Kadono’s filter, to Vehviläinen Step 80 [of Figure 6] without altering Ve- hviläinen’s other filters or detail calculations.” Appellants’ Br. 65. That argument is different from the argument pe- titioners made before the Board, where they argued that the proposed combination of Kadono and Vehviläinen “does not use Kadono’s filters; it applies Kadono’s selection teach- ings ([omega] threshold and SAD).” J.A. 2672. That dis- tinction is important given the Board’s reliance on the fact that Vehviläinen’s variance calculation is closely tied to its choice of filter. Netflix, 2021 WL 1582150, at *14. The Case: 21-1931 Document: 40 Page: 15 Filed: 06/27/2022

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suggestion that Kadono’s filter might be used in a way that maintains Vehviläinen’s primary principle of operation could change the motivation-to-combine analysis, but that argument was raised for the first time on appeal and is therefore forfeited. Petitioners’ arguments regarding the motivation to combine Kadono with Vehviläinen are unpersuasive. Be- cause the petition challenged claims 2 and 4 only on the ground of obviousness in view of Vehviläinen and Kadono, we uphold the Board’s decision rejecting petitioners’ argu- ment that those two claims are unpatentable. IV In summary, because the Board applied an improperly narrow construction of the term “level of detail” in claim 1 of the ’651 patent, we vacate the Board’s construction of that term along with its findings regarding whether Ve- hviläinen discloses the level-of-detail step of claim 1. Be- cause the Board’s finding that a skilled artisan would not be motivated to combine Vehviläinen with Kadono is sup- ported by substantial evidence, we affirm the Board’s deci- sion as to dependent claims 2 and 4. On remand, should the Board find that Vehviläinen discloses the level-of-detail step of claim 1 under the proper construction, it should address DivX’s remaining argu- ments for finding that claim 1 is not unpatentable. See Ap- pellee’s Br. 65–66. AFFIRMED-IN-PART, VACATED-IN-PART, AND REMANDED COSTS No costs.