  United States Court of Appeals
      for the Federal Circuit
                ______________________

IN RE: AT&T INTELLECTUAL PROPERTY II, L.P.,
                    Appellant
             ______________________

                      2016-1830
                ______________________

    Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. 95/002,353.
                  ______________________

                Decided: May 10, 2017
                ______________________

    CONSTANTINE L. TRELA, JR., Sidley Austin LLP, Chi-
cago, IL, argued for appellant. Also represented by
CHRISTOPHER A. EISWERTH, JOSHUA JOHN FOUGERE,
Washington, DC.

    MICHAEL SUMNER FORMAN, Office of the Solicitor,
United States Patent and Trademark Office, Alexandria,
VA, argued for intervenor Michelle K. Lee. Also repre-
sented by NATHAN K. KELLEY, BENJAMIN T. HICKMAN,
SCOTT WEIDENFELLER.
                ______________________

      Before DYK, MAYER, and REYNA, Circuit Judges.
REYNA, Circuit Judge.
   AT&T appeals a final decision of the Patent Trial and
Appeal Board in an inter partes reexamination. AT&T
argues that the Board improperly instituted the reexami-
2                      IN RE: AT&T INTELLECTUAL PROPERTY II




nation proceedings and erred in finding that the chal-
lenged claims are invalid as anticipated. The Board did
not exceed its statutory authority when instituting the
reexamination and substantial evidence supports the
Board’s finding of anticipation. We therefore affirm.
                       BACKGROUND
                 A. Patented Technology
    This case concerns methods of compressing and
transmitting digital video data. To increase the efficiency
of digital video transmission, video images are subdivided
into blocks, where each block consists of a discrete num-
ber of pixels. To compress and transmit the image, a
process called transform coding is used to analyze and
transform each block’s pixel data into a set of numerical
representations, called transform coefficients.       After
transmittal of the transform coefficient data, the image is
reconstructed by converting each block of transform
coefficients back into a block of pixels.
    Different methods of transform coding vary in effi-
ciency, and some result in higher image quality than
others. Prior art methods of transform coding taught a
method of scanning the transform coefficients called “run-
length encoding,” where the coefficients in each block are
scanned in a zigzag pattern from top left to bottom right.
This method had certain advantages, but the zig-zagging
scan pattern could make it difficult to put the coefficients
back in their correct order and reconstruct the pixel block.
                         1. Krause
    To address the inefficiencies of run-length encoding,
the Krause patent, U.S. Patent No. 5,295,203 (“Krause”),
discloses “vector coding,” which eliminates the need for
scanning the transform coefficients in any particular
order or pattern. Vector coding involves assigning a code
word to a subset of coefficients that are selected for
transmission within a block of transform coefficients, or
IN RE: AT&T INTELLECTUAL PROPERTY II                          3



within portions of the block referred to as regions. In a
preferred embodiment, Krause teaches dividing the block
of coefficients into regions and applying vector coding to
each region. As the written description explains, this is
intended to avoid complexities that arise when coding an
entire block of coefficients at once. Id. col. 7 ll. 25−35, col.
7 ll. 58−68.
Krause’s independent claim 1 describes vector coding, and
dependent claim 2 describes the preferred embodiment of
vector coding regions of coefficients:
    1. A method for coding video transform coeffi-
    cients for communication comprising the steps of:
        providing a block of transform coefficients;
        generating a vector to identify locations of
        a group of coefficients from said block that
        qualify for transmission according to pre-
        determined criteria;
        encoding said vector to provide a vector
        code word for transmission; and
        encoding the coefficients from said group
        to provide coefficient code words for
        transmission;
        wherein said vector code word correlates
        the coefficient code words to coefficient lo-
        cations in said block.
    2. A coding method in accordance with claim 1
    comprising the further step of:
        dividing said block into a plurality of re-
        gions containing subsets of coefficients,
        said vector identifying a group of coeffi-
        cients that qualify for transmission in a
        first one of said regions; and
4                        IN RE: AT&T INTELLECTUAL PROPERTY II




        generating additional vectors for encoding
        to identify locations of groups of coeffi-
        cients that qualify for transmission in oth-
        er regions of said block.
Id. col. 11 ll. 36−58.
                    2. AT&T’s ’071 Patent
    Like Krause, AT&T Intellectual Property II, L.P.’s
U.S. Patent No. 7,454,071 (“’071 patent”) is directed to a
method of compressing and transmitting transform coeffi-
cients in a manner that does not rely on scanning the
coefficients in any particular order. It relies on a one-shot
approach, where all of the coefficients in a block are
transmitted at once. See ’071 patent col. 4 ll. 43−48. It
does not teach Krause’s preferred embodiment of subdi-
viding the pixel blocks into regions.
    Representative claim 1 of the ’071 patent follows, with
bracketed language added that reflects amendments
made during the inter partes reexamination proceedings
discussed below:
    1. A method for identifying non-zero coefficients in
    a [square] block of image data, the method com-
    prising:
        mapping a [square] block of transform co-
        efficients into a one-dimensional list of
        transform coefficients in a fixed order;
        generating a single entity that identifies
        which transform coefficients in the one-
        dimensional list are non-zero; and
        coding the single entity.
Id. col. 6 ll. 15−21.
IN RE: AT&T INTELLECTUAL PROPERTY II                       5



                   B. Prior Proceedings
        1. Institution of inter partes reexamination
    On Friday, September 14, 2012, two days before the
inter partes review procedures went into effect, 1 LG
Electronics, Inc. filed a request for inter partes reexami-
nation of the ’071 patent. LG’s request alleged that
several claims of the ’071 patent were anticipated by an
article it asserted as prior art, Yang. 2
     In November 2012—before the PTO decided whether
to initiate reexamination—LG sought to have its request
for reexamination denied. Critically, LG did not with-
draw from the reexamination proceedings, nor did it
withdraw its request for reexamination. Instead, LG filed
a petition asking the PTO to suspend its standard rule
prohibiting a requester from filing any documents be-
tween the time of requesting inter partes reexamination
and the PTO’s initial office action on the merits. 37
C.F.R. § 1.939. LG sought the suspension so that it could
file a second request asking the PTO to deny LG’s initial
request for initiation of inter partes reexamination. To
justify suspending the PTO’s rules, LG stated that it “does
not believe that there is a reasonable likelihood of prevail-
ing with respect to any of the claims challenged in the
Request.” J.A. 172−75.



    1    In September 2011, Congress enacted the America
Invents Act, which amended and altered the procedures
for inter partes reexamination and created the procedures
for inter partes review, effective September, 16, 2012. See
Pub. L. No. 112−29, § 6, 125 Stat. 284, 299−305 (2011).
     2   Wenye Yang & Jerry D. Gibson, “Coefficient Rate
and Significance Maps in Transform Coding,” Conference
Record of the Thirty-First Asilomar Conference on Sig-
nals, Systems & Computers, Vol. 2, pp. 1373−77 (Novem-
ber 2−5, 1997).
6                       IN RE: AT&T INTELLECTUAL PROPERTY II




    Two weeks later, the PTO issued an Office Action
granting LG’s initial request for inter partes reexamina-
tion based on anticipation by Yang. J.A. 200. AT&T filed
a response seeking reconsideration of the Office Action.
LG filed a comment in support of AT&T’s response, urging
the PTO to withdraw its stated grounds for rejection
because they were “based on a factual interpretation of
Yang that [was] not consistent with Yang’s disclosure.”
J.A. 1429−33.
     The PTO denied LG’s petition to suspend the rules.
The PTO recognized that the rules can be waived in
extraordinary situations, but found that this did not
present an extraordinary situation. Further, the PTO
noted that LG’s concerns did not warrant any additional
filing, because the examiner is already required to “make
a thorough study of the patent and a thorough investiga-
tion of the available prior art relating to the subject
matter of the claimed invention upon taking it up in a
reexamination proceeding.” J.A. 1441−42 & n.4.
    2. Finding of anticipation by Krause, LG’s withdrawal,
           and AT&T’s interview with the examiner
    The examiner responded to the reexamination sub-
missions in March 2013, agreeing that AT&T and LG’s
arguments were sufficient to overcome Yang, but finding
new grounds of rejection based on Krause. J.A. 1447.
The examiner’s initial reasoning was that Krause’s disclo-
sure of scanning a region of coefficients can be extrapolat-
ed to cover an entire block of coefficients. J.A. 1449−50.
AT&T argued that the regional scanning in Krause does
not correspond to the disclosed method in the ’071 patent
where the entire pixel block is scanned at once. AT&T
argued that the regions described in Krause had to be of
irregular shape, whereas the block referenced in the ’071
patent was a perfect square.
   In August 2013, while the discussions between AT&T
and the examiner were ongoing, LG withdrew from the
IN RE: AT&T INTELLECTUAL PROPERTY II                      7



proceedings. With LG out of the proceedings, AT&T filed
a petition asking the PTO to suspend the usual prohibi-
tion against interviews during inter partes reexamination
proceedings. The PTO granted the petition.
    The interview took place in January 2014 and focused
on the issue of whether the regions described in Krause
correspond with the block described in the ’071 patent.
According to the examiner’s interview summary: “No
agreement in respect to the patentability of the claims
was reached.” J.A. 2033. AT&T’s interview summary
differs in that it concludes there was a general agreement
that AT&T’s proposed amendment changing the term
“block” to “square block” would overcome the anticipation
rejections. J.A. 2037−38.
       3. Post-interview office action, amendment,
                       and rejection
    In February 2014, prior to any amendment, the exam-
iner issued an Action Closing Prosecution that explained
a different basis for finding the ’071 patent anticipated by
Krause. Instead of asserting that the irregular-shaped
regions described in Krause could be extended to correlate
to the square block in AT&T’s claim, the examiner argued
that Krause’s regions are only a preferred embodiment
and that Krause’s written description and claims disclose
coding an entire pixel block. J.A. 2020−21.

    In March 2014, AT&T amended its claims to recite “a
square block of transform coefficients.” J.A. 2047−77
(emphasis added). The examiner entered the amend-
ments, but issued a Right of Appeal Notice maintaining
rejections in view of Krause. J.A. 2088−2102. The exam-
iner’s rejections were based on the same reasoning pro-
vided in the February 2014 pre-amendment Action
Closing Prosecution—i.e., Krause’s division of a block into
regions is only a preferred embodiment, and the written
description discloses coding an entire pixel block. J.A.
2090.
8                     IN RE: AT&T INTELLECTUAL PROPERTY II




                   4. The Board affirms
    AT&T appealed, and the Board affirmed the examin-
er’s finding of anticipation by Krause. The Board reiter-
ated the examiner’s reasoning that Krause’s division of a
pixel block into regions is only a preferred embodiment.
The Board agreed with the examiner that Krause’s writ-
ten description discloses vector coding of an entire block,
even though Krause also explains that doing so would not
be easy. J.A. 5−7.
                       DISCUSSION
    AT&T appeals, raising three arguments. First, AT&T
argues that it was improper to institute reexamination
after LG requested that its request for reexamination be
denied. Second, AT&T challenges the merits of the
Board’s finding that the ’071 patent is anticipated by
Krause. Third, AT&T asserts that the examiner improp-
erly shifted its basis for finding anticipation by Krause.
The PTO intervenes, arguing that this court lacks juris-
diction to entertain AT&T’s challenge to the institution
decision and defending the Board’s finding of anticipation.
               A. The Decision to Institute
    Our authority to review the Board’s decision to insti-
tute inter partes reexamination is limited by 35 U.S.C.
§ 312(c) (effective Sept. 16, 2011). That statute provides
that “[a] determination by the Director under subsection
(a) shall be final and non-appealable.” Id. (emphasis
added). Subsection (a) concerns only whether “the infor-
mation presented in the request shows that there is a
reasonable likelihood that the requester would prevail
with respect to at least 1 of the claims challenged in the
request.” 35 U.S.C. § 312(a) (effective Sept. 16, 2011).
Thus, § 312(c) of the inter partes reexamination statute
only restricts our review of a determination made under
§ 312(a).
IN RE: AT&T INTELLECTUAL PROPERTY II                      9



     In Belkin International, Inc. v. Kappos, 696 F.3d 1379
(Fed. Cir. 2012), this court explained the § 312(c) non-
appealability bar (under slightly different earlier lan-
guage) as follows: “[A]n inter partes reexamination is a
two-step process. First, the Director must make a deter-
mination ‘whether a substantial new question of patenta-
bility affecting any claim of the patent is raised by the
request.’ . . . The statute is clear that that decision is
‘final and non-appealable.’ § 312(c).” Id. at 1382 (empha-
sis added). To the extent AT&T argues that, without a
request or requester, the Board lacks statutory authority
to institute a reexamination, we may review that issue
because it does not pertain to whether “the information
presented in the request shows that there is a reasonable
likelihood that the requester would prevail.” The record
does not support a finding that the Board instituted inter
partes reexamination without the presence of a request
and a requester. LG was the requester, and LG submit-
ted a request. LG was still involved in the proceedings at
the time the institution decision was made. While LG
may have desired that its request to institute be denied, it
was granted. Because a request and a requester were
present, the Board acted within its statutory authority
when it decided to institute reexamination in this case,
and we lack authority to further consider the prudence or
propriety of the Board’s institution decision.
                B. Anticipation by Krause
    We have jurisdiction to review the merits of the
Board’s final decision finding that the ’071 patent is
anticipated by Krause. 28 U.S.C. § 1295(a)(4)(A).
    To anticipate a claim, a prior art reference must dis-
close every limitation of the claimed invention, either
expressly or inherently. Blue Calypso, LLC v. Groupon,
Inc., 815 F.3d 1331, 1341 (Fed. Cir. 2016). Whether a
claim is anticipated by prior art is a question of fact
reviewed for substantial evidence. Id. Substantial evi-
10                     IN RE: AT&T INTELLECTUAL PROPERTY II




dence is more than a mere scintilla; it is evidence that a
“reasonable mind might accept as adequate to support a
conclusion.” Id. at 1337.
     The only dispute before us is whether Krause disclos-
es the element in representative claim 1 of the ’071 patent
that requires: “mapping a square block of transform
coefficients into a one-dimensional list.” ’071 patent col. 6
ll. 17−18. Accordingly, the question before us is whether
substantial evidence supports the Board’s factual deter-
mination that Krause discloses vector coding of an entire
pixel block. We conclude that the Board’s finding of
anticipation is supported by substantial evidence.
    As the examiner and the Board have explained,
Krause’s written description describes vector coding a
subset of transform coefficients without limitation. Its
disclosure of dividing a block of coefficients into regions is
only a preferred embodiment, not a limitation on the
scope of the patent’s disclosure. Anticipation occurs when
a prior art reference discloses each element of the claimed
invention, not only where a particular embodiment within
a reference discloses each element of the claimed inven-
tion. See Blue Calypso, 815 F.3d at 1341. In addition, the
written description’s acknowledgement that vector coding
an entire block at once is difficult does not limit the scope
of the reference, but only demonstrates the advantage of
the preferred embodiment. This distinction between
Krause’s disclosure of the general ability to vector code a
subset of transform coefficients and the need to divide a
block of coefficients into regions is further demonstrated
by comparing Krause’s independent claim 1, which claims
vector coding a “group of coefficients,” with dependent
claim 2, which requires the additional limitation of divid-
ing a block into regions. ’203 patent col. 11 ll. 36−58.
Based on that evidence, a reasonable mind could accept
the conclusion that Krause discloses vector coding an
entire block of transform coefficients, and the Board’s
decision is supported by substantial evidence.
IN RE: AT&T INTELLECTUAL PROPERTY II                    11



           C. Changing Basis for Anticipation
    AT&T seems to argue that the reexamination pro-
ceedings were flawed because the examiner changed its
basis for finding anticipation by Krause. The record does
not support AT&T’s objection. The examiner’s initial
reason for finding anticipation by Krause was that the
irregular-shaped regions described in Krause could be
extended to correlate to the square block in AT&T’s claim.
AT&T discussed that argument during its interview with
the examiner and amended its claims to address the
issue. Despite AT&T’s impressions, the examiner’s inter-
view summary plainly states that the parties did not
reach any agreement as to patentability of the ’071 patent
claims. And as early as the examiner’s February 2014
Action Closing Prosecution—before any amendment to the
claims—AT&T received notice of a second basis for find-
ing anticipation, which was that Krause’s regions are only
a preferred embodiment and that Krause’s written de-
scription and claims disclose coding an entire pixel block.
Despite this notice, AT&T did not amend its claims to
respond to the examiner’s second basis for finding antici-
pation. Ultimately, that was the same basis upon which
the examiner found anticipation by Krause and upon
which the Board affirmed. As explained above, the
Board’s finding of anticipation is supported by substantial
evidence. We therefore affirm.
                      AFFIRMED
                          COSTS
   Each party to bear its own costs.
