       NOTE: This disposition is nonprecedential.


  United States Court of Appeals
      for the Federal Circuit
                ______________________

EMC CORPORATION, EMC INTERNATIONAL U.S.
      HOLDINGS, INC., VMWARE, INC.,
               Appellants

                           v.

                 CLOUDING CORP.,
                       Appellee
                ______________________

                      2016-1999
                ______________________

    Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. IPR2014-
01309.
                 ______________________

                 Decided: May 1, 2017
                ______________________

    ERIC SHUMSKY, Orrick, Herrington & Sutcliffe LLP,
Washington, DC, argued for appellants. Also represented
by BAS DE BLANK, ELIZABETH MOULTON, Menlo Park, CA;
DONALD E. DAYBELL, Irvine, CA; THOMAS A. BROWN, PAUL
T. DACIER, KRISHNENDU GUPTA, EMC Corporation, Hop-
kington, MA.

   TAREK N. FAHMI, Ascenda Law Group, PC, San Jose,
CA, argued for appellee.
2                       EMC CORPORATION   v. CLOUDING CORP.



                 ______________________

    Before PROST, Chief Judge, NEWMAN and DYK, Circuit
                          Judges.
PROST, Chief Judge.
    Appellants EMC Corporation, EMC International
U.S. Holdings, Inc., and VMware, Inc. (collectively,
“EMC”) appeal from a final written decision of the U.S.
Patent and Trademark Office’s Patent Trial and Appeal
Board (“Board”), holding that Petitioner EMC had not
shown that claims 6, 8, and 14 of U.S. Patent No.
5,944,839 (“’839 patent”) are invalid. Because the Board
made two errors that caused it to not address the princi-
pal issue before it, we vacate and remand.
                             I
     Clouding Corp. (“Clouding”) is the assignee of the ’839
patent, which generally relates to “a computer utility that
uses a set of sensors in combination with [a] case base to
diagnose and solve computer system problems.”
’839 patent col. 1 ll. 57–59. The ’839 patent discloses
sensors that gather information about various aspects of
the computer system and store this information in a
knowledge database where an artificial intelligence (“AI”)
engine can access it. Id. at col. 3 ll. 35–38. The
knowledge database also contains cases, questions, and
actions. Id. at col. 3 ll. 46–62. The cases describe poten-
tial computer problems and solutions. Id. at col. 3 ll. 47–
48. The questions are used to evaluate cases in order to
diagnose problems, while the actions describe steps that
can be taken to solve the diagnosed problems. Id. at col. 3
ll. 48–50, 58–63.
    If the sensors gather information that indicates a
problem with the computer system, then the AI engine is
activated. Id. at col. 4 ll. 43–45. The AI engine runs the
problem through the knowledge database, which involves
EMC CORPORATION    v. CLOUDING CORP.                        3



evaluating a series of cases and questions. Id. at col. 4
ll. 46–48. If more data are necessary to evaluate a case or
question, the AI engine directs the appropriate sensor to
gather the required data. Id. at col. 4 ll. 61–63. In some
instances, after all possible data has been gathered, the
AI engine will still not have a solution to the computer
problem. Id. at col. 4 l. 66–col. 5 l. 3. If the AI engine
fails to find a solution in the knowledge database, the
system saves the state of the computer system and
knowledge database to a location where a human comput-
er expert can examine them. Id. at col. 5 ll. 3–6.
     Claim 6 of the ’839 patent, the sole independent claim
at issue, recites:
    A method of optimizing a computer system, the
    method comprising the steps of:
        [1] detecting a problem in the computer sys-
        tem;
        [2] activating an AI engine in response to the
        problem detection;
        [3] utilizing, by the AI engine, selected ones of
        a plurality of sensors to gather information
        about the computer system;
        [4] determining, by the AI engine, a likely so-
        lution to the problem from the gathered in-
        formation; and
        [5] when a likely solution cannot be deter-
        mined, saving a state of the computer system.
Id. at col. 5 l. 58–col. 6 l. 4 (emphasis added).
    EMC petitioned for inter partes review of claims 1, 2,
6, 8, 14, 15, and 17 of the ’839 patent on three grounds.
Relevant here, EMC petitioned the Board to review
whether U.S. Patent No. 5,664,093 (“Barnett”) in view of
U.S. Patent No. 5,581,664 (“Allen”) render claims 6, 8 and
4                       EMC CORPORATION   v. CLOUDING CORP.



14 obvious under 35 U.S.C. § 103. Claims 8 and 14 de-
pend from independent claim 6.
    With respect to step 5 of claim 6, which is the only
claim limitation at issue, EMC argued in its Petition to
the Board that “[t]he combination of Barnett and Allen
’664 teaches this [limitation].” J.A. 115. Specifically,
EMC relied on Barnett for teaching the claimed “AI
engine,” id. (quoting Barnett col. 2 ll. 4–9), and relied on
Allen as teaching the entire “when a likely solution can-
not be determined, saving a state of the computer system”
limitation, J.A. 115–16 (quoting Allen col. 8 ll. 21–36).
Citing to its expert declarant, EMC argued that “[o]ne
skilled in the art would have understood Barnett’s diag-
nostic system, as modified by Allen ’664, would invoke a
rule to save a state of the computer system when a likely
solution to the identified faults cannot be determined, per
the teachings of Allen ’664.” J.A. 116 n.16.
    The Board determined that EMC had demonstrated
that there was a reasonable likelihood that it would
prevail in demonstrating that claims 6, 8, and 14 (“the
instituted claims”) are unpatentable under 35 U.S.C.
§ 103 for obviousness over the combination of Barnett and
Allen and instituted the subject inter partes review on
that ground. EMC Corp. v. Clouding Corp., No. IPR2014-
01309, 2015 WL 496349, at *8 (P.T.A.B. Feb. 4, 2015).
The Board did not institute on EMC’s other asserted
grounds of unpatentability. Id. at *16.
    During the IPR Oral Hearing, the Board sought clari-
fication on how EMC was using the prior art references
for its obviousness arguments. In particular, the Board
explained that “the confusion here is that by the way it
was presented that it looks like you’re taking alternative
positions on each of these limitations, that Barnett has
them, Allen has them, and somehow, a combination
occurs here.” J.A. 334–35 (16:25–17:5). EMC clarified
that it was generally relying on Barnett as the primary
EMC CORPORATION   v. CLOUDING CORP.                        5



reference and on Allen as adding support to that refer-
ence. J.A. 335 (17:17–19). Throughout the proceedings,
EMC made clear that, particularly for the disputed limi-
tation, it was relying on the combination of Allen and
Barnett. See, e.g., J.A. 335 (16:10–15), 341 (23:22–24),
344 (26:1–19), 345 (27:3–24), 350–51 (32:8–33:1), 351–53
(33:18–35:19), 355 (37:12–20).
    EMC also made two narrow concessions during the
proceedings with respect to the disclosure of the prior art
references. First, EMC conceded that although “[Allen’]s
solution, using an AI engine in conjunction with a rules-
based engine, is broadly applicable to multiple types of
problems,” J.A. 331 (13:20–23), “Allen itself does not
describe using the AI engine [for] a problem in the com-
puter system itself,” id. (13:15–17) (emphasis added); see
also J.A. 339 (21:15–19), 344 (26:9–19), 345 (27:16–24).
Second, EMC reiterated a previous statement from its
Petition and Reply to the Board that “Barnett . . . is silent
as to what the computer would do if it can’t identify a
likely solution, if it doesn’t identify a likely solution.”
J.A. 336 (18:6–9); see also J.A. 337 (19:9–19), 340 (22:6–8),
341 (23:8–12). Additionally, both parties confirmed that
the disputed issue before the Board was whether the
combination of Barnett and Allen teaches “saving a state
of the computer system.” See J.A. 350–51 (32:11–33:1)
(EMC); Oral Hearing Tr. 63:18–64:4, EMC Corp. v. Cloud-
ing Corp., No. IPR2014-01309 (Oct. 20, 2015), Paper No.
32 (Tr.) (Clouding); J.A. 368–71 (50:17–53:15) (Clouding).
    The Board ultimately issued its Final Written Deci-
sion concluding that Petitioner EMC had not shown by a
preponderance of the evidence that any of the instituted
claims are unpatentable. EMC Corp. v. Clouding Corp.,
IPR2014-01309, 2016 WL 380499, at *7 (Jan. 29, 2016)
(Final Written Decision).
    The Board correctly identified that step 5 was the sole
claim limitation at issue. In its analysis, the Board only
6                        EMC CORPORATION   v. CLOUDING CORP.



addressed the first half of this step. Read in the context
of the whole claim, the Board understood the first half of
step 5 to have two parts: (1) the condition in which “a
likely solution cannot be determined,” and (2) that the
“likely solution” is “to a problem in the computer system.”
See Final Written Decision at *7. The Board first deter-
mined that EMC had not argued that Allen teaches or
suggests the first half of step 5. Id. at *7. To the extent
that EMC had relied on Allen for this half of step 5, the
Board determined “that reliance was withdrawn at oral
argument.” Id. at *8.
    Next, having removed Allen from its consideration,
the Board turned to Barnett. The Board examined
whether EMC had proven by a preponderance of the
evidence that Barnett teaches or suggests the same half of
step 5. Id. at *9–14. The Board concluded that EMC had
not. Id. at *14. Having determined that EMC had not
relied on Allen to teach the first half of step 5, and that it
had also failed to prove by a preponderance of the evi-
dence that Barnett taught the same limitation, the Board
concluded that EMC had not shown by a preponderance of
the evidence that any of the instituted claims are un-
patentable. Id. at *15. The Board made no findings as to
whether Allen, Barnett, or the combination of the two,
teaches or suggests the second half of step 5: “saving a
state of the computer system.”
    EMC timely appealed the Board’s decision to this
court.   We have jurisdiction pursuant to 28 U.S.C.
§ 1295(a)(4)(A).
                              II
    The Board made two errors in its analysis. First, the
Board incorrectly determined that EMC had not argued
that Allen teaches or suggests the condition “when a
likely solution [to a problem in the computer system]
cannot be determined.” Final Written Decision at *7.
Second, the Board incorrectly found that, to the extent
EMC CORPORATION   v. CLOUDING CORP.                        7



EMC did rely on Allen for teaching this limitation, that
reliance was withdrawn at oral argument. Id. at *8.
                             A
    With respect to the first error, because EMC explicitly
argued in its Petition that Allen, in combination with
Barnett, teaches or suggests “when a likely solution [to a
problem in the computer system] cannot be determined,”
we disagree with the Board that EMC did not provide any
argument that Allen teaches or suggests this limitation.
     EMC addressed the first part of this limitation—the
condition in which “a likely solution cannot be deter-
mined”—in the claim chart in its Petition. J.A. 115–16
(citing Allen col. 8 ll. 21–36). Specifically, EMC cited to
Allen for the following: “[i]n the case-matching step 202 or
in the best-case step 203, the inference engine 111 may
determine that there is no case 105 which is a good match
for the case template 312.” J.A. 115 (citing Allen col. 8 ll.
21–24). Additionally, in discussing the prior art, EMC
stated that Allen discloses “a computerized case-based
reasoning system and inference engine that can be inte-
grated into a rule-based system so new cases (including
states of the computer system) are saved whenever faults
are detected, but a likely solution is not readily apparent.”
Pet. for Inter Partes Review at 8, EMC Corp. v. Clouding
Corp., No. IPR2014-01309 (Aug. 16, 2014), Paper No. 1
(emphasis added); see also id. at 10.
    With respect to the second part of the limitation—
whether the “likely solution” is “to a problem in the com-
puter system”—EMC relied on the combined teachings of
Allen and Barnett and argued in its Petition that “[o]ne
skilled in the art would have understood Barnett’s diag-
nostic system, as modified by Allen ’664, would invoke a
rule to save a state of the computer system when a likely
solution to the identified faults cannot be determined, per
the teachings of Allen ’664.” J.A. 116 n.16 (emphasis
added).
8                        EMC CORPORATION   v. CLOUDING CORP.



     Indeed, Clouding conceded—citing to the same portion
of the Allen specification that EMC cited to in its Peti-
tion—that Allen discloses the condition in which “a likely
solution cannot be determined.” See J.A. 243–44 (“Allen
’664 teaches that when a likely solution to a detected
problem is not apparent, a new case is created using an
existing case template and, optionally, user-prescribed
actions.” (citing Allen col. 8 ll. 22–30)), 158 (“Allen ’664
describes a case-based reasoning system in which an
inference engine may create a new case when no good
match for a situation exists in a case base.” (citing Allen
col. 4 ll. 17–23)); see also J.A. 368 (50:19–23) (“So I think
Allen does explain what to do when it doesn’t find a
[“]best case[”]. And so that correlate[s] with the idea that
there is no perhaps-likely solution available.”). Clouding
also conceded that, “in the event a likely solution to a
problem cannot be found (such as described by Allen
’664),” “the combination of Barnett and Allen ’664 sug-
gests” taking some action (albeit a different action than
EMC puts forward). J.A. 250; see also J.A. 369 (51:1–18).
    The Board concluded that EMC had not provided any
argument regarding Allen’s teachings based on EMC’s
purported silence in response to Clouding’s arguments
that “Barnett does not ‘teach or suggest any outcome
when the system cannot determine a likely solution to a
fault’ and that this is ‘a situation that is not truly con-
templated by Barnett.’” Final Written Decision at *7–8
(quoting Patent Owner’s Resp. at 6–7, EMC Corp. v.
Clouding Corp., No. IPR2014-01309 (May 4, 2015), Paper
No. 22). The Board faulted EMC for not contending in its
Reply that it instead relied on Allen as teaching or sug-
gesting this limitation. Id. at *8 (citing Pet’r’s Reply at 5–
6, EMC Corp. v. Clouding Corp., No. IPR2014-01309
(Aug. 4, 2015), Paper No. 25). But Clouding was not
arguing in isolation that Barnett does not teach or sug-
gest “when a likely solution cannot be determined.”
Rather, Clouding pointed to Barnett’s silence on this
EMC CORPORATION   v. CLOUDING CORP.                        9



limitation in support of its only argument against obvi-
ousness, which is that “the proposed combination of
Barnett and Allen ’664 would not yield a solution that
involves saving the state of a computer system as required
by claim 6.” J.A. 245 (emphasis added). In fact, Clouding
itself conceded, later in the same section of its Response,
that “a person of ordinary skill in the art would, . . . when
contemplating the teachings of Barnett and Allen ’664,
follow the directions of Allen ’664,” J.A. 246, and
“[f]ollowing the teachings of Allen ’664, . . . would adopt
the strategy proposed by Allen ’664 when it comes to
dealing with problems for which no likely solution exists
in its case base.” J.A. 247 (emphasis added). Accordingly,
Clouding’s Response only argued that the strategy Allen
proposes does not entail saving the state of a computer
system, as the second half of step 5 of claim 6 requires. 1
Id.
    Because EMC had already made these arguments in
its Petition and Clouding did not dispute them, we disa-
gree with the Board that EMC was required to explicitly
argue in its Reply to the Board that it was relying on
Allen to teach or suggest “when a likely solution [to a
problem in the computer system] cannot be determined.”
Even so, EMC did provide support in its Reply for its
reliance on Allen, in combination with Barnett, as teach-



    1   Clouding also stated during oral argument before
this court that the only limitation missing from the com-
bination of Barnett and Allen is “saving a state of the
computer system.” Oral Argument 14:47–15:01, available
at       http://oralarguments.cafc.uscourts.gov/mp3/2016-
1999.mp3 (THE COURT: “You admit that you can com-
bine the references. What’s missing when you combine
references as to step 5?” CLOUDING: “There is nothing
that suggests saving the state of a computer system in
that combination.”).
10                      EMC CORPORATION   v. CLOUDING CORP.



ing or suggesting this limitation. For example, in its
related discussion of “saving a state,” EMC argued that
“one of ordinary skill in the art would understand that
when the ‘customer problem’ of Allen ’664 is a faulty
computer system, the attributes of the ‘attribute-value
pair data from the case template’ [i.e. the ‘facts about the
problem’] are gleaned from Barnett’s computer system
and describe the state of the computer system.” J.A. 278.
    In sum, while we appreciate what may have led the
Board to conclude as it did, given EMC’s arguments and
the nature of Clouding’s arguments and concessions, we
conclude that the Board erred in finding that EMC did not
argue that Allen teaches or suggests “when a likely solu-
tion [to a problem in a computer system] cannot be de-
termined.”
                             B
    The Board also erred when it concluded that EMC
withdrew any reliance on Allen for teaching the claimed,
“when a likely solution [to a problem in the computer
system] cannot be determined.”
     The Board cites to a number of instances during the
Oral Hearing where EMC “concede[d] that Allen ’664
‘does not specifically say anything about solving a com-
puter problem in the terms of diagnosing a computer
system or a computer error in the way that Barnett
teaches.’” Final Written Decision *8 (quoting Oral Hear-
ing Tr. 21:15–18); see also id. at *8–9 (citing Oral Hearing
Tr. 26:3–6, 27:9–11, 27:16–20, 38:19–22, 72:21–25). We
agree with the Board that EMC conceded this specific
point; however, EMC’s concession was a narrow one.
EMC merely conceded that Allen is silent as to whether
the “likely solution” in Allen is specifically “to a problem
in the computer system.” From this concession, it does
not follow, however, that EMC withdrew its reliance on
Allen altogether, alone or in combination with Barnett,
for teaching this claim limitation.
EMC CORPORATION   v. CLOUDING CORP.                       11



   For example, as evidence of EMC’s concession, the
Board cited to the following response:
   [EMC]: Sure. Allen itself does not describe using
   the AI engine to detect or respond to a problem in
   the computer system itself. The example Allen
   gives -- the specific example is one of kind of com-
   ing up with insurance rates or insurance quotes.
J.A. 331 (13:15–20); see also Final Written Decision at *8
(citing Oral Hearing Tr. 13:15–17, 13:19–20). The re-
mainder of EMC’s response, however, clarified that EMC
was relying on the combined teachings of Allen and
Barnett. EMC continued its response as follows:
   But [Allen’]s solution, using an AI engine in con-
   junction with a rules-based engine, is broadly ap-
   plicable to multiple types of problems. And what
   Barnett teaches is specifically using a rules-based
   engine to detect and monitor problems in a com-
   puter system. So the combination of Barnett and
   Allen together give you -- using a AI engine in
   conjunction with a rules-based engine to detect
   and monitor and and [sic] repair problems in the
   computer system.
J.A. 331–32 (13:20–14:4). Moreover, other statements by
EMC clarified that the combination of Allen and Barnett
teaches step 5 of claim 6. See, e.g., J.A. 343–344 (25:7–
26:3) (“But the answer is we are relying on the combina-
tion of Barnett and Allen together.”), 345 (27:21–24)
(“Allen is not limited to how its system is being used. But
in combination with Barnett, it would be used to solve a --
it is a method for managing faulty [computer system]”).
    EMC also explained its arguments for a final time at
the close of the proceedings. For example, EMC stated:
“in Figure 3-A and 3-B of the Allen patent where you can
see the problem[,] which in the context of Allen -- I
kn[o]w[,] Judge Lee[,] is not limited [to] a computer
12                        EMC CORPORATION   v. CLOUDING CORP.



problem like the ’839, but when combined with Barnett
would be diagnosing a computer failure.” Oral Hear-
ing Tr. 69:25–70:5. EMC restated its argument with
respect to the full step 5 limitation as follows:
     that is disclosed in Allen where it shows the prob-
     lem, information about the problem is being put
     into the problem template in the attributes value
     pair; and that that problem template, including
     that attribute value pair, is being saved if there’s
     not a best match, there’s not a likely solution that’s
     identified. So the combination of Allen and Bar-
     nett, when you apply Allen to diagnosing and
     treating a faulty computer system, you’ve got a
     computer problem. You’ve got an attribute value
     pair which is the state of the computer system.
     It’s information reflecting that computer problem.
     It’s stored in the problem template, and Allen
     teaches that problem template is solved if there’s
     no best match, if there’s no case that has an action
     to be described to address that, that problem.
Id. at 71:3–19 (emphases added).
    Accordingly, while we agree with the Board that EMC
conceded that Allen is silent as to whether the “likely
solution” is “to a problem in the computer system,” EMC
did not withdraw its reliance on Allen. EMC clearly
relied on Allen for teaching the condition in which “a
likely solution cannot be determined,” and it clearly relied
on Allen in combination with Barnett for teaching that
the “likely solution” is “to a problem in the computer
system.”
                              III
    Clouding admitted that there would have been moti-
vation to combine Barnett and Allen and Clouding’s only
argument to the Board in support of nonobviousness was
that EMC’s proposed combination of Barnett and Allen
EMC CORPORATION   v. CLOUDING CORP.                    13



would not yield a solution that involves “saving the state
of a computer system,” as the second half of claim step 5
requires. Because the Board erred by not considering
Allen, however, it never reached this question. We con-
clude that EMC properly argued, and Clouding did not
dispute, that the combination of Barnett and Allen teach-
es the condition, “when a likely solution [to a problem in
the computer system] cannot be determined.” Thus, since
there is no claim of secondary considerations, the only
question remaining for the Board is whether Barnett and
Allen, considered in combination, would suggest to a
person of ordinary skill in the art “saving a state of the
computer system.” We remand for the Board to answer
this question.
            VACATED AND REMANDED
                          COSTS
   The parties shall bear their own costs.
