IP Law Daily, PATENT—Fed. Cir.: PTAB’s obviousness ruling vacated, denial of judge’s recusal upheld in Centripetal—Palo Alto dispute, (Oct 23, 2025)

By Saurabh Kashyap, B.A., M.A., LL.B., LL.M.

PTAB’s invalidity finding vacated for failure to consider copying evidence; refusal to recuse a judge upheld as minor stockholding was too remote to raise a conflict of interest.

The U.S. Court of Appeals for the Federal Circuit vacated a final written decision of the Patent Trial and Appeal Board (PTAB) that had found certain claims of a network threat detection patent owned by Centripetal Networks LLC unpatentable as obvious and remanded the matter for further proceedings. The court held that the PTAB failed to adequately consider evidence of copying presented by Centripetal as an objective indicium of non-obviousness. However, the Federal Circuit rejected Centripetal’s challenge that the Board’s decision was tainted by the belated recusal of an administrative patent judge who owned a small amount of stock in Cisco Systems, Inc., an appellee and later-joined party (Centripetal Networks, LLC v. Palo Alto Networks, Inc., No. 23-2027 (Fed. Cir. Oct. 22, 2025)).

Background. The appellant, Centripetal Networks LLC, is a cybersecurity technology company that develops systems for network threat detection and encrypted traffic analysis. The appellees—Palo Alto Networks, Inc., Cisco Systems, Inc., and Keysight Technologies, Inc.—are major U.S. technology corporations engaged in network security, telecommunications, and testing solutions. The U.S. Patent and Trademark Office (USPTO) intervened in the appeal through its Director.

The disputed U.S. Patent No. 9,917,856 (the ’856 patent), titled “Rule-Based Network-Threat Detection for Encrypted Communications,” covers systems and methods for identifying cyber threats in encrypted communications without decrypting the underlying data.

In November 2021, Palo Alto petitioned the PTAB to institute IPR of the ’856 patent, alleging that the challenged claims were obvious in light of prior art. Cisco and Keysight later filed identical petitions and sought joinder. A three-member PTAB panel instituted the IPR in early 2022.

Centripetal subsequently discovered that one administrative patent judge held a financial interest in Cisco. Centripetal moved to recuse the entire panel and to vacate the decision, contending that the stockholding compromised the panel's impartiality. The PTAB rejected the motion, ruling that the judge's participation did not violate executive branch ethics regulations because the financial interest was below the de minimis threshold set by the Office of Government Ethics (OGE). The Board also found Centripetal’s motion untimely, noting that it had waited over three months after learning of the stock ownership to raise the issue. During that time, it pursued other motions and appeals.

After considering the merits, the PTAB issued its final written decision in May 2023, finding claims 1, 24, and 25 of the ’856 patent unpatentable as obvious. Centripetal appealed, challenging the PTAB's recusal ruling and its substantive obviousness determination.

Timeliness. The court agreed with the PTAB that Centripetal’s recusal motion was untimely. Drawing on Polaroid Corp. v. Eastman Kodak Co., 867 F.2d 1415 (Fed. Cir. 1989), the court observed that a party aware of potential grounds for disqualification cannot wait strategically to see how the case develops before filing a recusal motion. The Board reasonably determined that Centripetal “sat on” the information about the judge’s stock ownership and only raised the issue after receiving unfavorable decisions.

Executive ethics regulations. The Federal Circuit next upheld the PTAB’s determination that the participation of the administrative judge complied with executive branch ethics rules. Under 18 U.S.C. § 208(a) and the implementing regulations, OGE may exempt financial interests that are “too remote or too inconsequential” to impair an employee’s integrity. Specifically, 5 C.F.R. § 2640.202(a) permits participation in matters involving publicly traded securities valued below $15,000. Because the judge’s Cisco holdings fell below that threshold, his participation did not violate applicable ethics standards.

Centripetal argued that more general appearance-based rules in 5 C.F.R. §§ 2635.501–502 should apply, but the court disagreed, explaining that those provisions govern personal and business relationships of household members, not the employee's own financial interests. The governing standards for an employee's holdings appear in § 2635.402 and § 2640.202, and the note to § 2635.501 explicitly directs reliance on those provisions. Thus, the court concluded that the PTAB correctly applied the de minimis exemption and that no ethics violation occurred.

Due process and fairness. Centripetal contended that its due process rights were violated by the Board’s tone and by applying less stringent standards to administrative judges than to Article III judges. The Federal Circuit rejected these arguments. The Board’s criticism of Centripetal’s recusal motion as “frivolous” did not, in the court’s view, demonstrate bias or hostility rising to a due process violation under Liteky v. United States, 510 U.S. 540 (1994).

The court also emphasized the structural distinction between administrative patent judges, who are executive officers governed by ethics regulations, and Article III judges, who are subject to 28 U.S.C. § 455. The due process standard applicable to agency adjudicators requires disqualification only where a decision-maker has a “substantial pecuniary interest,” citing Gibson v. Berryhill, 411 U.S. 564 (1973), rather than the “however small” threshold that applies to federal judges under § 455(d). Further, the court dismissed Centripetal’s argument that fairness demanded retroactive application of the USPTO’s 2023 directive barring judges from participating in cases involving any stock ownership.

Vacatur analysis. The court reaffirmed that vacatur is not automatic even if a mandatory recusal was required. Applying the three-factor test from Liljeberg v. Health Services Acquisition Corp., 486 U.S. 847 (1988), the panel found that all factors—the risk of injustice to the parties, to other cases, and to public confidence—weighed against vacating the Board’s decision on recusal grounds.

Centripetal had already received a merits determination from three unconflicted judges, and the administrative judge in question had recused shortly after Cisco’s joinder. The court found no evidence that his limited involvement influenced the outcome or tainted the proceeding. Moreover, the USPTO’s revised procedures to avoid similar conflicts reduced the likelihood of recurrence, further diminishing any risk to public confidence.

Failure to consider copying evidence. The Federal Circuit vacated and remanded the PTAB’s decision because the Board failed to address evidence of copying, an objective indicium of non-obviousness. Centripetal had introduced testimony and documents from related district court litigation against Cisco, including evidence that its executives met with Cisco in 2016 to present the patented technology and that Cisco’s engineers later studied Centripetal’s solutions.

The PTAB declined to evaluate this evidence, reasoning that the district court's earlier infringement judgment had been vacated and that it lacked a complete record of the litigation. The Federal Circuit held that this was a legal error. The Board was not required to review the entire district court record but was obligated to assess the specific evidence before it. Citing Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530 (Fed. Cir. 1983), the court reaffirmed that all secondary considerations—such as copying, commercial success, or industry praise—must be considered in the obviousness inquiry and given appropriate weight.

Because the PTAB failed to evaluate the submitted copying evidence, its obviousness analysis was incomplete and legally deficient. The Federal Circuit therefore vacated the final written decision and remanded for reconsideration of the evidence.

The Case is No. 23-2027.

Judge: Cunningham, T.

Attorneys: Paul D. Clement (Clement & Murphy, PLLC) for Centripetal Networks, LLC. Douglas Hallward-Driemeier (Ropes & Gray LLP) for Palo Alto Networks, Inc. Mark Christopher Fleming (Wilmer Cutler Pickering Hale and Dorr LLP) for Cisco Systems, Inc. Gerard M. Donovan (Reed Smith LLP) for Keysight Technologies, Inc.

Companies: Centripetal Networks, LLC; Palo Alto Networks, Inc.; Cisco Systems, Inc.; Keysight Technologies, Inc.

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