For Waterproofing Patent, Arguments Against Obviousness Didn’t Hold Water

The Federal Circuit’s decision in Outdry Technologies Corporation, v. Geox S.P.A. discusses some criteria for determining whether or not the explanations provided by the PTAB in an IPR decision are sufficient to support a finding of motivation to combine.

The independent claims of Outdry Technologies Corp.’s US Patent No. 6,855,171 (“the ‘171 patent”) were found to be obvious during IPR proceedings. Outdry’s ‘171 Patent is directed to two claimed processes for waterproofing leather by “directly pressing,” on an internal surface of the leather, a semi-permeable membrane to which a discontinuous pattern of glue dots has been added. One of the claimed leather waterproofing processes of the ‘171 patent requires the glue dots have a particular density. The other requires that the glue dots have a particular size. According to Outdry, directly pressing the glue dot-bearing membrane onto the leather addressed the problem of water pockets forming between the semi-permeable membrane and the leather when only the edges of the semi-permeable membrane are sown or glued to the leather.

In the IPR decision, the PTAB found the claimed leather waterproofing processes of the ‘171 to be obvious in view of US Patents to Thornton and Hayton, and a reference entitled “Chemistry of the Textiles Industry” (“Scott”), each of which discuss using glue dots, or something similar, to adhere a film or waterproof layer to another layer (e.g., a water permeable layer, like leather).  The PTAB determined that the petitioners for the IPR proceedings, Geox, S.p.A., had provided a rational underpinning for combining Scott and Hayton, and that the claimed leather waterproofing processes of the ‘171 Patent would have been obvious in view of Thornton, Hayton and Scott.

Outdry appealed the PTAB’s IPR decision, arguing, among other things, that the motivation to combine Thornton, Scott and Hayton relied upon by the PTAB during the IPR proceedings was insufficient.

In particular, Outdry argued that the PTAB failed to make the required findings supporting the conclusion that a motivation to combine Thornton, Scott and Hayton existed because the PTAB merely relied on Geox’s petition to find a motivation to combine without making its own findings. The CAFC disagreed. The CAFC listed a number of example reasons for which the findings of the PTAB have previously been determined by the CAFC to be insufficient to support a decision that motivation to combine exists, including: failing to cite any evidence, either in the asserted prior-art references or elsewhere in the record, with sufficient specificity for us to determine whether a person of ordinary skill in the art would have been so motivated; merely stating that a combination is “intuitive” or “common sense,” without articulating a rationale; and simply agreeing with arguments in a petitioner’s brief without making any factual findings. However, the CAFC concluded that the PTAB did not make any of the above-referenced errors by articulating, in the IPR decision, Geox’s arguments explaining the motivation to combine the cited references. Further, the CAFC clarified that a PTAB decision that relies on a petitioner’s arguments and includes an explanation supporting the decision to rely on the petitioner’s arguments is acceptable, unlike a PTAB decision that merely adopts a petitioner’s arguments by reference without providing such an explanation.

Outdry also argued that the PTAB’s finding of a motivation to combine was insufficient because the PTAB failed to explain why a person of ordinary skill in the art would be motivated to combine the cited references to solve the water pocket problem addressed by Outdry’s ‘171 Patent. The CAFC was not persuaded by this argument either. The CAFC responded to this argument by citing previous CAFC decisions indicating that a motivation to combine cited references identified in support of a conclusion of obviousness does not have to match a motivation provided by the patent at issue or the patentee.  The CAFC further explained that the identified motivation does not even have to come from the references, themselves.

Accordingly, in Outdry Technologies, the CAFC confirmed that there are standards the PTAB must satisfy when asserting, in an IPR decision, that a motivation to combine exists. Further, the CAFC also explained that these standards are not quite as strict as the Appellant argued they were.

Federal Circuit Broadly Affirms PTAB’s Determinations on Analogous Art, Motivation to Combine References, and Obviousness of Claims

43132461 - close-up of person hands using stamper on document with the text approved

The level of deference the Federal Circuit gives to the Board’s IPR decisions has been surprising to many practitioners, considering the Court’s reputation for reversing district court decisions.  The trend of deference to the Board continues, as illustrated in Unwired Planet, LLC v. Google Inc., 2015-1810, -1811, Nov. 15, 2016.

Unwired involved one patent, U.S. 7,024,205.  The Board nullified the patent twice over, finding the claims obvious in an IPR, and lacking written description in a CBM proceeding.  Unwired involved a consolidated appeal of both.  The Federal Circuit affirmed the Board’s obviousness finding, and thus did not reach the CBM decision.

The ‘205 patent involved a system and method for providing cell phone users with prioritized search results based either on the user’s location, or based on other criteria chosen by the network administrator (the point of the latter is to allow search providers to prioritize results based on whether, for example, a restaurant has paid to be listed).  More particularly, the patent claims a scheme wherein the search results list a further-away provider before listing a different, closer provider (called “farther-over-nearer ordering” in the opinion).

Google presented a variety of prior art including basic references on providing search results in an electronic setting and also a 1997 book by Galitz discussing principles for interface design, including various techniques for ordering text information and menus.  On appeal, Unwired presented 3 arguments:  (1) Galitz was non-analogous art; (2) the prior art does not teach farther-over-nearer ordering; and (3) there was inadequate motivation to combine Galitz with the other art.

The Federal Circuit rejected all three arguments.  As to non-analogous art, the Court first noted that the field of endeavor of a patent is not limited to the point of novelty, the narrowest conception of the field, or the particular focus within a given field.  Because both Galitz and the patent dealt, broadly speaking, with the field of interface design, the Court determined a person of ordinary skill would have looked to Galitz.

Second, as to the prior art’s alleged lack of teaching, the evidence was clear that the prior art sometimes would have returned results with farther-over-nearing ordering, even though that wasn’t necessarily the goal of that prior art.  Nonetheless, that was legally sufficient:  “We reject this argument because combinations of prior art that sometimes meet the claim elements are sufficient to show obviousness.”  Lastly, the Court found sufficient evidence (including in the form of expert testimony) to believe that a person of ordinary skill in the art would have combined the references.  Here too, the Court presented a relatively broad (and challenger-friendly) reading of the law:  “Google also argues that it does not need to show that there was a known problem with the prior art system in order to articulate the required rational underpinning for the proposed combination.  We agree.”  This final point is consistent with KSR, as the opposite position (that the problem need to have been known) would seem perilously close to the TSM test rejected in KSR.

The Federal Circuit’s deference to the Board, and challenger-friendly reading of the law, in IPR appeals continues to encourage parties to pursue their positions through IPR petitions.

Federal Circuit Provides Ammunition to Patentees In Magnum Decision

cafc1Patent Owners gained a bit of a reprieve in the Federal Circuit’s recent decision in In Re Magnum Oil Tool Int’l, Ltd.decided on July 25, 2016. In several key respects, Patent Owners regained some footing in the otherwise daunting IPR process.

As an initial matter, in one of its first post-Cuozzo (Supreme Court edition) decisions, the Federal Circuit determined that, for issues that are central to the Board’s Final Written Decision, the Court is not prohibited by § 314(d) from reviewing those decisions just because they were also addressed in the Decision to Institute. The merits of a final written decision is reviewable, even though the issue was initially decided by the Board at the decision to institute stage. Id. at 12. In the context of the Magnum decision, this meant that the Court had jurisdiction to review all of Patent Owner’s arguments regarding the basis for the Board’s ultimate judgment of unpatentability, including rationale to combine references, even though the Board addressed those arguments in the decision to institute.

The key substantive issue in the case was whether the Board’s decision adequately established a prima facie basis of obviousness. Specifically, Patent Owner argued that no adequate motivation to combine the subject references was articulated. The issue stemmed from the fact that, in the petition, Petitioner put forth a detailed obviousness argument on one set of references (“Ground 1”), but took a more abbreviated approach with a second set of references (“Ground 2”), that “incorporated by reference” the motivation to combine from Ground 1.

In response, the PTO argued that when the Board institutes a ground, it necessarily finds that Petitioner has demonstrated a reasonable likelihood of success and that this finding operates to shift the burden of producing evidence of nonobviousness to Patent Owner. But, the Court rejected the PTO’s contention and clarified that the burden of persuasion is always on the Petitioner to prove unpatentability by preponderance and that burden never shifts to the patentee. The court reasoned that, due to the significant difference between the standards of proof at institution (likelihood of success) and at trial (preponderance), it is inappropriate to shift the burden to the patentee after institution to prove that the claims are patentable.

As to the ultimate conclusion of obviousness, the court concluded that, in light of Petitioner’s failure to explain why a skilled artisan would combine the Ground 2 references, the Board had no basis for its conclusion that Petitioner had met its burden of proving obviousness by preponderance under KSR.  The court emphasized that to satisfy its burden of proving obviousness, Petitioner cannot employ mere conclusory statements because such statements cannot satisfy Petitioner’s burden. Nonetheless, the PTO argued that the Board did not err in making an obviousness argument on behalf of Petitioner based on the Ground 2 references because this argument “could have been included in a properly drafted petition.” The court flatly rejected the PTO’s contention that the Board is free to adopt arguments on behalf of Petitioners that could have been but were not raised by the Petitioner during an IPR, noting again that Petitioner bears the burden of proof. The court acknowledged that the PTO has broad authority to establish procedures in IPR’s but clarified that the authority is not so broad to allow the PTO to raise, address, and decide patentability theories never presented by the Petitioner and not supported by record evidence. Instead, the court emphasized that the Board must base its decisions on arguments advanced by a party and to which the opposing party was given a chance to respond. Accordingly, the court held that the Board’s obviousness conclusion was not based on sufficient evidence since the Board relied on Petitioner’s conclusory statements and improperly argued on behalf of Petitioner why the Ground 2 references could be combined.

Lastly, the Court addressed the PTO’s argument that Patent Owner should have challenged the Board’s actions in the rehearing request. The court quickly disposed the PTO’s argument, stating that the plain language of 35 USC § 141(c) does not require a party dissatisfied with the Board’s final written decision to first raise the issue in a rehearing request before appealing the issue to the court.

In sum, Magnum is a ray of hope for Patent Owners that have become accustomed to most aspects of IPR practice being construed against them. The Court’s docket contains many upcoming cases that will allow us to learn whether this is an aberration, or a trend.

PTAB Reversed for Failing to Explain “Why” a Person of Skill Would Modify the Prior Art

Judge's BenchIt is no secret that patent owners have, on average, struggled at the PTAB over the last three and a half years.  Some practitioners say that a reason for this result is that the Board many times takes an aggressive approach in the assessment of “obviousness” under Section 103.  Yesterday, the Federal Circuit issued its decision in Black & Decker, Inc. v. Positec USA, Inc., which may signal a change in that tide.

Positec challenged Black & Decker’s US Patent No. 5,544,417, which is directed to a manner of mounting a motor in the housing of a string trimmer.  In particular, the ‘417 patent discloses the use of a “motor mounting plate” supported by the string trimmer’s housing such that the motor does not contact the interior surface of the housing.  The motor is fixedly secured to the motor mounting plate.

The Board upheld the validity of claims 7 and 10 directed to a vegetation string trimmer, but found that claims 16 and 17, directed to a method of assembling an outdoor power tool, were unpatentable under 35 USC Sec. 103 in view of Mack alone.

The Federal Circuit reversed the Board’s finding of obviousness, finding that it “is not sufficient” under Section 103 to merely find that a person skilled in the art “could have” or “would have known” to do something.  The Board must “explain why one of skill in the art would have adapted or replaced Mack’s motor mounting yoke to ensure that the motor did not move relative to the motor mounting structure.  The Board did not do so.”  (emphasis added).  “Our precedent requires that the Board explain a rationale why a person of ordinary skill would have modified Mack’s motor.”  Citing, Ball Aerosol & Specialty Container, Inc. v. Limited Brands, Inc. 555 F.3d 984, 993 (Fed. Cir. 2009).  The Federal Circuit further noted that Positec offered mere attorney argument, not evidence, to explain why a person of ordinary skill would have “fixedly secure[d]” the motor.

Perhaps this case will result in more rigorous analyses of the rationale for proposed combinations and/or modifications to prior art in the context of Section 103 assessments.  In any event, this case is a positive for patent owners.

*By way of disclaimer, Harness Dickey represented Black & Decker in the IPR and the Federal Circuit appeal

PTAB Rejects Challenge to Onglyza® Patent

32481593_sThe lower burden of proof associated with inter partes reviews should make IPRs attractive to generic pharmaceutical companies, but even with that lower burden, success is not guaranteed, as illustrated by IPR2015-01340.  Mylan Pharmaceuticals challenged AstraZeneca’s patent RE44,186 on saxagliptin, the active ingredient in Onglyza® (used to treat type 2 diabetes).  Mylan’s petition argued the structure of the drug would have been obvious.  The Board disagreed, determining that the prior art did not provide sufficient motivation to modify the lead compound chosen by Mylan.  The Board denied review.

The Board started with the legal standard for this sort of issue:  “A determination of whether a new chemical compound would have been obvious over the prior art typically follows a two prong inquiry considering first, whether one of ordinary skill would have selected one or more lead compounds for further development and, second, whether the prior art would have supplied sufficient motivation to modify a lead compound to arrive at the compound claimed with a reasonable expectation of success.”

Here, the Board accepted Petitioner’s proposed lead compound, but found the record did not support the second prong of the test, modification of the lead compound to arrive at the claimed invention.  The Board analyzed the two aspects of the modification argument, stability and potency, and found both lacking.  As to stability, Petitioner argued that the person of ordinary skill would have been motivated to change one group on the lead compound to a more stable adamantyl group (as one would expect, the more stable group is also on the claimed compound).  The problem, though, was that the lead compound was noted for its stability, and the Board found the record was insufficient to establish a person of ordinary skill in the art would have been motivated to make it even more stable.  As to potency, Petitioner argued for a second substitution of a different group, which combined with the first substitution would yield the claimed compound.  The Board found the record failed to show that the proposed substitution would have been expected to increase potency.

The Board thus denied review.

Lessons Learned from a Rare CAFC Opinion on an IPR Matter

cafc1To date, the Federal Circuit has issued Rule 36 affirmances in over 80% of the cases it has heard. Thus, when a new, substantive opinion is issued by the Court, it is an opportunity to learn. On November 5th, the Federal Circuit issued an opinion in Belden Inc. v. Berk-Tek LLC, relating to the Final Written Decision issued in IPR2014-00057. The Federal Circuit affirmed the Board’s decision that claims 1-4 were determined to be unpatentable and reversed the Board’s decision that claims 5 and 6 were not determined to be unpatentable. It was a rough decision for the Patent Owner and some key lessons can be learned from the Court’s analysis:

The Board Can Rely on its Own Reading of the Prior Art: Despite the fact that the Petition was unaccompanied by expert testimony, the Court gave deference to the Board’s determination that claims 1 and 4 were obvious because those findings were supported by substantial evidence. Op. at 12-14. In so doing, the Court noted the discretion the Board can exercise in this type of case: “In the circumstances here, involving a simple point in a mechanical field and one very close piece of prior art, the Board was entitled to rely on its own reading of [the prior art]–supported by the Petition’s observations about it–to find that a skilled artisan would have understood the importance of [the key reference]”. Id. at 14. Thus, although the Petition only briefly addressed this key issue, the Board’s own view of the art can overcome such a shortcoming of the Petition.

Rationale to Combine Must Be Based on More than a General Statement: In affirming the unpatentability of claims 2 and 3, the Court noted that the Board made the correct inquiry regarding why a skilled artisan would have had reason to combine the prior art references at issue. Referencing the Board’s recitation of the KSR decision, the Court stated that “[t]he Supreme Court’s passage does not establish that it suffices for obviousness that a variation of the prior art would predictably work, but requires consideration of whether, in light of factors such as ‘design incentives and other market forces,’ the hypothetical skilled artisan would recognize the potential benefits and pursue the variation.” Op. at 15.

Broad Teaching in the Prior Art Can Provide Rationale to Combine: Relative to the decision to reverse the Board regarding the patentability of Claims 5 and 6, the Court found that the Board did not given sufficient weight to the teaching of the prior art and, instead, focused to much on the particular invention it was describing and attempted to protect. Id. at 18. Dismissing the other arguments from the Board to support patentability, the Court decided that, even in view of the substantial evidence deference afforded to the Board on factual issues, “the record is one-sided on the proper question of whether [the first prior art reference] taught a solution to the problem…that a skilled artisan would have been motivated to use in making [the disclosed product from the second prior art reference].” Id. at 20.

The PTAB, because of its Expertise, Does Not Always Need Expert Assistance to Understand Prior Art: Patent Owner argued that the evidence provided in Petitioner’s reply brief, in the form of expert testimony, was necessary to establish a prima facie case of obviousness. The Federal Circuit disagreed, finding that (1) the testimony was responsive to issues raised in the Patent Owner Response (i.e., each point from the declarant responded to a statement from Patent Owner’s declarant), and (2) the evidence was not needed to make out a prima facie case of obviousness. Although the Board often cited to the expert declaration, that did not mean the testimony was necessary for a prima facie case of obviousness. Op. at 23. The Federal Circuit concluded that the prior art itself contained all the information necessary to make out a prima facie case, especially in view of the Board’s technical expertise.

New Expert Testimony in the Petitioner Reply is Here to Stay: Patent Owner’s argument that it did not have a reasonable opportunity to the expert testimony provided in the Petitioner Reply. The Federal Circuit disagreed again, finding that there are numerous ways to respond to such testimony, including (1) cross-examination, with a motion for observation; (2) motion to exclude; (3) dispute the testimony at the oral hearing; (4) move for permission to submit a surreply; and (5) seek a waiver of any regulation that impairs its opportunity to respond.

In the end, this is a strong case for Petitioners to rely upon for all of the above-referenced aspects of the decision.

Board Has Change of Heart On Rehearing

37396761_sA request for rehearing is generally considered the IPR equivalent of an end-of-the-game Hail Mary pass, but just like in football, sometimes it works, as illustrated by the Board’s reversal of its prior decision denying review in Handi Quilter, Inc. & Tacony Corporation v. Bernina International AG, IPR2013-00270.

The Board originally denied review based on its determination that the Petitioner only showed that a person of ordinary skill in the art could have combined the relied-on references, but not why the person of ordinary skill would have done so.  Decision at 2.  Following the Petitioner’s request for a hearing, though, the Board had a change of heart and decided to institute inter partes review.  Under 37 C.F.R. § 42.71(d), “[t]he burden of showing a decision should be modified lies with the party challenging the decision” and the rehearing “request must specifically identify all matters the party believes the Board misapprehended or overlooked.”  Decision at 23.  Petitioners here successfully argued that the Board had previously misapprehended its argument (supported by declaration testimony) that its primary reference (Watabe) itself provided sufficient rationale for why a person of ordinary skill in the art would have looked to the secondary references and combine them with Watabe.  Thus, the Board instituted review.

Toward a Bullet-Proof Petition – Motivation to Combine

white puzzle with one piece missing, on blueWhile 8 out of 10 Petitions seeking inter partes review are granted by the PTAB, there remain several key errors that unsuccessful Petitioners make. Among them is the failure to provide sufficient factual basis for a rationale to combine prior art references in an obviousness analysis. That issue arose, in an unsuccessful petition, in Kinetic Technologies, Inc. v. Skyworks Solutions, Inc., IPR2014-00529, where the Board found Petitioner’s motivation to combine arguments inadequate. The case involved US Pat. No. 7,921,320, directed to a single wire serial interface that may be used to control stand-alone power integrated circuits and other devices.  Decision at 3.

Petitioner, in arguing obviousness of the challenged claims, asserted that combining to two prior art references was a matter of combining know elements to yield predictable results, among other conclusory remarks. Petitioner did list several similarities in the circuits of the two references, and provided expert testimony, but did not provide much in the way of details. Id. at 14.

As such, the Board was unpersuaded by Petitioner’s argument for motivation to combine. First, the Board gave little or no weight to the expert testimony, since it was virtually identical in content to the arguments presented in the petition, and lacked facts or data to support the opinion of the expert. Specifically, the Board criticized the expert declaration as filing to “expain the ‘how,’ ‘what,’ and ‘why’ of the proposed combination of references.” Id. at 15. To that end, the Board found that the expert did not explain how the references could be combined, or how such combination would yield a predictable result.  In the final criticism of the expert testimony, the Board noted that the expert failed to explain why the ordinary artisan would have combined elements from the two references in the specific way the ‘320 invention does.

Accordingly, the Board reminded Petitioner that there must be reasoning supporting combination of references in an obviousness challenge, and rejected Petitioner’s argument for motivation to combine references, stating that the argument lacked articulated reasoning with rational underpinning. Id. at 16. As such, the Board determined that Petitioner failed to demonstrate a reasonable likelihood that it would prevail in establishing the challenged claims as unpatentable.

Another IPR Petition Comes Up Short for Failing to Adequately Show Rationale to Combine

9710318_sMany Patent Owners are finding success in undermining the challenge grounds of a Petition by arguing that the Petition fails to make an adequate showing that a person of ordinary skill in the art would have combined the relied-on references. That was the case in Zimmer Holdings, Inc. and Zimmer, Inc. v. Bonutti Skeletal Innovations LLC, involved US Pat. No. 7,837,736, where the Board rejected a Petition due to an inadequate combination argument.

Relying on expert testimony, the Petitioner argued that it would have been obvious to the ordinary artisan to substitute a “dovetail joint” described in one reference (Beuchel) for the “abutment and recess” structure described in a second reference (Walker) to arrive at the ‘736 invention.  Specifically, the expert testified that the “dovetail” joints of Beuchel perform the same function as the “abutment and recess” of Walker—i.e., “constrained movement of meniscal components relative to the tray in mobile bearing knee implants.”  With that predicate, the expert posited that substituting the “dovetail” joints in place of the “abutment and recess” joints was simply a matter of design choice.

The Board disagreed, because Beuchel’s “dovetail” joints had substantially different structure and function than Walker’s “abutement and recess.”  Decision at 20–21.  Specifically, Beuchel’s “dovetail” joint functioned to limit or prevent rotation, while Walker’s “abutment and recess” functioned to facilitate rotation.  Decision at 21.  Accordingly, the Board found that Petitioner failed to support its substitution argument with “adequate articulated reasoning with rational underpinnings.”  Decision at 21 (citing In re Gal, 980 F.2d 717, 719 (Fed. Cir. 1992) (design choice is not a sufficient rationale for obviousness where the structure recited in claim and the function it performs are different from the prior art).  Accordingly, the Board declined to institute review.  Id.

Rationale from Denied Ground Used By PTAB In Final Written Decision

13329201_s (1)Lost a challenge ground in the Board’s Decision to Institute? The Board has given some hope that such denied grounds may still of use in an IPR proceeding in McClinton Energy Group, LLC v. Magnum Oil Tools International, Ltd., IPR2013-00231, involving US Pat. No. 8,079,413. In this decision on a motion for rehearing, the Board affirmed the propriety of its use of rationale from a denied ground from the Petition to support a final decision of unpatentability.

Earlier in the proceeding, the Board instituted inter partes review of the challenged claims based on six grounds of unpatentability, each of which was based on three references (References A, B, and C). The Petition also contained numerous grounds of unpatentability based in part on a fourth reference (Reference D), all of which were denied by the Board. Decision at 3-4. In the Petition, to support an argument that one of skill in the art would combine references A, B, and C, Petitioner made reference to the rationale for combining of references from denied-grounds relying on Reference D. The Board then relied upon this rationale in determining that all challenge grounds were unpatentable.

In the Motion for Rehearing, Patent Owner argued that by incorporating this argument from a denied ground, the Board was including a new ground of unpatentability in the final written decision and Patent Owner was therefore denied due process. Id. at 4.  The Board disagreed, pointing out that Patent Owner addressed the rationale at issue in the Patent Owner Response. That the same rationale to combined was used in both a sustained challenge ground and a denied challenge ground was not enough to change the thrust of the grounds of unpatentability. Accordingly, the fact that the Board adopted the rationale to combine references presented in a denied-ground of the petition in a granted-ground in final written decision does not create a new ground of unpatentability.  Id. at 5.