The Court of Appeals for the Federal Circuit decided an appeal earlier this month in a long-running battle between footwear manufacturers Nike and Adidas that gives Patent Owner Nike a partial (and perhaps fleeting) victory. The Federal Circuit affirmed the Patent Office decision in-part, vacated-in-part and remanded the case for further proceedings.

On November 28, 2012, Adidas AG petitioned the Patent Trial and Appeal Board (the “Board”) to institute an Inter Partes Review (“IPR”) to invalidate all of the claims of Nike’s 7,347,011 patent. (IPR2013-00067). After a trial was instituted, Nike did not file a Patent Owner Response but instead filed a Motion to Amend, requesting the Board cancel claims 1-46 and add new substitute claims 47-50. The Board granted the motion to cancel all of the original patent claims but denied the motion as to the proposed new claims 47-50, stating that Nike provided only a conclusory statement that the proposed claims were patentable which failed to persuade the Board to grant the motion. In the alternative, the Board also stated that Nike failed to prove patentability of the substitute claims over the prior art references identified by Petitioner Adidas. Nike appealed the decision. Nike, Inc. v. Adidas AG, No. 2014-1719, 2016 BL 38897 (Fed. Cir. Feb. 11, 2016).

Under § 316(e), the Petitioner carries the burden of proving that the patented claims under attack in an IPR proceeding are unpatentable. Nike argued that this burden also applies to new substitute claims submitted by the patent owner in a Motion to Amend. In other words, Nike argued that it does not carry the burden of proving that its new substitute claims were patentable. However, the Federal Circuit did not agree and concluded that section 316(e) does not keep the burden of proving unpatentability with the Petitioner for new substitute claims. Id. at 4. Accordingly, Nike carries the affirmative duty to justify why the newly drafted claims, which had never been evaluated by the USPTO, should be entered. Id. at 5.

However, the Federal Circuit concluded that at least one of reasons advanced by the Board for denying the Motion to Amend as to Nike’s substitute claims was improper. The court concluded that the statement used by Nike, that the proposed substitute claims were patentable over the prior art of record and over the prior art not of record but known to the patent owner, was adequate to address “known prior art” not of record in the proceeding absent an allegation of conduct violating the duty of candor. Id. at 21.

The Federal Circuit agreed with the Board that one skilled in the art facing the problem of efficiently creating knitted articles without requiring cutting would have reason to combine the prior art references to achieve the present invention. Id. at 8. Nike argued that the passage of time between the references and the invention should have precluded the Board from combining the references. However, the Federal Circuit stated that their precedent preventing the combination of references based on passage of time only applies when one skilled in the art was unaware of the problem being solved by the present invention. Id. at 9. Here there was no question that skilled artisans knew of the desire to reduce waste when producing wearable, knitted shoe uppers. Id.

Nonetheless, Federal Circuit remanded the case back to the Board to examine Nike’s long-felt need evidence and its impact on the obviousness determination. Id. at 11. The Federal Circuit determined that the Board erred by not addressing Nike’s presentation of secondary considerations and reiterated its holding in In re Kao, “when secondary considerations are present … it is error not to consider them.” Id. at 10.

The Federal Circuit further found that the Board improperly grouped two of the dependent claims (claims 48 and 49) together in its obviousness analysis, and failed to consider the different limitations added by new claim 49 – and, consequently, failed to explain why claim 49 was unpatentable as obvious over the prior art. Id. at 15.

On remand, the Board will need to at least resolve whether the evidence of record supports a finding of obviousness as to claim 49 and resolve whether secondary considerations, such as long-felt need, are sufficient to overcome the prima facie obviousness of any or all of the claims.