The US Court of Appeals for the Federal Circuit vacated a decision of the Patent Trial and Appeal Board (PTAB or Board), finding that the PTAB erred by improperly relying on inherency to find obviousness and also conducted an improper analysis in finding a motivation to combine references. Honeywell Int’l Inc. v. Mexichem Amanco Holding S.A., Case No. 16-1996 (Fed. Cir., Aug. 1, 2017) (Lourie, J) (Wallach, J, dissenting in part).

Honeywell owns a patent directed to the use of a refrigerant and a lubricant in heat transfer systems, such as air conditioning units. Mexichem filed two requests for inter partes re-examination of the patent, which the US Patent and Trademark Office granted and merged into a consolidated proceeding. During the proceeding, the Examiner concluded that the claims would have been obvious over the cited prior art.

Honeywell appealed to the PTAB, arguing that the prior art did not provide a motivation to combine the claimed refrigerant with the claimed lubricant with a reasonable expectation of success. To support its argument, Honeywell submitted evidence that the claimed refrigerant and claimed lubricant were known to be reactive and unstable, and therefore a skilled artisan would not have been motivated to combine them. To further support its argument, Honeywell submitted evidence of secondary considerations, including the unexpected stability of the claimed refrigerant in combination with the claimed lubricant.

The PTAB rejected Honeywell’s arguments. First, the PTAB found that the unexpected stability of the composition did not support patentability because a person of ordinary skill in the art would have “no more expected failure than success in combining the references.” A skilled artisan would have had a reason to try the claimed combination to assess its stability, and in doing so, would have arrived at the claimed combination by routine testing, according to the PTAB. Second, the PTAB found the evidence of secondary considerations unpersuasive because of a perceived lack of nexus between the evidence and the claimed combination. Honeywell appealed.

On appeal, Honeywell argued that the PTAB erred in (1) finding a motivation to combine the references with a reasonable expectation of success and (2) rejecting Honeywell’s evidence of secondary consideration. Honeywell also argued that the PTAB improperly relied on a new ground of rejection without giving Honeywell notice and an opportunity to respond.

Addressing Honeywell’s argument regarding the motivation to combine, the Federal Circuit concluded that the PTAB committed legal error by relying on inherency to find obviousness. First, the Court found that the use of inherency in the context of obviousness must be carefully circumscribed because “that which may be inherent is not necessarily known and that which is unknown cannot be obvious.” Using this rationale, the Court emphasized the PTAB’s error in dismissing inherent properties of the claimed invention without further consideration of unpredictability and unexpectedness. According to the Court, “what is important regarding properties that may be inherent, but known, is whether they are unexpected.” Here, the PTAB erred in dismissing properties of the claimed invention as inherent without considering whether such properties were unexpected.

Second, the Federal Circuit found that the PTAB erred because it used “reverse reasoning” to conclude that a skilled artisan would not have expected success because of the overall unpredictability, but then glossed over that finding with a routine testing rationale because Honeywell did not prove an expectation of failure. The Court found that the PTAB’s reasoning that a skilled artisan would no more expect failure than success, as not a valid ground for holding an invention to be obvious, and therefore error. The Court thus vacated the PTAB’s obviousness finding and remanded for further proceedings.

Finally, the Federal Circuit concluded that the PTAB relied on a new rejection when dismissing Honeywell’s evidence of unexpected results. During the re-examination, Mexichem identified a reference in its “Third Party Requester Comments” and proposed a rejection based on that reference. Although the Examiner did not address the reference, the PTAB relied on it to find the challenged claims obvious. The Court found that Honeywell did not have a fair opportunity to respond to the rejection since the patent owner responds to the Examiner’s reasoning, not to the requester’s unadopted argument. Thus the Court remanded with instructions to designate the reference as a new ground of rejection so as to provide Honeywell with an opportunity to respond.