Judges: Linn (author), Dyk, Stearns (District Judge sitting by designation)

[Appealed from Board]

In In re DBC, No. 08-1120 (Fed. Cir. Nov. 3, 2008), the Federal Circuit affirmed the Board’s rejection of all claims of U.S. Patent No. 6,730,333 (“the ’333 patent”) as obvious and further held that DBC, LLC (“DBC”) waived challenging the appointment of the APJs who presided over its appeal.

The ’333 patent is directed to a nutraceutical composition comprising a mixture of the pulp and pericarp of the mangosteen fruit. The ’333 patent defines a nutraceutical as “any compound[] or chemical[] that can provide dietary or health benefits when consumed by humans or animals.” Slip op. at 2 (alterations in original). The ’333 patent further states that studies have isolated in the mangosteen tree and its fruit chemical constituents known as xanthones, which are biologically active compounds potentially able to provide a variety of health benefits.

The PTO granted a third party’s request for ex parte reexamination of the ’333 patent. During reexamination, the examiner rejected all claims of the ’333 patent as obvious over a combination of seven prior art references, including Japanese Patent 11043442 (“JP ’442”) and Japanese Patent 08208501 (“JP ’501”). Of the seven references, JP ’442 was the only reference not before the original examiner. To provide objective evidence of nonobviousness, DBC submitted three declarations that attempted to demonstrate the success of the commercial embodiment of the patented invention, known commercially as XanGoTM juice. The examiner was not persuaded by DBC’s evidence and made the rejection final. DBC appealed the examiner’s final rejection to the Board, which affirmed the examiner’s obviousness rejection of the pending claims.

DBC appealed, contending that the Board erred in finding a prima facie case of obviousness based on a substantial new question of patentability, and that even if the Board properly found a prima facie case of obviousness, it erred by concluding that DBC’s evidence of commercial success was insufficient to rebut the prima facie case. DBC also argued that even if the Board correctly affirmed the examiner’s rejection of the claims as obvious, its decision must be vacated because two members of the panel that heard the appeal were unconstitutionally appointed.

On appeal, the Federal Circuit rejected DBC’s first argument that the Board’s decision must be reversed because two members of the panel that heard the appeal were unconstitutionally appointed. Under the theory advanced by DBC, legislation enacted in 2000 delegating the power to appoint APJs to the Director of the PTO instead of the Secretary of Commerce was constitutionally infirm under the Appointments Clause of the U.S. Constitution.

The Court found that DBC waived the issue by failing to raise it before the Board, noting that it is well established that a party generally may not challenge an agency decision on a basis that was not presented to the agency. The Court explained that the requirement that a party object to an agency before attacking that agency’s action in court serves two primary purposes. First, it gives the agency an opportunity to correct its own mistakes before it is haled into federal court, and thus discourages disregard of the agency’s procedures. Second, it promotes judicial efficiency, as claims generally can be resolved much more quickly and economically in proceedings before the agency than in litigation in federal court.

The Federal Circuit, noting that it retains discretion to reach issues raised for the first time on appeal, further determined that this was not an exceptional case that warranted consideration of the Appointments Clause issue despite its tardy presentation. The Court reemphasized that while the issue could have been raised before the Board, it was not. The Court also noted that legislation in August 2008 redelegated the power of appointment to the Secretary of Commerce, thereby eliminating the issue of unconstitutional appointments going forward. The Court stated that because Congress’s action meant that its decision would not affect cases decided by future panels of the Board, this further argued against exercising discretion to address the issue. Additionally, DBC made no allegation of incompetence or other impropriety regarding the APJs who heard its appeal, and those same APJs were reappointed by the Secretary of Commerce, acting under the new statute. The Court concluded that such circumstances did not warrant the exercise of its discretion to hear DBC’s Appointments Clause challenge.

The Federal Circuit next rejected DBC’s argument that the Board failed to establish a prima facie case of obviousness based upon a substantial new question of patentability and that JP ’442 was cumulative and nonanalogous art. The Court stated that JP ’442 was plainly material to patentability because it teaches a nutraceutical beverage combining fruits and fruit juices and mangosteen rind in the same composition. The Court also noted that JP ’442 was not cumulative over JP ’501 because, unlike JP ’442, JP ’501 does not teach that mangosteen rind (or extract) can be made into a composition with fruits or fruit juices to make a nutraceutical composition, only that it can be made into a syrup, solution, or suspension with a carrier. The Court therefore rejected DBC’s argument that JP ’442 did not raise a substantial new question of patentability and found that JP ’442, together with the other references cited, provided substantial evidence fully supporting the Board’s finding of a prima facie case of obviousness.

Finally, the Court found that substantial evidence supported the Board’s determination that DBC’s evidence of commercial success was insufficient to upset the prima facie case of obviousness. Declarations made by officers and employees of XanGo, LLC (“XanGo”), the exclusive licensee of DBC and marketer of XanGoTM juice, were offered in an attempt to show that the juice was made according to the claims of the ’333 patent and to demonstrate the commercial success of XanGoTM juice.

The Federal Circuit first agreed with DBC that the Board erred by concluding that the evidence failed to show that XanGoTM juice was commensurate with the claims.

The Court stated that the Bean declaration submitted by DBC was sufficient to demonstrate that XanGoTM juice fell within the scope of the claims. The Court found that the Board also erred in suggesting that the commercial embodiment of the claim must contain both a fruit juice and a vegetable juice where the claim recites “at least one second juice selected from the group consisting of fruit juice and vegetable juice.” Id. at 17. The Court stated that DBC need not sell every conceivable embodiment of the claims to rely upon evidence of commercial success, so long as what was sold was within the scope of the claims. The Court, however, found that evidence of commercial success alone is not sufficient to demonstrate nonobviousness of a claimed invention. Rather, the proponent must offer proof “that the sales were a direct result of the unique characteristics of the claimed invention—as opposed to other economic and commercial factors unrelated to the quality of the patented subject matter.” Id. at 18 (quoting In re Huang, 100 F.3d 135, 140 (Fed. Cir. 1996)). The sales evidence submitted by DBC did not reveal in any way that the driving force behind those sales was the claimed combination. Nor was there any evidence that sales of XanGoTM juice were not merely attributable to the increasing popularity of mangosteen fruit or the effectiveness of the marketing efforts employed. The Court therefore affirmed the Board’s decision.