On September 7, 2017, the Federal Circuit, in a split opinion, affirmed the district court’s summary judgment of obviousness in Intercontinental Great Brands (Kraft) v. Kellogg; despite what the district court called “substantial” and “compelling” evidence of objective indicia of non-obviousness. The Federal Circuit agreed that significant copying, increased sales volume, customer and industry praise, and long-felt need were not enough to overcome the prima facie case of obviousness.

Factual and Procedural Background

Kraft brought a patent infringement suit against Kellogg in the Northern District of Illinois, claiming that Kellogg infringed Kraft’s U.S. Patent No. 6,918,532 (the “’532 patent”), directed to a re-sealable food package that keeps cookies fresh. The ’532 patent teaches a combination of two common types of packaging: One type uses a frame surrounded by a wrapper to prevent the cookies from being crushed. The other type uses a peel-back re-sealable package (i.e., similar to the packaging of wet wipes) to keep the cookies fresh.

The record clearly states that all elements can be found in prior art references. The main prior art reference relied on by Kellogg disclosed a rigid re-sealable sushi tray, which covers all claim elements except the “frame” element. The district court found that the “frame” element was well-known in the prior art of cookie packaging. Combining the known elements, the district court determined that a skilled artisan in the art would have been motivated to combine those prior art references, because the lack of a “convenient opening and reclosing arrangement” was a “known problem” for cookie packaging.

The district court acknowledged the substantial and compelling evidence of objective indicia of non-obviousness, including copying, increased sales volume, customer and industry praise, and long-felt need. For example, Kraft’s sales volume increased by 4% after launching the new packaging. There was also “evidence of positive consumer feedback” and survey results praising the invention as “a clear favorite.” Kraft’s invention also won “one of the highest industry awards innovative packaging technology can receive.” Kraft also showed that Kellogg intentionally copied its packaging.

Nonetheless, the district court granted Kellogg’s motion for summary judgment of obviousness, finding that the prima facie case of obviousness was too strong to be overcome by secondary considerations. Kraft appealed.

Federal Circuit Decision

On appeal, the primary dispute was the proper procedure in determining patent obviousness under the Supreme Court’s decision in KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 406 (2007). In KSR, the Supreme Court explained that trial courts must consider the four Graham factors to determine whether an asserted claim would have been obvious: (1) the scope and content of prior art; (2) the differences between the prior art and asserted claims; (3) the level of ordinary skill; and (4) objective indicia of non-obviousness. Id.

The district court considered only the first three factors when assessing the prima facie case of obviousness, and then moved on to the fourth factor, i.e., objective indicia, to decide if secondary considerations would overcome the prima facie case of obviousness. The panel majority agreed with the district court’s approach, noting that “[t]his way of structuring the analysis fulfills KSR’s requirement that the approach to determining obviousness be “expansive” and “flexible.” The dissent, agreeing with Kraft, advocates that objective indicia must be evaluated simultaneously with the other three Graham factors, before drawing a conclusion on the prima facie case of obviousness.

Judge Reyna wrote: “For too long, this court has turned a blind eye to what I consider to be a grave concern: the application of a prima facie test that necessarily achieves a legal determination of obviousness prior to full and fair consideration of evidence of objective indicia of non-obviousness.” The judge further noted that “I am left to wonder how ‘substantial’ and ‘compelling’ evidence of objective indicia cannot overcome a prima facie showing. If such significant evidence does not make a difference in this case, it is hard to imagine a situation in which it would.”

Notably, the Supreme Court’s decision in KSR does not provide clear direction on the sequence in which lower courts should consider the Graham factors. In other words, should a lower court only consider the first three factors for the prima facie case of obviousness, and use objective indicia as a rebuttal, or should the lower court consider all four factors when deciding the prima facie case of obviousness? Kraft may file a petition for a writ of certiorari to ask the high court to clarify this procedural, yet outcome-determinative, issue.

What This Means for You

First impressions are lasting impressions. When an inventor combines existing elements into a novel and useful invention, courts may view the combination in hindsight to assume the motivation to combine. Objective indicia can provide an argument against such hindsight. But, under current law, a court may place outcome-determinative weight on the first three Graham factors in determining a prima facie case of obviousness. This sequence means that the fourth Graham factor, objective indicia of non-obviousness, may not be a factor at all, even if the indicia are substantial and compelling.

Until the Supreme Court steps in with clear direction on the appropriate sequence for considering the Graham factors, owners of patents consisting of combinations of known elements may want to decrease reliance on objective indicia for overcoming obviousness challenges.