The Board’s Final Written Decision Must Address All Grounds for Unpatentability Raised in a Petition for Inter Partes Review

In Adidas AG v. Nike, Inc., Appeal Nos. 2018-1180, 2018-1181, the Federal Circuit held that the Supreme Court’s decision in SAS Institute Inc. v. Iancu requires the Board to address all grounds for unpatentability raised in the IPR petition in its final written decision.

Adidas petitioned for inter partes review (IPR) of two patents owned by Nike. Each petition challenged the validity of the asserted claims on the same two grounds. Although both grounds asserted that the claims were obvious, the two grounds were based on two different reference combinations. The Board instituted IPR on all challenged claims, but on only one of the grounds. The Board’s final written decisions found all claims patentable over the prior art relied upon in the instituted ground raised in the petition. However, the final written decisions did not address the patentability of the challenged claims in view of the uninstituted ground. Adidas appealed.

During the pendency of the appeal, the Supreme Court decided SAS Institute, Inc. v. Iancu, which held that IPRs “must proceed ‘in accordance with in or conformance to the petition.” In view of this holding, Adidas filed a motion for remand to the Board for consideration of the second, uninstituted ground. Nike opposed the motion, arguing that SAS only requires the Board to address all challenged claims, not all grounds for unpatentability.

The Federal Circuit found that the SAS decision requires consideration of all the grounds originally raised in the petition if the proceedings are instituted. The Court noted that SAS held “[n]othing suggests the Director enjoys a license to depart from the petition and institute a different inter partes review of his own design.” The panel found that there was “no reason to treat this case differently” from the Federal Circuit’s other recent holdings which require the Board’s final written decision to address all claims raised in an IPR petition. Accordingly, the Court remanded the case to the Board to “promptly issue a final written decision as to all grounds raised in Adidas’s petitions.”

The Entire Market Value Rule of Damages Requires a Patentee to Prove the Unpatented Features Did Not Influence Consumer Demand

In Power Integrations, Inc. v. Fairchild Semiconductor, Appeal Nos. 2016-2691, 2017-1875, the Federal Circuit held that in order to rely on the entire market value rule to calculate damages, a patentee must prove that the unpatented features in the accused product did not influence consumer demand.

Power Integrations sued Fairchild for infringement of two patents. In the district court, the jury found that Fairchild infringed the patents at issue, and awarded damages of roughly $140 million. The damages verdict rested on testimony relying solely on the entire market value rule. Fairchild appealed, challenging the infringement decisions and the damages award.

The Federal Circuit first affirmed the district court’s judgments of infringement, but vacated the award of damages. With respect to damages, the Federal Circuit reiterated that the entire market value rule allows for the recovery of damages based on the value of an entire multi-feature apparatus only when the patented feature constitutes the basis for consumer demand. Conversely, when a product contains other valuable features, the patentee must prove that those other features did not influence purchasing decisions. Here, the Federal Circuit found that the accused products had other valuable features and that Power Integrations did not meet its burden to show that these features did not affect consumer demand. Thus, the Federal Circuit vacated the award of damages and remanded the case for further proceedings.

Experimental Use to Determine if the Invention Works for its Intended Purpose Does Not Constitute Public Use

In Polara Engineering Inc v. Campbell Company, Appeal Nos. 2017-1974, 2017-2033, the Federal Circuit held that the public-use bar is not triggered by experimental use that tests the claimed features to determine if the invention works for its intended purpose, and that a district court must fully explain its decision to enhance damages following a willful infringement finding.

Polara sued Campbell for infringement of a patent directed towards push-button crosswalk stations. Campbell argued the patent was invalid because Polara had tested prototypes prior to the critical date at public intersections. The jury found the asserted claims were not invalid and that Campbell had willfully infringed. The district court denied Campbell’s post-trial motion for judgment as a matter of law and granted Polara’s motion to enhance damages. Campbell appealed.

The Federal Circuit held that there was substantial evidence to support the jury’s finding of experimental use. The public-use bar is triggered where, prior to the critical date, the invention is in public use and ready for patenting. The bar is not triggered where an inventor tests the claimed features to determine if the invention works for its intended purpose, even if the testing occurs in public. Here, the Federal Circuit found that Polara needed to test the claimed features of the devices at actual crosswalks of different configurations to ensure they were safe.

The Federal Circuit also held that substantial evidence supported the jury’s finding of willful infringement. However, the district court erred by not adequately explaining its decision to enhance damages. The district court did not even mention the public-use defense, which the Federal Circuit held was a “close question.” Thus, the district court erred by either not considering the public-use defense or determining that the defense was so weak it was not worth mentioning. The Federal Circuit reversed and remanded with instructions to provide a more complete explanation of its decision on whether to enhance damages, including a discussion of the public-use defense.

Use of “i.e.” in Specification Signals Intent to Define a Word

In TF3 Limited v. Tre Milano, LLC, Appeal No. 2016-2285, the Federal Circuit held that a claim construction was not reasonable where it extended the breadth of the claims beyond what was described in the specification.

Tre Milano requested Inter Partes Review of a patent owned by TF3. The patent at issue describes a hair styling device that automates curling. Tre Milano argued that the claims at issue were anticipated by two references describing hair curling devices. Based on the PTAB’s broad construction of certain claim terms, the PTAB found the claims at issue to be anticipated.

The Federal Circuit reversed the PTAB’s decision and noted that a claim construction under the broadest reasonable interpretation standard is not reasonable where it contradicts the specification. The Federal Circuit found error with the Board’s assertion that the abbreviation “i.e.” in the specification did not denote a limitation. The Federal Circuit reiterated that the usage of “i.e.” “signals an intent to define the word to which it refers.” The Federal Circuit found that the claim construction adopted by the Board impermissibly broadened the claims to read on the prior art and was contrary to the clear description in the specification. The Federal Circuit found that the PTAB’s determination of anticipation was based on an improper enlargement of the claims. The device described in the patent at issue was in fact different from the hair styling devices in the prior art.

Weak Secondary Considerations May Be Insufficient to Overcome Strong Showings of Obviousness

In ZUP, LLC. v. Nash Manufacturing, Inc., Appeal No. 2017-1601, the Federal Circuit held that the weak showing of secondary considerations presented by the patent holder was insufficient to create a genuine dispute of fact sufficient to overcome the strong showing of obviousness.

ZUP sued Nash for infringement of a patent related to a water recreation board. Nash moved for summary judgment, arguing that the patent was obvious over the prior art. The district court found the prior art disclosed all of the claimed elements, and one skilled in the art would have been motivated to combine them to improve rider stability when changing positions on the board. The district court dismissed ZUP’s evidence of secondary considerations as too weak. Thus, the district court granted Nash’s motion and ZUP appealed.

The Federal Circuit affirmed. The Federal Circuit concluded there was no genuine dispute as to motivation to combine because the prior art disclosed all of the claimed elements and a consistent desire for riders to change positions. As a result, one skilled in the art would be motivated to combine the elements to make it easier to change positions. There was also no genuine dispute as to secondary considerations because the differences between the claimed invention and the prior art were minimal and others had already achieved the goal of “helping users maneuver between positions on a water recreational board.” Thus, the Federal Circuit held the “weak evidence of secondary considerations presented here simply cannot overcome the strong showing of obviousness.”

Judge Newman dissented, arguing that a prima facie obviousness determination must be based on all four Graham factors. Judge Newman argued that the majority improperly based its prima facie determination on the first three Graham factors and then treated the fourth factor (secondary considerations) solely as rebuttal evidence.