Nike v. Adidas: Federal Circuit refines PTAB motion to amend practice in inter partes review

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Federal Circuit building, Washington, DC.

Last week the United States Court of Appeals for the Federal Circuit issued a decision in Nike, Inc. v. Adidas AG, relating to an appeal from the inter partes review (IPR) of U.S. Patent No. 7,347,011 owned by Nike. Nike appealed the PTAB’s denial of its motion to amend, and the Director of the USPTO intervened to defend the PTAB decision.

The Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO) granted the IPR petition filed by Adidas AG and instituted inter partes review of claims 1–46 of the ’011 patent. Nike then filed a motion to amend in which it requested cancellation of claims 1–46 and proposed substitute claims 47–50.

The Board granted Nike’s motion to cancel claims 1–46, but denied the motion as to the substitute claims for two alternative reasons. First, the PTAB explained that it is the burden of the patent owner to demonstrate that substitute claims are patentable over the prior art of record and over prior art not of record but known by the patent owner. Because Nike’s motion only made conclusory statements that the proposed claims were patentable over prior art not of record but known to Nike, the Board denied Nike’s motion. The PTAB also alternatively denied the substitute claims because the Board felt Nike had failed to establish that the substitute claims were patentable over two references in particular, the Nishida and Schuessler references.


Burden on the Patentee

At the outset of the substantive discussion of the merits of Nike’s argument, Judge Raymond Chen, writing for the majority (joined by Judges Mayer and Stoll) explained that in prior rulings the Federal Circuit has found it appropriate for the burden to be placed on the patentee to demonstrate patentability of substitute claims. However, Nike challenged the propriety of these prior rulings pointing out that in an inter partes review the petitioner is statutorily mandated to carry the burden of proving unpatentability by a preponderance of the evidence. See 35 U.S.C. 316(e). The Court was not persuaded, finding that the evidentiary standard of 316(e) is not intended to apply to claims not present at the time the petition is filed, such as substitute claims.

In supporting earlier precedent authorizing the burden being placed on the patentee to establish the patentability of substitute claims, the Federal Circuit also explained the differing nature of inter partes review compared with examination, where a search is performed. The Court concluded that “placing the burden on the patent owner ensures that proposed substitute claims are critically analyzed before they are entered as claims that are part of the issued patent.”


Prior Art Not of Record

Perhaps the most interesting part of the ruling related to exactly which prior art the patent owner must distinguish in order to be entitled to substitute claims. In this case the PTAB, at least in part, denied Nike’s motion to amend because Nike did not address any prior art references not raised in the Adidas petition for inter partes review.

The PTAB explained in Idle Free that under 37 CFR 42.20(c), to be successful a motion to amend must demonstrate that substitute claims are patentable over not only the prior art of record, but also over the prior art not of record but known to the patent owner.

The USPTO argued that at the heart of the requirement that substitute claims be patentable over prior art not of record but known to the patentee is nothing more than a requirement that the patent owner submit information necessary to satisfy the duty of candor owed to the Office. The Federal Circuit agreed, but noticed that there was no allegation that Nike had violated the duty of candor. Absent an allegation that there has been a violation of the duty of candor, the Federal Circuit ruled that it is improper to deny a motion to amend for failure to raise prior art not found in the granted petition.



On appeal, Nike objected to three components of the PTAB’s obviousness analysis. First, Nike contested the Board’s finding that a person of skill in the art would have a reason to combine the two relevant prior art references to arrive at the unitary upper claimed in the substitute claims. Second, Nike argues that the Board failed to consider Nike’s evidence of secondary considerations in violation of this court’s precedent. Finally, Nike argued that, at the very least, proposed claim 49 recited a limitation absent from the cited prior art references.

On the issue of motivation to combine, the Federal Circuit affirmed the PTAB, finding that the PTAB decision was supported by substantial evidence.

On the issue of secondary considerations, however, the Federal Circuit reversed. In Nike’s brief supporting the motion to amend filed at the Board, Nike argued that reducing waste was a long-felt need in the shoe manufacturing industry and that Nishida did not resolve, providing argument and evidence for the PTAB to consider. Notwithstanding, the PTAB completely failed to address secondary considerations. Adidas argued this failure was not automatic grounds for reversal, and the USPTO argued that it was not error for the PTAB to fail to address secondary considerations because the decision “implicitly found that reducing waste was not a long-felt but unresolved need.” The USPTO argued implicit finding was wrapped up in the PTAB’s description of the teachings of the prior art.

The Federal Circuit disagreed. The Court was not persuaded that the PTAB discussion of the prior art teachings amounted to an implicit finding on secondary considerations, particularly pointing out that the discussion was only had in context of motivation to combine. While acknowledging that secondary considerations do not need to be considered where only conclusory and unsupported arguments are made, the Federal Circuit explained that where a litigant raises substantive arguments and provides evidence the PTAB must consider secondary considerations. Thus, the Court concluded that under the circumstances the PTAB should have explicitly acknowledged and evaluated Nike’s secondary considerations evidence.

With respect to claim 49, the Federal Circuit agreed with Nike that despite correctly reciting the Idle Free standard that multiple substitute claims are permissible if they are patentably distinct from each other, the PTAB nevertheless did not engage in any such analysis comparing proposed substitute claims 48 and 49. Thus, the PTAB decision meant that claim 49 would stand and fall with claim 48, which is not consistent with the rule set out by the PTAB in Idle Free. Therefore, the Federal Circuit remanded for a proper determination of how these claims should be treated per the standard set forth in Idle Free, and, if necessary, a full consideration of the patentability of each.


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2 comments so far.

  • [Avatar for Paul F, Morgan]
    Paul F, Morgan
    February 21, 2016 10:01 am

    P.S. re IPR considerations of secondary evidence of unobviousness, that cannot, of course, be done unless the patent owner has promptly submitted effective supporting declarations and exhibits. Also, such evidence must be clearly tied to the subject claims, just as in any other patent dispute. Even in ex parte application prosecution appealed to the Fed. Cir. such evidence is not often effectively tied to causation by the claimed invention well enough to change the 103 outcome.

  • [Avatar for Paul F. Morgan]
    Paul F. Morgan
    February 20, 2016 06:38 pm

    Re: “the Federal Circuit ruled that it is improper to deny a motion to amend for failure to raise prior art not found in the granted petition.”
    This is at the very end of this lengthy opinion, and there is more to it. First, this motion to amend or substitute a claim in the IPR did contain an affirmative assertion that the subject proposed amended claim distinguished over the prior art they were aware of. Also, the PTO had said to the Court, and they noted here, that a PTAB IPR decision subsequent to this one had already loosened the requirement for a substitute claim in this respect.
    Note that the prior art the motion-filer could be held to be aware of includes prior art cited in the application prosecution of the subject patent, not just the prior art cited by the IPR petitioner.