Federal Circuit Vacates Board’s IPR Decision on Patentability of Substitute Claims

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83-1. Federal Circuit Vacates Board’s IPR Decision on Patentability of Substitute Claims

Nike, Inc. v. Adidas AG, No. 2014-1719, 2016 U.S. App. LEXIS 2376 (Fed. Cir. Feb. 11, 2016) (Before Chen, Mayer, and Stoll, J.) (Opinion for the court, Chen, J.). Click Here for a copy of the opinion.

Nike owns a patent for an “upper” component of a shoe, which has the general shape of a foot and forms a void for receiving the foot.  The component is made from a warp or weft knitted textile consisting of a single material element made in a unitary construction.  Adidas petitioned for inter partes review of the patent, and after the Board’s decision, Nike’s request to enter substitute claims was denied. The Board noted that a patent owner is required to persuade the Board that the proposed claims are patentable over the prior art of record, and also over the prior art not of record but known to the patent owner.  The Board held that Nike’s motion was a conclusory statement of patentability and Nike had failed to establish patentability over two references.  Nike appealed.

federal-circuit-cafc-5aOn appeal, the Court disagreed with Nike’s view that 35 U.S.C. § 316(e) means the IPR petitioner has the burden of proving the unpatentability of proposed claims.  The patent owner has the affirmative duty to justify why newly drafted claims should be entered.  The Court also disagreed with Nike’s argument that the Nishida and Schuessler references were sufficiently different, such that a person of skill in the art would not think to combine them.  The Court held that a person of skill would be motivated to address the problems identified in one reference, by applying the teachings of another reference, to arrive at the Nike’s substitute claims — because both references served the same purpose of efficiently creating knitted articles.

Nike argued that the Board erred by failing to address secondary considerations in its analysis.  The Court agreed, noting that the Board’s decision contained no findings indicating why it rejected Nike’s evidence of long felt need. The Court remanded for the Board to examine this evidence.  Nike next argued that it was wrongly required to show that two of its proposed substitute claims were patentably distinct from each another, and that the Board incorrectly compared these claims to the prior art.  The Court agreed with Nike, and remanded accordingly.

The Court held that the Board’s finding of obviousness over the Nishida reference was unsupported, because it did not point to any disclosures in Nishida to explain how certain holes in the knitting were created.  The Court remanded, noting that this portion of the Board’s analysis lacked critical fact-findings required for an obviousness determination.

The Court affirmed that the broadest reasonable interpretation of this term was “an edge of a flat knit textile element, which is itself flat knit, e.g., which is not formed by cutting from a flat knit textile element.”  Adidas argued that this construction made the claimed feature obvious over the Schuessler Reference.  The Court rejected this argument, noting that it made no difference, because the Court had already affirmed that a person of ordinary skill in the art would be motivated to combine Schuessler with Nishida.

Adidas also argued that the “flat knit edge” was a negative limitation, and must satisfy a “heightened requirement” of written description support set forth under Santarus, Inc. v. Par Pharmaceutical, Inc., 694 F.3d 1344 (Fed. Cir. 2012).  The Court disagreed, finding that Santarus held that “[n]egative limitations are adequately supported when the specification describes a reason to exclude the relevant limitation.”  Id. at 1351.  The Board correctly relied on certain figures and the disclosure in the written description to conclude that the textile elements could be made using flat knitting, as described in the proposed substitute claims.

Finally, the Court held that the Board’s denial of Nike’s motion to amend for failure to show patentable distinction over “prior art not of record but known to the patent owner” was improper.  The Court held that the Board’s finding that Nike’s “conclusory statement” was “factually inadequate” under its interpretation of the Idle Free decision was too rigid and was an improper ground to deny Nike’s motion.  Accordingly the Court affirmed in part, vacated in part, and remanded the decision to the district court.


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