CAFC Vacates PTAB Obviousness Decision, Nonobviousness Nexus Established by Patent Owner

On Thursday, October 18th, the Court of Appeals for the Federal Circuit issued a non-precedential decision in LiquidPower Specialty Products v. Baker Hughes, vacating and remanding a final written decision from the Patent Trial and Appeal Board (PTAB); a decision which had invalidated claims of a LiquidPower patent in an inter partes review (IPR) proceeding. In a nutshell, the Federal Circuit found there to be substantial evidence supporting PTAB determinations relating to specifically what the prior art taught, and what the prior art motivated those of skill in the art to do vis-a-vis motivation to combine. However, the panel, made up of Chief Judge Sharon Prost and Circuit Judges Todd Hughes and Kimberly Moore, determined that substantial evidence did not support the PTAB’s finding that the patent owner failed to establish a nexus between the claimed invention and objective evidence of nonobviousness, or secondary considerations as they are sometimes called.  The case is now remanded to the PTAB for proper consideration of the objective evidence of nonobviousness presented by the patent owner.

The patent-at-issue in this appeal is U.S. Patent No. 8022118, titled Drag Reduction of Asphaltenic Crude Oils. Issued in September 2011, it covers a method of introducing a drag reducing polymer into a pipeline in such a way that the friction loss associated with the turbulent flow through the pipeline is reduced by suppressing the growth of turbulent eddies. The resulting invention addressed a need present in conventional polymeric drag reducers, which don’t perform well in crude oils having a low American Petroleum Institute (API) gravity and/or a high asphaltene content.

The ‘118 patent was part of a series of six patents asserted by Lubrizol Specialty Products, later renamed LiquidPower, against Baker Hughes in the Southern District of Texas. In its complaint, Lubrizol argued that Baker Hughes was marketing drag reducing agents (DRAs) for use in heavy, asphaltenic crude oils which infringed upon Lubrizol’s patents. Lubrizol alleged that Baker Hughes had knowledge of the ‘118 patent by August 2009 as the published patent application was submitted in information disclosure statements to the U.S. Patent and Trademark Office during the prosecution of two patent applications filed by Baker Hughes. Lubrizol accused Baker Heavy Crude DRA products, including the FLO ULTIMA Heavy Crude line of products, of infringing on Lubrizol’s patented methods of DRAs for use in pipelines carrying hydrocarbons having a high asphaltene content and an API gravity of less than 23 degrees.


Interestingly, the ‘118 patent was asserted by Lubrizol in a different patent infringement case filed in the Southern District of Texas and a consent judgment entered in that case in July 2016 found that the claims of ‘118 patent were not invalid, thereby confirming the validity of the claims. In that case, defendant Flowchem argued that the ‘118 patent was invalid and unenforceable on the basis of inequitable conduct during the patent’s prosecution at the USPTO. In the consent judgment, Flowchem acknowledged the validity of the ‘118 patent claims and the claims of the other patents-in-suit and was enjoined from offering for sale DRA agents intended for use in U.S. pipelines containing a heavy asphaltenic crude oil.

To challenge the propriety of the patent claims in question, Baker Hughes filed two IPR petitions against the ‘118 patent at the PTAB. One of the IPRs was dismissed procedurally pre-institution while the other was instituted and led to a final written decision issued last November which invalidated all 11 claims of the ‘118 patent on grounds of either 35 U.S.C. § 102 as anticipated or 35 U.S.C. § 103 as obvious. The PTAB determined that independent claims 1 and 11 of the ‘118 patent were invalid under Section 102 as anticipated by U.S. Patent No. 6015779, Methods for Forming Amorphous Ultra-High Molecular Weight Polyalphaolefin Drag Reducing Agents (“Eaton”). Independent claims 1 and 11 were also determined to be invalid under Section 103 as obvious over the combination of Eaton and U.S. Patent No. 4983186, Methods and Compositions for Reduction of Drag in Hydrocarbon Fluids (“Naiman”).

On appeal to the Federal Circuit, the appellate court did find substantial evidence supporting two of the PTAB’s findings. First, that the combination of Eaton, Naiman and a textbook chapter on solubility characteristics and the precipitation of asphaltenes published in 2003 by the Alberta Energy Research Institute (“Strausz”) disclosed the drag reduction limitation of the ‘118 patent claims. Second, that there was a motivation to replace Eaton’s polymers with Naiman’s polymers based on the testimony of Baker Hughes’ expert witness that a person of ordinary skill would have understood that Naiman’s polymerization process was less limited and less expensive than Eaton’s process.

However, the Federal Circuit sided with LiquidPower with respect to the argument that multiple objective indicia of non obviousness were present, including long-felt but unsolved need, commercial success and acquiescence to an injunction. This  objective evidence of nonobviousness wasn’t considered by the PTAB because the Board found that LiquidPower didn’t establish that it was entitled to a presumption of nexus. The Federal Circuit, however, found that LiquidPower submitted ample evidence to support a nexus including the commercial success of its ExtremePower product, which was driven by the claimed features of the ‘118 patent. Other evidence included presented supporting a nexus included the injunction to which Flowchem stipulated in U.S. district court as well as documentation that both Flowchem and Baker Hughes had recognized the need for improvements to the transportation of heavy crude oils through a pipeline but both had failed to develop a suitable DRA.

“To the extent that the Board made a fact finding that LSPI failed to establish nexus for its objective evidence, we conclude that this fact finding is not supported by substantial evidence,” wrote Judge Moore. “On remand, it is up to the Board to consider the amount of weight to give this evidence.”


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Join the Discussion

7 comments so far.

  • [Avatar for Pro Say]
    Pro Say
    October 25, 2018 12:47 pm

    Paul — just finished reading the three appeal briefs; your two and the PTO’s one.

    The solicitor improperly and illegally backed the Boards’ multiple abstract ideas contentions against your claims; just as (I presume; though I haven’t read your entire file wrapper) the Examiner did.

    Yet as the Supreme Court clearly, explicitly, and unambiguously repeatedly instructs in Alice, Mayo, and Bilski (note just one stated idea / concept in each Court decision with said one idea / concept being directed to all the claims at issue):

    “We hold that the claims at issue are drawn to the abstract idea of intermediated settlement …” Alice at 2352

    “First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts.” Alice at 2355

    “We must first determine whether the claims at issue are directed to a patent-ineligible concept.” Alice at 2355

    “The claims at issue in Bilski described a method for hedging against the financial risk of price fluctuations.” Alice at 2355

    “It follows from our prior cases, and Bilski in particular, that the claims at issue here are directed to an abstract idea.” Alice at 2356

    “Because the claims at issue are directed to the abstract idea of intermediated settlement …”Alice at 2357

    “First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts.” Mayo at 1296-1297

    Make no mistake — the difference and distinction between one and who knows how many concepts is a critical Alice / Mayo analytical factor indeed.

    Arguably the most important factor.

    Parties – including the Patent Office and the Courts – trying to deal with multiple-abstract-concept assertions – going against the Supreme Court’s express dictate and directive when they do so — would quickly find themselves mired in a due-process-denying (and unconstitutional) factual and legal morass.

    Swallowing all of patent law in the process:

    “At the same time, we tread carefully in construing this exclusionary principle lest it swallow all of patent law.” Mayo, 566 U.S., at ___, 132 S.Ct., at 1293-1294 (as quoted in Alice at 2354)

    How about two concepts directed to the claims at issue being acceptable? Would three concepts be O.K.? What about four? Five? Ten?

    Or how about one concept for each claim? Two for each claim? Three? Four? Five? Ten?

    Why not one for each limitation? Two? Three? Four, five, ten or more? Maybe one or more for each element? Would that be O.K.?

    Where would such patent madness end?

    All of patent law would indeed be swallowed.

    With America on the road to becoming an intellectual property third world country (now 12th and sinking fast); including because freeriding copyists the world over would steal American innovations with impunity (as they are doing).

    With the commensurate loss of untold 1,000’s of excellent American jobs.

    Something already happening since Mayo/Alice; and worse: their widespread misuse and misapplication (including your case Paul).

    Enough is enough.

    There’s no confusion here. No subjectivity. No uncertainty. No gray area. No interpretation.

    The Supreme Court said what it means and means what it says:

    One abstract idea. All the claims at issue.

    One can’t be identified? Then the claims are § 101 eligible. The Alice / Mayo analysis stops there. Step two is moot.

    Simple as that.

    Looks folks, you need to stop letting Examiners, the Board, the Solicitor, and the Courts get away with alleging multiple abstract ideas against your claims.

    If they 101 reject any of your claims; force them to state one and only one alleged abstract idea (against ALL such 101-rejected claims; just as SCOTUS said) — and then stand by it.

    Paul — if the CAFC follows the law — and the facts — you will prevail.

    I hope they do.

    p.s. Creative idea using Gartside. Don’t believe I’ve every seen that before. Something I may use in the future.

  • [Avatar for Pro Say]
    Pro Say
    October 24, 2018 03:51 pm

    I’m with Mike. Anyone have an example?

    Indeed, if and when infringement has been shown, the infringer’s successful / profitable use of the invention (claim/s) certainly proves such nexus.

    Nexus is nexus; regardless of who’s benefiting / profiting from the invention (claim/s).

    Nexus is nexus to the invention’s claim/s; who owns the patent shouldn’t matter.

  • [Avatar for BP]
    October 24, 2018 03:45 pm

    1 @PM “It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. . . . ” Perhaps they use a different “reasonable mind”, that of the judge and not a PHOSITA. An abstract idea under 101 is recognizable by anyone (right?); whereas, 103 must use a PHOSITA. BRI is moving away from PHOSITA and toward ordinary person on the street which is why technical terms are being stripped from claims “cardiac rhythm data” becomes merely “data”, which is inherently abstract (according to some). The “new” BRI (non-PHOSITA) is starting to infect 103 searches and rejections.

  • [Avatar for Mike]
    October 24, 2018 02:44 pm

    Can someone point me to an example case where a nexus was successfully established on a third-party product and secondary considerations were successfully argued for non-obviousness? In the webinar a few weeks ago, John and Gene said it could be done and John said he did it before on a case regarding an ocular lens. I was wondering if someone could provide an accessible case — something I could download/read and then use as a reference.

  • [Avatar for Paul Morinville]
    Paul Morinville
    October 24, 2018 02:35 pm

    See In Re Morinville. I argue pro se that Gartside applies to 101. Doesn’t look like they will grant oral arguments, but I asked for them.

  • [Avatar for EG]
    October 24, 2018 02:25 pm

    ” Why don’t they use it for 101? After all, it is required under Gartside.”

    Hey Paul,

    I hear you loud and clear and you’re absolutely correct. How Section 101 issues are currently treated by the Federal Circuit, in view of SCOTUS’ nonsensical and broken Mayo/Alice framework (where SCOTUS feels privileged to state what it believes to be “general knowledge” without any factual proof of such) is appalling.

  • [Avatar for Paul Morinville]
    Paul Morinville
    October 24, 2018 11:39 am

    So they use a substantial evidence standard for 103. Why don’t they use it for 101? After all, it is required under Gartside.

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