Zaxcom Asks Full Federal Circuit to Clarify Court-Created Confusion on Presumption of Nexus

“If not brought back in line with this Court’s longstanding authority, [the Fox Factory standard will] signal to inventors that no amount of praise will protect them from an obviousness attack.” February, the U.S. Court of Appeals for the Federal Circuit (CAFC) agreed with the Patent Trial and Appeal Board’s (PTAB’s) decision that the original claims of Zaxcom’s U.S. Patent No. 9,336,307 for Engineering Emmy® and technical OSCAR award-winning wireless microphone technology were unpatentable as obvious, but upheld the substitute claims Zaxcom had proposed. Now, Zaxcom has petitioned the court for rehearing en banc, arguing that the CAFC’s precedent in Fox Factory, Inc. v. SRAM LLC, 944 F.3d 1366 (Fed. Cir. 2019), “confused the law” regarding a rebuttable presumption of nexus.

Zaxcom first appealed the PTAB’s decision on the original claims of the ‘307 patent in May of 2020, arguing that the PTAB misconstrued the claims and failed to properly consider evidence of industry praise. The ‘307 patent disclosed several embodiments, including a “Dropout Embodiment” and a “Multi-track Embodiment”. In the Dropout Embodiment, the loss of audio data during a wireless transmission was remedied by replacing data with locally recorded audio data. In the Multitrack Embodiment, local audio data from a plurality of local audio devices was combined to create a single, local multi-track file or a single, remote multitrack file.

Zaxcom said the PTAB erred in its claim construction by determining that the claims encompass both the Dropout Embodiment and the Multitrack Embodiment and that the PTAB improperly construed the claims such that the local audio data and the remotely recorded audio data may be from different sources, rather than both originating from the same source. But the CAFC agreed with the PTAB’s approach, saying that “[u]nder the claims’ broadest reasonable interpretation (BRI), local and remote audio data may be ‘combined’ either to repair corrupted audio data received by the remote recorder or to create a multitrack audio file. In adopting that construction under the BRI standard, the Board correctly rejected Zaxcom’s argument for a requirement that the claimed ‘local audio data’ and ‘remote audio data’ derive from the same source (i.e., the same local audio event).”

The court agreed that, given the PTAB’s construction, the Board had “ample evidence” to support its finding that claims 1-11 were obvious over the primary reference, “Strub”, when combined with two other prior art references, or that claims 12-14 were anticipated by Strub.

The PTAB’s Final Written Decision in the case was designated precedential in April 2020 for its holding that a nexus between the evidence and the merits of the claimed invention must be established in order for objective indicia of nonobviousness to be given substantial weight. Citing Fox Factory, the PTAB noted that a patentee is entitled to a presumption of nexus “when the patentee shows that the asserted objective evidence is tied to a specific product and that product ‘embodies the claimed features, and is coextensive with them.’”

The CAFC agreed with the PTAB’s determination that Zaxcom’s evidence of objective indicia like industry praise and long-felt need “lacked the nexus to the claimed invention required to alter a conclusion of obviousness that would be justified based on the prior-art analysis.” Specifically, Zaxcom’s reliance on the industry awards it received and declarations from sound mixers failed because such praise was “primarily directed to the systems’ critical feature of dropout repair, while the claims of the ’307 patent, under the BRI construction properly adopted, are broadly directed to wirelessly transmitting audio data and combining local and remote audio data from a plurality of devices—a technique already known in the prior art.”

Zaxcom’s petition for en banc rehearing argues that this addition of a third prerequisite for a finding of rebuttable presumption of nexus—i.e., proof that the product has no “critical” unclaimed features that materially impact its functionality—is what confused the law and is “far removed from the underlying purpose of a having a nexus presumption in the first place.”

The pre-Fox Factory case law “is clear that a product that practices a patent is entitled to a presumption of nexus unless ‘the patented invention is only a small component of the product,’” says the petition, citing Henny Penny Corp. v. Frymaster LLC , 938 F.3d 1324, 7 1333 (Fed. Cir. 2019). “Outside this ‘limited exception,’ unclaimed features merely serve as potential rebuttal evidence,” the petition adds, citing WBIP, LLC v. Kohler Co., 829 F.3d 1317, 1329 & n.3 (Fed. Cir. 2016).

The petition also says that the Fox Factory is “intractably high” and “demoralizes” inventors. “If not brought back in line with this Court’s longstanding authority, [it will] signal to inventors that no amount of praise will protect them from an obviousness attack. Nowhere is this clearer than in the case-at-bar.”

Ultimately, Zaxcom is asking the CAFC to “reaffirm the longstanding rule that unclaimed features do not preclude a presumption of nexus unless “the patented invention is only a small component of the product tied to the objective evidence,” under Henny Penny, and to  reverse the Board’s decision of obviousness with respect to the  original challenged claims, “or at least remand with instructions to apply the presumption of nexus between those inventions and the industry praise.”

The February panel decision did affirm the PTAB’s approval of Zaxcom’s narrowed substitute claims, explaining that “the substitute claims narrow the ‘combined’ claim limitation to a limitation that requires ‘replacing’ the remotely recorded data with local audio data from a device’s memory.”

Since the asserted prior art basis for obviousness of the narrowed claims was weak, the PTAB concluded, and the CAFC agreed, that the objective indicia evidence was strong with respect to the new claims and entitled to a presumption of nexus. Furthermore, the evidence indicated a positive nexus, as the “claims are undisputedly directed to dropout repair in systems with wearable recording devices, and this feature was discussed in at least the Emmy Award.”

The petitioners may have a hard road to en banc review, considering several CAFC judges recently expressed frustration with the number of rehearing requests they have been receiving, according to an IPLaw360 report.

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