IP Law Daily Board erred in disregarding secondary considerations, rejecting amended claims in review of Nike footwear patent
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Thursday, February 11, 2016

Board erred in disregarding secondary considerations, rejecting amended claims in review of Nike footwear patent

By Thomas Long, J.D.

A decision by the Patent Trial and Appeal Board denying a motion by Nike, Inc., to substitute new claims in a patent for a knitted footwear “upper” has been vacated in part and remanded by the U.S. Court of Appeals for the Federal Circuit because the Board failed to consider Nike’s evidence of secondary considerations negating the obviousness of the proposed claims over prior art (Nike, Inc. v. Adidas AG, February 11, 2016, Chen, R.). In addition, the Board erred in denying Nike’s motion to amend on the ground that Nike failed to persuade it that the claims were patentable over prior art known by Nike but not made of record. The Board correctly determined, however, that Nike had the burden of proving the patentability of its substitute claims in the context of an inter partesreview (IPR) proceeding.

Patent-in-suit. Nike held U.S. Patent No. 7,347,011 (“the ’011 patent”), entitled “Article of footwear having a textile upper.” The ’011 patent related to the “upper” component of an article of footwear, which had the general shape of a foot and formed a void for receiving the foot through the ankle opening. The upper disclosed in the ’011 patent was made from a knitted textile using any number of warp knitting or weft knitting processes.

Review proceeding. Adidas AG petitioned the Board for IPR of the ’011 patent, asserting that all 46 of its claims were unpatentable for anticipation or obviousness in light of prior art. The Board granted review of certain of Adidas’s challenges; after the Board issued its institution decision, Nike filed a motion to amend the claims, seeking cancellation of claims 1-46 and proposing four substitute claims. In its final written decision, the Board granted Nike’s request to cancel claims 1-46, but it denied Nike’s request to enter substitute claims 47-50.

The Board reasoned that that a patent owner must “persuade the Board that the proposed substitute claim is patentable over the prior art of record, and over prior art not of record but known to the patent owner.” Nike’s motion included only a conclusory statement that the proposed claims were patentable over prior art not of record but known to Nike. Alternatively, the Board denied entry of the substitute claims because Nike failed to establish that the substitute claims were patentable over prior art references. Nike appealed.

Arguments on appeal. First, Nike asserted that the Board erroneously shifted to Nike (the patent owner) the burden of proving patentability of its proposed substitute claims 47-50. Second, Nike contested the Board’s finding on the merits that the proposed substitute claims were unpatentable as obvious. Third, Nike objected to the Board’s practice of requiring a patent owner to establish patentability of substitute claims over all prior art known to the patent owner, including prior art not of record but known to the patent owner.

Burden of proof. The court noted that Section 316(e) of the Patent Act provides, “In an inter partes review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence” (emphasis added). However, the court disagreed with Nike’s position that Section 316(e) also placed on the petitioner the burden of proving unpatentability of any newly proposed substitute claim that the patent owner sought to introduce during the proceedings. First, Congress had specifically delegated to the USPTO the authority to establish the standards and procedures with which a patent owner must comply to amend its patent during an IPR. In addition, the requirement of Section 316(a)(9) that the patent owner provide “information … in support of any amendment” indicated that the patent owner had an affirmative duty to justify why newly drafted claims should be entered into the proceeding. Accordingly, the Federal Circuit held that the USPTO may impose the burden of establishing the patentability of proposed substitute claims on the patent owner, and the Board did not err by placing the burden on Nike to establish patentability over the prior art of Nike’s proposed substitute claims.

Obviousness—motivation to combine. Substantial evidence supported the Board’s conclusion that a person skilled in the art would be motivated to combine the prior art references to arrive at the unitary, flat-knitted textile upper recited in the proposed substitute claims, in the court’s view. The references all related to the creation of three-dimensional, knitted articles created in an efficient and economical way by joining the edges of two-dimensional knit textiles. Therefore, the prior art references served the same purpose of efficiently creating knitted articles. A skilled artisan interested in minimizing waste in the production process would have logically consulted the well-known practice of flat-knitting, which eliminated the cutting process altogether. This conclusion supported the Board’s obviousness determination, the court said.

The court rejected Nike’s argument that the age of the prior art references and the passage of time between their public availability and the inventions recited in the proposed substitute claims should have precluded the Board from finding a reason to combine the references. Although the age of a reference could highlight the fact that no one in the art understood the problem to be solved, in this case, there was no question that skilled artisans knew of the desire to reduce waste when producing wearable, knitted shoe uppers.

Obviousness—secondary considerations. Nike argued before the Board that reducing waste was a long-felt need in the shoe manufacturing industry and that prior art did not resolve this need because the process disclosed by the prior art still resulted in some waste. Despite this argument and evidence, the Board’s final written decision lacked a discussion, or even an acknowledgement, of secondary considerations, such as a long-felt but unresolved need. The Board should have explicitly acknowledged and evaluated Nike’s secondary considerations evidence, in the court’s view.

The Board’s statements describing the teachings of the prior art did not amount to an “implicit” rejection of Nike’s long-felt-need evidence and argument. These statements were made in the context of the Board’s discussion of the motivation to combine prior art references. Nothing suggested that the Board weighed and rejected Nike’s evidence of long-felt need to eliminate waste in the manufacture of knit textile uppers before concluding that the proposed substitute claims were unpatentable as obvious. Therefore, the Federal Circuit remanded the case for the Board to examine Nike’s evidence of secondary considerations and its impact, if any, on the Board’s analysis regarding obviousness.

Obviousness—claim 49. Nike argued—and the court agreed—that the Board improperly grouped together proposed substitute claims 48 and 49 in its obviousness analysis. The Board failed to consider Nike’s arguments that the claims were patentably distinct and that claim 49 was nonobviousness in light of prior art. Accordingly, the Board’s determination regarding claim 49 was remanded. The court declined to find, on the record before it, that claim 49 was patentable, as Nike urged; this conclusion could not be reached because the Board had not made the requisite factual findings.

Prior art not of record but known to the patent owner. Under 37 C.F.R. §42.20(c), a patent owner moving to amend must persuade the Board that a proposed substitute claim is patentable over the prior art of record, and over prior art not of record but known to the patent owner” (emphasis added). Nike attempted to carry this burden in its motion to amend by simply stating that its proposed claims were patentable over prior art known to Nike, but not part of the record of the proceedings. The Board denied Nike’s request to enter proposed substitute claims 47-50 in part because Nike’s motion failed to address any prior art reference that was not discussed in Adidas’s petition for review or Adidas’s opposition to Nike’s motion to amend. 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” did not provide an adequate basis for affirmance.

There had been no allegation that Nike violated its duty of candor, the court noted. Moreover, the USPTO acknowledged that Nike’s statement about the substitute claims’ patentability over prior art not of record but known to Nike would satisfy Nike’s obligation of good faith and candor to the USPTO. Absent an allegation of conduct violating the duty of candor, the court could not see how the statement used by Nike would be inadequate. The court therefore concluded that this was an improper ground on which to deny Nike’s motion to amend.

The case is No. 2014-1719.

Attorneys: Mark Christopher Fleming (Wilmer Cutler Pickering Hale and Dorr LLP) for Nike, Inc. Mitchell G. Stockwell (Kilpatrick Townsend & Stockton LLP) for Adidas AG. Michael Sumner Forman, Office of the Solicitor, United States Patent and Trademark Office, for Intervenor Michelle K. Lee.

Companies: Nike, Inc.; Adidas AG

MainStory: TopStory Patent FedCirNews

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