Not Every Instance of an Agency Reaching Inconsistent Outcomes in Similar, Related Cases will Necessarily be Erroneous

In Vicor Corp. v. Synqor, Inc., [2016-2283] (August 30, 2017) the Federal Circuit affirmed in part, vacated in part, and remanded the Board’s decisions in two reexaminations, one in which the Board found that certain claims of U.S. Patent No. 8,023,290 are patentable; and one in which the Board found certain claims of U.S. Patent No. 7,272,021 unpatentable as anticipated or obvious.

The Federal Circuit found that despite sharing a common panel and having opinions issued on the same date, the decisions in the respective reexaminations contain inconsistent findings on identical issues and on essentially the same record. With respect to the ‘290 patent reexamination, the Federal Circuit said that the
Board improperly analyzed the obviousness arguments under only one of the four Graham factors when it looked exclusively at the objective evidence, without considering the remaining factors and the relative strength of the factors. The Federal Circuit further said that the Board reached inconsistent conclusions as to the evidentiary weight to be given to the secondary considerations evidence presented in the respective reexaminations of the ’290 and ’021 patents, without any explanation to justify such inconsistency.

The Federal Circuit said that the Board’s legal error with respect to the ‘290 patent is underscored by its opinion issued on the same day in the related reexamination of the ’021 patent, where the Board applied all four Graham factors in the ’021’s reexamination and stated that “[t]he Federal Circuit has determined that only after considering the four Graham criteria together can the decision maker make the legal determination of whether the invention is nonobvious.”

The Federal Circuit said that in the ’290’s reexamination, the Board found the objective
evidence to be so persuasive that it approved of the examiner’s decision to withdraw rejections without analyzing the remaining Graham factors and without considering
Federal Circuit decisions on related claims.  In the ’021’s reexamination, however, the Board determined that the objective evidence principally related to features of the
claims that were found to be anticipated in other cases and, therefore, found that there was no nexus between the objective evidence and the claims of the ’021 patent. The Federal Circuit concluded that Board’s decisions do not evince any explanation or justification for these inconsistent findings, given the similarity between the claims at issue in the respective reexaminations.

The Federal Circuit said that not every instance of an agency reaching inconsistent outcomes in similar, related cases will necessarily be erroneous, but concluded that the inconsistent application of the Graham factors in two cases reaching different results, required that the cases be vacated and remanded,

Routine Optimization Cannot Make Invention Obvious Without A Reasonable Expectation for Success

In In re Stepan Co., [2016-1811] (August 25, 2017), the Federal Circuit vacated the PTAB’s affirmance of the Examiner’s rejection of claims 1–31 of U.S. Patent Application No. 12/456,567 on herbicidal formulations containing glyphosate salt with a surfactant system.

The Examiner found that the prior art contained the preferred surfactants, and further taught glycols as an optional ingredient, and concluded that “it is routine optimization to select and adjust the surfactants to the undisclosed range.  The Board affirmed.

The Federal Circuit began with the premise that an obviousness determination requires finding both “that a skilled artisan would have been motivated to combine  the teachings of the prior art . . . and that the skilled
artisan would have had a reasonable expectation of success in doing so.” The Federal Circuit said that the Board failed to explain why it would have been “routine optimization” to select and adjust the claimed surfactants and achieve the claimed results.  The Federal Circuit said that an  agency tribunal must make findings of relevant facts, and present its reasoning in sufficient detail that the court may conduct meaningful review of the agency action, and that relying on routine optimization falls short of this standard.  Specifically, the Federal Circuit said the Board did not explain “why it
would have been routine optimization to arrive at the claimed invention.”

The Federal Circuit said that just like cases where the Board has characterized the invention as “intuitive” or “common sense,” the Board must provide some rational underpinning explaining why a person of ordinary skill in the art would have arrived at the claimed invention
through routine optimization.

The Federal Circuit also noted the absence of a reasonable expectation of success.   The Federal Circuit said that to have a reasonable expectation of success, one must be motivated to do more than merely to vary all parameters or try each of numerous possible choices until one possibly arrived at a successful result.

Finally the Federal Circuit said the Board improperly placed the burden of proving patentability on the applicant.  The claim required the composition have a “cloud point above 70°” and it was the USPTO’s burden to show that achieving this would have been obvious to a person of ordinary skill
in the art.

The Board’s decision was vacated, and the application remanded for further examination.


You Need Standing to Appeal and IPR Decision, But Not to Participate in the Appeal

In Personal Audio, LLC v. Electronic Frontier Foundation, [2016-1123] (August 7, 2017), the Federal Circuit affirmed the PTAB’s determination in an IPR that claims 31-35 of U.S. Patent No. 8,112,504, related to a system and apparatus for storing and distributing episodic media files, were unpatentable.

The Federal Circuit first addressed whether the Electronic Frontier Foundation had standing to participate in the appeal after  Consumer Watchdog v. Wisconsin Alumni Research Foundation, 753 F.3d 1258 (Fed. Cir. 2014), where the Federal Circuit held that a challenger who was not a competitor did not have Article III standing to appeal a PTAB determination of patentability.

However the Federal Circuit concluded that because Personal Audio had standing to appeal the invalidation of its patent claims, the Electronic Frontier Foundation did not need Article III standing to merely participate in the proceeding in which the appellant had standing.

On the merits, the Federal Circuit rejected Personal Audio’s objections to the Board’s claim construction, and affirmed the Board’s decision that the claims were anticipated or obvious.

Can Unexpected Results Make the Obvious Non-Obvious?

In Honeywell, Int’l Inc. v. Mexichem Amanco Holdings S.A., [16-1996] (August 1, 2017). the Federal Circuit vacated the USTPO’s reexamination decision invalidating claims 1–26, 31–37, 46–49, 58, 59, 61–68, 70–75, 80, and 81 of U.S. Patent 7,534,366 on a refrigerant and lubricant composition for air conditioning systems.  The Federal Circuit found that the Board erred by improperly relying on inherency to find obviousness and in its analysis of motivation to combine the references.

First, the Board erred in relying on inherency to dismiss evidence showing unpredictability in the art.   The use of inherency in the context of obviousness must be carefully circumscribed because that which may be inherent is not necessarily known and that which is unknown cannot be obvious.  What is important regarding properties that may be inherent, but unknown, is whether they are unexpected. All properties of a composition are inherent in that composition, but unexpected properties may cause what may appear to be an obvious composition to be nonobvious.  The Board, in dismissing properties of the claimed invention as merely inherent, without further consideration as to unpredictability and unexpectedness, erred as a matter of law.

Second, the Board erred in dismissing evidence of unpredictability in the art when it stated that one of ordinary skill would no more have expected failure than success in combining the references, and thus concluded that the person of ordinary skill would be led to routine testing, which would have eventually led to the claimed combination.  The Federal Circuit found that this put the burden on the patent owner to show that a person of ordinary skill in the art would have expected failure.  The Federal Circuit said that instead the the burden is on the Office to show that one of ordinary skill would have had a motivation to combine the references with a reasonable expectation of success.

The use of unexpected results to show non-obviousness is a curious aspect of patent law.  If it truly is obvious to modify a reference, or combine two or more references, then the fact that the obvious modification or obvious combination results in something unexpected, should not change the determination of obviousness, While we might feel like rewarding someone who provides unexpected results, by giving them a patent for doing what is obvious is not what the patent laws prescribe.  In Honeywell, however, the non-obviousness did not hinge on unexpected results, but on the unpredictability of the art.

The Federal Circuit also agreed that the Board improperly relied upon a new ground of rejection, resurrecting a reference cited by the requesters, but not relied upon by the Examiner.

Reasonable Expectation of Success, Not Absolute Predictability, is All that is Required for Obviousness

In Soft Gel Techs., Inc. v. Jarrow Formulas, Inc., [16-1814](July 26, 2017), the Federal Circuit affirmed the PTAB decision review inter partes reexamination, that claims in U.S. Patent Nos. 8,124,072, 8,105,583, and 8,147,826, directed to CoQ10 in solvents known as monoterpenes, were invalid for obviousness.

In trying to resurrect its claims, Soft Gel pointed to a later article reflecting follow up research, the necessity of which, it argued showed that earlier references did not make the claimed invention obvious.  The Federal Circuit called Soft Gel out, stating that  that it argued showed that Soft Gel was applying an incorrect legal standard for obviousness, requiring “absolute predictability” rather than simply “a reasonable expectation of
success.”  The Federal Circuit said:

A supplemental study does not imply lack of awareness of the likely result; rather, studies are frequently conducted to confirm what is suspected to be true. An incentive to conduct a confirmatory study frequently exists even when one has every reason to expect success.


Unexpected Results of an Obvious Process are Non-obvious

In Millennium Pharmaceuticals, Inc., v. Sandoz Inc., [2015-2066, 2016-1008, 2016-1009, 2016-1010, 2016-1109, 2016-1110, 2016-1283, 2016-1762] (July 17, 2017), the Federal Circuit reversed the district court, finding that invalidity was not established.

 At issue was the validity of U.S. Patent No. 6,713,446 for treatment
of oncology disease, sold under the name Velcade®.    The district court held that the claims were obvious because they were the inherent result of an allegedly obvious process, namely lyophilizing bortezomib in the presence of the bulking agent mannitol, even though nothing the prior art
taught or suggested that the claimed new compound would be formed, or taught or suggested making the claimed new compound by any method, or taught or suggested that this new compound would have the properties of stability, solubility, and dissociability that it exhibited.

The Federal Circuit framed the issue as “whether a person of ordinary skill, seeking to remedy the known instability and insolubility
and to produce an efficacious formulation of bortezomib,
would obviously produce the D-mannitol ester of bortezomib,
a previously unknown compound.”  Finding that the prior art contains no teaching or suggestion of this new compound, or that it would form during lyophilization, the Federal Circuit concluded that the invention was not obvious.

While conceding the truth of Sandoz’ argument that (1) lyophilization was generally known in formulating pharmaceutical products; (2) bulking agents were known for use in lyophilization; and (3) that mannitol was a known bulking agent, the Federal Circuit nonetheless found that the prior art does not teach or suggest that lyophilization of bortezomib in the presence of mannitol  would produce a chemical reaction and form a new chemical compound, or provide a reason to make this specific
new chemical compound, or that this new compound would solve the previously intractable problems of bortezomib formulation.

In the end, this is a triumph of “unexpected results” over what it technically obvious, or at least what is the inherent result of what is technically obvious.  The Federal Circuit suggested otherwise, noting that “[a] result is obvious when it is ‘the natural result flowing from the operation as taught,’ or a ‘property that is necessarily present’ when applying a process disclosed in the prior art,” and finding that Sandoz “failed to show that it was obvious to use mannitol to make an ester during lyophilization, or that the ester would solve the problems experienced with bortezomib.  The Federal Circuit’s analysis seems to put more weight on the obviousness of the unexpected results, than the obviousness of the process that resulted in unexpected results.

While it seems right to reward someone who solves a “previously intractable problem,”  it throws a kink into the obvious analysis to evaluate the obviousness of the unexpected results of an obvious process (which by definition are not obvious), rather than the obviousness of the process itself.


The Board can Rely on a Party’s Arguments in an IPR, as Long as it Explains Why

In Outdry Technologies Corp. v. Geox S.P.A., [2016-1769] (June 16, 2017), the Federal Circuit affirmed the Board’s determination that claims 1–15 of U.S. Patent No. 6,855,171 would have been obvious over a combination of prior art.

The ‘171 patents claims methods of waterproofing leather, particularly for the manufacture of shoes, clothes, or leather accessories by lining the interior surface of the leather with a semipermeable membrane.  The Board found that one reference showed all of the elements of the claimed method except for the size and density of the adhesive dots, and that the other references taught the size and density of the adhesive dots.

The Federal Circuit agreed with the Board’s construction of “directly pressing” as to mean “applying pressure without any intervening
materials or layers other than the recited adhesive.”  The Federal Circuit also discounted the “process for waterproofing leather” language of the claim, because it was in the preamble and was “simply a statement of intended use, not a separate claim limitation.”

The Federal Circuit rejected the patent owner’s argument that the Board failed to provide adequate motivation to combine the references.  After reviewing cases (Rovalma, Van Os, Arendi, Cutsforth, NuVasive, and Icon Health) where the Board did fail to provide adequate motivation, the Federal Circuit found that the Boards decision did not suffer from similar deficiencies.  The Federal Circuit said that the Board clearly articulated Petitioner’s arguments for why a person of ordinary skill in the art would have been motivated to modify the process of adhering dots to create waterproof and breathable leather with the secondary references disclosed glue patterns.  The Federal Circuit concluded that the Board engaged in reasoned decision making and sufficiently articulated its analysis in its opinion to permit review.

The Federal Circuit found that the Board’s reliance on petitioner’s arguments did not undermine its otherwise adequate explanation for finding a motivation to combine. The Federal Circuit noted that the Board did not reject the patent owner’s positions without clarity as to why it found petitioner’s arguments persuasive. It did not merely incorporate petitioner’s petition by reference, leaving uncertainty as to which positions the Board was adopting as its own. Nor was it other unclear what evidence the Board may or may not have relied
on to find a motivation to combine. The Federal Circuit said that the Board is “permitted to credit a party’s argument as part of its reasoned explanation of its factual findings”; it simply must “explain why it accepts the prevailing argument.”


General Statements in Petition and Institution Decision Did Not Give Patent Owner Fair Notice of the Grounds of Invalidity in the Final Written Decision

In Emerachem Holdings, LLC v. Volkswagen Group of America, Inc., [2016-1984] (June 15, 2017), the Federal Circuit affirmed the Board’s decision that claims 1–2, 4–14, and 17–19 of U.S. Patent No. 5,599,758 were obvious, and vacated and remand as to claims 3, 16, and 20.

The ‘558 patent claims methods for regenerating a catalyst/absorber that has absorbed and oxidized nitrates and nitrites from the combustion gases of an engine.  The regeneration can be carried out in situ, without
removing and replacing the catalyst with a fresh, unreacted one.

The patent owner attempted to remove a reference under 102(e), with the declaration of the inventor, but the Board found the evidence insufficient.  The Federal Circuit agreed, noting that corroboration is always required of an inventor’s testimony about invention, although the level of corroboration depends upon the circumstances.

The patent owner was more successful in its argument under the APA that it was denied adequate Notice and Opportunity to Respond. Petitioner’s provided detailed claim charts, but only cited to a single reference for dependent claims 3, 16, and 20, and the Board’s institution decision only cited the same one reference as to these claims.  However the final written decision relied upon a different reference.

The Federal Circuit stated that in a formal adjudication, like an IPR, the APA imposes particular procedural requirements on the USPTO.  In particular, the agency must timely inform the patent owner of the matters of fact and law asserted, and give all interested parties the opportunity to submit and consider facts and arguments, and allow a party “to
submit rebuttal evidence as may be required for a full and true disclosure of the facts. 5 U.S.C. §§ 554(b)–(c), 556(d).

The Federal Circuit found that the Board denied patent owner its procedural rights guaranteed by the APA by relying on a new reference for its disclosure of limitations in dependent claims 3, 16, and 20.  The Federal Circuit rejected petitioner’s arguments that the patent owner had adequate notice of the reference from general comments about obviousness in the Petition.  The Federal Circuit also rejected petitioner’s arguments that the patent owner had adequate notice from general statements in the Institution Decision.  The Federal Circuit said that given the specificity with which the petition’s claim chart and the Institution Decision’s list of claims expressly identified particular references’ disclosures for some claims and not for others, it cannot be the case that the general statements relied upon provided sufficient notice that Stiles could be applied to all claims.

The Federal Circuit distinguished Cuozzo, because the institution decision gave the patentee notice of the prior art combination that
the final decision relied upon, even though the petition did not. In the current case, neither the petition nor the Institution Decision put the patentee on notice of the reference that would be used to reject claims 3, 16, and 20.  The Federal Circuit also distinguished Genzyme because  the patent owner had the opportunity to address the relied upon by the Board.

The Federal Circuit explained that it was not holding that the Board is constricted in its final written decision to citing only the portions of a reference cited in its Institution Decision — “word-for-word parity between the institution and final written decisions” is not required.  The questions was not whether the Board cited a different passage of a reference than what it specifically cited in the Institution Decision, rather the question was whether the Board provided adequate notice and opportunity to respond to the reference being used to reject claims 3, 16, and 20, given the specificity with which the Board itemized the
challenged claims with specific grounds for rejection in the Institution Decision. On this question, the Federal Circuit said that the Board did not.

Not Necessarily Unfair to Reply on Patent Owner’s Submissions in Obviousness Finding, but Board Failed to Provide Adequate Explanation

In Rovolma, S.A. v. Bohler-Edelstahl GmbH & Co., KG, [2016-2233] (May 11, 2017), the Federal Circuit vacated the Board’s Final Written Decision in IPR2015-00150, finding the Board did not set forth its reasoning in sufficient detail to determine whether the Board’s decision was substantively supported and procedurally proper, and remanded the case.

Bohler petitioned for inter partes review of all four claims of U.S. Patent No. 8,557,056, arguing that the claims should be construed to cover the specific chemical compositions described in the specification, regardless of whether they were created according to the recited process steps.  Rovalma successfully argued that the claims should be construed to require the process steps, but the Board then used Rovalma’s evidence of enablement to find the claims obvious.

The Fedeal Circuit noted the importance of clarity with respect to obviousness determinations, and noted that it has repeatedly
insisted on explanations in reviewing the adequacy of the Board’s analysis—both as a matter of obviousness law and as a matter of administrative law.  However, the Federal Circuit found that the Board did not sufficiently lay out the basis for its implicit findings regarding serveral of the process limitations in the claims, noting that the Board simply found that these steps would have been obvious in view of Rovalma’s submissions, with no explanation of the evidentiary basis for those determinations.  The Federal Circuit noted that petitioner did not provide any explanation regarding the process claim elements that the Board could adopt as its own.  The Federal Circuit also found that the Board did not adequately explain what would motivate a person of ordinary skill to make the modifications.  Finally, the Federal Circuit found that Board did not adequately explain why a person of ordinary skill in the art would have reasonably expected success.

The Federal Circuit rejected Rovalma’s argument that the Board was precluded from relying on a patent owner’s submissions in determining that the claims, as construed by Patent Owner, would have been obvious over the Petitioner-asserted prior art.  The Federal Circuit said that this took the rule of Magnum Oil Tools too far.  Magnum Oil Tools rejected the PTO’s position that the Board is free to adopt arguments on behalf of petitioners that could have been, but were not, raised by the petitioner during an IPR, and simply required the Board to base its decision on
arguments that were advanced by a party, and to which the opposing party was given a chance to respond.”  This does not preclude the Board from using submissions of the Patent Owner to support invalidity arguments of which Patent Owner adequate notice and opportunity to be heard.

The Federal Circuit suggested that a Petitioner may commit forfeiture when it receives notice of the Patent Owner’s claim construction (in the Patent Owners’ response) and chooses not to present a case for unpatentability under that construction when it had the opportunity, in its Reply.

As to Rovalma’s challenge that it was not given notice and an opportunity to respond, the Federal Circuit said that because it could not sufficiently determine which inferences the Board drew from Rovalma’s submissions, it would not decide whether the Board violated Rovalma’s procedural rights. The Federal Circuit said that to make that decision, it would need
to be able to determine what evidence the Board relied on to support its implicit factual findings, how the Board interpreted that evidence, and what inferences the Board drew from it.




Just Because the Board Didn’t Say It; Doesn’t Mean that the Board Didn’t Think It

In Novartis AG v. Torrent Pharmaceuticals Limited, [2016-1352] (April 12, 2017), the Federal Circuit affirmed the PTAB’s determination that the challenged claims of U.S. Patent No. 8,324,283, and Novaritis’ proposed substitute claims, were unpatentable as obvious.

On appeal, Novaritis that it was denied due process under the APA when the the Board used a reference that it rejected as being anticipatory in the institution decision, as additional evidence of the reason to combine.

The Federal Circuit noted that under the APA, and an agency
may not change theories in midstream without giving respondents reasonable notice of the change and ‘the opportunity to present argument under the new theory.  The Federal Circuit disagreed that the Board ruled the reference out of the case entirely in the Institution Decision.  Th Federal Circuit said that the Board merely used the reference to reinforce its finding of obviousness, and that the Board’s discussion of the reference in the Final Written Decision was not inconsistent with its review of the reference in the Institution Decision.  The Federal Circuit further noted that the parties debated the reference at length throughout the proceeding and in the same context that it was discussed by the Board in the Final Written
Decision.  The Federal Circuit concluded that it is quite clear that
Novartis had more than sufficient notice and opportunity to be heard the reference’s potential relevance, and in fact actively and repeatedly attempted to distinguish the reference to defeat the very argument relied on by the Board in the Final Written Decision.

Novartis also argued that the Board further erred in its motivation to combine analysis because it failed to read the prior art as a whole and overlooked critical evidence of the combination’s known disadvantages.  Where the prior art contains apparently conflicting teachings (i.e., where some references teach the combination and others teach away from it) each reference must be considered for its
power to suggest solutions to an artisan of ordinary skill, considering the degree to which one reference might accurately discredit another.  The Federal Circuit noted that the Board expressly discussed the negative properties in the Final Written Decision, and noted that, despite this potentially discouraging characteristic, it was still commonly used.  In the end, the Federal Circuit was not persuaded that Novartis presented its arguments in such a way that it would be appropriate to find fault in the Board’s arguably limited treatment of those arguments in the Final Written Decision.

Although the prior art must be considered as a whole and the disadvantages of a reference must be considered in addition to the benefits, there is no requirement that the Board expressly discuss each and every negative and positive piece of evidence lurking in the record to evaluate a cursory argument. Given that the Board cited to the relevant pages of Novartis’ Patent Owner Response, we find no reason to assume the Board failed to consider the cited negatives simply because they were not recited at length in the Board’s Final Written Decision.

With respect of objective indicia of non-obviousness,  the Board rejected Novaritis argument of unexpected results because it was not commensurate with the scope of the claims.  On appeal Novaritis argued that the evidence nonetheless applied to the narrower dependent claims, but the Federal Circuit found that Novaritis did not separately argue the dependent claims, and therefore waived the argument.

Novaritis further argued that the invention enjoyed commercial success, industry praise, and met a long-felt but previously unsolved need.  For objective indicia evidence to be accorded substantial weight, a nexus must exist between the evidence and the merits of the claimed invention.  Where the objective indicia actually results from something other than what is both claimed and novel in the claim, there is no nexus to the merits of the claimed invention.  The Federal Circuit agreed that Novartis’ proffered evidence is not probative of the
nonobviousness inquiry, because other products were known with the same feature, even though had not yet been approved by the FDA.