Strength of Objective Indicia from Prior Litigation Overcomes Strong Obviousness Challenge in IPR
by Andy Rosbrook, Matthew George Hartman & Rubén H. Muñoz
Patent Trial and Appeal Board, Inter Partes Review, Obviousness
Aug. 19, 2020
In a recent inter partes review (IPR), a patent owner overcame a facially persuasive obviousness challenge by relying on evidence from an earlier litigation to establish objective indicia of nonobviousness.
In RTI Surgical, Inc. v. LifeNet Health, the petitioner challenged various claims of a patent directed to a soft tissue graft product. Although the Patent Trial and Appeal Board agreed with the petitioner that nearly all of the claims were anticipated, the patent owner managed to save one dependent claim—claim 4—that differed from the other claims in that it required the soft tissue graft to be suitable for use “without rehydration.”
Because of this additional limitation, petitioner argued that claim 4 would have been obvious in light of the anticipating references and an additional piece of prior art that taught a way to use soft tissue grafts without rehydration. The board reviewed this prior art and determined that all of the elements of claim 4 could be found in those references. The board further found that petitioner made a “moderately persuasive” showing that a skilled artisan would have been motivated to make the proposed combination of references with a reasonable expectation of success. The patent owner, however, marshalled enough objective indicia of nonobviousness—including (i) whether there existed a long-felt but unresolved need, (ii) the failure of others, (iii) industry adoption of the patented invention, (iv) industry praise and (v) commercial success of the patented invention—to overcome the petitioner’s obviousness showing.
Much of the most persuasive objective indicia evidence came from an earlier successful lawsuit. The patent owner had previously sued a company called LifeCell for infringing a patent related to the patent under review, and successfully obtained a $35 million judgment. In the IPR, the patent owner used trial transcripts and documents containing sales information from this lawsuit as objective evidence that claim 4 was not obvious.
To make the objective indicia evidence relevant, the patent owner had to first establish a “nexus” between the merits of claim 4 and LifeCell’s product sales. This required a fairly extensive showing by the patent owner. First, it submitted an expert declaration comparing claim 4 to LifeCell’s soft tissue graft products, concluding that the product was covered by—and co-extensive with—the claims. Then, the patent owner provided evidence that LifeCell advertisements specifically touted that its soft tissue grafts were “ready to use” because they did not require rehydration. Petitioner attempted to counter patent owner’s “nexus” showing by arguing that the benefits of the LifeCell soft tissue graft product stemmed from their unpatented features. The board dismissed this counterargument because petitioner did not provide evidence to support it.
With nexus established, the patent owner provided evidence of two types of objective indicia that the board found very persuasive: industry adoption and commercial success. Specifically, the patent owner submitted undisputed evidence that LifeCell, an industry-leading manufacturer, had shifted its product sales from a noninfringing soft tissue graft product to an infringing soft tissue graft product and upon doing so, the infringing product cannibalized sales of the noninfringing product. The patent owner further submitted undisputed evidence that the infringing soft tissue graft product accounted for a significant part of LifeCell’s revenues. The board found that this evidence demonstrated that the market preferred and rapidly adopted the invention of claim 4, making it less likely that the invention was obvious.
The patent owner had presented additional objective indicia evidence that the board did not find persuasive. Specifically, the patent owner provided evidence of a failure by LifeCell to develop a noninfringing ready-to-use graft product. But the board gave this evidence little weight because it involved a single entity attempting a single failed approach. The board further disregarded the patent owner’s evidence of industry praise as too insignificant. The alleged “praise” consisted only of two isolated instances, one of which the board characterized as anonymous and promotional in nature. Moreover, the board gave no weight to the patent owner’s evidence of “long-felt need” because the evidence post-dated the filing of the patent application.
Taking all of the evidence together, the board ultimately determined that the patent owner’s “objective indicia” evidence of nonobviousness outweighed the petitioner’s obviousness evidence and concluded that claim 4 was not obvious.
Practice Tip: When faced with a strong obviousness challenge, a patent owner should consider presenting evidence of objective indicia of nonobviousness. This may include evidence of record from a prior litigation. To successfully rely on that evidence, a patent owner must establish a nexus between the evidence presented and the claimed features.
RTI Surgical, Inc. v. Lifenet Health, IPR2019-00572, Paper 74 (PTAB August 4, 2020).
Despite TC Heartland, Forum Selection Clause Controls Venue in Patent Dispute
by Jonathan James Underwood & Rubén H. Muñoz
Aug. 24, 2020
A district court has ruled that the exclusive statute for determining venue in patent cases, 28 U.S.C. § 1400(b), did not override the parties prior agreement on where suit could be brought. The court also ruled that transfer to another district under forum non conveniens was not merited.
The dispute began in 2013 when the patent owner filed suit in the Central District of California alleging that the defendant, a Florida-based company, was infringing a design patent. Following that initial dispute, the parties entered a confidential settlement agreement which included a forum selection clause identifying the Central District of California as the exclusive venue for any action regarding the settlement agreement. In 2018, the patent owner filed another suit in the Central District of California alleging that the defendant was again infringing the patent. The patent owner also alleged breach of contract, false advertising and violation of various California business codes. In response, the defendant sought dismissal for improper venue under Rule 12(b)(3), or, in the alternative, transfer to the Southern District of Florida under 28 U.S.C. § 1404(a). The defendant argued that notwithstanding the forum selection clause, § 1400(b) controlled and that the previously agreed-upon forum did not meet the statute’s tests for venue.
The court began its analysis by noting that because venue may be waived by a forum selection clause, the Rule 12(b)(3) motion would be resolved by determining whether the clause was enforceable. The court found that the defendant had failed to establish that the clause was unenforceable. First, the clause was not the result of “fraud, undue influence or overweening bargaining power.” Second, the clause was not overreaching in light of TC Heartland because the forum was “proper at the time of the [settlement agreement].” Third, defendant’s argument that being forced to litigate in a forum “nearly 3,000 miles” away would be “exceptionally absurd and inequitable” was an inconvenience argument that was not relevant to enforceability, and that the defendant had failed to show any bona fide deprivation of its right to a day in court. Finally, there were no demonstrable public interest factors strong enough to outweigh the factors favoring enforcement. Moreover, TC Heartland was resolved by statutory interpretation, not public policy concerns, suggesting that venue could be waived just as it is in other civil cases. The court ruled that the clause was therefore enforceable.
Next, the court considered and determined that the clause was a venue waiver. The court found that defendant had failed to elaborate upon, or provided legal support for, its statement that it had not waived venue by entering the agreement. Instead, the court reasoned that waiver was proper here because the defendant had assented to the clause and knew which forum would handle disputes.
Finally, the court denied the defendant’s motion for transfer under § 1404(a). Because the forum selection clause was enforceable, all of the private interest factors weighed in favor of denial of transfer. Precedent required that the clause be given controlling weight absent exceptional circumstances, but the defendant had not shown that the case was “exceptional.” Rather, the defendant had agreed to litigate in the forum, and the public interest factors did not warrant transferring the case.
Practice Tip: A party seeking to extricate itself from a forum selection clause has a heavy burden. Despite TC Heartland’s significant effect on patent litigation, even agreements that predate the U.S. Supreme Court’s decision will not be discarded lightly. A party entering into an agreement with a forum selection clause should carefully consider the impact of the clause, especially if the agreed-upon forum is geographically remote.
Sundesa, LLC v. IQ Formulations, LLC, Case No. 2:19-cv-06467, slip op. (C.D. Cal. Aug. 19, 2020)
USPTO Issues Guidance on “Applicant Admitted Prior Art” in IPRs
by Thomas W. Landers IV & C. Brandon Rash
Patent Trial and Appeal Board, Prior Art, 35 U.S.C. § 311(b) , Inter Partes Review, Post-Grant Proceedings
Aug. 31, 2020
In an August 18 memorandum1, the U.S. Patent and Trademark Office (USPTO) issued binding agency guidance on the proper role of “applicant admitted prior art” (AAPA) in inter partes review (IPR) proceedings. The memorandum clarified that AAPA, which generally consists of the applicant’s statements in a challenged patent, cannot serve as the sole reference in an invalidity ground because AAPA is not a “prior art patent or printed publication” under 35 U.S.C. § 311(b). AAPA may, however, be used to show “general knowledge” in the art at the time of the invention if it is asserted in combination with other, qualified prior art.
According to the memorandum, Patent Trial and Appeal Board (PTAB) panels have been inconsistent in deciding whether § 311(b)—which allows requests for IPR “only on the basis of prior art consisting of patents or printed publications”—allows the use of AAPA. Panels have generally interpreted the statute in three ways: (1) AAPA is technically a “prior art patent” and thus can be relied on, alone or in a combination, as a basis for IPR; (2) AAPA is neither a prior art patent nor a printed publication and thus cannot be relied on, whether alone or in a combination, as a basis for IPR; or (3) AAPA is neither a prior art patent nor a printed publication and thus cannot be relied on alone as a basis for IPR, but it may be combined with other prior art to demonstrate obviousness. The memorandum requires the PTAB to apply this third interpretation.
In coming to this conclusion, the Patent Office explained that § 311(b) plainly requires a “basis” that is either a “prior art patent” or a “printed publication.” And because neither the challenged patent nor statements therein are a “prior art patent,” AAPA cannot form the necessary “basis” under § 311(b). As a result, AAPA cannot be used for anticipation or single-reference obviousness grounds because such grounds would lack an appropriate “basis.”
The memorandum clarifies, however, that AAPA may be used in conjunction with prior art that does qualify as a “basis” under § 311(b). In particular, AAPA can be used to show “general knowledge” in the art, which can in turn be used in an obviousness challenge. For example, AAPA can demonstrate “motivation to combine” or can supply a “missing limitation” in an obviousness combination. Of course, as with other evidence of general knowledge, the patent owner is free to challenge whether AAPA indeed demonstrates what the petitioner alleges.
The Patent Office further explained that using AAPA to show “general knowledge” does not run afoul of § 311(b) because other prior art serves as a “basis” (or “starting point”) for the petition. Indeed, it has been “longstanding practice” in reexamination proceedings—which are governed by a “materially-identical” statute to § 311(b)—to allow AAPA as evidence of general knowledge. The memorandum further notes that other statutes, such as those allowing expert declarations in IPRs, similarly allow “evidence outside a prior art patent or printed publication.”
In a final note, the Patent Office addressed an apparent inconsistency between its guidance and 37 C.F.R. § 42.104(b)(4), which asks petitioners to “specify where each element of the claim is found in the prior art patents or printed publications relied upon.” The memorandum explained that this regulation “requires specific information from the parties to ensure orderly proceedings, but does not narrow the scope of IPR petitions further than § 311 itself does,” citing other C.F.R. regulations that the PTAB does not strictly enforce.
In addition to clearing up some uncertainty in IPRs, the Patent Office may have provided a useful tool for petitioners by expressly allowing AAPA to supply missing limitations and reasons to combine in obviousness challenges. If used in this way, petitioners should be sure to characterize AAPA as “general knowledge” and use it in conjunction with a prior art patent or printed publication.
By that same token, patentees should be on the lookout for petitions that fail to properly characterize alleged AAPA as “general knowledge” or that fail to assert AAPA in conjunction with other art. Patentees should also keep in mind that AAPA can be challenged as failing to show the “general knowledge” alleged by the petitioner. Finally, patentees should be cautious regarding what subject matter they acknowledge as prior art or “background.”
PTAB Ruling Highlights a Petitioner’s Burden for Qualifying an Internet Screenshot as a “Printed Publication”
by Melissa R. Gibson, Clayton N. Matheson & Rubén H. Muñoz
Patent Trial and Appeal Board, Prior Art, Inter Partes Review, Post-Grant Proceedings
Sept. 17, 2020
In a recent decision issued in Louisiana-Pacific Corp. v. Huber Engineered Woods LLC, the Patent Trial and Appeal Board addressed the showing that a petitioner for inter partes review must make to demonstrate that an asserted prior art reference pulled from the Internet qualifies as a “printed publication” for purposes of an obviousness or anticipation challenge. Specifically, the board examined whether the petitioner had met its burden for establishing a reasonable likelihood that two website screenshots were publicly accessible before the challenged patent’s critical date. After finding that the petitioner had not done so, the board went on to deny institution of the requested IPR.
The two screenshots at issue were two online press releases dated October 15, 2001 and March 1, 2003, respectively. The screenshots thus appeared, at least facially, to have been publicly accessible before the relevant critical date of February 23, 2004. Notably, the board’s decision indicates that the petitioner had relied on the same screenshots in a prior proceeding concerning a related patent, in which the board had instituted the requested IPR. This might explain why, in the new proceeding, the petitioner made little effort to cite any evidence substantiating the press release’s purported publication dates. However, the prior institution decision came a few months before the board issued its precedential ruling in Hulu, LLC v. Sound View Innovations.
In Hulu, the board’s Precedential Opinion Panel clarified a petitioner’s initial burden for establishing the “printed publication” status of a prior art reference. “At the institution stage,” the board explained, “the petition must identify, with particularity, evidence sufficient to establish a reasonable likelihood that the reference was publicly accessible before the critical date of the challenged patent and therefore that there is a reasonable likelihood that it qualifies as a printed publication.” In other words, the petitioner has the initial burden to show “a reasonable likelihood” that the relied-upon reference in fact was publicly accessible at the necessary time.
Applying this standard, the board in Louisiana-Pacific concluded that the petitioner had not met its initial burden with respect to the two screenshots. The board first observed that the press release dated October 15, 2001 actually bore a copyright date of 2003, while the press release dated March 1, 2003 bore an “ambiguous” copyright date of “1998-2009.” The board stressed that the petitioner made no attempt to explain these discrepancies or otherwise reconcile the publication dates with the “seemingly inconsistent” copyright dates. The board next noted that the petitioner had failed to “submit any testimony to support a finding that either of these documents is a prior art printed publication.” Finally, the board emphasized the lack of evidence “in the record indicat[ing] that these screenshots were obtained from websites contemporaneously archived at the alleged time of publication, for example, by the Wayback Machine” (which, as the board observed, both it and the Federal Circuit “have relied on to validate websites as a source of prior art”).
The board thus ruled that the petitioner “failed to identify with particularity evidence sufficient to establish a reasonable likelihood that either [press release] was publicly accessible before the critical date.” As a consequence, the board did not consider the press releases—which underpinned one of the petitioner’s three asserted grounds of obviousness—in deciding the petition’s merits.
Implications: The Louisiana-Pacific decision highlights the need for both petitioners and patent owners to carefully consider the evidence regarding the public accessibility of website screenshots and other types of non-traditional prior art references. Neither party should assume that just because a reference was posted on the Internet, it necessarily will qualify as a “printed publication.” Instead, the petitioner should assess whether it needs to adduce additional evidence to substantiate the reference’s purported publication date. And the patent owner should assess whether it has an argument that the evidence cited in the petition is insufficient to satisfy the Hulu standard (even if the reference may have been publicly accessible at some point in time).
N.D. Ill.: Neither Statutory Estoppel nor “Misleading” Statements Regarding Its Scope Sufficient to Knock Out Invalidity Defenses
by Jonathan James Underwood & Rubén H. Muñoz
Invalidity, District Court, 35 U.S.C. § 315(e)(2) estoppel, Northern District of Illinois
Sept. 30, 2020
A district court has ruled that the scope of IPR estoppel under 35 U.S.C. § 315(e)(2) did not apply to invalidity grounds that relied on physical products. The court also declined to apply judicial estoppel, notwithstanding the defendant’s “misleading” statements about the effect of estoppel, made when seeking a stay pending the outcome of IPR proceedings.
Earlier in the district court litigation, the patent owner had asserted four patents. The defendant then petitioned for inter partes review (IPR) at the Patent Trial and Appeal Board (PTAB). During the pendency of the institution decisions, the defendant served its final invalidity contentions in the district court, identifying anticipation and obviousness grounds that all included prior art products. The PTAB instituted the IPR petitions, and the defendant then sought and obtained a stay in district court pending the outcome of the IPR proceedings. The PTAB found unpatentable the claims of one of the four patents asserted in district court. Thereafter, the court lifted the stay, and the parties disputed the scope of the statutory IPR estoppel and whether the defendant was judicially estopped from bringing its prior art arguments. Patent owner argued that the court should look to whether the product was described and disclosed in a publication that could have been raised in an IPR.
The court began its analysis by noting the absence of appellate court precedent on the scope of statutory estoppel, as well as the current division of opinion among district courts. By considering how the term “ground” had been construed in other aspects of IPR proceedings, the court interpreted “ground” to mean “the specific piece of prior art or combination of prior art that a petitioner raised, or could have raised, to challenge the validity of a patent claim during an IPR.” As such, the court ruled estoppel does not apply to prior art products. The court acknowledged that a defendant could not avoid estoppel to a ground that relied on printed materials merely because the “materials reflect or represent a prior art product.” But the court concluded that such was not the case here because the defendant’s claim charts, “replete with photographs” of the products, showed that the defendant intended to argue that the actual products disclosed limitations of the claims.
The court then considered whether to apply judicial estoppel to the prior art grounds in light of the defendant’s representations made when seeking a stay. On this issue, the court considered its regional circuit’s three-part test. First, the court determined that the defendant’s current estoppel argument was “clearly inconsistent” with its earlier representations on case-narrowing following an IPR. The defendant had previously argued that it would have to narrow its invalidity positions in light of the outcome of the IPRs. When the defendant made those statements, it had already served its final invalidity contentions which included prior art invalidity grounds that all included prior art products. Thus, this factor favored application of judicial estoppel because the defendant’s pre-stay statement was inconsistent with its post-IPR argument that it was not required to narrow any of its prior art grounds.
For the next factor of the circuit law test, the court found that the defendant’s earlier position had succeeded in persuading the court to stay the case pending the outcome of the IPRs. The court’s stay ruling was based, in part, on potential simplification of the invalidity issues. As such, this factor also favored application of judicial estoppel.
Under the final factor of the circuit law test, however, the court found that it would not be unfair to the patent owner to allow the defendant to proceed with its prior art invalidity theories. The court found that the defendant’s assertions, although misleading, were “not so egregious or manipulative as to warrant wholesale preclusion of its prior art invalidity theories.” The court explained that it granted a stay based on several factors, including no disadvantage to the patent owner and the potential to remove claims from the case. The court further explained that the patent owner had been able to prepare responses to the invalidity grounds for over a year and could rely on relevant work from the IPR proceedings.
Considering the three factors and using its “equitable judgment and discretion,” the court decided that the patent owner was “not entitled to a knockout blow on [the defendant’s] prior art invalidity arguments.”
Practice Tip: The jurisprudence of estoppel continues to develop through district court decisions. Regarding statutory estoppel, in the absence of binding precedent, a defendant may be well-served by making explicit reference to the features of a prior art product as opposed to a printed publication describing the product. A patent owner should, on the other hand, scrutinize the defendant’s invalidity grounds and, where the parties have made arguments to the court about a stay, the patent owner should consider the defendant’s pre-stay and post-IPR representations concerning the simplification of the case. Concomitantly, in light of the potential for a party to be judicially estopped, litigants should pay close attention to the arguments raised for or against a stay pending an IPR outcome.
Medline Indus., Inc. v. C.R. Bard, Inc., No. 17 C 7216, 2020 WL 5512132 (N.D. Ill. Sept. 14, 2020)