IP News

In WBIP, LLC v. Kohler Co., No. 15-1038 (Fed. Cir. July 19, 2016), a case between two competitors in the manufacture and sale of marine generators (“gen-sets”) used on houseboats, patentee WBIP obtained a jury verdict that the asserted patents were infringed by Kohler and were not invalid, that the infringement was willful, and that WBIP's damages based on reasonable royalty calculation were about $9.6 M. The district court denied Kohler's post-trial motion for JMOL of invalidity, granted WBIP's motions for enhanced damages and attorney's fees, but denied WBIP's motion for a permanent injunction. The Federal Circuit affirmed the district court's willful infringement and validity determinations, but vacated and remanded the denial of a permanent injunction.

In an obviousness analysis, the Federal Circuit discussed in detail the “motivation to modify” and “objective evidence of non-obviousness” factors set forth in Graham v. John Deere Co. of Kan. City, 383 U.S. 1, 36 (1966). The Federal Circuit considered evidence of long-felt need, industry praise, skepticism, copying, and commercial success, and the nexus between the presented evidence and the claimed invention. The court disagreed with Kohler that objective considerations “can never overcome a strong prima facie case of obviousness,” explaining that a “determination of whether a patent claim is invalid as obvious under '103 requires consideration of all four Graham factors, and it is error to reach a conclusion of obviousness until all those factors are considered.” Slip op. at 10'11. Moreover, while the patentee is required to show a nexus between the objective evidence and the claimed invention, the evidence does not have to relate to the specific claim elements that are absent from the prior art:

Requiring patentees to prove that objective evidence is tied to a specific claim element ' and only that claim element ' runs counter to the statutory instruction that the obviousness analysis involves determining whether the claimed invention as a whole would have obvious.

Id. at 17'18 (emphasis in original, quotation marks omitted).

With respect to the permanent injunction issue, the Federal Circuit agreed with the patentee that the district court's analysis was an abuse of discretion. The district court determined that WBIP was a much smaller manufacturer of the subject gen-sets, hence the injunction would be against public interest as it “would deprive the consuming public of access to a potentially life-saving product.” Id. at 39. Based on this finding, and without addressing the remaining eBay factors (eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006)), the district court denied WBIP's injunction request. The Federal Circuit noted that, if this analysis was sufficient, “it would create a categorical rule denying permanent injunctions for life-saving goods.” Id. at 40. The Federal Circuit thus vacated the denial of injunction and remanded for “a more thorough analysis of the eBay factors.” Id.

Patent Owner Does Not Have to Prove Non-Obviousness In IPR Proceedings

In In re: Magnum Oil Tools International, Ltd., No. 15-1300 (July 25, 2016), the Federal Circuit clarified the burdens of proof applicable in IPR proceedings. The Patent Trial and Appeal Board (Board) instituted an IPR of a Magnum Oil patent directed to technology in the field of oil drilling through use of hydraulic fracturing (or “fracking”). After the Board found all challenged claims invalid as obvious in a final written decision, the challenger and patent owner settled, and the patentee appealed. The U.S. Patent and Trademark Office (PTO) Director intervened in the appeal to defend its decision. The PTO's view was that, “upon institution of an IPR, the Board necessarily finds that the Petitioner has demonstrated a 'reasonable likelihood of success,'” and therefore the burden of producing evidence of non-obviousness in an IPR proceeding shifts to the patentee. Slip op. at 13. The Federal Circuit firmly rejected this approach, stating that in an IPR, the burden of production, as well as the ultimate burden of persuasion, remains on the petitioner at all times: “Where, as here, the only question presented is whether due consideration of the four Graham factors renders a claim or claims obvious, no burden shifts from the patent challenger to the patentee.” Id. at 16'17.

The Federal Circuit also held that the Board improperly shifted the burden to the patentee to disprove obviousness, without first requiring the petitioner to prove its assertion of obviousness by a preponderance of the evidence. And, the Board improperly relied on an argument that “could have been included in a properly-drafted petition,” but in fact was not: “while the PTO has broad authority to establish procedures for revisiting earlier-granted patents in IPRs, that authority is not so broad that it allows the PTO to raise, address, and decide unpatentability theories never presented by the petitioner and not supported by record evidence.” Id. at 25'26. Because the Board erred in shifting the burden of proof, failed to support its factual findings with substantial evidence, and relied on arguments not raised by the petitioner, the Federal Circuit reversed the obviousness determination.

Howard J. Shire is Editor-in-Chief of this newsletter and a Partner in the New York office of Kenyon & Kenyon LLP. Ksenia Takhistova is an associate in the New York office of the firm.