Nike, Inc. v. Adidas AG

• Decision Date: 11 February 2016
• Docket Number: No. 2014–1719.,2014–1719.
• Citation: 812 F.3d 1326
• Parties: NIKE, INC., Appellant v. ADIDAS AG, Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

812 F.3d 1326

NIKE, INC., Appellant

v.ADIDAS AG, Appellee.

No. 2014–1719.

United States Court of Appeals, Federal Circuit.

Feb. 11, 2016.

Mark Christopher Fleming, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA, argued for appellant. Also represented by William F. Lee, Kevin Goldman ; Andrea Weiss Jeffries, Los Angeles, CA.

Mitchell G. Stockwell, Kilpatrick Townsend & Stockton LLP, Atlanta, GA, argued for appellee. Also represented by Vaibhav P. Kadaba, Tiffany L. Williams.

Michael Sumner Forman, Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA, argued for intervenor Michelle K. Lee. Also represented by Nathan K. Kelley, Thomas W. Krause, Scott Weidenfeller.

Before CHEN, MAYER, and STOLL, Circuit Judges.

CHEN, Circuit Judge.

This appeal arises from the inter partes review (IPR) of U.S. Patent No. 7,347,011 (the '011 patent) owned by Nike, Inc. (Nike). The United States Patent and Trademark Office, Patent Trial and Appeal Board (Board) granted the IPR petition filed by adidas AG (Adidas) and instituted inter partes review of claims 1–46 of the '011 patent. Nike then filed a motion to amend in which it requested cancellation of claims 1–46 and proposed substitute claims 47–50. The Board granted Nike's motion to cancel claims 1–46, but denied the motion as to the substitute claims because Nike failed to meet its burden of establishing patentability of substitute claims 47–50.

Nike now appeals the Board's denial of its motion to amend, and the Director of the United States Patent and Trademark Office (Director) intervened to defend the Board's decision. For the reasons stated below, we affirm-in-part, vacate-in-part, and remand for further proceedings consistent with this opinion.

BACKGROUND

I

Articles of footwear generally consist of two primary components: a sole structure and an "upper." The '011 patent, entitled "Article of footwear having a textile upper," relates to the "upper" component, which has the general shape of a foot and forms a void for receiving the foot that is accessed using the ankle opening. The upper disclosed in the '011 patent is made from a knitted textile using any number of warp knitting or weft knitting processes. '011 patent, 3:30–32. It is undisputed that weft knitting is well known in the art and includes "flat knitting," where the textile is knit as a sheet or flat piece of textile, and "circular knitting," where the textile is produced as cylindrical textile structure. Id. at 7:5–8, 29–32.

The knitted textile upper of the '011 patent specifically consists of "a single material element that is formed to exhibit a unitary (i.e., one-piece) construction"Id. at 5:38–39. In another embodiment, this unitary textile element "may be formed as a part of a larger textile element" where the upper is then cut and "removed from the larger textile element." Id. at 5:43–45. Once manufactured, the unitary textile element is then "formed or otherwise shaped to extend around the foot." Id. at 5:40–41. By manufacturing the upper component in this fashion, the "unitary construction is intended to express a configuration wherein portions of a textile element are not joined together by seams or other connections." Id. at 6:43–46.

?

Figure 8 of the '011 patent illustrates the shape of the seamless unitary textile element before the various edges of the element are joined by seams in certain places to form the shape of the upper, as depicted in Figure 2.

?

Nike's proposed substitute claims generally relate to a unitary flat-knitted textile element:

Claim 47. (Substitute for independent claim 16) An article of footwear comprising an upper incorporating a flat knit textile element, the flat knit textile element

(1) having flat knit edges free of surrounding textile structure such that the flat knit edges are not surrounded by textile structure from which the textile element must be removed, some of the flat knit edges joined together to form an ankle opening in the upper for receiving a foot, the ankle opening having an edge comprised of one of the flat knit edges; and

(2) having a first area and a second area with a unitary construction, the first area being formed of a first stitch configuration, and the second area being formed of a second stitch configuration that is different from the first stitch configuration to impart varying properties to the textile element; and a sole structure secured to the upper.

Joint Appendix (J.A.) 1226–27.

II

Adidas petitioned the Board for inter partes review of the '011 patent, asserting that all forty-six claims were unpatentable under either 35 U.S.C. § 102 or § 103 in view of numerous prior art references. The Board granted review of certain of Adidas's challenges to the patentability of all claims. After the Board issued its institution decision, Nike filed a motion to amend the claims in which it sought cancellation of claims 1–46 and proposed four substitute claims. In its final written decision, the Board granted Nike's request to cancel claims 1–46. The Board denied, however, Nike's request to enter substitute claims 47–50 for two alternate reasons. First, the Board acknowledged the requirement announced in the Board's Idle Free decision that a patent owner "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. " J.A. 34–36. Because Nike's motion included only a conclusory statement that the proposed claims were patentable over prior art not of record but known to Nike, the Board denied Nike's motion. Alternatively, the Board denied entry of the substitute claims because Nike failed to establish that the substitute claims were patentable over the Nishida and Schuessler references.

Nike filed a timely appeal from the Board's decision, and the Director intervened. We have jurisdiction under 28 U.S.C. § 1295(a)(4)(A).

DISCUSSION

We review the Board's conclusions of law de novo and its findings of fact for substantial evidence. 5 U.S.C. § 706(2)(E) ; In re Sullivan, 498 F.3d 1345, 1350 (Fed.Cir.2007). "Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consol. Edison Co. v. NLRB, 305 U.S. 197, 217, 59 S.Ct. 206, 83 L.Ed. 126 (1938).

In this appeal, Nike raises three primary arguments. First, Nike asserts that the Board erroneously shifted to Nike (the patent owner) the burden of proving patentability of its proposed substitute claims 47–50. Second, Nike contests the Board's finding on the merits that the proposed substitute claims are unpatentable as obvious. Finally, Nike objects 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.

I. Burden of Proof

When Congress created IPR proceedings, it also enacted 35 U.S.C. § 316, which directs the PTO to "prescribe regulations" governing a considerable number of different aspects of these new proceedings. 35 U.S.C. § 316(a). Particularly relevant to this case is § 316(a)(9), in which Congress delegated authority to the PTO to prescribe regulations "setting forth standards and procedures for allowing the patent owner to move to amend the patent under [§ 316 ](d) to cancel a challenged claim or propose a reasonable number of substitute claims." Id. § 316(a)(9) ; see also id. § 316(d)(1) ("During an inter partes review ..., the patent owner may file 1 motion to amend the patent in 1 or more of the following ways: (A) Cancel any challenged patent claim. (B) For each challenged claim, propose a reasonable number of substitute claims."). Consistent with § 316(a)(9), the PTO promulgated a regulation relating to motions practice, 37 C.F.R. § 42.20, which explains that "[r]elief, other than a petition requesting the institution of a trial, must be requested in the form of a motion" and that "[t]he moving party has the burden of proof to establish that it is entitled to the requested relief." 37 C.F.R. § 42.20(a), (c).

The Board addressed these regulations in its Idle Free "informative" decision in which it interpreted section 42.20(c) and explained that "[t]he burden is not on the petitioner to show unpatentability [of new, substitute claims], but on the patent owner to show patentable distinction over the prior art." Idle Free Sys., Inc. v. Bergstrom, IPR 2012–00027, 2013 WL 5947697, at *4 (PTAB June 11, 2013) ; see also Patent Trial and Appeal Board, Standard Operating Procedure 2 (Revision 9), at 3 (¶ IV.A–B) (Standard Operating Procedure 2), available at http://www.uspto.gov/sites/default/files/documents/sop2–revision–9–dated–9–22–2014.pdf (explaining that Board decisions labeled "informative" are "not binding authority," but provide "Board norms on recurring issues," "guidance on issues of first impression," and "guidance on Board rules and practices").

In our recent decision in Microsoft Corp. v. Proxyconn, Inc., we held that the Board's interpretation of section 42.20(c) was permissible in light of the text of § 316(a)(9) and the language of the PTO's regulation. 789 F.3d 1292, 1306–08 (Fed.Cir.2015) ; see also id. at 1307 ("Nor can we say that the Board's interpretation of § 42.20(c) in Idle Free —requiring the patentee to show patentable distinction [of the substitute claims] over the prior art of record—is plainly erroneous or inconsistent with the regulation or governing statutes." (alteration in original) (citation omitted)).

We further explained that placing this burden on the patent owner for its newly formulated claims is appropriate given "the very nature of IPRs," which are distinctly different from a typical PTO examination or reexamination where a patent examiner performs a prior art search and independently conducts a patentability analysis of all claims, whether newly proposed or previously existing. Id. at 1307.

During IPRs, once

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