Copied What?: Secondary Indicia of Nonobviousness

by Dennis Crouch

Liqwd, Inc. v. L’Oreal (Fed. Cir. 2019) [CAFC Decision][PTAB Decision]

Liqwd’s U.S. Patent 9,498,419 covers a method for bleaching hair that includes maleic acid (0.1% – 50% by weight) alongside a bleaching formulation and without any hair coloring agent. The maleic acid apparently protects the hair from some damage caused by the bleaching agent.  L’Oreal filed a post grant review (PGR) challenge soon after the patent issued, and the PTAB eventually concluded that the claims would have been obvious.

On appeal, the Federal Circuit has vacated and remanded — holding that the Board did not give proper weight to evidence of copying by L’Oreal in its obviousness analysis.

The gory setup is that Liqwd’s founder Dean Christal and the ‘419 inventor (Eric Pressley) met with L’Oreal folks in pursuit of a deal; provided L’Oreal with a copy of the then-confidential parent patent application; and disclosed to L’Oreal various technical details — all subject to a non disclosure agreement.  Although L’Oreal has argued that it independently invented its product, the PTAB found copying — that L’Oreal’s use of maleic acid was “because of L’Oreal’s access to Liqwd’s confidential information.”

To be clear, L’Oreal did not copy Liqwd’s product (Liqwd didn’t have one at the time covered by the patent), but rather copied (allegedly copied) Liqwd’s technology after obtaining a copy of its yet-unpublished patent application.

Copying by a competitor is a classic objective indicia of nonobviousness.  As the story goes, if the innovation were obvious, the competitor wouldn’t have needed to copy. Here, however, the PTAB ruled that this copying didn’t count because ““copying
requires the replication of a specific product” and “cannot be established without showing that Petitioner copied a patented product, rather than Patent Owner’s technology generally.”  PTAB Final Written Decision, quoting Iron Grip Barbell Co., Inc. v. USA Sports, Inc., 392 F.3d 1317 (Fed. Cir. 2004).  On appeal, the Federal Circuit has rejected that analysis — narrowing its interpretation of Iron Grip to the following one-liner:

In other words, more is needed than merely showing that similarity exists between the patent and the competitor’s accused product.

Liqwd.  The basic copying-of-a-product focus was designed by the court to avoid an undue overlap between proof of infringement and the nonobviousness secondary indicia of copying.  Copying is often proven by the combination of access + resulting similar product, the court felt that the doctrine could get out of hand if proof of infringement + access to the patent document were sufficient.  In Liqwd, the court looked back to its prior cases on this issue and summarized:

Our primary concern in each of these cases has been to avoid treating mere infringement as copying simply because the claims of a patent arguably read on a competitor product.

Id.

Evidence of Access vs Evidence of Copying: In Liqwd, the court found a different situation than many prior cases because the copying was not based simply upon access and resulting product, but instead found “evidence of actual copying efforts.”   When such evidence exists, “that evidence is always relevant.”

The evidence presented by Liqwd shows more than merely a “competing product that arguably falls within the scope of a patent.” WyersDetermining that this evidence is relevant does not implicate our concern with avoiding every infringement suit turning into a confirmation of the nonobviousness of a patent. Because this evidence of actual copying efforts is relevant, the Board erred by disregarding its finding.

Id.  On remand, the PTAB will  now need to give weight to the copying in the obviousness analysis and ask whether that shift is enough to tip the scales in favor of patentability.

= = = = =

38 thoughts on “Copied What?: Secondary Indicia of Nonobviousness

  1. 8

    Re the blog title here of “Secondary Indicia of Nonobviousness”, were there not some Fed. Cir. member criticisms of “secondary,” and is that inconsistent with Sup. Ct. decisions?

    1. 8.1

      From a law review article: “Graham v. John Deere Co., 383 U.S. 1, (1966) .. at 36 “[Secondary-considerations evidence] focus[es] attention on economic and motivational rather than technical issues and [is], therefore, more susceptible of judicial treatment than are the highly technical facts often present in patent litigation.”

      1. 8.1.1

        Indeed. This reminds me of the age-old distinction made in Europe between what is obvious in technology and what is obvious in commerce.

        I mean, take 100 new product lines on a supermarket shelf, all creative but none embodying a patentable invention. Only one or two of them will succeed but nobody knows which ones they will be. The successful ones will be copied. How does that act of copying have anything to do with whether the successful product embodies a patentable invention.

        But, as Paul points out, it is easier for judges to address evidence of copying than evidence of whether, 10 years ago, this or that science or engineering insight was “obvious” to that notional concept, the PHOSITA.

        1. 8.1.1.1

          There are some decent points here from Paul and MaxDrei.

          Copying in and of itself may NOT reflect that the item being copied was indeed innovative in any way. Commerce may well be concerned with the notion of simply “selling” and creative advertising and promotion may well be drivers along a spectrum of factors that may drive copying.

          But in the analysis of secondary factors, are not these elements already kept in mind?

  2. 7

    “Here, however, the PTAB ruled that this copying didn’t count because ““copying
    requires the replication of a specific product” and “cannot be established without showing that Petitioner copied a patented product, rather than Patent Owner’s technology generally.” PTAB Final Written Decision, quoting Iron Grip Barbell Co., Inc. v. USA Sports, Inc., 392 F.3d 1317 (Fed. Cir. 2004). On appeal, the Federal Circuit has rejected that analysis — narrowing its interpretation of Iron Grip to the following one-liner:”

    Yeah fed circ got that one right.

    1. 6.1

      Er, link closing problems there. “Unconstitutional” was to be last word of that sentence.

      1. 6.1.1

        Yeah. Not sure to what extent that is going to affect all the IPRs. I guess it will give the patent judges a lot of new work. Freebies to repeat the same work.

        1. 6.1.1.1

          Impact of the decision seems limited. They severed the constitutional violation by removing PTAB judges’ job security, making PTAB judges not subject to Title 5. That apparently fixed the Appointments Clause issue. The decision thus only renders PTAB decisions invalid if two conditions are met: (1) the PTAB issued a final written decision prior to October 31, 2019, and (2) the decision is on appeal and someone raised the Appointments Clause issue. If your decision meets those two, the CAFC will remand the case back to the PTAB to convene a new panel to have the oral hearing and issue a new Final Written Decision. I think it will affect a few dozen appeals, at most.

          1. 6.1.1.1.1

            Should practitioners be concerned about malpractice claims for failing to raise the appointments issue on appeal?

          2. 6.1.1.1.2

            Impact of the decision seems limited.

            For patentees, yes. I agree that the actual number of IPRs whose ultimate outcome will be affected here will be quite small (likely single digits). For the APJs on the PTAB themselves, the impact will be significant.

            1. 6.1.1.1.2.1

              the impact will be significant.

              In the past I have shared that administrative agencies with “adjudicatory functions” exist along a spectrum of that adjudicatory function being independent (and thus more reflective of an Article III adjudicatory body).

              I had mentioned that the administrative agency of the USPTO had already suffered from being on the far end of the spectrum AWAY from the Article III nature.

              This restructuring of the nature of the administrative agency (by the judicial branch, no less) places the adjudicatory element of the administrative agency even further along the spectrum AWAY from the Article III nature – and MUST call into series question the “wisdom” of the reasoning behind the Oil States decision.

          3. 6.1.1.1.3

            LR,

            Interestingly, the fix of changing factor 3 is applied only going forward (kicking the immediate case back for a rehearing under a new panel).

            This can mean that ALL PTAB decisions prior to this October 31 decision and still within the window of appealing the PTAB decision are impacted.

            A few dozen? Perhaps, I do not know what the pipeline looks like in regards to how far back one may go for PTAB decisions that still could be appealed.

            Perhaps a different question could be: is it malpractice to NOT file an appeal wherever possible** on PTAB decisions pre-October 31?

            ** wherever possible means by BOTH sides (whichever side was a loser below), back to the date at which time the ability to file an appeal has lapsed.

            Mind you, ALL PTAB decisions (not just the ones that the patentee lost) may be affected since the loss in every case can cite to Arthrex for a second bite with a new panel.

        1. 6.1.2.1

          This Fed. Cir. panel decision may be ripe for en banc review or cert, since it may affect various other agencies administrative proceedings judges, and the decision itsself admits that while “Arthrex argues that the APJs exercise the type of significant authority that renders them Officers of the United States. Neither Appellees nor the government dispute that APJs are officers as opposed to employees.” [I.e., that was uncontested here] Also further noting that the test or distinction between senior and junior officers is not that clear.
          Furthermore, will the APJs themselves be able to sue to maintain their civil service job protection the Fed. Cir. has sua sponte removed here?

          1. 6.1.2.1.1

            Definitely this will have more action.

          2. 6.1.2.1.2

            will the APJs themselves be able to sue to maintain their civil service job protection the Fed. Cir. has sua sponte removed here?

            Under what legal theory do you see the APJs so filing suit? Against whom?

    2. 6.2

      It will be interesting to see how this plays out because now the PTAB judges will be subject to political pressure from a political appointee. I would expect to see lots of lobbying from big companies directed at the Sec of Commerce or at the President to appoint a Sec of Commerce that will be friendly to big corporate interests. It would only take firing one or two judges who make a politically unpopular decision to ensure that all of the others get the message. I guess an unbiased review is going the way of the dodo.

      1. 6.2.1

        Really good point DVan. I scanned it, but it appeared to say that the President would have to appoint them in order for their appointments to be valid without the removal of the job security part.

        What a weird thing to do. Sever the job security.

        1. 6.2.1.1

          It is interesting that the court here entertained other options and explained why those other options were less palatable.

          Notwithstanding the explanations, I am not buying their bottom line of “we have not rewritten structural law” though.

          If indeed the change is “minimal” to obtain effect, it is still a change that must be seen for what it is. The court projecting that Congress would have so chosen is still a projection of Congressional action. The court – not Congress – has rewritten the law here.

          It’s worth noting in contrast to the Duffy paper, Congress there reinstituted appointment by the Secretary of Commerce (as a correction).

          And who knows with Congress… If indeed Congress knew (had listened – as I know that myself and others had notified our representatives of flaws in the AIA during its passage through Congress) OF this infirmity, Congress would not have been limited to a binary choice. Phrasing this as nothing more than taking the only Constitutionally available choice is a false presentation.

  3. 5

    Great analysis. What the USPTO and the Federal Circuit are missing though is the terrible harm done by forcing inventors to spend years and most of a million dollars fighting with the USPTO to keep the rights they already earned. Liqwd is a small company. How can they innovate when the lawyers and the government suck out all the value? Most inventors cannot afford a proper preliminary response, much less multiple trials and round trips to the Federal Circuit.

    1. 5.1

      It is too bad then, eh Josh, that the patent is not a Public Franchise right in which the Franchisee could turn to the Franchisor and shift the costs of keeping/enforcing the underlying rights so franchised to the Franchisee?

      (as a substitute for me holding up my “S” sign)

  4. 4

    “Patentability shall not be negatived by the manner in which the invention was made.”

    Still part of the statute, no?

    1. 4.1

      Not sure what point you are trying to get at here, Malcolm.

      Are you somehow trying to write a converse statement into 103?

    2. 4.2

      I don’t understand this point either. To use a really awkward phrase, this sounds like a case of where “patentability is positived by the manner in which the infringement was accomplished.” As anon says, almost like a converse. Unless you’re suggesting something else entirely.

      1. 4.2.1

        Patentability is determined at the time of the invention (again, see the statute) so infringement afterwards is legally irrelevant.

        Unless you want to ignore the plain words of the statute. Sometimes the patent maximalist types get very very upset by that! Except when they don’t. I’m sure there’s an explanation for the inconsistency.

        1. 4.2.1.1

          The plain words of the statute don’t say that patentability is determined at the time of the invention. The “manner in which the invention is made” isn’t even related to that question.

          But even if you’re right that the patentability question is assessed at the time of invention, it’s still possible that later-arising evidence can bear on that determination. If someone robs a store, then at the moment of the robbery, it either *was* or *was not* the same person as the defendant who’s on trial. But if a witness saw the defendant running away from the store with a fistful of cash 30 seconds later, that sure seems like evidence that bears on the question…

        2. 4.2.1.2

          Your attempted point is very much still unclear.

          Patentability is determined at the time of the invention” – sure, but nor a part of your initial post, and it is not clear how you want to tie this statement into that initial post (given the topic of the thread).

        3. 4.2.1.3

          2 responses

          1. If I’m understanding correctly, I think your argument would make most or all secondary-considerations evidence legally irrelevant. Most such evidence that I’ve seen tends to be after-the-fact stuff. Commercial success of a patented product is the most obvious example.

          I don’t think after-the-fact stuff is legally irrelevant. Rather, it’s only relevant to the extent it tends to show that the claims were nonobvious at the time of the invention. So, if competitors resort to outright copying years after the invention, that tends to show that the invention was nonobvious at the time of invention… or so a factfinder could infer in a particular case.

          2. This seems to be a different point than the one you were making earlier. It’s other language in 35 USC 103, not the “Patentability shall not be negated [/negatived in the pre-AIA version]” language that places the patentability inquiry at the time of the invention (or the effective filing date in the post-AIA version).

        4. 4.2.1.4

          “Patentability is determined at the time of the invention (again, see the statute) so infringement afterwards is legally irrelevant.”

          True, but apparently the courts allow for evidence arising afterwards to count in that analysis as of the time of invention. It’s a legal fiction baked into the overall “obviousness” determination, likely having arisen long ago in the mists of legal history.

          1. 4.2.1.4.1

            but apparently the courts allow for evidence arising afterwards to count in that analysis as of the time of invention

            6 – Emphasized the portion of your quote that matters. The whole “arising after” part is a smokescreen/obfuscation, as any such items merely represent evidence of the conditions at the time of invention. The evidence — as with much technical evidence — still has to play by the rules of evidence. This is not the same as your implied “weakness” of “legal fiction baked into.” The aspect to keep in mind is that ANY such “later arising” is a contrast drawn directly back to the critical time. Such is NOT evidence for any post critical time activity of the invention itself.

            You are welcome.

  5. 3

    The negative limitation caught my eye.

    1. 3.1

      Out on other post. Did you read Chien’s comments? The content is upper-level abstract nonsense. She clearly has no idea what she is talking about.

    2. 3.2

      Plus, anon, a lot of what she said are close to talking points of the anti-patent crowd.

      (*) She is walking around the goal of trying to get the applicants responsible for prior art searches.

      (*) She is talking about creating a lesser “defensive” patent. Anyone —anon—anyone that knows anything about how the AIA was devised knows that one of the pushes of the SV set has been to create a lesser patent, because then they can then push the lesser patent while slowly weakening a normal patent. (And the ultimate goal is to get bio separated from everything else.)

      Pay attention. She just parroted out her masters’ words, but toned them down to disguise them for Congress. This person is every bit into this as Lemley.

      1. 3.2.1

        I will read the material again this weekend – thanks for highlighting aspects to pay attention.

        (I see that you have been Count Filtered out as well)

  6. 2

    This is totally off-topic, but an interesting observation, and of potential significance to pharma pricing patent debates.

  7. 1

    This is indicated to be a remand of a rarely used AIA post grant review (PGR). It is only available against newly issued patents, and has much broader scope than an IPR, but serious estoppel. It will be interesting to see if the PTAB allows more adverse discovery on this partial-copying issue as a 103 rebuttal? [I think they should, but doubt if they will.]
    The 103 attack was based on U.S. Patent No. 7,044,986 (“Ogawa”) or with U.S. Patent Publication No. 2002/0189034 (“Kitabata”) in combination with German Patent Publication DE 1,220,969 (“Berkemer”) and Korean 4 LIQWD, INC. v. L’OREAL USA, INC. Patent Publication KR2006-0059564 (“KR ’564”). J.A. 18–19.
    The latter are typical examples of prior art discovered by petitioners for any post grant proceedings that are unlikely to be found in a limited time examiner search, re the below blog on patent quality. But since they are all publications, why was PGR used instead of an IPR?

    1. 1.1

      An example of useful additional evidence that might be obtained in a case like this with additional discovery [if that were available] would be whether or not L’OREAL had considered patenting its planned product itself.

      With apologies, the “4 LIQWD, INC. v. L’OREAL USA, INC.” within the above cut & paste from the decision is of course the page 4 header.

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