by Dennis Crouch
The intersection between factual inquiries and legal conclusions in patent law is a complex and ever-evolving area, this is especially true in obviousness doctrine. A recent Federal Circuit decision highlights the tricky analysis required in assessing obviousness and damages in patent cases. In Cyntec Co. v. Chilisin Electronics Corp., the appellate court examined whether the lower court’s directed verdict (JMOL) of nonobviousness improperly removed factual questions from the jury. This case provides an important reminder of the care required in delineating the fact finding and legal determinations in patent trials. As is common, I think both the District Court and the Federal Circuit got it wrong.
Note, the court’s decision includes an interesting analysis of damages, finding that the plaintiff’s damages expert should have been excluded. It also includes a useful claim construction decision on when to give a term its plain and ordinary meaning.
A molded choke is a device used in electronic devices to filter undesirable signals. The device contains a coiled conducting wire encapsulated in a molded mixture of magnetic powder. The powder is heated to a sufficiently high temperature to allow it all to bond together. The patentee, Cyntec, had experienced some difficulties in creating the devices — with the high heat causing various problems such as melting the conducting wire or its insulative layer. The solution that they hit upon was using a mixture of magnetic powders with different hardness and particle sizes. This permitted a lowering of the required molding temperature and thus avoided wire damage during molding. See U.S. Patent Nos. 8,922,312 and 9,481,037.
Competitor Chilisin began selling its own molded chokes and Cyntec sued for infringement. At trial, Chilisin presented invalidity arguments that the claims were obvious based on two prior art references – Shafer and Nakamura. However, the district court granted JMOL of nonobviousness in favor of Cyntec before the case went to the jury (i.e., directed verdict). The jury subsequently found infringement and awarded full lost profits damages based on Cyntec’s expert calculations.
Although obviousness is ultimately a question of law, it depends upon upon substantial factual finding. The particular threshold of where factual findings end and legal conclusions begin is quite tricky in this area. In KSR, the Supreme Court appeared quick to determine as a matter of law that it PHOSITA would have been motivated to combine the references in a way rendering the claims obvious. In subsequent cases, however, the Federal Circuit took pains to tease out motivation to combine from the ultimate conclusion of obviousness.
“Before KSR, we had also consistently treated the question of motivation to combine prior art references as a question of fact… KSR did not change this rule ….” Wyers v. Master Lock Co., 616 F.3d 1231, 1238–39 (Fed. Cir. 2010) (as quoted in Apple Inc. v. Samsung Elecs. Co., Ltd., 839 F.3d 1034, 1051 (Fed. Cir. 2016) (en banc)).
But, the fact/law divide is a bit more complicated in Cyntec because it involves a Judgment as a Matter of Law (JMOL). We typically have two distinct types of legal questions at the JMOL stage:
- Regular questions of law, such as the meaning of a statute or the ultimate conclusion of a patent claim’s obviousness; and
- Lopsided questions of fact, where the evidence so favors one-side that no reasonable jury could find otherwise.
At JMOL, the district court is empowered to make these two types of legal conclusions, but cannot otherwise invade the jury’s factfinding role.
Adding to the difficulty is the reality that determination of the Graham factors rarely lead directly to the obviousness/nonobvious determination. In Graham, the Supreme Court indicated that courts should work through the following for step fact-finding process and then rely upon the results to make the ultimate legal conclusion of obviousness.
These factual questions include: “(1) the scope and content of the prior art, (2) differences between the prior art and the claims at issue, (3) the level of ordinary skill in the pertinent art, and (4) [if presented,] the presence of objective indicia of nonobviousness such as commercial success, long felt but unsolved needs, failure of others, and unexpected results.”
Cyntec Co. v. Chilisin Electronics Corp., No. 22-1873 (Fed. Cir. Oct. 16, 2023) (quoting Elbit Sys. of Am., LLC v. Thales Visionix, Inc., 881 F.3d 1354, 1357 (Fed. Cir. 2018)). The point here is that even after the fact-finder has made all the factual findings, there is still quite a bit of work for a the law-decider to do. That said, quite a bit of the work is occupied by the motivation-to-combine factual finding.
Here, the patentee presented prior art and testimony regarding a motivation to combine. The district court found the evidence insufficient and awarded JMOL for the patentee. On appeal, the Federal Circuit vacated that decision and instead concluded that “Chilisin presented the jury with evidence that would have allowed it to reasonably find the asserted claims obvious in view of Shafer and Nakamura. . . . Taken together and drawing all reasonable inferences in Chilisin’s favor, this evidence is enough for a reasonable jury to have found that the asserted claims would have been obvious.”
I have an important nitpick with the appellate court’s decision that goes back to the complexity of the law-fact divide in obviousness analysis. The court skipped an important step by simply concluding that a reasonable jury could have found the claims obvious. Recall that obviousness is a question of law, and at JMOL we are only concerned taking disputed facts away from the jury. The appellate court should have instead explained something like the following: “that the defendant presented evidence sufficient to put the factual question of motivation-to-combine into dispute in a way that, if taken as true, would lead to a legal conclusion of obviousness.”
The distinction here is important, the Federal Circuit’s rule here makes it harder to award summary judgment of non-infringement because it places an additional layer of reasonableness on the ultimate legal conclusion of obviousness. But that is a question of law, and with questions of law we don’t account for reasonable fact finders but instead ask only whether the question was decided rightly or wrongly. This distinction is why legal determinations are reviewed de novo on appeal and factual findings are given deference. This analysis also reveals the dirty secret that, although the law does not permit reasonable deference into legal questions, reasonable minds regularly do disagree upon the conclusion of obviousness even after making all the underlying factual findings.
On remand, the district court must ensure that the jury is tasked only with resolving the factual disputes, while reserving the ultimate legal question for itself. Carefully delineating the fact finding and legal conclusions will be critical to applying the proper review on any subsequent appeal.
Regarding damages, the Federal Circuit found the district court abused its discretion in admitting Cyntec’s expert testimony on alleged lost profits. Cyntec’s expert used total revenue from customer SEC filings to estimate what percentage of products containing the accused chokes were imported into the U.S. However, the appellate court found his methodology “speculative” because the filings included revenue from products that did not contain accused chokes, without distinguishing between them. Citing precedent like Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348 (Fed. Cir. 2013), the Federal Circuit held the expert “assumed that (1) the sales revenue reported in the customers’ Form 10-K reflected sales of products with molded chokes; and (2) each third-party product shipped into the United States contained an infringing choke.” This “speculative” testimony should have been excluded under Daubert. The appellate panel thus vacated the lost profits award. On remand, the damages calculation will need to be reevaluated without the flawed expert testimony, likely with a new trial focusing on obviousness and damages.
I do not know the statistics for a directed verdict (JMOL) of nonobviousness as here, much less one that is sustained on appeal. But I suspect it quite rare. Because when I checked some years ago the percentage of patent suits actually ended by a comparable non-jury “summary judgement” by the judge was less than 5%, and typically for nearly indisputable “on sale” or “in public use” [for more than a year earlier] prior art, or clear 102 publication prior art.
“As is common, I think both the District Court and the Federal Circuit got it wrong.”
Yet another stellar opinion from CJ Moore …
??? Judge Stoll authored the opinion–Judge Moore was part of the panel.
“Here, the patentee presented prior art and testimony regarding a motivation to combine. The district court found the evidence insufficient and awarded JMOL for the patentee. ”
Huh?
This whole post is hard to decipher.
As I’ve written (48 AIPLA Q.J. 1), I disagree that motivation-to-combine should be deemed a question of fact. Rather, it’s a restatement of the ultimate obviousness determination — a question of law. After the fact-finder resolves the Graham factors, the court must decide as a matter of law whether the proffered combination of references would have been obvious to a POSITA, and this essentially collapses into whether a POSITA would have been motivated to make that combination. If a POSITA would have been motivated to make a specific combination, then it follows that she would have deemed that combination to be obvious. What other conclusion could there be? (Yes, I’m aware of the reasonable-expectation-of-success requirement, but that’s really just a sub-component of the motivation question. If a POSITA wouldn’t expect a given combination to succeed, then she wouldn’t be motivated to make that combination).
KSR supports this framing, btw, as the Supreme Court really did decide as a matter of law that a POSITA would have been motivated to combine the two proffered references in that case.
Not sure that I would agree that it correlates to a full restatement, given that it is a subset of factors of the legal determination.
That being said, I can contemplate that it should be a legal subset.
“I’m aware of the reasonable-expectation-of-success requirement, but that’s really just a sub-component of the motivation question.”
Agree to disagree.
Breeze has it correct. They are in fact separate and distinct.
And therefore can — and indeed must be — analyzed separately.
Is there anything to be criticised in the attitude of the English courts, that one needs to be clear on the distinction between a mere “hope to succeed” and a legitimate “expectation of success”? A hope to succeed can present a “motivation to combine” and so you really can have a motivation to combine even while you still don’t have any “expectation” of success.
Criticize?
Do you you think mere hope should be elevated to be a “State of the Art” consideration?
How do you feel about science fiction?
I do HOPE that you understand the absurdity of your slinging fecal matter against the wall (yet again), MaxDrei.
“KSR supports this framing, btw,…”
No, it does not. The court clearly said, for example, “For the same reason, if a technique has been used to improve one device, and a person of ordinary skill in the art would recognize that it would improve similar devices in the same way, using the technique is obvious unless its actual application is beyond his or her skill.”
As another example, the court said, “When there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense.”
Success in actually modifying/combining the prior art teachings is required as much as the teaching/suggestion/motivation/articulated reasoning with rational underpinning to attempt the modification/combination.
Respectfully, I don’t see anything in the KSR passages you quoted suggesting that SCOTUS viewed motivation-to-combine as a question of fact rather than a question of law.
You said, ” I disagree that motivation-to-combine should be deemed a question of fact. Rather, it’s a restatement of the ultimate obviousness determination — a question of law.”
As is clear from the quotes from KSR that I provided, the court did not, and does not, view “motivation-to-combine” as merely “a restatement of the ultimate obviousness determination” as you seem to believe. The court clearly recognizes that reasonable expectation of success, e.g., “anticipated success” or “within his or her technical grasp” (not to mention the umpteen instances where the court requires the outcome of the combination be “predictable”) is a separate and distinct factual inquiry that must be resolved before the “ultimate obviousness determination.”
“ If a POSITA wouldn’t expect a given combination to succeed, then she wouldn’t be motivated to make that combination”
I don’t think it’s that simple. There can be a relation between motivation to combine and the reasonable expectation of success but that relationship does not necessarily always exist. For example, the motivation (or desire) to make a handheld portable phone with the ability to perform an accurate MRI on a human brain already exists. But the current art teaches this is not achievable (zero expectation of success). So … the motivation to make the combination exists but the expectation of success is lacking.
Similarly, in an unpredictable art (pharma), there can be a motivation to make a drug with a particular improved profile but no reasonable expectation of success that any SPECIFIC claimed combination of molecules will have that profile.
To take your own example . . . we have specific prior art references that teach mobile phones and specific prior art references that teach MRI machines. But a POSITA would not be motivated to combine them, precisely because she wouldn’t expect the combo to work. Ergo, your reasonable expectation of success (or lack thereof) helps define which specific combos you’d be motivated to make.
In other words, motivation-to-combine isn’t a fanciful wishful-thinking exercise about “boy, wouldn’t it be great if we had a machine that did X.” Rather, it’s whether a POSITA would be motivated to combine specific references, under real-world technological constraints as of the priority date, to produce a desired result. If the POSITA wouldn’t expect a specific combo to work, then she wouldn’t be motivated to make that combo.
LOL, no. You are collapsing the two prongs on themselves. That is a mistake because as I pointed out, it is entirely possible to have the motivation (desire) for a combination while lacking a reasonable expectation that the combination can be successfully made.
Word.
“reasonable minds regularly do disagree upon the conclusion of obviousness”
But but but but that would mean that the hard cases (the ones most likely to be litigated) are essentially subjective random walks.
And history suggests that is so. It’s just a frictional cost of a functional patent system.
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