by Dennis Crouch
Ontel Products Corp. v. Guy A. Shaked Investments Ltd., No. 22-1938 (Fed. Cir.)
This pending case raises key issues of (1) mootness in the IPR/Court interplay and (2) the role of secondary indicia in obviousness determinations.
Gary Shaked (Dafni) holds several patents on hair straightening brushes, and the business took off as a video of the time-saving tool went viral. Dafni sued Ontel and others for patent infringement based upon several utility and design patents. Dafni responded with an IPR of one of the patents. U.S. Patent No. 9,877,562. Although the IPR was instituted, the patentee eventually won a judgment confirming that the claims were not proven invalid. The PTAB’s non-obviousness decision was largely based upon a indirect indicia of non-obviousness, including evidence of industry praise and industry adoption.
Meanwhile, back in the district court, the patentee wanted to move forward with the litigation and offered to dismiss the ‘562 patent from the litigation (with prejudice) in order to lift the stay. The defendant agreed and the parties jointly filed a stipulated dismissal of that claim.
Of course, the IPR was not automatically dismissed just because the litigation over the patent was dismissed. When the patentee eventually won the IPR, petitioner appealed.
In the appeal, there are two main questions:
- Whether the appeal should be dismissed as moot and the IPR vacated under Munsingwear because of a lack of ongoing actual controversy between the parties regarding the patent.
- On the merits, were the indirect indicia of non-obviousness properly considered.
The petitioner here is not going to be sued on the patent for any of its current activities. But, petitioner still argued that the PTAB decision could be used by the district court to help prove the secondary considerations of non-obviousness with regard to the other asserted patents.
On the standing/mootness questions, the court really has three options:
- Find that it has proper standing and that the case is not moot — then move forward with the appeal.
- Find that the case is moot and vacate the PTAB decisions upholding the patent under cases such as United States v. Munsingwear, Inc., 340 U.S. 36, 39–41 (1950).
- Find that the case is moot and/or lacks standing, but refuse to vacate the PTAB decision based upon the “voluntary cessation doctrine” discussed in ABS Global, Inc. v. Cytonome/ST, LLC, 984 F.3d 1017 (Fed. Cir. 2021).
The voluntary cessation doctrine – indicates that a party who wins a judgment below but who might lose on appeal cannot keep that judgment in place by taking affirmative steps to moot the appeal. Rather, in Munsingwear, the Supreme Court indicated that the appropriate appellate action in that situation where appellant is constitutionally prohibited from appealing under Article III is to also vacate the lower court judgment. During oral arguments before Judges Taranto, Chen and Cunningham, the parties debated whether the patentee had unilaterally created the mootness by dismissing its infringement assertion. The petitioner (accused infringer) argued it was effectively unilateral, and that the joint-stipulation of dismissal was a mere formality. The patentee argued that the accused infringer had a hand in the dismissal and so cannot now use that act to collaterally attack a PTAB decision that it does not like. I believe that the patentee here has the better argument, the defendant was clearly a participant in the dismissal of the claims as part of a negotiated process and so it cannot be seen as unilateral. We’ll have to wait to see what the Federal Circuit says.
In general though, I hope that the court reaches the merits because I am working a paper involving objective indicia of non-obviousness and would like another decision to study.
A key issue on appeal is whether the patent owner properly established a nexus between the evidence of industry praise and industry acceptance for its DAFNI hair straightening brush and the claimed features of the ‘562 patent.
As the Federal Circuit has made clear, “Evidence of objective indicia of nonobviousness must have a nexus to the claims, i.e., there must be a legally and factually sufficient connection between the evidence and the patented invention.” Fox Factory, Inc. v. SRAM, LLC, 944 F.3d 1366, 1373–74 (Fed. Cir. 2019). Lack of proven nexus has been repeatedly used to deny the relevance of key objective evidence that would otherwise tend to show nonobviousness.
Ontel argues that Dafni failed to meet the Fox Factory test. Specifically, Ontel contends that:
- None of the industry praise evidence shows that the praise directly resulted from the unique characteristics of the invention as identified by the Board, such as the elongate heating elements, insulating spacers, and peripheral spacers.
- Much of the evidence relates to unclaimed features or features found in other Dafni patents, which rebuts a finding of nexus.
In addition to lack of nexus, a patentee’s arguments for secondary considerations are often denied if the evidence provided is not significant enough or compelling. This has two levels of impact. First, a tribunal may make a factual finding that the evidence is insufficient to establish, for instance, industry praise or industry acceptance. Second, the tribunal may also use the low level of evidence when answering the ultimate legal question of obviousness — finding that the secondary considerations are insufficient to outweigh the direct evidence presented.
Here, the patent challenger argued that Dafni’s evidence of industry praise and acceptance was not significant or compelling enough to support the Board’s finding. Specifically, Ontel contended that the evidence relied upon by Dafni and the Board was “neither significant nor compelling” because (1) it consisted merely of a handful of internet articles by individual users rather than industry praise; (2) Dafni made no showing that any of the articles constituted industry praise; and (3) much of the evidence suffered from numerous weaknesses like being promotional in nature or failing to technically analyze the product. Thus, Ontel argued the evidence was inadequate to establish the “significant industry praise and acceptance” found by the Board both as a factual matter and when weighing it against the strong showing of prima facie obviousness in the ultimate legal obviousness analysis.
- Crediting of Dafni’s expert testimony linking the claimed features to the capabilities for which the DAFNI brush was praised, such as the ability to quickly and effectively straighten hair.
- Establishing that a nexus can rely on a unique combination of known individual elements.
- Ontel failing to rebut Dafni’s prima facie showing of nexus with evidence that the praise related to unclaimed or prior art features.
Oral arguments got stuck on the standing/mootness issues and so the parties did not further advance their arguments on the merits of the obviousness case. The Federal Circuit will thus have to weigh the arguments as briefed if it permits the case to move forward.