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Chemours Company FC, LLC v. Daikin Industries, Ltd., Appeal Nos. 2020-1289, -1290 (Fed. Cir. July 22, 2021)

In this week’s Case of the Week, the Federal Circuit reversed a PTAB decision in consolidated IPRs that two patents were unpatentable as obvious. The Court held that the Board erred in reaching its conclusions both in terms of what the prior art taught and in application of objective indicia of nonobviousness.

This consolidated appeal arises from two IPR decisions filed by Daikin with regard to Chemours’s ’431 patent and ’609 patent. The patents at issue “relate to a polymer with unique properties such that it can be ‎formed ‎at high extrusion speeds while still producing a high-‎quality coating on the communication ‎cables.”‎ The Board found all challenged claims of the ’431 and ’609 patents to be unpatentable as obvious in light of the Kaulbach patent.

On appeal, Chemours submitted several arguments to the Court. First, Chemours argued that the case should be reversed and remanded because “the Board issued its decision in violation of the Appointments Clause because the Board’s decision came after th[e] [C]ourt’s decision in Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320, 1335 (Fed. Cir. 2019), but before th[e] [C]ourt issued its mandate.” Specifically, Chemours argued that the case should be reversed and remanded because the Board’s decision was issued prior to final resolution of the constitutional defect at issue in Arthrex. However, Chemours withdrew this argument and as such, the Court declined to vacate and remand based on Arthrex.

Second, Chemours argued that the Board failed to provide substantial evidence in support of its factual findings on obviousness because “it failed to show that a person of ordinary skill in the art [ ] would modify Kaulbach’s polymer to achieve the claimed invention.” The Court agreed, explaining that the Board improperly “ignored the express disclosure in Kaulbach that teaches away from the claimed invention and relied on teachings from other references that were not concerned with the particular problems Kaulbach sought to solve.”

Finally, Chemours argued that the Board erred in its analysis of objective indicia of nonobviousness, both as to its rejection of Chemours’s showing of commercial success due to lack of market share data and as to its conclusion that the patents at issue were blocking patents. The Court agreed, explaining first that the Board erred in its conclusion that “gross sales figures, absent market share date, ‘are inadequate to establish commercial success.’” And second, the Court explained that the Board erred in its conclusion that the asserted patents were “blocking patents” because “a blocking patent is one that is in place before the claimed invention because ‘such a blocking patent may deter non-owners and non-licensees from investing the resources needed to make, develop, and market such a later, “blocked” invention.’”

Accordingly, the Court reversed the Board’s decision on obviousness.

Circuit Judge Dyk filed a separate opinion concurring in part and dissenting in part. Circuit Judge Dyk concurred as to the Majority’s opinion with regard to Arthrex and the Board’s analysis of objective indicia of nonobviousness. However, Circuit Judge Dyk disagreed with the Majority’s finding that Kaulbach “teaches away from the claimed invention,” explaining that such conclusion was contrary to the Court’s precedent. Emphasizing the fact that Kaulbach expressly acknowledged the feasibility of the alternative used in the claimed invention, Circuit Judge Dyk explained that the Court’s precedent provides, “‘that better alternatives exist in the prior art does not mean that an inferior combination is inapt for obviousness purposes.’” Thus, Circuit Judge Dyk found that the Majority’s approach was an impermissible expansion of the teaching away doctrine in that it encompassed a “reference’s mere preference for a particular alternative.” Accordingly, Circuit Judge Dyk dissented from the majority’s treatment of the teaching away doctrine.

A copy of the opinion can be found here.

By Annie White

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