Federal Circuit Clarifies the Rebuttable Presumption of Nexus Applicable to Secondary Considerations of Non-Obviousness
By: Sheri L. Gordon
In FOX Factory, Inc. v. SRAM, LLC, Appeal Nos. 2018-2024 and 2018-2025 (Fed. Cir. Dec. 18, 2019), the Federal Circuit panel clarified the circumstances by which a patentee may be entitled to a rebuttable presumption of nexus between the evidence of secondary considerations and a patent claim, particularly when the secondary considerations evidence concerns a commercial product that has both claimed and unclaimed features, relative to the patent at issue.
SRAM obtained patents on a bicycle chainring structure that is alleged to better maintain the chain and avoid the need for extraneous structures. The independent claims of one of those patents, which FOX sought to invalidate in IPR proceedings, recite a chainring with alternating narrow and wide tooth tips and teeth offset from the center of the chainring. Slip op. at 2-3, 11. One set of claims at issue requires teeth offset away from the body of the bicycle (“outboard offsets”); the other set generally covers tooth tips offset toward the body of the bicycle (“inboard offsets”). Id. at 3.
The PTAB instituted review on certain obviousness grounds proposed by FOX and, after trial, found that the asserted art discloses all limitations of the challenged independent claims. The PTAB also found a motivation to combine the asserted references. Slip op. at 2, 5-7. SRAM presented evidence of secondary considerations, which related to its commercial X-Sync product. The PTAB concluded from this evidence that SRAM was entitled to a presumption of nexus between the X-Sync products and the challenged claims, and held that FOX ultimately did not show by a preponderance of the evidence that the challenged claims were obvious. Id. The PTAB found that the secondary considerations evidence, which concerned specific products or components (e.g., chainrings, cranksets, or drivetrains), is only coextensive with the challenged claims that broadly cover that particular component. Id. For example, the PTAB found that because the independent claims cover a chainring, they are only coextensive with sales or industry praise of the X-Sync chainrings, not X-Sync cranksets or drivetrains. Id. FOX appealed.
The Federal Circuit opinion provides a nice summary of the requirements for proving obviousness, the obviousness analysis, and what is needed to accord substantial weight to secondary considerations in the obviousness analysis. Slip op. at 9-10.
The Court explained in its discussion of secondary considerations and the rebuttable presumption of nexus that a patentee is entitled to a rebuttable presumption of nexus between the evidence of secondary considerations and a patent claim “if the patentee shows that the asserted evidence is tied to a specific product and that the product is the invention disclosed and claimed”—that is, that the product embodies the claimed features and is coextensive with them Slip op. at 9-10 (emphasis in original, internal quotes and citation omitted). The Court further explained that this presumption will not apply if the thing that is commercially successful is not coextensive with the patented invention—e.g., the patented invention is merely a component of a commercially successful machine or process. Id. Recognizing the importance of the coextensiveness requirement, the Court noted that the commercial success of a product must be limited to the features of the claimed invention in order to find a nexus. Id. The Court also observed that the inquiry into secondary considerations does not end if the presumption does not apply because the patent owner still has an opportunity to prove nexus “by showing that the evidence of secondary considerations is the direct result of the unique characteristics of the claimed invention.” Id. at 11.
Addressing the coextensiveness requirement in the context of SRAM’s X-Sync chainrings and the evidentiary record before it, the Court noted that the products unquestionably include features that are not claimed in the subject patent. Slip op. at 11-13. The Court observed, for example, that one such feature is a gap filling feature that is claimed in SRAM’s ‘250 patent, a continuation of the patent at issue. Id. (discussing the claimed chainring of the ‘250 continuation that has both wide and narrow teeth and wide teeth with >80% gap filling). The Court also observed that SRAM stated in IPR proceedings involving the ‘250 patent that this particular feature is “critical” or “important” to its invention. Id. at 5, 11-12, 18. FOX relied on the unclaimed features, the ‘250 patent, and SRAM’s statements about the gap filling feature to argue that the nexus presumption cannot apply. Id. at 11-13.
The Court acknowledged that it has never held “that the existence of one or more unclaimed features, standing alone, means nexus may not be presumed” and that there is “rarely a perfect correspondence between the claimed invention and the product.” Slip op. at 12 (emphasis in original). The Court observed that, in light of the reason for the coextensiveness requirement, “if the unclaimed features amount to nothing more than additional insignificant features, [then] presuming nexus may nevertheless be appropriate,” and reasoned:
[T]he degree of correspondence between a product and a patent claim falls along a spectrum. At one end of the spectrum lies perfect or near perfect correspondence. At the other end lies no or very little correspondence, such as where the patented invention is only a component of a commercially successful machine or process. Although we do not require the patentee to prove perfect correspondence to meet the coextensiveness requirement, what we do require is that the patentee demonstrate that the product is essentially the claimed invention.
Id. (internal quotes and citations omitted). The Court then determined that no reasonable fact-finder could conclude under the correct standard that the X-Sync chainrings are coextensive with the challenged claims. Id. Agreeing that “the mere existence of one or more unclaimed features does not necessarily mean presuming nexus is inappropriate,” the Court observed that one or more unclaimed features in the X-Sync chainrings “materially impact the functionality” of the product. Id. at 16. Under these circumstances, nexus could not be presumed. Id.
The Court rejected the position taken by SRAM and the PTAB that the “coextensiveness” requirement is met so long as the patent claim broadly covers the product that is the subject of the secondary considerations evidence, regardless of the nature of any unclaimed features. Slip op. at 16-17. The Court explained that adopting this view would allow the coextensiveness requirement to “rest entirely on minor variations in claim drafting” and turn the inquiry into one of form over substance. Id. at 16-17 (illustrating SRAM’s and the PTAB’s view and the Court’s reasoning in the context of a patent that has some claims specifically covering novel brake pads and others directed to an automobile). The Court found that, on this point, it is bound by the holding of Demaco Corp. v. F. Von Langsdorff Licensing Ltd., 851 F.2d 1387 (Fed. Cir. 1988), wherein it held that “nexus can only be presumed where the evidence of secondary considerations is tied to a specific product that ‘is the invention disclosed and claimed’” and explained that “nexus cannot be presumed where, for example, ‘the patented invention is only a component of a commercially successful machine or process.’” Id. at 17 (quoting Demaco, 851 F.2d at 1392) (emphasis in original).
The Court also rejected SRAM’s argument that a finding that the presumption of nexus in this case is unwarranted results in an absurd outcome where continuations of a patent at issue bar the presumption. Slip op. at 17-19. The Court explained that “[w]here a product embodies claims from two patents, a presumption of nexus can be appropriate only if the claims of both patents generally cover the same invention,” and distinguished the cases relied on by SRAM from the facts of SRAM’s continuation patent (relied on by FOX to show that the presumption does not apply). Id. at 17-18 (finding that, contrary to the facts in the cases relied on by SRAM, the patent currently at issue and the ‘250 continuation do not cover the same invention but, rather, claim different combinations of chainring features).
The Court went on to discuss the gap filling feature referenced above that is present in the X-Sync chainrings, unclaimed in the patent at issue but claimed in the ‘250 continuation, and SRAM’s statements that this feature is “critical” or “important” to its invention. Slip op. at 18. The fact that SRAM separately sought patent protection for the combination of wide and narrow teeth with this feature was, by itself, found “probative of whether this combination of features adds up to more than an insignificant additional feature. Id. The Court went on to find that the presumption of nexus would be inappropriate in this case even if SRAM never sought separate patent protection over this feature, citing SRAM’s statements about the importance or criticality of the feature. Id. The Court concluded that the X-Sync chainrings cannot be coextensive with the independent claims of the challenged patent because they include the “critical” gap filling feature, which is not covered by the independent claims, and that this feature “materially impacts the product’s functionality by [in SRAM’s own words] ‘lead[ing] to a chainring that will retain a chain in even the worst conditions.’” Id. (quoting statements made by SRAM in separate IPR proceedings involving the ‘250 patent). The Court observed that this fact would be true regardless of whether SRAM included it in its other patents. Id.
The Court also considered the PTAB’s finding in IPRs of the ‘250 patent that the nexus presumption applied as between the independent claims of that patent and the secondary considerations evidence, which was essentially the same evidence at issue in the present case. Slip op. at 19. The Court found that the PTAB’s determinations in the ‘250 IPRs highlighted another reason why nexus cannot be presumed in the present case—“[t]he same evidence of secondary considerations cannot be presumed to be attributable to two different combinations of features.” Id. The Court continued, explaining that in such situations, “the patentee retains the burden of proving the degree to which evidence of secondary considerations tied to a product is attributable to a particular claimed invention.” Id.
The Court vacated the PTAB’s obviousness determination in view of its holding that the PTAB erred in presuming nexus between the evidence of secondary considerations and the independent claims of the challenged patent, and remanded. Slip op. at 19-20.