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Federal Circuit Raises the Standard of Nexus Requirement for Secondary Indicia of Non-Obviousness

The Federal Circuit recently addressed the requirement for establishing “nexus” for secondary indicia. On December 18, 2019, the Court of Appeals for the Federal Circuit (the “Federal Circuit”) vacated and remanded a PTAB decision of non-obvious, and ultimately raised the bar a patentee needs to meet to invoke secondary considerations of non-obviousness. In Fox Factory, Inc. v. SRAM, LLC, No. 18-2024 (Fed. Cir. Dec. 18, 2019), the Federal Circuit vacated an inter partes review (“IPR”) final decision holding the claims of U.S. Patent No. 9,182,027 as non-obvious due in large part to a finding of commercial success attributed to the claimed invention. On appeal, the Federal Circuit concluded that the PTAB improperly applied the presumption of nexus between the evidence of commercial success and the claims of the patent. The court held that the proper presumption of nexus can only be achieved by proving that the product sold by the patentee is “essentially the claimed invention.” Id. at 12.

The patents-at-issue in Fox Factory covered a chainring of a bicycle where the teeth of the chainring were constructed to maximize engagement with the chain. During the IPR, the PTAB found that the prior art apparently taught all of the claimed elements of the patents as well as a motivation to combine the references. However, SRAM presented evidence of commercial success of its product as secondary evidence that its patents were nonobvious. The PTAB determined that such evidence of success was appropriate because SRAM established a “nexus” connecting the evidence to the claims by showing the product sold both “embodied” the claimed invention and was “coextensive” with the claims. The PTAB reasoned that the “coextensive” requirement was met as long as the claims of the invention broadly covered the product.

On appeal, the Federal Circuit clarified the meaning of “coextensive.” Noting that SRAM’s product included a number of unclaimed features, the court concluded that to prove “coextensive” meant to prove “that the product is essentially the claimed invention.” Id. at 12. Elaborating, the court continued by acknowledging that the requirement of coexistence between the product and the claimed invention was a spectrum: “the existence of one or more unclaimed features [in the product], standing alone,” did not mean that nexus could not be established, “if the unclaimed features amount to nothing more than additional insignificant features” of the product. Id. However, although “perfect correspondence” is not required, “the patentee [must] demonstrate that the product is essentially the claimed invention.” Thus, the court clarified the boundaries of the coextensive element – the more features a product possesses over the claimed invention, the less likely a court will find sufficient nexus between them.

The Federal Circuit also struck down the coexistence between a single evidence of secondary consideration and two or more patents. SRAM’s chainrings were covered by two patents, one of which was a continuation of the other. SRAM’s attempt to establish nexus between the product’s commercial success and the two patents was rejected by the court, which reasoned “[t]he same evidence of secondary considerations cannot be presumed to be attributable to two different combinations of features.” Id. at 19. Further, the court posited that the attempt to seek patent protection on a different combination of features was evidence probative of no coexistence. Id. at 18. The court remanded back to the PTAB ordering that SRAM may not rely on the presumption of nexus due to lack of coexistence, but may still be able to prove secondary considerations if it proved that the evidence is “attributable to the claimed combination” of the patented features as opposed to unclaimed or prior art features. Id. at 19.

This holding illustrates just how close a claim needs to be drafted to the purported invention. Too many anomalies between the product sold and the invention described in the claim could result in the loss of presumption of nexus.