In a rare holding, the Federal Circuit in Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., No. 2011-1555, held that objective evidence of nonobviousness was so strong that it rebutted a prima facie case of obviousness. ---F.3d--- (Fed. Cir. 2012)(Moore, J.) (Transocean II). The dispute started in 2007 when Transocean alleged that three of its patents were infringed by a rig that Maersk was building in the Gulf of Mexico. Transocean's patents are directed to a "dual activity" offshore drilling vessel with two stations that operate together to drill an oil well in the ocean floor. In contrast to "single activity" vessels with only one station, dual activity vessels offer significant cost and efficiency savings.

In the earlier Transocean I proceedings, the Federal Circuit held that Maersk had established a prima facie case of obviousness, but nonetheless overturned summary judgment of obviousness because the district court had failed to weigh the fourth Graham factor: "To be clear, a district court must always consider any objective evidence of nonobviousness presented in a case." Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617 F.3d 1296, 1305 (Fed. Cir. 2010)(Moore, J.). On remand, the jury found that Transocean's patents were nonobvious and awarded $15 million to Transocean. Notwithstanding the jury's verdict, the district court granted Maersk's motion for judgment as a matter of law that the claims were obvious. Transocean appealed.

In Transocean II, the Federal Circuit reinstated the jury verdict, holding that the secondary indicia of nonobviousness were so substantial that no reasonable jury could have found the claims obvious. Transocean ultimately prevailed because it successfully tied the objective evidence of nonobviousness to the merits of the patented invention:

  • Commercial Success — Customer contracts showed that Transocean's customers expressly required dual activity rigs, which commanded a market premium over single activity rigs because of the efficiency gains.
  • Industry Praise and Unexpected Results — Competitors noted the unexpected efficiency gains, and the claimed invention was praised as one of 50 key technologies to have shaped the offshore drilling industry. A magazine article also hailed dual activity rigs as "critical to [the] future" of offshore drilling.
  • Copying — Maersk internal documents encouraged copying and specifically noted that Transocean's dual activity rigs were "the best known examples of dual activity vessels."
  • Industry Skepticism — Industry documents showed skepticism as to whether any efficiency gains would be achieved with dual activity vessels.
  • Licensing — Maersk had argued that Transocean's licensing activity should not be credited because the asserted licenses also conveyed rights to other patents not at issue. Transocean, however, presented evidence that the royalties under its licenses exceeded any litigation costs and were thus an accurate reflection of the value of the claimed invention. The Federal Circuit agreed that sophisticated companies would not pay such high royalties otherwise.
  • Long-felt but Unresolved Need — Two of the named inventors testified that, prior to the claimed invention, the industry was researching ways to increase drilling efficiency without interrupting operations of the drilling well, as achieved by the claimed invention.

What This Means for You

Since the establishment of the more flexible "obvious to try" inquiry in KSR International Co. v. Teleflex, Inc., 550 U.S. 398, 421 (2007), there have been few cases outside the pharmaceutical area in which objective evidence of nonobviousness has successfully rebutted a prima facie case of obviousness. Transocean II establishes that secondary indicia of nonobviousness are by no means secondary in importance — objective evidence can still be a critical tool for demonstrating nonobviousness, provided a nexus can be established between the objective evidence and the merits of the claimed invention.

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