United States: Federal Circuit Reverses Course On Obviousness– Affirms Apple Victory In Smartphone Battle

In an unusual en banc decision rendered without requesting briefing from the parties, the United States, or interested amici curiae, the U.S. Court of Appeals for the Federal Circuit recently affirmed several rulings in favor of Apple Inc. in its ongoing smartphone patent war with Samsung. Apple Inc. v. Samsung Electronics Co., No. 2015-1171 (Fed. Cir. Oct. 7, 2016). The decision was unusually critical of an earlier decision by a panel of three Federal Circuit judges, who vigorously dissented from the en banc majority decision.


The case involves Apple's litigation against Samsung alleging infringement of claims in three patents: U.S. Patent No. 5,946,647, 8,046,721, and 8,074,172. The litigation also included other Apple patents and Samsung infringement counterclaims against Apple, none of which were relevant to the appeal. After the U.S. District Court for the Northern District of California ruled in favor of Apple on the three patents following a jury trial, a three-judge panel of the Federal Circuit reversed the rulings in February 2016. The panel ruled that the '647 patent was not infringed and the '721 and '172 patents were invalid as obvious.

En Banc Decision:

One unusual aspect of the case is the procedural posture of the court's en banc review. Apple filed a petition for rehearing en banc arguing, inter alia, that the panel improperly looked to information outside the record in construing the claims. The court granted rehearing, vacated the panel decision, and issued a new decision by the full court affirming the district court on the validity and infringement issues, all without requesting additional briefing or allowing the United States or other interested parties to participate. The three judges on the original panel – Chief Judge Prost and Circuit Judges Dyk and Reyna – each filed vigorous dissents.

In the majority opinion, Circuit Judge Moore stated that the court granted rehearing to reaffirm the limits of appellate review, including review of claim construction issues in light of Teva Pharms., Inc. v. Sandoz, Inc., 135 S. Ct. 831 (2015). Among other things, the majority noted that the panel decision had overturned "nearly a dozen jury fact findings including infringement, motivation to combine, the teachings of prior art references, commercial success, industry praise, copying, and long-felt need across three different patents. It did so despite the fact that some of these findings were not appealed and without ever mentioning the applicable substantial evidence standard of review." Slip op. at 5.

The majority opinion affirmed the district court findings that Samsung infringed the '647 patent.

The patent covers a system and method for detecting "structures," such as phone numbers, and linking them to actions or commands. The court ruled that the panel improperly overturned the district court's construction of a key term in the '647 patent claims, even though neither Apple nor Samsung had objected to the district court's construction and neither contested the issue on appeal. The majority criticized the panel for relying on extra-judicial evidence not in the record, including a treatise and a technical dictionary, in reviewing the district court's claim construction. It concluded that substantial trial evidence, including testimony from Apple's expert witness, supported the jury infringement verdict.

The majority decision also affirmed the district court ruling that the '721 and '172 patents were not invalid as obvious. The '721 patent covers Apple's "slide-to-lock" technology for using gestures to lock and unlock devices to prevent pocket-dialing and other accidental activations. The '172 patent claims a text entry system using word-level disambiguation to automatically correct keystroke errors. The majority opinion focused on the secondary evidence of nonobviousness that Apple presented at trial, including critical acclaim for the features in Apple's iPhone product, copying, and the commercial success of the products. It raised two fundamental issues with the panel's earlier opinion, which found that the patent claims were obvious based on a combination of prior art references. First, it reiterated that "What a prior art reference teaches and whether a skilled artisan would have been motivated to combine references are questions of fact." Slip op. at 28. As a result, the jury's findings on obviousness are entitled to deference, and the Federal Circuit review is limited to determining whether the findings are supported by substantial evidence:

Our job is not to review whether Samsung's losing position was also supported by substantial evidence or to weigh the relative strength of Samsung's evidence against Apple's evidence. We are limited to determining whether there was substantial evidence for the jury's findings, on the entirety of the record. And under the Ninth Circuit standard [applicable to denial of post-verdict motions for judgment as a matter of law], we cannot conclude that the evidence affords only one reasonable conclusion and that it is contrary to that of the jury.

Slip op. at 30-31. In addition, the majority noted that secondary evidence of nonobviousness, such as industry praise, copying, and commercial success, are an essential part of the Graham v. John Deere obviousness framework, and Apple's trial evidence on those points "tip[ped] the scales of patentability" in favor of Apple and providing substantial evidence supporting the jury verdict:

Even in cases in which a court concludes that a reasonable jury could have found some facts differently, the verdict must be sustained if it is supported by substantial evidence on the record that was before the jury. But as an appellate court, it is beyond our role to reweigh the evidence or consider what the record might have supported, or investigate potential arguments that were not meaningfully raised. Our review is limited to whether fact findings made and challenged on appeal are supported by substantial evidence in the record, and if so, whether those fact findings support the legal conclusion of obviousness.

Slip op. at 50.

The three judges forming the panel issuing the earlier decision reversing the trial court each filed a dissenting opinion. Chief Judge Prost argued that the majority misapplied the substantial evidence standard of review, contending that the record was devoid of evidence and that the majority effectively found substantial evidence where existed. She noted that, "In the majority's view, the existence of any evidence that could theoretically support a jury verdict would seem to end our substantial evidence review on appeal." Dissent at 2. Judge Prost also argued that the majority misapplied the Graham framework for analyzing obviousness by using secondary evidence of nonobviousness to support its conclusion that a person of ordinary skill in the art would not be motivated to combine prior art references:

It is unclear what analytical framework the majority has adopted in its analysis and whether this goes to the question of motivation to combine. We have only weighed the teachings of a prior art reference related to motivation to combine against each other in the teaching away context. Doing so as part of the ultimate legal question of obviousness, as the majority does now, is a new approach that neither we nor the Supreme Court has sanctioned. Given the majority's conclusion (with which I disagree) that there was no motivation to combine references in this case, there is no reason for the majority to go on to opine on the question of secondary considerations at all — that discussion is arguably dicta.

Dissent at 9 (citations and footnote omitted). Judge Prost argued that under Graham, Apple's evidence of secondary considerations was inadequate to overcome a strong prima facie conclusion of obviousness.

In his dissent, Judge Dyk pointed out that the majority decision apparently modified the analytical framework for determining obviousness in numerous ways. First, it "turns the legal question of obviousness into a factual issue for a jury to resolve, both as to the sufficiency of the motivation to combine and the significance to be given to secondary considerations." Dissent at 4. Second, Judge Dyk noted that the court "lower[ed] the bar for nonobviousness by refusing to take account of the trivial nature of the two claimed inventions," which had been found invalid in other countries. Third, Judge Dyk argued that that the majority misapplied the standard for obviousness by requiring specific evidence that a motivation to combine prior art references exists. He noted that the Supreme Court's decision in KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398 (2007) "held, contrary to the majority, that evidence of a specific motivation to combine is not required." Fourth, Judge Dyk argued that, again contrary to the KSR decision, the majority rejected prior art involving a different device (a wall-mounted touch panel) from the mobile device at issue. In KSR, the Supreme Court ruled that a person of ordinary skill in the art might apply an improvement known to work on one device to a similar device. Judge Dyk warned that, "The majority's approach will create significant opportunities to dismiss relevant prior art and find almost any patent nonobvious by narrowly defining the relevant technology. In this respect, the en banc decision will work a significant change on future cases in the district courts and the PTO." Dissent at 12. Finally, Judge Dyk argued that the majority misapplied any evidence of secondary considerations of nonobviousness, by failing to require an adequate nexus between the evidence and the patented technology. Judge Reyna wrote a dissenting opinion noting that en banc review was inappropriate. He noted that "En banc review is disfavored and granted only when necessary to secure or maintain uniformity of the court's decisions or when the proceeding involves a question of exceptional importance[,]" neither of which was present in this case.

Practical Significance:

The Federal Circuit's decision is significant for two reasons. First, it signals that the court may be continuing a trend towards deferring to district court decisions. The Supreme Court recently stressed district court discretion and appellate deference to that discretion in Teva and other cases. Halo Electronics, Inc. v. Pulse Electronics, Inc., No. 14-1513 (U.S. June 13, 2016) (decided with Stryker Corp. v. Zimmer, Inc., No. 14–1520); Octane Fitness, LLC v. ICON Health & Fitness Inc., 572 U. S. ___ (2014) (considering the award of attorney fees in "exceptional" cases under 35 U.S.C. § 285); Highmark Inc. v. Allcare Health Management System, Inc., 572 U. S. ___ (2014) (requiring appellate deference to district court rulings on attorney's fees). For an appellate court that historically has reversed district court decisions at a relatively high rate, this pattern of deference could have important strategic significance.

Second, the majority decision raises important issues concerning the application of the Graham obviousness analysis to a complex set of facts. Although secondary considerations of nonobviousness are an important part of the obviousness analysis, they traditionally have been consulted after a preliminary determination of obviousness, and only rarely overcome a strong case of prima facie obviousness. The Apple majority suggests that impressive evidence of commercial success or industry praise also may influence the question whether a combination or modification of the prior art is obvious.

The long-term impact of the Apple decision will depend on whether the Federal Circuit cites it for guidance in subsequent cases, or limits it to its specific facts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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