The Graham v. John Deere standard for evaluating the obviousness of a claimed invention has been in place for over 50 years. The traditional Graham v. John Deere approach requires analysis of four factors: (1) the scope and content of the prior art; (2) the differences between the prior art and the patent claims; (3) the level of ordinary skill in the art; and (4) secondary considerations (also known as "objective indicia" of nonobviousness). Supreme Court and Federal Circuit case law require that all four factors be evaluated collectively before a conclusion on obviousness is reached. The cases also require that the burden of proving obviousness is on the patent challenger and never shifts.
Several recent Federal Circuit decisions, however, have adopted a different approach, under which the court considers only the first three Graham factors to determine whether the patent challenger has made a prima facie showing of obviousness. Only after making a prima facie determination will the court consider rebuttal evidence on secondary considerations to determine whether it overcomes the prima facie case. The prima facie framework has become so common that two lines of cases are developing in both district courts and the Federal Circuit: the traditional Graham approach and the prima facie – rebuttal approach. This split of authority has been pointed out by Federal Circuit Judges Pauline Newman and Jimmie V. Reyna, both of whom have issued dissenting opinions highly critical of the prima facie obviousness framework. The disagreement among Federal Circuit judges should be resolved by the en banc court or the Supreme Court. In the meantime, the prima facie obviousness framework continues to be employed by many Federal Circuit panels and district courts. Practitioners should be prepared to address both the traditional Graham v. John Deere approach and the prima facie – rebuttal approach at trial and on appeal. Below, we examine how the two approaches are applied and the implications of each for litigants.
Background
The Supreme Court in Graham defined the standard for determining obviousness under 35 U.S.C. § 103 as follows (emphasis supplied): "the scope and content of the prior art are to be determined; differences between the prior art and the claims at issue are to be ascertained; and the level of ordinary skill in the pertinent art resolved. Against this background, the obviousness or nonobviousness of the subject matter is determined. Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc., might be utilized to give light to the circumstances surrounding the origin of the subject matter sought to be patented."
The Supreme Court and en banc Federal Circuit have set forth three principles regarding how the Graham factors are applied to issued US patents. First, all evidence relating to all four Graham factors is required to be considered collectively before a determination of obviousness or nonobviousness is reached. Second, the burden of persuasion of establishing obviousness by clear and convincing evidence rests on the party challenging the validity of the patent and never shifts. Third, all evidence relating to secondary considerations must be considered en route to a determination of obviousness.
Despite the foregoing, two lines of district court decisions have emerged: the traditional Graham v. John Deere approach where the court considers all four Graham factors before reaching a determination of obviousness or nonobviousness, and another where the court first makes a legal conclusion of prima facie obviousness based only on the first three Graham factors and then considers evidence of secondary considerations solely for rebuttal purposes to determine if it can overcome the prima facie case. The prima facie – rebuttal approach has also been applied in Section 337 (19 U.S.C. §1337) investigations before the United States International Trade Commission (ITC). The two lines of decisions are illustrated below:
The prima facie obviousness framework originated in United States Court of Customs and Patent Appeals case law involving patent applications, not issued patents. There is nothing controversial about the burden shifting approach of the prima facie framework in the context of patent prosecution given the applicant bears the burden of establishing patentability and it is appropriate to shift the burden back to him or her once the examiner has presented evidence that the claimed subject matter is unpatentable. As discussed below, however, Federal Circuit Judges Newman and Reyna, as well as Judge Kathleen M. O'Malley, believe the prima facie obviousness framework should not be applied to issued patents, which enjoy a statutory presumption of validity.
Application of the traditional Graham v. John Deere approach to obviousness
In 2007, the Supreme Court reaffirmed Graham in KSR v. Teleflex, in which it noted that although the sequence of the four Graham factors might be reordered in any given case, "the factors continue to define the inquiry that controls." Further, the Federal Circuit has interpreted Graham to require "that all evidence relevant to obviousness or nonobviousness be considered, and be considered collectively." The Federal Circuit has also held that a fact finder may not defer examination of the secondary considerations until after a determination of obviousness is reached. In Stratoflex v. Aeroquip, the court instructed that "evidence rising out of the so-called ‘secondary considerations’ must always when present be considered en route to a determination of obviousness" and that a court must not reach a conclusion on that issue "until all pieces of evidence on that issue have been fully considered and each has been given its appropriate weight." This principle was reiterated by the en banc Federal Circuit in Apple Inc. v. Samsung, which stated, “A determination of whether a patent claim is invalid as obvious under §103 requires consideration of all four Graham factors, and it is error to reach a conclusion of obviousness until all those factors are considered.”
The Supreme Court has never imposed a formal burden-shifting framework in the obviousness context. Neither Graham nor KSR mentions a “prima facie case of obviousness” or a shifting of the burden from the patent challenger to the patentee. In Cyclobenzaprine, a decision authored by Judge Kathleen M. O’Malley and joined by Judges Newman and Reyna, the Federal Circuit reviewed those cases and found “no indication” that the Supreme Court “believes the burden of persuasion should shift to the patentee at some point to prove nonobviousness.”
Application of the prima facie – rebuttal approach to issued patents
Judges Newman, Reyna and O’Malley believe that the prima facie -rebuttal approach is inconsistent with the traditional Graham v. John Deere approach. In their views, it leads to four undesirable consequences:
- Failure to consider all of the relevant evidence on the issue of obviousness collectively before a legal conclusion of obviousness is reached.
- Improper burden shifting with respect to the “rebuttal” characterization of the secondary considerations (ie, to rebut the prima facie case of obviousness). As Judge Reyna pointed out in his dissent in Intercontinental Great Brands v. Kellogg (discussed below), district courts applying the prima facie obviousness framework regularly shift the burden to the patent owner to present objective evidence to overcome the challenger’s case, a practice that cannot be reconciled with the law that the burden of proving obviousness rests on the challenger and is never shifted.
- Failure to guard against hindsight analysis. As the court in Cyclobenzaprine noted, “it is sound in requiring that a fact finder consider the objective evidence before reaching an obviousness determination. The objective considerations, when considered with the balance of the obviousness evidence in the record, guard as a check against hindsight bias.”
- Encouraging district courts to view objective evidence as less important than the first three Graham factors, causing them to review the objective evidence less carefully, with the result that objective evidence is not given appropriate weight or is overlooked entirely.
Merck v. Hospira provides a good example of how the prima facie - rebuttal approach has been applied. The district court held Merck's Orange Book patent covering its Invanz® (ertapenem) antibiotic valid and infringed. However, the court held a second patent covering the process for manufacturing Invanz® invalid for obviousness, even though the patent was found to be infringed, commercially successful, copied, and not invalid on grounds of anticipation or indefiniteness.
By way of background, the antibiotic ertapenem degrades in two different ways. The process patent claimed a multi-step process for manufacturing a “final formulation product” of ertapenem containing low levels of the two types of degradants. This was an unexpected result given that the prior art taught that minimizing one type of degradant would lead to unacceptably high levels of the other.
The district court found that Hospira “made a prima facie showing” of obviousness based solely on the prior art, even though the court acknowledged that the prior art “may not explicitly lay out the claimed steps,” and the Federal Circuit panel majority (Judges Alan D. Lourie and Todd M. Hughes) confirmed that certain elements of each claim step and “the order of the steps” were not expressly disclosed in the prior art.
The district court relied on the inventor’s testimony as to why the claimed order of steps was critical as a basis for finding the steps obvious, despite the fact that the same inventor testified that “the steps, the order of the steps, the details of how each step is carried out” were not disclosed in the prior art. This was contrary to Federal Circuit precedent holding that “Judicial hindsight must be avoided….It is inappropriate to use the template provided by the inventor, to render the inventor's contribution obvious.”
Only after making a prima facie determination of obviousness did the district court (and later, a Federal Circuit panel majority) consider whether the secondary considerations of commercial success and copying overcame the prima facie case of obviousness. Both the district court and the Federal Circuit panel majority failed to address the evidence of unexpected results that the claimed method simultaneously minimized both types of degradation. This was contrary to Federal Circuit precedent because, as pointed out in Stratoflex v. Aeroquip, it is “inappropriate to disregard any relevant evidence” on obviousness or any other issue.
Judge Newman authored a dissenting opinion, consistent with dissenting opinions she and Judge Reyna have issued in a number of cases where the panel majority applied the prima facie obviousness framework. She noted that the district court “either accorded insufficient weight or failed to acknowledge the objective indicia of nonobviousness” and cited this case as yet another illustration of how the Federal Circuit's prima facie obviousness case law has led lower courts into error. Judge Newman called for en banc review: “It is time to restore conformity to precedent, in the interest of stability of practice and procedure, and predictability and fairness of result. I would reestablish the proper analytic criteria under the four Graham factors….”
Another example of the prima facie - rebuttal approach is Intercontinental Great Brands v. Kellogg. There, a divided Federal Circuit panel (Judge Richard G. Taranto and Chief Judge Sharon Prost in the majority, Judge Reyna dissenting) affirmed summary judgment that a patent to a resealable food package was invalid for obviousness despite what the district court acknowledged was “substantial” and “strong” objective evidence of commercial success, industry praise, and copying. The panel majority agreed with the district court that this objective evidence was not enough to overcome the strong prima facie case of obviousness based on the prior art, even though the same prior art was considered by the United States Patent and Trademark Office during the patent's reexamination.
In his dissent, Judge Reyna argued that "[t]his case presents a textbook example of why courts should not make any determinations of obviousness, prima facie or otherwise, prior to considering objective indicia of nonobviousness." In his view, the district court's findings regarding objective evidence were even stronger than the panel majority acknowledged: “substantial” evidence of commercial success, “evidence of positive consumer feedback” and survey results showing that the invention was “a clear favorite for nearly all” survey respondents. The district court also found that the invention satisfied a long-felt but unsolved need, won one of the highest industry awards innovative packaging technology can receive, and pointed to many industry publications praising the technology. Further, the district court found “compelling” evidence that Kellogg intentionally copied the invention. Judge Reyna concluded by wondering “how ‘substantial’ and ‘compelling’ evidence of objective indicia cannot overcome a prima facie showing. If such significant evidence does not make a difference in this case, it is hard to imagine a situation in which it would."
Two different approaches to obviousness
The Federal Circuit so far has shown no inclination to address the criticisms of Judges Newman, Reyna and O'Malley regarding the prima facie - rebuttal approach to obviousness. Merck's request for rehearing en banc on this issue was denied in Merck v. Hospira, as was a similar request in Intercontinental Great Brands. Nor has this issue been raised on a petition for certiorari to the Supreme Court as of the date of publication. Until the issue is taken up by the Federal Circuit en banc or taken up by the Supreme Court, practitioners should be aware that district courts and the Federal Circuit may employ either of two different frameworks to evaluate a patent's validity under 35 U.S.C. § 103, and the choice can make a significant difference in any given case.
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An earlier version of this article was published by Law360 on November 29, 2018.