In a precedential decision that was unsealed last week by the Federal Circuit, the Patent Trial and Appeals Board (PTAB) was told that it erred in not considering evidence of copying when rendering its decision on obviousness of claims related to formulations and methods of keratin treatment in a patent owned by Liqwd, Inc. On remand, the PTAB will need to consider Liqwd’s objective indicia of nonobviousness as it relates to evidence of copying by L’Oreal USA, Inc. rather than disregarding it as it did the first time around. 

The Post-Grant Review at issue in the appeal is only one part of a multi-forum fight between Liqwd and L’Oreal that began several years ago over formulations and methods for strengthening and protecting hair. Until the decision came out last week from the Federal Circuit, the fight, which has been labeled by some to be a “David v. Goliath” battle, seemed to be in L’Oreal’s favor at the USPTO and Liqwd’s favor in the district court. In fact, L’Oreal’s challenge to the validity of claims in the ʼ419 patent (PGR2017-00012) resulted in a finding from the PTAB that claims 1-8 and 10 of Liqwd’s U.S. Patent No. 9,498,419 were unpatentable as obvious in June 2018. A little over a year later, the PTAB found that claims 1-13, 19-23, and 29-30 in Liqwd’s U.S. Patent No. 9,668,954 were unpatentable as obvious (PGR2018-00025, currently on appeal). In August 2019, a jury in the District of Delaware sided with Liqwd on claims of trade secret misappropriation and breach of contract by L’Oreal (L’Oreal had already been found to infringe certain claims of the ʼ419 and ʼ954 patents on summary judgment). The case (1:17-cv-00014) is currently in the post-trial motion phase, but it will most certainly be up on appeal to the Federal Circuit thereafter.

In the instant appeal, the Federal Circuit was persuaded by Liqwd’s argument that the PTAB erred by not giving weight in its obviousness analysis to its own factual finding that L’Oreal used maleic acid in its products because of L’Oreal’s access to Liqwd’s confidential patent application. To be clear, the PTAB afforded no weight to the copying that was found to occur because there was no evidence of copying a specific product embodying the claimed invention. Indeed, Liqwd did not have a product at the time of L’Oreal’s purported copying; rather, L’Oreal was accused of copying Liqwd’s technology generally from the unpublished parent application of the ʼ419 patent. 

The PTAB’s error appeared to stem from the guidance in the 2004 decision Iron Grip Barbell, Inc. v. USA Sports, Inc, which stated that “copying requires the replication of a specific product.” The court explained that what it really meant in Iron Grip was that “copying requires duplication of features of the patentee’s work based on access to that work, lest all infringement be mistakenly treated as copying.” The court further explained that “even in cases involving claims directed to a product, access to an issued patent coupled with circumstantial evidence regarding changes to a competitor’s design is sufficient to support copying.” In sum, the copying analysis for the purposes of objective indicia of nonobviousness is not limited to copying of products that embody the claimed invention, but may include copying from patent publications and published articles.

Despite this “win” on appeal by Liqwd, remand may not produce the result that Liqwd hopes for since evidence of copying is only one relevant indicium of nonobviousness. In fact, the PTAB already found that “there is insufficient evidence that the ’419 patent satisfied a long-felt and unmet need for a way to protect hair from damage during bleaching treatments” and further explained that “the long-felt need to which [Liqwd] adverts was satisfied by [Liqwd’s] own products before it was satisfied by the ’419 patent.” 

Indeed, while there are examples of success with the patent owner’s evidence of objective indicia to overcome obviousness, the decisions seem to have the same things in common: The evidence included more than one objective indicium of nonobviousness. For example, in Fox Factory, Inc. v. SRAM, LLC (IPR2016-01876), under a standard obviousness analysis, the PTAB found that the prior art disclosed all of the features in the challenged claims and that there was sufficient (albeit weak) motivation to combine that prior art. However, the PTAB ultimately found that the challenged claims were not invalid as obvious based on evidence of (1) substantial commercial success within the relevant market, (2) praise and skepticism from industry participants, (3) a long-felt, but unresolved, need, and (4) evidence related to copying of the patent owner’s products and licenses. In addition, unlike in Fox Factory where the PTAB specifically noted that there was only a weak motivation to combine the references, the PTAB in Liqwd was not persuaded by Liqwd’s myriad of arguments against a motivation to combine, suggesting that the motivation here will be afforded much more weight than in Fox Factory. In Argentum Pharm. LLC v. Research Corp. Techs., Inc. (IPR2016-00204), the PTAB found significant evidence of satisfying a long-felt, but unmet, need, as well as probative evidence of commercial success to arrive at a conclusion of nonobviousness. And, in Varian Medical Sys., Inc. v. William Beaumont Hospital (IPR2016-00162), the PTAB found that “the very strong evidence of each of industry praise and long-felt need,” modest commercial success, and copying evidence outweighed the finding that the prior art accounted for every limitation of the independent claim.

Is copying on its own, without any other evidence of objective indicium, enough to swing the pendulum to nonobviousness in Liqwd’s favor? Based on the examples above, it seems that it may not be enough, but we will have to wait and see what the PTAB ultimately decides. It is also interesting to note that, in the PGR filed to challenge the ʼ954 patent, the PTAB seems to have reached the opposite conclusion as to copying when it found that L’Oreal “had developed its own maleic-acid additive for a bleaching composition before receiving Patent Owner’s confidential patent application.” Perhaps on remand the PTAB will also take the opportunity to explain the apparent inconsistency between the two proceedings.