NIKE, INC. v. ADIDAS AG

Before Lourie, Chen, and Stoll. Appeal from the Patent Trial and Appeal Board.

Summary: The Patent Trial and Appeal Board may sua sponte identify a patentability issue for a proposed substitute claim based on the prior art of record, but must provide notice and an opportunity for the parties to respond before issuing a final decision.

The PTAB granted Adidas’s IPR against a Nike patent. Nike moved to amend, cancelling all claims and substituting four new claims. Adidas opposed on the ground that the proposed substitute claims were obvious. The PTAB agreed and denied Nike’s substitution. In a first appeal, the Federal Circuit remanded for the PTAB to reevaluate obviousness. The Federal Circuit then decided Aqua Products en banc, which held that the patent owner does not have the burden of persuasion on patentability of proposed amended claims during IPR. Then the PTAB issued its decision after remand, finding a proposed substitute claim obvious based on a prior-art reference that was of record but not cited by Adidas. On a second appeal, Nike argued that the Board violated the notice provisions of the Administrative Procedure Act by finding obviousness based on a prior-art reference that was of record but never cited by Adidas as disclosing the limitation at issue.

The Federal Circuit held that while the Board was permitted to raise its own theory of obviousness, the Board must provide the parties with notice and an opportunity to respond as required by the APA. The Federal Circuit vacated as to the substitute claim at issue and remanded for the Board to determine whether the claim is obvious after providing the parties with an opportunity to respond.

Editor: Paul Stewart