“Seams” Like Activity Giving Rise to Infringement Risk Supports Appellate Jurisdiction

By on July 8, 2020

Adding to its body of jurisprudence on standing to challenge an adverse final written opinion in inter partes review (IPR) proceedings, the US Court of Appeals for the Federal Circuit found a petitioner had constitutional standing to appeal where it showed it engaged in activity that would give rise to a possible infringement suit. Adidas AG v. Nike, Inc., Case Nos. 19-1787; -1788 (Fed. Cir. June 25, 2020) (Newman, J.).

Nike owns two patents which are generally directed to methods of manufacturing an article of footwear with a textile upper and which cover Nike’s Flyknit product. Five months after Nike announced Flyknit, Adidas announced a similar product that it called Primeknit. Adidas filed petitions for IPR challenging Nike’s patents. The Patent Trial and Appeal Board (PTAB) found that Adidas had not demonstrated the challenged claims as unpatentable. Adidas appealed.

On appeal, Nike challenged appellate jurisdiction, claiming Adidas had not suffered an injury in fact because Nike had not sued or threatened to sue Adidas for infringement of either patent. Addressing the jurisdictional issue, the Federal Circuit found that a challenger need not face a specific threat of infringement litigation by the patentee to establish the requisite injury in an appeal from a final written decision in an IPR. The Court noted that although Nike had not yet accused Adidas of infringing either of the challenged patents, Nike had asserted one of the patents against a third-party product similar to Adidas’ footwear. The Court also noted that Nike had accused Adidas’ Primeknit products of infringing Nike’s related German patent as part of its global enforcement strategy. Given that Nike refused to grant Adidas a covenant not to sue, the Court found that Adidas had engaged in activity that would give rise to a possible infringement suit that would likely be redressed by a favorable judicial decision.

Despite overcoming the jurisdictional hurdle, Adidas was unable to convince the Federal Circuit that the PTAB’s motivation to combine analysis lacked “substantial evidence.” In affirming the PTAB’s decision, the Court highlighted the fact that the obviousness inquiry does not merely ask whether a skilled artisan could combine the references, but instead whether they would have been motivated to do so. Given that the cited references Adidas relied on had fundamental differences with regard to their seaming techniques, and that the PTAB found Adidas had not addressed these seaming technique differences, but merely relied on “other objects” mentioned in one of the references concerning cost reduction and garment production, the Court concluded that the PTAB’s opinion did not lack substantial evidence, as the fundamental differences would have adversely affected a skilled artisan’s motivation to combine the references.

Practice Note:  This case illustrates that a petitioner not involved in active litigation need not be directly threatened with an infringement suit to have standing to appeal an IPR decision. As with declaratory judgment jurisdiction, it is generally sufficient for the appellant to show that it has engaged in or will likely engage in activity that would give rise to a possible infringement suit. For example, a litigant may try to show that a competitor refused to provide a covenant not to sue, or that they have challenged third parties with a similar product.