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Tribunal Burden – Nike v. Adidas

Nike, Inc. v. Adidas AG & Kathi Vidal, 21-1903 (Fed. Cir. 2022)

This ongoing dispute between the two athletic apparel companies has been ongoing since Adidas filed its IPR petition back in in 2012.  IPR2013-00067.  The decade is explainable procedurally–this is the third appeal in the case.  The appeals have all centered on Nike’s proposed substitute claims.  Initially, the Board refused to allow Nike to enter a substitute claim.  That decision was partially vacated on appeal by Nike, Inc. v. Adidas AG, 812 F.3d 1326 (Fed. Cir. 2016) (Nike I) and then the doctrine of  allowing substitute claims was substantially shifted by the court’s en banc decision in Aqua Prods., Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017). The Board then issued a second written decision concluding that the substitute claims were obvious.  On appeal, the Federal Circuit again vacated based upon the PTAB’s failure to provide notice that it would rely upon a particular prior art reference (Spencer). Nike, Inc. v. Adidas AG, 955 F.3d 45 (Fed. Cir. 2020) (Nike II).   Back on remand, the Board opened the case to additional briefing on obviousness and then concluded again that the new claims were obvious.  The PTAB again relied upon Spencer to teach a particular stitch configuration for flat lace holes.

Ordinary IPR proceedings place the burden of proof on the petitioner who challenged the patents. 35 U.S.C. 316(e) (“petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.”).   Things get a little bit tricky with amended and substitute claims.  Originally (pre-Aqua), the Board had held that the patentee had the burden of showing the patentability of any new claims.  However, in Aqua, the en banc Federal Circuit held that 316(e) applies also to amended claims.  Aqua (the AIA “places the burden of persuasion with respect to the patentability of amended claims on the petitioner.”).

Who Has the Burden – Petitioner, Patentee, or the Board?: In adversarial proceedings, we typically argue about which party has the burden of proving some factual contention.  At times, however, the burden is placed upon the judicial tribunal instead.  In my civil procedure class yesterday we covered Rule 11 sanctions and discussed how the rules empower the judge to act sua sponte, but must issue a written order that “describe the sanctioned conduct and explain the basis for the sanction.”  FRCP R. 11.

In this case, it was the Board that raised the use of Spencer to teach the lace-hole in the substitute claim. And, despite the seeming direct statement from Aqua that the petitioner bears the burden, the Board concluded that in that situation the Board could take-on the burden of persuasion itself.  The Board noted the unusual circumstances of substitute claims that raise new issues not expected by the petition and that – at times petitioners “fail to raise certain evidence of unpatentability that is readily identifiable and persuasive.”  In order to protect the integrity of the system, it is the Board’s responsibility to step-up and provide the evidence.  The Board read Aqua as prohibiting any shifting of the burden onto the patentee, but failing to provide any guidance in the situation of patentability questions raised by the Board.

On appeal here, the Court refused to particularly answer this question.  Rather, the court noted that the petitioner (Adidas) met the burden of proof in its briefing on remand.  Thus, even if the Board’s statement regarding its burden is in error, that error is harmless.

The Board and Adidas’s arguments mirror each other, and therefore, the outcome below would have been the same regardless of whether the burden fell to Adidas or the Board. We thus find it unnecessary to determine here whether, in an inter partes review, the petitioner or Board bears the burden of persuasion for an unpatentability ground raised sua sponte by the Board against proposed substitute claims.

Slip Op. Obviousness affirmed.

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One reason why it is totally fine for the court to duck the question of burden allocation is that the Patent Office has adopted a revised rule that expressly allocates the burdens of persuasion.  The rule codified at 37 C.F.R. § 42.121(d).  Under the new rules a petitioner always has the burden: “A petitioner bears the burden of persuasion to show, by a preponderance of the evidence, that any proposed substitute claims are unpatentable.”

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