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JMOL Overturned Because Substantial Evidence Supported Jury’s Findings of Nonobviousness

August 13, 2012

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Last Month at the Federal Circuit - September 2012

Judges: Bryson, Dyk (concurring), O'Malley (author)

[Appealed from: W.D. Tex., Judge Furgeson]

In Kinetic Concepts, Inc. v. Smith & Nephew, Inc., No. 11-1105 (Fed. Cir. Aug. 13, 2012), the Federal Circuit reversed and remanded the district court’s grant of JMOL to defendant Smith & Nephew, Inc. (“S&N”) of invalidity for obviousness, because S&N failed to establish by clear and convincing evidence that the claims were obvious.

Kinetic Concepts, Inc., KCI Licensing, Inc., KCI USA, Inc., KCI Medical Resources, KCI Manufacturing, and Medical Holdings Limited (collectively “KCI”), and Wake Forest University Health Sciences (“Wake Forest”) brought suit against S&N, alleging infringement of U.S. Patent Nos. 7,216,651 (“the ’651 patent”) and 5,645,081 (“the ’081 patent”), which are owned by Wake Forest and exclusively licensed by KCI. The claims of the asserted patents are directed towards methods and apparatuses for the treatment of wounds through the application of negative pressure.

In the district court, the parties disagreed about the form and content of the jury instructions with regard to obviousness. Ultimately, the jury verdict form presented yes or no questions about differences between the prior art and the asserted claims, a yes or no chart about certain objective indicia of nonobviousness, and a yes or no question on whether S&N had proven obviousness. The jury determined that the prior art exhibited differences from the claims, that objective considerations of nonobviousness were present, and that obviousness was not established.

S&N moved for JMOL, arguing that the jury’s explicit findings were not supported by substantial evidence. The district court agreed, finding that, contrary to the jury’s explicit findings, the differences between the claimed invention and the prior art, if any, were minimal, and that the objective indicia of nonobviousness did not overcome the strong case of obviousness. The district court granted JMOL in favor of S&N, and Wake Forest appealed.

As an initial matter, the Federal Circuit rejected S&N’s argument that the jury verdict was “advisory” and therefore not binding. The Court held that because the district court did not use the term “advisory jury” to denote a jury under Fed. R. Civ. P. 39(c)(1), the cases cited by S&N were irrelevant. The Court concluded that the district court instead used the term “advisory jury” to indicate that the jury was permissibly given a legal issue whose ultimate determination was reserved for the court. Accordingly, the Court held that all of the jury’s explicit and implicit factual findings were to be reviewed for substantial evidence, and that the legal conclusion of obviousness was to be examined de novo.

The Court addressed each of the Graham factors and concluded that the jury’s findings with respect to each were supported by substantial evidence. First, the Court held that the district court erroneously found no support for the proposition that the primary references did not disclose the treatment of wounds utilizing negative pressure. Second, the Court reasoned that the jury adopted the level of skill in the art proposed by S&N, which was lower than that proposed by Wake Forest. Third, the Court held that there were differences between the prior art and the claims, and that “[e]ven if the references disclosed all of the limitations of the asserted claims, which they do not, S&N still needed to proffer evidence indicating why a person having ordinary skill in the art would combine the references to arrive at the claimed invention.” Slip op. at 41 (citing Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363, 1374 (Fed. Cir. 2008)). “Here, not only did S&N offer no evidence establishing a reason to combine, but Wake Forest offered substantial evidence that a person having ordinary skill in the art had no reason to combine the prior art references to arrive at the claimed invention.” Id. at 42. The Court held that it must defer to the jury’s presumed finding of no reason to combine, because it was supported by substantial evidence. Fourth, the Court found that “there is more than substantial evidence [in the record] supporting the jury’s findings of commercial success, long-felt need, copying, unexpected and superior results, wide spread acceptance in the field, and initial skepticism.” Id. at 44.

On the ultimate question of obviousness, the Court held that on the basis of the jury’s factual findings, the district court erred by granting S&N’s JMOL motion. The Court reasoned that, “[w]hile the Supreme Court made clear that a mechanical application of the teaching-suggestion-motivation test . . . is inappropriate, ‘[the Court] must still be careful not to allow hindsight reconstruction of references to reach the claimed invention without any explanation as to how or why the references would be combined to produce the claimed invention.’” Id. at 45 (quoting Innogenetics, 512 F.3d at 1374 n.3). Here, the Court held that “hindsight provides the only discernable reason to combine the prior art references.” Id. at 47.

With respect to the objective indicia of nonobviousness, the Court found the evidence strongly in favor of a finding of nonobviousness. “[T]he evidence strongly establishes the existence of nearly every objective indicia of nonobviousness, namely commercial success, long-felt need, copying, unexpected and superior results, wide spread acceptance in the field, and initial skepticism.” Id. at 48. The Court pointed to its recent “warning” about the dangers of ignoring objective indicia of nonobviousness in Mintz v. Dietz & Watson, Inc., 679 F.3d 1372, 1379 (Fed. Cir. 2012), and noted that “[t]he objective indicia of nonobviousness serve a particularly important role in a case, like this one, where there is a battle of scientific experts regarding the obviousness of the invention.” Slip op. at 49. “In such a case, the objective indicia provide an unbiased indication regarding the credibility of that evidence.” Id. The Court concluded that on the record, S&N did not prove by clear and convincing evidence that the asserted claims were obvious and that the district court committed error by failing to defer to the jury’s factual findings and by granting JMOL.

Judge Dyk wrote a concurring opinion. While Judge Dyk agreed with the majority that deference is owed to the jury’s implied findings in support of its nonobviousness verdict, he believed that the majority erred in its construction of the “healing” limitations of the claims. In Judge Dyk’s view, it is impossible to determine what findings the jury made because they were not properly instructed on claim construction. “At the same time, because the accused infringer did not seek a construction of the ‘healing’ limitations, [the Court] should assume the jury used the correct construction.” Dyk Concurrence at 2. Judge Dyk stated that, under the construction, he agreed with the majority that the accused infringer did not establish invalidity for obviousness as a matter of law.

Summary authored by Richard M. Hanna, student associate at Finnegan.