Federal Circuit applies ‘rule of reason’ to find inventor testimony credible in IPR

Federal CircuitNFC Tech., LLC v. Matal,  (Fed. Cir. Sep. 20, 2017) (Before Newman, Lourie, and Hughes, J.) (Opinion for the court, Lourie, J.)

The Federal Circuit reviewed a Patent Trial and Appeals Board decision in IPR2014-01198 that invalidated a patent owned by NFC Technology as obvious. The Board determined that NFC could not prove an early reduction to practice, based on third-party assistance, to avoid the prior art. The Court found that the Board’s findings were not supported by substantial evidence and reversed. The case was remanded for further proceedings because the Board did not determine whether NFC’s prototype embodied the claimed invention.

NFC owns a patent relating to a near-field communication device, which uses electromagnetic induction to communicate information over short distances. HTC Corp. petitioned for an IPR of the patent, contending that the claims were obvious over a prior art patent with a filing date of February 8, 1999. In response, NFC argued that the inventor, Bruno Charrat, worked with his team at Inside Technologies to design the device. Inside commissioned a chip fabrication company to print circuit board layouts for the device according to Charrat’s design. NFC alleged that this resulted in a reduction to practice of the invention by November 1998. In support, NFC offered Charrat’s testimony and supporting documentary evidence, including an initial data sheet, the circuit board layout generated for Inside, and a facsimile cover sheet from the third party to Charrat, regarding the circuit board order.

The Board did not decide if NFC’s prototype in fact embodied the claimed invention. It found that, even if it did, NFC could not establish that Charrat conceived the invention, or that the third party fabrication was directed by Charrat and inured to his benefit. The Board took issue with the sufficiency of NFC’s documents as corroborating evidence. NFC appealed. HTC withdrew from the appeal after reaching a settlement agreement with NFC. The USPTO exercised its discretion to file a brief and participate in the oral argument.

In deciding the case the Court limited its analysis to whether the evidence showed that Charrat conceived the invention, so that the third-party work by the chip fabrication company could inure to his benefit. Recognizing that there is no particular formula that must be followed with respect to corroboration of inventor testimony, the Court applied a “rule of reason” analysis for corroboration, which evaluates all pertinent evidence as a whole. Under this analysis, Charrat’s testimony was ultimately determined to be adequately corroborated by NFC’s documentary evidence.

The Court substantively explained the law relating to the sufficiency of inventor testimony:

“[A]n inventor’s testimony, standing alone, is insufficient to prove conception—some form of corroboration must be shown.” Price v. Symsek, 988 F.2d 1187, 1194 (Fed. Cir. 1993). “There is no particular formula that an inventor must follow in providing corroboration of his testimony of conception.” Singh, 317 F.3d at 1341. Instead, corroboration “is determined by a ‘rule of reason’ analysis, in which ‘an evaluation of all pertinent evidence must be made so that a sound determination of the credibility of the inventor’s story may be reached.’” Id. (quoting Price, 988 F.2d at 1195). Under the rule of reason, the evidence “must be considered as a whole, not individually.” Price, 988 F.2d at 1196; see also Perfect Surgical Techniques, Inc. v. Olympus Am., Inc., 841 F.3d 1004, 1007–08 (Fed. Cir. 2016); Brown v. Barbacid, 436 F.3d 1376, 1380 (Fed. Cir. 2006). Thus, an inventor’s conception can be corroborated even though “no one piece of evidence in and of itself” establishes that fact, Price, 988 F.2d at 1196, and even through circumstantial evidence, Lacotte v. Thomas, 758 F.2d 611, 613 (Fed. Cir. 1985). At bottom, the goal of the analysis is to determine “whether the inventor’s story is credible.” Fleming, 774 F.3d at 1377.

The Board had found that there was no author named on the initial data sheet. However, the sheet included Charrat’s initials (“by BC”), which contradicted a find that no author was named. The circuit board layouts noted “Inside Technologies,” Charrat’s company, as the client for the prototype, which also corroborated his testimony that he ordered the construction of the circuit boards while at Inside. Finally, the Board improperly discounted the facsimile cover sheet, which corroborated the date Charrat requested the prototype to be built, and that he was the one who directed the third party to build it. When taken as a whole, the documents did sufficiently corroborate Charrat’s testimony regarding conception under a rule of reason.

The Board had taken issue with NFC’s evidence supporting that the prototype was made according to Charrat’s design or direction because there was a lack of documented communications showing Charrat or Inside conveyed the design to the third party. Applying Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368 (Fed. Cir. 1998), the Board “found significant ‘the absence of any physical record to support the oral evidence,’ despite ‘the ubiquitous paper trail of virtually all commercial activity’ that normally exists ‘in modern times.’”

The Court found the Board’s reliance on Woodland Trust to be “misplaced” because in that case there had been continued public use for a period of a decade without any documentary evidence to support conception. To the contrary, on the facts presented here there was some documentation over the period of several months. Furthermore, that documentation took place nearly twenty years ago, which according to the Court wrote made this situation far closer to Loral Fairchild Corp. v. Matsushita Electric, 266 F.3d 1358 (Fed. Cir. 2001). In Loral Fairchild the Court previously “forgave the inventor’s inability ‘to submit documents showing production test results, considering that the events at issue occurred almost 30 years ago’” — when the inventor’s account was otherwise adequately corroborated. Additionally, there was no one else suggested by either party as the actual inventor.

The Board’s analysis in this case also inherently raised the question of who designed the prototype if not Charrat. Since the prototype was fabricated over twenty years ago, the Court found Charrat’s account was adequately corroborated by NFC’s existing documentation, and therefore the prototype inured to Charrat’s benefit. The fact that there was no rebuttal evidence pointing to another inventor was significant.

“Under the rule of reason,” Judge Lourie wrote, “the totality of the evidence establishes the credibility of Charrat’s account.”

The Court remanded the case to the Board to determine whether the prototype actually embodied the claimed invention and could therefore antedate the prior art.

When evaluating inventor testimony regarding conception, the Court will apply a “rule of reason” analysis, and will consider all relevant evidence as a whole, to determine whether an inventor’s testimony is adequately corroborated.



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Joseph Robinson

Joseph Robinson has over 20 years of experience in all aspects of intellectual property law. He focuses his practice in the pharmaceutical, life sciences, biotechnology, and medical device fields. His practice encompasses litigation, including Hatch-Waxman litigation; licensing; counseling; due diligence; and patent and trademark prosecution. He has served as litigation counsel in a variety of patent and trademark disputes in many different jurisdictions, and has also served as appellate counsel before the Court of Appeals for the Federal Circuit. Joe also focuses on complex inter partes matters before the U.S Patent and Trademark Office, inventorship disputes, reexaminations and reissues. His experience includes numerous interferences, a particular advantage in new U.S. Patent and Trademark Office post-grant proceedings. He also counsels on patent–related U.S. Food and Drug Administration issues, including citizen petitions, Orange Book listing, and trademark issues. For more information and to contact Joe please visit his profile page at the Troutman Sanders website.

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Discuss this

There are currently 2 Comments comments.

  1. Dan Hanson September 29, 2017 2:14 pm

    Of interest is that the Federal Circuit reversed the Board on a factual issue, rather than a legal one.

    This case demonstrates an interesting aspect to the substantial evidence standard. The Board did not rule any evidence inadmissible, nor exclude evidence, nor overtly ignore evidence. The Board considered the submitted evidence but gave it little weight, and the Board ruled that showing of evidence was inadequate to establish a finding.

    Even so, the Board was reversed on its factfinding.

    What do the Board do wrong? The Board apparently considered evidence piece-by-piece when it ought to have considered the evidence as a whole. The Board also mis-construed and mis-stated the evidence in the record.

  2. Paul F. Morgan September 30, 2017 8:55 am

    I thought this was a fine write-up of this decision. Especially, inherent appreciation of the fact that modern companies do not normally save most old paper internal documents for all those years. Many even have document retention policies against that.
    Fortunately, for disputes over post-AIA patents instead of old patents, it will become much less likely that they will be needed or relevant, with the gradual elimination of both interferences and “swearing behind” prior art, as here.