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<strong>[E]vidence relating to all four Graham factors -- including objective evidence of secondary considerations -- must be considered before determining whether the claimed invention would have been obvious to one of skill in the art at the time of invention.</strong>

On August 7, 2013, in <em>Apple, Inc. v. Int'l Trade Comm'n</em>, the U.S. Court of Appeals for the Federal Circuit (Moore,* Linn, Reyna) affirmed-in-part, reversed-in-part, vacated-in-part and remanded the ITC's decision that U.S. Patent No. 7,663,607, which related to a touch panel with a transparent capacitive sensing medium that can detect multiple touches at once, was invalid for anticipation and obviousness, and that Motorola did not infringe U.S. Patent No. 7,812,828, which related to a method to determine if the displaced charge at the nodes corresponds to a finger touching the screen. The Federal Circuit stated:
<blockquote>For a prior art reference to anticipate a claim, the reference must disclose each claim limitation in a single document. The prior art document, however, may incorporate subject matter by reference to another document such that the incorporated material becomes part of the host document for the purposes of anticipation. "To incorporate material by reference, the host document must identify with detailed particularity what specific material it incorporates and clearly indicate where that material is found in the various documents." Whether and to what extent a host document incorporates material by reference is a question of law, subject to de novo review. . . .

Having resolved that Perski '455 [(U.S. Patent No. 7,372,455)] is prior art for claims 1-7 of the '607 patent, we conclude that substantial evidence supports the ITC's finding that Perski '455 anticipates those claims. . . . The ITC's decision that Perski '455 anticipates claim 10, however, lacks substantial evidence. Motorola argues that if we reverse the ITC's decision that Perski '455 anticipates claim 10 of the '607 patent, we should reverse the ITC's decision that SmartSkin does not anticipate claim 10. . . . Motorola argues that the ALJ erred because SmartSkin's disclosure would have enabled a skilled artisan to build a touchscreen using transparent ITO electrodes. We agree with Apple and the ITC that substantial evidence supports the ITC's finding of no anticipation. . . . Given SmartSkin's limited disclosure, we decline to disturb the ITC's finding that Motorola failed to prove that SmartSkin anticipates claim 10 of the '607 patent.

Despite finding that SmartSkin did not anticipate the '607 patent claims, the ALJ concluded that they would have been obvious in light of SmartSkin in combination with a patent application that stemmed from the SmartSkin project, Unexamined Japanese Patent Application No. 2002-342033A (Rekimoto). The ITC reviewed the ALJ's decision and upheld it. The ITC agreed with the ALJ's conclusion that SmartSkin provides a motivation to combine the use of transparent electrodes with a mutual capacitance sensor. The ITC also agreed with the ALJ's finding that Rekimoto disclosed the limitations in claim 10 that are absent from SmartSkin.

We are troubled by the ITC's obviousness analysis. We have repeatedly held that evidence relating to all four Graham factors -- including objective evidence of secondary considerations -- must be considered before determining whether the claimed invention would have been obvious to one of skill in the art at the time of invention. Indeed, it is axiomatic that "[t]he establishment of a prima facie case . . . is not a conclusion on the ultimate issue of obviousness." The ITC failed to follow this precedent. Prior to even mentioning the secondary considerations, the ALJ concluded that "the evidence clearly and convincingly shows that the '607 patent is obvious in light of SmartSkin in combination with Rekimoto." That error warrants vacating the ITC's decision. The ITC also concluded that claim 10 was obvious and issued its own findings regarding the first three Graham factors (rejecting some of the ALJ conclusions regarding the disclosures in the prior art). The ITC concluded that the '607 patent claims at issue would have been obvious in view of Smartskin in combination with Rekimoto. The ITC, however, never even mentioned, much less weighed as part of the obviousness analysis, the secondary consideration evidence Apple presented. It stated only that it did not review the ALJ finding regarding secondary considerations. This is not adequate under our law. The ultimate conclusion of obviousness is a legal conclusion to be reached after weighing all the evidence on both sides. The ITC analyzed only the disclosure of the prior art references and based solely on that evidence determined the claims would have been obvious. We conclude that the ITC's fact findings regarding what the references disclose are supported by substantial evidence. And as the ALJ and the ITC found, the Smartskin reference is very close and expressly recommends as "Conclusions and Directions for Future Work" using transparent ITO electrodes to build a "transparent SmartSkin sensor." Indeed, the reference teaches that this transparent sensor could be integrated with "most of today's flat panel displays" because those systems rely on an "active matrix and transparent electrodes." The ITC erred, however, to the extent that it did not analyze the secondary consideration evidence.

This error was not harmless. Secondary considerations evidence can establish that "an invention appearing to have been obvious in light of the prior art was not" and may be "the most probative and cogent evidence in the record." This evidence guards against the use of hindsight because it helps "turn back the clock and place the claims in the context that led to their invention." Apple presented compelling secondary considerations evidence that may have rebutted even a strong showing under the first three Graham factors, and the ITC failed to grapple with it. For example, Apple presented evidence of industry praise by business publications. . . . Apple also presented evidence of copying. The ITC failed to address this evidence as well. Lastly, Apple presented evidence that the iPhone has achieved a high degree of commercial success. . . . Apple also presented evidence showing a nexus between the undisputed commercial success of the iPhone and the patented multitouch functionality, namely evidence that Apple's competitors copied its touchscreen and that those in the industry praised the iPhone's multitouch functionality. The ITC did not address any of this evidence.

[W]e vacate the ITC's decision that claim 10 of the '607 patent would have been obvious and remand the case for further proceedings. To be clear, we conclude that the ITC fact findings regarding the scope and content of the prior art (what the reference discloses) are supported by substantial evidence. We remand so the ITC can consider that evidence in conjunction with the evidence of secondary considerations and determine in the first instance whether claim 10 would have been obvious to one of skill in the art at the time of the invention.</blockquote>
If you have questions about the material presented above, please contact <a href="http://www.bakerlaw.com/LawrenceMSung">Dr. Lawrence M. Sung</a> (<a href="mailto:lsung@bakerlaw.com">lsung@bakerlaw.com</a> or 202.861.1537) or any member of our <a href="http://www.bakerlaw.com/intellectualproperty/">Intellectual Property</a> Team.

Patent Watch: Apple, Inc. v. Int’l Trade Comm’n