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Federal Circuit declines to consider constitutionality of BPAI judge appointments, affirms rejection

November 06, 2008
Post by Blog Staff

In a decision this week, the Federal Circuit decided a case involving both obviousness and the Appointments Clause relating to allegedly unconstitutional appointment of members of the Board of Patent Appeals and Interferences. The court determined that appellants failed to timely raise the issue of the constitutionality of the Appointments Clause by not presenting it to the Board, and therefore waived the issue on appeal. On the merits, the court agreed there was a substantial new question of patentability and therefore reexamination was properly granted. The court also agreed with the Board that the evidence of commercial success did not rebut the prima facie case of obviousness, as there was no evidence that the commercial success was the "driving force" behind the sales of the patented product. Accordingly, the court affirmed the rejection of the claims.More on In re DBC after the jump.This case involves an ex parte reexamination before the USPTO of DBC's U.S. Patent No. 6,730,333 ("the '333 patent"). The patent is directed to a nutriceutical beverage comprising pericarp from fruit of a mangosteen tree, juice from the fruit and at least a second juice (either fruit juice or vegetable juice). After the USPTO found a substantial new question of patentability, the examiner rejected all claims of the '333 patent as obvious over a combination of a seven different references. Six of the seven references were before the examiner during initial prosecution of the '333 patent. However, one reference, a Japanese patent, was newly presented upon reexamination. Upon rejecting all claims of the '333 patent as obvious, DBC submitted declarations under Rule 132 to demonstrate the commercial success of the nutriceutical beverage. However, the examiner did not find the evidence persuasive and the rejection was made final. DBC appealed the rejection to the Board of Patent Appeals and Interferences, who affirmed the examiner's rejections. DBC appealed to the Federal Circuit.On appeal, DBC raised three issues: (1) the constitutionality of the Board administrative patent judges who made up the panel that affirmed the examiner's rejections, (2) whether there was a sufficient prima facie case of obviousness presented to examiner and Board to generate a substantial new question of patentability, and (3) whether the examiner and Board properly held DBC's evidence of commercial success did not overcome the evidence of obviousness of the claims. The Federal Circuit determined that DBC waived the appointment clause challenge by failing to raise it before the Board. The Appointments Clause vests power only to "the President alone, in the courts of law, or in the heads of departments" for appointing "inferior officers", which includes administrative patent judges. The court set forth that it is a well-established principle that a challenge to an agency decision must be first presented to the agency. Such general rule serves two purposes: (1) allowing the agency to correct a mistake, if applicable, before a filing in a court; and (2) promoting judicial efficiency. The court noted that DBC was not prevented from bringing such challenge while it was before the Board, and in fact such challenge at that time would have resulted in more immediate relief and a decrease in expenditures of the parties and of administrative resources.The court also referenced the merits of the Appointments Clause argument. The argument was first raised in a 2007 article by Professor John F. Duffy of The George Washington University Law School explaining that legislation from 2000 delegating the power to appoint patent judges to the Director of the USPTO, rather than the Secretary of Commerce, was unconstitutional under the Appointments Clause (which explains why it was not raised before the Board). On August 12, 2008 President Bush signed into law legislation re-delegating the power of appointment to the Secretary in order to eliminate the issue of unconstitutional appointments in the future. The court identified that although Professor Duffy's article may have brought attention to the issue of the unconstitutional appointment of patent judges for DBC, it does not represent an intervening change of law that would allow the present appeal on the basis of the Appointments Clause. Rather, the court noted that it would not award DBC's "lack of diligence" by using the court's discretion to hear the challenge. Moreover, the court noted there is no redress available for DBC, as the same patent judges who heard the initial appeal could very well be the same judges serving in the position if the case were sent back to the Board.The second issue before the Federal Circuit was the establishment of a prima facie case of obviousness. The question was whether a substantial new question of patentability was brought forth by the third party requesting ex parte reexamination. DBC argued that the only prior art reference not previously before the examiner was cumulative of those reference that were before the examiner and nonanalogous art. The court determined that because the newly-presented Japanese patent taught a nutriceutical beverage combining fruit and fruit juices with the mangosteen rind it is "plainly material to patentability." The court then clarified that the reference was not cumulative over the other six references which were previously reviewed by the patent examiner, as the Japanese reference is the only reference teaching the mangosteen rind can be combined with fruits and fruit juices to make a nutriceutical composition.Finally, the court addressed whether the Rule 132 declarations submitted by DBC set forth sufficient secondary considerations to obviate the obviousness rejection. The declarations explained that over $130 million in gross sales during the first two years the product (marketed as XanGo Juice) and that XanGo's advertising budget represented only a small fraction of such sales. The court did agree with DBC that the evidence showed XanGo Juice was commensurate in scope with the claims of the '333 patent. However, ultimately the Federal Circuit affirmed the Board's decision because DBC's evidence of commercial success alone was insufficient to demonstrate non-obviousness of the claimed invention. The court specifically stated that even the demonstration of substantial sales in the first two years "does not reveal in any way that the driving force behind those sales was the claimed combination of mangosteen fruit, mangosteen rind extract, and fruit or vegetable juice." Accordingly, the court agreed with the Board that the evidence of commercial success was insufficient to rebut the prima facie case of obviousness, and affirmed the Board's decision.To read the full decision in In re DBC, click here.


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