Nike Pressed by Fed. Cir. in Adidas Shoelace-Hole Patent Dispute

A Federal Circuit panel seemed skeptical on Monday that Nike Inc. would have saved a patent claim regardless of whether Adidas AG had the “burden of persuasion” after a patent tribunal raised its own challenge to a shoelace hole patent at the heart of decade-long dispute.

Adidas and Nike made their third trip to the US Court of Appeals for the Federal Circuit in a case concerning whether Nike owns the method of creating knit sneakers without punching out holes for shoelaces. If Nike successfully defends the patent, it could force Adidas and others to obtain licenses to use its resource-saving method to manufacture knitted sneakers, attorneys have said.

The Federal Circuit during oral argument weighed who has the burden of persuasion when the Patent Trial and Appeal Board scrutinizes the validity of a patent claim of its own volition. The board had said neither had the burden, and found that one of Nike’s amended patent claims was invalid as obvious.

The panel probed whether assigning the burden to one party or the other would make any difference in the case, while heavily questioning the US Patent and Trademark Office on whether a regulation answers the issue raised in the case.

Judge Raymond T. Chen questioned Nike’s attorney, Michael J. Harris of Arnold & Porter Kaye Scholer LLP, on whether the PTAB’s purported error would be “harmless” if the appeals court found that Adidas should’ve had to produce evidence for an unpatentability ground raised by the board.

Chen asked how the board’s decision would’ve been “substantively different” if Adidas had to bear the burden.

“Adidas has only provided attorney argument,” Harris said. “Attorney argument alone isn’t enough to satisfy the burden of persuasion.”

Harmless Error

Nike and Adidas started the battle over US Patent No. 7,347,011 roughly 10 years ago, after each shoemaker released new knitted sneakers.

In its second round at the Federal Circuit, the appeals court ruled that the board is allowed to raise its own challenges to patents, but Nike needed the opportunity to respond. The PTAB on its own had found that one amended claim was obvious, relying on a knitting handbook that neither party had submitted as evidence.

Nike now argues that after the board raises a challenge, the petitioner—here, Adidas—must present the patent validity challenge in a persuasive way.

“The question today is if the board sua sponte raises a non-patentability proposition, which it’s allowed to do,” Harris said, “does that remove the burden of persuasion from an active petitioner?”

Judge Sharon Prost compared the case to the situation where a petitioner has dropped out of the board’s proceeding, but the case moves forward between the agency and the patent holder, without the petitioner needing to advance any evidence. This case seems to also follow that same “logic and rules of law,” Prost said.

Judge Kara F. Stoll questioned Adidas’ attorney Michael T. Morlock of Kilpatrick Townsend & Stockton LLP if he was aware of any circumstances where there’s no burden of persuasion with two parties who are actively participating.

“I don’t think it makes a difference in these specific facts,” Morlock said. “Because, regardless of where the burden would lie here, the board fully analyzed Nike’s arguments, fully analyzed Adidas’s arguments. The ultimate outcome would be the same. It would be harmless error.”

‘One-Off’ Case

Prost also questioned the patent office on whether a regulation put into effect last year gives any guidance on the burden-assignment question. Benjamin T. Hickman, arguing for the PTO from the solicitor’s office, said the rule doesn’t speak to that precise question, but later agreed with Chen that the regulation could be read in a way that says no one bears the burden in this circumstance.

Chen questioned why there was a “gap” on burden assignments in the regulation. Chen cited the 2017 full Federal Circuit decision in Aqua Products Inc. v. Matal, where a plurality of judges found that the agency can’t place the burden of persuasion on patent owners when they try to amend claims, meaning the holders don’t have to show the amended claims are valid.

“A majority of the court said even though the statute is ambiguous, what happened here in putting the burden on the patent owner for that motion was procedurally improper because there was no regulation put in place,” Chen said. “Now, here we are again with a motion to amend and we have a situation where you have written a brand new regulation but the regulation doesn’t speak to the burden assignment question.”

This case appears to be a “one-off,” Hickman said, adding that the Federal Circuit doesn’t need to decide the issue now.

“If the court believes that on the merits it wouldn’t make a difference, then this issue doesn’t need to be decided,” Hickman said. “Perhaps it’s better to decide with a case that came after the regulation was promulgated.”