Nike Gets New Chance to Defend Sneaker Patent in Adidas Battle

Nike Inc. convinced the Federal Circuit that the U.S. Patent and Trademark Office improperly invalidated part of its sneaker patent based on a novel argument without giving the company a chance to respond.

The Patent Trial and Appeal Board found that the patent’s claim for omitting stitches to create holes for shoe laces was obvious because the technique is described in a knitting handbook. Adidas AG, which challenged the patent, introduced the handbook into the record, but didn’t rely on it in arguing that the claim was invalid.

The board appropriately cited invalidity grounds not raised by the challenger based on the record, the U.S. Court of Appeals for the Federal Circuit held. But the board must give the parties notice of its plan to rely on the new grounds and give them a chance to respond, the court said.

The case raises a question posed but left undecided by its 2017 en banc decision in Aqua Prods., Inc. v. Matal, the court said. There the full court held that the board must consider the whole record when assessing the patentability of amended claims.

That decision didn’t address whether the board may raise patentability challenges to a proposed amended claim on its own. In the Nike case, the court held that it can.

“It makes little sense to limit the board, in its role within the agency responsible for issuing patents, to the petitioner’s arguments in this context,” the court said. But the board can’t change course midstream without telling the parties, the Federal Circuit said.

The board granted Adidas’s petition to review claims of Nike’s U.S. Patent No. 7,347,011, which Adidas argued were obvious under the prior art. Nike then amended its patent to substitute new claims. The board initially found the new claims invalid because they’re obvious. On the case’s first trip on appeal, the Federal Circuit vacated parts of the board’s decision.

On remand, the board once again found the claims invalid, but this time it based its findings on a handbook of knitting technology in the record.

Nike again appealed, arguing the board violated the Administrative Procedure Act by relying on the handbook without telling the parties before issuing its decision. The appeals court agreed.

Judge Kara F. Stoll wrote the opinion, joined by Judges Alan D. Lourie and Raymond T. Chen.

Banner & Witcoff Ltd. represented Nike. Kilpatrick Townsend & Stockton LLP represented Adidas.

The case is Nike, Inc. v. Adidas AG, Fed. Cir., No. 19-1262, 4/9/20.