Federal Circuit overturns PTAB decision on inurement

The US Court of Appeals for the Federal Circuit has overturned a decision by the Patent Trial and Appeal Board (PTAB) which found that NFC Technology had failed to prove that the inventor of a communication device had created a prototype.

In a precedential decision handed down yesterday, September 20, the court reversed the PTAB’s decision on inurement (the doctrine that the work done by a person hired by an inventor to test a conception supports the right of that inventor to the resulting invention).

The court also remanded for the board to determine whether NFC Technology had presented sufficient evidence that the prototype embodied the claimed invention.

US patent number 6,700,551, which is owned by NFC, covers a near-field communication device.

These devices use electromagnetic induction to communicate information over very short distances.

Taiwan-based electronics company HTC petitioned for an inter partes review (IPR) of the ‘551 patent, arguing that claims 1–3 and 5 were obvious in light of US patent number 6,122,492 (Sears).

The Sears patent was filed in February 1999.

NFC hit back, claiming that the inventor of the ‘551 patent, Bruno Charrat, had reduced the invention to practice in November 1998, before Sears’s priority date.

NFC’s general theory was that Charrat had conceived the invention by June 1998, and then worked with a team to design a device embodying the invention.

According to NFC, by September 1998, Charrat had sufficiently developed the device and so commissioned chip fabrication company Concept Electronique (CE) to generate printed circuit board layouts for the device (a prototype).

But, in its final written decision, the PTAB held that NFC hadn’t “adequately demonstrated” that Charrat had reduced the invention to practice before Sears’s priority date.

“The board reasoned that CE had reduced the invention to practice because it, not Charrat, had physically created the prototype,” said Circuit Judge Alan Lourie, speaking on behalf of the Federal Circuit.

He added: “For Charrat to receive the benefit of that reduction to practice, the board read our precedents as requiring that Charrat conceived the claimed invention and communicated the underlying subject matter to CE.”

The PTAB then found that NFC hadn’t introduced sufficient evidence that Charrat had “conceived the subject matter of the claims”.

It concluded that claims 1–3 and 5 of the patent were unpatentable as obvious.

NFC appealed, and Joseph Matal, director of the US Patent and Trademark Office, intervened.

After Matal intervened but before filing its own brief, HTC settled its dispute with NFC and, as part of the settlement, agreed not to participate in the appeal.

NFC claimed that the board should not have addressed the inurement issue because it was not raised by the parties, that NFC had provided sufficient evidence corroborating Charrat’s conception to establish inurement, and that the board had erred by evaluating evidence using interference standards for determining priority of invention.

However, the court limited its analysis to the board’s findings and conclusions relating to Charrat’s conception.

The Federal Circuit agreed with NFC that the company had established conception by Charrat.

“We determine that the board’s findings as to the contents of the documents are either inconsistent with the documents themselves or do not adequately consider the portions of the documents that support corroboration, and are therefore not supported by substantial evidence,” said Lourie.

The court found that the PTAB had erred in concluding that NFC had submitted inadequate evidence of conception, adding that the board’s analysis “raises the question of who, if not Charrat, designed the prototype”.

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

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