Nike has come out on top in the latest leg of a long-running web of legal battles with adidas over their respective knitted footwear. After beating out the German sportswear giant before the Patent Trial and Appeal Board (“PTAB”) in connection with its quest to invalidate a number of claims in two patents for Nike’s heavily-protected Flyknit technology, Nike has been handed a victory from the U.S. Court of Appeals for the Federal Circuit.
A 3-judge panel for the Federal Circuit determined that while adidas does, in fact, have standing to appeal the PTAB’s earlier inter partes review (“IPR”) decision, in which it held that adidas “had not demonstrated that the challenged claims [in Nike’s patents] are unpatentable as obvious,” the court also held that that PTAB did not err in ultimately siding with Nike as to the patentability of its claims, both of which center on the method for making the knitted body of Nike’s Flyknit footwear.
In a decision dated June 25, Judge Moore of the Federal Circuit affirmed the PTAB’s previous determination that “adidas had not demonstrated that the challenged claims [in two of Nike’s Flyknit-specific patents, 7,814,598 and 8,266,749] are unpatentable as obvious,” thereby, enabling Nike to walk away from the proceeding with both of its patents intact.
Before diving into adidas’ arguments about the validity – or better yet, the invalidity – of Nike’s two Flyknit patents, the Federal Circuit addressed the Beaverton, Oregon-based titan’s allegation that adidas lacked standing to appeal the PTAB’s decision in the first place. According to Nike, adidas could not establish “injury in fact,” as Nike “has not sued or threatened to sue Adidas for infringement of either” of the two patents at issue.
To this, the court held that in order to lodge an appeal, a party “need not face ‘a specific threat of infringement litigation’” from the patent holder. “Instead, it is generally sufficient for the appellant to show that it has engaged in, is engaging in, or will likely engage in activity that would give rise to a possible infringement suit.”
Adidas meets this standard for a few reasons, according to the court. For one thing, back in 2012, “Nike accused adidas, based on adidas’ introduction of its ‘Primeknit’ products, of infringing one of Nike’s ‘Flyknit’ patents.” In addition to that, adidas faces a potential threat of infringement, the court found, based on the fact that while “Nike has not yet accused Adidas of infringing the patents at issue], Nike has asserted [one of] the patents against a third-party product similar to Adidas’ footwear,” which refers to a lawsuit that Nike filed against Skechers.
Still yet, given that Nike – which has a portfolio of “more than 300 issued utility patents” for its Flyknit technology – “has refused to grant Adidas a covenant not to sue,” the court held that adidas’ “risk of infringement is concrete and substantial,” and as a result, it has the standing to appeal the PTAB’s decision.
With the issue of standing out of the way, the court turned to Nike’s patent claims, which center on a method of “mechanically-manipulating a yarn with a circular knitting machine . . . to form a cylindrical textile structure.” As adidas argued in its initial IPR petitions, certain claims in Nike’s two patents fail to meet the “non-obvious” requirement for patentability – which states that an invention is obvious, and thus, not protectable, if someone of ordinary skill in a relevant field could easily make the invention based on prior art – and thus, should be invalidated in light of a number of existing patents, which, when combined, make Nike’s claims about how to create the knitted upper obvious.
However, the PTAB previously held that adidas had “not established the unpatentability of the challenged claims,” in part because ithad not demonstrated that “a person of ordinary skill in the art would have been motivated to combine” the inventions in the patents that adidas cited, and the Federal Circuit agreed, asserting that “the obviousness inquiry does not merely ask whether a skilled artisan could combine the references, but instead asks whether ‘they would have been motivated to do so.”
In terms of the third-party patents that adidas points to, the court held that this latter element is not met, as the patents, themselves, have “fundamental differences in seaming techniques” and the “intended purposes” behind the stitching techniques in the third-party patents – i.e., “to reduce the need for stitching” versus “to produce pre-seamed, substantially finished garments” – also differ. “Because Adidas failed to reconcile these differences,” the court held that it had not met the “motivation to combine” element.
Given that the PTAB “did not err in its obviousness analysis” and in light of the fact that “substantial evidence supports its underlying factual findings,” the court upheld its decision and refused to invalidate the relevant claims in Nike’s patents.
The IPR fight between Nike and adidas is the latest in a string of legal battles – including lawsuits in the U.S. and in Germany, as well as other IPR proceedings – between the two since they introduced their respective knitted footwear ahead of the London Olympics in 2012.
*The case is Adidas AG v. Nike, Inc., 19-1787 (Fed. Cir.).