In Liqwd, Inc. v. L’Oreal USA, Inc., the Federal Circuit vacated a decision of the USPTO Patent Trial and Appeal Board (PTAB) that failed to take into account evidence of copying in its obviousness analysis. The Federal Circuit emphasized that “where there is evidence of actual copying efforts, that evidence is always relevant.”

The Patent and Copying At Issue

The patent at issue was Liqwd’s U.S. Patent No. 9,498,419, directed to methods for bleaching hair. The independent claim at issue recited a method of bleaching hair using a formulation comprising maleic acid and a bleaching formulation.

L’Oreal challenged the validity of the patent in a Post-Grant Review proceeding before the PTAB. In response to L’Oreal’s obviousness assertions, Liqwd presented evidence that L’Oreal had copied its invention, as objective indicia of non-obviousness. The evidence included declarations and supporting records indicating that Liqwd had disclosed its then-unpublished patent application to L’Oreal under a non-disclosure agreement.

The PTAB Decision

The PTAB found that the evidence showed that “L’Oreal would not have developed products using maleic acid without having access to Liqwd’s confidential information.” Nevertheless, the PTAB “determined the evidence of copying was irrelevant as a matter of law because Liqwd had not shown that L’Oreal copied a specific product.” Rejecting Liqwd’s other arguments, the PTAB held that the prior art cited by L’Oreal rendered the claims obvious.

The Federal Circuit Decision

The Federal Circuit decision was authored by Judge Reyna and joined by Judges Hughes and Stoll.

The Federal Circuit addressed the Iron Grip Barbell case relied upon by the PTAB, and acknowledged that the decision, in that case, stated that “copying requires the replication of a specific product.” The Federal Circuit explained that that language stemmed from the principle that, to establish copying, “more is needed than merely showing that similarity exists between the patent and the competitor’s accused product.” The Federal Circuit reviewed its body of precedent on copying and concluded:

In each case, the question of legal relevancy was determined by whether there was actual evidence of copying efforts as opposed to mere allegations regarding similarities between the accused product and a patent; the focus was not whether the copying efforts involved a “specific product.”

The Federal Circuit noted further that access to a granted patent or published article describing the invention has been used to support a finding of copying.

The Federal Circuit concluded that, because the PTAB had found that “L’Oreal used maleic acid because of L’Oreal’s access to Liqwd’s confidential information,” it erred in disregarding that evidence when making its obviousness determination. The Federal Circuit, therefore, vacated the PTAB decision, and remanded with instructions for the PTAB to “consider this evidence in its obviousness analysis.”

The Limits Of A Non-Disclosure Agreement

In addition to shedding more light on the value of evidence of copying in an obviousness analysis, this case highlights the risks of disclosing an invention to a possible competitor. Here, it appears that L’Oreal was considering purchasing Liqwd’s technology when the confidential information was disclosed. According to the Federal Circuit opinion, L’Oreal “lost interest” in that transaction, but went on to “develop its own products.”