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Fifth Circuit Rejects Recruiter’s Trade Secret Misappropriation and Contract Defenses

The US Court of Appeals for the Fifth Circuit affirmed a district court’s decision finding trade secret misappropriation and breach of contract based on a recruiter’s improper use of confidential client information. Counsel Holdings, Incorporated v. Jowers, Case No. 22-50936 (5th Cir. Apr. 1, 2024) (King, Ho, Engelhardt, JJ.) (per curiam).

In April 2006, Evan Jowers was hired by MWK (whose successor is Counsel Holdings) as a legal recruiter. Jowers signed an employment agreement with noncompete and nonsolicitation covenants. During his employment, Jowers relocated to Hong Kong, where he began recruiting for law firms in Asia. Jowers resigned from MWK in December 2006, after which he began working for another recruiting firm in Hong Kong called Legis Ventures.

MWK sued Jowers for trade secret misappropriation and breach of the restrictive covenants in the employment contract. MWK alleged that while Jowers was still employed with MWK, he submitted its candidates for employment through Legis Ventures. After a bench trial, the district court found in favor of MWK on both claims. As to the trade secret claim, the district court concluded that MWK’s customers’ “names, their clients, how much their practices were worth, their language skills, their goals for switching firms, and their law school records” constituted trade secrets. As for the contract claim, the district court found that enforcement of the restrictive covenants was justified because MWK’s client information was a legitimate business interest. Jowers appealed.

The Fifth Circuit affirmed. As to the trade secret claim, the Court explained that Jowers’s employment agreement explicitly required confidentiality and that MWK’s customers requested that Jowers keep their information secret. Despite the restrictions, Jowers divulged MWK’s customer information to others, including a competing recruitment firm, without authorization. The Fifth Circuit agreed with the district court’s determination that Jowers’s actions constituted trade secret misappropriation.

As to the breach of contract claim, Jowers argued that MWK lacked a “legitimate business interest.” The Fifth Circuit found no clear error with the district court’s determination that MWK’s client information was a legitimate business interest that justified enforcement of the restrictive covenant.




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Easy Tiger: Docuseries Summary Judgment Remanded for Further Fair Use Consideration

Addressing copyright fair use in the wake of the Supreme Court’s recent guidance in Warhol, the US Court of Appeals for the Tenth Circuit partially reversed the district court’s grant of summary judgment in favor of the defendants. The Tenth Circuit held that the first fair use factor (the purpose and character of the use) weighed in favor of the plaintiffs and remanded for further consideration of the accused infringing work’s effect on the potential market for the copyrighted work. Whyte Monkee Productions, LLC; Timothy Sepi v. Netflix, Inc.; Royal Goode Productions, LLC, Case No. 22-6068 (10th Cir. Mar. 27, 2024) (Holmes, C.J.; Hartz, Carson, JJ.)

In 2020, Netflix and Royal Goode Productions (the defendants) released the popular multipart documentary Tiger King: Murder, Mayhem and Madness. Tiger King included eight videos filmed by Timothy Sepi (the plaintiff), seven of which were filmed while Sepi was employed by the zoological park featured in the docuseries. The eighth video, a 24-minute recording of the funeral of Travis Maldonado (who was the husband of Joe Exotic, aka the Tiger King) was filmed by Sepi after his employment ended. After the release of Tiger King, the plaintiffs registered the copyrights for the eight videos and sued the defendants for copyright infringement.

The district court granted summary judgment in favor of the defendants, holding that Sepi did not own the copyright for the seven videos he filmed during his employment because they were “works made for hire” and that the defendant’s use of the eighth video was permissible fair use. The plaintiffs appealed.

On appeal, the plaintiffs argued that the district court erred in holding that seven of the videos were works made for hire because Sepi’s scope of employment “did not extend to cinematography and film editing conducted on his own time.” The plaintiffs also argued that the district court incorrectly assessed each of the fair use factors in connection with the eighth video.

The Tenth Circuit swiftly affirmed the grant of summary judgment on the first seven videos, noting that the plaintiffs’ argument regarding the scope of Sepi’s employment was a new theory on appeal and therefore had been waived. Nonetheless, the Court reversed the grant of summary judgment in favor of the defendants with respect to the eighth video, stating that the district court erred in concluding that the first and fourth fair use factors weighed in favor of the defendants.

As set forth in the Copyright Act, there are four nonexclusive factors to consider in assessing whether the use of a copyrighted work is protected fair use:

  • The purpose and character of the use
  • The nature of the copyrighted work
  • The amount and substantiality of the portion used
  • The effect of the use on the potential market for or value of the copyrighted work.

Important here, the Tenth Circuit noted that all four factors should be weighed together “in light of the aim of copyright, which is ‘to promote the progress of science and the arts, [...]

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ITU Applicants Beware: Federal Courts Have Jurisdiction Over Pending Trademark Applications

The US Court of Appeals for the Ninth Circuit affirmed in part a district court’s ruling in a trademark dispute, upholding its decision to invalidate trademark applications. The Ninth Circuit held that district courts have jurisdiction to alter or cancel trademark applications in an action properly brought under 15 U.S.C. § 1119, and that in the context of challenges to intent-to-use (ITU) applications, proof of a lack of bona fide intent can invalidate. BBK Tobacco & Foods LLP v. Central Coast Agriculture, Inc., Case Nos. 22-16190; -16281 (9th Cir. Apr. 1, 2024) (Hurwitz, Desai, JJ.) (Bumatay, J., dissenting).

BBK sells and distributes smoking-related products with BBK’s “RAW” branding. Central Coast Agriculture (CCA) sells cannabis products using “Raw Garden” branding. BBK filed a complaint against CCA including claims of trademark infringement and a petition to void several ITU trademark applications owned by CCA for lack of a bona fide intent to use the relevant trademarks in commerce. Instead of disputing the merits of BBK’s claims, CCA argued that the district court had no jurisdiction to adjudicate this issue. The district court granted summary judgment in favor of BBK on its claims to invalidate the trademark applications. CCA appealed.

The Ninth Circuit affirmed the summary judgment in favor of BBK on its claims to invalidate CCA’s trademark applications. The Court explained that “when an action involves a claim of infringement on a registered trademark, a district court also has jurisdiction to consider challenges to the trademark application of a party to the action.” The Lanham Act, at 15 U.S.C. § 1119, provides that “[i]n any action involving a registered mark the court may determine the right to registration, order the cancelation of registrations, . . . restore canceled registrations, and otherwise rectify the register with respect to the registrations of any party to the action.” The Lanham Act, at § 1051, defines an application for use of trademark as a “request for registration of a trademark on the principal register.” Because a challenge to an application affects the applicant’s right to the registration, the Court reasoned that § 1119 authorizes a district court to resolve disputes over trademark applications.

The Ninth Circuit held that a “lack of bona fide intent to use a mark in commerce is a valid basis to challenge a trademark application,” aligning with decisions in sister circuits and the Trademark Trial & Appeal Board. An applicant can seek to register a mark if the mark is already being used in commerce or if the applicant has a bona fide intention, under circumstances showing the good faith of such person, to use a trademark in commerce. While applicants filing under the ITU provisions may begin the registration process based on a bona fide intent to later use the mark in commerce, the Lanham Act requires such applicants to either subsequently file a verified statement of actual use of the mark or convert their application into a use application. As a result, the Ninth Circuit affirmed the district court’s ruling [...]

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Reasonable Royalty Available for Foreign Activities (But Not This Time)

The US Court of Appeals for the Federal Circuit affirmed a district court’s decision to preclude a patent owner from seeking damages based on method claims infringed outside of the United States but confirmed that reasonable royalties are available based on foreign activities. Harris Brumfield v. IBG LLC, Case No. 22-1630 (Fed. Cir. Mar. 27, 2024) (Prost, Taranto, Hughes, JJ.)

Trading Technologies International (TT), whose successor is Harris Brumfield, filed a lawsuit against IBG in 2010 alleging infringement of four patents directed to graphical user interfaces for commodity trading and methods for placing trade orders using those interfaces. During the underlying proceeding, the district court issued several orders. The district court granted IBG’s motion for summary judgment that the claims of two of the patents were invalid. The district court also excluded one of TT’s damages theories concerning foreign activities. Prior to trial, the district court found that two of the patents were invalid as patent ineligible and that the other two patents contained patent eligible subject matter. The district court also excluded one of TT’s damages theories concerning foreign activities.

The case proceeded to trial on the two remaining patents, and the jury found the asserted claims of those two patents infringed. IBG proposed $6.6 million in damages, which corresponds to the total demanded by IBG using IBG’s proposed royalty rate measured against domestic usage, rather than global users. By contrast, TT proposed damages of $962 million, which included all worldwide users of the accused product, regardless of whether they performed the claimed method. The jury agreed with IGB and awarded TT $6.6 million. the district court denied TT’s post-verdict motion for a new trial on damages, a motion in which TT alleged that IBG had misrepresented how it calculated the damages figures it presented to the jury. TT appealed.

Under the Supreme Court’s 2018 decision in WesternGeco v. Ion Geophysical, a patent owner can recover damages in the form of foreign lost profits when infringement is found under 35 U.S.C. § 271(f)(2) of the Patent Act. TT argued that under WesternGeco, it can seek damages in the form of a reasonable royalty based on IBG “making” the accused product in the US, even though the products were used overseas. The Federal Circuit engaged in a detailed description of WesternGeco, concluding that the Court must examine the particular acts alleged to constitute infringement under particular statutory provisions to determine if the allegations focus on domestic conduct. The Court explained that under § 271(a), the making, using, offering to sell and selling provisions are limited to domestic acts. The Court acknowledged that the WesternGeco framework applies to reasonably royalty awards (not just lost profits) and that a reasonable royalty would be the amount a hypothetical infringer would pay to engage in the domestic acts constituting the infringement.

Despite finding that reasonable royalties are permitted under WesternGeco, the Federal Circuit affirmed the district court’s exclusion of TT’s damages theory because TT’s infringement theory about making the accused product [...]

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Taking the High Road: Ambiguity Regarding “Versions” of Beer Precludes Summary Judgment

The US Court of Appeals for the Second Circuit affirmed a district court’s summary judgment denial and determination that the definition of “beer” (which encompassed “other versions and combinations” of beer and malt beverages) in a trademark licensing agreement was ambiguous. Cerveceria Modelo de Mexico, S. de R.L. de C.V. v. CB Brand Strategies, LLC, Case No. 23-810 (2d Cir. Mar. 25, 2024) (Cabranes, Wesley, Lohier, JJ.) (nonprecedential).

In 2013, Modelo granted Constellation Brands a perpetual sublicense to use Modelo’s trademarks for Corona and Modelo to sell “beer” in the United States. The sublicense defined “beer” as “beer, ale, porter, stout, malt beverages, and any other versions or combinations of the foregoing, including non-alcoholic versions of any of the foregoing.” Several years later, Constellation launched Corona Hard Seltzer and Modelo Ranch Water, both of which are flavored alcoholic seltzers derived from fermented sugar.

Modelo sued Constellation in 2021, alleging that Constellation’s sales of the “Corona” or “Modelo” branded hard seltzers violated the sublicensing agreement because the license for use of the marks on “beer” did not encompass sugar-based hard seltzers. Modelo moved for summary judgment, which the district court denied after determining that the agreement’s definition of “beer” was ambiguous. At trial, the jury found that Modelo had failed to show that the seltzers were not “beer” under the sublicense definition. Modelo appealed.

Modelo asserted that the district court erred in denying summary judgment, arguing that the agreement’s definition of “beer” was unambiguous and challenged the district court’s jury instructions and exclusion of certain evidence at trial.

The Second Circuit agreed that the term “beer” as used in the agreement was ambiguous. The Court noted that a motion for summary judgment in a contract dispute generally may only be granted when the relevant language has a definite meaning and is unambiguous. Modelo argued that the sublicense plainly excluded the hard seltzers because they were not “beer,” “malt beverages,” or versions or combinations of either. Modelo contended that the term “versions” was limited to beverages with characteristics in common with “beer” and “malt beverages” and would not include “malt-free,” “hops-flavorless” hard seltzers.

The Second Circuit assumed for purposes of the opinion that the plain and ordinary meaning of “beer” and “malt beverages” excluded seltzers but reasoned that Corona Hard Seltzer and Modelo Ranch Water could plausibly be understood as a “version” of either. The Court found Modelo’s limited view of the term “versions” unpersuasive, given that the sublicense allowed for “nonalcoholic versions” of beer and malt beverages, even though dictionary definitions uniformly define “beer” as containing alcohol. Because each party’s reading of “versions” was at least plausible, the Court concluded that the relevant contract language was ambiguous and affirmed the district court’s summary judgment denial.

Modelo also argued that the district court failed to instruct the jury that undefined words should be given their plain and ordinary meaning and improperly instructed the jury to ignore dictionary definitions. The Second Circuit rejected this argument, noting that the instructions properly informed the jury [...]

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Faulty Jury Instruction Tampered With Tamper-Proof Trial

The US Court of Appeals for the Federal Circuit affirmed in part, vacated in part and remanded a district court decision after concluding that a jury instruction on the objective indicia of nonobviousness that failed to specify all indicia on which evidence had been received constituted prejudicial legal error. Inline Plastics Corp. v. Lacerta Group, LLC, Case Nos. 22-1954; -2295 (Fed. Cir. Mar. 27, 2024) (Taranto, Chen, Hughes, JJ.)

Inline Plastics owns a patent family pertaining to containers with specific tamper-proof features and methods of producing these containers using thermoformed plastic. The invention is intended to deter unauthorized tampering with products in the containers. These tamper-proof features serve to prevent theft and product loss and maintain consumer confidence in product integrity.

Inline sued Lacerta Group for patent infringement over its tamper-proof technology. The district court made several significant pretrial rulings, including a claim construction order, and granted Inline’s motion for partial summary judgment of infringement on some of the asserted claims. During trial, Inline voluntarily withdrew certain claims, and the jury returned a verdict declaring all remaining claims (even those on which summary judgment had been granted) invalid and not infringed. After trial, Inline sought partial final judgment, which was granted, but also motioned for judgment as a matter of law and a new trial on invalidity. The district court denied Inline’s motions. Both Inline and Lacerta appealed.

Inline argued that it was entitled to judgment as a matter of law of no invalidity and that an error in the jury instructions requires a new trial on invalidity. Lacerta cross-appealed, challenging the denial of attorneys’ fees and the “without prejudice” dismissal of certain patent claims that Inline voluntarily dropped from its asserted-claims list near the end of trial.

The Federal Circuit rejected Inline’s argument for judgment as a matter of law of no invalidity but agreed with Inline that the jury instruction on the objective indicia of nonobviousness constituted prejudicial legal error. The Court determined that the jury could have reasonably found obviousness and rejected Inline’s three arguments against it. First, Inline argued deficiencies in Lacerta’s prior art references and expert testimony, but the Court found these arguments unpersuasive. Second, Inline challenged Lacerta’s evidence of motivation to combine references, but the Court found enough support to prove a motivation to combine. Third, Inline argued that Lacerta’s challenge failed because there was no rebuttal or opinion on objective-indicia evidence. The Court dismissed this argument, explaining that the absence of such testimony did not necessarily discredit the patentee’s evidence on nonobviousness. According to the Court, Inline failed to explain why the jury could not reasonably assign little weight to its objective-indicia evidence, which led the Court to reject Inline’s categorical argument based on the absence of expert testimony from Lacerta’s side.

However, the Federal Circuit agreed with Inline’s argument for a new trial on invalidity. The Court explained that jury instructions must be legally correct and sufficiently comprehensive to address disputed evidence. The Federal Circuit concluded that the district court’s objective-indicia instruction [...]

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Who Solved the Problem? Joint Inventors, That’s Who

The US Court of Appeals for the Federal Circuit affirmed a district court’s decision to correct inventorship in a post-issuance inventorship dispute, finding that the alleged joint inventors’ contributions were significant even though they were mostly unclaimed. Tube-Mac Indus., Inc. v. Campbell, Case No. 22-2170 (Fed. Cir. Mar. 15, 2024) (Lourie, Hughes, Stark, JJ.) (nonprecedential).

Steve Campbell was the original sole inventor named on a utility patent application directed to a container for transporting gaseous fluids. Before Campbell filed the patent application, Campbell’s prototypes had a “major problem” with the container’s liner. Campbell enlisted the help of Tube-Mac Industries’ Gary Mackay and Dan Hewson to solve the problem. Campbell, Mackay and Hewson exchanged plans regarding the problem over the course of several months. Campbell’s patent issued, naming himself as the sole inventor. Mackay, Hewson and Tube-Mac filed suit seeking to be named as co-inventors. The district court agreed and ordered correction of the patent under 35 U.S.C. § 256. Campbell appealed.

A court may order a correction of inventorship when it determines that an inventor has been erroneously omitted from a patent. In any inventorship challenge, the inventors listed in an issued patent are presumed to be the correct inventor(s). Thus, a party challenging inventorship must prove incorrect inventorship by clear and convincing evidence. A joint inventor must contribute significantly to the invention’s conception or reduction to practice when that contribution is measured against the scope of the full invention.

The Federal Circuit found that prior to the involvement of Mackay and Hewson, Campbell did not have a viable invention that could be reduced to practice without extensive experimentation. The Court also found that Mackay’s and Hewson’s contributions solved the problem that precluded the prototype from being successful, even though their contributions were “mostly unclaimed.” The Court noted, however, that their contributions were included in the application’s figures, specifications and dependent claims. Accordingly, the Court found that Mackay and Hewson contributed significantly to the conception of the invention and should be included as co-inventors.

The Federal Circuit also dismissed Campbell’s arguments that the district court did not properly construe the claims to determine their scope and erred by misidentifying the subject matter of the claims.




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What Use Does § 271(e)(1) Safe Harbor “Solely” Protect?

The US Court of Appeals for the Federal Circuit affirmed that the 35 U.S.C. § 271(e)(1) safe harbor protecting certain infringing acts undertaken for regulatory approval applied to an alleged infringer’s importation of transcatheter heart systems while attending a trade conference, finding the importation reasonably related to submitting information to the US Food & Drug Administration (FDA) for medical device approval. Edwards Lifesciences Corp. v. Meril Life Sciences Pvt. Ltd., Case No. 22-1877 (Fed. Cir. Mar. 25, 2024) (Stoll, Cunningham, JJ.) (Lourie, J., dissenting).

The fact pattern in this case is unusual. Meril, a manufacturer of a transcatheter heart system approved for sale in Europe but not in the United States, brought two demonstration samples to San Francisco with lawyer-generated instructions that the samples could not be used, sold or offered for sale in the US. Meril presented at a trade booth during a cardiovascular medical device conference. It was undisputed that the samples never left a bag that was first kept at a hotel and later brought to the conference and placed in a storage room.

Edwards Lifesciences nevertheless sued for infringement based on importation. The district court found that Meril’s importation was reasonably related to its attempts to secure regulatory approval because they were for the purposes of recruiting investigators for a clinical trial Meril had made initial efforts to commence (as required to market this type of device in the US). Accordingly, the district court granted summary judgment of noninfringement on grounds that the safe harbor under § 271(e)(1) applied. Edwards appealed.

Edwards argued that the district court erred by not finding a genuine material dispute of fact relating to Meril’s subjective intent (i.e., whether, notwithstanding some evidence, Meril actually intended the importation to relate to FDA approval). Edwards also challenged whether the importation was solely related to FDA approval and argued that the non-use of the devices to recruit investigators rendered the safe harbor inapplicable.

The Federal Circuit rejected all three challenges. Canvassing the Federal Circuit’s decades of prior case law, the Court concluded that a putative infringer’s intent is irrelevant when determining whether the safe harbor applies. Thus, even if Edwards were correct in challenging Meril’s intent, there would still be no material factual dispute. On the issue of whether the importation activity was solely related to FDA approval, the Court, discussing the use of “solely” in terms of the safe harbor provision, reiterated prior cases’ determination that the uses need not be solely related to FDA approval, but rather, that the only uses that would be protected were those within the safe harbor. Finally, the Court again deemed the non-use of the devices irrelevant, as nothing in the statute required actual use.

Judge Lourie dissented, not because he necessarily viewed the district court’s or the majority’s application as squarely incorrect under existing precedent, but because he believed that existing precedent did not expressly give proper weight to the statute’s use of the word “solely.” Applying a plain text analysis, Judge Lourie argued that the safe harbor [...]

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Mandamus Denied but Jurisdictional Door Left Open a Crack

The US Court of Appeals for the Federal Circuit denied a patent owner’s writ of mandamus seeking to prevent a defendant from amending its answer to add an affirmative licensing defense, but also noted that the defense was added only after the district court found that there were no remaining claims. In re VLSI Technology LLC, Case No. 24-116 (Fed. Cir. Mar. 18, 2024) (Moore, Taranto, Chen, JJ.)

VLSI asserted four patents against Intel in the Northern District of California. In December 2023, the district court granted summary judgment that two of the patents were not infringed and denied summary judgment of noninfringement on the remaining two patents. The parties additionally submitted cross motions for summary judgment on a licensing defense that turned on a forum selection clause, but the court denied both motions. To deprive the court of jurisdiction, VLSI granted Intel a covenant not to sue for infringement of the remaining two patents in the case. Two days later, Intel moved to amend its answer to add a counterclaim for a declaratory judgment that Intel was licensed to VLSI’s entire patent portfolio. The district court granted Intel’s motion, and VLSI filed a mandamus petition to block Intel’s amendment.

The Federal Circuit denied VLSI’s petition for two primary reasons. First, the Court determined that VLSI had not shown that it had no other available means of obtaining relief. The district court expressly invited the parties to brief issues pertaining to Intel’s licensing defense in subsequent briefing, and VLSI had since filed a motion to dismiss pertaining to this very issue. The Court also noted that VLSI could raise this issue on appeal after a final judgment. Second, the Court determined that VLSI failed to show that the district court abused its discretion in allowing Intel to amend its answer, finding that Intel acted diligently in seeking to amend its answer and that VLSI had long since known about the potential defense.

With respect to the substantive issue of whether the district court had subject matter jurisdiction, the Federal Circuit declined to offer an opinion at this stage. Nevertheless, in an apparent message to the court below, the final sentence of the Court’s opinion reads, “[w]e only note that Intel’s motion to amend its answer was filed after the court determined there were no remaining claims, such that no case or controversy remained before the court.”




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Is Evidence of All Claimed Elements in Prior Art Enough? Not Without Motivation to Combine

The US Court of Appeals for the Federal Circuit reversed a Patent Trial & Appeal Board obviousness decision, finding that disclosure in the prior art of all recited claim elements across multiple references, without more, does not establish obviousness unless there is evidence of a motivation to combine. Virtek Vision Int’l ULC v. Assembly Guidance Systems, Inc., Case No. 22-1998 (Fed. Cir. Mar. 27, 2024) (Moore, C.J.; Hughes, Stark, JJ.)

Virtek holds a patent that discloses “an improved method for aligning a laser projector with respect to a work surface.” Lasers are used to “project a template image onto a work surface to direct manufacturing processes.” The patent discloses a two-step process that improves efficiency over the prior art.

Aligned Vision petitioned for inter partes review (IPR), challenging all of the patent’s claims. Aligned Vision asserted four combinations of prior art references over which it contended the claims were obvious. In its Final Written Decision, the Board found that some of the claims were unpatentable as obvious, but others were not.

The Board determined that certain claims, which depended from the independent claim, would have been obvious over two combinations of references: Keitler and Briggs, and Briggs and Bridges. In pertinent part, the independent claim recites “identifying a pattern of the reflective targets on the work surface in a three dimensional coordinate system.” Save for the 3D claim element, all the other claim elements were disclosed in Bridges and Keitler. The Board found that a skilled artisan would have been motivated to use the 3D coordinate system disclosed in Briggs instead of the angular direction systems in Keitler or Bridges. The Board reasoned that this combination would have been obvious to try because Briggs disclosed both 3D coordinates and angular directions.

With respect to the direct appeal, the Federal Circuit found that the Board erred as a matter of law regarding motivation to combine. “It does not suffice to meet the motivation to combine requirement to recognize that two alternative arrangements such as an angular direction system using a single camera and a 3D coordinate system using two cameras were both known in the art.” Rather, the patent challenger must show that a skilled artisan would swap the element in one reference for an element in another reference. “The mere fact that these possible arrangements existed in the prior art does not provide a reason that a skilled artisan would have substituted the one-camera angular direction system in Keitler and Bridges with the two-camera 3D coordinate system disclosed in Briggs.”

Here, the patent challenger presented no argument in the IPR petition regarding why a skilled artisan would make this substitution, other than that the two different coordinate systems were “known to be used.” Specifically, Briggs made no mention of any benefits the 3D system might provide over the angular system. Aligned Vision’s expert testified multiple times that he could not provide a reason to combine the references, and Aligned Vision presented no evidence that “there are a finite number of [...]

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