The United States Court of Appeals for the Federal Circuit recently issued an opinion in CQV Co., Ltd. v. Merck Patent GmbH, vacating and remanding the Patent Trial and Appeal Board (PTAB) decision regarding U.S. Patent No. 10,647,861. The ruling focuses on key legal issues related to patent infringement, prior art determination, and procedural fairness in PTAB proceedings.

Background of the Case

Merck Patent GmbH owns U.S. Patent No. 10,647,861, which claims α-Al2O3 (“alpha-alumina”) flakes used in industrial coatings, automotive coatings, printing inks, and cosmetic formulations. The patent purports that these flakes provide improved optical properties compared to prior art.

CQV Co., Ltd. petitioned the PTAB for post-grant review, arguing that claims 1–22 of the ’861 patent were unpatentable as obvious in light of prior art, including the commercial product Xirallic®. The PTAB, however, found that CQV failed to prove by a preponderance of the evidence that the cited prior art (Xirallic®) was publicly available before the patent’s critical date and rejected CQV’s invalidity challenge. CQV appealed to the Federal Circuit.

Key Legal Issues Addressed by the Court

1. Prior Art and the Burden of Proof

A central issue in the appeal was whether CQV sufficiently established that Xirallic® was prior art before the patent’s critical date. Under patent law, a reference must be publicly available before the critical date to qualify as prior art. The court scrutinized the PTAB’s analysis and found that the Board improperly disregarded unrebutted evidence from CQV indicating that the product was available to the public.

The Federal Circuit emphasized that, while petitioners bear the burden of proving prior art status, they need only meet the preponderance of the evidence standard. The Board, in rejecting CQV’s argument, failed to fully consider critical evidence that supported Xirallic®’s availability, including testimony on quality control procedures and sales records.

2. Standing in Post-Grant Review Appeals

Merck challenged CQV’s standing to appeal the PTAB decision, arguing that CQV had not suffered a concrete injury. The Federal Circuit rejected this argument, holding that CQV had demonstrated a sufficient injury-in-fact based on Merck’s communications with CQV’s customers alleging infringement of the ’861 patent. Because CQV was contractually obligated to indemnify one of its customers against infringement claims, the court found that CQV had standing under Arris Grp., Inc. v. British Telecomms. PLC, which recognizes standing for suppliers who face indirect threats of litigation.

3. Failure to Consider the Entirety of the Record

The court criticized the PTAB for failing to consider all relevant evidence regarding the availability of Xirallic® as prior art. Specifically, it noted that the Board omitted testimony from CQV’s expert that contradicted the Board’s conclusion. The Federal Circuit reiterated that the Administrative Procedure Act (APA) requires the Board to fully explain its decisions and consider all material evidence. The failure to do so necessitated vacating and remanding the decision for reconsideration.

Implications for Patent Litigation and PTAB Proceedings

This decision highlights several important aspects of patent law:

• Patent challengers must present compelling evidence to establish prior art status, but the PTAB must also fairly weigh all available evidence when making its determinations.
• Standing in post-grant review appeals may be established through indemnity obligations, reinforcing the ability of suppliers to challenge patents that may indirectly affect them.
• The Federal Circuit continues to hold PTAB accountable for failing to properly consider the record, signaling that procedural fairness remains a key concern in administrative patent proceedings.

Conclusion

The Federal Circuit’s ruling in CQV Co. v. Merck Patent GmbH serves as a significant reminder of the evidentiary and procedural standards that govern PTAB proceedings. By vacating the PTAB’s decision, the court reinforced the importance of a thorough and fair assessment of prior art claims and set a precedent for future disputes involving commercial products as prior art. As the case returns to the Board for further consideration, patent litigators and stakeholders will be watching closely to see how the PTAB reevaluates the evidence in light of the Federal Circuit’s guidance.

By Charles Gideon Korrell