The Federal Circuit reversed an inter partes review (IPR) decision holding that the Patent Trial and Appeal Board (the "Board") incorrectly applied the standard for an inventor to prove diligence in reducing the invention to practice.
The dispute between Arctic Cat, Inc. ("Arctic Cat") and GEP Power Products, Inc. ("GEP Power") involved two of Arctic Cat's patents relating to power distribution models for all-terrain vehicles (ATVs). During the IPRs, the Board found in GEP Power's favor, determining that all claims of both patents were unpatentable. On appeal, one of the issues that Arctic Cat raised was that Boyd, a prior art reference that the Board relied on, was not prior art to either of the challenged patents. Arctic Cat argued that (1) the inventor conceived the invention before Boyd's filing date of April 1, 2002, and was diligent in reducing the invention to practice by October 29, 2002—the priority date of both patents, and (2) Boyd was not the work of "another" under the relevant statute (i.e., 35 U.S.C. § 102(e)(2)).
The Federal Circuit agreed with Arctic Cat's first argument, holding that the Board erred in rejecting Arctic Cat's proof that the inventor was diligent in reducing the invention to practice. The court began by discussing the standard for diligence—"[r]easonable diligence must be shown throughout the entire critical period, which begins just prior to the competing reference's effective date and ends on the date of the invention's reduction to practice." The court further explained that "diligence need not be perfectly continuous—only reasonably continuous." Indeed, "the point of the diligence analysis is not to scour the patent owner's corroborating evidence in search of intervals of time where the patent owner has failed to substantiate some sort of activity."
The Federal Circuit determined that the evidence showed that the inventor was reasonably diligent during the critical period. The court criticized the Board for appearing to search for gaps in activity, rather than considering the record as a whole. Collectively, the court found that the inventor did not unreasonably delay or abandon his invention. In fact, one of the periods of "inactivity" occurred when a third party was conducting necessary testing of the device, and evidence showed that the inventor diligently oversaw that testing. Accordingly, the court rejected the Board's analysis as resting "on too rigid a standard," and held that the record established diligence under the correct standard.
Practice Tip: Because diligence is evaluated under a rule of reason, it does not require a perfect accounting of activity on a precise schedule. However, parties who have an apparent gap in activity during the diligence period should make every effort to account for those gaps in the context of the entire course of conduct that led to a reduction to practice.
Arctic Cat Inc. v. GEP Power Prods., Inc., Nos. 2018-1520, 2018-1521, slip op. (Fed. Cir. Mar. 26, 2019).
[Before Prost, Reyna, and Taranto (Opinion)]
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