[00:00:01] Speaker 01:
Good morning, ladies and gentlemen.

[00:00:03] Speaker 01:
We have three cases on the docket for today.

[00:00:07] Speaker 01:
As I understand it, in the first case, Margolis, you want to reserve three minutes for rebuttal, is that correct?

[00:00:19] Speaker 05:
Yes, Your Honor.

[00:00:19] Speaker 01:
Did I pronounce that name correctly?

[00:00:21] Speaker 01:
Margolis, Your Honor.

[00:00:22] Speaker 01:
OK.

[00:00:23] Speaker 01:
The case is Specialized Bicycle Components versus KG Motors, Inc., docket number 15141.

[00:00:31] Speaker 01:
Two, it is an appeal from the Patent Trial and Appeal Board.

[00:00:37] Speaker 01:
You can begin when you're ready.

[00:00:39] Speaker 05:
May it please the court.

[00:00:41] Speaker 05:
Precious Little separated the closest prior art in this case, Okajima 307, from the claims of the patented suit.

[00:00:48] Speaker 05:
Okajima 307 had all of the elements of the patent other than specifically calling out the dimension of the sidewall height.

[00:00:56] Speaker 05:
But that dimension was available to one of skill in the art.

[00:00:59] Speaker 05:
Okajima 766 had a flat bead seat and the claimed dimensions shown in its sidewall.

[00:01:06] Speaker 04:
That's the crotchet style rim, right?

[00:01:08] Speaker 05:
Yes.

[00:01:09] Speaker 05:
I don't know whether it's pronounced crotchet or crochet, Your Honor.

[00:01:12] Speaker 05:
I'll go with crochet.

[00:01:13] Speaker 04:
Yes.

[00:01:15] Speaker 04:
It's a different rim than the rim of the 307, right?

[00:01:25] Speaker 05:
It is only to the extent that

[00:01:29] Speaker 05:
you look at what's called the standard.

[00:01:31] Speaker 05:
The standard is a manual so that tire manufacturers and rim manufacturers can be on the same page.

[00:01:39] Speaker 05:
The reason we don't believe that is relevant here is the 307 rim was already outside of the standard.

[00:01:49] Speaker 05:
Because this is a market for enthusiasts, so while most consumers might want to

[00:01:58] Speaker 05:
make sure they're buying a tire in a rim that fits and is relatively standard, we see that people in this area are working outside the preordained standards.

[00:02:10] Speaker 05:
So in terms of general shape, the 307 and the 766 look very similar, though the 307 is not within the quote unquote standard crochet or crochet style.

[00:02:25] Speaker 05:
The board found that this was prima facie obvious, that the claim dimension was within the options to one of skill in the art.

[00:02:36] Speaker 01:
What the board did find, however... What we're reviewing, though, is the total determination of obviousness.

[00:02:41] Speaker 01:
Correct.

[00:02:42] Speaker 01:
So, you know, we could disagree with the board's finding as it relates to motivation to combine, even if we think that there are some arguments that you've made that are somewhat persuasive on commercial success, right?

[00:02:56] Speaker 05:
Yes, your honor.

[00:03:00] Speaker 05:
We believe that the board was correct in finding prima facie obviousness.

[00:03:04] Speaker 05:
We find the board's error to be in its finding of that commercial... I'm sorry.

[00:03:09] Speaker 05:
We believe that the board was correct in finding prima facie obviousness.

[00:03:12] Speaker 05:
The board was incorrect in finding that the secondary consideration of commercial success outweighed that.

[00:03:20] Speaker 05:
And we believe there are three errors.

[00:03:22] Speaker 01:
With respect to the motivation to combine, though, one of the

[00:03:26] Speaker 01:
the things that jumps out at me is if it was so obvious to combine the two, then why didn't the inventor and the prior art combine the two?

[00:03:35] Speaker 05:
What we don't know is that the inventor didn't do this, and I apologize for the double negative.

[00:03:40] Speaker 05:
Okajima 307 shows figures without dimensions in it.

[00:03:46] Speaker 05:
And we had argued to the board the first time that if they were drawn to scale,

[00:03:51] Speaker 05:
it would have been within the dimensions of the patent.

[00:03:53] Speaker 05:
The board pointed out, and we don't disagree with the board's finding there, that because it wasn't clearly called out that it was drawn to scale, we can't import those dimensions.

[00:04:03] Speaker 05:
But there's no... That's crazy.

[00:04:05] Speaker 01:
Correct.

[00:04:06] Speaker 01:
Law 101.

[00:04:08] Speaker 01:
I apologize for the use of that 101, but you know what I mean.

[00:04:12] Speaker 05:
And we agree totally.

[00:04:13] Speaker 05:
But there's no evidence that Okajima 307

[00:04:18] Speaker 05:
did not use those dimensions.

[00:04:20] Speaker 05:
And that's why I call it out.

[00:04:23] Speaker 05:
That if you look at it, there's nothing to say Mr. Okajima.

[00:04:28] Speaker 01:
I know, but who's supposed to be?

[00:04:30] Speaker 01:
I mean, what's the burden here in terms of establishing motivation to combine?

[00:04:35] Speaker 01:
The burden is on us here.

[00:04:38] Speaker 01:
So to say, well, there's no evidence that he didn't use those dimensions, the real point is that there's no evidence that he did.

[00:04:43] Speaker 05:
Correct.

[00:04:44] Speaker 05:
And that is what we filled in with the testimony of Mr. Thompson, that these dimensions were out there to one of skill in the art and that they very easily could have been combined.

[00:04:57] Speaker 05:
It was just a design choice there.

[00:05:00] Speaker 05:
In fact, the shorter sidewall heights are also listed in the standard as possible sidewall heights.

[00:05:09] Speaker 05:
The board, as it is required to do, did look at secondary considerations, and that's where we think they erred.

[00:05:17] Speaker 05:
What they found was they... So what did the board do?

[00:05:21] Speaker 00:
Did it require that there be a prima facie showing first before consideration of secondary considerations?

[00:05:30] Speaker 05:
In the board's decision, it looked at two issues.

[00:05:34] Speaker 05:
It first found the prima facie obviousness.

[00:05:36] Speaker 05:
That was hotly contested below and it somewhat contested

[00:05:39] Speaker 05:
above.

[00:05:40] Speaker 05:
They found the prima facie obviousness and then they did look at the secondary considerations.

[00:05:46] Speaker 05:
When they looked at the secondary... Are you aware Leo Pharmaceuticals?

[00:05:50] Speaker 05:
Yes, Your Honor.

[00:05:50] Speaker 01:
Where this court said that in order to give the objective indicia of non-obviousness appropriate weight, it's supposed to be considered at the same time the question of motivation to combine is considered and that they're all supposed to inform each other.

[00:06:09] Speaker 05:
I have no, I don't believe that the board did it wrong.

[00:06:13] Speaker 05:
I'm just reporting how they did it in terms of writing their decision.

[00:06:19] Speaker 04:
But you'd agree the idea is that ultimately the board's responsibility was to consider all the evidence taken together in the sense that the prima facie showing of obviousness is just a procedural tool.

[00:06:35] Speaker 04:
But then once the rebuttal evidence comes in from the patent owner,

[00:06:39] Speaker 04:
In a sense, whatever was that made up the prima facie case in a way dissolves.

[00:06:44] Speaker 04:
And then now you've got to reconsider everything anew in light of the rebuttal evidence to make a determination of whether in fact one of ordinary skill in the art at the time of the invention would have found these claims obvious.

[00:06:57] Speaker 05:
Absolutely.

[00:06:58] Speaker 05:
We do not disagree with that at all, that you must look at the totality of the evidence.

[00:07:04] Speaker 05:
You can weigh the relative prima facie

[00:07:09] Speaker 05:
engineering-based obviousness with the evidence in the record of secondary considerations.

[00:07:13] Speaker 05:
But we don't at all say that you shouldn't have looked, that the board shouldn't have looked at the secondary considerations or that it's not a primary or at least a, primary is a very bad word when, it's a very important thing to look at when determining the obviousness of the patent.

[00:07:32] Speaker 04:
So getting to the secondary consideration evidence, I guess your concern was your

[00:07:37] Speaker 04:
Biggest concern be the fact that there was no market share data presented?

[00:07:43] Speaker 05:
Actually, my biggest concern is that what the board looked at for a nexus really does not, even on a surface reading of that evidence, support the nexus.

[00:07:59] Speaker 05:
What this court has said is that gross sales are at best a week

[00:08:05] Speaker 05:
indication of commercial success, but it's at least a weak indication of commercial success.

[00:08:10] Speaker 01:
Do we begin with a presumption of Nexus?

[00:08:13] Speaker 05:
You can only begin with the presumption of Nexus if it's shown that the commercial embodiment, the commercial product both embodied the claims of the patent and were coextensive.

[00:08:25] Speaker 05:
There was never such a finding by the board here.

[00:08:29] Speaker 01:
I'm not sure we get that coextensively.

[00:08:34] Speaker 05:
In the Brown and Williamson case, that's what this court has said.

[00:08:42] Speaker 01:
And in numerous cases, the court was looking to- Never imposed a coextensive requirement, because in some ways that would make no sense, because there are often additional elements.

[00:08:54] Speaker 01:
That would simply say that unless you essentially are able to have an anticipation

[00:09:00] Speaker 01:
type analysis that there wouldn't be any presumption, but that's not what our law is.

[00:09:06] Speaker 04:
It seems like the only that would reduce nexus to just maybe for drug patents.

[00:09:13] Speaker 04:
Anything that's a non-drug patent could never be truly coextensive with the commercial product.

[00:09:19] Speaker 05:
I'll give you three examples from the case law as to what we believe coextensive means from this court.

[00:09:24] Speaker 05:
In the DiMacco case, H51F2nd 1387,

[00:09:28] Speaker 05:
It said when the commercial embodiment of the patent is merely a component of what's for sale, it's not co-extensive.

[00:09:36] Speaker 05:
In media text licensing, it looked to see if there were other reasons that the embodiment of the patent sold there.

[00:09:44] Speaker 05:
It found better manufacturing techniques and celebrity.

[00:09:48] Speaker 05:
And in the Sterisense case, it found that the commercial embodiment was a commercial embodiment of both the patent in suit and another.

[00:09:57] Speaker 05:
And therefore, in all three of those cases, did require the additional showing of a nexus.

[00:10:02] Speaker 05:
It didn't presume.

[00:10:04] Speaker 05:
And the board here didn't presume as well.

[00:10:08] Speaker 01:
What the board did was the board looked at- The board didn't apply a presumption.

[00:10:12] Speaker 01:
And I don't necessarily agree with you on your presumption analysis.

[00:10:16] Speaker 01:
But putting that aside, if you look at all of the evidence the board relied on,

[00:10:23] Speaker 01:
I think one of your problems is that it's really not just a pure commercial success.

[00:10:27] Speaker 01:
If you look at all of the evidence, the board didn't describe it as such, but there is a huge amount of industry praise that is directly tied to this feature.

[00:10:40] Speaker 05:
With all due respect, Your Honor, the board did not find industry praise.

[00:10:45] Speaker 05:
That's an independent secondary consideration.

[00:10:47] Speaker 01:
Well, when you say they didn't find it, they talked about it.

[00:10:50] Speaker 01:
And it is encompassed within a fair reading of what it is the board was looking at.

[00:10:59] Speaker 05:
The articles that were there were talking about what was on the market.

[00:11:05] Speaker 05:
Some of the articles offered were buyer's guides, and then there were discussions of the various items for sale.

[00:11:13] Speaker 05:
The articles, when talking about

[00:11:16] Speaker 05:
the KG Motors product, Stam's No Tubes was the commercial name used, talked about those products and its benefits as a wheel set with all the components combined and was doing it for each year of the evolution of the product.

[00:11:35] Speaker 05:
And there were many descriptions there.

[00:11:37] Speaker 05:
So I think what the board said it was finding, and by pulling snippets of those articles, was using those articles for a nexus.

[00:11:47] Speaker 05:
I mean, we can disagree whether it is in effect industry praise, but it was not a finding of industry praise.

[00:11:55] Speaker 01:
And we don't have to have a finding.

[00:11:57] Speaker 01:
There's a difference between an alternative ground of rejection and just finding additional support in the record for the actual ground of rejection that the board relied upon, correct?

[00:12:09] Speaker 01:
Yes.

[00:12:10] Speaker 01:
So if we find that the board's conclusion of non-obviousness was supported,

[00:12:17] Speaker 01:
along with other things by evidence of industry praise that is supported by the record, then we're free to conclude that, right?

[00:12:27] Speaker 05:
I believe as a legal conclusion under the Chenery doctrine, this court is not supposed to find facts that were not found below, but because obviousness is at the end of the day a legal conclusion, this court can make any legal conclusion.

[00:12:43] Speaker 01:
Right.

[00:12:43] Speaker 01:
I mean, Chenery says we can't

[00:12:45] Speaker 01:
use alternative grounds.

[00:12:47] Speaker 01:
So if we were to find that the patent was, or say the board found it invalid on obviousness, we couldn't find it invalid on anticipation or invalid under 112 without sending it back to the board.

[00:12:59] Speaker 01:
But we could find support for the board's actual ground of rejection in the evidence of record.

[00:13:05] Speaker 05:
Yes.

[00:13:07] Speaker 05:
And we believe that support simply isn't there when read in context and when read in full.

[00:13:12] Speaker 05:
And it's only approximately 11 pages of

[00:13:16] Speaker 05:
articles and and um... buyers guide they they don't support the finding of a nexus every time the product was part of a real set and a design so sold to the consumer as a whole but there were multiple times in those various articles where those reviews zeroed in on the shortening of the sidewall and then the reviewers

[00:13:42] Speaker 04:
You can find several places where they say, okay, we've got a shorter sidewall here with Stanley Cozy Attack's new bicycle rim and look, we can avoid pinch flats with that.

[00:13:52] Speaker 04:
Look, they're lighter and they're stiffer and now you have more surface area of the tire to contact the road and things like that.

[00:14:02] Speaker 04:
The point is there's all these different aspects or attributes now of these tires

[00:14:08] Speaker 04:
that are due to or driven by the shorter sidewalls as identified by the multiple reviewers.

[00:14:13] Speaker 04:
And if that's the case, why can't the board reasonably find an inference that all of these improvements in the bicycle rim that flow from the shorter sidewall were the reason why customers were driving up sales growth for these new bicycle rims?

[00:14:33] Speaker 05:
I will try to reserve one minute for rebuttal, but quickly,

[00:14:38] Speaker 05:
In terms of shorter sidewalls standing alone, that was indisputably in the prior art.

[00:14:43] Speaker 05:
But more importantly, the snippets say as a fringe benefit the sidewalls and then go on to all the other reasons about the sidewalls.

[00:14:52] Speaker 05:
And pinch flats, as one of the articles submitted by patentees showed, is an advantage of all tubeless tires not limited to this one.

[00:15:02] Speaker 05:
So red as a whole,

[00:15:05] Speaker 05:
the articles we believe do not actually provide the Nexus evidence, a substantial evidence of the Nexus.

[00:15:13] Speaker 01:
Okay, we'll restore two minutes of rebuttal for you.

[00:15:16] Speaker 05:
I appreciate that, Your Honor.

[00:15:17] Speaker 01:
Because you pretty much used it all up.

[00:15:19] Speaker 01:
And to the extent, Mr. Dowd, you need an extra two minutes, we can give that to you too, but I'm not encouraging you to necessarily use it.

[00:15:28] Speaker 03:
Thank you, Your Honor.

[00:15:29] Speaker 03:
I don't believe I will need it.

[00:15:31] Speaker 03:
Jim Dowd, on behalf of the Appellee KG Motors,

[00:15:35] Speaker 03:
who I will refer to by their commercial name, No Tubes.

[00:15:38] Speaker 03:
The question before the court is whether the board's decision that the 846 claims are not obvious is supported by substantial evidence.

[00:15:47] Speaker 03:
And we would submit that on all fronts, it is supported by substantial evidence.

[00:15:51] Speaker 01:
It wasn't the most fulsome obviousness analysis that I've ever seen.

[00:15:57] Speaker 03:
Your Honor, I believe that it was not so fulsome on the prima facie case, but it was

[00:16:04] Speaker 03:
what was necessary on the secondary considerations case.

[00:16:07] Speaker 03:
And ultimately, I believe it's 17 to 18, the balancing, the weighting of those evidence was complete.

[00:16:16] Speaker 03:
And on each of the elements that Specialized has raised, there is substantial evidence in the record to support those elements.

[00:16:23] Speaker 03:
So when it comes to commercial success and the success of the product, the first thing I'd like to point out, which is a bit confused when you read the reply brief, is

[00:16:34] Speaker 03:
that the data that is presented on the sales is for sale of the rim alone, not for sale of a complete wheel set, not for sale of spokes or hubs.

[00:16:45] Speaker 03:
It is exactly the rim.

[00:16:47] Speaker 04:
What do these rims go for?

[00:16:49] Speaker 03:
The rims vary in price.

[00:16:51] Speaker 03:
I think the average price, if you look at the data, is somewhere around $40 for just the rim itself.

[00:16:58] Speaker 03:
Some of the higher end ones, like the ZTR Olympic, may be north of $100.

[00:17:03] Speaker 03:
But they are rather expensive.

[00:17:05] Speaker 03:
And they're for elite athletes.

[00:17:06] Speaker 03:
If you look to the articles, you'll see folks like Lance Armstrong named as one of the best.

[00:17:12] Speaker 04:
How do we know these are commercially successful when all you did was give us sales figures?

[00:17:17] Speaker 04:
And we've said time and again, sales figures is not particularly compelling when just given to us in isolation.

[00:17:25] Speaker 03:
For at least two reasons, Your Honor.

[00:17:27] Speaker 03:
The first is it wasn't just sales figures.

[00:17:31] Speaker 03:
Actually, there are three reasons.

[00:17:32] Speaker 03:
It wasn't just sales figures that were given.

[00:17:34] Speaker 03:
The first thing that the board said was, these rims are the same as what's claimed.

[00:17:41] Speaker 03:
And there's evidence to support that.

[00:17:43] Speaker 03:
If you look to Mr. Koziadek's declaration, I believe it's at A145, he says that the rim itself is the invention.

[00:17:52] Speaker 03:
And that's backed up by the engineering schematics for the rims that were actually sold.

[00:17:56] Speaker 00:
Were there sales other than these particular rims?

[00:18:00] Speaker 00:
How many different lines of rims does No Tubes have?

[00:18:04] Speaker 03:
There were only two, Your Honor.

[00:18:06] Speaker 03:
There were the pre-invention rims, which are the first generation rims that are listed in the table at A145.

[00:18:12] Speaker 03:
And then there are the inventive rims, which are all the other rims that get sold.

[00:18:17] Speaker 00:
So all the figures that we have relate to the inventive rim?

[00:18:20] Speaker 03:
Exactly.

[00:18:21] Speaker 03:
And the engineering schematics, there's an example at A180.

[00:18:25] Speaker 00:
But let's go back.

[00:18:26] Speaker 00:
They relate to the inventive rim only because those are the only rims that

[00:18:29] Speaker 00:
that the company is selling.

[00:18:31] Speaker 00:
That's correct.

[00:18:32] Speaker 00:
That's correct.

[00:18:33] Speaker 00:
When we say gross sales, really we're talking about gross sales related to that specific rim.

[00:18:38] Speaker 03:
It is sales volumes of the specific rim that practices the invention.

[00:18:42] Speaker 03:
And you can see that by comparing the engineering schematic of the rim at A180 to figure two of the claim.

[00:18:49] Speaker 03:
The board did that comparison.

[00:18:51] Speaker 03:
That's at, I believe, A15.

[00:18:56] Speaker 03:
And they said the sales data pertains to the sales of the rims only.

[00:19:00] Speaker 03:
And they cite the Coziatic Declaration exhibits A through L, which are the same.

[00:19:04] Speaker 04:
So you've given me one of your three reasons.

[00:19:06] Speaker 04:
And the first reason sounded more like a nexus justification, not why this is commercially successful.

[00:19:12] Speaker 03:
Well, then briefly, Your Honor, the second reason would be if you look to specialized evidence, specialized submitted the declaration of Mr. Buckley.

[00:19:21] Speaker 03:
And Mr. Buckley actually testified in that declaration

[00:19:25] Speaker 03:
that specialized has realized significant commercial success for its control rim.

[00:19:32] Speaker 03:
If you compare the sales of the control rim to the sales of the no tubes ZTR rim, which is the commercial embodiment, which the board actually does do at A16, what you see is Mr. Buckley says that, and really the question here is, is it commercially significant?

[00:19:50] Speaker 03:
Are these sales commercially significant?

[00:19:52] Speaker 03:
And what he says is a significant commercial success

[00:19:55] Speaker 03:
are sales that are at the level of 1,500 a year, 2,200 a year, 3,376 a year.

[00:20:00] Speaker 04:
Right, and then you have sales that are a couple orders of magnitude above that.

[00:20:07] Speaker 03:
37 times greater.

[00:20:08] Speaker 04:
But why didn't you give us market share evidence?

[00:20:13] Speaker 03:
I believe the answer to that is that the market for this product was developing and maturing over time, and the data for the

[00:20:22] Speaker 03:
for market share outside of this direct competitive relationship wasn't available to us to provide.

[00:20:28] Speaker 01:
However, the third point I would make is that with respect to the argument that... So you're saying that just by comparing the two competitors, you're thinking that that is reflective essentially of a market share analysis?

[00:20:42] Speaker 03:
It is reflective of the fact that the sales volume is commercially significant, which is what the cases say you're looking to with this market share.

[00:20:51] Speaker 04:
Information commercially significant to you is the same thing as commercial success.

[00:20:57] Speaker 03:
I'm saying that the commercial success of the product is shown by the volume of sales and the case law actually where we said that.

[00:21:05] Speaker 03:
Well what we talked about market share actually in the tech air case which is cited in our brief.

[00:21:11] Speaker 03:
It's one ninety two at third thirteen fifty three.

[00:21:15] Speaker 03:
The court specifically addressed this question and said

[00:21:18] Speaker 03:
quote, sales figures alone are also evidence of commercial success.

[00:21:22] Speaker 04:
That's true.

[00:21:23] Speaker 04:
And then there have been other times before and since Tech Air where we've said, sales figures alone are weak evidence of commercial success.

[00:21:33] Speaker 04:
I think you agree with that, right?

[00:21:35] Speaker 03:
We've said that.

[00:21:36] Speaker 03:
There are such cases.

[00:21:37] Speaker 03:
But the question here is, is the board's finding supported by substantial evidence?

[00:21:42] Speaker 03:
And the evidence is the sales volume figures, which show a rapid growth.

[00:21:48] Speaker 03:
43% compound growth over the period that we're looking at.

[00:21:51] Speaker 03:
It is the admission from specialized that sales that are in the thousands are actually a significant commercial success in this specific market between these competitive products.

[00:22:03] Speaker 03:
And we have the fact that no tubes had 37, sometimes as much as 45 times greater sales in the same period.

[00:22:11] Speaker 00:
The problem I have with the lack of market share data is that

[00:22:18] Speaker 00:
The biking industry has experienced an upward tick, correct, in sales as a whole, the industry.

[00:22:26] Speaker 03:
I don't believe that there's evidence in the record to demonstrate that.

[00:22:31] Speaker 03:
But the record evidence does demonstrate that these particular products were widely recognized.

[00:22:37] Speaker 00:
Let's assume that that's the case.

[00:22:39] Speaker 00:
Let's assume that our society has become more health conscious and a lot more people are bicycling.

[00:22:45] Speaker 00:
from 2004 to 2011, going out and buying bikes and engaging in mountain biking and that type of activity.

[00:22:54] Speaker 00:
So you have an expansion of the market.

[00:22:58] Speaker 00:
How are we to know that these sales, what the level of these sales are relative to the expanded market?

[00:23:08] Speaker 03:
I believe it comes back, Your Honor, to the point that I was making earlier, which is that if you look to what we know of this market,

[00:23:16] Speaker 03:
This market contains two products.

[00:23:18] Speaker 03:
It's the specialized control rim and the no tubes ZTR rim.

[00:23:23] Speaker 03:
And if you compare these two products, the sales levels that the ZTR rim achieved are 37 times greater than specialized.

[00:23:30] Speaker 01:
What you're saying is that the market is not for bike rims.

[00:23:33] Speaker 01:
It's for specialized bike rims for high end athletes.

[00:23:36] Speaker 03:
That's correct, Your Honor.

[00:23:37] Speaker 03:
This is a sub market.

[00:23:39] Speaker 03:
It's not all rims that we're competing against.

[00:23:42] Speaker 03:
These are mountain bike,

[00:23:43] Speaker 03:
rims that are written by elite athletes.

[00:23:47] Speaker 01:
And so it is a very small... Other than the reference to Lance Armstrong and a few other elite athletes, what in the record supports that conclusion?

[00:23:57] Speaker 03:
I think that the fact that we have these two particular products supports it.

[00:24:03] Speaker 03:
I think that the articles which talk about who the riders are, for example, there's an article by

[00:24:14] Speaker 03:
I believe it's Single Track Magazine at A681, which talks specifically about these rims.

[00:24:22] Speaker 03:
And it says that Mr. Koziatic is probably one of the most creative, inventive, persistent figures in the mountain bike industry.

[00:24:28] Speaker 03:
It says, before anyone else in the industry even thought to consider the concept, Koziatic was making rims with short sidewalls and minimal bead hook, specifically for tubeless tire setups.

[00:24:39] Speaker 03:
The short sidewall and minimal bead hook allows the tire to roll and conform to terrain

[00:24:44] Speaker 03:
Plus, the bead nests more securely in the small space between the bead hook and the tire bed.

[00:24:50] Speaker 03:
And then it goes on to say, add to these characteristics less rim material, which means less weight, improved resistance to denting.

[00:24:57] Speaker 03:
The no tube rim profile makes a lot of sense.

[00:25:00] Speaker 03:
And then it identifies all of the riders who are riding these rims.

[00:25:05] Speaker 03:
Sabine Spitz, Lance Armstrong, Dave Wines, it continues.

[00:25:09] Speaker 03:
The point is, these are elite athletes in this industry.

[00:25:13] Speaker 03:
And they're sold to those folks who are willing to pay a premium.

[00:25:18] Speaker 01:
And you don't see me writing on these rooms?

[00:25:20] Speaker 01:
Is that what you're?

[00:25:22] Speaker 02:
Well, I hope you would.

[00:25:27] Speaker 01:
Let me ask you, why did you argue industry praise?

[00:25:31] Speaker 01:
I mean, with Apple out there, it would seem like there's some good language you could rely on for purposes of saying, this isn't just commercial success.

[00:25:42] Speaker 01:
industry praise.

[00:25:44] Speaker 01:
And all those documents that you submitted would seem to support a notion of industry praise, but you didn't even argue it.

[00:25:51] Speaker 03:
I think industry praise is an alternative grounds that the court could use to affirm the decision below.

[00:25:57] Speaker 03:
Responding to the Chenery point, I think your honor is correct.

[00:26:02] Speaker 03:
There is a case that this court decided that addresses the limits of Chenery.

[00:26:07] Speaker 03:
It's Killip versus Office of Personnel Management, 991

[00:26:12] Speaker 03:
F second, 1564, and specifically at 1568 to 69.

[00:26:20] Speaker 03:
The court says that we may, however, where appropriate, affirm the board on grounds other than those relied upon in rendering its decision when upholding the board's decision does not depend on making a determination of fact not previously made by the board.

[00:26:35] Speaker 04:
Isn't industry praise, though, of fact-finding?

[00:26:38] Speaker 04:
Whether there was, in fact, industry praise?

[00:26:41] Speaker 03:
Well, the board below, we presented those articles as praise in support of the Nexus issue.

[00:26:47] Speaker 04:
For commercial success.

[00:26:48] Speaker 04:
For commercial success.

[00:26:49] Speaker 04:
But I guess the point is it was not framed to the board as a separate ground for secondary consideration evidence, nor did the board make an independent fact finding separate from the Nexus finding for commercial success that there was in fact industry praise

[00:27:08] Speaker 04:
with regard to the merits of this claimed invention.

[00:27:12] Speaker 04:
So therefore, we do not have a fact finding on industry praise as an additional factor for secondary consideration.

[00:27:20] Speaker 03:
Is that correct?

[00:27:22] Speaker 03:
I would differ in the analysis only in the sense that although the separate secondary consideration of industry praise wasn't independently presented, necessarily in the course of finding the nexus, they found that the praise of this article

[00:27:38] Speaker 03:
supports or was specifically for the inventive features of the product.

[00:27:45] Speaker 03:
And therefore, there is the factual finding sufficient for this court to rely upon these articles as praise.

[00:27:52] Speaker 03:
I don't think that the court needs to get to that point, however, because the Nexus finding is supported independently by these articles and is itself a ground to affirm.

[00:28:08] Speaker 03:
Whether you need to go to the praise as a separate secondary consideration or not, I don't think the court needs to get there.

[00:28:15] Speaker 03:
The Nexus finding is supported by these articles.

[00:28:19] Speaker 03:
As well as, I will point out, I'd like to come back to the issue of the Nexus being presumed, which I believe Your Honor raised.

[00:28:29] Speaker 04:
Did you argue that to the board?

[00:28:31] Speaker 03:
We did argue that to the board, Your Honor.

[00:28:33] Speaker 03:
The board didn't seem to use it, though.

[00:28:36] Speaker 03:
Well, what the board found was, and this is at A14, was that the rims correspond to rims having the features recited in claims 1 and 23.

[00:28:45] Speaker 03:
And in the J.T.

[00:28:48] Speaker 03:
Eaton case, which is cited in our brief, the articulation of the presumption is very much as I believe Judge O'Malley articulated it.

[00:28:59] Speaker 03:
And that is, when the patentee can demonstrate commercial success, usually shown by significant sales in a relevant market, and the successful product is the invention disclosed and claimed in the patent, it is presumed that the commercial success is due to the patented invention.

[00:29:15] Speaker 03:
Now, that's an alternative ground.

[00:29:16] Speaker 03:
You don't need to apply the presumption to a front of the board.

[00:29:19] Speaker 03:
Did you say J.T.

[00:29:20] Speaker 03:
Eaton?

[00:29:21] Speaker 03:
J.T.

[00:29:21] Speaker 03:
Eaton, yes.

[00:29:22] Speaker 04:
Re-examination case?

[00:29:24] Speaker 03:
I believe it was a case

[00:29:27] Speaker 01:
is out of the district court.

[00:29:28] Speaker 01:
Out of a district court.

[00:29:30] Speaker 03:
Yes, Your Honor.

[00:29:31] Speaker 03:
So this is coming out of the PTO.

[00:29:34] Speaker 03:
It is, but the principle is the same.

[00:29:36] Speaker 04:
The principle being that when PTO cases, there's a case called In Ray Wong, for example, which was an appeal from the PTO, where this court said, at least for that particular case, there's no presumption of nexus under those same circumstances that you would have

[00:29:56] Speaker 03:
for an issued patent being litigated in district court.

[00:29:59] Speaker 03:
I believe in In Re Wong, you didn't have the same level of evidence.

[00:30:02] Speaker 03:
If you look to the schematics of the product sold being identical to the figure two that sold as was recognized by the board at A15.

[00:30:12] Speaker 03:
And so you didn't have the fact of the sales, the demonstration that the thing sold is exactly the rim, not anything else.

[00:30:20] Speaker 03:
It's not a combination with other things.

[00:30:23] Speaker 03:
So here you've got,

[00:30:26] Speaker 03:
both the sales volume and you've got the finding that the rims correspond to the features recited in the claim.

[00:30:33] Speaker 03:
That, under JT Eaton, does give rise to a finding of commercial success, a presumption of the nexus to the commercial success.

[00:30:43] Speaker 01:
OK, you're just about out of your time.

[00:30:46] Speaker 01:
You want to wrap up?

[00:30:47] Speaker 01:
Any last things?

[00:30:48] Speaker 03:
If I could just touch one final thing, and that is the suggestion that the 766 patent

[00:30:54] Speaker 03:
discloses the flat bead seat that's claimed in the claims of the 846 is not correct.

[00:31:00] Speaker 03:
And that can be shown pretty readily by taking a look at the figure that the board below looked at.

[00:31:10] Speaker 03:
First, there was no specific finding by the board that the 766 discloses a flat bead seat.

[00:31:18] Speaker 03:
Second, if we look to the claim, the claim of the 846 patent,

[00:31:24] Speaker 03:
requires, it has a specific requirement about what it means to be a flat bead seat, and that is flat with respect to, quote, an intersection point with a respective sidewall surface.

[00:31:35] Speaker 03:
So that requires you to be flat with respect to the sidewall.

[00:31:39] Speaker 03:
In the 766 case, rather... The claim also talks about horizontal, though, as well, right?

[00:31:45] Speaker 03:
With respect to the axis of rotation.

[00:31:47] Speaker 03:
So you can have a flat with respect to the sidewall.

[00:31:51] Speaker 03:
That's the requirement of the flat bead seat.

[00:31:53] Speaker 03:
Then there's also horizontal, horizontally disposed with respect to the axis of rotation of the wheel.

[00:31:59] Speaker 03:
You can be flat with respect to the sidewall, but not horizontal with respect to the axis of rotation of the wheel.

[00:32:07] Speaker 03:
So those are independent requirements of the claim.

[00:32:10] Speaker 03:
The 766 does not disclose flat in the sense of the claim of the 846.

[00:32:15] Speaker 03:
What it discloses specifically, and what the board pointed to, was inclined surfaces,

[00:32:23] Speaker 03:
2b and at column 7 lines 43 to 45 it specifically says that the inclined surfaces 62b are angled at an angle v of between about three degrees and about 17 degrees relative to the imaginary line L which would be horizontal and would be also perpendicular to the sidewall.

[00:32:46] Speaker 03:
So there is no disclosure in the 766 pattern of something that is

[00:32:50] Speaker 03:
flat, meaning perpendicular with respect to itself.

[00:32:53] Speaker 00:
Is that reflected in Figure 6 of Okajima 776?

[00:33:01] Speaker 03:
Figure 6 was not discussed below, and Figure 6 shows a flat... What Figure 6 shows is at 62B, you have an inclined surface that is between 3 and 17 degrees relative to what is

[00:33:20] Speaker 03:
being referred to as the side wall, which is along the side there.

[00:33:23] Speaker 03:
I guess arrow 50 is pointing to that.

[00:33:26] Speaker 03:
So throughout this patent, throughout the 766, inclined surface 62B is not flat with respect to the side wall.

[00:33:36] Speaker 03:
It is inclined.

[00:33:37] Speaker 03:
And therefore, the teaching of the 766 patent, this in part gets to the prima facie case.

[00:33:45] Speaker 03:
And if your honor.

[00:33:46] Speaker 01:
You're way past your time.

[00:33:47] Speaker 01:
Even with your extra two minutes.

[00:33:49] Speaker 03:
Thank you, your honor.

[00:33:58] Speaker 05:
Your honors, I'd like to focus in my two minutes on the gross sales concept.

[00:34:03] Speaker 05:
First, the record shows that there were multiple competitors in this industry.

[00:34:07] Speaker 05:
It is from the articles themselves.

[00:34:09] Speaker 05:
VeloNews on AH62 has the No Tubes product, the Shimano product, and the Spinergy product.

[00:34:17] Speaker 05:
AH53 from the New Zealand mountain biker has the No Tubes VTR, the Bontrager, which is a trek company, and Mavic.

[00:34:26] Speaker 05:
And what it says here is,

[00:34:28] Speaker 05:
You'll get a two dish ready wheel set but can count on some or all of the following.

[00:34:34] Speaker 05:
Lighter weight, increased strength, higher quality components, better durability or liability from all of these competitors.

[00:34:41] Speaker 05:
So we simply don't know what market share.

[00:34:45] Speaker 05:
A very interesting comment was made by council that they didn't have market share because it was a developing and maturing market.

[00:34:52] Speaker 05:
That does suggest that if the market itself as a whole was growing, we do not know

[00:34:57] Speaker 00:
that there was commercial success in relation to the market as a whole, which is why this question... I think it's somewhat incredible that one would not be able to determine market share, especially in a niche market.

[00:35:09] Speaker 00:
I mean, it could be even more difficult if you're measuring an industry or maybe even a sector within an industry as a whole, but not a niche market.

[00:35:20] Speaker 00:
I mean, obviously, this isn't just Lance Armstrong buying these rims, right?

[00:35:25] Speaker 00:
Isn't that

[00:35:26] Speaker 00:
wannabe, Lance Armstrongs are also buying rims?

[00:35:29] Speaker 05:
I believe that's the marketing concept to have many people buy all these sorts of rims.

[00:35:35] Speaker 05:
The burden was on the patentee to show the commercial success.

[00:35:40] Speaker 05:
Specialized is not a rim company, Specialized is by and large a bicycle company so it did not have this market share data or else it would have.

[00:35:48] Speaker 04:
But you were competing obviously with your product and their product that they came up with first was

[00:35:56] Speaker 05:
outselling years on on a scale of a hundred to one it was but that wasn't the problem specialized sales primarily bicycles so this was a small component up to speak of specialized awful sales so commercially significant according your expert I'm he he thought it was I that that his sales were up successful and and he said that in the context of once you remove the patented features

[00:36:25] Speaker 05:
the product was sold even more and at a greater rate.

[00:36:29] Speaker 05:
So that was his reference to commercial success.

[00:36:32] Speaker 05:
But this is not our market.

[00:36:34] Speaker 05:
Our market was primarily bicycle.

[00:36:36] Speaker 04:
Last question.

[00:36:39] Speaker 04:
The parties had a litigation in district court that's settled?

[00:36:43] Speaker 05:
Yeah.

[00:36:45] Speaker 05:
The damages in dispute was in approximately the $60,000 range.

[00:36:50] Speaker 05:
Specialized had changed its design, made an offer of judgment, specifically stating that no findings have any rest judicata effect and made no admissions, and it just made more sense not to litigate the matter, given the amount in dispute.

[00:37:06] Speaker 05:
So it was an offer of judgment that was accepted.

[00:37:11] Speaker 05:
Thank you, Your Honor.