NOTE: This disposition is nonprecedential.

 

United States Court of Appeals 

for the Federal Circuit ______________________ 

EVERSTAR MERCHANDISE CO. LTD.,

Appellant

v.

WILLIS ELECTRIC CO., LTD.,

Appellee

______________________ 

2021-1882

______________________ 

Appeal from the United States Patent and Trademark 

Office, Patent Trial and Appeal Board in No. PGR2019-

00056.

______________________ 

Decided: April 12, 2022

______________________ 

BRENTON R. BABCOCK, Loeb & Loeb LLP, Los Angeles, 

CA, argued for appellant. Also represented by PRESTON 

HAMILTON HEARD, Womble Bond Dickinson (US) LLP, Atlanta, GA; BARRY J. HERMAN, Baltimore, MD; TYLER TRAIN, 

Irvine, CA. 

 PATRICK M. ARENZ, Robins Kaplan LLP, Minneapolis, 

MN, argued for appellee. Also represented by BRENDA L.

JOLY. 

 ______________________ 

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Before LOURIE, DYK, and REYNA, Circuit Judges.

REYNA, Circuit Judge.

Appellant Everstar Merchandise Co. Ltd. appeals the 

Patent Trial and Appeal Board’s final written decision in a 

post grant review concluding that Everstar did not meet its 

burden to show the challenged claims unpatentable as obvious. In reaching its decision, the Board found Everstar 

failed to establish a motivation to combine the asserted 

prior art. We hold that the Board abused its discretion 

when it refused to consider whether cost reduction would 

have motivated a skilled artisan to combine the asserted 

prior art. Thus, we vacate and remand.

BACKGROUND

Appellee Willis Electric Company, Ltd. owns U.S. Patent No. 10,222,037 (the “’037 Patent”), titled “Decorative 

lighting with reinforced wiring.” The claimed novelty of 

the ’037 Patent is the use of internally reinforced wires in 

decorative net lights. As explained by the ’037 Patent, 

prior art decorative lighting used other methods for reinforcement like twisted pair wires, thicker wires, or externally supported wires. The ’037 Patent claims a different 

design that purportedly reduces material costs, bulk, and 

weight without sacrificing strength: a single wire reinforced with a strand of polymer material running internally along its axis.

On August 13, 2019, Everstar petitioned for post grant 

review of all claims of the ’037 Patent, alleging among 

other things that the claims are unpatentable as obvious 

over the combination of two prior art references, Kumada1

1 U.S. Patent No. 6,367,951 (“Kumada”), titled “Economical Net or Mesh Light Set,” discloses a prior art net 

light design. J.A. 1346–61.

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and Debladis ’120.2 Everstar argued in its petition that a 

person of ordinary skill in the art (“POSITA”) would be motivated to combine Kumada and Debladis ’120 “if she were 

looking for known methods that could be used to increase 

the strength and durability of the decorative lighting products.” J.A. 194. Everstar asserted that Kumada “explains 

that the absence of any electrical wire within . . . ropes 

greatly reduces their cost and renders both the light set 

and its method of manufacture economical.” J.A. 173.

On November 27, 2019, Willis Electric filed a patent 

owner’s preliminary response, contending that 

Debladis ’120 is non-analogous art as compared to Kumada 

and the ’037 Patent. Willis Electric noted that a stated goal 

of Kumada is to “make it . . . cheaper to manufacture a net 

light” by “reducing the length of wires that need to be 

twisted,” J.A. 371, and that a stated benefit of 

Debladis ’120 is to make a “lighter weight, compact automobile cable[] . . . without being expensive to manufacture,” J.A. 372.

On February 20, 2020, the Board instituted post grant 

review. Everstar Merch. Co., Ltd. v. Willis Elec. Co., Ltd., 

No. PGR2019-00056, 2020 WL 862906, at *22 (P.T.A.B. 

Feb. 20, 2020). In its institution decision, the Board said: 

The evidence of record supports Petitioner’s argument that the combination [of Kumada and 

Debladis ’120] involves the ‘simple substitution of 

one known element for another to obtain the predictable and desirable result of a more durable 

wire.’ Pet. 30 [J.A. 194]. For example, both Kumada and Debladis ’120 discuss the desire to reduce 

manufacturing costs for wiring having good 

2 U.S. Patent No. 8,692,120 B2 (“Debladis ’120”), titled “Electrical control cable,” discloses a prior art design 

for an internally reinforced electrical wire. J.A. 1403–07.

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mechanical strength and that is capable of maintaining an electrical connection, and it is undisputed that Debladis ’120 teaches doing so by 

including an internal reinforcing strand and conductor strands in a wire.

Id. at *8 (emphasis added). 

On June 15, 2020, Willis Electric filed a patent owner’s 

response and addressed the Board’s discussion of reduced 

cost as a potential motivation to combine Kumada with 

Debladis ’120. See J.A. 568–69. Willis Electric argued that 

“Debladis ’120 only recognizes a reduction in cost if there 

is excess copper in the wire that can be removed for signal 

transmission purposes,” and that Everstar “d[id] not argue 

that the amount of copper in the intermediate wires of Kumada would be reduced.” J.A. 568.

On September 15, 2020, Everstar filed a reply to Willis 

Electric’s patent owner response. J.A. 636–69. Everstar 

argued that “a POSITA would be motivated to incorporate 

the polymer reinforced wire of Debladis ’120 [with Kumada] in order to improve durability and reduce cost.” 

J.A. 656 (emphasis added). Everstar contended that “a 

POSITA would have been motivated to reduce costs by incorporating the internally reinforced wire of Debladis ’120 

into the net light system of Kumada,” as “[s]uch a combination would reduce the amount of total copper used in the 

system of Kumada, which would reduce the cost of the system and be compliant with the UL standards.” J.A. 657 

(emphasis omitted).

On November 2, 2020, Willis Electric filed a patent 

owner’s sur-reply, addressing the cost reduction argument 

on the merits. J.A. 702. Willis Electric also provided a list 

of reply arguments that it claimed were presented for the 

first time in Everstar’s reply brief.. J.A. 712–16. In particular, Willis Electric identified Everstar’s motivation to 

combine theory based on a reduction in cost as an improperly raised, new argument. J.A. 713. Willis Electric 

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argued that the new arguments and evidence should be rejected and not considered by the Board.

On February 18, 2021, the Board issued a final written 

decision and noted that the parties agreed on claim constructions and the fact that the asserted prior art, as a 

whole, discloses every claim element. Everstar Merch. Co., 

Ltd. v. Willis Elec. Co., Ltd., No. PGR2019-00056, 2021 WL 

653034, at *5–6 (P.T.A.B. Feb. 18, 2021). The only points 

of disagreement were (1) whether Debladis ’120 is analogous art, and (2) whether a POSITA would have been motivated to combine Kumada with Debladis ’120. Id. at *6. 

With respect to motivation to combine, the only issue

relevant on appeal, Everstar argued that a POSITA would 

have been motivated to combine Kumada with 

Debladis ’120 to improve wire durability and to reduce material costs. However, the Board declined to consider cost 

reduction as a motivation to combine because it determined 

that Everstar failed to assert the theory in its petition. Id.

at *12–13. Consequently, the Board focused its attention 

solely on whether a POSITA would have been motivated by 

a desire to improve wire durability. Viewed as such, the 

Board found that Everstar did not meet its burden to show 

a motivation to combine Kumada with Debladis ’120. Id.

at *9–12. The Board also explained that its determination 

was dispositive for all challenged claims. Id. at *13–17. 

Thus, the Board concluded that Everstar failed to show 

that any of the challenged claims are unpatentable as obvious. Id. at *17. Everstar appeals. We have jurisdiction 

pursuant to 28 U.S.C. § 1295(a)(4)(A).

STANDARD OF REVIEW

We review the Board’s legal conclusions de novo and its 

factual findings for substantial evidence. ACCO Brands 

Corp. v. Fellowes, Inc., 813 F.3d 1361, 1365 (Fed. Cir. 

2016). Substantial evidence means “such relevant evidence as a reasonable mind might accept as adequate to 

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support a conclusion.” In re Gartside, 203 F.3d 1305, 1312 

(Fed. Cir. 2000).

Obviousness is a question of law with underlying factual issues relating to the “scope and content of the prior 

art, differences between the prior art and the claims at issue, the level of ordinary skill in the pertinent art, and any 

objective indicia of non-obviousness.” Randall Mfg. v. Rea, 

733 F.3d 1355, 1362 (Fed. Cir. 2013) (citing KSR Int’l Co. 

v. Teleflex Inc., 550 U.S. 398, 406 (2007); Graham v. John 

Deere Co. of Kansas City, 383 U.S. 1, 17–18 (1966)). “The 

presence or absence of a motivation to combine references 

in an obviousness determination is a pure question of fact.” 

Par Pharm., Inc. v. TWI Pharms., Inc., 773 F.3d 1186, 1196 

(Fed. Cir. 2014).

We review the Board’s application of procedural rules 

under an abuse of discretion standard. Chamberlain Grp., 

Inc. v. One World Techs., Inc., 944 F.3d 919, 924 (Fed. Cir. 

2019). We affirm Board determinations unless the determination “(1) is clearly unreasonable, arbitrary, or fanciful; 

(2) is based on an erroneous conclusion of law; (3) rests on 

clearly erroneous fact findings; or (4) involves a record that 

contains no evidence on which the Board could rationally 

base its decision.” Id. (quoting Ultratec, Inc. v. CaptionCall, LLC, 872 F.3d 1267, 1272 (Fed. Cir. 2017)).

DISCUSSION

On appeal, Everstar argues that the Board abused its 

discretion when it refused to consider cost reduction as a 

potential motivation to combine. We agree.

The petitioner in a post grant review must, in its petition, “identify ‘with particularity’ the ‘evidence that supports the grounds for the challenge to each claim.’” 

Intelligent Bio-Systems, Inc. v. Illumina Cambridge Ltd., 

821 F.3d 1359, 1369 (Fed. Cir. 2006) (quoting 35 U.S.C. 

§ 312(a)(3)); see also 35 U.S.C. § 322(a)(3) (establishing requirements for a petition for post grant review). A 

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petitioner may not assert an “entirely new rationale” in a 

post-institution reply. Intelligent Bio-Systems, Inc., 

821 F.3d at 1370. The Board in its discretion may reject 

any reply brief that “crosses the line from the responsive to 

the new.” Ariosa Diagnostics v. Verinata Health, Inc., 

805 F.3d 1359, 1368 (Fed. Cir. 2015). These rules help ensure that the owner of a challenged patent receives notice 

of and a fair opportunity to meet alleged grounds of invalidity. Belden Inc. v. Berk-Tek LLC, 805 F.3d 1064, 1080 

(Fed. Cir. 2015). 

On the other hand, “[p]arties are not barred from elaborating on their arguments on issues previously raised.” 

Chamberlain Grp., Inc., 944 F.3d at 925 (citing Interactive 

Gift Express, Inc. v. CompuServe Inc., 256 F.3d 1323, 1347 

(Fed. Cir. 2001)). Where a petitioner on reply “cites no new 

evidence and merely expands on a previously argued rationale,” it is an abuse of discretion for the Board to reject 

the reply as improper under 37 C.F.R. § 42.23(b). Ericsson 

Inc. v. Intellectual Ventures I LLC, 901 F.3d 1374 (Fed. Cir. 

2018) (“The Board’s error was parsing Ericsson’s arguments on reply with too fine of a filter.”).

Here, the Board should have considered cost reduction 

in its motivation to combine analysis because the record 

shows that increased wire strength and reduced material 

cost are intertwined benefits of the claimed invention. The

’037 Patent explains that a “drawback” in “prior art methods of reinforcing and strengthening decorative lighting” is 

that using more wire “tends to drive up material cost.” 

’037 Patent col. 5 l. 65–col. 6 l. 2. Everstar also noted in its 

petition that Kumada teaches this inverse relationship between cost and the amount of material used. J.A. 173. Willis Electric acknowledged this relationship in its 

preliminary response and accompanying expert testimony

when discussing both Kumada, J.A. 345–46, 2580–81, and 

Debladis ’120, J.A. 371–72, 2606–07. In its institution decision, the Board reasoned that “both Kumada and 

Debladis ’120 discuss the desire to reduce manufacturing 

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costs for wiring having good mechanical strength and that 

is capable of maintaining an electrical connection.” 

J.A. 433. The parties then garnered expert testimony on

and briefed the merits of cost reduction as a potential motivation to combine. J.A. 568, 646, 650, 657, 659, 703, 2203, 

2979, 2991, 2301, 2311, 2331–32, 2356–57, 3174, 3178, 

3184. Given the developed record on the correlation between wire strength and material cost, we find that Everstar’s cost reduction argument is a fair extension of its 

previously asserted arguments, and the Board abused its 

discretion in refusing to consider it. See Ericsson, 901 F.3d 

at 1380–81. 

We note that a petitioner is entitled in its reply to “respond to arguments raised in the corresponding opposition, 

patent owner preliminary response, patent owner response, or decision on institution.” 37 C.F.R. § 42.23(b) 

(2020).3 Any ambiguity as to whether a reply constitutes a 

new argument is eliminated when the reply is a legitimate 

reply to arguments introduced in a patent owner’s response 

or the Board’s institution determination. Apple Inc. v. Andrea Elecs. Corp., 949 F.3d 697, 706–07 (Fed. Cir. 2020) 

(citing Anacor Pharms., Inc. v. Iancu, 889 F.3d 1372, 1380–

3 The 2020 version of § 42.23(b) permits the petitioner to address in its reply issues discussed in the institution decision, which reflects a change made “in response 

to issues arising from [SAS Institute Inc. v. Iancu, 138 S. 

Ct. 1348 (2018)].” See PTAB Rules of Practice for Instituting on All Challenged Patent Claims and All Grounds and 

Eliminating the Presumption at Institution Favoring Petitioner as to Testimonial Evidence 85 Fed. Reg. 31,728-01, 

31,729 (May 27, 2020); Office Patent Trial Practice Guide, 

August 2018 Update, 83 Fed. Reg. 39,989-01, 39,989 

(Aug. 13, 2018) (citing update available at 

https://www.uspto.gov/sites/default/files/documents/2018_

Revised_Trial_Practice_Guide.pdf). 

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81 (Fed. Cir. 2018)). In this case, Everstar’s cost reduction 

argument on reply directly addresses issues raised in Willis Electric’s preliminary response and post-institution response, as well as in the Board’s institution decision. We 

see no lingering uncertainty as to whether the argument is 

new in view of the petition. The record before us shows 

that clearly it is a legitimate reply to arguments introduced 

by Willis Electric and the Board.

CONCLUSION

The Board should have considered whether cost, in addition to increased strength and durability, would have 

presented a sufficient motivation to combine the asserted 

references. The Board’s refusal to do so under these circumstances amounts to an abuse of discretion. We therefore vacate the Board’s decision and remand for further 

proceedings consistent with the above.

VACATED AND REMANDED

COSTS

Costs to Appellant. 

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