Court Opinion

ID: 4178648
Source: CourtListenerOpinion
Date Created: 2017-06-19 15:04:15.688382+00
Date Added: 2024-06-11T14:38:39.216402
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                ______________________

      COLE KEPRO INTERNATIONAL, LLC,
                 Appellant

                           v.

              VSR INDUSTRIES, INC.,
                      Appellee
               ______________________

                      2016-2258
                ______________________

    Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. IPR2015-
00182.
                 ______________________

                Decided: June 19, 2017
                ______________________

   JOHN S. ARTZ, Dickinson Wright PLLC, Troy, MI, ar-
gued for appellant. Also represented by BRYAN JOSEPH
SCHOMER.

   ADAM YOWELL, Brownstein Hyatt Farber Schreck,
LLP, Reno, NV, argued for appellee. Also represented by
STEVEN A. CALOIARO, MICHAEL D. ROUNDS; EVAN M.
ROTHSTEIN, Denver, CO.
               ______________________
2     COLE KEPRO INTERNATIONAL, LLC   v. VSR INDUSTRIES, INC.

     Before PROST, Chief Judge, LOURIE, and STOLL, Cir-
                      cuit Judges.
STOLL, Circuit Judge.
    VSR Industries, Inc. filed a petition for inter partes
review with the Patent Trial and Appeal Board to review
the patentability of Cole Kepro International LLC’s U.S.
Patent No. 6,860,814. The Board instituted an IPR
proceeding on a subset of the grounds in the petition and
ultimately determined that three instituted grounds
collectively rendered claims 1–14 unpatentable as obvi-
ous. Cole Kepro appeals from the Board’s final written
decision. We affirm.
                        BACKGROUND
                             I.
    The ’814 patent discloses a “gaming apparatus for
presenting a wager-type game compris[ing] a cabinet and
a door connected to the cabinet.” ’814 patent, Abstract.
The specification describes “two very common types of
gaming devices” in the prior art: (1) mechanical type slot
machines; and (2) video gaming devices. Id. at col. 1 ll.
14–37. Prior art video gaming devices are described as
comprising “a cabinet including a cathode ray tube (CRT)
for displaying information,” where the “CRT is supported
on a shelf in a main portion of the cabinet and viewable
through a[n] opening in the door.” Id. at col. 1 ll. 27–37.
    According to the specification, these gaming devices
“are currently manufactured as separate and distinct
designs” in that “a manufacturer custom designs one
particular device to be configured as a video gaming
device, and custom designs another particular device to be
a mechanical reel type device.” Id. at col. 1 ll. 40–44. The
specification explains that “[t]here are a number of prob-
lems with these gaming devices as currently designed.”
Id. at col. 1 ll. 45–46. For example, the “cost of each
individual gaming device is high because it has few fea-
COLE KEPRO INTERNATIONAL, LLC   v. VSR INDUSTRIES, INC.    3

tures which are common to any other gaming device.” Id.
at col. 1 ll. 46–48. Another problem is that “CRT based
video gaming devices are very large because they must
accommodate the CRT,” which may be 10–20 inches deep.
Id. at col. 1 ll. 56–59. These devices are also large in
overall size, reducing the number of devices that can be
accommodated on a casino floor.
    The ’814 patent purports to overcome these problems
by disclosing a gaming apparatus that “comprises a device
which is readily configured to present one of several
different games.” Id. at col. 2 ll. 19–21. Additionally, the
device’s display comprises an LCD screen or other sub-
stantially planar or thin display, which is sized to display
information through a viewing window in the cabinet
door. The specification praises the advantages of this
design:
       It will now also be appreciated that the con-
   figuration of the gaming devices 20,120 of the in-
   vention is such that the total size of the device can
   be reduced substantially as compared to similar
   devices utilized today.
   ....
       Advantage[]s are also realized by connecting
   the video display to the door of the gaming device.
   In particular, because the display is connected to
   the door, no supports are needed in the cabinet for
   the display, freeing up substantial space within
   the cabinet 22 for other components, such as cir-
   cuitry and the like. Also, when the door is moved
   to its open position, the display is moved out of
   the interior of the cabinet, making the interior
   portion of the cabinet more accessible. The at-
   tachment of the display to the door also renders
   the display more readily accessible for servicing or
   removal.
4     COLE KEPRO INTERNATIONAL, LLC       v. VSR INDUSTRIES, INC.

Id. at col. 9 ll. 59–62, col. 10 ll. 46–56.
     Figures 4 and 5 of the ’814 patent, reproduced below,
illustrate the gaming apparatus. As shown, the gaming
apparatus includes a cabinet 22, with a back 24, sides 26
and 28, a top 30, a bottom 32, and a door 34. The display
190 is preferably a liquid crystal display or other substan-
tially planar or thin display mounted to the door 34 using
a support 74.

    The ’814 patent includes claims 1–14. Claims 1 and 8
are independent, claims 2–7 depend from claim 1, and
claims 9–14 depend from claim 8. Claim 1 is illustrative
of the challenged claims and is reproduced below:
        1. A gaming apparatus configured to present
    one or more wager-based games comprising
        a cabinet,
        a door connected to said cabinet,
             said door moveable between a first po-
        sition and a second position,
             said door in said first position cooper-
        ating with said cabinet to define a general-
        ly closed interior space,
COLE KEPRO INTERNATIONAL, LLC     v. VSR INDUSTRIES, INC.   5

           said door in said second position per-
       mitting access to said interior space,
           said door having an inner surface and
       an outer surface and an opening therein,
        a generally planar video display mounted to
   said inner surface of said door and movable with
   said door when said door is moved between said
   first and second positions,
           said video display aligned with said
       opening in said door to be viewable
       therethrough,
       and at least one gaming controller,
           said gaming controller located in said
       interior space and connected to said video
       display to provide game information for
       display by said video display.
Id. at col. 11 ll. 2–17 (line breaks and indentation added
for clarity).
                            II.
     VSR petitioned for IPR of the ’814 patent, alleging,
inter alia, that claims 1–14 were unpatentable as obvious
under 35 U.S.C. § 103 in view of five different prior art
grounds. The Board instituted review of claims 1–14 on
the following grounds: (1) obvious in view of U.S. Patent
No. 3,796,433 (“Fraley”); (2) obvious in view of Fraley in
combination with U.S. Patent No. 4,718,672 (“Okada”); (3)
obvious in view of U.S. Patent No. 3,940,136 (“Runte”); (4)
obvious in view of Runte in combination with Okada; and
(5) obvious in view of U.S. Patent No. 5,351,176 (“Smith”).
    The Board’s final written decision concluded that
claims 1–8 and 10–14 are unpatentable as obvious in view
of Fraley in combination with Okada. J.A. 20–21. The
Board additionally concluded that claims 1–14 are un-
6       COLE KEPRO INTERNATIONAL, LLC   v. VSR INDUSTRIES, INC.

patentable as obvious in view of Runte. Id. at 29–31. The
Board finally concluded that claims 1–8 and 10–14 are
unpatentable as obvious in view of Smith. Id. at 38–39.
The Board also determined that Cole Kepro’s evidence of
secondary considerations of nonobviousness did not
overcome VSR’s prima facie case of obviousness for any of
the grounds of unpatentability.
    Cole Kepro timely appealed to this court. We have
jurisdiction under 28 U.S.C. § 1295(a)(4)(A) and 35 U.S.C.
§ 141(c) to review the Board’s final written decision.
                        DISCUSSION
    On appeal, Cole Kepro raises several arguments
related to the Board’s obviousness determinations.
    A patent claim is unpatentable as obvious “if the
differences between the subject matter sought to be
patented and the prior art are such that the subject
matter as a whole would have been obvious at the time
the invention was made to a person having ordinary skill
in the art.” 1 35 U.S.C. § 103. Obviousness under § 103 is
a mixed question of law and fact. We review the Board’s
ultimate obviousness determination de novo and underly-
ing factual findings for substantial evidence. Harmonic
Inc. v. Avid Tech., Inc., 815 F.3d 1356, 1363 (Fed.
Cir. 2016). Substantial evidence “means such relevant
evidence as a reasonable mind might accept as adequate
to support a conclusion.” Consol. Edison Co. v.
NLRB, 305 U.S. 197, 217 (1938). Factual considerations
underlying the obviousness inquiry include the scope and
content of the prior art, the differences between the prior

    1   Given the effective filing date of the claims of the
’814 patent, the version of 35 U.S.C. § 103 that applies
here is that in force preceding the changes made by the
America Invents Act. See Leahy–Smith America Invents
Act, Pub. L. No. 112-29, § 3(n), 125 Stat. 284, 293 (2011).
COLE KEPRO INTERNATIONAL, LLC     v. VSR INDUSTRIES, INC.      7

art and the claimed invention, the level of ordinary skill
in the art, and relevant secondary considerations. KSR
Int’l Co. v. Teleflex Inc., 550 U.S. 398, 406 (2007) (citing
Graham v. John Deere Co., 383 U.S. 1, 17–18 (1966)).
Relevant secondary considerations include commercial
success, long-felt but unmet need, failure of others, and
unexpected results. Id.
    The Board held each claim of the ’814 patent un-
patentable as obvious in view of Runte, 2 which discloses a
gaming device, as shown in Figures 1 and 3 below, where
the “players sit around a table and manipulate the de-
vice.” Runte col. 1 ll. 40–41.

As Runte explains: “Amusement device 10 generally
consists of a support 12, a housing 14 mounted on the
support 12, a table top 16 hingedly mounted on the hous-
ing 14, [and] a conventional cathode ray tube 18 mounted
on the interior of table top 16 . . . .” Id. at col. 2 ll. 41–45.

    2   Because we determine that the Board did not err
in concluding that claims 1–14 of the ’814 are unpatenta-
ble as obvious in view of Runte, we do not address the
other instituted grounds analyzed by the Board.
8     COLE KEPRO INTERNATIONAL, LLC   v. VSR INDUSTRIES, INC.

Runte’s table top 16 also has a rectangular screen aper-
ture 44 at its center.
     Cole Kepro first argues that the Board’s conclusion
that it would have been obvious to replace Runte’s CRT
with an LCD or plasma display, thereby increasing the
leg-room for players, is not supported by substantial
evidence. Specifically, Cole Kepro argues that Runte
“expressly teaches away from any such configuration as
its table top device already provides comfortable seating
for its patrons.” Appellant’s Br. 36–37. The Board disa-
greed, finding that “Runte’s disclosure that its device is
comfortable does not indicate that user comfort could not
be further enhanced by additional legroom.” J.A. 28.
    “A reference may be said to teach away when a person
of ordinary skill, upon reading the reference, would be
discouraged from following the path set out in the refer-
ence, or would be led in a direction divergent from the
path that was taken by the applicant.” Galderma Labs.,
L.P. v. Tolmar, Inc., 737 F.3d 731, 738 (Fed. Cir. 2013)
(quoting DePuy Spine, Inc. v. Medtronic Sofamor Danek,
Inc., 567 F.3d 1314, 1327 (Fed. Cir. 2009)). Reviewing
Runte, we conclude that substantial evidence supports
the Board’s fact finding that Runte does not teach away
from substituting its CRT with an LCD. While Runte
does disclose that its table top gaming device already
provides comfortable seating for its players, it does not
discourage the provision of additional legroom that an
LCD or plasma display may provide. Thus, we see no
error in the Board’s determination that it would have
been obvious to a person of ordinary skill in the art to
replace Runte’s CRT with an LCD or plasma display.
    Cole Kepro next argues that substantial evidence does
not support the Board’s finding that replacing Runte’s
CRT with an LCD or plasma display would result in a
“reduced depth dimension” as required by claim 8. Claim
8 defines a cabinet with a “reduced depth dimension” as
COLE KEPRO INTERNATIONAL, LLC   v. VSR INDUSTRIES, INC.   9

“a cabinet having a first side, a second side, a front and a
back, said cabinet having a width from said first side to
said second side which exceeds a depth of said cabinet
from said front to said back.” ’814 patent col. 11 l. 39 –
col. 12 l. 3. The Board construed a similar term in claim
4, “a reduced dimension from said front to said back,” as
“encompass[ing] at least a cabinet having a width greater
than its depth.” J.A. 7. The parties did not dispute this
construction. The Board also construed the term “cabi-
net” in claim 8 as not requiring an upright orientation.
Cole Kepro does not dispute the Board’s claim construc-
tions on appeal.
    The Board found that modifying Runte by replacing
its CRT with an LCD or plasma display “would result in a
‘reduced depth dimension’ because the flat panel would
allow the depth of the housing to be reduced such that its
depth is less than its width.” J.A. 28–29. Cole Kepro
argues that such modification to Runte would only result
in reducing the dimension of the device from top to bottom
as opposed to front to back. This argument presumes,
however, that the top of Runte’s device, table top 16,
cannot also be the front of Runte’s cabinet, housing 14.
We disagree.
    Claim 8 requires a “door connected to said cabi-
net, . . . said door in said first position cooperating with
said cabinet to enclose at least a portion of said front of
said cabinet and define a generally closed interior space.”
’814 patent col. 12 ll. 3–7. While Runte’s device is orient-
ed differently than an upright cabinet, Runte’s table top
16 is a door that is connected to a cabinet, housing 14.
Thus, the depth of Runte’s device from top to bottom is
oriented in the same direction as the depth of Runte’s
cabinet from front to back. In other words, the front of
Runte’s housing 14 is also the top of Runte’s housing 14.
Accordingly, we conclude that substantial evidence sup-
ports the Board’s interpretation of Runte, and we see no
10    COLE KEPRO INTERNATIONAL, LLC   v. VSR INDUSTRIES, INC.

error in the Board’s ultimate conclusion of obviousness as
to this claim limitation.
    Cole Kepro next argues that the Board erred in hold-
ing that dependent claim 9 would have been obvious in
view of Runte. Claim 9 depends from claim 8 and adds
the further limitation of “a bracket connected to said door
support connected to said bracket, said support defining a
generally horizontal supporting surface upon which a
lower edge of said video display is supported when con-
nected to said door.” ’814 patent col. 12 ll. 20–23.
    In finding that Runte discloses a bracket as recited in
claim 9, the Board relied on Cole Kepro’s technical expert,
Bart Lewin, who testified that “Runte requires equally
supporting all four edges of the CRT in order to securely
hold the CRT in place and to insure that it remains paral-
lel to the tabletop.” J.A. 30 (quoting Lewin Decl.,
J.A. 427, ¶ 54). Cole Kepro argues on appeal claim 9
required that the only support for the video display must
be lower horizontal supporting surface.
    As the Board acknowledged, however, “claim 9 does
not indicate that the horizontal supporting surface must
be the sole source of support for the display. As such, the
presence of supports on the other three edges of the
display do not preclude the subject matter of claim 9 from
being disclosed.” J.A. 30–31. We agree that the plain
claim language does not support Cole Kepro’s interpreta-
tion of the claim. Moreover, Cole Kepro does not point to
support in the specification for such a construction.
    We finally consider Cole Kepro’s argument that its
licensing evidence overcomes a prima facie case of obvi-
ousness of claims 1–14 of the ’814 patent in view of Runte.
    At the PTAB, Cole Kepro submitted nine exemplary
licenses to the ’814 patent, arguing that the ’814 patent
had been licensed to the vast majority of the gaming
machine market. The Board found that “the large propor-
COLE KEPRO INTERNATIONAL, LLC   v. VSR INDUSTRIES, INC.   11

tion of the relevant industry that has taken a license to
the ’814 patent weighs in” Cole Kepro’s favor. J.A. 46.
The Board additionally found, however, that “the signifi-
cance of the licensing evidence as a secondary considera-
tion of nonobviousness is weakened by several factors.”
Id.
    The Board first found that all of the submitted licens-
es conveyed rights to other patents beyond the ’814 pa-
tent, demonstrating that the value of the licenses is not
entirely attributable to the ’814 patent. The Board also
found that, of the licenses that provided a royalty rate,
most did not separately apportion the royalty rate for the
’814 patent, “making a determination of how much of the
value of the license is attributable to the ’814 patent
somewhat speculative.” J.A. 46. The Board further found
that the per-unit royalty amounts “appear to be quite
small compared to the value of the machine,” relying on
the testimony of Cole Kepro’s CEO, Frederick Cook, who
testified that one of the license’s royalty rates is a “de
minimis” amount. J.A. 47. The Board finally found that
the lump-sum amount of one of the licenses was “difficult
to square with [Cole Kepro’s] assertion that the total
value of each of the licenses exceeded potential litigation
costs.” Id.
    Based on these findings, the Board acknowledged that
Cole Kepro’s evidence was entitled to some weight, but on
balance, determined that this evidence was outweighed by
VSR’s evidence of obviousness. On appeal, Cole Kepro
disagrees, arguing that its licensing evidence supports the
nonobviousness of claim 1–14 of the ’814 patent.
    When presenting licensing evidence to demonstrate
commercial success, our cases require affirmative evi-
dence of nexus “because it is often ‘cheaper to take licens-
es than to defend infringement suits.’” Iron Grip Barbell
Co. v. USA Sports, Inc., 392 F.3d 1317, 1324 (Fed. Cir.
2004) (quoting EWP Corp. v. Reliance Universal Inc., 755
12    COLE KEPRO INTERNATIONAL, LLC   v. VSR INDUSTRIES, INC.

F.2d 898, 908 (Fed. Cir. 1985)). Accordingly, this evidence
must demonstrate that the licensing program was suc-
cessful because of the merits of the claimed invention as
opposed to “business decisions to avoid litigation, [] prior
business relationships, or for other economic reasons.” In
re Antor Media Corp., 689 F.3d 1282, 1294 (Fed. Cir.
2012).
     On this record, we see no error in the Board’s deter-
mination that Cole Kepro’s licensing evidence, while
entitled to weight, did not overcome VSR’s prima facie
case of obviousness. Substantial evidence supports the
Board’s findings that: (1) all of the submitted licenses
convey rights beyond the ’814 patent; (2) most of these
licenses do not separately apportion the royalty rate for
the ’814 patent; (3) the per-unit royalty amounts “appear
to be quite small compared to the value of the machine”;
and (4) the lump-sum amount of at least one of the licens-
es is “difficult to square with [Cole Kepro’s] assertion that
the total value of each of the licenses exceeded potential
litigation costs.” J.A. 46–47. Further, while Cole Kepro
maintains that “these license agreements were not en-
tered into for the purpose of settling patent infringement
litigation,” Appellant Br. 57, this argument is significant-
ly weakened by one of the submitted licenses, which
expressly recites the parties’ wishes to resolve an ongoing
patent litigation by entering into the licensing agreement.
    For these reasons, it is reasonable to understand why
the Board found it difficult to ascertain whether these
licenses arose out of recognition and acceptance of the
claimed subject matter of the ’814 patent or for some
other reason unrelated to the merits of the ’814 patent.
Accordingly, we see no error in the Board’s fact findings or
its conclusion that claims 1–14 of the ’814 would have
been obvious in view of Runte.
COLE KEPRO INTERNATIONAL, LLC   v. VSR INDUSTRIES, INC.   13

                        CONCLUSION
    We have considered Cole Kepro’s remaining argu-
ments but discern no errors in the Board’s analysis.
Because we conclude that the Board did not err in holding
claims 1–14 of the ’814 patent unpatentable, we affirm.
                        AFFIRMED
                          COSTS
   Costs to Appellee.