In CQV Co. Ltd. v. Merck Patent GmbH, No. 23-1027 (Fed. Cir. March 10, 2025), the Federal Circuit vacated and remanded the Patent Trial and Appeal Board’s (PTAB) decision that upheld the validity of Merck Patent GmbH’s patent in a post-grant review (PGR) proceedings.
Merck Patent GmbH (“Merck”) owns U.S. Patent No. 10,647,861 (the ‘861 patent) which relates to the composition of transparent alumina flakes for paints, industrial and automotive coatings, printing inks, cosmetics, and effect pigments. The specification of the ‘861 patent explains that pearlescent pigments based on flakes containing the alpha-alumina composition are well-known and commercially available through the patentee under the trademark Xirallic for automotive coatings.
CQV, a competitor in the pigment market, petitioned for PGR challenging claims 1-22 of the ‘861 patent, arguing that the patent was obvious in view of a particular lot of Xirallic called “Sample C” (a pearlescent pigment product developed by Merck) in combination with other prior art references. The PTAB found CQV failed to show Xirallic Sample C qualifies as prior art and thus failed to show the unpatentability of any claim. CQV appealed to the Federal Circuit, arguing that PTAB improperly dismissed its prior art evidence and applied an overly strict evidentiary standard. Merck challenged CQV’s Article III standing to appeal.
Before considering the merits of CQV’s appeal, the Federal Circuit addressed the threshold issue of standing. As the party appealing a final written decision by the PTAB, CQV had the burden of showing that it suffered an injury in fact sufficient to confer Article III standing. Gen. Elec. Co. v. United Techs. Corp., 928 F.3d 1349, 1353 (Fed. Cir. 2019). To establish injury in fact, it is generally sufficient to show that the appellant “has engaged in, is engaging in or will likely engage in activity that would give rise to a possible infringement suit.” Grit Energy Sols., LLC v. Oren Techs., LLC, 957 F.3d 1309, 1319 (Fed. Cir. 2020).
CQV argued that it had standing because its Adamas pearlescent pigment products directly competed with Merck’s Xirallic. CQV submitted evidence that Merck contacted its U.S. customers, alleging potential infringement of the ’861 patent. As a result, one customer ceased purchasing Adamas, while another required CQV to enter into an indemnity agreement. The Federal Circuit found that this indemnification obligation constituted sufficient injury-in-fact under Arris Grp., Inc. v. British Telecommunications PLC, 639 F.3d 1368 (Fed. Cir. 2011). The Court ruled that CQV’s potential liability and lost business due to Merck’s actions established standing to challenge the patent.
Turning to the merits, the Federal Circuit concluded that it could not discern whether the relevant evidence was properly evaluated, and therefore remanded the case to the PTAB. As the petitioner in PGR, CQV had the burden to show that an asserted reference qualifies as prior art by a preponderance of the evidence. To meet this burden CQV presented evidence that Xirallic had been available before 2012; that an employee had purchased Sample C in 2011; and that Merck had manufactured Sample C as early as 2007. However, the PTAB held that this evidence failed to establish that Sample C was probably available to the public before the critical date April 30, 2012.
The Federal Circuit explained that “the PTAB erred by failing to consider the whole record,” including “highly material and unrebutted evidence” that “the PTAB discarded without explanation.” The Federal Circuit determined that PTAB’s failure to sufficiently address key testimony and supporting documents constituted a lack of substantial evidence, rendering its decision unsupported by substantial evidence.
Thus, the Federal Circuit vacated the PTAB’s patentability determinations concerning claims 1-17 and 21 of the ‘861 patent and remanded the case for reconsideration. The Court instructed the PTAB to reevaluate whether Xirallic Sample C qualifies as prior art by: (1) considering all evidence in the record, including CQV’s quality control timeline and product availability testimony; (2) applying the correct evidentiary standard, ensuring that the preponderance of the evidence standard is used rather than an excessively high burden; and (3) providing a reasoned explanation if it decides to exclude certain evidence from its analysis.