Agriboard International LLC v. Deputy Controller of Patents and Designs

High Court of Delhi Decided: 31 March 2022 C.A. (COMM.IPD-PAT) 4/2022 Bench: Hon’ble Ms. Justice Prathiba M. Singh

Background

Agriboard International LLC is a company incorporated in the United States engaged in the development of methods and apparatus for the manufacture of compressed structural fiberboard from agricultural fibrous matter, particularly rice straw. On March 14, 2019, Agriboard filed a patent application in the United States bearing priority application No. 16/353,624 in respect of an invention titled ‘Efficient Method and Apparatus for Producing Compressed Structural Fiberboard’. The corresponding Indian patent application bearing No. 202014010848 was filed on March 13, 2020 before the Indian Patent Office, claiming priority from the US application in accordance with the provisions of the Patents Act, 1970 read with India’s obligations under the Patent Cooperation Treaty.

The subject invention related to an efficient method and apparatus for producing compressed structural fiberboard from agricultural fibrous matter. The core of the invention resided in a specially designed extruder in which a cyclic ram was actuated and driven by electric linear actuators, controlled by motion control software integrated into a programmable logic control system. The linear actuators, as described in paragraph 45 of the specification and illustrated in Figure 9 of the patent application, operated at a speed of 60 strokes per minute with a stroke length of approximately 30 to 32 inches, providing greater control over the time and force of the cyclic ram during the compression cycle as compared to conventional extruders. The specification claimed that the use of electric linear actuators in place of the conventional rotating equipment drive flywheel, connecting rod and crank connection resulted in significant advantages including lesser energy consumption, reduced cost of operation, lower maintenance requirements and reduced safety risks. The complete apparatus, illustrated in Figure 1 of the application, consisted of multiple cells including two conveyors, a heat sink track cooler, a water jet cutting system and an air table, through which agricultural fibrous matter was processed into finished compressed structural fiberboard.

Upon filing of the request for examination, the Indian Patent Office issued a First Examination Report dated July 21, 2020 raising objections to Claims 1 to 15 of the application on grounds of both lack of novelty under Section 2(1)(j) and lack of inventive step under Section 2(1)(ja) of the Patents Act, 1970. Three prior art documents were cited in the FER as the basis for the objections: Document D1 being US5945132A, Document D2 being US20090188642A1 and Document D3 being CN102026785B. The primary prior art relied upon throughout the proceedings was D1, which disclosed a method for making compressed structural fiberboard from agricultural fibrous matter using an extruder with a cyclic ram driven by a connecting rod extending from a crank connection connected to a drive flywheel the conventional mechanical apparatus that the subject invention sought to improve upon.

Agriboard filed its response to the FER on February 21, 2021, distinguishing the subject invention from the prior art and specifically contending that the use of electric linear actuators in place of the mechanical drive flywheel and crankshaft mechanism represented a technically significant and non-obvious advance over the prior art. The applicant’s agent appeared for a hearing and filed written submissions on April 30, 2021. Despite the hearing and the written submissions, the Deputy Controller of Patents and Designs, by the impugned order dated June 16, 2021, refused the patent application on the sole ground of lack of inventive step under Section 2(1)(ja) of the Act. The impugned order was a short order that extracted one paragraph from the FER relating to D1 and arrived at the bare conclusion that the subject invention lacked inventive step, without engaging with Agriboard’s response or providing any analysis of the differences between D1 and the subject invention.

Agriboard challenged the impugned order by filing C.A. (COMM.IPD-PAT) 4/2022 before the Delhi High Court under Section 117A(2) of the Patents Act, 1970. A delay of 100 days in filing the appeal was condoned by the court in I.A. 161/2022 in view of the reasons stated in the application and the order of the Supreme Court dated September 23, 2021 in Suo Motu Writ Petition (C) No. 3 of 2020 in Re: Cognizance for Extension of Limitation.

Issues for Determination

Whether the impugned order dated June 16, 2021 passed by the Deputy Controller of Patents and Designs refusing the patent application of Agriboard under Section 2(1)(ja) of the Patents Act, 1970 was legally sustainable, having regard to whether it contained adequate reasoning and analysis as required by the principles of natural justice and the provisions of the Act.
Whether the Deputy Controller was required, before rejecting a patent application for lack of inventive step under Section 2(1)(ja) of the Patents Act, 1970, to conduct and record a structured analysis comprising the disclosure of the prior art, the disclosure of the subject invention and the manner in which the subject invention would be obvious to a person skilled in the art and whether the failure to do so vitiated the order.
Whether the subject invention specifically the use of an extruder with a cyclic ram driven by electric linear actuators controlled by motion control software, in place of the conventional mechanical mechanism of a drive flywheel, connecting rod and crank connection represented a feature involving technical advance as compared to existing knowledge, within the meaning of Section 2(1)(ja) of the Patents Act, 1970, so as to constitute an inventive step.
Whether the replacement of a conventional mechanical extruder drive mechanism with electric linear actuators constituted a mere workshop modification obvious to a person skilled in the art, as contended by the Indian Patent Office or whether it represented a significant change in the operating principle of the ram constituting a non-obvious technical advance.
What weight, if any, was to be accorded to the finding of the United States Patent Office that the prior art D1 failed to provide an extruder having a cyclic ram driven by electric linear actuators as claimed and that such modification represented a significant change in the operating principle of the ram rendering the invention non-obvious over the prior art.
Whether the principle of audi alteram partem, as articulated by the Supreme Court in Assistant Commissioner, Commercial Tax Department v. Shukla and Brothers (2010) 4 SCC 785 and Manohar v. State of Maharashtra & Ors. AIR 2013 SC 681, required the Deputy Controller to pass a reasoned and speaking order disposing of the patent application and whether the impugned order satisfied this requirement.

Key Holdings of the Court

First, the court held that the impugned order dated June 16, 2021 was completely lacking in reasoning. The order simply extracted the objection from the First Examination Report relating to prior art D1 and arrived at a bare conclusion that the subject invention was lacking in inventive step, without any discussion of the manner in which Agriboard had sought to distinguish D1 from the subject invention in its response to the FER and without any reasoning by the Controller as to why the subject invention would be obvious over D1.
Second, the court held that when rejecting a patent application for lack of inventive step under Section 2(1)(ja) of the Patents Act, 1970, the Controller is required to consider and address three essential elements: the invention disclosed in the prior art; the invention disclosed in the application under consideration; and the manner in which the subject invention would be obvious to a person skilled in the art. Without a structured discussion on all three elements, a bare conclusion that the subject invention lacks inventive step is not permissible under the Act, unless the case for obviousness is absolutely clear on the face of the record.
Third, the court held that the statutory definition of inventive step under Section 2(1)(ja) being a feature that involves technical advance as compared to existing knowledge or having economic significance or both and making the invention not obvious to a person skilled in the art required the Controller to analyse the existing knowledge, identify what the person skilled in the art would know and then reason through the gap between the existing knowledge and the subject invention. Without this analysis, the rejection was contrary to the provision itself.
Fourth, the court noted on the technical merits that the subject invention clearly disclosed features not contained in the prior art D1. The linear actuators in the subject invention, controlled by motion control software in an integrated programmable logic control system, were found to be different in their manner of mounting and functioning from the drive flywheel, connecting rod and crank connection mechanism in D1. The specification’s paragraph 45 and Figure 9 specifically distinguished the subject invention from conventional extruders and articulated the technical advantages of the electric linear actuator system.
Fifth, the court noted that the US Patent Office had, after considering prior art D1 in the same context, concluded that the prior art failed to provide an extruder with a cyclic ram driven by electric linear actuators, that there was no disclosure in the prior art providing motivation to a person skilled in the art to modify the existing methods to include electric linear actuators and that such modification represented a significant change in the operating principle of the ram. The court observed that this analysis had not been taken into account in the impugned order.
Sixth, the court applied the Supreme Court’s holding in Shukla and Brothers that passing of a reasoned and speaking order is an integral part of the principle of audi alteram partem and its reiteration in Manohar v. State of Maharashtra that application of mind and recording of a reasoned decision are basic elements of natural justice, holding that these principles applied with full force to the rejection of patent applications.
Seventh, the court set aside the impugned order dated June 16, 2021 and remanded the matter to the Indian Patent Office for fresh consideration within four months. The IPO was permitted in the fresh proceedings to consider prior art D1 as also other prior arts and the International Search Report issued by the PCT Office, while the observations made in the present order regarding D1 were expressly held to be non-binding on the Controller.

Statutory Provisions Involved

Section 2(1)(j) of the Patents Act, 1970 defines “invention” to mean a new product or process involving an inventive step and capable of industrial application. The First Examination Report had raised an initial objection of lack of novelty under this provision, which formed part of the background of the examination proceedings culminating in the impugned order.

Section 2(1)(ja) of the Patents Act, 1970 defines “inventive step” to mean a feature of an invention that involves technical advance as compared to the existing knowledge or having economic significance or both and that makes the invention not obvious to a person skilled in the art. This provision was the sole ground on which the Deputy Controller refused the patent application and formed the central statutory focus of the appeal. The court’s elaboration of the three-element analytical framework required for a finding of lack of inventive step under this provision is the most significant statutory interpretation in the judgment.

Section 25 of the Patents Act, 1970 governs opposition proceedings, both pre-grant and post-grant and provides for the grounds on which a patent application may be opposed, including lack of inventive step. The examination and hearing process before the Controller that culminated in the impugned refusal order was conducted within the framework of this provision.

Section 117A(2) of the Patents Act, 1970 provides the statutory right of appeal to the High Court against an order of the Controller refusing a patent application. This provision was the jurisdictional basis of the appeal before the Delhi High Court and the court’s power to set aside the impugned order and remand the matter to the IPO for fresh consideration was derived from this provision.

Article 33(3) of the Patent Cooperation Treaty, 1970 establishes the standard for inventive step in the context of the international preliminary examination of PCT applications, providing that an invention shall be considered to involve an inventive step if, having regard to the prior art as defined in Article 33(2), it is not, at the prescribed relevant date, obvious to a person skilled in the art. The International Search Report issued by the PCT Office, which had found the claims of the subject application to lack inventive step under this provision, was referred to by the respondent’s counsel and was directed by the court to be considered by the IPO in the remanded fresh examination.

Reasoning of the Court

The court approached the appeal with a focused examination of both the procedural and substantive dimensions of the Deputy Controller’s order. On the procedural dimension, the court found the impugned order to be deeply deficient in its reasoning. The order consisted of little more than an extraction of a paragraph from the First Examination Report pertaining to prior art D1, followed by a bare conclusion that the subject invention lacked inventive step. There was no engagement with the detailed response filed by Agriboard to the FER on February 21, 2021, no acknowledgement of the written submissions filed on April 30, 2021 and no analysis of the manner in which the subject invention differed from or was alleged to be obvious over D1. The impugned order did not discuss the electric linear actuator mechanism that was the core distinguishing feature of the subject invention, did not consider the programmable logic control system integrated with the actuators and did not address any of the technical advantages claimed for the invention over the prior art.

The court drew upon the well-established constitutional and common law principle that a person against whom an adverse order is passed must be given not only an opportunity to be heard but also the assurance that the authority has genuinely applied its mind to the submissions made. The Supreme Court’s articulation in Shukla and Brothers that a reasoned and speaking order is an integral part of the principle of audi alteram partem was directly applicable and the court found that the impugned order fell far short of this requirement. The further reiteration of this principle in Manohar v. State of Maharashtra, to the effect that application of mind and recording of a reasoned decision are the basic elements of natural justice, reinforced this conclusion.

The court then formulated a clear three-element analytical framework for the examination of inventive step under Section 2(1)(ja): the Controller must identify the invention disclosed in the prior art; identify the invention disclosed in the application under consideration; and then reason through the manner in which the subject invention would be obvious to a person skilled in the art. This framework follows naturally from the statutory definition of inventive step as a feature that makes the invention not obvious to a person skilled in the art, since the question of obviousness can only be answered after a careful comparison of the prior art and the claimed invention from the perspective of the person skilled in the art. Without this structured comparative analysis, the conclusion of obviousness rests on nothing more than the ipse dixit of the Controller, which is both procedurally impermissible and substantively unreliable.

On the substantive technical analysis, the court examined the prior art D1 and the subject invention with some care. It noted that D1 described an extruder in which the ram head was mounted on a plate that was connected by a connecting rod to a crank connection attached to a drive flywheel a conventional mechanical reciprocating mechanism. The subject invention, by contrast, employed four electric linear actuators arranged in a specific spatial configuration and controlled by motion control software in an integrated programmable logic control system, operating at 60 strokes per minute with a stroke length of approximately 30 to 32 inches. The court found that these features particularly the integration of electric linear actuators with motion control software were not contained in D1 and that the manner in which the extruding ram was mounted and functioned was, on the face of the specification, significantly different from the mechanism in D1.

The court also found it significant that the US Patent Office, after considering the very same prior art D1 in the prosecution of the US priority application, had reached the conclusion that D1 failed to provide the claimed extruder with a cyclic ram driven by electric linear actuators, that there was no motivation in the prior art for a person skilled in the art to make such a modification and that the modification represented a significant change in the operating principle of the ram. While the court was careful to note that its own observations on D1 were not binding on the Controller in the remanded proceedings, the US Patent Office’s analysis reinforced the court’s conclusion that the impugned order’s dismissal of the inventive step argument without any reasoning was untenable.

The court was also alert to the respondent’s argument that the change from a mechanical to an electric extruder drive was a mere workshop modification and that D1 itself had been filed by an affiliate of the appellant Agriboard Industries Inc. in 1999 and was due to expire in 2019, suggesting that the subject application was merely an attempt to extend the term of the earlier patent. While the court noted these arguments, it did not determine them in the appeal, confining its order to the setting aside of the impugned order for lack of reasoning and the remand for fresh consideration, expressly leaving all technical and substantive questions open for the Controller to determine afresh in the light of the full record including the ISR.

Doctrinal Significance

The judgment in Agriboard International LLC v. Deputy Controller of Patents and Designs is a significant contribution to the developing body of Indian patent law jurisprudence on the procedural and substantive requirements for the examination and rejection of patent applications on the ground of lack of inventive step. Its importance lies at the intersection of administrative law principles of natural justice and the specific statutory framework governing the assessment of inventive step under Section 2(1)(ja) of the Patents Act, 1970.

The court’s formulation of a three-element analytical framework prior art disclosure, subject invention disclosure and the reasoning of obviousness from the perspective of a person skilled in the art is a valuable and practically significant contribution to patent examination jurisprudence in India. Prior to this judgment, while the principles of natural justice requiring reasoned orders were well established in administrative law generally, their specific application to the context of patent examination and the rejection of applications for lack of inventive step had not been articulated with comparable precision by Indian courts. The three-element framework provides both patent applicants and Controllers at the Indian Patent Office with clear and actionable guidance on the minimum analytical requirements that must be satisfied before a patent application can be lawfully refused on the ground of inventive step.

The judgment also reinforces the principle that the duty to pass reasoned orders in administrative proceedings applies with particular stringency in technical subject matters such as patent law, where the applicant has invested substantial resources in the development of the invention, the preparation of the application and the engagement with the examination process. The court’s observation that without the three-element analysis, a bare conclusion of lack of inventive step would be contrary to Section 2(1)(ja) itself elevates the reasoning requirement from a merely procedural obligation to one grounded in the substantive statutory definition of inventive step.

The court’s engagement with the US Patent Office’s analysis of the same prior art in the prosecution of the priority application raises an interesting question about the evidentiary weight to be accorded to the decisions of foreign patent offices in Indian patent proceedings. While the court was careful not to treat the US Patent Office’s allowance as binding or even determinative in the Indian context, it found it relevant and worthy of note that the same prior art, when considered by a different patent office examining the same invention, had led to a conclusion of non-obviousness. This approach reflects the broader principle increasingly recognized in Indian patent jurisprudence that while decisions of foreign patent offices are not binding, they may constitute relevant and probative material in Indian patent proceedings, particularly where the same invention and the same prior art are under consideration.

The judgment also contributes to the growing body of Indian jurisprudence on the importance of the distinction between a mere workshop modification and a genuine inventive step in the context of mechanical engineering patents. The respondent’s argument that the substitution of electric linear actuators for a mechanical drive flywheel and crankshaft constituted a mere workshop modification a category of change that Indian courts have consistently held to be insufficient to constitute an inventive step was an important contested issue that the court did not resolve on the merits, leaving it open for fresh determination. This restraint was appropriate given the court’s finding that the impugned order itself lacked the reasoning necessary to sustain a finding on this point. The question of where the line falls between a workshop modification and a non-obvious technical advance in the context of mechanical substitution of drive mechanisms is thus left for resolution by the Controller in the remanded proceedings.

Finally, the procedural outcome of this case setting aside the Controller’s order and remanding for fresh consideration with a four-month time limit and liberty to consider additional prior art reflects the pragmatic approach adopted by the Delhi High Court in intellectual property appeals, balancing the applicant’s right to a fair and reasoned determination with the need to ensure that the substantive patent examination process is completed expeditiously at the appropriate administrative level rather than being determined finally at the appellate stage without the benefit of a full administrative record.

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