IP Law Daily PTAB may both institute review and decide merits; en banc rehearing denied
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Wednesday, June 22, 2016

PTAB may both institute review and decide merits; en banc rehearing denied

By Thomas Long, J.D.

The U.S. Court of Appeals for the Federal Circuit has denied a petition by patent-holder Ethicon Endo-Surgery, Inc., for rehearing en banc of a case in which a three-judge panel determined in January that the same panel of the Patent Trial and Appeal Board (PTAB) that made a decision to institute inter partes review of the patent-in-suit could make the final determination as to the patent’s validity (Ethicon Endo-Surgery, Inc. v. Covidien LP, June 22, 2016, per curiam). The denial leaves standing the panel’s decision that there was no error in the PTAB’s determination that the asserted claims of Ethicon Endo-Surgery’s patent for a surgical device would have been obvious over the prior art. Circuit Judge Pauline Newman dissented from the denial.

The patent-in-suit was U.S. Patent No. 8,317,070 ("the ’070 patent") for a surgical stapling device. The claims of the ’070 patent are directed to a surgical device used to staple, secure, and seal tissue that has been incised. Covidien LP—which sold a competing product that, according to Ethicon, embodied the claims of the ’070 patent—petitioned the USPTO for inter partes review of the ’070 patent. A panel of the PTAB granted the petition, and the same panel found all challenged claims invalid as obvious over prior art. Finally, it found that Ethicon’s evidence of secondary considerations did not overcome the strong case of obviousness.

On appeal, Ethicon argued that the use of the same panel to carry out both the functions of deciding whether to institute review and whether to find for the review petitioner on the merits was improper under the America Invents Act (AIA) and violated constitutional principles of due process. Ethicon objected to this combination of functions in the same panel because the panel was first exposed to a limited record consisting of the petition and the patent holder’s preliminary response, creating a risk that the panel could prejudge the case before seeing the full record.

A three-judge panel of the Federal Circuit disagreed. Nothing in the AIA or its legislative history indicated a concern with separating the functions of initiation and final decision. The Director could delegate to the PTAB the authority regarding decisions whether to institute review. Both the decision to institute and the final decision were adjudicatory decisions and did not involve combining investigative and prosecutorial functions with an adjudicatory function, the court reasoned, analogizing the procedure to a district court determining whether there is "a likelihood of success on the merits" and then later deciding the merits of a case. The court went on to decide that the PTAB’s decision as to obviousness was supported by the evidence.

Judge Newman’s dissenting opinion. Dissenting from denial of rehearing en banc, Judge Newman wrote that the USPTO, by delegating the Director’s authority under the AIA to make threshold institution determinations to the PTAB, ignored a division of responsibilities expressly called for by the AIA. Judge Newman noted that the inter partes review was divided into two distinct phases. First, the Director made a threshold institution determination. Second, if instituted by the Director, the PTAB then conducted a trial and determined the validity of the challenged claims. In Judge Newman’s view, the USPTO’s current practice imperiled the public confidence in the fairness and correctness of the review proceedings.

The AIA’s post-grant procedures were carefully drafted by Congress to protect due process rights, and the statutory provisions establishing the Director’s role in deciding whether to institute review was such a protection, Judge Newman opined. The initial phase and the trial phase had different evidentiary and procedural rules, which protected patent-holders by ensuring that the threshold decision to institute did not prejudice the later decision on the merits. Independence of the two decision-makers was, in Judge Newman’s view, crucial to achieving the AIA’s purpose. Consolidating the decision-makers violated the statute, Judge Newman wrote.

The case is No. 2014-1771.

Attorneys: Steven D. Maslowski (Akin, Gump, Strauss, Hauer & Feld, LLP) and Philip Staton Johnson (Johnson & Johnson) for Ethicon Endo-Surgery, Inc. Kathleen Daley (Finnegan, Henderson, Farabow, Garrett & Dunner, LLP) for Covidien LP.

Companies: Ethicon Endo-Surgery, Inc.; Covidien LP

MainStory: TopStory Patent FedCirNews

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