IP Law Daily Same panel of PTAB may both institute review and make final decision
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Wednesday, January 13, 2016

Same panel of PTAB may both institute review and make final decision

By Peter Reap, J.D., LL.M.

Neither the America Invents Act nor the Constitution precludes the same panel of the Patent Trial and Appeal Board that made a decision to institute inter partes review from making the final determination, according to the U.S. Court of Appeals for the Federal Circuit (Ethicon Endo-Surgery, Inc. v. Covidien LP, January 13, 2016, Dyk, T.). Furthermore, 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. Accordingly, the PTAB’s decision was affirmed.

Ethicon owns 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. The ’070 patent claims two primary aspects of stapler design: the use of staples of different pre-formed and formed heights (i.e., heights before and after stapling) and the use of staples with nonparallel legs. It is undisputed that both of these improvements, separately, were also well-known in the prior art. Thus, the purported inventive aspect of the ’070 patent is the combination of these two features in a surgical stapler.

In 2010, Covidien began selling surgical staplers that, Ethicon contends, embody the claimed invention of the ’070 patent. Covidien petitioned the USPTO for inter partes review of claims 1–14 of the ’070 patent. The USPTO, through a panel of the PTAB, granted the petition. On the merits, the same Board panel found all challenged claims invalid as obvious over the prior art. Finally, it found that Ethicon’s evidence of secondary considerations did “not overcome the strong case of obviousness.” Ethicon appealed.

PTAB proceedings. Ethicon argued that the final decision of the PTAB should be set aside because it was made by the same panel that made the decision to institute inter partes review.

The USPTO has determined that, in the interest of efficiency, the decision to institute and the final decision should be made by the same Board panel, in line with the purposes of the AIA, which requires the Director consider the “efficient administration of the [PTO], and the ability of the [PTO] to timely complete proceedings” in promulgating regulations, the court noted. 35 U.S.C. §316(b). Ethicon contended that this combination of functions is improper because the statutory text and structure, guided by constitutional principles, require that the decision to institute not be made by the same panel of the Board that makes the ultimate decision and, in fact, that the statute does not authorize the Director to delegate the institution decision to the Board at all.

As an initial matter, the USPTO, as intervenor, argued that 35 U.S.C. §314(d) barred the Federal Circuit from considering this issue on appeal because it is an issue concerning the institution of an inter partes review proceeding. However, here, Ethicon challenged a defect in the final decision, and Section 314(d) does not prevent the Federal Circuit from hearing a challenge to the authority of the Board to issue a final decision, the court held.

On the merits, Ethicon argued that having the same panel make the decision to institute and then later decide the merits of the inter partes review raises “serious due process concerns. According to Ethicon, because the panel of the Board is first exposed to a limited record consisting of the petition and patent holder’s preliminary response, there is a risk that the panel may prejudge the case before seeing a full record, thereby depriving a patent holder of a due process right to an impartial decision maker.

The appellate court disagreed. Where, as here, there are no other separate procedural-fairness infirmities alleged, the USPTO’s assignment of the institution and final decisions to one panel of the Board does not violate due process under governing Supreme Court precedent. Here, both the decision to institute and the final decision are adjudicatory decisions and do not involve combining investigative and/or prosecutorial functions with an adjudicatory function, the court reasoned. The inter partes review procedure is directly analogous to a district court determining whether there is “a likelihood of success on the merits” and then later deciding the merits of a case.

Lastly, Ethicon argued that the Board panel’s exposure to a limited record in the decision to institute improperly biases it so as to disqualify it from making the final decision on the merits. But, adjudicators are afforded a “presumption of honesty and integrity” and even “exposure to evidence presented in nonadversary investigative procedures is insufficient in itself to impugn the fairness of [adjudicators] at a later adversary hearing.” Withrow v. Larkin, 421 U.S. 35, at 47, 55 (1975), according to the court.

Turning to Ethicon’s statutory arguments, Ethicon argued that because Congress (1) specifically gave the Director the power to institute, see, e.g., 35 U.S.C. §314(a); (2) did not explicitly give the Director authority to delegate the institution decision to the Board; and (3) gave the Board the power to make the final determination, Congress intended to keep the functions of institution and final decision separate.

However, there was nothing in the statute or legislative history of the statute indicating a concern with separating the functions of initiation and final decision. Ethicon ignored the longstanding rule that agency heads have implied authority to delegate to officials within the agency, even without explicit statutory authority and even when agency officials have other statutory duties, the court said.

Finally, Ethicon’s argument that the existence of 35 U.S.C. §3(b)(3)(B), which allows the Director to delegate duties to officers and employees she appoints, evidences a congressional purpose to cabin the Director’s authority with respect to delegation, was rejected. §3(b)(3) could not be read to limit the ability of the Director to delegate tasks to agency officials not mentioned in §3(b)(3) and the Director here has the inherent authority to delegate institution decisions to the Board, the court held.

Obviousness. Ethicon did not challenge the Board’s finding that all of the claim elements are found in the prior art, nor did it challenge the Board’s determination that a person of ordinary skill would have been motivated to combine those prior art elements to come up with the invention in the ’070 patent. Ethicon instead argued that the Board did not properly take into account the secondary considerations of non-obviousness.

Ethicon argued that the Board failed to afford Ethicon a presumption of nexus between the commercial success of an allegedly infringing product made by Covidien and the patented features. However, regardless of any presumption of nexus, Ethicon’s own evidence demonstrated that other non-patented features and features known in the prior art underlay the commercial success of Covidien’s allegedly infringing product, the court observed.

As the Board recognized, the Covidien products contained numerous unclaimed features, “such as ergonomic design, precise articulation, and reloads that provide simpler selection and reduced inventory,” which could instead have been responsible for the commercial success of the products. The Board concluded that, in light of these unclaimed features, Ethicon had “not shown sufficient credible evidence that the sales of the [Covidien devices] are the result of the claimed invention.” The appellate court concurred.

Lastly, Ethicon’s contention that the Board failed to weigh its evidence demonstrating a long-felt but unresolved need was without merit. At most, the evidence showed a long-felt need for staples of different heights (a feature in the prior art), not the combination of features that is the invention here, the court explained.

Dissent. In her dissent, Judge Newman argued that the bifurcated design of post-grant review is clear not only from the language of Sections 314(a) and 316(c), but pervades the structure of these post-grant proceedings. Congress unambiguously placed these separate determinations in different decision-makers, applying different criteria. The majority’s endorsement of the USPTO’s statutory violation departed not only from the statute, but also from the due process guarantee of a “fair and impartial decision-maker.”

The case is No. 2014-1771.

Attorneys: Philip Staton-Johnson (Johnson & Johnson) for Ethicon Endo-Surgery, Inc. Kathleen Daley (Finnegan, Henderson, Farbow, Garrett & Dunner, LLP) for Covidien LP.

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

MainStory: TopStory Patent FedCirNews

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