Federal Circuit Staples Ethicon in IPR Ruling

In its January 13, 2016 ruling Ethicon Endo-Surgery, Inv. v. Covidien LP, The United States Court of Appeals for the Federal Circuit held, inter alia, that a panel of the Patent Trial and Appeals Board (“PTAB”) can both (1) decide to institute an inter partes review and (2) render a final determination in that same inter partes review proceeding it decides to initiate.

At issue was Ethicon's U.S. Patent No. 8,317,070 (the "’070 patent”) directed to a surgical stapling device.

Select '070 patent figure.

Covidien, a Boston-based medical device company that also sold surgical stapling devices with self-described "Tri-Staple TM" technology, petitioned the USPTO for inter partes review of claims 1-14 of the ‘070 patent on the basis that all claims were invalid as obvious over the prior art.

A PTAB panel granted the petition and that same panel rendered a final decision that all claims of the '070 patent were invalid as obvious over the prior art.

Ethicon appealed to the Federal Circuit, arguing that the PTAB panel's final decision was not valid because the America Invents Act ("AIA") and U.S. Constitution forbade a single decision-maker -- PTAB -- from deciding to both institute and decide the same inter partes review. Ethicon also argued on the merits that the Board erred in finding the claims obvious.

The Federal Circuit, in an opinion by Judge Dyk who was joined by Judge Taranto, rejected both arguments. The Court reached its decision by pointing out that nothing in the language of the statute precluded the Director from delegating the power to institute inter partes review to PTAB, that the statute and legislative history were silent on Congressional intent to separate the initiation and final decision functions, and that long-standing Supreme Court precedent allowed such delegations under similar circumstances without violating Due Process. With respect to fairness, the Court posited that PTAB judges are owed a presumption of honesty and integrity, and that actual bias must therefore be demonstrated.

Judge Newman dissented with a straightforward statutory interpretation argument. In her view, the statute is clear that the job of instituting is for the Director and the job of rendering a final decision is in the hands of PTAB—separate and distinct functions for separate and distinct decision-makers. "The statute requires that these proceedings be separated, the first decision required to be made by the Director, and the second decision made by the Board. This court has now endorsed proceedings in which the Board makes both decisions. This procedure cannot be reconciled with the statute." Judge Newman, Dissent at 2.

The Court went on to affirm the panel’s ruling that all of the claims of Ethicon’s ‘070 patent were obvious in view of the prior art. The Court also decided that the AIA (specifically 35 U.S.C. § 314(d)) does not preclude it from hearing Ethicon’s challenge to the authority of the Board to make a final decision.

In reaching this decision, the Court cited In re Cuozzo Speed Techs., LLC, 793 F.3d 1268 (Fed. Cir. 2015), a case in which the Supreme Court of the United States ("SCOTUS") granted certiorari just a few days after the ruling discussed above.

There is no indication that the outcome of In re Cuozzo would affect the Court’s ruling in the subject case, or whether Ethicon intends to petition the Supreme Court for certiorari in the subject case. Regardless, this decision will likely have far reaching implications for many reasons, not the least of which is that the body that decides that there is a "reasonable likelihood" that the petitioner would prevail is the same body that will decide the matter on the merits. Patent holders receiving an adverse ruling on such petitions therefore have legitimate reason for concern.

This posting is for informational purposes only and does not, and is not intended to, constitute legal advice in any manner whatsoever. Feel free to contact the lawyer with whom you normally consult for legal advice. The posting is an original writing by the author(s) only and is not attributable to Shores & Oliver, P.C. or its clients.

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