by Dennis Crouch
In this decision, the Federal Circuit has affirmed that the IPR procedure allowing the same PTAB panel to both institute an IPR and issue the final decision cancelling the claims is proper. In the process, the divided court rejected both a constitutional and statutory challenge.
In Ethicon Endo-Surgery v. Covidien (Fed. Cir. 2016), a divided Federal Circuit has affirmed the PTAB’s final judgment that all of Ethicon’s challenged patent claims are invalid as obvious. The court also confirmed that the PTAB’s procedure of having the same panel decide both the IPR initiation petition and the final decision is proper. “Neither the statute nor the Constitution precludes the same panel of the Board that made the decision to institute inter partes review from making the final determination.”
Ethicon’s U.S. Patent No. 8,317,070 is directed to a surgical stapling device used in endoscopic surgery. The purported novelty of the stapler is that it uses (a) two sets of staples (with different heights) and (b) staples with non-parallel legs. The prior art included surgical staplers with each of these features, but no prior art teaches the combination of the two. “Thus, the purported inventive aspect of the ’070 patent is the combination of these two features in a surgical stapler.”
From the majority’s perspective, the case involves a straightforward application of KSR’s holding that a “combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.” Here, the court noted that the patent itself “discloses no particular synergy resulting from the combination.” Ethicon did present evidence of commercial success of Covidien’s infringing product. However, that argument failed because, according to the court, Ethicon provided no evidence of nexus between the particular inventive combination of features and the proven commercial success.
Nowhere does Ethicon demonstrate, or even argue, that the commercial success of the Covidien products is attributable to the combination of the two prior art features—varied staple heights and non-parallel staple legs—that is the purportedly inventive aspect of the ’070 patent.
I’ll pause here to note that that the court’s nexus requirement here appears to be doctrinally different than the more traditional requirement that the commercial-success be linked to the claimed invention (as a whole) rather than the clearly more stringent inventive features of the claimed invention. See Wyers v. Master Lock Co., 616 F.3d 1231, 1246 (Fed. Cir. 2010) (“the patentee must establish a nexus between the evidence of commercial success and the patented invention.”).
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Ethicon also argued (unsuccessfully) that the PTAB’s procedure violated Ethicon’s procedural due process rights. In particular, Ethicon argued that the final decision was invalid because it was “made by the same panel that instituted the inter partes review.” The appellate panel rejected that argument- finding that “[t]he 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” and that the initial decision to grant a petition did not create any presumption of prejudice or bias against the patentee.
Ethicon’s best (but still weak) argument was that the AIA does not permit the PTAB to make the institution determination. In particular, the statute gives the PTAB power and authority to make final determinations regarding an IPR, but assigns the USPTO Director the power to institute IPRs. The statutory scheme, according to Ethicon, requires separation of these two functions. On appeal, the Federal Circuit rejected that argument as well – finding that the USPTO director has implicit authority to delegate her authority to officials within the agency.
Ethicon argues 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.
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The majority opinion was penned by Judge Dyk and joined by Judge Taranto. Judge Newman wrote in dissent arguing that the statutory scheme created a clear distinction:
At the first stage, the Director determines whether the review is to be instituted. 35 U.S.C. § 314(a) (“The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition . . . and any response . . . shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition.”). (Of course, the Director may designate an examiner or solicitor to conduct this initial review.)
If instituted by the Director, the Board then conducts a trial on the merits. 35 U.S.C. § 316(c). . . .
The bifurcated design of post-grant review is clear not only from the language of §§ 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 PTO’s statutory violation departs not only from the statute, but also from the due process guarantee of a “fair and impartial decision-maker.”
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Phil Johnson (President of the Intellectual Property Owners Association) argued the case on behalf of Ethicon while Kathleen Daley of Finnegan argued for Covidien and Katherine Twomey Allen of the DOJ represented the USPTO as an intervenor.
The parties relied upon Supreme Court for support and the case has some chance of heading up.
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