End of the Road for Ethicon’s Anti-Delegation Argument?

by Dennis Crouch

In a 10-1 decision, the Federal Circuit has rejected Ethicon’s petition for en banc rehearing on the question of  whether the USPTO Director improperly delegated IPR institution decisionmaking. Ethicon will likely petition the Supreme Court for its views.  The case raises interesting, but ones that I expect will ultimately fail.  Chief Judge Prost likely held the decision release to await the Cuozzo affirmance that implicitly supports the court’s ruling here.

Inter Partes Reviews (IPRs) can be broken down into a two step process. At the institution stage, the Patent Office Director is tasked with determining whether to institute the proceeding. 35 U.S.C. § 314. Once instituted, the Patent Trial and Appeal Board (PTAB) holds trial and makes a final determination of merits. 35 U.S.C. § 316(c).  Despite the statutory separation, the Director has delegated the entire procedure to the PTAB – including the institution decision.  In its failed petition, Ethicon questioned this delegation – asking: “Does the Patent Act permit the [PTAB] to make inter partes review institution decisions?”

The decision in Cuozzo does not directly address the challenge issues here, but the court’s loose language does suggest that it would side with the Federal Circuit.  In particular, the court repeatedly refers to actions by the “Patent Office” regarding institution and other decision rather than using the statutory language “Director.”  Although not as consistent, the court also repeatedly refers to actions by the PTAB as by the “Patent Office.”  In his dissent, Judge Alito addresses the issue directly and without criticism, although failing to note that Director Lee is a woman:

The Director of the Patent Office has delegated his authority to institute inter partes review to the Patent Trial and Appeal Board (Board), which also conducts and decides the inter partes review. See 37 CFR §§42.4(a), 42.108 (2015); 35 U. S. C. §§316(c), 318(a). I therefore use the term “Patent Office” to refer to the Director, the Board, and the Patent Office generally, as the case may be.

Alito dissent at footnote 2.


57 thoughts on “End of the Road for Ethicon’s Anti-Delegation Argument?

  1. 12

    Paul Morinville: the very existence of IPRs has made a large number of patents unenforceable. That in itself is a taking.


    But he’s a very serious person!

    1. 12.1

      Malleus Maleficarum (MM) the hammer of the witches for K-Street.

      The K-street Hammer of the Witches!

      (Each word paid for by Google.)

    1. 11.1

      Thanks anon, but actually that is something I thought about almost 40 years ago. I notice they didn’t deal with the tricky issue of entanglement.

      1. 11.1.1

        I figured that you would be conversant with the topic, but I also get the impression that your naysayers think that you totally make that stuff up, and this is more for them to see and appreciate your views perhaps a little more.

        As to entanglement, that is indeed some interesting “spooky at a distance” stuff.


          Ned (the panderer to the root of all evil in patent law) didn’t even know who Turning was.

  2. 10

    Very interesting to realize that this generation from the 60’s is, as we speak, in control of many posts in your PTO and was until recently controlling nearly all of the gov. It still controls quite a bit of it. If you guys ever wonder why your PTO, or gov as a whole, is acting up, look no further than the 60’s generation still being in control of your gov.

    link to ejfi.org

    1. 10.1

      For a different context (and one that includes this quote: “Part of the problem is that the “developed countries are all aging very rapidly,” which is leading to a higher ratio of government spending in the form of entitlements, Greenspan said.” – and noting the difference in “entitlements” of patents in that the Government pays nothing – it is ALL (all several Billion of it) innovator funded:

      link to finance.yahoo.com

      1. 10.1.1

        Yeah I saw that article as well. Although I’m not convinced that the whole of the entitlement program is being paid for by innovators. You just mean the whole cost of the administration of the issuing agency is being funded by that (and you could argue also by IPR request fees etc.). The “costs” themselves of the entitlements, aka the “benefits” to the gov. certified “innovators” are ultimately paid by producers/consumers/farmers/other innovators etc. on down the line.

        But yes, Greenspan is talking about different entitlements.


          You confuse yourself by trying to conflate the benefits of exclusivity with some notion of “cost.”

          That is an anti-patent Belieb system thing leaking out.

      2. 10.1.2

        One thing folks like Greenspan are referring to [beside old infrastructure] is the huge underfunded pension and health obligations for government employees like police, fire, military, teachers, prison guards, etc. that now often live on in retirement more than twice the years that they worked. E.g., it is about to run IL out of cash.
        Do the total PTO “user” fees [for applicants, PGRs and maintenance of issued patents] cover all of the health insurance and pension costs for PTO examiners and other employees? The last I heard it did not.


          Did “what you hear” include the nigh Billion dollars diverted to the general tax coffers…?


          “The last I heard it did not.”

          As far as I know it does. It certainly covers the “health insurance costs” aka the portion of our health insurance that the employer pays. As to the pensions I’m not 100% sure but I’m pretty sure it does. That’s why they “reformed it” to where we have substantially less.

          But then, on the other hand, it still isn’t too bad, last I heard I think I get 30% of whatever I was making when last I left the office after I retire if I stay on for like 15 years+ or something like that.

    1. 9.1

      Lots of wailing and gnashing of teeth, as far as I can read.

      And yet, somehow, as I understand it, it was the people themselves that set the tone and have chosen a different course. Has such democracy in the face of a One World Order become so gauche as to earn such widespread disdain from the learned?

      Elsewhere I invited our resident non-US-sovereign to provide some insight into how these developments may impact the patent world on that side of the pond. I was interested to learn that the EU and the EPO are quite separate things (something that seems quite dissonant itself from the wailings and gnashings that I have read upon). If I were to take MaxDrei’s words to heart, I have to wonder why all that grief from the (self?) appointed IP thought leaders that this exit must have serious and deleterious effects upon the innovation community of those that have decided to leave the EU. I remain uncertain of the connections between the political pieces given how MaxDrei surely knows his own backyard, and yet, the near-totality of others who also know that backyard.

      Perhaps others from that realm may step forward and help us Yankees understand.

      Is there an impact?
      Is there no impact?
      Is (any) impact due not to the IP corner, which may or may not proceed apace, but rather, some other, perhaps larger, societal interactions which now must face new uncertainties (change)?

      1. 9.1.1

        democracy in the face of a One World Order

        Still waiting for Texas and Arizona to secede. That’ll show everyone!

      2. 9.1.2

        “Has such democracy in the face of a One World Order become so gauche as to earn such widespread disdain from the learned?”

        Of course. “the learned” always sht on the little man. That’s generally how they make their dollas.

        “If I were to take MaxDrei’s words to heart, I have to wonder why all that grief from the (self?) appointed IP thought leaders that this exit must have serious and deleterious effects upon the innovation community of those that have decided to leave the EU”

        Idk about the innovation community, but the mainstream community seems most concerned because they won’t get to la la la easily up and move to the mainland at their leisure. And that their trade will be in the shtter for a small while.


          That “mainstream community” is not concerned – they are the ones that voted this way.

          You seem to miss the point about a democratic election…

  3. 8

    This, like Cuozzo, is one of several inherently weak challenges to IPR procedures, because they could not have made any significant difference in the number of patents losing claims in IPRs even if they had been successful. [As distinguished from the two pending “long shot” cert petitions to kill IPRs entirely as unconstitutional]. Another one just shot down was a challenge to the Fed. Cir. IPR review standard. None of these procedural differences are nearly as significant as the fact that patent application examiners have only a few hours to search for and apply prior art. Unavoidably often missing highly relevant prior art that can be found in the far more thorough prior art searches done by most IPR petitioners. Approximately 80% of all IPR petitioners are very strongly motivated to do a really thorough, expensive, publication prior art search and IPR presentation by being sued on the subject patent, and to have that art compared to the subject claims by patent attorney APJs rather than lay jurors.
    [Before IPRs, far less asserted patents were ever fully tested for validity. Less than 5% of defendants being sued for patent infringement, even if they had good prior art, were willing to pay for a full blown trial and appeal needed to get a judicial decision on invalidity, because S.J. is only rarely granted and sustained on that basis.]

    1. 8.1

      PM Before IPRs, far less asserted patents were ever fully tested for validity. Less than 5% of defendants being sued for patent infringement, even if they had good prior art, were willing to pay for a full blown trial and appeal needed to get a judicial decision on invalidity, because S.J. is only rarely granted and sustained on that basis.]

      Yup. And so you’d have a ridiculous j@cked up claim construction by some district court judge followed by a settlement that created a “precedent” and a legally relevant “fact” (“license has been taken”) that (for nonsensical reasons) makes proving invalidity even more difficult.

      1. 8.1.1

        MM, I am no cynical about the district courts. The judges I have seen do not favor one side, and truly try to get the right construction if for no other reason so that they do not have to retry the case.


          The district courts do just about anything to get patent cases off their docket.

      2. 8.1.2

        MM, as understood, the problem is not that much with judicial Markman claim scope definitions in and of themselves, albeit the Fed. Cir. reverses quite a few, both ways. Rather, it is that in too many D.C.s like E.D. TX the Markman hearing and its decision is put off until way too late into the litigation. Too late to reduce discovery and other extensive litigation costs from the patent owners broad claim scope assertions. In particular. too late for economical and efficient S.J. suit disposal on non-infringement based on a proper claim scope definition. A claim scope definition often narrower than that which a patent owner is allowed to assert unchallenged until most defendants pay up just to end the litigation cost bleeding.

      3. 8.1.3

        “There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that ‘my ignorance is just as good as your knowledge.”
        ~ ISAAC ASIMOV

        ‘my ignorance is just as good as your knowledge.” – MM. Pretty sure that that is MM’s motto.

      4. 8.1.4

        Notice the coward MM has again refused to make predictions in the outcome of cases. Doesn’t fit his purchased time.

    2. 8.2

      …so why are we (the Royal we, as in innovators choosing to use the patent system) paying Billions (yes, with a B) into such a system?

      Sounds like a registration system (which would likely run far less than a million) would have a much better value proposition.

      Or is the problem one that we are willing to allow examiners not to care about their work product…? (since you are implicitly saying that they are not doing what they are being paid to do: fully examine – and no, the internal workings of how much time they are allowed is just NOT the problem of my clients, so don’t bother going there)

      1. 8.2.1

        You keep going on about billions anon, but you have to remember how many people are being “served”. When the number served is 400k a year, and the thing isn’t cheap, then I say low billions is still a bargain basement price.


          I keep going on…?

          You keep going on and keep missing the point.

          How would you feel (context) about if this “entitlement” were like other entitlements and that “bargain basement price” was paid by general taxes instead of being paid for by those that are actually seeking the “entitlement”….?

          You cannot have it both ways – you cannot claim “bargain basement” and then ignore the context that the SUM TOTAL cost is simply NOT being footed by “gubmint” taxes on general folk like other entitlements.


            “How would you feel (context) about if this “entitlement” were like other entitlements and that “bargain basement price” was paid by general taxes instead of being paid for by those that are actually seeking the “entitlement”….?”

            I’m not sure I follow you here. “how would I feel”? As in how would I feel if the administrative costs (in addition to the costs already born by US gov taking licenses to inventions) were taken care of by taxes rather than user fees? Hmmm, good question but I think I would generally “feel” or “think”, that it was a gov/taxpayer hand out to the rich and rich corps (mostly). On top of the licensing that already is generally a hand out of that sort.

            “You cannot have it both ways – you cannot claim “bargain basement” and then ignore the context that the SUM TOTAL cost is simply NOT being footed by “gubmint” taxes on general folk like other entitlements.”

            I’m not trying to have it both ways. I do not ignore that context. “the sum total admin costs is not being footed by taxes” < there, I said it for you, are you happy? Also "this is not like many other entitlements" < there I said that as well. It certainly can be bargain basement prices and at the same time not be like other entitlement programs in some ways.

    3. 8.3

      Paul, you would be surprised just how many IPRs are conducted on references that art the same or no different in substance than the references before the examiner. Recall also there is a duty of disclosure thingy that forces patent owners to disclose the best prior art they know of. Examiners do not often miss anticipatory prior art.

      That being said, the issue is entirely different when the patent is in the software realm. Software patents use custom terms so the tradition search tools are not as efficient. Here, the closest prior art may also not be of the patent variety.


          anon, we might consider a legislative fix for software patents that simply issues them as registrations with no presumption of validity regardless that they are examined.


            Ned, let’s see: software industry in US grown up with patents and is 10 times better than any other software industry in any other country.

            But, ole wise Ned, just knows that they are actually causing terrible problems.

            What a joke you lot are.


              Night, being against business method patents is not being against software patents. The only reason you do not recognize this distinction is that the business method patents need a crutch and you know it.


                That is most definitely not the only reason, Ned.

                The far more apparent reason is that these are two subjects which raise the irrational Windmill chases.

                So while they are certainly “different things,” there is a certain amount of “cross-over” in anti-patent rhetoric and lack of inte11ectual honesty coming from those seeking to deny patent protection.


                I think anon is right, but the other thing is there is no definition of business method. And, many “business methods” that are tied to new technology should be eligible. I don’t have a big problem with business methods that are not implemented with technology not being patent eligible as long as tricks are played where then people try to extract the method of business and see if something more is added by the technology.

                You know—reality–information processing is new and anyone that says they know where it is leading is a fool and anyone that believes them is a bigger fool.

                What amazes me, though, is the parallels between manual labor and intellectual labor and the machines.

                1. A machine that does ANY type of labor is still a machine.

                  A “logic” machine is still a machine.
                  A “be-bop-be pushing” machine is still a machine.

                  Some people simply do not want to recognize that (for philosophical or “feelings” reasons).

                  That “want” though is immaterial to the law – as is readily understood by attorneys who are not so busy prevaricating about what the law actually is.

      1. 8.3.2

        I do not believe the former, and I know the latter is not true, because in many years of practice we very frequently found anticipatory or excellent 103 prior art against asserted patent claims with thorough searches, including publications such as prior product service manuals as well as prior art patent disclosures. Particularly including patents from the nearly half of all issued U.S. patents that are filed by non-U.S. companies. Reasonable companies would negotiate and withdraw licensing assertions of such patent claims. But that was before the rise of PAEs that sued w/o warning and ignored any negotiation that did not offer them cash settlements.
        [I do agree that finding prior art software in patent publications is difficult.]

  4. 7

    The Grand Jury analogy in Cuozzo is ill-considered. They are separate bodies from the courts and law enforcement agencies, and consist of citizens in order to provide independent review of probable cause before initiating criminal proceedings with an indictment.

    Following that analogy, the decision to initiate an IPR proceeding should not be made by the PTAB. While the Director has authority to delegate that responsibility, a different or newly created body could have been selected in order to ensure that institution and final decisions are independently considered.

    By delegating IPR institution to the PTAB, independent review does not occur and the procedure is somewhat analogous to a motion for preliminary injunction that will be decided by the same judge who will conduct the trial and decide whether to issue a permanent injunction. (Although interlocutory appeals of preliminary injunction decisions are authorized by statute). While efficiency is served by this procedure, independent review is disserved.

    Because Congress intended IPRs to provide an alternative to expensive and time consuming district court litigation of patent validity disputes, the decision to institute may have greater impact on patent challengers than patent owners. While a patent owner may still prevail at trial (or on appeal to the CAFC) after a decision to institute an IPR proceeding has been made, a patent challenger does not have the same opportunity, and has no recourse, when a petition to institute is denied.

    As of 1-15-2016, only 24% of challenged claims were found unpatentable in IPR proceedings according to USPTO statistics. Perhaps independent authority to institute is unnecessary, and perhaps authorization to appeal such decisions is necessary.

    1. 7.1

      Steve, you might add to your stats that some 86% of final decisions hold a claim invalid. That does suggest that the initial decision is all but a final decision.

      Until just recently, patent owners have not been able to rebut the petition with testimonial evidence in their preliminary response. Unless the petition was somewhat defective, if the petition put forth evidence (unrebutted) on all elements and issues, institution was ordered. Now, even though the patent owner might be but with counter evidence, if there is a dispute of fact between the petition’s evidence and the patent owners counter evidence, trial is authorized. There seems no way for a patent owner to avoid institution where the petition makes a prima facie case. And it remains that history is shown that the final decision heavily favors the petitioner and that might be an probably is because the PTAB is not going to reverse itself unless it sees new evidence. There really is no independent second review.

  5. 6

    Chief Judge Prost likely held the decision release to await the Cuozzo affirmance that implicitly supports the court’s ruling here.

    I doubt that. Covidien and the PTO Director filed their responses on April 21. 2 months from response to denial is par for the course when the denial comes with a dissenting opinion. And for Judge Newman to produce a dissent in two months is… somewhat fast.

    1. 5.1

      Reginald, you might be right that the real issue is a right to jury trial. Judges can decide preliminary matters all the time, but the jury decided the facts.

      Of course, one can waive their right to a jury trial.

      Which all goes to show, that the issue Ethicon wants to really make is already before the Supreme Court in MCM.

  6. 4

    There is a major due process problem here. Imagine if the same jury who decided to indict based on probable cause also were the jury to decide guilt.

    1. 4.1

      Or what if – *gasp* – the same court were to decide both a preliminary injunction motion and also the merits of the case on summary judgment? What a huge due process problem that would be!

      1. 4.1.1

        Oh, that’s not so bad.

        But thank goodness we don’t have a system where the same judge who considers and denies a motion to dismiss then goes on to hear the rest of the case.

      2. 4.1.2

        foobar, I assume you do know that there must be no issues of material fact for the court to decide a case on summary judgment.

      3. 4.1.3

        Further, Mrs. Foobar, you do know that a judge and a jury are two different entities and that one has a right to a jury trial on disputed facts before one can have his patent invalidated?

        But that does bring up the issue, does it not, whether patents are public rights or private rights. I think there is a substantially different level of due process consideration depending on what is at stake. If one is only being denied a benefit, as being stripped of his property, the level of due process required may be different and I think is different.

      4. 4.1.4

        Well, considering preliminary injunctions are equitable, they are solely for the court decide. Whereas, summary judgment is fine because the jury right is only really important for factual determination and summary judgment is only proper if no material fact is in dispute and the party is entitled to judgment as a matter of law.

  7. 3

    I’m sure a lot of posters here would find it amusing if Director Lee had to personally render the institution decisions on a couple thousand IPRs annually.

  8. 2

    The biggest problem the dissent is facing, which the dissent failed to address, is that by definition the PTAB includes the Director. 35 usc 6. Therefore, in my view, the institution and the trial could technically be performed by the Director. So even though the statute says institution by Director and merits trial by PTAB, the director is part of the PTAB. So she can delegate as she sees fit. Now if 35 USC 6 did not have such a definition, I would tend to agree with the dissents rationale.

    1. 2.1

      This is interesting and seems right, if a little bit surprising. The upshot seems to be that Congress never actually required two separate decisionmakers anywhere in the statute. Some things are given to “the Director” (which the Director can delegate), and some things are given to the PTAB (which includes the Director, but also some other people). I suppose that makes sense, as the final decision isn’t an appeal of the institution decision. Judge Newman’s right that there are strong reasons to think that the result in this case app permits bad policy, but not illegal policy.

      35 U.S.C. 6(a) and (c) say this:
      (a) In General.- There shall be in the Office a Patent Trial and Appeal Board. The Director, the Deputy Director, the Commissioner for Patents, the Commissioner for Trademarks, and the administrative patent judges shall constitute the Patent Trial and Appeal Board. The administrative patent judges shall be persons of competent legal knowledge and scientific ability who are appointed by the Secretary, in consultation with the Director. Any reference in any Federal law, Executive order, rule, regulation, or delegation of authority, or any document of or pertaining to the Board of Patent Appeals and Interferences is deemed to refer to the Patent Trial and Appeal Board.

      (c) 3-Member Panels.- Each appeal, derivation proceeding, post-grant review, and inter partes review shall be heard by at least 3 members of the Patent Trial and Appeal Board, who shall be designated by the Director. Only the Patent Trial and Appeal Board may grant rehearings.

      and 35 USC 316(c) says this: The Patent Trial and Appeal Board shall, in accordance with section 6, conduct each inter partes review instituted under this chapter.

    2. 2.2

      I agree with anon here. That said, the people who backed IPRs apparently thought that they would be conducted substantially like re-examinations where one examiner made the call on “institution” and a second examiner actually conducted the examination. I have had re-examinations where the examining attorney had allowed the case without issuing an office action with reasons for allowance after another attorney had ordered re-examination.

      Given Cuozzo, I do not think a strict statutory construction argument would not prevail. The only issue I see here is a due process issue which ties heavily into the idea that a patent is a property right and that due process requires that the trier of fact revoking the patent must be different from the trier of fact authorizing institution. The institution decision is made without counter evidence from the patent owner and is therefor heavily biased in favor of the petitioner.

      After the PTAB institutes trial, it seldom changes its mind. The patent owner really has to poke holes in the petitioner’s case through cross-examination of their expert. Otherwise they really have no chance; and the final decision basically reaffirms the initial decision to institute which effectively makes the burden of proof to bring down a patent a “reasonable likelihood” standard of proof without allowing the patent owner even a fair rebuttal opportunity when the real decision to invalidate is made.

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