Federal Circuit OKs PTAB invalidating patent claims prior litigation confirmed as valid

By Gene Quinn
April 4, 2017

Chief Judge Prost, Federal Circuit.

Earlier today the United States Court of Appeals for the Federal Circuit issued an opinion in Novartis AG v. Noven Pharmaceuticals, Inc., which affirmed the Patent Trial and Appeal Board (PTAB) invalidation of claims in related inter partes review (IPR) proceedings. The IPRs related to U.S. Patent No. 6,316,023 and U.S. Patent No. 6,335,031.

Patent owners losing claims and the Federal Circuit rubber stamping the PTAB isn’t news, sadly. What makes this case different, however, is that these very same patents were previously litigated and the claims were found to be nonobvious in federal district court.

Novartis argued to the Federal Circuit that the arguments presented to the PTAB by Noven, as well as the prior art submitted to support those arguments, were the same as considered during litigation in federal court. The Federal Circuit disagreed, finding that the record in federal court was not identical to the record at the PTAB. But the Federal Circuit went further, saying that even if the records were identical Novartis’ argument would have to fail.

Judge Wallach, who was joined by Chief Judge Prost and Judge Stoll in this decision, wrote:

[E]ven if the record were the same, Novartis’s argument would fail as a matter of law. The PTAB determined that a “petitioner in an inter partes review proves unpatentability by a preponderance of the evidence (see 35 U.S.C. § 316(e)) rather than by clear and convincing evidence[] as required in district court litigation,” meaning that the PTAB properly may reach a different conclusion based on the same evidence. Noven II, 2015 WL 5782081, at *2 (italics omitted). That position comports with recent Supreme Court precedent…

Wallach went on to quote a passage from Cuozzo Speed Technologies, LLC v. Lee, acknowledging that it is entirely possible that a district court may find a patent claim to be valid but that the USPTO may later cancel the claim on its own review. That is the problem when you have different standards applied by decision makers reviewing the same legal question. In the district courts the Phillips standard, which provides a “correct” claim construction, is mandated. See PPC Broadband, Inc. v. Corning Optical Communications RF, LLC at 7.  At the PTAB the broadest reasonable interpretation (BRI) of a claim is used as if the claim has never been previously examined and issued, and the PTAB does not presume the patent is valid despite there being no apparent statutory authority for the PTAB to ignore the presumption of validity.  Indeed, 35 U.S.C. 282 says: “A patent shall be presumed valid.” Interestingly, § 282 does not say that the presumption is voided in proceedings at the PTAB, but in their infinite wisdom the PTAB (and USPTO) do not think patents are required to be presumed valid at the PTAB. Shockingly, the Federal Circuit agrees.

Indeed, it is very difficult to understand why the Federal Circuit continues to allow the PTAB to ignore the presumption of validity that is so clearly and directly written into § 282. The presumption of validity is unmistakable, not at all ambiguous, and exceptionally direct. According to the Supreme Court, the proper role of a court is not to engage in a free-ranging search for the best policy, but rather to focus solely on statutory interpretation, and in so doing give effect to the clear meaning of the statutes as they are written, giving each word its ordinary, contemporary, common meaning. See Star Athletica LLC v. Varsity Brands, Inc. (slip op. at 6).*

So how is it possible that the words — a patent shall be presumed valid — have been interpreted to mean that a patent shall be presumed valid unless it is challenged at the Patent Trial and Appeal Board?

In any event, the Novartis argument regarding it being inappropriate to invalidate patent claims already finally adjudicated to be valid was premised on In re Baxter International, Inc. (Fed. Cir. 2012), which said:

When a party who has lost in a court proceeding challenging a patent, from which no additional appeal is possible, provokes a reexamination in the PTO, using the same presentations and arguments, even with a more lenient standard of proof, the PTO ideally should not arrive at a different conclusion.

Wallach explained that the Baxter court saying “ideally” the PTO will not reach a different conclusion was not intended to be a mandate. He wrote:

[T]he context in which that passage appears demonstrates that we used “ideally” to connote aspiration and, in fact, recognized that Congress has provided a separate review mechanism before the USPTO with its own standards. We will not imbue Baxter with a meaning that the decision itself does not support.

(citations and quotations omitted).

Ultimately, the Federal Circuit found there was substantial evidence to support the PTAB’s decision that the claims of the ‘023 patent and the ‘031 patent were invalid.

Patent claims being adjudicated valid in federal district court and then being killed in an administrative proceeding at the PTAB is exactly the problem so many of us saw coming. Time and time again throughout the debates in Congress, and all through the legislative history, post grant proceedings were explained as being a faster, low-cost alternative to litigating validity disputes in Federal District Court. That was just a lie. Post grant proceedings at the PTAB are not cheap, and they are not an alternative to district court proceedings. The PTAB is duplicative and anti-patent. In fact, because of the different standards used between district courts and the PTAB, and because district courts presume patents are valid pursuant to 35 U.S.C. 282, different outcomes are practically inevitable.

District courts are now subordinate to the omnipotent PTAB. What a mess Congress created with the America Invents Act (AIA).

UPDATED Wednesday, April 5, 2017. An earlier version of this article incorrectly stated that the majority opinion was written by Chief Judge Prost. Just Wallach wrote the opinion, which was joined by Chief Judge Prost and Judge Stoll.

_______________

* In Star Athletica Justice Thomas writing for the majority wrote: “This is not a free-ranging search for the best copyright policy, but rather “depends solely on statutory interpretation.” Mazer v. Stein, 347 U. S. 201, 214 (1954). “The controlling principle in this case is the basic and unexceptional rule that courts must give effect to the clear meaning of statutes as written.” Estate of Cowart v. Nicklos Drilling Co., 505 U. S. 469, 476 (1992). We thus begin and end our inquiry with the text, giving each word its “ordinary, contemporary, common meaning.” Walters v. Metropolitan Ed. Enterprises, Inc., 519 U. S. 202, 207 (1997) (internal quotation marks omitted).”

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 23 Comments comments.

  1. Curious April 4, 2017 3:33 pm

    Ultimately, the Federal Circuit found there was substantial evidence to support the PTAB’s decision that the claims of the ‘023 patent and the ‘031 patent were invalid.
    Getting back to administrative law, “substantial evidence” means that there is more than a scintilla — it doesn’t even mean a preponderance of the evidence. Basically, as long as the PTAB’s decision is based upon a whiff of evidence, then that is enough.

    The AIA-inflicted, PTAB patent death squads have essentially rendered null the presumption of validity in 35 USC 282. The execs at Google are laughing it up over this one — another nail in the coffin in which we’ll bury the notion that real patent rights exist in the United States.

    Google’s “do no evil” apparently does not apply to the competitiveness of US industry in the world.

  2. Ken April 4, 2017 3:39 pm

    I agree with the substance of this concern, but what could the Federal Circuit legitimately do about it – in light of what Congress did (in creating IPR and giving it the “preponderance” standard)?

    Here’s hoping “Oil States” may finally get rid of IPR…

  3. Night Writer April 4, 2017 4:00 pm

    So, a patent owner no matter is subject to endless IPRs.

  4. Gene Quinn April 4, 2017 4:09 pm

    Ken-

    I agree with you to some extent. The statute sets up the preponderance standard, which I think is a mistake but not something the Federal Circuit or PTAB can do anything about. But the BRI standard is one that applies to unexamined applications during examination. The PTAB does not allow amendments and it is an adjudication, thus the BRI standard is inappropriate. I also think BRI is inconsistent with a presumption of validity. How can the patent claim be presumed valid under 282 if it is construed as you would an unexamined and unissued claim? BRI is an inappropriate standard regardless of what the Supremes think.

    I agree with you. Hopefully Oil States will solve this mess. In the meantime, a new Director who wants to make changes to IPR could also do a lot of good.

  5. Steve Battaglia April 4, 2017 4:14 pm

    She’s nuts ! CAFC is rubber stamping Michelle Lee’s bizarre set up

  6. David April 4, 2017 4:15 pm

    This is yet another unfortunate example of why the “public rights” label is so important. If “public rights” become “private rights,” then the administrative order is merely advisory, and the original district court decision stands.

    However, if the validity of an issued patent remains a public right, then the claim is administrative, and the PTAB’s power will go as far as Congress wants it – including above the SCOTUS.

    It’s unfortunate that pharma & biotech have remained on the sidelines during the Article III challenges.

    Several tips for pharma & biotech GCs and patent counsel:

    Do NOT consult with IPR counsel for advice regarding potential involvement with the constitutional challenges. They have a significant conflict of interest.

    Do NOT rely on academics who largely advocate for policy above the rule of law and the separation of powers.

    Instead, consider:

    1. Cooper and MCM were both relisted by an 8-member Court;

    2. The Court instructed the USPTO to file its waived response in Oil States;

    3. Gorsuch’s record on Article III and the separation of powers largely speaks for itself.

    It’s time to get in the game.

  7. peter April 4, 2017 9:22 pm

    Prost is obviously an uninspired jurist. One wonders if this decision was set up in anticipation of reviewing VirnetX’ patents- which are currently at the CAFC and which are accompanied by hundreds of millions in damages award from a jury and infringement from two trials.

  8. Anon April 5, 2017 7:10 am

    The stripping of a stick in the bundle of property rights (of the presumption) occurs at the initiation decision point.

    This occurs (in part) because you are taking an item that has passed the executive branch’s reach (at the point of grant) and putting the item back into the reach of the executive branch.

    The better question is whether or not Congress can pass a patent law (even as Congress is the chosen branch of the government to write patent law) when such a law may violate other inured Constitutional protections (as property does).

    Keep in mind please that the America Invents Act did NOT touch the property aspect of a granted property. The section that Gene references (35 USC 282) was not amended in the least; and neither was section 35 USC 261.

    There is (and must be) a taking in order to revert a granted property right back into something less than that whole – at the initiation decision point – in order for the executive office to “adjudicate” on the item.

    This is not the “doing” (per se) of the Executive branch – but rather, the important focus needs to be on the doing of the Legislative branch (in the AIA) that does not afford the other Constitutional protections to a granted property right.

    It is the AIA itself that is critically flawed in a Constitutional sense.

  9. Night Writer April 5, 2017 8:11 am

    Prost’s face says it all. I am ignorant. I am powerful. I don’t care if it is right or wrong. You will bow before me.

  10. EG April 5, 2017 8:52 am

    Hey Gene,

    As made painfully clear by this case, these differing legal standards between IPRs and court adjudication in determining the validity of patent rights (which are personal property per 35 USC 261 and over 200 years of case law) cry out why IPRs violate “due process” under the 5th Amendment. (Anon-your “bundle of sticks” analogy makes complete sense to me for why IPRs are an unlawful “taking” under the 5th Amendment.) That SCOTUS or the Federal Circuit won’t acknowledge that fact is dreadful and embarrassing.

  11. Peter April 5, 2017 10:13 am

    Defining patent rights as “public rights” is the cornerstone of the CAFC relationship with the PTAB. Without it the whole house of cards comes down.
    Dyk in MCM v HP had to reach back to the mid 1800s to find support for the categorization of patent rights as public rights. Dependence on the 19th century both vague and tenuous case is coupled with the ignoring of established law for the next hundred plus years.

  12. Eric Berend April 5, 2017 10:20 am

    That slight sound of feet hitting the ground? It grows as a groundswell, like the crescendo of drops at the onset of rain.

    At first, there were few. Long standing practices require strong contradiction to undermine confidence. Then, awful realization took hold. The few became the many. And now, the stampede of inventors away from anything to do with the captive organ known as the USPTO, is legion.

    This result is too perfect for the interests of intellectual property pirates – the TRUE “trolls” – to have been the result of accidental activities. Nay: such deliberate fraud upon the U.S. public and specific private interests, of such an enormous magnitude; does not occur solely, on a mere whim – unless it perhaps be, of the dark princeling of the new realm known as Peter Thiel; or, his mentors at the evil alma mater of Stanford.

    These judges and so-called “Justices”, do not ‘decide’. The politicians and so-called “legislators”, do not ‘decide’. This plundering leviathan of evil exploitation, did not arise at their behest alone: it is the so-called “amici curae” and the ‘K Street’ cabal, that “DECIDES”, in America today.

    This is what criminal corruption in the guise of civil influences, looks like. How could massive evil; on such vast scale; perpetrated for the benefit of gluttonous narrow interests, appear any different?

  13. Paul F. Morgan April 5, 2017 10:36 am

    It is surprising that this has happened so rarely,* since a decision in one D.C. proceeding not to invalidate a patent is not even binding in any other D.C. proceeding against any other defendant, much less binding in a post-grant proceeding, which is in rem. That is, D.C.s do not hold patents valid, they hold that that particular defendant did not prove invalidity.

    *Presumably because most IPRs are decided faster than D.C. proceedings, and [slow] inter partes reexaminations have been eliminated.

  14. David April 5, 2017 10:42 am

    @ Peter

    In fact, quite the opposite. Dyk brazenly rewrote longstanding 19th century SCOTUS precedent holding that patent rights are property rights requiring Article III adjudication.

    What makes it particularly brazen is that in its prior evaluation of the19th century precedent the CAFC explained that the SCOTUS ruled against the patent office on constitutional grounds (Patlex).

    The litigants explain this in fairly damning detail.

    The CAFC is showing signs of being a failed experiment. Sending patent matters back to the regional COA would help diffuse what has become an unreasonable consolidation of judicial power.

    Conversely, the SCOTUS appears to have noticed, and the increased “vigilance” over CAFC matters may be its way of sending a message. The SCOTUS handled the COA9 similarly when it previously showed signs of going rogue.

  15. GrzeszDeL April 5, 2017 12:47 pm

    This is a small point, but this opinion was not authored by Chief Judge Prost. It was authored by Judge Wallach. Why is there is so much talk about Prost on this thread?

  16. Gene Quinn April 5, 2017 2:15 pm

    GrzeszDel-

    That would be my fault. Chief Judge Prost joined with the majority, but the opinion was authored by Judge Wallach. When the article first published I incorrectly identified Chief Judge Prost as the author of the majority opinion rather than just joining the opinion.

    -Gene

  17. B April 5, 2017 6:54 pm

    “BRI is an inappropriate standard regardless of what the Supremes think. ”

    Yes, but patent examiners are not equipped to address the appropriate construction laws. Personally, I make an attempt to write claims in such a way that a BRI construction and the same as a Markman construction. Of course, Examiners excel in unreasonable interpretations that I fight every day – today no exception.

  18. Anon April 5, 2017 9:04 pm

    EG @ 10,

    As far as I know, no one as of yet has asked the right question of the court.

    Asking the court if the PTAB is following what Congress wrote will only give the “answers” that we have seen so far.

    Asking the court if Congress has the Constitutional authority to write a law that creates an unjustifiable takings scenario (even a law that is otherwise firmly in the domain of Congress, such as patent law) is an altogether different beast.

    For a little “I Robot” fun:

    https://www.youtube.com/watch?v=C3xM8sHGoiQ

  19. Anon April 5, 2017 9:06 pm

    also a little more fun:

    https://www.youtube.com/watch?v=RCj-gkbtvrw

  20. step back April 5, 2017 11:01 pm

    As noted elsewhere, the Constitution only empowers Congress to “secure” rights for inventors. It does not empower Congress to de-secure rights which the inventor has lawfully obtained.

    https://en.wikipedia.org/wiki/Copyright_Clause

  21. Night Writer April 8, 2017 9:24 am

    @20 step : you know step, if you are going to try and actually impose things like the Constitution on us, then we are going to have to just ignore you.

    The SCOTUS has figured out ways around the Constitution. You create new words that aren’t in the Constitution and then tell everyone what those words mean and since they aren’t in the Constitution there is nothing to contradict you.

  22. Night Writer April 8, 2017 9:25 am

    @15: it was a gut reaction to Prost who surely exemplifies the type of person that does not belong on the CAFC.

  23. step back April 8, 2017 2:02 pm

    Night @21

    Good point 🙂

    The SCOTeti have determined that most inventions are obvious as a result of “market forces”.

    Why just the other day I was in a DIsney store and I felt “the force”.
    No need for inventors any more. We have the force on our side.