Merck & Cie v. Gnosis S.P.A. (Fed. Cir. 2015)

By Kevin E. Noonan --

As she has done many times before (and so many times that she has been unfairly characterized as a scold on the Federal Circuit), Judge Pauline Newman dissented from the panel majority decision affirming an obviousness determination by the U.S. Patent and Trademark Office in an inter partes review by the Patent Trial and Appeal Board in Merck & Cie v. Gnosis S.P.A.  And as she has in several other cases, Judge Newman raises in her dissent important questions involving the proper role of the Federal Circuit in reviewing USPTO decisions and the interplay of the Patent Act and the Administrative Procedures Act in how the Court does so.

The case involves U.S. Patent No. 6,011,040, which claims "methods of using folates to lower levels of homocysteine in the human body."  Specifically, the claims on appeal (a subset (claims 8, 9, 11, 12, 14, 15, and 19-22) of the challenged claims, following cancellation of several (claims 1-3, 5, 6 and 13) of the claims originally challenged) were directed at such methods using 5-methyl-tetrahydrofolic acid (5-MTHF) and in particular, one stereoisomer of this compound (the L-isomer, having biological activity), alone or in combination with one or a plurality of B vitamins.  The PTAB found these claims obvious, based on three principal references (European application EP0959005, U.S. Patent No. 5,194,611, and a scientific reference to Ubbink et al.).  The PTAB found that the deficiencies in the primary '005 application were overcome by combination with the '611 patent and/or the Ubbink reference, and that the desirability of this combination would have been appreciated by the skilled worker in view of additional prior art references considered by the Board raised by either party.  Further, the Board found that evidence of secondary considerations was not sufficient to overcome the evidence of obviousness adduced by the petitioner.  In this regard the Board relied upon evidence raised by Gnosis to counter Merck's argument of the prior art "teaching away" from the claimed invention to establish that the skilled worker would have had a reasonable expectation of success at achieving the claimed invention to support the Board's obviousness determination.

The Federal Circuit affirmed, in an opinion by Judge Hughes joined by Judge Plager.  Importantly for the issues raised by Judge Newman in her dissent, the majority applied the "substantial evidence" standard for factual determinations made by the Board in arriving at the legal conclusion that the claims were obvious.  This standard, arising from the Administrative Procedures Act, was mandated by the Supreme Court for the Federal Circuit's review of PTO action in Dickinson v. Zurko, 527 U.S. 150 (1999), and first implemented in In re Gartside, 203 F.3d 1305, 1313 (Fed. Cir. 2000).  According to the majority, under this standard factual determinations by the PTO, including those of the PTAB, are entitled to deference if supported by substantial evidence, and while the resulting legal conclusions are reviewed de novo in practice deferring to the Board on the facts results in affirming the legal conclusions, as occurred here.

Judge Newman's dissent challenges the application of these precedents to inter partes review decisions by the PTAB, based on her understanding of Congress's intent in establishing this mode of challenging granted patents.  She begins her analysis by recognizing that Congress intended to correct a trend by the PTO of granting patents "too easily" and that courts were not deciding patent issues "consistently" (which admission must have stung a bit).  She perceived that in establishing the PTAB and establishing "new procedures including changes in the burdens of proof, limiting the path of judicial review, and providing for finality and strict time limits" Congress intended to "restore an effective and balanced system of patents, whereby valid patents may reliably be confirmed and invalid patents efficiently invalidated."

The majority's stance in deferring to the PTAB's factual determinations, for Judge Newman, "raises questions of implementation of the statutory plan," and with particular regard to the Federal Circuit's role cites the Supreme Court in N.L.R.B. v. Brown, 380 U.S. 278, 291–92 (1965):

Reviewing courts are not obliged to stand aside and rubberstamp their affirmance of administrative decisions that they deem inconsistent with a statutory mandate or that frustrate the congressional policy underlying a statute.  Such review is always properly within the judicial province, and courts would abdicate their responsibility if they did not fully review such administrative decisions.

Specifically, Judge Newman believes that the AIA imposed on the petitioner the burden of showing, by a preponderance of the evidence, that a patent was invalid.  35 U.S.C. § 316(e).  This standard is much lower than the "clear and convincing evidence" standard required by a district court, because inter alia claims in district court litigation are presumed to be valid.  35 U.S.C. § 283.  This created "a powerful incentive" for challenging patent validity before the PTAB in inter partes proceedings, Judge Newman writes, but "the correct law must be applied, and disputed facts found and reviewed on the entirety of the evidence, as the preponderance standard requires."

Just as importantly for Judge Newman are the provisions of the AIA that make the Federal Circuit the only avenue for reviewing PTAB decisions, because Congress excluded inter partes review decisions from review by district courts or the International Trade Commission.  This raises the level of responsibility on the Court in performing its review, and in Judge Newman's view makes the kind of deferential standard applied by the majority to be error.  As she states, "[t]he substantial evidence standard determines whether the decision could reasonably have been made, not whether it was correctly made" and stems from appellate court decisions of jury verdicts, "in recognition of the role of credibility at trial."  Its use in the Administrative Procedures Act was sanctioned by a recognition of the particular expertise of specialized agencies in fulfilling their statutory mandate, according to Judge Newman's dissent, and that is the trouble:  by its very nature an inter partes review proceeding is predicated on an allegation by the petitioner that the agency (the PTO) failed to do its job properly and granted the patent improvidently.  Indeed, that problem was what Congress wanted to address by enacting the inter partes review provisions of the AIA in her view (supported by copious citation to the legislative history of the AIA).  Under these circumstances, "[d]eferential review by the Federal Circuit falls short of the legislative purpose of providing optimum determination of patent validity."

In her view, "[o]n appeal to the Federal Circuit, our assignment is to determine whether the PTAB ruling is correct in law and supported by a preponderance of the evidence.  The panel majority errs in importing into these proceedings the Administrative Procedure Act standard that applies to initial patent examination decisions [as set forth in In re Gartside]."  And requiring a showing by an administrative agency of a preponderance of evidence, a much higher standard than the substantial evidence standard, is not unheard of and has been adopted in other instances cited by the Judge.  "Such close appellate scrutiny is critical to the legislative balance of the America Invents Act," according to the dissent, "whose purpose is to reach an expeditious and reliable determination on which inventors and industry innovators and competitors can rely."  The majority's use of the deferential "substantial evidence" standard "strays from this purpose" and is contrary to the standard set forth by Congress in the AIA.

It perhaps goes without saying that Judge Newman disagrees with the majority on the merits, and some of her observations in this regard illuminate her broader point:  for example, with regard to the sufficiency vel non of the evidence regarding motivation to combine the cited references, she writes "[d]eferential review on a standard that looks at only one side of the evidence is less likely to uncover errors in the balance and burden of proof."  While her explication of why she reached the opposite conclusion is informative is it not what is significant about her dissent.  That significance lies in the questions she raises about the proper role of the PTAB, as an "adjudicative body" and the standards the Federal Circuit uses to review and supervise the PTAB in its invalidity determinations under the AIA.  She raises questions that only the Supreme Court can properly decide if they deign to do so.

Merck & Cie v. Gnosis S.P.A. (Fed. Cir. 2015)
Panel: Circuit Judges Newman, Plager, and Hughes
Opinion by Circuit Judge Hughes; dissenting opinion by Circuit Judge Newman

Comments

[Heebie-Jeebies]

Congratulations to the CAFC for abdicating its role and enabling the farce that the US patent process has become: issue a patent, often at great cost to the applicant; then renege on that issuance, at further cost to the now-patentee, in a PTAB proceeding in which the patent is invalidated, even though the claimed invention really is useful, novel and non-obvious; and then have the CAFC rubber-stamps the PTAB decision, at yet greater cost to the patentee.

As she is 99.9% of the time, in this case Judge Newman is right.

[Kevin E. Noonan]

Apologies to Judge Pauline Newman for our Emily Latella moment. We of course meant no disrespect.

[skeptical]

"She raises questions that only the Supreme Court can properly decide if they deign to do so."

I do not see any disrespect for Judge Newman. The Justices of the Supreme Court, on the other hand...

[EG]

Hey Kevin,

Once again, Newman correctly holds her colleagues' statutory "feet to the fire." She is one of the few currently on the Federal Circuit bench that I respect.