Patent Docs

United Therapeutics Corp. v. Liquidia Technologies Inc. (Fed. Cir. 2024)

By Kevin E. Noonan --

Zealous advocacy is a hallmark of adversarial proceedings, whether in district court or before the USPTO, where the opportunities for such advocacy have multiplied with the establishment by the Leahy-Smith America Invents Act of inter partes review or IPRs (and to a lesser extent post-grant review or PGRs).  But sometimes such advocacy can morph into overzealousness and an example of this form of advocacy arose in an IPR between United Therapeutics Corp. v. Liquidia Technologies Inc. decided in a recent decision by the Federal Circuit.

There was extensive (ANDA) litigation between the parties over inhaled formulations of treprostinil (UTC's Tyvaso®, Liquidia's Yutrepia™) for treating pulmonary hypertension, wherein UTC asserted claims in U.S. Patent No. 9,593,066 as well as U.S. Patent No. 10,716,793.  The District Court held that the asserted claims of the '066 patent were invalid for anticipation or were not infringed, a decision affirmed in all respects by the Federal Circuit, and that the asserted claims in the '793 patent were infringed and were not invalid; see "United Therapeutics Corp. v. Liquidia Technologies, Inc. (Fed. Cir. 2023)".  In an inter partes review proceeding, the Patent Trial and Appeal Board held that the challenged claims of the '793 patent (which the District Court held were infringed) were invalid for obviousness, a decision also affirmed by the Federal Circuit; see "United Therapeutics Corp. v. Liquidia Technologies, Inc. (Fed. Cir. 2024)".

In the matter at hand, Liquidia challenged in a separate IPR UTC's claims in U.S. Patent No. 9,604,901 for obviousness of a method of making treprostinil; claim 1 is representative:

A pharmaceutical batch consisting of treprostinil or a salt thereof and impurities resulting from (a) alkylating a benzindene triol, (b) hydrolyzing the product of step (a) to form a solution comprising treprostinil, (c) contacting the solution comprising treprostinil from step (b) with a base to form a salt of treprostinil, (d) isolating the salt of treprostinil, and (e) optionally reacting the salt of treprostinil with an acid to form treprostinil, and wherein the pharmaceutical batch contains at least 2.9 g of treprostinil or its salt.

Liquidia submitted an expert declaration in support of its IPR petition that did not contain the conventional recognition that the declaration testimony was made under oath and the penalties for perjury that would arise for false swearing.  UTC timely objected to the declaration and moved to exclude on 35 U.S.C. § 25 and 37 C.F.R. § 42.2 grounds; Liquidia attempted (unsuccessfully) to cured by submitting a substitute declaration having the necessary language but this submission was held to be untimely by the PTAB and insufficient because it contained no evidence in substantive response to UTC's objection.  However, and importantly, UTC deposed Liquidia's expert prior to filing its Patent Owner response, where the deponent affirmed his duty to provide "truthful and accurate testimony."  At oral argument, Liquidia explained that the deficiencies in the declaration were inadvertent and an accidental deletion of the language during drafting, was not intentional, and argued that UTC was not prejudiced due to its exercised ability to depose the expert before filing its Owner's statement and oral argument.  During oral argument, UTC's representative conceded that "he would be 'hard pressed to sit here and say, you know, that we suffered a specific cognizable prejudice.'"  The PTAB filed a Final Written Decision (FWD) that some but not all of the challenged claims were invalid, relying in some part on Liquidia's expert declaration.  The Board considered this evidence despite its deficiencies because UTC had not been prejudiced, in its view, because UTC had had the opportunity to depose the expert.  This appeal followed.

The Federal Circuit affirmed in a decision by Judge Stoll joined by Judges Hughes and Cunningham.  The panel affirmed the PTAB's reliance and consideration on Liquidia's expert declaration based on compliance with the Administrative Procedures Act (APA).  Specifically, the Court held that the Board's decision was not "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" under 5 U.S.C. § 706, citing In re Sullivan, 362 F.3d 1324, 1326 (Fed. Cir. 2004).  Nor was the decision an abuse of discretion (defined as a decision that is "(1) is clearly unreasonable, arbitrary, or fanciful; (2) is based on an erroneous conclusion of law; (3) rests on [a] clearly erroneous fact finding; or (4) involves a record that contains no evidence on which the Board could rationally base its decision) under Intelligent Bio-Sys., Inc. v. Illumina Cambridge Ltd., 821 F.3d 1359, 1367 (Fed. Cir. 2016) (quoting Bilstad v. Wakalopulos, 386 F.3d 1116, 1121 (Fed. Cir. 2004)).  While acknowledging the aptness of UTC's assertions regarding the statutory and regulatory standards for declarations and affidavits to be sworn under oath, the purpose for the rule is "to provide a guarantee of truthfulness where, as here, the testimonial evidence is in paper form," reciting Former Emps. of Barry Callebaut v. Chao, 357 F.3d 1377, 1383 (Fed. Cir. 2004), and is not burdensome ("easy to satisfy").  The opinion notes that UTC "made a strategic decision" to "rigorously" depose Liquidia's expert and established under oath that "there were no issues concerning the truthfulness of the opinions" therein.  The Court found "no harmful error" in the Board's reliance on the witness's testimony in rendering its FWD under these circumstances, and in the absence of an error "that was genuinely harmful or prejudicial" had no basis for finding the Board had abused its discretion, citing Swagway, LLC v. Int'l Trade Comm'n, 934 F.3d 1332, 1343 (Fed. Cir. 2019), for the opportunity for the Board and the Court to recognize harmless error under the APA.  On the merits the opinion notes that "UTC responded to Dr. Winkler's opinions in its Preliminary Response, Patent Owner Response, Sur-Reply, and its own expert's declaration" and thus had had "a full and fair opportunity to litigate Dr. Winkler's sworn opinions and suffered no prejudice."  "At bottom, under the facts here, substance beats form" the panel pithily summarized its opinion on UTC's arguments challenging the PTAB's decision (the panel relying on the parties' judgment in not having this decision used to "create a perverse incentive for a party to not depose a declarant who failed to include an oath or declaration with her affidavit").

The opinion also affirmed the PTAB's obviousness determination based on that determination being supported by substantial evidence provided by the cited prior art and Liquidia's expert.  The opinion also rejected UTC's argument that the PTAB's finding of obviousness was contrary to the Court's limitations of reliance on "common sense" in obviousness determinations enunciated in Arendi S.A.R.L. v. Apple Inc., 832 F.3d 1355 (Fed. Cir. 2016), because the Board had relied on "more than common sense" in the form of "reasoned analysis and evidentiary support."

United Therapeutics Corp. v. Liquidia Technologies Inc. (Fed. Cir. 2024)
Nonprecedential disposition
Panel: Circuit Judges Hughes, Stoll, and Cunningham
Opinion by Circuit Judge Stoll

Purdue Pharma L.P. v. Collegium Pharmaceutical, Inc. (Fed. Cir. 2023)

By Kevin E. Noonan --

One of the many changes introduced into U.S. patent law by the Leahy-Smith America Invents Act were provisions for post-grant review (PGR) and inter partes review (IPR).  There have been thousands of these proceedings instituted since their enactment into law, and the contours of how the Patent Trial and Appeal Board (PTAB) have executed these statutory provisions have been the subject of several Supreme Court decisions (see "Thryv, Inc. v. Click-to-Call Technologies, LP (2020)"; "Return Mail, Inc. v. United States Postal Service (2019)"; "Oil States Energy Services, LLC. v. Greene's Energy Group, LLC (2018)"; "SAS Institute Inc. v. Iancu (2018)"; "Cuozzo Speed Technologies LLC v. Lee (2016)").  Remarkably, however, there has never been a Federal Circuit decision addressing the status of either proceeding should the PTAB fail to satisfy the one-year limitation on the Board for issuing a Final Written Decision (FWD) (subject for good cause to a six-month extension), but that changed with the Court's decision in Purdue Pharma L.P. v. Collegium Pharmaceutical, Inc.

The case arose in a post-grant review proceeding over Purdue's U.S. Patent No. 9,693,961, which is directed to opioid formulations modified to "prevent or deter" abuse (a tactic pursued by Purdue in part to expiate any responsibility that could be attributed to the company for the escalating opioid addiction crisis over the past decade or so; see, e.g., Keefe, Empire of Pain: The Secret History of the Sackler Dynasty).  The Patent Trial and Appeal Board in its Final Written Decision found all claims (1-17) invalid for lack of an adequate written description and anticipation.  Claim 1 is representative:

A method of preparing an abuse deterrent controlled release dosage form comprising:
    combining oxycodone or a pharmaceutically acceptable salt thereof as active agent, polyglycolyzed glycerides, a C₁₂ to C₄₀ fatty acid or a mixture thereof, carnauba wax and beeswax, to form a homogenous mixture, wherein the oxycodone or pharmaceutically acceptable salt thereof is the sole active agent in the dosage form;
    preparing particles from the homogenous mixture; and containing the particles in a capsule;
    the abuse deterrent dosage form providing a therapeutic effect for about 12 hours or longer when orally administered to a human patient, and
    the abuse deterrent dosage form being abuse deterrent when subjected to tampering comprising heating at a temperature greater than about 45° C.

The PGR was filed after Purdue filed suit against Collegium in District Court for infringement.

Purdue argued before the PTAB that the '961 patent was not subject to PGR proceedings because it claimed priority to an earlier application having a filing date of August 6, 2001, but the Board rejected this challenge to its statutory authority when it held that the earlier-filed application did not support the priority claim for failure to satisfy the written description requirement of 35 U.S.C. § 112(a) and that the earliest effective filing date was after March 16, 2013 (making the patent subject to PGR scrutiny).  Both the PGR and district court litigation were stayed when Purdue filed for bankruptcy on September 24, 2019.  These stays were lifted by the bankruptcy court on September 1, 2020.  Even though the Chief Patent Judge had found good cause to extend by six months the statutory one-year deadline for the Board to render a Final Written Decision (until April 4, 2020), the Board did not render its FWD until November 19, 2021.

Based on this timeline, Purdue moved the Board to terminate the PGR on the grounds that the Board's statutory authority had lapsed under 35 U.S.C. § 326(a)(11) and 37 C.F.R. § 42.200(c).  The Board rejected this motion and issued the FWD, finding all '961 claims invalid.  This appeal followed.

The Federal Circuit affirmed the Board's FWD, in an opinion by Judge Dyk joined by Judges Hughes and Stoll.  The opinion notes that this is the first instance in which the Board has not issued a FWD by the statutory or extended deadlines, making this a case of first impression for the Court.  The opinion cites voluminous Supreme Court opinions, including United States v. James Daniel Good Real Prop., 510 U.S. 43, 63 (1993); Nielsen v. Preap, 139 S. Ct. 954, 967 (2019); Dolan v. United States, 560 U.S. 605, 611 (2010); Barnhart v. Peabody Coal Co., 537 U.S. 149, 159 (2003); Regions Hosp. v. Shalala, 522 U.S. 448, 459 n.3 (1998); and United States v. Montalvo-Murillo, 495 U.S. 711, 717 (1990), for the principle that "if a statute does not specify a consequence for non-compliance with statutory timing provisions, the federal courts will not in the ordinary course impose their own coercive sanction."  In particular, the Court cited the Federal Circuit's own precedent that "when a statute does not specify the consequences of non-compliance, courts should not assume that Congress intended that the agency lose its power to act," citing Hitachi Home Elecs. (Am.), Inc. v. United States, 661 F.3d 1343, 1347 (Fed. Cir. 2011) (quoting Liesegang v. Sec'y of Veterans Affs., 312 F.3d 1368, 1376– 77 (Fed. Cir. 2002)) and Transpacific Steel LLC v. United States, 4 F.4th 1306, 1320–21 (Fed. Cir. 2021).  Here the Court used this precedent and the absence of statutory direction supporting Purdue to affirm the PTAB's decision that its lack of timeliness was not sufficient basis to remove its power to issue even a tardy FWD.

The opinion specifically addresses Purdue's arguments to the contrary, for example the express use of the term "shall" in the relevant timing statutes.  This argument is contrary to the Supreme Court's decision in Brock v. Pierce Cnty., 476 U.S. 253, 266 (1986), however which was sufficient to uphold the Board's invalidity arguments.  Similarly, the panel rejected Purdue's reliance on the use of "negative words" such as "not later than" and "by not more than" under other Supreme Court precedent (specifically, French v. Edwards, 80 U.S. 506 (1871)) because that case did not involve a statutory deadline and later Supreme Court cases did not support the principle.  Another unsuccessful argument advanced by Purdue was based on the purported express tying of the statutory time limitation with the Board's statutory authority under Section 6, the interpretation of which the Federal Circuit held could be upheld under Supreme Court precedent only when Congress had clearly stated that "procedural rules, including time bars, cabin a court's power," citing United States v. Wong, 575 U.S. 402, 409 (2015) (quoting Sebelius v. Auburn Reg'l Med. Ctr., 568 U.S. 145, 153 (2013)).  The panel also rejected Purdue's argument that limitations in the statute relating to "good cause" and "joinder" circumstances evinced the required Congressional intent, particularly in view of the Court's Barnhart decision, wherein "enunciation of two exceptions does not imply an exclusion of a third."  Finally, portions of the Leahy-Smith America Invents Act which do bar the Office from acting after a time period expires use "quite different language" including Section 315(b) (that an IPR "may not be instituted" after the 1-year time bar); and Section 321(c) (wherein a PGR petition "may only be filed" not later than 9 months after patent grant).  According to the panel, these instances established that "[h]ad Congress meant to deprive the agency of power in section 326(a)(11), it knew how to do it" and had not.

Likewise the Federal Circuit did not find any support in the legislative history of the AIA to support Purdue's assertion that the Board lost its authority to issue a FWD after the statutory time period had expired.  The panel understood the purposes for the amendments to the statute to substitute PGRs and IPRs for inter partes reexamination was to make the post-grant review process more efficient, and stripping the PTAB of the capacity to render a FWD after undertaking the proceedings merely due to missing the statutory time proscriptions was not consistent with increasing efficiency of post-grant reviews.  And the Court further rejected Purdue's arguments that its decision would leave post-grant review proceedings just as open-ended as the inter partes reexaminations Congress intended that they replace; this is inaccurate according to the opinion because the Board "cannot ignore statutory deadlines," and the proper remedy under the circumstances faced by Purdue was mandamus, citing Norton v. Southern Utah Wilderness All., 542 U.S. 55, 65 (2004); Telecommunications Rsch. & Action Ctr. v. F.C.C., 750 F.2d 70, 76 (D.C. Cir. 1984); and Mylan Lab'ys Ltd. v. Janssen Pharmaceutica, N.V., 989 F.3d 1375, 1380–81 (Fed. Cir. 2021) (quoting Int'l Union, United Mine Workers of Am. v. U.S. Dep’t of Lab., 358 F.3d 40, 43 (D.C. Cir. 2004)).  Accordingly, the Court asserted that:

Here, Purdue had an available mandamus remedy and simply chose not to seek to compel an earlier decision from the Board. Failure to seek relief by mandamus does not, however, mean a loss of the Board's authority to act.

(Albeit merely in a footnote, the opinion asserts that the panel did not "reach the question of whether the bankruptcy automatic stay applies to PGRs" because "[t]his would require interpretation of the Bankruptcy Code" and the relevant provisions thereof seem not applicable to IPR or PGR proceedings.)

Turning to the merits of the PTAB's FWD, the court upheld the Board's determination that the claims lacked adequate written description support.  Specifically the panel held that "the specification makes clear that the claims require 'inclusion of at least one aversive agent' and the parties agree that the claims require the use of an aversive agent," and provides "long lists" of such agents ("a bittering agent, an irritant, a gelling agent, or combinations thereof").  Applying the syllogism that "some surfactants can be gelling agents and that gelling agents can satisfy the aversive agent requirement, [but that] not all surfactants [such as the claimed polyglycolyzed glycerides] are gelling agents," the specification's written description failure was that it did not disclose which of the claimed polyglycolyzed glycerides are gelling agents.  Indeed, the opinion states that polyglycolyzed glycerides are described in the specification as surfactants, not gelling agents and that "surfactants can be used completely separate from and in addition to the gelling agent."  Thus, according to the opinion "[t]he disclosure of the application [both the '961 patent and the earlier-filed provisional application] does not reasonably convey to those skilled in the art that the inventor had possession of the claimed drug formula containing PGGs as a gelling agent (aversive agent)" as properly determined by the PTAB in invalidating all claims of the '961 patent.

Purdue Pharma L.P. v. Collegium Pharmaceutical, Inc. (Fed. Cir. 2023)
Panel: Circuit Judges Dyk, Hughes, and Stoll
Opinion by Circuit Judge Dyk

Allgenesis Biotherapeutics Inc. v. Cloudbreak Therapeutics, Inc. (Fed. Cir. 2023)

By Kevin E. Noonan --

The Federal Circuit dismissed an appeal from an unsuccessful challenger in an inter partes review (IPR) proceeding based on failure to satisfy the standing requirements for appeal in Allgenesis Biotherapeutics Inc. v. Cloudbreak Therapeutics, Inc.

The case arose in an IPR over U.S. Patent No. 10,149,820, directed to compositions and methods for treating pterygium, "an eye condition in which a tumor-like growth extends from the nasal or temporal side of the eye to the cornea."  Surgery was the recognized treatment, and also recognized was the likelihood of tumor recurrence.  The '820 patent claims use of multikinase inhibitors including nintedanib, pazopanib, and sunitinib.

Nintedanib

Claims 4 and 5 were the only claims remaining after the IPR; claim 4 was set forth as representative:

1.  [disclaimed] A method for reducing hyperemia or symptoms thereof in pterygium in an affected eye of a subject in need of such treatment, without surgically excising a pterygium, comprising administering to the affected eye of the subject a therapeutically effective amount of a multikinase inhibitor.

3.  [disclaimed] The method of claim 1, wherein the multikinase inhibitor is administered to the affected eye in the form of topical ocular formulation or ocular implant.

4. The method of claim 3, wherein the multikinase inhibitor is nintedanib and the nintedanib is administered to the affected eye in the form of a topical ocular formulation and is administered topically to the affected eye.

Relevant to the issues on appeal, the Board held that Allgenesis had not shown the remaining (not disclaimed) claims of the '820 patent were invalid for anticipation or obviousness over its own PCT application because the earliest priority date for the '820 patent (June 5, 2015) was earlier than the priority date of the PCT application (June 22, 2015) and Cloudbreak's provisional application provided sufficient written description support for claims 4 and 5 of the '820 patent.  The Board also determined that the '820 claims were not obvious in view of the combination of two other references because of the '820 patent's disclosure of unexpected results of improved efficacy and safety.  Allgenesis appealed both grounds of the Board's determination of non-obviousness.

The Federal Circuit dismissed the appeal based on Allgenesis' failure to satisfy Article III requirements, in a decision by Chief Judge Moore joined by Judges Stoll and Cunningham.  The opinion sets forth the basis for Allgenesis' deficiency as being rooted in the requirement for standing of injury in fact under Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016).  This requirement, while not arising for standing to file an IPR petition, Cuozzo Speed Techs., LLC v. Lee, 579 U.S. 261, 279 (2016), is required to appeal the Board's decision under Consumer Watchdog v. Wis. Alumni Rsch. Found., 753 F.3d 1258, 1261 (Fed. Cir. 2014).  Allgenesis asserted standing based on "(1) its potential infringement liability and (2) the Board's priority determination."  Neither assertion was sufficient, according to the opinion, because Allgenesis' allegations of injury were speculative and insufficiently concrete to establish injury in fact.  With regard to potential liability for infringement, the opinion states that the evidence, a declaration from Allgenesis' Vice President of Finance, relied on a Phase II clinical trial in 2020 and vague assertions of future plans to produce a nintedanib commercial product.  The opinion found these assertions to be unconvincing, saying that they "fail[] to identify any specific, concrete plans for Allgenesis to develop a nintedanib product that might implicate claims 4 and 5 of the '820 patent."  Nor did Allgenesis provide testimony regarding plans for further development such as a Phase III trial.  Instead, according to the panel, Allgenesis provided "generic" statements that it had not abandoned plans for a commercial product.  However, according to the opinion, "[s]uch conclusory testimony is insufficient to establish that Allgenesis has any concrete plans to develop and bring to market a nintedanib treatment for pterygium."  Nor did Allgenesis assert any threat from Cloudbreak to file suit for infringement.  The panel concludes that "Allgenesis has failed to establish it has nonspeculative, concrete plans for future activity that creates a substantial risk of future infringement."

Allgenesis was no more successful in its second assertion of injury in fact, that the Board's decision on priority of invention in favor of Cloudbreak would impair its ability to obtain its own patent on using nintedanib to treat pterygium.  Once again, the Federal Circuit found Allgenesis' evidence and argument to be insufficient to support its injury in fact claim.  The opinion analogizes the circumstances with the Court's  earlier decision in Best Medical International, Inc. v. Elekta Inc., 46 F.4th 1346 (Fed. Cir. 2022) (despite significant distinctions between the factual circumstances, recognized by the Court).  What the cases had in common, in the Federal Circuit's view, was reliance on collateral estoppel as the basis for the injury and, as the Court notes, "[c]ollateral estoppel will not attach to the Board's non-appealable priority determination," citing SkyHawke Techs., LLC v. Deca Int'l Corp., 828 F.3d 1373, 1376 (Fed. Cir. 2016).  And again the Court states that "Allgenesis has, based on these quite vague allegations, failed to establish a concrete injury."  Even when eschewing estoppel arguments Allgenesis "failed to articulate with any specificity how the Board's priority determination will impact its issued patents or pending continuation applications which claim priority to its PCT application," those articulations being found in "a single paragraph containing only vague allegations in its opening brief and reply brief, respectively."

Having decided that Allgenesis failed to establish injury in fact as required for standing the Federal Circuit dismissed the appeal without reaching the merits.

Allgenesis Biotherapeutics Inc. v. Cloudbreak Therapeutics, Inc. (Fed. Cir. 2023)
Panel: Chief Judge Moore and Circuit Judges Stoll and Cunningham
Opinion by Chief Judge Moore

Mylan Pharmaceuticals Inc. v. Merck Sharp & Dohme Corp. (Fed. Cir. 2022)

By Kevin E. Noonan --

The Federal Circuit affirmed the Patent Trial and Appeal Board's (PTAB) Final Written Decision (FWD) in an inter partes review (IPR) that Mylan Pharmaceuticals failed to show the claims of U.S. Patent No. 7,326,708 were either anticipated or rendered obvious by the asserted prior art, in Mylan Pharmaceuticals Inc. v. Merck Sharp & Dohme Corp.

The claimed subject matter at issue was sitagliptin dihydrogenphosphate ("sitagliptin DHP"), a dihydrogenphosphate salt of 4-oxo-4-[3-(trifluoromethyl)-5,6-dihydro [1,2,4]triazolo[4,3-a]pyrazin-7(8H)-yl]-1-(2,4,5-trifluorophenyl)butan-2-amine:

This compound is useful for treating non-insulin dependent (Type 2) diabetes based on its activity as a dipeptidyl peptidase-IV inhibitor.  Claims 1-4, 17, 19, and 21-23 of U.S. Patent No. 7,326,708 were challenged in the IPR.

Mylan argued that International Patent Publication No. WO 2003/004498 (equivalent to another Merck patent, U.S. Patent No. 6,699,871) anticipated the claims at issue in the IPR.  Specifically, the '498 application disclosed dipeptidyl peptidase-IV inhibitors for treatment of diseases such as Type 2 diabetes.  The application disclosed 33 species of these inhibitors, including sitagliptin.  Also disclosed were the preparation of pharmaceutically acceptable salts (as a class) and hydrates thereof, including but not specifically directed to phosphoric acid.  The Board rejected Mylan's anticipation argument because the '498 application did not disclose all of the limitations in the challenged claims (specifically a 1:1 sitagliptin DHP salt), based inter alia on "evidence, both experimental and from the technical literature, undeniably showed that 1:1 sitagliptin DHP does not form every time sitagliptin and DHP were reacted" (which was the basis for the Board rejecting Mylan's inherent anticipation argument).

The Board also rejected Mylan's obviousness assertions, based on the combination of the '498 application with two scientific publications:  Brittain, which disclosed the "pharmaceutical importance and prevalence of crystalline hydrates of pharmaceutical compounds"; and Bastin, which disclosed "salt selection and optimization procedures during the development of pharmaceutical compounds."  For claims 1, 2, 17, 19, and 21-23 the Board held that Merck was able to antedate the '498 application under pre-AIA 35 U.S.C. § 102(a), and while the related '871 patent was available as prior art under pre-AIA § 102(e), application of the reference was prohibited under pre-AIA § 103(c) because the '871 and '708 patents were commonly owned or subject to an obligation for assignment.

With regard to claim 3 (directed to the (S)-configuration of sitagliptin) and claim 4 (directed to the (R)-configuration), the Board found that none of the cited references disclosed (S)-sitagliptin and thus claim 3 was not obvious.  Regarding (R)-sitagliptin recited in claim 4 the Board found that "Mylan provided no rationale to explain why a person of ordinary skill would have been motivated to make the claimed crystalline monohydrate form of 1:1 sitagliptin DHP of claim 4 and failed to show that a skilled artisan would have had a reasonable expectation of success in making the crystalline monohydrate form of the 1:1 sitagliptin DHP salt."

The Federal Circuit affirmed in an opinion by Judge Lourie, joined by Judges Reyna and Stoll.  Regarding Mylan's anticipation argument, the Court held the Board's decision was supported by substantial evidence, based in part on the testimony of Mylan's own expert witness that the '498 application did not expressly disclose sitagliptin DHP nor the production of dihydrogenphosphate salts.  The panel also found substantial evidence supported the Board's determination that the '498 application did not inherently anticipate the sitagliptin dihydrogenphosphate claimed in the '708 patent.  This decision distinguished the circumstances here from those in In re Petering (relied upon by Mylan), on the basis that Petering was based on their being only a limited number of members of the class of compounds. 301 F.2d 676, 681 (C.C.P.A. 1962).  In this case, the evidence of record showed that the 33 disclosed dipeptidyl peptidase inhibitors could result in 957 combinations with various pharmaceutically acceptable salts, under circumstances where another Mylan expert admitted that "salt formation is an unpredictable art that requires a 'trial and error process.'"  While not ruling on what would or could constitute a limited class that would satisfy the Petering standard the Court held that the proper standard was not met under these circumstances.

In considering the Board's decision on obviousness grounds, the Court first considered and rejected Mylan's argument concerning whether Merck's experimental evidence and the status of the '871 and '708 patents under pre-AIA §§ 102(a) and 102(e) precluded assertions of the '498 application as prior art.  Once again, the Court held that the Board's decision was supported by substantial evidence, including that the '498 application did not disclose 1:1 sitagliptin DHP and thus could not and did not disclose a monohydrate of the salt.

Finally, with regard to claims 3 ((S)-sitagliptin) and 4 ((R)-sitagliptin), the panel also found the Board's decision supported by substantial evidence.  The FWD held that Mylan failed to establish a motivation to combine the '498 application and the Bastin reference and that the skilled artisan would not have had any reasonable expectation of success had the reference been combined.  Considering claim 3 (again relying on Mylan's expert's testimony that the (S)-sitagliptin enantiomer was not disclosed in the '498 application, the panel held the Board was correct in concluding that Mylan had "advanced no expected or theoretical benefit to making the (S)-enantiomer of 1:1 sitagliptin DHP, and that the general disclosure on diastereomers in [the '498 application] encompasses millions of potential compounds and salts with no motivation to make the (S)-enantiomer with a reasonable expectation of success, particularly in an unpredictable activity like salt formation."  Similarly, the Court held the PTAB's decision regarding claim 4 was also supported by substantial evidence that there would have been no motivation to combine the cited references nor any reasonable expectation of success in doing so (yet again relying on Mylan's expert's testimony in this regard and also Merck's expert regarding the art teaching away from hydrates due to their unpredictability).  (In an aside, the opinion also affirms the Board's consideration of secondary indicia of non-obviousness).

While there is nothing particularly earth-shattering or precedent-setting in the Court's precedential opinion, it does illustrate once again the difficulty parties have in overcoming the presumption of substantial evidence in IPRs (and the advantages to be accrued by attempting to avoid IPR institution in the first place).

Mylan Pharmaceuticals Inc. v. Merck Sharp & Dohme Corp. (Fed. Cir. 2022)
Panel: Circuit Judges Lourie, Reyna, and Stoll
Opinion by Circuit Judge Lourie

Click-to-Call Technologies LP v. Ingenio, Inc. (Fed. Cir. 2022)

By Kevin E. Noonan --

For most of the past decade, the Supreme Court has been marking out the metes and bounds of the Patent Trial and Appeal Board's execution of the post-grant review provisions of the Leahy-Smith America Invents Act, particularly with regard to inter partes reviews (see "Oil States Energy Services, LLC. v. Greene's Energy Group, LLC (2018)"; "Return Mail, Inc. v. U.S. Postal Service (2019)"; "SAS Institute Inc. v. Iancu (2018)"; "Cuozzo Speed Technologies, LLC v. Lee (2016)"; and "Teva Pharmaceuticals USA, Inc. v. Sandoz Inc. (2015)").  In its most recent decision, Thryv, Inc. v. Click-to-Call Technologies, LP (2020), the Court ruled that 35 U.S.C. § 315(b), which precludes a petitioner from filing an inter partes review petition more than one year after being served with a complaint alleging infringement, are barred from judicial review under 35 U.S.C. § 314(d).  The Court's decision reversed an en banc Federal Circuit opinion that the time bar was reviewable.

Last week, the Federal Circuit heard an appeal from a related patent infringement lawsuit between the parties that had been stayed during the IPR and lengthy appeals they spawned.  In the opinion, Click-to-Call Technologies LP v. Ingenio, Inc., the Federal Circuit held that infringement defendant Ingenio was barred by the statutory estoppel codified at 35 U.S.C. § 315(e)(2) from challenging validity of a claim for which the PTAB refused to institute the IPR, under what the Court characterized as "a rather unusual set of facts."

As set forth in the opinion, in response to Click's assertion of patent infringement of its U.S. Patent No. 5,818,836, Ingenio sought to institute an IPR based on two grounds:  one for anticipation and/or obviousness over the Dezonno reference, and the other for obviousness over the Freeman reference.  The Board instituted the IPR only on the first Dezonno ground; as a consequence only one claim (claim 27) was not within the scope of declared IPR, and the Board ultimately issued a Final Written Decision that all the challenged claims were invalid.

However, the Supreme Court's decision in SAS Institute v. Iancu intervened, in which the Court held the PTAB was compelled to render a Final Written Decision (FWD) on all claims challenged by a petitioner in its IPR petition.  Ingenio did not respond to this decision by seeking remand at the Board to include claim 27 in the IPR (it being relevant to note that the Court's SAS decision did not mandate that the Board arrive at any different conclusion regarding validity of claim 27 and that if the Board had joined claim 27 it could have and likely would have held Ingenio had not shown this claim to be invalid in view of the Freeman reference).

After the District Court lifted the stay at the final conclusion of the IPR and its appeals, Ingenio moved for summary judgment that claim 27 was invalid based on the Dezonno reference.  The District Court rejected Click's argument that Ingenio was estopped under § 315(e)(2) from challenging validity of claim 27, and granted summary judgment of invalidity against Click; this was the principal issue on appeal.  (A secondary issue was whether the District Court had abused its discretion by refusing to allow Click to amend its complaint to include two additional '836 claims not involved in the IPR; these claims had been asserted in Click's complaint but removed from consideration pursuant to the district court's order that Click reduce the number of claims to be tried, prior to the IPR being instituted.)

The Federal Circuit reversed-in-part (as to the estoppel issue), affirmed-in-part (as to the abuse of discretion issue) and remanded, in an opinion by Judge Stoll joined by Judges Schall and Cunningham.  The District Court erred, according to the Federal Circuit, by addressing Click's estoppel argument solely under the common law principle of issue preclusion, and failing to address Click's argument that the estoppel arose under the statute.  In addition, the panel found error in the District Court's reliance on Click's failure to satisfy the requirement for common law estoppel that the "issue must have been fully and vigorously litigated in the prior action," citing United States v. Shanbaum, 10 F.3d 305, 311 (5th Cir. 1994).  This requirement can be found nowhere in § 315(e)(2) and moreover it would have been unreasonable to apply this requirement in view of the provision that the estoppel arises on grounds that "reasonably could have [been] raised" by the express language of the statute.  Reaching what the opinion calls the merits of Click's estoppel argument, the opinion asserts that invalidity of claim 27 over the Dezonno reference is one that Ingenio "reasonably could have raised" in the IPR (but did not).  The Court also rejected Ingenio's argument that the estoppel should not apply because the Board had not rendered a FWD against that claim, based on a statutory construction argument regarding § 315(e)(2).  The opinion's basis for finding the estoppel applied was in the context of what it termed "the unusual procedural posture" of this case; the opinion notes:

Ingenio included claim 27 in its [IPR] petition, and the IPR did result in a final written decision[ as to that claim].  The fact that the Board, due to a legal error corrected by SAS, failed to include claim 27 in its final written decision does not absolve Ingenio of the estoppel triggered by its choice to challenge claim 27 at the Board.

The Federal Circuit also indicated the panel was influenced by the equities here, because "Ingenio was not helpless to remedy the Board's institution error" and could have moved to have claim 27 included in the IPR after the SAS decision was handed down.  "Ingenio's choice to leave unremedied the Board's mistake does not shield it from estoppel as to a claim it included in its IPR petition" according to the Court.  The case was remanded for the District Court to deny Ingenio's motion and hold that clam 27 was not invalid as being anticipated by the Dezonno reference.

Turning to the District Court's denial of Click's motion to amend its complaint to include claims not involved in the IPR, the Federal Circuit based its determination that this was not an abuse of discretion in part because it implicated the district court's management of its docket, for which the opinion states its review uses "a highly deferential lens," citing 5th Circuit (S&W Enters., L.L.C. v. SouthTrust Bank of Ala., NA, 315 F.3d 533, 535 (5th Cir. 2003)), as well as Federal Circuit (Alpek Polyester, S.A. de C.V. v. Polymetrix AG, No. 2021-1706, 2021 WL 5974163, at *8 (Fed. Cir. Dec. 16, 2021)) precedent.  Another basis for the Court's opinion was the length of time the case was pending prior to Click's motion.  As noted in the opinion, Click filed its lawsuit against Ingenio on May 29, 2012 and the District Court granted Ingenio's motion to stay on December 5, 2013.  The stay was in place for more than six years as noted in the opinion and during that time there were several status reports filed with the District Court in which Click never asked for leave to add additional claims.  And the Board's Final Written Decision issued in 2014, informing Click of the Board's reasoning in finding the challenged claims unpatentable over the Dezonno reference.  Yet Click "did not request leave to amend its asserted claims until six years later" in response to Ingenio's summary judgment motion (the panel stating that Click's request was "cursory" and lacking in justification for the request).  These facts, according to the Court, supported their conclusion that the District Court did not abuse its discretion in denying Click's motion to amend.  Specifically, the Court rejected Click's reliance on S&W Enters., L.L.C. v. SouthTrust Bank of Ala., NA, inter alia, because Click's terse and cursory motion did not itself cite S&W Enterprises in support of its motion ("We will not fault the district court for failing to apply a case that Click-to-Call did not even present to the district court") and the panel refused to consider the S&W Enterprises factors for the first time on appeal.

The Court remanded the case to the District Court for further considerations, which under the circumstances should be limited to infringement.

Click-to-Call Technologies LP v. Ingenio, Inc. (Fed. Cir. 2022)
Panel: Circuit Judges Stoll, Schall, and Cunningham
Opinion by Circuit Judge Stoll

LSI Corp. v. Regents of the University of Minnesota (Fed. Cir. 2022)

By Kevin E. Noonan --

A little more than three years ago, the Federal Circuit rejected the University of Minnesota's contention that LSI was barred from bringing (and the Patent Trial and Appeal Board barred from hearing) an inter partes review of certain University-owned patents under the sovereign immunity doctrine; see "Regents of the University of Minnesota v. LSI Corp. (Fed. Cir. 2019)").  Last week the Federal Circuit ruled on the outcome of the remaining IPR at issue in the prior appeal, affirming the PTAB's decision that two of the challenged claims were not invalid, in LSI Corp. v. Regents of the University of Minnesota.

To recap, the Regents of the University of Minnesota, an "arm of the state," sued separately LSI Corp. (a semiconductor chipmaker) and customers of Ericsson Inc. (a telecommunications company that intervened on its customers' behalf) for infringement of U.S. Patent Nos. 5,859,601 ('601 patent; LSI)) and 7,251,768 ('768 patent), 7,292,647 (RE45,230 patent), 8,588,317 ('317 patent), 8,718,185 ('185 patent), and 8,774,309 ('309 patent; Ericsson), and each defendant separately filed inter partes review (IPR) petitions against each asserted patent.  Before the Board instituted the IPRs, the University of Minnesota filed a motion to dismiss on State sovereign immunity grounds.  The PTAB, in an expanded panel, ruled that while State sovereign immunity applied, Minnesota had waived the immunity by filing suit.  The Federal Circuit affirmed, in an expansive decision holding that State sovereign immunity did not immunize Minnesota from IPR proceedings for the same reasons that tribal sovereign immunity did not preclude IPR proceedings involving the St. Regis Mohawk Indian Tribe (see "Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc. (Fed. Cir. 2018)").

Back before the PTAB, the University disclaimed all challenged patent claims except claims 13, 14, and 17 of the '601 patent.  The Board considered LSI's IPR petition for anticipation of these claims by two prior art references:  U.S. Patent Nos. 5,392,270 ("Okada") in Ground 1 and 5,731,768 ("Tsang") in Ground 2.

Claim 13 is set forth in the opinion expressly:

A method for encoding m-bit binary datawords into n-bit binary codewords in a recorded waveform, where m and n are preselected positive integers such that n is greater than m, comprising the steps of:
    receiving binary datawords; and producing sequences of n-bit codewords;
    imposing a pair of constraints (j;k) on the encoded waveform;
    generating no more than j consecutive transitions of said sequence in the recorded waveform such that j≧2; and
    generating no more than k consecutive sample periods of said sequences without a transition in the recorded waveform.

Dependent claim 14 recites the additional limitation "wherein the consecutive transition limit is defined by the equation 2≦j<10" and claim 17 further limits claim 14 with "limitations directed to an additional format for representing data and transitions."  The Board found claim 13 to be unpatentable over the Okada reference but that claims 14 and 17 were not, and that the Tsang reference was not prior art because it was not an invention "by another."  Specifically the Board held that claims 14 and 17 were not anticipated by the Okada reference because the reference did not disclose the limitation that "2≦j<10" and that a second argument in support of this ground (based on disclosure in Tables 8 and 9 of the reference) was not timely presented (although the Board also held that LSI did not establish anticipation by this disclosure either).

Regarding LSI's second ground based on the Tsang '768 patent, the panel recognized that LSI's anticipation argument relied on disclosure found in the Tsang patent that had been previously disclosed in a document called the Seagate Annual Report (prepared for an industry collaborator on the '601 patent inventors' research; the opinion notes that the Seagate Annual Report cannot be prior art to the '601 patent because it is not "of another").  The Tsang patent was the result of a patent application filed by a Seagate employee before the earliest filing date of the '601 patent and thus (according to LSI) was an anticipatory reference.  But because the subject matter in the Tsang patent relied upon by LSI was the same as was found in the Seagate Annual Report by the named inventors of the '601 patent, the Board held the Tsang patent was not prior art under the pre-America Invents Act statute, 35 U.S.C. § 102(e).

The Federal Circuit affirmed the PTAB's decision regarding claims 14 and 17 appealed by LSI, in an opinion by Judge Dyk joined by Judges Reyna and Hughes.  With regard to the Board's determination that LSI had not established that the Okada reference anticipated claims 14 and 17 of the '601 patent because the argument was presented untimely, the panel relied upon in Intelligent Bio-Systems, Inc. v. Illumina Cambridge Ltd., 821 F.3d 1359, 1369–70 (Fed. Cir. 2016).  There the Court had held that "the Board's rejection of arguments on the ground that they were newly raised in a reply brief was not an abuse of discretion even though the Board went on to address the merits" (the very argument LSI raised here); accord, Gen. Access Sols., Ltd. v. Sprint Spectrum L.P., 811 F. App'x 654, 659 n.3 (Fed. Cir. 2020), and more generally Gen. Access Sols., Ltd. v. Sprint Spectrum L.P., 811 F. App'x 654, 659 n.3 (Fed. Cir. 2020).

Turning to the Tsang patent and its availability as prior art, the Court applied the test set forth in Duncan Parking Techs., Inc. v. IPS Grp., Inc., 914 F.3d 1347, 1357 (Fed. Cir. 2019):

[T]he Board must (1) determine what portions of the reference patent were relied on as prior art to anticipate the claim limitations at issue, (2) evaluate the degree to which those portions were conceived "by another," and (3) decide whether that other person's contribution is significant enough, when measured against the full anticipating disclosure, to render him a joint inventor of the applied portions of the reference patent.

The panel rejected LSI's argument that because it relied upon the Tsang patent and not the Seagate Annual Report it had satisfied the first prong of the Duncan Parking test, saying LSI "misunderstands" the test.  The question was not merely whether the disclosure would anticipate, but Tsang's reliance in the '768 patent upon the University inventors' earlier work as set forth in the Seagate Annual Report.  "Tsang's summary of, and reliance on, the earlier work of [University inventors] Dr. Moon and Dr. Brickner does not make Tsang an inventor of the earlier work" was dispositive here, according to the opinion.  The portions of the '768 patent that did not rely on the University inventors' work were not relevant to the scope of the challenged claims according to the opinion (the Court having arrived at this conclusion from LSI's arguments regarding the distinctiveness of the invention disclosed in the '768 patent).  Thus, the Tsang '768 patent did not anticipate claims 14 and 17 of the '601 patent because the portions disclosed therein that could anticipate were not "of another" (because they were taken from the University inventors' work disclosed earlier in the Seagate Annual Report) and the portions "by another" (i.e., contributed solely by Inventor Tsang) were did not provide an anticipating disclosure.

Accordingly the Federal Circuit affirmed the PTAB regarding claims 14 and 17, granting costs to the University.  Presumably patent infringement litigation over these claims will now ensue (or recommence).

LSI Corp. v. Regents of the University of Minnesota (Fed. Cir. 2022)
Panel: Circuit Judges Dyk, Reyna, and Hughes
Opinion by Circuit Judge Dyk

USPTO Provides Guidance on PTAB Discretionary Denials of Challenges Based on Parallel Litigation

By Joshua Rich --

On June 22, 2022, the U.S. Patent and Trademark Office issued two documents regarding the Patent Trial and Appeals Board's discretionary denials of post-grant challenges based on parallel litigation: a retrospective study of such denials since 2019[1] and a prospective interim guidance memorandum from the Director regarding considerations for future decisions.[2]  Both documents discuss the circumstances in which the PTAB may choose to deny institution of post-grant challenges when the same patent is being asserted in district court or ITC litigation.  In combination, the two documents identify how to narrow the discretion that the PTAB will exercise in determining whether to proceed based on parallel litigation.

The USPTO's retrospective study identified four cases as causing substantial inflections in discretionary denials of post-grant challenges:  (1) NHK Spring Co., Ltd. v. Intri-Plex Techs., Inc., Case IPR2018- 00752, Paper 8 (Sept. 12, 2018); (2) Apple Inc. v. Fintiv, Inc., Case IPR2020-00019, Paper 11 (March 20, 2020); (3) Sand Revolution II, LLC v. Continental Intermodal Group – Trucking LLC, Case IPR2019-01393, Paper 24 (June 16, 2020); and (4) Sotera Wireless, Inc. v. Masimo Corporation (§ II.A), IPR2020-01019, Paper 12 (Dec. 1, 2020).

In NHK, the PTAB denied institution both on the basis that the cited prior art had already been considered in the Office and because the same invalidity challenges were being raised in the IPR petition and district court litigation.  NHK was notable as the first decision expressly citing the "advanced state" of the district court litigation as a basis for denying the petition, namely that the trial was scheduled to occur before the inter partes review would have reached a final decision.  But it also served as the catalyst for many others to seek denial of institution on the basis of parallel litigation.

Fintiv was one of those cases in which the patent owner asked the PTAB to deny institution.  By that time, there had been enough such requests that the PTAB decided to provide some guidance to parties regarding the considerations that would go into the exercise of its discretion.  The PTAB therefore provided a list of six non-exclusive factors that it would consider:
    (1) whether a stay exists in the parallel litigation or would likely be granted if a proceeding is instituted;
    (2) proximity of the court's trial date to the Board's projected statutory deadline;
    (3) investment in the parallel proceeding by the court and parties;
    (4) overlap between issues raised in the petition and in the parallel proceeding;
    (5) whether the petitioner and the defendant in the parallel proceeding are the same party; and
    (6) other circumstances that impact the Board's exercise of discretion, including the merits.

The promulgation of the Fintiv factors brought increased clarity to whether the PTAB would exercise its discretion to deny institution of a petition, but it also brought a substantial upswing in the percentage of cases in which the argument would arise.  It also led to a similar upswing in the number of cases in which the existence of parallel proceedings would lead to denial of institution.

The upward trend can be clearly seen in one of the USPTO's graphs of both the number of cases and percentage of cases in which discretionary denial was raised:

A little over a year after the Fintiv factors were promulgated, the PTAB decided Sand.  There, the petitioner sought reconsideration of a decision denying institution of an IPR by submitting a stipulation stating that it would not raise the same grounds in the IPR and parallel proceeding.  The Board found that the stipulation, submitted to resolve the fourth Fintiv factor in the petitioner's favor, tipped the balance and instituted the proceeding.  The Sand decision caused the pendulum to swing back toward institution: more parties submitted similar stipulations and the number of discretionary denials based on parallel proceedings eventually shrank.

The trend downward for discretionary denials really escalated with the Sotera decision.  There, the petitioner filed an even broader stipulation agreeing that it would not assert in the district any grounds "raised or that could have been reasonably raised in an IPR."  The PTAB instituted the review in Sotera, and many petitioners followed Sotera's lead, which has led the Board not to exercise its discretion to reject review of the post-grant challenges.

Again, the USPTO's statistical picture tells the tale.  Once petitioners began filing robust Sotera-like petitions in the months after the decision, discretionary denials of institution dropped quickly:

While these cases were being resolved, the USPTO asked for comments to support potential rules on approaches to the exercise of discretion.  It received 822.  So while the Office is sifting through those comments, Director Vidal issued interim guidance to help practitioners.  The guidance came in the form of four practices that the Board will implement.

First, whether the PTAB will have discretion to deny institution depends on the strength of the petition.  If the petition's evidence is insufficient to justify institution on the merits, the Board will not rely on the Fintiv factors as an alternative ground for denial.  If the petition makes a sufficient showing under the statute -- but not a strong one -- the Fintiv factors will be in play.  But if the petition's evidence is compelling, the PTAB will not deny institution on the basis of the Fintiv factors.

Second, the PTAB will consider the Fintiv factors only in relation to parallel district court litigation.  Although it has denied institution based on parallel ITC proceedings in the past, it will no longer do so because the ITC lacks the power to invalidate a patent and its rulings are not binding on the Office or district courts.

Third, following Sotera, the PTAB will not discretionarily deny institution if the petitioner files a stipulation indicating that it will not pursue in the district court the same invalidity grounds or any grounds that could reasonably be raised before the PTAB.  That is, the Office is making the downward trend its full-time practice based on the overwhelming strength of the fourth Fintiv factor.

Fourth, in determining the second Fintiv factor (the proximity of the court's trial date to the Board's projected statutory deadline), the PTAB will consider not only scheduled trial date, but also time-to-trial statistics such as number of cases before the judge and speed and availability of other case dispostions.  This is because -- as numerous comments pointed out -- different courts have different practices regarding the likelihood of extensions of the trial date.  It is a point strongly reflected in the statistics published by the USPTO -- in 2021, review of the Fintiv factors led to discretionary denial about 10% of the time when the case was pending in the District of Delaware, about 15% of the time when the case was pending in the Western District of Texas, and almost 65% of the time when the case was pending in the Eastern District of Texas.

In light of Director Vidal's guidance, practitioners have much greater clarity regarding how to address discretionary challenges based on parallel litigation.  Patent owners know they should not raise the issue based on an ITC proceeding, and likely should not in a slower-to-trial jurisdiction.  But they also know that the argument fits nicely with an argument on the merits, as an attack on the strength of the petition can be couched as a Fintiv argument.  The petitioner, however, can moot the Fintiv argument if it is willing to provide a broad, Sotera-like stipulation not to pursue in the district court any invalidity grounds that it can raise before the PTAB.  As a result, the PTAB's discretion will be much more limited and Fintiv decisions will be far more predictable.

[1] https://www.uspto.gov/sites/default/files/documents/ptab_parallel_litigation_study_20220621_.pdf
[2] https://www.uspto.gov/sites/default/files/documents/interim_proc_discretionary_denials_aia_parallel_district_court_litigation_memo_20220621_.pdf

Top Three Stories of 2021

By Donald Zuhn –-

After reflecting upon the events of the past twelve months, Patent Docs presents its 15th annual list of top patent stories.  For 2021, we identified nine stories that were covered on Patent Docs last year that we believe had (or are likely to have) a significant impact on patent practitioners and applicants.  Last week we counted down stories #9 to #7 and stories #6 to #4 and today we count down the top three stories of 2021.  As with our other lists (2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011, 2010, 2009, 2008, and 2007), links to our coverage of these stories (as well as a few links to articles on related topics) have been provided in case you missed the articles the first time around or wish to go back and have another look.  As always, we love to hear from Patent Docs readers, so if you think we left something off the list or disagree with anything we included, please let us know.  In addition, we will be offering a live webinar on the "Top Patent Law Stories of 2021" on January 19, 2022 from 10:00 am to 11:15 am (CT).  Details regarding the webinar, which will focus on a few of the most important stories on this year's list, can be found here.

3.  Supreme Court Vacates and Remands U.S. v. Arthrex

Last year, the Supreme Court's decision to review the Federal Circuit's decision in Arthrex, Inc. v. Smith & Nephew, Inc., in which the Court of Appeals determined that the manner in which administrative patent judges were appointed to the Patent Trial and Appeal Board violated the Appointments Clause of the Constitution (Art. II, sec. 2, cl. 2), made it to #4 on our Top Stories list.  We noted at the time that a decision in the case was likely to be issued by the Supreme Court in June, and that Arthrex would likely make our 2021 list.

In June, the Supreme Court determined that "the unreviewable authority wielded by APJs [Administrative Patent Judges] during inter partes review is incompatible with their appointment by the Secretary [of Commerce] to an inferior office," and the Court vacated the judgment of the Federal Circuit and remanded for further proceedings consistent with its opinion.  Chief Justice delivered the opinion of the Court and was joined with respect to Parts I and II by Justices Alito, Gorsuch, Kavanaugh, and Barrett, and with respect to Part III by Justices Alito, Kavanaugh, and Barrett.  Justice Gorsuch filed an opinion concurring in part and dissenting in part; Justice Breyer filed an opinion concurring in the judgment in part and dissenting in part, and was joined by Justices Sotomayor and Kagan; Justice Thomas filed a dissenting opinion, and was joined as to Parts I and II by Justices Breyer, Sotomayor, and Kagan.  In Part III of his opinion, which was only joined by Justices Alito, Kavanaugh, and Barrett, the Chief Justice addressed "the appropriate way to resolve this dispute given this violation of the Appointments Clause," and indicated that "the structure of the PTO and the governing constitutional principles chart a clear course: Decisions by APJs must be subject to review by the Director."  In his opinion, however, Justice Gorsuch noted that without some direction from Congress, the dispute cannot be resolved as a matter of statutory interpretation.  Although Justice Breyer did "not agree with the Court's basic constitutional determination," he wrote that:

Under the Court's new test, the current statutory scheme is defective only because the APJ's decisions are not reviewable by the Director alone.  The Court's remedy addresses that specific problem, and for that reason I agree with its remedial holding.

Following the Supreme Court's decision in Arthrex, the U.S. Patent and Trademark Office, in a series of Arthrex Q&As, outlined an interim internal process by which an advisory committee established by the Director will evaluate requests for Director review made by parties to a PTAB proceeding or reviews initiated sua sponte by the Director.

For information regarding this and other related topics, please see:

• "U.S. v. Arthrex: Is Historical Practice of the USPTO Relevant?" March 3, 2021
• "U.S. v. Arthrex: Supreme Court Oral Argument," March 2, 2021

2.  Increased Focus on Closing Diversity Gap in Innovation and Patent Practice

In December 2020, the Intellectual Property Owners Association wrote to then President-Elect Joe Biden and Vice President-Elect Kamala Harris "to recommend that intellectual property (IP) law and policy be priorities in your administration."  In its letter, the IPO declared that "[c]losing the diversity gap in innovation is also vitally important to our economic growth and global competitiveness," noting that women, people of color, and other minority groups are vastly underrepresented in the patent system.  The letter also pointed out that recent "scholarship indicates that increasing participation in inventing by underrepresented groups could increase U.S. GDP by as much as 4.4%," and suggested that "[i]t is imperative that the public and private sectors work together to close this gap and harness our country's potential to innovate at greater levels than ever before."  The IPO's letter at the close of 2020 led to an increased focus in the patent community last year on closing the diversity gap in innovation and patent practice.

In one such example, Sen. Thom Tillis (R-NC), the Ranking Member of the Senate Subcommittee on Intellectual Property, wrote to President Biden in March regarding the selection of the next Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office.  Sen. Tillis declared that the nominee "must be committed to increasing diversity in our nation's intellectual property system," stating that "[f]or too long, too many women and people of color have been underrepresented in our innovation ecosystem," and noting that "[t]hese individuals often face unique barriers to engaging in the intellectual property system and their lack of access costs our economy billions of dollars every year." On October 26, 2021, President Biden announced the nomination of Kathi Vidal, managing partner of Winston & Strawn’s Silicon Valley Office, for Under Secretary for Intellectual Property and Director of the USPTO.  The White House announcement stated that:

Kathi is a recognized leader in diversity and women's issues.  She is one of four law firm advisory board members for ChIPs, a non-profit organization committed to advancing women at the intersection of law, technology, and regulatory policy.  She founded the Next Gen initiative and actively advocates for training and opportunities for junior lawyers.  She is also a member of Winston & Strawn's Executive Committee and Diversity.  At her prior firm, Fish & Richardson, Kathi was the Litigation Chair and sat on the firm's management committee.  She has a strong technical background, having practiced in industry for five years at General Electric and Lockheed Martin in circuit, systems, software and artificial intelligence.

Ms. Vidal's nomination was placed on the Senate Executive Calendar on January 13.

For information regarding this and other related topics, please see:

• "USPTO News Briefs," November 22, 2021
• "USPTO to Host Event Celebrating LGBTQ+ Innovators," June 26, 2021
• "Sen. Tillis Sends Letter to President Regarding Next USPTO Director," March 7, 2021
• "USPTO Responds to Congressional Request for Information Regarding Criteria for Registration Examination for Admission to Patent Bar," January 21, 2021
• "IPO Sends Letter on IP Law and Policy to President-Elect and Vice President-Elect," January 4, 2021

1.  Pandemic Continues to Impact Patent Practice & Ongoing Discussions Regarding WTO Waiver Proposal

On March 11, 2020, World Health Organization Director-General Tedros Adhanom declared that the COVID-19 outbreak "can be characterized as a pandemic," cautioning that the WHO has "rung the alarm bell loud and clear."  At the time of the announcement, the WHO noted that there were 118,000 cases reported globally in 114 countries.  By January 12, 2021, the WHO indicated that there had been 88,387,352 cases globally.  And in its latest report, issued on January 11, 2022, the WHO indicates that there have been 304,350,207 cases globally.

As it has for nearly every single industry, the COVID-19 pandemic continues to have a profound impact on patent practice.  In the more than two years since the SARS-CoV-2 virus was first detected in a patient sample, the pandemic has changed how most of us work, where most of us work, and what many of us work on.  However, as the Pharmaceutical Research and Manufacturers of America (PhRMA) noted in a letter the organization sent to the Biden Administration in March, over that same two year period "[p]erhaps more than any other time in history, society is seeing and benefiting from the innovation supported by intellectual property."  For example, the U.S. Food and Drug Administration granted an Emergency Use Authorization (EUA) for Gilead Sciences' remdesivir 123 days after the virus was first detected in a patient sample, granted an EUA for convalescent plasma 237 days after the virus was first detected, granted an EUA for Eli Lilly's antibody treatment 315 days after the virus was first detected, granted an EUA for the Pfizer-BioNTech vaccine 347 days after the virus was first detected (and then followed with two more EUAs for Moderna's vaccine and Johnson & Johnson's vaccine), and approved Pfizer's antiviral PAXLOVID 723 days after the virus was first detected.

Last year also saw an ongoing debate over a proposal by India and South Africa to waive implementation, application, and enforcement of Sections 1, 4, 5, and 7 of Part II of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement in relation to the prevention, containment, or treatment of COVID-19.  Despite receiving letters opposing the proposed waiver from the Biotechnology Innovation Organization (BIO), PhRMA, other industry and trade organizations, IP organizations, and members of Congress, U.S. Trade Representative Katherine Tai announced In May that the Biden Administration supported the proposed TRIPS waiver, noting that "the extraordinary circumstances of the COVID-19 pandemic call for extraordinary measures."  While a revised version of the waiver proposal was to be discussed during the 12th Ministerial Conference (MC12) of the WTO in Geneva beginning November 30, the MC12 was postponed due to the omicron outbreak.  That postponement marked the second time the pandemic had forced postponement of the Ministerial Conference, and no new date has been set for the MC12.  The hope is that the coming spring will see the pandemic finally recede such that we can all return to something very close to "normal".

For information regarding this and other related topics, please see:

• "Sen. Tillis Writes to U.S. Trade Representative (Again) Regarding TRIPS Waiver," December 12, 2021
• "U.S. Trade Representative Responds to Letters from Senators Regarding TRIPS Waiver," November 14, 2021
• "U.S. Chamber of Commerce Urges Administration to "Double Down" on Global Vaccine Distribution," November 3, 2021
• "Is This the WTO Waiver End Game?" July 25, 2021
• "BIO Declaration on Global Access to COVID-19 Vaccines and Treatments and Role of IP," June 24, 2021
• "GOP Legislators Write in Opposition to Proposed TRIPS Waiver," May 16, 2021
• "Science Does Not Support the Latest COVID Hysteria," May 13, 2021
• "Population of Patents at Risk from Proposed WTO Patent Waiver," May 12, 2021
• "Sen. Daines Urges Biden Administration to Withdraw Support for COVID-19 IP Waiver," May 12, 2021
• "Pfizer CEO Pens Open Letter on COVID-19 Vaccine IP Waiver," May 10, 2021
• "If the Devil of the WTO IP Waiver Is in the Details, What Are the Details?" May 9, 2021
• "The Road to Hell Is Paved with What Everybody Knows," May 6, 2021
• "BIO & IPO Issue Statements on Biden Administration's Support for Proposed WTO Waiver," May 6, 2021
• "Biden Administration Supports Waiver of IP Protection for COVID-19 Vaccines," May 5, 2021
• "Suspending IP Protection: A Bad Idea (That Won't Achieve Its Desired Goals)," April 26, 2021
• "Sen. Tillis Asks Biden Administration to Oppose WTO Waiver Proposal," April 21, 2021
• "IP Organizations Support Continued Opposition to Waiver Proposal," April 5, 2021
• "Evolution of SARS-CoV-2 from Bat to Human Pathogen," March 31, 2021
• "Industry Coalition Supports Continued Efforts to Oppose Waiver Proposal," March 29, 2021
• "Neanderthal Ancestors Can Be Human Guardian Angels for COVID Infection, Too," March 18, 2021
• "BIO and PhRMA Urge Biden Administration to Oppose Proposed WTO TRIPS Waiver," March 11, 2021
• "Do mRNA-based COVID Vaccines Have an Achilles Heel?" January 26, 2021
• "Going from Bad to Worse: Evidence for Neuro-COVID Infections," January 17, 2021
• "USPTO Provides Update on COVID-19 Prioritized Examination Pilot Program," January 3, 2021

Appellant Raises Due Process Issues in New Vision Gaming and Development v. SG Gaming

By Kevin E. Noonan --

Ever since institution of the post-grant review proceedings enacted under the Leahy-Smith America Invents Act were implemented by the U.S. Patent and Trademark Office (through the newly constituted Patent Trial and Appeal Board), parties (particularly patentees who lost patent rights thereby) have challenged the outcome on procedural, substantive, and constitutional grounds (see "Cuozzo Speed Technologies LLC v. Lee"; "SAS Institute Inc. v. Iancu;  Return Mail, Inc. v. United States Postal Service"; "Thryv, Inc. v. Click-to-Call Technologies, LP ").  The most recent (and legally creative) challenge is pending before the Supreme Court (see "U.S. Government Petitions for Certiorari in Arthrex Case"; "Arthrex Files Certiorari Petition in Arthrex Case"), wherein patentee Appellants (and respondents before the Court) argued an Appointments Clause violation because Administrative Patent Judges on the PTAB are principal officers not properly installed with Senate approval.

Appellant in New Vision Gaming and Development* v. SG Gaming (to be heard by the Federal Circuit on April 9th) has taken another tack, arguing that the administrative details of how APJs are paid, bonused, and controlled by the Director could be contrary to patentee's rights to due process (Corrected Brief of Appellant; Reply Brief of Appellant).  The argument is based on Supreme Court precedent in Tumey v. Ohio, 273 U.S. 510 (1927).  In that case, the Supreme Court reversed a criminal conviction under Ohio state law under conditions where the mayor of a village sat in judgment of a defendant accused of violating the state's Prohibition Act.  On appeal, the convicted petitioner argued that the mayor had pecuniary and other interests in his conviction and the petitioner was thus denied due process.  The basis of this allegation was a provision under the law that "[m]oney arising from fines and forfeited bonds shall be paid one-half into the state treasury credited to the general revenue fund, one-half to the treasury of the township, municipality or county where the prosecution is held, according as to whether the officer hearing the case is a township, municipal, or county officer."  Section 6212-19, General Code Ohio.  There were also allegations that monies raised from convictions like the plaintiff's inured to the mayor's benefit as a resident of the village, as well as the law providing direct payments to the mayor.

The Supreme Court based its decision reversing plaintiff's conviction on the "general rule" that "officers acting in a judicial or quasi-judicial capacity are disqualified by their interest in the controversy to be decided" but that "[n]ice questions[] often arise as to what the degree or nature of the interest must be."  But as here, "it certainly violates the Fourteenth Amendment and deprives a defendant in a criminal case of due process of law to subject his liberty or property to the judgment of a court, the judge of which has a direct, personal, substantial pecuniary interest in reaching a conclusion against him in his case."  The Court held that, as a consequence of ratification of the Fourteenth Amendment, such an arrangement violates the requirement for due process of law.  Relevant to Appellant's argument here, the Court stated:

The mayor is the chief executive of the village.  He supervises all the other executive officers.  He is charged with the business of looking after the finances of the village.  It appears from the evidence in this case, and would be plain if the evidence did not show it, that the law is calculated to awaken the interest of all those in the village charged with the responsibility of raising the public money and expending it, in the pecuniarily successful conduct of such a court.  The mayor represents the village and cannot escape his representative capacity.  On the other hand, [under this law] he is given the judicial duty, first, of determining whether the defendant is guilty at all; and, second, having found his guilt, to measure his punishment . . . .  With his interest as mayor in the financial condition of the village and his responsibility therefor, might not a defendant with reason say that he feared he could not get a fair trial or a fair sentence from one who would have so strong a motive to help his village by conviction and a heavy fine?  . . .  A situation in which an official perforce occupies two practically and seriously inconsistent positions, one partisan and the other judicial, necessarily involves a lack of due process of law in the trial of defendants charged with crimes before him.

While acknowledging that the consideration at issue might not motivate some mayors to permit it to influence their judgment, the Court opined that:

[T]he requirement of due process of law in judicial procedure is not satisfied by the argument that men of the highest honor and the greatest self-sacrifice could carry it on without danger of injustice.  Every procedure which would offer a possible temptation to the average man as a judge to forget the burden of proof required to convict the defendant, or which might lead him not to hold the balance nice, clear, and true between the state and the accused denies the latter due process of law.

This led the Court to the conclusion that a "temptation" arising from "structural bias" in a statutory regime can violate the Due Process Clause even in the absence of actual bias.  The subtlety of this argument with regard to the current post-grant review regime is patent:  Appellant is not accusing the USPTO, its Director, or any individual APJs of anti-patent bias (a charge levied perhaps imprudently by others; see, e.g., "Is The PTAB a Death Sentence for Patent Rights?), but raising the structural possibility as being sufficient for the Constitutional infirmity.

The principles enunciated in Tumey have also been the basis for consistent decisions in Dugan v. Ohio, 277 U.S. 61 (1928), and Ward v. Village of Monroeville, 409 U.S. 58 (1972) (notably, where the fines at issue accounted for between 35% to 50% of the village income).  However, it must be mentioned in passing that there are distinctions between Tumey and this case that could make a difference to a reviewing court, including that Tumey involved a criminal proceeding and that the statute at issue was state and not Federal law.

Appellant's argument focuses on institution decisions and their relation to USPTO oversight and the system by which the Office financially rewards APJs based on the economic consequences of institution (versus refusing to institute).  Calling the current regime a "constitutional flaw," Appellant argues that the scheme "creates impermissible incentives for the PTAB, its leadership, and the individual administrative patent judges  . . . and that APJs are 'subjected to performance reviews and management tools by PTAB leadership, and the APJ's salary and bonus structures incentivize higher 'production,' which means more institutions.'"  Taken in conjunction with a lack of judicial independence, Appellant further argues that this raises "conflicting interests" that can raise the possibility -- or appearance -- of the PTAB granting "borderline petitions[] in order to ensure continued workflow, possible bonuses, and robust PTAB fee collections" (citing USPTO statistics that about $23 million in annual revenues depend on institution of post-grant review provisions).  These assertions are supported by citation to statute (35 U.S.C. § 42; 35 U.S.C. §§ 311(a), 321(a)) and USPTO official utterances such as Setting and Adjusting Patent Fees During Fiscal Year 2017, 82 Fed. Reg. 52,780, 52,780 (Nov. 14, 2017), as well as the PTAB's administrative and performance review structures and standards.

A similar situation arose in the first decade of the 21st Century, where the Office's policies directed a severed diminution in granted patents (motivated by misguided reliance on arguments from academics and interest groups that the Office was granting too many patents of poor quality; see "Law Professors Back USPTO in Tafas v. Dudas Appeal"; "Public Interest Groups Back USPTO in Tafas v. Dudas Appeal").  As a consequence, the Office received greatly diminished allowance fees and consequently greatly diminished maintenance fees, resulting in a budgetary shortfall as those fees made up a significant portion of the USPTO's annual revenues.  The consequences were forestalled, of course, by judicial obstruction of these rules; see "Tafas v. Dudas; SmithKline Beecham Corp. v. Dudas" and "No April Fool's Joke -- Tafas and GSK Win on Summary Judgment" and later refusal by then-new Director Kappos to implement them when the Federal Circuit left open that possibility (see "New Rules' Officially Rescinded").

Appellant argues that the circumstances arising in the USPTO's implementation of the post-grant review provisions of the AIA "may very well be unique in the federal government" because "[i]t is entirely user-fee funded, and the PTO's budget is effectively based on its fee collections."  Relying on USPTO statistics, Appellant argues that "[a]bout 40% of the approximately $57 million in annual AIA fee collections depends on granting petitions to institute," thereby drawing the nexus between structural features and due process injury.  In addition, the brief notes the "dual roles" of PTAB leadership in exercising both executive and adjudicatory functions as raising the appearance of unfairness.  This argument is supported in the brief by noting that the Chief APJ, the Deputy, and the Vice Chief APJs all bear some responsibility for institution decisions due to their responsibility to "provide policy direction and ensure the quality and consistency of AIA decisions," while at the same time having "significant responsibilities managing the PTAB's finances as a distinct 'business unit' within the PTO."  These structural circumstances mirror those found to be due process violations in Tumey, Dugan, and Ward.

Exacerbating these conditions is the dependence on institution decisions and the frequency and number thereof on how individual APJs are compensated, evaluated, and bonused, according to Appellant's brief (while being careful to disclaim any specific instance of unethical behavior as opposed to the appearance thereof engendered by PTAB structure; indeed, the brief characterizes the resulting pressures on individual APJs as "unfair"), citing Gibson v. Berryhill, 411 U.S. 564, 578 (1973):

Although a decision to institute does not absolutely guarantee an economic benefit for the APJ, a guarantee is not necessary.  To violate due process, all that is necessary is a reasonable connection between the decision and the pecuniary benefit.

Appellant's argument is thus rooted in structural violations of due process, which it argues "creates too strong a motive and unfair temptation for 'the average man as a judge,'" citing Ward, and which can "sometimes bar trial by judges who have no actual bias and who would do their very best to weigh the scales of justice equally between contending parties," citing Aetna Life Ins. Co. v Lavoie, 475 U.S. 813, 825 (1986).  And a possible balancing consideration, judicial independence, is unavailable to PTAB APJs according to the brief, because these officers lack the independence of Article III judges and Administrative Law Judges in other agencies (a distinction argued at length in Arthrex and referenced in Appellant's brief).

Finally, the brief notes that the Supreme Court's recent decision in Thryv, Inc. v. Click-to-Call Technologies, LP exacerbates the temptation argument, because the Court restricted judicial review of institution decisions.

In addition to these arguments, Appellant's brief raises the question of Appointments Clause infirmity (no doubt to preserve the issue in anticipation of a "favorable" decision by the Supreme Court in U.S. v. Arthrex) and on the merits whether the PTAB erred in holding the claims at issue invalid as being directed to patent-ineligible subject matter under 35 U.S.C. § 101.  On more particularly procedural grounds, the brief also argues that Appellee had eschewed recourse to the PTAB as part of prior licensing agreements between the parties.  But wisely Appellant argues that the USPTO has the ability to remedy the situation, giving the Federal Circuit or Supreme Court an alternative to deconstructing the post-grant review statutory edifice.

The Federal Circuit has shown no inclination to abrogate Congressional prerogatives under the AIA with regard to its post-grant review provisions (and Appellant has provided alternative bases for finding in their favor).  However, the Supreme Court has acknowledged that Due Process concerns could be a basis for finding Congress had overstepped its constitutional authority in establishing the post-grant provisions of the AIA (see "Oil States Energy Services, LLC. v. Greene's Energy Group, LLC (2018)").  Indeed, a running undercurrent in Arthrex at oral argument, from counsel and the Court, was whether the Appointments Clause issues implicated infringement on patentees' due process rights.  Appellant has been careful to ground its due process argument on Supreme Court precedent in this regard, and even more careful to base its argument Calpurnia-esque on the importance of avoiding the appearance of the possibility of impropriety.  To the extent that these concerns resonate either with the Federal Circuit or, failing that, the Supreme Court, Appellant's arguments may provide the most potent rationale for hobbling if not dismantling the post-grant review regime enacted under the AIA.

*Appellant is represented by Matthew J. Dowd, David Boundy, and Robert J. Scheffel.

Board of Regents of the University of Texas System v. Baylor College of Medicine (Fed. Cir. 2020)

By Kevin E. Noonan --

Any patent litigant unwilling to acquiesce to an adverse judgment from the Patent Trial and Appeal Board (PTAB) can appeal to the Federal Circuit.  28 U.S. Code § 141.  But the right to appeal is not the same as the wisdom of filing an appeal, as illustrated by the decision of the Federal Circuit last week in Board of Regents of the University of Texas System v. Baylor College of Medicine.

The case arose over an inter partes review petitions filed by Baylor against the University of Texas Board of Regents (UT).  The Board filed motions to dismiss both petitions, asserting that as an arm of the state, sovereign immunity precluded being subjected to the proceedings.  The PTAB denied the motions, citing the Federal Circuit's determination that state sovereign immunity did not prevent a petitioner from instituting an IPR against a state or arm of the state, in Regents of the University of Minnesota v. LSI Corp., 926 F.3d 1327 (Fed. Cir. 2019), cert. denied, 140 S. Ct. 908 (2020).  As set out in a per curiam opinion by the Court:

As UT recognizes, we held in University of Minnesota that "sovereign immunity does not apply to IPR proceedings when the patent owner is a state."  . . .  UT contends, however, that "the University of Minnesota panel applied the wrong standards and reached the wrong conclusion when it held" that state sovereign immunity does not apply to IPR proceedings.  . . .  But, as UT also recognizes, "[t]his panel is bound by the University of Minnesota decision."

Agreeing it was so bound, the panel affirmed the PTAB's denial of UT's motion.

It can only be surmised that UT is now preparing a certiorari petition of its own to test whether "the University of Minnesota panel applied the wrong standards and reached the wrong conclusion" in its decision denying sovereign immunity from PTAB proceedings for state universities.  On the other hand, perhaps UT has a licensee with a license provision mandating an appeal on any matter involving a licensed patent.  More unlikely is the possibility that being UT they believed they could be more persuasive than MN in making their case.  But not having been the beneficiary of a Christmas miracle, the IPR proceeding should proceed against UT before the PTAB in due course.

Board of Regents of the University of Texas System v. Baylor College of Medicine (Fed. Cir. 2020)
Nonprecedential disposition
Panel: Chief Judge Prost and Circuit Judges Lourie and Stoll
Per curiam

Snyders Heart Valve LLC v. St. Jude Medical, LLC (Fed. Cir. 2020)

    By Donald Zuhn --

Earlier today, the Federal Circuit vacated the final written decision by the U.S. Patent and Trademark Office Patent Trial and Appeal Board in an inter partes review involving Appellant Snyders Heart Valve LLC and Appellee St. Jude Medical, LLC, and remanded for proceedings consistent with the Court's decision in Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019).  Snyders argued that the final written decision at issue on appeal violated the Constitution's Appointments Clause because it was rendered by an unconstitutionally appointed panel of Administrative Patent Judges.  Snyders also argued that the remedy in Arthrex is insufficient because it does not allow for review of the Board's decisions by a superior officer and is inconsistent with Congress' intent that Administrative Patent Judges act independently.  Snyders further argued that due to the unique circumstances of its case, it was entitled to greater relief than afforded under Arthrex.

With respect to Snyders' first argument, the Court indicated that the issue had been decided in Arthrex, and that Snyders was entitled to vacatur and remand for a hearing before a properly appointed Board.  The Court did not address Snyders second argument, noting that it was bound by Arthrex.

With respect to Snyders' third argument, Snyders explained that USPTO Director Andre Iancu had served as counsel for St. Jude Medical LLC in a parallel proceeding prior to his appointment as Director.  Although Director Iancu had recused himself from the instant case, Snyders argued that the Director's conflict should be imputed to all USPTO employees and that his recusal should impact the remedy available to Snyders.  The Court, however, found Snyders' argument to be without merit, noting that the Deputy Director has the authority, under 35 U.S.C. § 3(b)(1), "to act in the capacity of the Director in the event of the absence or incapacity of the Director," and that a conflict requiring recusal qualifies as an "incapacity" within the meaning of the statute.

St. Jude's argued on appeal that because Snyders expressly waived its Arthrex-based challenge in a companion appeal, the Court should deem the argument to have been waived in the instant appeal.  The Court, however, explained that "Snyders was not obligated to press every argument available to it in a different appeal to maintain its rights in this one," noting that the companion appeal addressed inter partes reviews of a different patent than the one at issue in the instant appeal, and therefore determined that Snyders had not waived its Arthrex-based challenge in the instant appeal.

The Court concluded that "Snyders is entitled to the same relief given to the Arthrex appellant and no more," and therefore vacated and remanded the Board's final written decision.

Snyders Heart Valve LLC v. St. Jude Medical, LLC (Fed. Cir. 2020)
Nonprecedential disposition
Panel: Circuit Judges Newman, O'Malley, and Taranto
Per curiam opinion

Adidas AG v. Nike, Inc. (Fed. Cir. 2020)

By Joshua Rich --

Although the Federal Circuit faced obviousness issues that were simple to resolve in Adidas AG v. Nike, Inc., it saw an opportunity to continue to clarify its jurisprudence regarding standing on appeal from an adverse final written opinion in inter partes review.  Thus, while the merits of the case will have little impact beyond the parties -- apart from a reminder of the burden of proof on appeal for an aggrieved petitioner -- it will go down as another clarifying brick in the wall of the law of standing in circumstances for a petitioner not involved in active litigation.

In 2012, Nike introduced its Flyknit technology -- shoes with one-piece uppers woven out of lightweight fibers that can provide greater flexibility, support, or durability through the specific weaving of the fibers.  Instead of traditional shoe upper design, which had a tongue separate from the rest of the upper, Flyknit shoes required an athlete's foot to slip into the shoe like a sock.  Nike has protected its technology with a portfolio of more than 300 patents.  But five months after Nike's introduction of Flyknit, adidas introduced a similar product called Primeknit.  And adidas's desire to market its Primeknit shoes free of a threat from Nike's patents gave rise to two inter partes review proceedings filed in 2016.

adidas challenged U.S. Patent Nos. 7,814,598 and 8,266,749, asserting that both patents were invalid due to obviousness.  Claims 1 and 4 of the '598 patent are illustrative of the base weaving claims and unitary construction claims:

1.  A method of manufacturing an article of footwear, the method comprising steps of:
    mechanically-manipulating a yarn with a circular knitting machine to form a cylindrical textile structure;
    removing at least one textile element from the textile structure;
    incorporating the textile element into an upper of the article of footwear.

4.  The method recited in claim 1, wherein the step of mechanically manipulating includes forming the textile element to include a first area and a second area with a unitary construction, the first area being formed of a first stitch configuration, and the second area being formed of a second stitch configuration that is different from the first stitch configuration to impart varying textures to a surface of the textile element.

adidas asserted two grounds of obviousness based on different combinations of prior art.  Originally, the Patent Trial and Appeal Board instituted review on only the first ground and issued a final written decision against adidas on that ground.  adidas appealed, and the Federal Circuit reversed and remanded based on SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018).  The PTAB then considered both grounds and reached a final written decision adverse to adidas on both grounds.  adidas again appealed.

Before considering the merits of the appeal, the Federal Circuit first was required to determine whether adidas had standing to appeal.  Almost anyone can petition for inter partes review,[1] but only a party that has the concrete interest traditionally required for Federal court litigation can pursue an appeal against an adverse IPR decision.  Standing requires that the appellant from an IPR show that it has (1) suffered an injury in fact, (2) that the injury is fairly traceable to the adverse IPR decision, and (3) that the injury is likely to be redressed by a favorable judicial decision on appeal.  For a patent owner, that showing is straightforward: an adverse final written decision invalidates its patent claims.  For an IPR petitioner, however, the showing can be more of a challenge.  It must show that it runs some risk of loss from the patent remaining in force.  And while that does not require a showing of a specific threat of infringement litigation, the petitioner generally must "show that it has engaged in, is engaging in, or will likely engage in activity that would give rise to a possible infringement suit."

Here, Nike had not accused adidas of infringing the reviewed patents in the seven years between the launch of adidas's Primeknit line and the filing of its appeal.  However, adidas and Nike are direct competitors, not only in athletic footwear but even athletic shoes with knit, unitary uppers.  And when adidas had launched its Primeknit line, Nike had sued adidas in Germany for infringement of one of the patents in the Flyknit portfolio.  Nike had also sued a third party for infringement of one of the challenged patents based on a design similar to an adidas design.  Finally, Nike refused to provide adidas a covenant not to sue.  Thus, the Federal Circuit found the facts made the dispute sufficiently concrete to establish standing for appeal.

On the merits, however, adidas had far less success.  It asserted two combinations of art that involved different references that teach "pre-seaming" shoe uppers with a reference that teaches seaming a textile element after it is cut from the textile structure.  Important, the unitary construction claimed in the challenged patents avoided any seams like those disclosed in the "pre-seaming" art.  For that reason, the PTAB had found that there would be no motivation to combine, especially because it would either alter the principles of the "pre-seaming" art or render it inoperable for its intended purpose.

adidas argued that the PTAB decisions were not supported by substantial evidence because the references would be compatible due to their relation to knitting multiple layers and a person of ordinary skill in the art would be motivated to combine them to avoid waste.  The Federal Circuit did not agree.  adidas had focused on the similarities between the references, but had ignored their fundamental differences.  In doing so, it relied on considerations that the PTAB had considered and rejected and did nothing to overcome the finding of a lack of motivation to combine.  Because the final written decisions were therefore supported by substantial evidence, the Federal Circuit affirmed them.

While this case does not break any new ground on substantive post-grant proceedings, it is a helpful clarification on both standing issues and a useful reminder on how to challenge PTAB decisions.  While the legal requirements for standing to appeal adverse PTAB decisions are settled, the application of that legal doctrine to the facts of IPRs is still developing. This case provides another useful guidepost regarding the facts that need to be established to ensure appealability.

And it also provides a reminder:  when appealing a decision under the "substantial evidence" standard, you not only must identify strong evidence to support your position, but also -- and more importantly -- must show that the PTAB's decision was unsupportable under the record evidence.  It is simply not enough to have the better argument, there must not be substantial evidence to support the counterargument.

A petitioner's standing to appeal from post-grant proceedings has been a particularly tricky issue, both for the Federal Circuit and petitioners.  Being a competitor is an important, but not sufficient, condition to make a dispute sufficiently concrete.[2]  Nor is it enough to have plans eventually to launch a product that might fall within the scope of the patent's claims.[3]  Instead, a petitioner's infringement must be "sufficiently imminent" to make the dispute concrete, an amorphous concept that has led the Federal Circuit to render seemingly conflicting decisions on standing.  But it is even more of a difficult decision for the petitioner:  to make the validity dispute concrete, it must establish that it is at risk should an infringement claim be asserted.  That is, the petitioner must do the patentee's traditional job of establishing the credibility of an infringement claim if it wants to be assured of standing to appeal.  That threat itself -- either sacrifice the power to appeal an adverse final written decision or argue against one's own interest in infringement litigation -- has been enough to prevent some parties from bringing post-grant proceedings in the first place.

Adidas AG v. Nike, Inc. (Fed. Cir. 2020)
Panel: Circuit Judges Moore, Taranto, and Chen
Opinion by Circuit Judge Moore

[1] One notable exception is that the agencies of the Federal government are not permitted to prosecute post-grant review proceedings, including IPRs.  See https://www.patentdocs.org/2019/06/return-mail-inc-v-united-states-postal-service-2019.html

[2] In 2019, the Federal Circuit rejected the assertion of "competitor standing" in AVX Corp. v. Presidio Components, Inc.  See https://www.patentdocs.org/2019/05/avx-corp-v-presidio-components-inc-fed-cir-2019.html

[3] See https://www.patentdocs.org/2020/05/argentum-pharmaceuticals-llc-v-novartis-pharmaceuticals-corp-fed-cir-2020.html.

 

Supreme Court Takes Pass on Considering IPR Constitutionality

By Kevin E. Noonan --

There is little rhyme nor reason in the cases the Supreme Court decides to review.  But the Court has patterns in its case selection that do (to some degree) probe what the Justices think are important questions.  One pattern that has been evident in the past few years is that the Court believed it important to set the contours of the post-grant review provisions of the Leahy-Smith America Invents Act, particularly with regard to inter partes review proceedings.  Thus, the Court held in Cuozzo Speed Technologies LLC v. Lee (2016) that the USPTO properly applied the "broadest reasonable interpretation" standard for claim construction for IPRs and that the statute mandated that the decision to institute an IPR was not subject to judicial review.  Two years later, the Court handed down two IPR-related decisions.  In SAS Institute Inc. v. Iancu (2018), the Court challenged the PTAB's practice of partial IPR institution and held that the U.S. Patent and Trademark Office was compelled to render a Final Written Decision (FWD) on all claims challenged by a petitioner in its IPR petition.  And in Oil States Energy Services, LLC. v. Greene's Energy Group, LLC (2018), the Court held that IPRs do not violate Article III or the Seventh Amendment of the Constitution.  Last year, in Return Mail, Inc. v. United States Postal Service (2019), the Court's decision precluded federal government agencies from availing  themselves of post-grant proceedings under the AIA, and earlier this year in Thryv, Inc. v. Click-to-Call Technologies, LP (2020), the Court mandated that the provisions of 35 U.S.C. § 315(b), which preclude a petitioner from filing an IPR petition more than one year after being served with a complaint alleging infringement, are barred from judicial review under 35 U.S.C. § 314(d).

The Court's decisions have ranged from the (relative) minutiae of statutory construction and administrative implementation thereof to questions of constitutionality.  But the Oil States decision was perhaps the Court's most explicit reservation of judgment on whether Congress (or the PTO) had (or might) overstep its Constitutional moorings under certain circumstances.  The Court noted that it was not determining whether IPR proceedings raise due process concerns, and stressed that the holding should not be misconstrued to suggest that other constitutional challenges could not be made, for example challenges related to the Due Process Clause or the Takings Clause.  The Court seemed content to await these issues (should they arise) to come before it in future cases.

This week, the Court announced that that future is not now, in denying petitions for certiorari in two cases, Celgene Corp v Peter and Enzo Life Sciences, Inc. v. Becton, Dickinson & Co.  Both cases involved Constitutional challenges against retroactive application of IPR challenges on patents that were filed before enactment of the AIA.  These challenges were addressed expressly by the Federal Circuit, and in both cases the Court denied those challenges.

In Celgene, in an opinion by Chief Judge Prost, joined by Judges Bryson and Reyna, the Court based its decision that IPRs are not unconstitutional on the history, beginning in 1980, of Patent Office review of previously granted patents, which at least put patentees on notice that the Office could reconsider the validity of the patent grant.  This history made that grant contingent on there not being a successful post-grant challenge, and thus an IPR is nothing more than the latest iteration of such proceedings.  Characterizing IPRs in this way removed much of the force of the retroactivity argument, without which the constitutional challenge fell.  It is also consistent with the Court's decisions in Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985), and Joy Technologies, Inc. v. Manbeck, 959 F.2d 226 (Fed. Cir. 1992), where the Court rejected similar challenges to ex parte reexamination.  According to the opinion, "Celgene's pre-AIA patents were therefore granted subject to existing judicial and administrative avenues for reconsidering their validity" and "[f]or several decades [prior to Celgene applying for its patents], the Patent Office also possessed the authority to reexamine—and perhaps cancel—a patent claim that it had previously allowed."

The Office also persuasively argued that invalidation of a patent is not an unconstitutional taking because "the patent owner 'never had a valid property right because the patent was erroneously issued in the first instance.'"  And the panel noted that "[t]he validity of patents has always been subject to challenge in district court," although there is (or should be) a distinction between the agency reversing itself within its own sphere of expertise and a court deciding that the agency had erred.

In view of the similarities between IPRs and these earlier types of post-grant review proceedings, the panel stated that:

[I]t suffices for us to decide that IPRs do not differ sufficiently from the PTO reconsideration avenues available when the patents here were issued to constitute a Fifth Amendment taking.  Celgene identifies a number of differences between reexaminations and IPRs, including that IPRs are adjudicative and have discovery, briefing, and an oral hearing, . . . but as explained below [where the panel recites the many similarities between IPRs and earlier post-grant review proceedings], these differences are not sufficiently substantive or significant to constitute a taking.

The Court's reticence to grant certiorari is perhaps more understandable in Enzo.  There, in an opinion by Judge Lourie joined by Judges O'Malley and Chen, the Federal Circuit dealt summarily with Enzo's argument that subjecting patents granted prior to enactment of the AIA to the IPR provisions of the AIA was unconstitutional:

We recently addressed this issue in Celgene Corp. v. Peter, No. 18-1167, 2019 WL 3418549, at *12–16 (Fed. Cir. July 30, 2019), which is now precedent that governs this case.  Celgene held that "retroactive application of IPR proceedings to pre-AIA patents is not an unconstitutional taking under the Fifth Amendment."  Accordingly, we hold that the retroactive application of IPR proceedings to the '197 patent, which issued before the enactment of the AIA, is not an unconstitutional taking under the Fifth Amendment.

It is unlikely that the Court has much stomach for considering arguments against the constitutionality of the post-grant proceedings set forth in the AIA.  Perhaps this is simply that a majority of the members of the Court believe (against likelihood or at least recent experience) that the Federal Circuit is correct and the patent bar's acquiescence, and settled case law, to earlier post-grant review regimes (the ex parte reexamination statute in 1980 and the inter partes reexamination statute in 1999) creates sufficient precedent that Congress's latest foray in providing a remedy to Patent Office misadventure in improvidently granting "bad patents."  This history suggests that a successful constitutional challenge in these grounds might be presented will take the type of inordinate exercise in cleverness by patent practitioners that the Court has warned against.  Until then (or until the patent winds in Congress change), the AIA's post-grant review regime appears to be here to stay.

Argentum Pharmaceuticals LLC v. Novartis Pharmaceuticals Corp. (Fed. Cir. 2020)

By Kevin E. Noonan --

Last week, the Federal Circuit had the occasion to address anew the requirements for standing to appeal an adverse decision of the Patent Trial and Appeal Board in an inter partes review proceeding under Article III of the Constitution, in Argentum Pharmaceuticals LLC v. Novartis Pharmaceuticals Corp.

The appeal arose over U.S. Patent No. 9,187,405, with several parties having filed inter partes review petitions, for which the PTAB granted joinder under 35 U.S.C. § 315 (c).  These parties included Apotex Inc. and Apotex Corp. (who filed the first granted petition); Sun Pharmaceutical Industries, Ltd., Sun Pharmaceutical Industries, Inc., and Sun Pharma Global FZE (collectively, Sun); Teva Pharmaceuticals USA, Inc. and Actavis Elizabeth LLC; and Argentum Pharmaceuticals LLC.  The PTAB determined that the petitioners had not demonstrated unpatentability under 35 U.S.C. § 314(a); petitioners appealed.  However, before the Federal Circuit could render a decision, all petitioners except Argentum settled with Novartis and withdrew their appeals.

Novartis filed a motion to dismiss Argentum's appeal, on the grounds that Argentum lacked standing.  Anyone (other than the patent holder) has standing to petition for inter partes review under the Leahy-Smith America Invents Act.  Paradoxically, petitioners who fail to establish that at least one challenged claim is invalid do not automatically have standing to appeal.  Here this was not an issue initially, because only one party to an appeal needs to have standing and it was undisputed that the other petitioners did so.  Once those unsuccessful petitioners settled, however, only Argentum remained in the appeal.  As argued by Novartis, the question of Argentum's standing was a threshold issue that the Court was required to settle before reaching the merits, citing Phigenix, Inc. v. Immunogen, Inc.

The Federal Circuit held that Argentum did not have standing, in an opinion by Judge Moore, joined by Judges Lourie and Reyna.  The test for standing is that the putative appellant has "(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision," citing Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016).  This requirement for appeals from PTAB decisions was established by the Federal Circuit in Consumer Watchdog v. Wis. Alumni Research Foundation.  The quantum of injury-in-fact requires a showing that the appellant has "suffered 'an invasion of a legally protected interest' that is 'concrete and particularized' and 'actual or imminent, not conjectural or hypothetical'" the opinion states, citing Spokeo.

Argentum argued three bases for injury-in-fact.  The first was a "reasonable and imminent threat of litigation" because it is pursuing a generic version of Novartis's Gilyena® product and was "in the process of filing an ANDA" with its manufacturing partner, KVK-Tech.  Novartis argued in response that KVK, not Argentum, would be filing any such ANDA and thus Argentum could not rely on this risk of suit for standing (and in addition litigation was conjectural because neither party had filed any such Gilyena®-targeting ANDA).  Argentum countered with the Federal Circuit's Altaire Pharmaceuticals, Inc. v. Paragon Bioteck, Inc., 889 F.3d 1274, 1282–83 (Fed. Cir. 2018), decision for the principle that an ANDA did not need to have been filed to confer standing.  The Court found Argentum's arguments "unavailing" with respect to Altaire, stating that in that case the company asserting standing was the company that planned to file the ANDA, unlike the case here.  There "the threat of litigation was 'real' and 'imminent' and Altaire was affected 'in a personal and individual way,'" according to the opinion.

Argentum's second argument was that it would incur "significant economic injury" ("$10-50 million per year in lost profits once the FDA grants provisional approval to the ANDA; italics added) if subject to a "looming infringement action by Novartis."  Novartis responded that this argument was entirely speculative.  The Court concluded that "Argentum has not provided sufficient evidence to establish an injury in fact through economic harm," citing General Electric Co. v. United Techs. Corp., 928 F.3d 1349, 1353–54 (Fed. Cir. 2019), for analogous circumstances.  The opinion also concluded that Argentum had not established that it had an investment in KVK's generic Gilyena® product nor ANDA, characterizing Argentum's allegations as "generalities" and its assertions regarding the economic costs as "conclusory and speculative."  This, the Court held, was not "concrete and particularized" nor "actual and imminent" injury-in-fact.

Finally (with regard to the arguments the Court entertained), Argentum argued that it would be estopped under 35 U.S.C. § 315(e) from raising patentability and validity issues should Novartis eventually sue them for infringement under 35 U.S.C. § 271(e)(2).  But Phigenix held that potential IPR estoppel was not sufficient to establish standing and thus this argument also failed to persuade the panel.

The Court having found no standing, it dismissed the appeal, costs to Novartis.

Argentum Pharmaceuticals LLC v. Novartis Pharmaceuticals Corp. (Fed. Cir. 2020)
Panel: Circuit Judges Lourie, Moore, and Reyna
Opinion by Circuit Judge Moore