Earlier today the United States Court of Appeals for the Federal Circuit issued an opinion in Novartis AG v. Noven Pharmaceuticals, Inc., which affirmed the Patent Trial and Appeal Board (PTAB) invalidation of claims in related inter partes review (IPR) proceedings. The IPRs related to U.S. Patent No. 6,316,023 and U.S. Patent No. 6,335,031.
Patent owners losing claims and the Federal Circuit rubber stamping the PTAB isn’t news, sadly. What makes this case different, however, is that these very same patents were previously litigated and the claims were found to be nonobvious in federal district court.
Novartis argued to the Federal Circuit that the arguments presented to the PTAB by Noven, as well as the prior art submitted to support those arguments, were the same as considered during litigation in federal court. The Federal Circuit disagreed, finding that the record in federal court was not identical to the record at the PTAB. But the Federal Circuit went further, saying that even if the records were identical Novartis’ argument would have to fail.
Judge Wallach, who was joined by Chief Judge Prost and Judge Stoll in this decision, wrote:
[E]ven if the record were the same, Novartis’s argument would fail as a matter of law. The PTAB determined that a “petitioner in an inter partes review proves unpatentability by a preponderance of the evidence (see 35 U.S.C. § 316(e)) rather than by clear and convincing evidence as required in district court litigation,” meaning that the PTAB properly may reach a different conclusion based on the same evidence. Noven II, 2015 WL 5782081, at *2 (italics omitted). That position comports with recent Supreme Court precedent…
Wallach went on to quote a passage from Cuozzo Speed Technologies, LLC v. Lee, acknowledging that it is entirely possible that a district court may find a patent claim to be valid but that the USPTO may later cancel the claim on its own review. That is the problem when you have different standards applied by decision makers reviewing the same legal question. In the district courts the Phillips standard, which provides a “correct” claim construction, is mandated. See PPC Broadband, Inc. v. Corning Optical Communications RF, LLC at 7. At the PTAB the broadest reasonable interpretation (BRI) of a claim is used as if the claim has never been previously examined and issued, and the PTAB does not presume the patent is valid despite there being no apparent statutory authority for the PTAB to ignore the presumption of validity. Indeed, 35 U.S.C. 282 says: “A patent shall be presumed valid.” Interestingly, § 282 does not say that the presumption is voided in proceedings at the PTAB, but in their infinite wisdom the PTAB (and USPTO) do not think patents are required to be presumed valid at the PTAB. Shockingly, the Federal Circuit agrees.
Indeed, it is very difficult to understand why the Federal Circuit continues to allow the PTAB to ignore the presumption of validity that is so clearly and directly written into § 282. The presumption of validity is unmistakable, not at all ambiguous, and exceptionally direct. According to the Supreme Court, the proper role of a court is not to engage in a free-ranging search for the best policy, but rather to focus solely on statutory interpretation, and in so doing give effect to the clear meaning of the statutes as they are written, giving each word its ordinary, contemporary, common meaning. See Star Athletica LLC v. Varsity Brands, Inc. (slip op. at 6).*
So how is it possible that the words — a patent shall be presumed valid — have been interpreted to mean that a patent shall be presumed valid unless it is challenged at the Patent Trial and Appeal Board?
In any event, the Novartis argument regarding it being inappropriate to invalidate patent claims already finally adjudicated to be valid was premised on In re Baxter International, Inc. (Fed. Cir. 2012), which said:
When a party who has lost in a court proceeding challenging a patent, from which no additional appeal is possible, provokes a reexamination in the PTO, using the same presentations and arguments, even with a more lenient standard of proof, the PTO ideally should not arrive at a different conclusion.
Wallach explained that the Baxter court saying “ideally” the PTO will not reach a different conclusion was not intended to be a mandate. He wrote:
[T]he context in which that passage appears demonstrates that we used “ideally” to connote aspiration and, in fact, recognized that Congress has provided a separate review mechanism before the USPTO with its own standards. We will not imbue Baxter with a meaning that the decision itself does not support.
(citations and quotations omitted).
Ultimately, the Federal Circuit found there was substantial evidence to support the PTAB’s decision that the claims of the ‘023 patent and the ‘031 patent were invalid.
Patent claims being adjudicated valid in federal district court and then being killed in an administrative proceeding at the PTAB is exactly the problem so many of us saw coming. Time and time again throughout the debates in Congress, and all through the legislative history, post grant proceedings were explained as being a faster, low-cost alternative to litigating validity disputes in Federal District Court. That was just a lie. Post grant proceedings at the PTAB are not cheap, and they are not an alternative to district court proceedings. The PTAB is duplicative and anti-patent. In fact, because of the different standards used between district courts and the PTAB, and because district courts presume patents are valid pursuant to 35 U.S.C. 282, different outcomes are practically inevitable.
District courts are now subordinate to the omnipotent PTAB. What a mess Congress created with the America Invents Act (AIA).
UPDATED Wednesday, April 5, 2017. An earlier version of this article incorrectly stated that the majority opinion was written by Chief Judge Prost. Just Wallach wrote the opinion, which was joined by Chief Judge Prost and Judge Stoll.
* In Star Athletica Justice Thomas writing for the majority wrote: “This is not a free-ranging search for the best copyright policy, but rather “depends solely on statutory interpretation.” Mazer v. Stein, 347 U. S. 201, 214 (1954). “The controlling principle in this case is the basic and unexceptional rule that courts must give effect to the clear meaning of statutes as written.” Estate of Cowart v. Nicklos Drilling Co., 505 U. S. 469, 476 (1992). We thus begin and end our inquiry with the text, giving each word its “ordinary, contemporary, common meaning.” Walters v. Metropolitan Ed. Enterprises, Inc., 519 U. S. 202, 207 (1997) (internal quotation marks omitted).”