The Federal Circuit’s recent decision in Merck and Cie v. Gnosis highlights the importance of getting it right the first time at the PTAB. In its decision, the Federal Circuit denied Merck’s request for the whole court to consider raising the legal standard by which the court reviews the PTAB’s decisions. By denying the petition, the Federal Circuit left in place the system of deferential review that makes changing the outcome of a PTAB trial more difficult than challenging a decision from a district court.
The issue stems from the PTAB’s decision invalidating claims of Merck’s patent. At the PTAB, Merck made a number of arguments to try to save the claims from an obviousness challenge, including offering evidence of “objective indicia of non-obviousness” to try to undermine Gnosis’s case. The PTAB was unconvinced, and made “factual findings” that aligned with Gnosis’s arguments and supported a decision to invalidate the claims. Merck tried again at the Federal Circuit, but the system of deferential review meant that, once the Federal Circuit saw “substantial evidence” to support the PTAB’s factual findings, it could only review whether the PTAB applied the law correctly to those facts. After its loss, Merck tried to convince the court to impose a more rigorous review, which would allow Merck to challenge the factual findings that had been fatal to its case.
Merck’s loss means that the Federal Circuit will only review the PTAB’s factual findings for whether there was a sufficient basis for the conclusion. In practice, this means that many PTAB decisions may be insulated from Federal Circuit review and makes winning at the PTAB critical.
The PTAB is in many ways a “one shot” situation. The rules permit for some changes or additions to arguments in response to new information, but the PTAB can often make it difficult to rely on those procedures. Parties to PTAB proceedings would therefore do well to focus on developing their entire case in their earliest submissions to the Board, including both their own arguments and rebuttals to predicted counter-arguments.
The decision in Merck and Cie v. Gnosis also serves as a reminder that the PTAB trial system is still relatively new, and some portions of it may still be subject to challenge or change. Though they concurred in the court’s decision to maintain deferential review, several judges wrote at length that they only did so because they felt bound by precedent and that a more rigorous (and less deferential) review was more appropriate. Those judges encouraged Congress or the Supreme Court to change the standard. Watch for updates in the Post-Grant Strategist on whether either takes up the suggestion.