When Congress created inter partes review, it established that “the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.”1 This evidentiary standard is less burdensome than the clear and convincing burden faced by a patent challenger in federal district court litigation.2 Accordingly, a federal district court and the PTAB could conceivably reach different conclusions concerning patentability when examining the same, or very similar, evidence. The Federal Circuit recently addressed this issue of different conclusions regarding invalidity at the PTAB and in district court.
Pre-PTAB Precedent on Conflicting Validity Conclusions
The possibility of conflicting conclusions on patent validity between district courts and the USPTO existed even before the advent of inter partes review in the context of reexamination proceedings. In Ethicon, Inc. v. Quigg,3 the accused infringer sought an injunction against the USPTO Commissioner’s decision to stay reexamination proceedings pending the resolution of a federal district court case.4 The Commissioner argued that “staying a reexamination proceeding until a court renders its decision will avoid the awkwardness that would result if the PTO and the court were to reach different conclusions as to validity.”5 The Federal Circuit enjoined the stay and rejected this argument, explaining that “[t]he awkwardness presumed to result if the PTO and court reached different conclusions is more apparent than real.”6 The Court reasoned “different results between the two forums may be entirely reasonable,” because they “can consider different evidence” and “have different standards of proof for determining invalidity.”7
In the wake of Ethicon, the Federal Circuit routinely held that the USPTO may invalidate patents previously subjected to final judgments of validity in federal district court. The Court acknowledged that constitutional issues might exist based on those results but never directly addressed them. In In re Baxter, the patentee appealed the USPTO’s invalidation of its patent in reexamination proceedings to the Federal Circuit, where that same patent had previously been found valid by a federal district court and affirmed by the Federal Circuit.8 The Federal Circuit again upheld the USPTO’s ability to invalidate the patent, because “Congress has provided for a reexamination system that permits challenges to patents by third parties, even those who have lost in prior judicial proceedings.”9 Understanding the seeming unfairness of the outcome, the majority also provided the following statements:
Lest it be feared that we are erroneously elevating a decision by the PTO over a decision by a federal district court, which decision has been affirmed by this court, the following additional comments must be made. 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.10
Judge Newman dissented, asserting that the USPTO invalidation of a patent for which validity had been litigated in court “violates not only the constitutional plan” for finality of judicial review under Article III, “but also violates the rules of litigation repose as well as the rules of estoppel and preclusion.”11 In her opinion, “[a] patent that has been adjudicated to be valid cannot be invalidated by administrative action, any more than a patent adjudicated to be invalid can be restored to life by administrative action.”12 Further, she reasoned that obviousness was an issue of law, and therefore the differences in burdens of proof between the federal district court and the USPTO were irrelevant.13
Meanwhile, the district court case involving the patent at issue in In re Baxter had proceeded to a trial on damages, and the court issued a final judgment awarding damages to the patentee after the USPTO’s determination of invalidity in the reexamination (but before the Federal Circuit’s affirmance).14 On appeal of that damages award, the Federal Circuit vacated the award, finding that the USPTO’s cancellation of the patent claims mooted the district court litigation and precluded the award of damages.15 The Federal Circuit reasoned that, despite the district court’s prior adjudication of the patent’s validity, the USPTO’s cancellation of those claims did not violate principles of collateral estoppel because the district court’s adjudication of the patent’s validity was not a “final judgment” as it had not disposed of all issues in the case at that time.16 Judge Newman authored a similar dissent in this case.17
Conflicting Validity Conclusions at the PTAB and in District Court
In Novartis AG v. Noven Pharm. Inc., the Federal Circuit again addressed issues related to the possibility of conflicting results between the USPTO and federal district courts in the context of the newly created PTAB.18 The Court heard a consolidated appeal from inter partes reviews of U.S. Patent Nos. 6,316,023 and 6,335,031.19 The patents were directed to a particular pharmaceutical composition of rivastigmine in free base or acid addition salt form and an antioxidant.20 The District Court for the District of Delaware found that the patents were not obvious in view of United Kingdom Patent Application GB 2,203,040 (“Enz”), U.S. Patent No. 4,948,807, and a scientific paper written in 1991 by Elmalem et al.21 Just a few months later, the PTAB, using the lower burden of proof, concluded that claims 1–2, 4–5, and 7 of the ’023 Patent would have been obvious over a combination of two prior art references—Enz and Japanese Patent Application 59-184121 (“Sasaki”)—and that claim 8 would have been obvious over a combination of Enz, Sasaki, and two other references.22 Novartis, the patent owner, appealed to the Federal Circuit on the grounds that the prior art evidence presented in both the District of Delaware and the PTAB was the same, and therefore Baxter required that both tribunals should reach the same result.23
The Federal Circuit rejected Novartis’ arguments on both factual and legal grounds.24 As an initial matter, the Court disagreed with appellant’s characterization of the factual evidence.25 The Court explained that the PTAB examined evidence that was not presented to the district court.26 Specifically, the PTAB based its decision on Sasaki and five expert declarations that were not presented in the District of Delaware.27 Novartis conceded that the records were different but argued that the material was substantively the same and therefore could not create different results.28 The Court, however, gave the similarity of the evidence little weight, explaining that it was “unsurprising that different records may lead to different findings and conclusions.”29
The Court further expanded that even if the records were factually identical, Novartis’ arguments would still fail as a matter of law.30 The Court based its legal analysis on the Supreme Court’s decision in Cuozzo Speed Techs., LLC v. Lee:
A district court may find a patent claim to be valid, and the [USPTO] may later cancel that claim in its own review…. This possibility, however, has long been present in our patent system, which provides different tracks—one in the [USPTO] and one in the courts—for the review and adjudication of patent claims. As we have explained … inter partes review imposes a different burden of proof on the challenger. These different evidentiary burdens mean that the possibility of inconsistent results is inherent to Congress’ regulatory design.31
As such, both Congress and the Supreme Court have acknowledged the existence of the different evidentiary standards and the possibility of inconsistent results inherent therein.
Finally, the Court concludes that Novartis’ reliance on Baxter is not proper here.32 The Court explained that in Baxter, the Court used the term “ideally” as an aspiration, not as a legal requirement.33 In an ideal world, the two tribunals might always reach the same results, but the fact remains that Congress created the evidentiary standard for the PTAB with knowledge of the existing standards at the federal district court level.34
However unjust a patentee may find the end results, the Federal Circuit maintains that because Congress created the separate burden of proof for the PTAB in inter partes review proceedings, it is strictly up to Congress to decide whether that possibility should be precluded. Importantly, the Federal Circuit has not addressed how this statutory design might be impacted by the constitutional issues relating to finality of judgments and Article III powers hinted at in its prior decisions or whether different evidentiary standards can properly dictate different conclusions on issues of law (as opposed to issues of fact). Until the Federal Circuit or Supreme Court addresses these issues, or until Congress revisits the differing burdens of proof in the two forums, litigants should not assume that victory in one forum guarantees a similar result in the related proceedings.