Federal Circuit has no authority to replace “substantial evidence” standard with “clear error” standard

Merck & Cie v. Gnosis S.P.A., No. 2014-1779 (Fed. Cir. Apr. 26, 2016) and  South Alabama Medical Science v. Gnosis S.P.A., No. 2014-1778 (Fed. Cir. Apr. 26, 2016)

In Merck & Cie v. Gnosis S.P.A. (Gnosis I), the petitioner filed a petition for rehearing en banc of a panel decision affirming the result in an inter partes review (IPR) before the Patent Trial and Appeal Board (PTAB). The PTAB held that the contested claims of the patent-in-suit were obvious. Merck urged the court to sit en banc to decide whether “clear error” was the applicable standard for reviewing the PTAB’s results or whether “substantial evidence” standard used by the panel was appropriate. The petition for rehearing en banc was denied.

Judges O’Malley, Wallach, and Stoll separately concurred. While acknowledging that the “substantial evidence” standard is seemingly inconsistent with the America Invents Act (AIA) insofar as that statute purported to establish IPRs as a “replacement” for district court proceedings, the concurrence noted that the court was bound by Dickinson v. Zurko. In Dickinson, the Supreme Court concluded that 5 U.S.C. § 706 (which provides that “substantial evidence” review is afforded to agency fact finding) applies to PTAB findings. The concurring judges further noted that absent action by Congress or by the Supreme Court, the seeming inconsistency the intent of the AIA, and the holding in Dickinson was not within its power to cure.

Writing in dissent, Judge Newman noted that because the entire thrust of the AIA is that PTAB proceedings would be an alternative to district court proceedings, and, as such, the highly deferential “clear error” standard of review that would be applicable to district court fact finding should likewise apply to the review of IPR fact finding. As such, she concluded that en banc action is needed to realign the Federal Circuit’s standard of review with the legislative purpose of the AIA.

In South Alabama Medical Science Foundation v. Gnosis (Gnosis II), a companion appeal to Gnosis I, the petitioner similarly sought “en banc rehearing for the same reasons addressed” by Merck & Cie in its petition for hearing. Judges O’Malley, Wallach, and Stoll concurred in the denial of rehearing en banc, while Judge Newman dissented for the same reasons discussed in her dissent to the denial of the en banc rehearing in Gnosis I.

Gnosis I opinion ► | Gnosis II opinion ►