The US Court of Appeals for the Federal Circuit affirmed a Patent Trial and Appeal Board (PTAB) decision finding that the America Invents Act (AIA) is constitutionally sound as applied to patents issuing on applications filed prior to AIA enactment. The Court also found that the PTAB’s use of a rationale for motivation to combine different than that used in the original petition was procedurally compliant with the Administrative Procedure Act (APA). Arthrex, Inc. v. Smith & Nephew, Inc., Case No. 18-1584 (Fed. Cir. Aug. 21, 2019) (Stoll, J).
Smith & Nephew filed an inter partes review (IPR) petition against Arthrex’s patent related to a surgical suture anchor used to reattach soft tissue to bone. The PTAB found Arthrex’s patent invalid. Arthrex appealed, arguing that (1) the PTAB violated Arthrex’s procedural rights by crafting a new reason for combining references; (2) the PTAB erred in its finding that a person of ordinary skill in the art (POSITA) would have found the claimed invention obvious based on substantial evidence; and (3) IPR for Arthrex’s patent was unconstitutional.
IPR proceedings are formal administrative adjudications subject to the procedural requirements of the APA, one of which is that an agency may not change theories in midstream without giving respondents reasonable notice of the change and the opportunity to present argument under the new theory. Nor may the PTAB craft new grounds of unpatentability not advanced by the petitioner, as the Federal Circuit previously held.
Arthrex first argued that by describing the reference’s casting method as “preferred,” a characterization not found in Smith & Nephew’s petition, the PTAB crafted a new reason for combining that reference with another and violated Arthrex’s procedural rights in finding the challenged claim invalid. The Federal Circuit disagreed, stating that although the PTAB did use different language than the petition in its discussion of whether a POSITA would have been motivated to the combine the references, it did not introduce new issues or theories into the proceeding. And even if the PTAB had done so, Arthrex took advantage of the opportunity to argue these issues when asserting that the casting method of one of the references would be inherently problematic. Therefore, Arthrex was not deprived of that procedural right under the APA.
The Federal Circuit acknowledged that although Arthrex was correct that the PTAB used the term “preferred,” which differs from the petition’s characterization of reference’s casting as “well-known,” “accepted” and “simple,” the PTAB ultimately relied on the same few lines of the reference as were relied on in the petition in finding motivation to combine the casting technique of one reference with the anchor of the other. Furthermore, the Court acknowledged that while Arthrex’s evidence arguably did cut against the PTAB’s conclusion, it did not preclude substantial evidence from supporting the PTAB’s fact finding. Because the PTAB’s finding of motivation to combine was supported by such evidence as “a reasonable mind might accept as adequate,” the PTAB did not err procedurally. The Court thus affirmed the PTAB’s conclusion that the challenged claim would have been obvious over the prior art combination.
The Federal Circuit quickly struck down Arthrex’s constitutional challenge of IPR as applied retroactively to patents issued prior to the enactment of the AIA. In its analysis, the Court found immaterial the fact that Arthrex filed its patent applications prior to passage of the AIA, since the patent at issue was granted almost three years after passage of the AIA, and almost two years after the first IPR proceedings began. Hence, the Court ruled that application of IPR to Arthrex’s patent could not be characterized as retroactive. The Court reiterated its ruling in the recent Celgene case (IP Update, Vol. 22, No. 8) that application of the re-examination statute does not violate the Fifth Amendment, Seventh Amendment or Article III “controls the outcome” of similar challenges to IPR.
Practice Note: The Federal Circuit afforded the PTAB additional KSR flexibility in terms of language it may use in its obviousness analysis: “courts determine whether there was an apparent reason to combine the known elements in the fashion claimed by the patent at issue; the analysis is a flexible one, accounting for the inferences and creative steps that a person of ordinary skill in the art would employ.”