L&A Federal Circuit Review

February 2016

As part of our ongoing effort to keep clients and friends informed of important legal updates, we are pleased to provide the L&A Federal Circuit Review, a monthly publication highlighting recent Federal Circuit and Supreme Court decisions. Each monthly review summarizes a few decisions and the key takeaways. Please contact your lead L&A attorney for additional details.

Only the Patent Owner or Third-Party Requester Can Appeal Inter Partes Reexamination Decision

Agilent Technologies, Inc. v. Waters Technologies Corporation, No. 2015-1280

In Agilent, the Federal Circuit held that only the Third-Party Requester of an Inter Partes Reexamination or the patent holder may appeal to the Federal Circuit upon the final decision.

Waters filed suit for infringement against a company called Aurora SFC Systems, Inc., and Aurora challenged the validity of the patent in a pre-AIA request for Inter Partes Reexamination. About five months later Agilent acquired some portion of Aurora. The reexamination continued and the Patent Office ultimately upheld the validity of the Waters’ patent, a ruling that was adverse to Aurora and, by extension, Agilent. Aurora continued to be active in the Reexamination proceedings and remained the named Defendant in the infringement suit. Agilent, not Aurora, appealed the adverse decision of the Inter Partes Reexamination to the Federal Circuit.

On appeal, the Federal Circuit held that only the patent owner or the Third-Party Requester may appeal the outcome of an Inter Partes Reexamination. The Federal Circuit found that Aurora was the Third-Party Requester and Agilent had not made any showing sufficient to be deemed to have stepped into the shoes of Aurora. The Court expressly declined, however, to decide whether a true successor-in-interest becomes the Third-Party Requester because Agilent had not established that it was a successor-in-interest. Specifically, Agilent merely asserted it had acquired “substantially all” of Aurora’s assets but did not present an acquisition contract or make any showing as to what exactly had been acquired. Further, Aurora remained an ongoing concern and continued to appear in the proceedings prior to appeal. The Federal Circuit also noted that there was no request to substitute Agilent as the Third-Party Requester during the underlying proceedings, implying that perhaps Aurora or Agilent could have done so.

Key Takeaway: Appeals to the Federal Circuit from Post-Grant Proceedings are limited to the parties involved in the original proceedings.  Although this case involved a pre-AIA request for Inter Partes Reexamintion, the same reasoning would apply to post-AIA reexaminations. A successor-in-interest should establish itself as a party to the proceedings as soon as possible.

Institution of Inter Partes Review and Final Decision by Same Panel did not Violate Constitutional Due Process

Ethicon Endo-Surgery, Inc. v. Covidien LP, No. 2014-1771

In Ethicon, the Federal Circuit held that it is not a violation of due process for the same panel of the Patent Trial and Appeal Board to institute an inter partes review and also issue a final decision on the merits in the same review.

Covidien petitioned the patent office for inter partes review of a patent owned by Ethicon. A panel of the Patent Trial and Appeals Board granted the petition and instituted review. On the merits the same panel found all challenged claims invalid as obvious.

On appeal, Ethicon argued it was violation of due process for the same panel to make both the decision to institute and the final decision.  Ethicon also asserted that the decision to institute a review is vested with the Director of the USPTO by statute.  Therefore, the decision to institute is either non-delegable, or cannot be delegated to the same body that will issue the final decision on the merits.

The Federal Circuit held that combining functions in a single body does not deprive the patentee of due process. The Supreme Court has never held a system of combined functions to be a violation of due process, and has upheld several such systems. These combinations have been found to raise no question as to whether the judge will remain impartial during the later court proceedings. Furthermore, the heads of agencies retain the implicit power to delegate to subordinates, absent clear congressional intent to the contrary. No such intent is evident in the America Invents Act.

Judge Newman dissented from the majority opinion, asserting that the statutory language of the AIA purposely separates the responsibilities of instituting review and reaching a final decision on the merits. Furthermore, because a separate decision to institute was intended as a procedural protection for patent owners against cumulative or harassing proceedings, the best way to prevent improper bias was to have the matter finally decided by a different panel.

Key Takeaway: The same PTAB panel that granted the petition to institute review may also issue the final decision.

District Court Did Not Pick and Choose Unrelated Teachings In Finding Claims Anticipated or Obvious

Purdue Pharma. L.P. v. Epic Pharma, LLC, 2014-1294

In Purdue Pharmaceuticals, the Federal Circuit affirmed the invalidation of two sets of patents directed to a reformulated version of abuse-resistant OxyContin.

The Federal Circuit affirmed a lower court judgment that a patent directed to abuse-resistant high breaking strength tablets was invalid as anticipated and/or obvious. The patentee argued that the district court erred by taking distinct sections of a prior art reference and assembling them into an embodiment having all of the claimed limitations. While an anticipating reference must clearly disclose the claimed invention without any need for picking or choosing and combining various disclosures, the court found that each of the sections relied upon by the lower court were directly related, and therefore there was no “picking or choosing” in its combination.

The appellate court also affirmed a judgment invalidating a set of patents directed to “low-ABUK” oxycodone as obvious. The patentee had discovered an impurity created during drug manufacture of OxyContin that led to an “ABUK” compound in the final product that may have been toxic. The asserted claims were directed to a product having a low-ABUK level. Even though methods of reducing ABUK levels were known in the art, the patentee argued the claims were not obvious because they were the first to discover the impurity that was the cause of the ABUK compound. The Federal Circuit disagreed, finding that the source of the ABUK compound was irrelevant where the patentee did not claim a method for remedying a newly identified problem, but merely the end product. While the claim required that the compound be “derived from” the impurity, the Court found this to be a process limitation, and therefore not part of the obviousness analysis for a product claim.

Key Takeaway: The Federal Circuit is willing to interpret prior art references broadly for the purpose of anticipating or rendering obvious an asserted patent. A prior art reference disclosing several embodiments may still be used to invalidate a claim where all of the anticipating disclosures are “directly related.” Additionally, patent practitioners should pay close attention to the form of the claim when claiming solutions to newly identified problems, particularly where the structure of the solution could be obvious but for the problem it seeks to solve.

Patent Term Adjustment Does Not Accrue for Period Between Initial and Corrected Restriction Requirements

Pfizer v. Lee, 2015-1265

In Pfizer, the Federal Circuit affirmed that the accrual period for A-type patent term adjustment delay can stop upon the mailing of a deficient restriction requirement by the PTO.

The PTO mailed a restriction requirement to the applicant 404 days after the time period expired for the PTO to mail an action without accrual of A-type delay. The patent examiner and applicant agreed during a telephone interview that the restriction requirement was deficient because it omitted a number of dependent claims from the restriction. The examiner withdrew the restriction requirement and mailed a corrected restriction requirement six months after the original.

Pfizer argued that A-type delay should have accrued until the corrected restriction requirement was mailed because the original action failed to satisfy the notice requirement of 35 U.S.C. § 132. The Federal Circuit disagreed, holding that “[s]ection 132 merely requires that an applicant ‘at least be informed of the broad statutory basis for [the rejection of] his claims, so that he may determine what the issues are on which he can or should produce evidence.” The court agreed with the USPTO that despite failing to classify six dependent claims, it did not require significant guesswork to determine where the inadvertently omitted claims belonged. Thus, the patentee was on notice as of the date of the mailing date of the first restriction requirement, and no further A-type delay accrued past that point.

Key Takeaway: A Patent applicant will still be “on notice” under Section 132 of the Patent Act if they are broadly aware of the statutory basis for the rejection, even if the rejection is technically deficient.  Practitioners should take steps to avoid or minimize delays caused by minor defects in office actions, as patent term adjustment delay may not accrue for the time it takes the office to issue a correction.