Ethicon Endo-Surgery, Inc., v. Covidien LP, No. 2014-1771 (Fed. Cir. 2016)

Written By: John Kirkpatrick

Appellant Ethicon asserts that the America Invents Act (AIA) and due process preclude the same panel of the Patent Trial and Appeals Board that instituted inter partes review of patented claims from making a final decision regarding the validity of the patented claims.  In addition, Ethicon argues that the disputed claims are valid because the commercial success of Appellee’s allegedly infringing invention is a “strong secondary indication of non-obviousness.”  Ethicon Endo-Surgery at *19.  The Court (DYK, Taranto) holds that “that neither the statute nor the Constitution precludes the same panel of the Board that made the decision to institute inter partes review from making the final determination” and finds no error in the Board’s obviousness determination.   Id. at *2-3.  The Dissent (Newman) argues that the AIA requires bifurcation of the process because the AIA requires the Director to make the institution decision and the Board to issue the final decision.

Ethicon owns U.S. Patent No. 8,317,070 (the ’070 patent) directed to a surgical stapler.  The claimed inventive aspect is the use of staples with non-parallel legs and different heights.  However, both features are individually disclosed in the prior art.  Id. at *5.  Covidien sells a surgical stapler using “‘progressive staple heights’” and achieved over $1 billion in sales in the first three years.  Id.  Upon Covidien’s request, the Board instituted an inter partes review of claims 1-14 of the ’070 patent, finding that the evidence of secondary considerations “‘did not overcome the strong case of obviousness.’”  Id. at *6.  Ethicon appeals the Board’s final decision, alleging that the decision is defective because the decision was made by the same panel that instituted the inter partes review.  Ethicon at *8.

The Court holds that the AIA “gives the Director the authority to determine whether an inter partes review should be initiated, and the Director has delegated this authority to the Board.”  Id. at *7.  Ethicon argues that the Director’s decision to allow the same Board panel to institute and make the final decision raises due process concerns because the decision maker, upon granting the review, may be no longer be impartial.  The Court disagrees, citing Withrow v. Larkin, 421 U.S. 35 (1975), in which the Supreme Court held no due process violation when a state medical board both investigated and adjudicated a physician’s suspension.  Id. at *9.  Specifically, the Court notes that Appellant’s argument is weakened because the decisions to institute and the final decision are both adjudicatory and not even a combination of an investigative function and an adjudicatory function as in Withrow.  The Court further dismisses Ethicon’s due process argument that the panel’s decision to institute biases it from making a final decision because “adjudicators are afforded a ‘presumption of honesty and integrity.’”  Id. at *11, quoting Withrow.  Rather, a biased decision might occur when a judge bases a decision on “‘his own personal knowledge and impression of what had occurred.’”  Id. at *12.   

As to Ethicon’s statutory arguments, the Court finds “[t]here is nothing in the statute or legislative history of the statute indicating a concern with separating the functions of initiation and final decision” because agency heads have implied authority to delegate decisions.  Id. at *13.  In support, the Majority cites various statutes in which the Director has authority to delegate and notes the Director’s rulemaking authority. 

Regarding the Board’s finding of obviousness, the Court finds that there is no nexus between Ethicon’s claimed inventive feature and the commercial success of the Covidien’s device.  Specifically, the Court finds that the success is due to non-patented features and features known in the prior art, such as varying staple heights.  Eithicon at *19-20. 

The Dissent argues that the AIA requires decision to institute and the final decision to be made by different decision makers.  Specifically, the Dissent notes that the AIA Post-Grant Review proceedings are meant to be a surrogate for district court litigation.  Newman, Dissent at *3-4.  The Dissent surmises that the Court’s outcome prejudices the Appellant by placing Board judges in a position to defend the decision to institute.  Further, the Dissent notes that the AIA requires the Director to institute and the Board to hold a trial and make a final decision.  “Statutes must be interpreted to conform to ‘the design of the statute as a whole and to its object and policy.”  Id. at *10, citing Crandon v. United States, 494 U.S. 152, 158 (1990).  Thus, deference to the Office interpretation is overridden by the clear meaning of the statute.
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