In affirming a PTAB ruling that the challenged patent was invalid for obviousness, a split Federal Circuit panel recently held that neither the America Invents Act nor the Constitution precludes the same PTAB panel that made the decision to institute IPR from also rendering the final written decision on patent validity. Ethicon Endo-Surgery, Inc. v. Covidien LP, No. 2014-1771 (Fed. Cir. Jan. 13, 2016). The Federal Circuit also found that having the same PTAB panel decide both determinations is consistent with the “efficiency” goals of the AIA.
In its appeal to the Federal Circuit, Ethicon made two main arguments against having the same panel decide both institution and final decision. First, Ethicon argued that having the same panel decide both decisions raises “serious due process concerns,” as the panel’s exposure to a limited record for institution purposes improperly biases it in the subsequent final determination. The Federal Circuit majority disagreed, analogizing to other approved systems where a single administrative body performs both investigative and adjudicatory functions.
The Federal Circuit also analogized to preliminary injunction determinations in litigation, noting that exposure to a limited record does not present bias issues because adjudicators are afforded a “presumption of honesty and integrity.” Further, a PTAB panel is not exposed to unofficial, “extrajudicial” sources of information.
Second, Ethicon argued that statutorily, Congress intended to keep the functions of institution and final decision separate because the AIA (1) specifically gives the Director the power to institute, (2) does not give the Director authority to delegate the institution decision to the PTAB, and (3) gives the PTAB the power to make the final determination. Again, the Federal Circuit majority disagreed, stating that the Director has inherent authority to delegate the institution decision to the PTAB under the “longstanding rule” that agency heads have implied authority to delegate to officials within the agency, even without explicit statutory authority.
Further, Congress assumed that the Director would delegate because the Director regularly did so with other tasks prior to the AIA, and realistically the Director cannot review every IPR petition. Moreover, the majority stated that Congress’s vesting of broad rulemaking powers in the head of the agency is an alternate source of authority to delegate.
In her dissent, Judge Newman essentially agreed with Ethicon’s arguments. To Judge Newman, the AIA requires separation of the institution and final decisions, the first to be made by the Director and the second by the PTAB. Judge Newman warned that disregarding the procedure established by the AIA threatens the viability of what is supposed to be a “new frontier of patent litigation,” and that the threshold institution proceeding was designed to avoid the disadvantages of prior inter partes reexaminations. Further, Judge Newman found due process and bias concerns exist in permitting the same decision-maker to review its own prior decision.
Barring an appeal to the en banc court, Ethicon appears to resolve any challenges to the PTAB’s process of allowing the same panel to render both institution and final decisions. Seemingly consistent with Ethicon, a subsequent Federal Circuit panel unanimously held that a PTAB panel is not bound by any findings made in its Institution Decision. TriVascular v. Samuels, No. 15-1631 (Fed. Cir. Feb. 5, 2016).
In TriVascular (which we wrote about here), despite having instituted the IPR proceeding based on obviousness grounds, the PTAB held in its final decision that the challenged patent was not obvious over the prior art. Notably, two of the three judges on the instituting panel remained on the panel for the final written decision.