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Summary of Ethicon Endo-Surgery, Inc. v. Covidien LP, 2014-1771

1/13/2016

Federal Circuit, January 13, 2016, 2014-1771

Author: Sujin Park

In Ethicon Endo-Surgery, Inc. v. Covidien LP, the Federal Circuit addressed the issue of whether the same panel of Patent Trial and Appeals Board (“PTAB”) that made the decision to institute inter partes review (“IPR”) is permitted to make the final determination. 

Ethicon owns U.S. Patent No. 8,317,070 (“the ’070 patent”), which is directed to a surgical stapling device. The claimed invention is a combination of the use of staples of different pre-formed and formed heights and the use of staples with non-parallel legs. Covidien LP (“Covidien”) sells surgical staplers that Ethicon alleged embody the claimed invention.

On March 25, 2013, Covidien requested IPR of claims 1–14 of the ’070 patent. On August 26, 2013, a PTAB panel granted Covidien’s petition for IPR. On June 9, 2014, the same PTAB panel that instituted the IPR issued a final decision finding the challenged claims of the ’070 patent obvious. Ethicon appealed.

Ethicon argued that the PTO's determination that, in the interest of efficiency, the decision to institute and the final decision should be made by the same Board panel is improper because the statute does not authorize the Director to delegate the institution decision to the Board at all.  Ethicon also argued that having the same panel make the decision to institute and then later decide the merits of the inter partes review raises “serious due process concerns.”

In response, the Federal Circuit held that neither statute nor the Constitution precludes the same panel of the PTAB that made the decision to institute inter partes review (“IPR”) from making the final determination.  The majority found that PTAB’s exposure to a limited record on the decision to institute should not disqualify the same panel from making the final decision. The Court ruled that, to show actual bias, a challenger must show that “an adjudicator is exposed to unofficial, ‘extrajudicial’ sources of information.” Because Ethicon did not allege any exposure to extra-judicial information, there were no due process concerns.

The majority also concluded that there is “nothing in the [America Invents Act (“AIA”)] or the legislative history of the statute indicating a concern with separating the functions of initiation and final decision.” Indeed, there is a long-standing rule that agency heads have implied authority to delegate to other officials within their agency. Further, the majority noted that even prior to the AIA, Congress assumed that the Director of the PTO would delegate. Therefore, as a matter of inherent authority and general rulemaking authority, the Director had authority to delegate institution decisions to the PTAB.

Finally, as to the merits, the Court rejected Ethicon’s argument that the PTAB did not properly take into account the secondary considerations of non-obviousness. The majority agreed with the PTAB that the alleged commercial success of the claimed device was not sufficient evidence of non-obviousness because the patent owner had not demonstrated a sufficient nexus between the inventive aspect of the claims and its commercial success.