ARTHREX, INC., Appellant v. SMITH & NEPHEW, INC., ArthroCare Corp., Appellees
2017-1239
United States Court of Appeals, Federal Circuit
January 24, 2018
880 F.3d 1345
Assuming Commerce wished to rewrite the regulation in this manner, could it do so in this way? The answer is no. Because the regulation‘s meaning is clear, no deference is warranted. Deferring to Commerce‘s position “would be to permit the agency, under the guise of interpreting a regulation, to create de facto a new regulation.” Christensen v. Harris Cty., 529 U.S. 576, 588, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000) (unambiguous regulation could not be rewritten by agency under guise of interpreting regulation and judiciary owed no deference to agency interpretation). If Commerce wished to rewrite or amend the regulation, such a regulation intended to have the force of law must be adopted with notice-and-comment rulemaking, which was absent here. See id. at 587-88, 120 S.Ct. 1655.
Since the 2011 Notice was intended to effectively rewrite the substantive meaning of the regulation without going through the necessary notice-and-comment rulemaking, it has no legal standing, and thus provides no basis upon which the Secretary could make his decision. That was the ruling made by the CIT, and it is correct.
The CIT required the Secretary to remake the decision about the extension of time, applying the criteria contained in the only legally applicable standard, the one set out in
CONCLUSION
For the foregoing reasons, the judgment of the CIT is affirmed.
AFFIRMED
NATHAN R. SPEED, Wolf, Greenfield & Sacks, PC, Boston, MA, argued for appellees. Also represented by RICHARD GIUNTA, BOSTON, MA, MICHAEL N. RADER, New York, NY.
Before Newman, Dyk, and O‘Malley, Circuit Judges.
Concurring opinion filed by Circuit Judge O‘Malley.
Dissenting opinion filed by Circuit Judge Newman.
Dyk, Circuit Judge.
In a pending inter partes review proceeding (“IPR“) before the Patent Trial and Appeal Board (“the Board“), Arthrex, Inc. disclaimed all claims that were the subject of the petition. The disclaimer occurred before the Board issued an institution decision. The Board then entered an adverse judgment pursuant to
BACKGROUND
On April 19, 2016, Smith & Nephew, Inc. and Arthrocare Corp. filed an IPR petition challenging claims 1-9 of U.S. Patent No. 8,821,541 (“the ‘541 patent“), which is owned by Arthrex. On July 22, 2016, Arthrex disclaimed claims 1-9 of the ‘541 patent as permitted under
A party may request judgment against itself at any time during a proceeding. Actions construed to be a request for adverse judgment include:
(1) Disclaimer of the involved application or patent;
(2) Cancellation or disclaimer of a claim such that the party has no remaining claim in the trial;
(3) Concession of unpatentability or derivation of the contested subject matter; and
(4) Abandonment of the contest.
After further briefing, the Board entered an adverse judgment against Arthrex pursuant to
When the Board entered an adverse judgment, an estoppel effect attached, as
DISCUSSION
I
The first issue is whether the adverse final judgment is appealable. There is no contention that the statutory appeal-bar provision applies here. See
We approach this question in light of the general rule that judicial review is presumed to be available with respect to final agency action. The Supreme Court has recognized “the strong presumption that Congress intends judicial review of administrative action.” Mach Mining, LLC v. EEOC, — U.S. —, 135 S.Ct. 1645, 1651, 191 L.Ed.2d 607 (2015); see also Cuozzo, 136 S.Ct. at 2140; Administrative Procedure Act § 10,
Here, the language of
Smith & Nephew argues, however, that the more specific reference to appeal rights in § 319 should govern; that § 319 only provides for review from a final written decision; and that there has been no final written decision here. Section 319 provides, “A party dissatisfied with the final written decision of the Patent Trial and Appeal Board under section 318(a) may appeal the decision pursuant to sections 141 through 144.”
On its face, § 319 does not cabin the appeal rights conferred by § 1295. However, Smith & Nephew points to language in our previous decision, St. Jude Medical, Cardiology Division, Inc. v. Volcano Corp., 749 F.3d 1373 (Fed. Cir. 2014). St. Jude stated that § 1295(a)(4)(A) “is most naturally read to refer precisely to the Board‘s decision under section 318(a) on the merits of the inter partes review, after it ‘conducts’ the proceeding that the Director has ‘instituted.‘” Id. at 1376. It also stated “[t]he final written decision is the only decision that the statute authorizes a
In St. Jude, the issue was whether § 1295(a)(4)(A) authorized review of a Board decision declining to institute an IPR or whether such an appeal was barred by § 314(d), which provides, “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”
Because § 319 does not on its face provide the exclusive means for appeal over IPR decisions not subject to the appeal bar, and § 1295(a)(4)(A) on its face provides a right to appeal, we conclude that a final decision that disposes of an IPR proceeding in the form of an adverse judgment is a “decision” from the Board with respect to IPRs under title 35 and that § 1295 provides a right to appeal a final adverse judgment. This is also not a situation in which § 319 impliedly precludes review under § 1295. See Block v. Cmty. Nutrition Inst., 467 U.S. 340, 345-48, 104 S.Ct. 2450, 81 L.Ed.2d 270 (1984); Pregis Corp. v. Kappos, 700 F.3d 1348, 1357-58 (Fed. Cir. 2012).
II
The next question is whether the Board properly entered an adverse judgment pursuant to
Arthrex argues only that the regulation is inapplicable. It first argues that this is so because Arthrex specifically stated that it was not requesting an adverse judgment. The application of the rule on its face does not turn on the patentee‘s characterization of its own request, and such a construction would make no sense. If the Board‘s authority to enter an adverse judgment depended on whether the patent owner requested an adverse judgment, a patent owner could always avoid an adverse judgment by simply stating that it is not requesting one, even with respect to the specific instances articulated in
Arthrex alternatively points out that subsection 2 of
While the rules define “trial” as requiring “a contested case instituted by the Board based upon a petition,”
Additionally, it seems that the subsections of
The fact that the other provisions of
CONCLUSION
We conclude that the Board‘s decision is appealable, and that the Board‘s interpretation is consistent with the language of the regulation. We do not reach the questions of whether the regulation is authorized by the statute or whether, if so, it was properly promulgated.
AFFIRMED
COSTS
No costs.
O‘Malley, Circuit Judge, concurring.
I agree with Judge Dyk that we have jurisdiction under
The Board relied on
I question the Board‘s authority to issue adverse judgments prior to institution for another reason.
I also am skeptical that the framework of the Leahy-Smith America Invents Act (“AIA“) provides the Board with the necessary authority to issue adverse judgments based on statutory disclaimers prior to institution of inter partes review. The AIA does not address procedural actions before institution beyond the filing of a petition and the patent owner‘s response, should the patent owner wish to submit one.
Because Arthrex affirmatively disclaimed any such statutory or administrative law challenge to the Board‘s reliance on
Newman, Circuit Judge, dissenting.
The Petitioners’ request for inter partes review was not “instituted” because the patentee, Arthrex Inc., disclaimed all of the challenged claims before the PTAB decided whether to institute the requested review. Thus inter partes review could not be instituted, for no challenged claims remained in the patent. See
No inter partes review will be instituted based on disclaimed claims.
Nonetheless, the PTAB issued an adverse judgment on the disclaimed claims. The parties agree—a position apparently shared by the panel majority—that this adverse judgment subjects Arthrex to the estoppel provisions of
From this flawed statutory and regulatory interpretation, I respectfully dissent.
DISCUSSION
Soon after Smith & Nephew, Inc. filed a petition for inter partes review of claims 1-9 of U.S. Patent No. 8,821,541 (“the ‘541 patent“), Arthrex disclaimed all of the challenged claims. Inter partes review was no longer available, see
The PTO accompanied the America Invents Act with the issuance of Rules, including
(1) Disclaimer of the involved application or patent;
(2) Cancellation or disclaimer of a claim such that the party has no remaining claim in the trial;
(3) Concession of unpatentability or derivation of the contested subject matter; and
(4) Abandonment of the contest.
I emphasize the words in the trial in subsection (2) because this is an explicit limitation, not included in the other subsections. Here there was no trial, and no trial was possible after the disclaimer of claims 1-9, for institution of trial was not possible. Subsection 42.73(b)(2), by its terms, makes clear that it relates to procedures “in the trial;” it has no relevance to the institution phase.
I also note that Arthrex explicitly stated to the PTAB that it “is not requesting an adverse judgment,” for Arthrex states that
A further conflict arises in the PTAB‘s issuance of this “final decision,” for final decision on inter partes review, as authorized by
I. Agency Compliance with Statute and Rules
An administrative agency must comport with its authorizing statute, and the PTO‘s practices and regulations must implement the statutory purpose. See Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 125, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000) (“Regardless of how serious the problem an administrative agency seeks to address, however, it may not exercise its authority in a manner that is inconsistent with the administrative structure that Congress enacted into law.“) (internal quotations omitted); Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208, 109 S.Ct. 468, 102 L.Ed.2d 493 (1988) (“It is axiomatic that an administrative agency‘s power to promulgate legislative regulations is limited to the authority delegated by Congress.“).
The judicial obligation is to assure agency compliance with its legislated authority. See Nat‘l Broad. Co. v. United States., 319 U.S. 190, 224, 63 S.Ct. 997, 87 L.Ed. 1344 (1943) (“Our duty is at an end when we find that the action of the Commission was based upon findings supported by evidence, and was made pursuant to authority granted by Congress. It is not for us to say that the ‘public interest’ will be furthered or retarded by the [regulation].“). Here the PTAB stated that “our rules” authorize an adverse judgment in the absence of institution and the absence of trial. That is incorrect, for Rule 42.73(a) is explicit as to when such an adverse judgment is authorized, and Rule 42.73(b)(2), the only subsection directed to disclaimed or cancelled claims, refers to adverse judgment only when there is “no remaining claim in the trial.” Here, there was no trial, and no trial was possible.
Arthrex observes that some PTAB decisions have held that such an adverse judgment “creates an estoppel that would limit Arthrex‘s rights as to future patent claims in continuing applications.” Arthrex Br. 3. This consequence makes it imperative that the PTAB‘s rules conform to the legislative intent, and are implemented in accordance with their text, so that the concerned public will know the consequences of its choices.
The language of
Subsection (b)(2) on its face is directed to disclaimer or cancellation “in the trial.” It is not disputed that “in the trial” can occur only after institution. “[W]here, as here, the statute‘s language is plain, the sole function of the courts is to enforce it according to its terms.” United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989)
Claims 1-9 were disclaimed before institution. Accordingly, the present situation is outside of subsection (b)(2), for there was no trial and no possibility of trial. As required by
The inclusion of “in the trial” in subsection (b)(2) is a critical distinction from the other subsections, which do not distinguish between institution and trial. This distinction cannot be ignored. “Where an agency includes particular language in one section of a regulation but omits it in another it is generally presumed that the agency acts intentionally and purposely in the disparate inclusion or exclusion.” Yonek v. Shinseki, 722 F.3d 1355, 1359 (Fed. Cir. 2013) (alterations omitted).
The PTAB‘s interpretation of subsection (b)(2) to eliminate the words “in the trial” is an explicit change in the Rule, requiring rulemaking procedures. Such rule change is governed by the Administrative Procedure Act, see
Instead, the majority attempts to reconcile the PTAB‘s decision by interpreting § 42.73(b)(2)‘s statement of “no remaining claim in the trial” as meaning “no remaining claim for trial.” Maj. Op. at 1350. Thus, my colleagues construe the words “in the trial” as including non-institution where no trial is possible. This is a distortion of a carefully worded regulation, and changes its meaning. However, “a court is not free to disregard requirements simply because it considers them redundant or unsuited to achieving the general purpose in a particular case.” C.I.R. v. Gordon, 391 U.S. 83, 93, 88 S.Ct. 1517, 20 L.Ed.2d 448 (1968).
Our task is to assure that agency regulations conform to the statute, and that the regulations are applied in accordance with that conformity. See E.P.A. v. EME Homer City Generation, L.P., — U.S. —, 134 S.Ct. 1584, 1600, 188 L.Ed.2d 775 (2014) (“However sensible (or not) the Court of Appeals’ position, a reviewing court‘s task is to apply the text [of the regulation], not to improve upon it.“) (internal quotations omitted). A cardinal principle of statutory and regulatory construction is to ““give effect, if possible, to every clause and word.“” Williams v. Taylor, 529 U.S. 362, 404, 120 S.Ct. 1495, 146 L.Ed.2d 389 (2000) (quoting United States v. Menasche, 348 U.S. 528, 538-39, 75 S.Ct. 513, 99 L.Ed. 615 (1955)); see Roberto v. Dep‘t of the Navy, 440 F.3d 1341, 1350 (Fed. Cir. 2006) (“The rules of statutory construction apply when interpreting an agency regulation.“).
The panel majority ignores the differences among the subsections of Rule 42.73(b), and states that the rule allows that “an adverse judgment may be entered after a petition has been filed, but before an IPR proceeding has been instituted.” Maj. Op. at 1350. What is clear is the contrary, for there can be no adverse judgment “before an IPR proceeding has been
The statutory design of the America Invents Act is that when institution is denied, the IPR does not proceed to trial and decision, and the consequences of a final decision do not arise. The legislative record is clear as to those consequences, see H.R. REP. 112-98, 48, 2011 U.S.C.C.A.N. 67, 78 (“[A] final decision in a post-grant review process will prevent the petitioner, a real party in interest, or its privy from challenging any patent claim on a ground that was raised in the post-grant review process. The post-grant review procedure is not intended, however, to inhibit patent owners from pursuing the various avenues of enforcement of their rights under a patent, and the amendment makes clear that the filing or institution of a post-grant review proceeding does not limit a patent owner from commencing such actions.“).
The PTAB‘s Rule as now interpreted is contrary to the statute. And although the Rule states that a patentee may request an adverse judgment at any time, here the patentee expressly requested no adverse judgment. My colleagues’ view that estoppels can nonetheless be involuntarily imposed by the PTAB when no claims were subject to trial exceeds the PTAB‘s statutory authority. Such looseness simply adds to the uncertainties facing practitioners seeking to comply with the Rules implementing the America Invents Act.
The PTO Rules of Practice for Trials Before the PTAB refer to estoppels flowing from “those claims that were lost.” 77 Fed. Reg. 48,612, 48,649 (Aug. 14, 2012). These Rules are contradicted by the majority‘s holding that “there seems to be no meaningful distinction between claims that are cancelled before an IPR proceeding is instituted and claims that are cancelled after an IPR proceeding is instituted.” Maj. Op. at 1350. To the contrary: there is a powerful distinction. The foundation of the AIA is the distinction between the threshold determination of whether to “institute” trial, and the trial proceedings and ensuing estoppels after trial.
Arthrex is not challenging the PTO‘s authority to adopt relevant regulations; Arthrex states in its brief that “Arthrex never suggested that a Patent Owner could avoid adverse judgment in one of the expressly defined situations of
II. Prior Adjudication.
I take note of the district court litigation between these parties, on claims 10-11 of the same ‘541 patent. That case had not been stayed by the district court, and validity of claims 10-11 was sustained. Both Arthrex and Smith & Nephew state uncertainty arising from the PTAB‘s ruling herein, bringing into further focus the need for reliable regulations, consistently applied.1
CONCLUSION
When all of the claims for which the Petitioners sought review were disclaimed
PAULINE NEWMAN
UNITED STATES CIRCUIT JUDGE