Federal Circuit clarifies IPR Judgment-Estoppel Provisions
By Michael Bonella // January 26, 2018
In Arthrex, Inc. v. Smith & Nephew, Inc., the Federal Circuit addressed two important inter-partes review (“IPR”) procedural issues. The Federal Circuit addressed the issue of whether the Patent Trial and Appeal Board (“PTAB”) properly entered an adverse judgment against patent owner Arthrex. The Federal Circuit also addressed the issue of whether an order by the PTAB entering an adverse judgment against Arthrex, when no decision to institute the proceedings was issued, was appealable.
Arthrex responded to an IPR Petition filed by Smith and Nephew and Arthrocare Corp. by disclaiming the petitioned claims under 37 C.F.R. § 42.107(e). Arthrex also filed a Preliminary Response to the IPR Petition arguing that an IPR should not be instituted because 37 C.F.R. § 42.107(e) provides that an “no inter partes review will be instituted based on disclaimed claims.” However, Arthrex also stated in its Preliminary Response that Arthrex was not requesting an adverse judgment under 37 C.F.R. § 42.73(b). Despite Arthrex’s statement, the PTAB entered an adverse judgment against Arthrex based on 37 C.F.R. § 42.73(b), which permits the PTAB “to construe a statutory disclaimer of all challenged claims as a request for adverse judgment, before the Board has entered a decision on institution.”
The PTAB’s adverse judgment presented a problem for Arthrex under the IPR judgment-estoppel provisions. The IPR judgment-estoppel provisions preclude a patent owner “from taking action inconsistent with the adverse judgment, including obtaining in any patent . . . [a] claim that is not patentably distinct from a finally refused or canceled claim” (37 C.F.R. § 42,73(d)(3)(i)). At the time of the PTAB’s decision, Arthrex had two pending continuation applications, which subsequently issued as patents. Arthrex has another continuation application pending. Accordingly, the judgment-estoppel provisions may apply to Arthrex’s related patents and preclude Arthrex from obtaining certain claim coverage.
On Appeal, Arthrex argued that the PTAB erred in entering an adverse judgment because Arthrex stated in Arthrex’s Preliminary Response that Arthrex was not requesting an adverse judgment. The Federal Circuit rejected this argument stating that the responder’s characterization of its own request does not govern because to hold otherwise would permit a responder to escape an adverse judgment. The Federal Circuit further explained that Arthrex’s argument was contrary to 37 C.F.R. § 42.73(b), which permits “the Board to construe a statutory disclaimer of all challenged claims as a request for adverse judgment, before the Board has entered a decision on institution.”
Arthrex also argued that the PTAB improperly proceeded under the adverse judgment provisions contained in 37 C.F.R. § 42.73(b) because that provision only applies after an IPR has been instituted. The Federal Circuit rejected that argument based on the other regulations that reference the IPR proceeding or trial beginning with the filing of a petition.
The Federal Circuit also addressed the issue of whether the PTAB judgment was appealable. Smith and Nephew contended that the PTAB judgment was not appealable because the only appeal recognized by statute is set forth in 35 U.S.C. § 319 and requires a “final written decision” and here there was no “final written decision.” The Federal Circuit rejected this argument holding that 35 U.S.C. § 319 is not the exclusive basis for an IPR appeal. The Federal Circuit held that 28 U.S.C. § 1295, which provides the Federal Circuit with jurisdiction from an appeal from a PTAB decision, permitted an appeal from the PTAB’s judgment.
Based on the Federal Circuit’s analysis, a patent owner that wants to disclaim claims and pursue different claim coverage in a related-application should do so before an IPR petition is filed. Otherwise, the patent owner will be faced with the potential application of the judgment-estoppel provision.