PTAB / Estoppel / Federal Circuit / PTAB Procedures and Rules

Federal Circuit affirms Board’s grant of adverse judgment based on pre-institution disclaimer

Published January 24, 2018

Today, the Federal Circuit affirmed a Board decision of adverse judgment against a Patent Owner based on the pre-institution disclaimer of challenged claims.

In IPR2016-00917, Arthrex (Patent Owner) filed a preliminary response requesting denial of the petition based on the disclaimer of all challenged claims  and specifically stating that it was not requesting adverse judgment. In response, Smith & Nephew (Petitioner) requested adverse judgment based on the disclaimer and the Board, after additional briefing, entered adverse judgment against Arthrex, thereby triggering the Patent Office estoppel provisions of 37 C.F.R. § 42.73(d).

In a 2-1 decision, the Federal Circuit affirmed the Board’s decision. After addressing whether this issue is appealable– and finding that it is based on the strong presumption of appealability and because it is not an institution decision under 314(d)–the Federal Circuit held that the Board’s regulations permit entering adverse judgment in this situation.

The regulation at issue is 37 C.F.R. § 42.73(b) which states:

(b)Request for adverse judgment. 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.

Arthrex argued that (1) it specifically stated that the disclaimer of claims in its Preliminary Response was not a request for adverse judgment and (2) that 42.73(b)(2) specifically refers to the cancellation of claims such that there is “no remaining claim in the trial,” which means it only applies if trial has been instituted.

The majority in Arthrex v. Smith & Nephew found neither argument convincing. As to whether Arthrex’s intention was relevant, the majority noted that the Board has “authority to construe a patent owner’s actions as a request for an adverse judgment, suggesting the Board’s characterization of the action rather than the patent owner’s characterization is determinative.”

Regarding the 42.73(b)(2) argument, the majority made the following contrary points (all emphasis added):

  • 47.73(b) contemplates that a “party may request judgment against itself at any time during a proceeding”;
  • “the language of subsection 2 relating to remaining claims ‘in the trial’ can be interpreted as meaning that there is no claim remaining for trial, which occurs when, as here, all of the challenged claims have been cancelled”; and
  • 42.73(b)(1) has no time limitation and there is “no reason why estoppel should apply if a patent owner disclaims an entire patent or application before an institution decision but should not apply if a patent owner merely disclaims some of the claims.”

The 2-1 decision was written by Judge Dyk, with Judge O’Malley concurring and Judge Newman dissenting. Judge O’Malley wrote separately to express doubts whether the Director had the authority to issue a regulation that permits adverse judgments prior to institution (an argument not raised by Arthrex in its appeal).

Posted on 1/24/2018 by Deakin Lauer