CAFC Standard of Review Options Critical in Appeals From USPTO

The new patent challenge mechanisms of the America Invents Act (AIA) will greatly increase the number of CAFC appeal from the USPTO, as much as several hundred cases per year. This is because the patents subject to the new post grant proceedings (IPR, CBM, PGR) are almost always high-value assets involved in co-pending litigation, and these proceedings will conclude faster than any previous mechanism for challenging a U.S patent. At the time of this writing there are roughly 400 IPR and CBM proceedings pending, all of which will be ripe for appeal to the CAFC in 2014 absent settlement (rate of settlement is roughly 10% at present).

When evaluating the PTAB’s decisions on appeal, the CAFC employs either a de novo standard of review for questions of law or, the more deferential substantial evidence standard of review for questions of fact. Not surprisingly, appeals that employ the de novo standard provide a more significant opportunity for reversal. For this reason, it is important to understand the Court’s practice in applying one standard over the other.

For fact finding, the CAFC applies the more liberal substantial evidence standard. That is to say, when considering whether or not the USPTO’s finding meets the substantial evidence standard, the CAFC considers whether a reasonable mind would accept the fact finding as supporting the associated conclusion. Thus, the Court will affirm a USPTO conclusion if the fact finding is deemed sufficient, even if the individual judges of the Court do not necessarily agree with the conclusion of the agency. As many USPTO appellants quickly realize, when appealing an art based rejection to the CAFC, disputing the fact finding of the Office can be quite an uphill battle.

On the other hand, legal conclusions are reviewed de novo. For example, many of the recent reversals of the USPTO in the area of patent reissue were a result of perceived misapplications of the law by the USPTO.

Last year the interrelationship between the differing standards was demonstrated in Plasmart v. Kappos (here). In Plasmart, the PTAB (then BPAI) reversed the obviousness rejections of an examiner in the inter partes patent reexamination of U.S. Patent 6,722,674 (directed to a scooter safety improvement). On appeal to the CAFC, the third party requester (Plasmart) questioned the Board’s application of the law (103 case law, KSR) to reverse the rejection of the examiner, arguing that the Board failed to account for a “common sense view of the references” as mandated by KSR. In reversing the Board, the CAFC agreed with the Examiner and ruled the claims obvious, explaining:

The Board, in reversing the examiner’s rejections, relied only on minor distinctions between the prior art and the claimed invention. . . . .The Board agreed with the examiner that [the secondary reference] discloses a reason for adding universal wheels (the safety driving equipment in [the secondary reference]) to [the primary reference] scooter, but then held that because [the secondary reference] does not place those universal wheels in the exact location as the ’674 patent, it cannot render claim 1 obvious. . . . .

The decision to attach the [secondary reference] safety wheel directly to the twister member instead of the body would have been a common sense alternative design choice and reasonably obvious to one of ordinary skill in designing a safety feature to prevent tipping of the [primary reference] scooter. Such a modification is nothing more than a predictable use of prior art elements (universal wheels in contact with the ground in front of the twister member) to address a known problem (stability), and would thus have been obvious. See KSR, 550 U.S. at 417. We therefore reverse the Board’s holding that claim 1 would not have been obvious over the prior art.

While Plasmart demonstrated the importance of arguing questions of law where possible, last week’s decision in Smith & Nephew Inc v. Rea (CAFC 2013) demonstrated that the deference accorded fact finding may also be side stepped to an extent by unraveling the underlying reasoning of the Board. In reversing the PTAB’s confirmation of claims directed to a bone plate, the Court concluded:

We recognize, of course, that the “substantial evidence” standard of review requires a deferential approach to the Board’s findings. 1316 (Fed. Cir. 2000). In this case, however, the facts are largely undisputed, and the Board’s decision regarding the obviousness of including only threaded holes in the head portion of the condylar plate was mainly the result of the analytical errors discussed above, not the Board’s resolution of factual questions. In re Gartside, 203 F.3d 1305, Accordingly, we conclude that the Board erred in ruling that removing the nonthreaded holes from the head portion of the prior art plates would not have been expected to allow the plates to impart compression between the head portion and the bone.

As can be appreciated, the ability to successfully navigate a PTAB appeal through the CAFC hinges upon an Appellants appreciation of the differing standards of review.