The AIA explicitly bestows the USPTO Director with the authority to institute IPRs and the PTAB with the authority to decide the ultimate question of patent validity.  The Director delegated the authority to institute IPRs to the Board, but is it proper to assign the decision to the same APJs that render a final decision?  A split panel at the Federal Circuit held that neither the AIA nor the Constitution precludes the same PTAB panel from rendering both institution and final decisions.  Ethicon Endo-Surgery, Inc. v. Coviden LP, No. 2014-1771 (Fed. Cir. 2016).

There is nothing in the Constitution or the statute that precludes the same Board panel from making the decision to institute and then rendering the final decision.

Coviden petitioned for inter partes review of claims 1-14 of Ethicon’s U.S. Patent No. 8,317,070, directed to a surgical stapling device.  The PTAB granted Coviden’s petition, and ultimately held that the challenged claims were invalid as obvious in view of the art.  Ethicon appealed, challenging that the final decision was invalid because it was made by the same panel that instituted review.  According to Ethicon, the current scheme raises due process concerns because a panel’s institution decision, which is based on a limited record, may bias the panel before consideration of a full record.  The court disagreed, looking to Supreme Court and lower court precedent finding that combining functions (e.g., investigative and adjudicative functions) in a single entity does not violate due process. In this regard, the court compared IPR procedure “to a district court determining whether there is ‘a likelihood of success on the merits’ and then later deciding the merits of a case.”

Ethicon also argued that the AIA statutory scheme does not permit the Director to delegate institution determinations to the PTAB.  According to the court, the Director has implicit authority to assign functions required by the AIA to subordinates, and nothing in the legislative history suggests that delegation of authority to institute IPRs is impermissible.

Judge Newman dissented, and stated that institution and adjudication are two discrete steps in IPR procedure, which the statute assigns to separate bodies within the USPTO.  The PTAB’s final decision, according to Judge Newman, is independent of and gives no deference to the institution decision, and the final decision is not reviewable by the Director.  Judge Newman explained that this bifurcated design of IPR proceedings is required by statute and signals Congress’s intent to place the separate determinations in the hands of separate decision makers.  Judge Newman also cautioned that placing institution and final decision authority in the same panel “may not always provide the constitutionally required impartial-maker” required for due process.  Further, Judge Newman criticized the majority’s comparison of IPRs to a district court proceedings relating to preliminary injunction, because district court decisions are immediately subject to appeal, unlike institution decisions.

We previously reported on the USPTO’s proposed pilot program wherein a single APJ would decide whether to institute IPR, and two additional APJs would be assigned to complete the panel to render a final decision.  At least one commenter suggested that assignment of institution decisions to a single APJ may help eliminate bias such as that proposed by Ethicon.  See, e.g., AIPLA’s comments on the proposed pilot program.  Many submitted written comments expressing concern over the USPTO’s proposed shift.  This decision highlights the court’s deference to the USPTO and potential difficulty in challenging post grant review procedures.  The deadline for submitting comments on the pilot program was November 18, 2015.  The USPTO has not released any additional information regarding the status of the pilot program.